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ViroLogic and ACLARA BioSciences Revise Merger Terms
ViroLogic Provides Preliminary Third Quarter Revenue Estimate
SOUTH SAN FRANCISCO, Calif. and MOUNTAIN VIEW, Calif., Oct. 19
/PRNewswire-FirstCall/ -- ViroLogic, Inc., (NASDAQ:VLGC) and ACLARA
BioSciences, Inc. (NASDAQ:ACLA) today announced that they have modified the
terms of the contingent value rights (CVR) in the definitive merger agreement
previously executed by the companies. While CVR terms have been revised, the
exchange ratio remains unchanged with each outstanding share of ACLARA common
stock to be exchanged for 1.7 shares of ViroLogic common stock and 1.7 CVR. The
companies have postponed their respective annual meetings previously scheduled
for October 27, 2004. The meetings are expected to be rescheduled to occur
later in the fourth quarter of 2004.
In addition, ViroLogic announced today that it expects to report revenue of
approximately $8.6 million for the third quarter of 2004 compared to $9.2
million for the third quarter of 2003. As a result, ViroLogic anticipates that
revenue for the full year will come in below the low end of its previous 2004
revenue guidance of $38 million to $41 million. ViroLogic plans to announce
full financial results for the third quarter and provide an update on the
business after the market closes on November 15, 2004.
CVR Terms
Under the amended agreement, the terms of the CVR have been modified by (i)
increasing the maximum potential payment, (ii) allowing for the increase in the
potential payment to be made in stock at the option of ViroLogic, (iii)
extending the time until the determination date for the payment amount by six
months for a total of 18 months and (iv) reducing the ViroLogic stock price at
which the maximum payment may be made. These changes have been made to provide
greater flexibility to both ACLARA and ViroLogic stockholders, to reflect
changes in market valuation since the announcement of the transaction, and to
facilitate stockholder support for the merger.
"The revised CVR terms have several advantages for both the ViroLogic and
ACLARA stockholders," stated William D. Young, CEO and Chairman of ViroLogic.
"The new terms provide ACLARA stockholders with additional protection.
Moreover, the longer timeframe gives ViroLogic, post merger, more time in which
to build the value of the business, and thereby potentially eliminate the CVR
payments, preserving cash for future investment in the business. Importantly,
the maximum potential required cash payment is not affected."
The revised CVR provides for a potential payment in cash and/or stock of up to
$0.88 per CVR, equivalent to $1.50 per ACLARA share (formerly $0.50 per CVR and
$0.85 per ACLARA share, respectively), depending on the ViroLogic stock price
18 months (formerly 12 months) following completion of the merger. Under the
revised agreement, the maximum payment under the CVR would be $0.88 per CVR, if
ViroLogic's stock price trades at or below an average price of $2.02 per share
(formerly $2.40) during the 15 trading days immediately preceding the
eighteen-month anniversary of the closing of the merger, declining to $0.00 per
CVR if ViroLogic's stock averages $2.90 per share or higher (unchanged from
prior terms) during such time. If any payments are to be made on the CVR, the
first $0.50 per CVR will be paid in cash. Any payments due beyond the first
$0.50 per CVR can be made in cash, ViroLogic common stock or a combination of
cash and stock, at the option of ViroLogic. The CVR is expected to be listed on
either the Nasdaq Stock Market or the OTC Bulletin Board.
"The pending merger of ACLARA and ViroLogic promises to create an emerging
leader in individualized molecular diagnostics focused on infectious diseases
and cancer," commented Thomas G. Klopack, CEO of ACLARA. "We believe more
strongly than ever that the combination of these two companies will leverage
ViroLogic's HIV testing franchise and established commercial infrastructure and
ACLARA's leading-edge eTag(TM) technology to address a significant need in the
development and prescription of targeted cancer treatments, representing a
large market opportunity. We are pleased with the progress we have made so far
in joint product and integration planning, and we are excited about getting to
work together as one company in the very near future."
The companies expect to file an amended Form S-4, set new dates for their
respective annual meetings and circulate a revised Joint Proxy/Prospectus
related to the merger as soon as possible. The ViroLogic board of directors
and management structure after the merger will be as previously announced. The
merger is expected to close by the end of the fourth quarter.
ViroLogic Preliminary Third Quarter Revenue
While several factors affected revenue in the third quarter of 2004, volume of
in-coming patient samples grew versus the third quarter of 2003. This growth
was despite hurricanes impacting testing volume in the Southeast, particularly
Florida, which represents one of the largest and fastest growing HIV testing
markets. A preliminary analysis shows that patient testing revenue is expected
to be approximately $5.9 million for the third quarter of 2004, versus $6.2
million in the third quarter of 2003. The factors affecting patient testing
revenue included a higher than expected number of tests for which results could
not be generated due to sample handling and quality prior to submission to
ViroLogic. In addition, the Company had a larger than normal backlog of
in-process tests. Revenue from the pharmaceutical testing business is expected
to be approximately $2.1 million compared to $2.6 million in the third quarter
of 2003 reflecting the previously disclosed delays in the start of certain
late-stage clinical trials.
"We are aggressively addressing the underlying factors that contributed to this
quarter's results," said Young. "However, we were encouraged by the increased
interest in our combination PhenoSense GT(TM) product in the third quarter,
since this is a good indicator of growing acceptance by physicians and patients
of the importance of testing for helping determine appropriate HIV therapies.
We continue to see a robust pipeline of potential HIV therapies entering
clinical trials and pharmaceutical companies continue to choose ViroLogic as
their provider of resistance testing for these trials."
Voting Agreements
The directors and executive officers of both ViroLogic and ACLARA have agreed
to vote the shares owned by them in favor of the merger. In addition, the two
largest stockholders in ACLARA, Tang Capital Partners, L.P. and Perry Corp.,
have agreed to vote the ACLARA shares owned by them in favor of the merger.
The aggregate number of ACLARA shares covered by these voting agreements is
approximately 8.6 million, representing approximately 24% of ACLARA's
outstanding shares.
Conference Call Details
The companies will host a conference call today, October 19, 2004, at 8:30 a.m.
Eastern Time. To access the live call, please dial 800-901-5217 (U.S.) or
617-786-2964 (international). The conference ID is 32753826. Live audio of
the conference call will be simultaneously broadcast over the Internet and will
be available to members of the news media, investors and the general public.
Access to live and archived audio of the conference call will be available by
following the appropriate links at http://www.virologic.com/ and clicking on
the Investor Relations link, or by going to http://www.aclara.com/ and clicking
on the Conference Calls link in the Investor Relations section. Following the
live broadcast, a telephone replay will also be available at 888-286-8010
(U.S.) or 617-801-6888 (international), passcode 88035276, until midnight
Eastern Time on October 26, 2004.
The information provided on the teleconference is only accurate at the time of
the conference call, and ViroLogic and ACLARA will take no responsibility for
providing updated information except as required by law.
About ViroLogic
ViroLogic is a biotechnology company advancing individualized medicine by
discovering, developing and marketing innovative products to guide and improve
treatment of serious infectious diseases such as AIDS and hepatitis. The
Company's products are designed to help doctors optimize treatment regimens for
their patients that lead to better outcomes and reduced costs. The Company's
technology is also being used by numerous biopharmaceutical companies to
develop new and improved antiviral therapeutics and vaccines targeted at
emerging drug-resistant viruses. More information about the Company and its
technology can be found on its web site at http://www.virologic.com/.
About ACLARA
Founded in 1995, ACLARA is a biotechnology company working to provide
physicians and researchers products and services to make personalized medicine
a reality through its protein-based assay technology -- the eTag(TM) System.
ACLARA is dedicated to unlocking the power of pathway biology to accelerate the
development of next-generation targeted therapeutics, recognizing the most
appropriate patients for approved therapies and identifying the
highly-specific, protein-based biomarkers that will enable physicians to create
truly personalized treatment regimens for patients suffering from cancer and
other life-threatening disorders.
ACLARA is commercializing its proprietary eTag System to enhance and accelerate
drug discovery research and the preclinical and clinical development of
targeted therapeutics. ACLARA's technology may also enable the development of
highly-specific, protein-based diagnostics capable of providing physicians with
a powerful tool for creating personalized treatment regimens for patients
suffering from serious and difficult-to-treat cancers. For more information on
ACLARA please visit the Company's web site at http://www.aclara.com/.
Forward Looking Statements
Certain statements in this press release are forward-looking, including
statements relating to revenue growth, expectations of testing products and
actions designed to continue the growth of patient testing revenue, the ability
of the combined companies to create a leader in molecular diagnostics for
personalized medicine in oncology and infectious disease, the size of the
oncology testing opportunity and the approval of new targeted therapeutics
requiring individual patient testing, and the timing of completion of the
merger. These forward-looking statements are subject to risks and
uncertainties and other factors, which may cause actual results to differ
materially from the anticipated results or other expectations expressed in such
forward-looking statements. These risks and uncertainties include, but are not
limited to: risks related to the inability to obtain, or meet conditions
imposed for, governmental and other approvals of the merger, including approval
by stockholders of the companies; the risk that the ViroLogic and ACLARA
businesses will not be integrated successfully; risks related to any
uncertainty surrounding the merger, and the costs related to the merger; the
risks that the Companies' products may not perform in the same manner as
indicated in this press release; whether the combined company successfully
conducts clinical trials and successfully introduces new products; risks
related to the commercialization of ACLARA's eTag assay system; risks related
to the implementation of ViroLogic's distribution agreement with Quest; whether
others introduce competitive products; the risk that the combined company's
products for patient testing may not continue to be accepted or that increased
demand from drug development partners may not develop as anticipated; the risk
that gross margins may not increase as expected; the risk that the combined
company may not continue to realize anticipated benefits from its cost-cutting
measures; the timing of pharmaceutical company clinical trials; whether payors
will authorize reimbursement for its products; whether the FDA or any other
agency will decide to regulate the combined company's products or services;
whether the combined company will encounter problems or delays in automating
its processes; whether intellectual property underlying ViroLogic's PhenoSense
technology and ACLARA's eTag System is adequate; the ultimate validity and
enforceability of the companies' patent applications and patents; the possible
infringement of the intellectual property of others and whether licenses to
third party technology will be available; and whether the combined company is
able to build brand loyalty and expand revenues. For a discussion of other
factors that may cause ViroLogic's and ACLARA's actual events to differ from
those projected, please refer to each Company's most recent annual reports on
Form 10-K and quarterly reports on Form 10-Q, as well as other subsequent
filings with the Securities and Exchange Commission.
Additional Information
ViroLogic, Inc. intends to file with the Securities and Exchange Commission an
amended registration statement on Form S-4 that will include a joint proxy
statement/prospectus of ViroLogic and ACLARA and other relevant documents in
connection with the proposed transaction. Investors and security holders of
ViroLogic and ACLARA are advised to read the amended joint proxy
statement/prospectus when it becomes available, and other documents filed by
ViroLogic and ACLARA, because they will contain important information about
ViroLogic, ACLARA and the proposed transaction. Investors and security holders
may obtain a free copy of the amended joint proxy statement/prospectus, when
available, and other documents filed by ViroLogic and ACLARA at the Securities
and Exchange Commission's web site at http://www.sec.gov/. The joint proxy
statement/prospectus and such other documents may also be obtained, when
available, from ViroLogic by directing such request to ViroLogic, Inc., 345
Oyster Point Boulevard, South San Francisco, California 94080, Attention:
Investor Relations. The joint proxy statement/prospectus and such other
documents may also be obtained, when available, from ACLARA by directing such
request to ACLARA BioSciences, Inc., 1288 Pear Avenue, California 94043,
Attention: Investor Relations. ViroLogic, ACLARA and their respective executive
officers and directors may be deemed to be participants in the solicitation of
proxies from stockholders of ViroLogic and ACLARA with respect to the
transactions contemplated by the merger agreement. A description of any
interests that ViroLogic's or ACLARA's directors and executive officers have in
the proposed merger will be included in the joint proxy statement/prospectus.
Information regarding ViroLogic officers and directors is included in
ViroLogic's 10-K/A filed with the Securities and Exchange Commission on April
23, 2004. Information regarding ACLARA's officers and directors is included in
ACLARA's 10-K/A filed with the Securities and Exchange Commission on April 29,
2004. These materials are available free of charge at the Securities and
Exchange Commission's web site at http://www.sec.gov/ and from ViroLogic and
ACLARA.
DATASOURCE: ViroLogic, Inc.
CONTACT: Investor Relations of ViroLogic, +1-650-635-1100, or Investor
Relations of ACLARA, +1-650-210-1200
Web site: http://www.aclara.com/
Web site: http://www.virologic.com/