Gen-Probe Inc., a maker of tests for AIDS and the West Nile virus, hired Morgan Stanley to seek a buyer for the company, according to three people with knowledge of the sale. The shares rose the most in almost seven years Thursday.
Initial bids for Gen-Probe (Nasdaq: GPRO), with a market value of $3.9 billion, are due in the next couple of weeks, said one of the people, who declined to be identified because the process is confidential. The San Diego-based company Thursday reported a 3.8 percent decline in first-quarter net income, beating analyst estimates by two cents.
Possible bidders for the test-maker include Novartis AG, which markets Gen-Probe products worldwide, Thermo Fisher Scientific Inc., Danaher Corp. and Carlsbad-based Life Technologies Corp., one of the people said.
"Because they're a high-quality company, it opens the field up" to other potential acquirers including Johnson & Johnson, the world's second-largest seller of health-care products, Abbott Laboratories and General Electric Co., said Peter Lawson, a Mizuho Securities analyst in New York, in a phone interview. "It fits in with this whole interest in personalized medicine."
Gen-Probe gained $9.45, or 13 percent, to $79.61 Thursday in Nasdaq Stock Market composite trading, the biggest single-day advance since November 2004. The shares have increased 69 percent in the past 12 months.
Michael Watts, a spokeswoman for Gen-Probe, said the company doesn't comment on rumors or speculation. Pen Pendleton, a Morgan Stanley spokesman, declined to comment. Eric Althoff, a spokesman for Novartis, Ron O'Brien of Thermo Fisher and Life Technologies' Jaime Rupert also declined to comment. Danaher's Matt McGrew didn't immediately return a call.
Gen-Pro sells diagnostics used to identify diseases, tests to screen donated blood for viruses such as HIV and hepatitis C, and products to ensure transplant compatibility, according to its website. The company reported 2010 sales of $543 million.
Gen-Pro's first-quarter net income was $23.3 million on revenue of $143 million, the company said in a statement today. Earnings excluding certain items of 54 cents beat the 52 cents average estimate of 16 analysts surveyed by Bloomberg.
The company reaffirmed revenue projections for 2011, previously issued March 16, of $570 million to $595 million.
Diagnostic companies have recently been purchased for three to six times sales, Lawson said, citing Thermo Fisher's 2009 acquisition of Brahms AG. Gen-Probe could get more than $100 a share, a 20 percent premium from current levels, if sold to a strategic party, Jon Wood, an analyst with Jefferies & Co. in New York, said in a note.
There have been 76 announced or completed acquisitions in the U.S. diagnostic equipment market in the past three years, according to data compiled by Bloomberg. The deals had an average disclosed size of $30 million and an average premium of 50 percent.
The largest deal was GE's purchase of Aliso Viejo, Calif.-based Clarient Inc. for $447 million in October.
Gen-Probe has more than 100 marketed diagnostic tests and products and continues to introduce new products, Watts said. A test for trichomonas, the most common curable sexually transmitted disease, was approved by the U.S. Food and Drug Administration on April 20 and tests for human papilloma virus and a gene implicated in some prostate cancer cases are pending before the agency, he said.
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