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Aiming for Upstream Applications and Broader Portfolio, Millipore Plans to Acquire Serologicals

In an effort to expand its bioscience offerings and gain a piece of the upstream bioprocessing market, Millipore signed a deal this week to acquire Serologicals for $1.4 billion in cash.

The acquisition will enable Millipore to access new high-growth research markets and will place it in more direct competition with several companies in the BCW Index, including Invitrogen, Qiagen, and Sigma-Aldrich.

"We don't have a broad portfolio," said Millipore Chairman, President, and CEO Martin Madaus during a conference call after the agreement was announced. "One of Serologicals' greatest strengths is [its] broad portfolio of innovative bioscience products. The addition of these products will transform our bioscience division into a leading research reagents and tool supplier to our customers. Now we'll have the breadth and depth in both divisions to be successful in the long term."

The acquisition will give Millipore's Bioscience Division, which includes tools for protein and DNA research, analytical sample preparation, and bioassay development, a larger presence in the drug-discovery products and services, antibodies, cell biology reagents, and stem cell research markets. Serologicals' research division is particularly focused on neuroscience, nuclear function, and stem cell research products, as well as multiplex platform technologies.


"We don't have a broad portfolio. One of Serologicals' greatest strengths is [its] broad portfolio of innovative bioscience products."

The firm's Bioprocess Division, meantime, will gain Serologicals' cell culture supplements, which will help it to enter the upstream bioprocessing market, which it pegs at $1 billion. Combined, these products will enable Millipore to sell upstream cell culture and downstream separation offerings for biopharmaceutical production.

Madaus said that Serologicals has a greater presence in the cell culture supplement market, while Millipore is stronger in downstream filtration and purification. "Historically, we haven't had a significant presence in the upstream part of the bioprocessing market. With Serologicals' strong position in that market, we will have access to a $1-billion market segment," he said.

The acquisition will enable Millipore to "optimize workflows from sample preparation, to developing and performing assays, to analyzing results," Madaus said. "Our ... offering will include process development and scale-up, upstream processing, downstream filtration, and ongoing compliance monitoring and testing."

The combined company will employ around 5,800 people and will have significantly expanded R&D capabilities, according to the companies. The combined firm also will have a worldwide sales, sales support, and service staff of 1,200.

It was not immediately clear whether the acquisition will cause Millipore to shed Serologicals staff, but Madaus said during the call that the firm would try to retain "as many of the people from Serologicals as we possibly can."

Serologicals President and CEO David Dodd will help integrate the firms and then depart from the company when the acquisition is completed.

"The high-growth profile of Serologicals will help us to accelerate our organic growth over the long-term, [and] provides critical mass for us to be a more strategic supplier to our customers," said Madaus. "Serologicals will provide access to high-growth markets where we don't have a presence today. Most importantly, their strong profitability will enable us to improve our earnings per share already in 2006 and '07."

Paying a Premium for Top-Line Growth

Terms of the deal, which are subject to Serologicals shareholder approval, customary regulatory approvals, and other conditions, call for Serologicals shareholders to receive $31.55 in cash for each common share they own — a 35.3-percent premium over the stock's closing price of $23.32 on Monday, the day before Millipore announced the acquisition.

Millipore said the purchase, which is expected to close by June 30, will enable it to generate around $1.4 billion in 2006 revenue and grow 2007 receipts by between 9 and 11 percent year over year. Serologicals brought in revenue of $274.9 million last year, a 40.3-percent increase over 2004.

The addition of Serologicals is expected to add $.10 to $.15 per share in the second half of 2006 to Millipore's earnings, Madaus said during the call. He added that the firm now expects to report EPS of $3.00 to $3.10 for the year.

Millipore Q1 Revenues Rise 7 Percent;
Serologicals Revenues Fall 3 Percent

In addition to announcing the proposed acquisition of Serologicals, Millipore said this week that its first-quarter revenue grew 7 percent to $268.4 million from $250.2 million year over year. Sales for its Bioscience Division grew 5 percent to $104.8 million, while revenue for the Bioprocess Division rose 9 percent to $163.6 million.

Millipore posted a profit of $34.5 million, or $.64 per share, for the quarter, compared with net income of $32.3 million, or $.64 per share, for the comparable period a year ago.

Meanwhile, Serologicals' first-quarter revenues declined 2.8 percent to $55 million from $56.6 million in last year's first quarter. The firm said the decrease was primarily due to the divestiture of certain bioprocessing product lines.

Despite the sales decline, the firm's net income rose to $4.9 million, or $.14 per share, a 14-percent increase over a profit of $4.3 million, or $.13 per share, in Q1 2005.

— EW

Madaus said Millipore anticipates $9 million to $10 million in savings due to cost synergies in 2007, going up to $15 million to $17 million on an annualized basis in 2008.

"One of the aspects of Serologicals that has impressed the entire team at Millipore is their success in generating revenue from new products, which is a critical differentiator in serving the bioscience market," said Madaus.

"They've increased the number of new products each year from approximately 930 three years ago to 1,700 in 2005," he said. "The ability to rapidly launch new products that create more value for the customer and command higher pricing in the market is an important strength that Serologicals will bring to Millipore. This will help us to improve our R&D productivity, which will be very important to secure future growth in the long term."

Millipore also said it expects to increase sales of Serologicals' products in markets such as Europe, Asia and Japan, where Millipore has a significant presence.

Madaus said that the "geographic synergies are powerful" between the firms, with Millipore having a strong global sales force, and Serologicals' sales force concentrating on US sales.

"We have a direct sales force worldwide, [but] the account overlap is very small," he said.

Madaus added that Millipore is "committed to our current distribution partners. We have not done the analysis … but we are happy with our current set up [with the] direct sales force and distribution."

Asked during the call whether this acquisition would be the last for Millipore for a while, Madaus said, "M&A has [been] and is part of our strategy. Obviously, it will take some time to digest this transaction and do the integration well, [but] medium- and long-term, M&A will always be a part of our strategy."

Serologicals recently has been active in the M&A market, acquiring St. Louis-based Linco for $74.8 million and Cambridge, UK-based Cytomyx for $7 million in March (see BioCommerce Week 3/29/2006). Those acquisitions were aimed at gaining customer bases in high-growth research areas in reagents and ion channel drug-discovery tools.

A month earlier, Serologicals acquired the CellCard high-content assay technology from defunct Vitra Biosciences. It also announced that month that it would collaborate with Pittsburgh-based biotech Cellumen to co-develop and sell a cytotoxicity profiling panel and services for use in pharmaceutical drug discovery.

— Edward Winnick ([email protected])

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