July 11 (Bloomberg) -- Ventana Medical Systems Inc., the U.S. maker of a new test for breast cancer, rejected Roche Holding AG's hostile $3 billion takeover offer as `inadequate.'' After faltering, Ventana shares reached a record high.

Roche's $75-a-share bid wasn't enough to account for new diagnostic tests Ventana will introduce next year, Ventana Chief Executive Officer Christopher Gleeson said today in a telephone interview. Ventana's shares, which jumped to $82.53, have traded above the offer price for 11 straight days as investors anticipated a higher bid.

Roche, the world's biggest diagnostics maker, said its offer is ``full and fair'' and threatened to run its own slate of candidates for the Ventana board. Ventana's pipeline includes tests to identify patients whose tumors may respond to drugs targeting specific genes, said Gleeson, 57. The technology would accelerate development and sales of new drugs, he said.

``Roche undervalued our company, particularly when you consider how much our diagnostics would help a company like Roche to speed development of its cancer therapeutics by gaining our products,'' Gleeson said. He declined to say whether there had been other bidders or what price might fairly value the pipeline.

Ventana makes a test to find patients who might respond to Herceptin, a breast-cancer treatment that is Roche's second- largest seller.

Shares Climb

Shares of Ventana, based in Tucson, Arizona, reversed an earlier decline after Roche vowed to pursue a combination. The stock jumped $2.28, or 2.8 percent, to $82.53 at 4 p.m. New York time in Nasdaq Stock Market composite trading. Roche's offer is 45 percent higher than the closing Ventana price on June 25, before the bid was disclosed.

Roche, based in Basel, Switzerland, declined 1.8 Swiss francs, or almost a percent, to 216.5 francs at the close of trading in Zurich.

``We are committed to bringing our companies together and continue to prefer to commence discussions with Ventana to effect a negotiated transaction,'' said Franz B. Humer, chairman and chief executive officer of Roche, in a statement.

Ventana has expanded its sales force by 20 percent each of the past three years, an asset that Roche didn't consider in its bid, Ventana's Gleeson said. Ventana will discuss details of its new diagnostic tests on July 19, when it reports earnings for the second quarter, he said.

`Accelerating Momentum'

In a statement today, Ventana said it wouldn't negotiate with Roche, citing ``high-handed tactics.'' Last week, Roche sued Ventana and the Arizona attorney general, challenging the state's 1987 anti-takeover law.

``The offer of $75 per share is far below the value that can be created for stockholders by our company continuing to remain an independent entity,'' Ventana said in a letter today to Roche.

Gleeson in today's statement cited ``the accelerating momentum of our business'' and ``our game-changing next- generation technologies'' as offering shareholders higher value than the Roche bid.

``Roche will probably increase the price,'' Pascale Boyer Barresi, an analyst at Bordier & Cie. in Geneva, said in a telephone interview. ``I don't think they will leave Ventana to another company because of the diagnostic test for Herceptin. It's important for them to have that.''

Delaware Suit

The Swiss drugmaker also sued Ventana in Wilmington, Delaware, to invalidate a ``poison pill'' defense the U.S. company adopted that would give shareholders rights to buy new stock at half price, increasing the cost of a buyout.

``It seems to be the normal thing for companies to play hardball and see how high they can push the price up,'' said Nick Draeger, a fund manager at Adamant Biomedical Investments in Basel. ``It is a sellers' market now.''

Greenhill & Co. and Citigroup Inc. are acting as financial advisers to Roche, and Davis Polk & Wardwell is acting as legal counsel, Roche said. Ventana identified its advisers as Merrill Lynch & Co., Goldman, Sachs & Co., Sidley Austin LLP and Snell & Wilmer LLP.

To contact the reporters on this story: Christopher Elser in London at celser@bloomberg.net; Dermot Doherty in Geneva at Ddoherty9@bloomberg.net.

Last Updated: July 11, 2007 16:13 EDT