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Acquisitions, Reorganizations to Shape 05 Second Half; Cross-Border Deals to Grow

Acquisitions, geographic expansion, new and ongoing reorganizations, and shifting resources have helped define the multi-platform molecular biology tools space over the past year, and these trends will continue to grow in the second half of 2005, according to interviews and public comments from the company executives and industry observers.

From small-scale acquisitions that added incremental value — such as Invitrogen's $20 million purchase of reagents maker Caltag in May and Qiagen's $9.7 million acquisition of protein analysis tools manufacturer Nextal Biotechnology earlier this month — to bigger deals, such as Beckman Coulter's purchase of Agencourt Bioscience for $140 million in May, the pace of acquisitions in the first half of the year was steady.

That pace is almost certain to continue as companies try to diversify and expand their offerings and seek access to emerging markets. In addition, smaller firms are finding it increasingly difficult to raise money in the public markets, making some of them more amenable to being acquired by larger, more established players.

Invitrogen, the molecular biology tool field's most active acquirer over the past couple of years, has said it may spend up to $500 million on additional acquisitions before the year is done (see $8 million



Zymed




$60 million



Dynal



April 2005


$391 million



Caltag



May 2005


$20 million


Lucier also said, ""Undoubtedly there are technologies we can add to enhance our ability to perform in this business model."" But for now, Invitrogen plans to aggressively pursue deals as an OEM supplier and take market share from the other reagent makers.


Invitrogen will let its larger diagnostic partners handle the regulatory process, while the firm sticks to its role as a supplier, according to Lucier.


The firm also plans additional collaborations on biomarkers, such as the partnership with the Mayo Clinic signed this past December (see BioCommerce Week 12/9/2004), and is negotiating a similar collaboration with a well-known, yet undisclosed, cancer research center. The company expects to announce that deal in the second half of this year.


Another major consideration for the firm in playing in the molecular diagnostics space is its sample-preparation portfolio, and this was the key reason Invitrogen purchased DNA Research Innovations and its ChargeSwitch nucleic acid-purification technology in October. With this technology, the firm is taking aim at competitor Beckman Coulter, which enhanced its own sample-prep abilities with the recent purchase of Agencourt Biosciences (see BioCommerce Week 5/5/2005).


Invitrogen also fired a salvo across the bow of competitors saying that its sample-prep technology can work well on a variety of molecular diagnostic platforms. ""There are a lot of different existing installed base platforms out there right now, and we want to put our chemistries across as many of them as possible, including entrenched competitors who might not necessarily want us to do that,"" Lucier said.


There are also plans in the works to collaborate with an established imaging technologies partner on molecular imaging products, though company officials wouldn't name any potential candidates.


In a somewhat unusual move, Illumina sent a representative to the meeting to provide an update on the oligonucleotide collaboration between Invitrogen and Illumina. The firms reiterated their plan to launch the platform, based on Illumina's Oligator technology, and snatch up market share by providing lower-cost oligos through Invitrogen's expansive customer base (see BioCommerce Week 12/23/2004).


Lucier suggested that the partnership with Illumina could command a 50-percent market share in the next three to four years. The firms will be competing with the likes of IVT, Sigma-Aldrich, and Operon Biotechnologies.


One other noteworthy piece of information that was revealed during the webcast was that Invitrogen is evaluating adding instrumentation to its offerings. During a Q&A session, Shawn Smith, director of Invitrogen's BioProduction unit, said, ""Do we want to have a specific application platform that's automated within our own offering? The answer to that is, 'Yeah.' I think that's inevitable. I think we have to have the ability to offer the complete offering. It's a broader product portfolio than just the chemistries exclusively.""


Company officials declined to elaborate on what kind of instrument that might be.


— Edward Winnick ([email protected])


"/110668-1.html" target="_blank">BioCommerce Week 06/23/2005

). Beckman and PerkinElmer also said that they may seek smaller tuck-in acquisitions, and Stratagene's CEO has stated publicly that the firm was looking at acquisitions "in the neighborhood of $10 million" to fill capacity that emerged at its facilities in California and Texas after it acquired Hycor Biomedical last year (see BioCommerce Week 5/26/2005).


Cross-border deals, particularly in the assay reagent market, will "become more global and less region-centric."

Many industry observers also believe that acquisitions and alliances between partners in different parts of the world, such as Invitrogen's acquisition of Norway-based Dynal and Qiagen's purchase of Chinese firm Tianwei Times, are likely to continue. Cross-border deals, particularly in the assay reagent market, will "become more global and less region-centric," Panna Sharma, CEO and managing partner of TSG Partners, a life sciences corporate advisory firm, recently told BioCommerce Week.

Another theme that has emerged over the past year and is certain to continue is expansion in emerging markets, particularly China and India. Several of the firms tracked by the BCW Index have stated their intentions to set up R&D facilities or expand sales efforts in Asia (see BioCommerce Week 5/26/2005).

Greg Lucier, CEO of Invitrogen, has called the Asia-Pacific market the "real gem of our business," while Agilent recently established a training center in Shanghai with the intent of increasing the technical capabilities of the company's life science customer support teams (see BioCommerce Week 5/19/2005).

Going hand in hand with the focus on Asia is the decision by many firms to commit fewer resources to traditional European markets, where revenues have slowed, though Eastern Europe is viewed as a market with some strong growth potential. Weakness in the European market was cited by Waters earlier this year when it cut its revenue-growth projections for the year (see BioCommerce Week 3/31/2005).

And just last week PerkinElmer said that it had cut some jobs in Europe, even as it planned to add positions in China and India (see BioCommerce Week 7/14/2005).

Awaiting the Effect of Reorganizations

A couple of the companies in the BCW Index announced reorganizations over the past year that will affect their performance over the remainder of the year.

It has been a year since Applied Biosystems announced a major restructuring, and customers and investors have been waiting to see the effect of the shake-up. Thus far, revenue growth has been anemic, and last month the firm announced that it was cutting 250 jobs, or around 6 percent of its workforce. However, it noted that it planned to "rebalance" its staff through new hires in fiscal 2006 in such areas as manufacturing quality, advanced research, and field sales and support, especially in North America (see BioCommerce Week 6/30/2005).

Second-Quarter Earnings Release
Dates for BCW Index Companies
Date Company
July 15 General Electric
July 26 Molecular Devices
July 26 PerkinElmer
July 26 Waters
July 27 Applied Biosystems*
July 27 Sigma-Aldrich
July 27 Thermo Electron
July 28 Invitrogen
August 3 Beckman Coulter
August 4 Bio-Rad
August 8 Qiagen
August 9 Stratagene
August 15 Agilent**
TBD Bruker BioSciences
TBD Harvard Bioscience
*Fiscal fourth quarter
** Fiscal third quarter
SOURCE: The companies.

ABI's lagging sales — it reported year-over-year increases of 1 percent and 3 percent in its fiscal second and third quarters, respectively — prompted the company to re-examine the effectiveness of its sales operations and determine the best way for the firm, which has focused on instrument sales, to cash in on the sale of consumables (see BioCommerce Week 4/14/2005).

ABI rival Harvard Bioscience also announced a reorganization last summer intended to turn around its Genomic Solutions business. The firm recently provided investors and analysts with a more complete picture of its two major business segments, which showed that its capital equipment business was struggling (see BioCommerce Week 6/9/2005). However, the firm has said that it expects the unit to return to profitability in the fourth quarter of this year, and investors will be monitoring its progress when the company reports its second-quarter results in August.

Will Takara be Able to Revive Clontech?

Becton Dickinson's highly anticipated sale of Clontech was finally announced on July 1, as Japanese firm Takara Bio said it would take the struggling unit off BD's hands for $60 million (see BioCommerce Week 7/7/2005). The sale also provides Takara with entry to the field.

"I think it's a great first move for a company wanting to be aggressive in this space," said TSG Partners' Sharma. "The portfolio has such an entrenched presence in laboratories, both academic and pharma, and you can't build that brand presence overnight," he told BioCommerce Week. "The key for them is going to be how to reinvigorate the portfolio."

The unit struggled under BD, with its revenues dropping for four consecutive years.

— Edward Winnick ([email protected])

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