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Beckman Coulter Pulls Out of Bidding War for Biosite, But Will Still Seek 'Content' Buys

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
Beckman Coulter this week decided not to match a $92.50 per share bid by Inverness Medical Innovations to buy Biosite, effectively ending its plans to acquire the diagnostics firm.
 
Beckman Coulter’s refusal to match Inverness’ bid, which would value Biosite at approximately $1.72 billion, will trigger a $54 million break-up fee from Biosite. Although Beckman will lose out on a company that it had its eye on for a while, its M&A strategy remains unchanged and the firm would consider other “content” acquisitions this year, a company spokesperson said this week.
 
The end of the bidding war comes nearly two months after Beckman Coulter signed an agreement to acquire Biosite for $85 per share, or roughly $1.55 billion (see BioCommerce Week 3/28/2007). The premium that Beckman agreed to pay was roughly five times Biosite’s revenue and raised concerns among analysts and investors that it may be paying too much for Biosite.
 
A few weeks later, Inverness made a competing bid of $90 per share, which Beckman matched last week. The firm, however, declined to match Inverness’ most recent offer of $92.50 per share, and is willing to walk away with the $54 million break-up fee, payable to Beckman upon termination of the pact, which is expected later this week.
 
Biosite said Beckman has the right to make a counter-offer that is "at least as favorable" by 12:01 am on Friday, May 18. Otherwise, Biosite has notified Beckman it intends to terminate the earlier agreement.
 
Beckman said this week that it had extended its $90 per share offer until midnight on May 18. However, the firm noted in a statement that the extension “is a technical matter and in no way changes the intent of Beckman Coulter that its $90 per share offer is its best and final offer.”
 
The termination of the acquisition, though, is not expected to alter Beckman’s M&A strategy going forward.
 
“We have stated before that we’re always very interested in finding new content that we can distribute over our different analytical systems, and our recent acquisitions of small companies like DSL and Lumigen are an example of that,” a Beckman Coulter spokesperson told BioCommerce Week. She said Biosite would have been an example of that strategy as well.
 
Last year, Beckman purchased Lumigen, a maker of chemiluminescent technologies for diagnostics and research purposes, for $185 million. A year earlier it purchased Diagnostic Systems Laboratories for roughly $138 million. DSL markets reproductive endocrinology tests and holds exclusive rights to a potential biomarker of cardiovascular risk.
 
“At this point, if we find another acquisition like that … that would be the direction for us in the future,” she said.
 
The acquisition of Biosite would have expanded Beckman’s offerings in the diagnostics market and increased the share of revenue the firm realizes from consumables sales. It also would have provided markers that could potentially be used in Beckman’s new molecular diagnostics instrument, which is scheduled for launch in 2010 (see BioCommerce Week 12/6/2006).
 
Beckman and Biosite have been partners for four years on a B-type natriuretic peptide test designed to diagnose, stratify risk, and assess heart failure. According to Beckman Coulter President and CEO Scott Garrett, the firms had been discussing a possible merger throughout the alliance.
 

“We have stated before that we’re always very interested in finding new content that we can distribute over our different analytical systems, and our recent acquisitions of small companies like DSL and Lumigen are an example of that.”

Biosite, which had 2006 revenue of $309 million, derives roughly 80 percent of its sales from cardiovascular tests. It also sells tests for bacterial and parasitic infections, drugs of abuse, and toxicology. Its development pipeline includes tests for acute coronary syndrome, acute kidney injury, and sepsis.
 
During a March conference call announcing the acquisition agreement, Garrett said the firm aimed to launch the acute kidney injury and sepsis tests in the US in 2008.
 
Harry Glorikian, managing partner of life sciences consultancy Scientia Advisors, told BioCommerce Week via e-mail this week that “there are not many others out there that fit this profile and have a benefit to Beckman as good as [Biosite] does.”
 
He said there are other point-of-care diagnostics companies in the market with “good technology and good revenues,” if Beckman was looking to beef up that part of its business. But the Beckman spokesperson said, “The important thing about Biosite was the content,” not its position in the rapid diagnostics market.
 
There are plenty of small players in the biomarker discovery and development space that could pique Beckman’s interest, but Glorikian told BioCommerce Week sister publication ProteoMonitor earlier this month that he doesn’t see a lot of demand for such companies. “I see potentially a lot of collaborations, but just as an acquisition for a pure-play biomarker company, the risk is still very significant,” he said.
 
Beckman’s investors clearly agreed with the firm’s decision not to raise its bid for Biosite. In Tuesday trade on the New York Stock Exchange, Beckman’s share rose 2.3 percent to close at $66.08. This is in stark contrast to March 26, the first day of trading after the proposed deal was announced, when shares of Beckman dropped 7 percent to close at $62.51.

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