En Route to IPO, San Diego’s Prometheus Labs Detours to Nestlé Buyout

[Updated 5/24/11 9:25 am. See below.] San Diego’s Prometheus Laboratories, a specialty pharma and diagnostics company in registration for an IPO, has instead agreed to a buyout offer from Nestlé Health Science, a new subsidiary of Switzerland’s Nestlé S.A.

[Updated with estimated buyout range.] Financial terms of the deal were not disclosed in a statement today. Zurich-based analyst Jean-Philippe Bertschy of Bank Vontobel estimates that Nestlé may have paid from $567 million to more than $1 billion for Prometheus, according to a Bloomberg report.

As I reported last summer, Prometheus has focused its business on detecting, diagnosing and treating gastrointestinal diseases and disorders in the United States, and planned to change its name to Prometheus RxDx. The company was generating most of its revenue from budesonide (Entocort EC), a glucocorticosteroid prescribed for mild to moderately active Chron’s disease. The company also was integrating its marketing and delivery of pharmaceuticals with its high-value diagnostic testing capabilities for cancer and gastrointestinal diseases.

Prometheus, which filed for an IPO in December, 2007, updated its filing last summer and again about three months ago. The privately held company has nearly 500 employees and is profitable, with annual net income of more than $48 million on revenue of nearly $519 million in 2010, according to its latest IPO filing.

Nestlé says its Health Science subsidiary was established almost six months ago to provide “science-based nutritional solutions” to improve health care. In the statement from the companies, Nestlé Health Science CEO Luis Cantarell calls the Prometheus acquisition “a strategic move into gastrointestinal diagnostics. Prometheus’s leading edge diagnostics technology and outstanding sales force will help us to develop an integrated approach to personalized healthcare.”

Prometheus CEO Joseph Limber says the Nestlé deal will enable the company to accelerate its development of diagnostic technologies and potentially expand into other therapeutic areas.

Prometheus was founded in 1995 with equity funding from DLJ Merchant Banking Partners, SPVC (managed by Split Rock Partners), Sprout Group (sub-advised by New Leaf Venture Partners), Apax Partners, Pamlico Capital and Brentwood Venture Capital.

Author: Bruce V. Bigelow

In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University. Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.