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In Bid to Expand Genetic Analysis Offerings, Affy Acquires Reagents Shop USB for $75M

Affymetrix said this week that it will buy life sciences reagent supplier USB for $75 million in cash in a move that will enhance its product portfolio and enable development of new genetic analysis offerings.
 
Affymetrix was unwilling to provide specific information regarding what types of new genetic analysis tools it is developing or plans to commercialize that would include USB’s reagents. Over the past year, the firm has taken a series of actions to diversify its revenue streams and position it for future revenue growth, and this deal would appear to fit that strategy.
 
USB is a privately held firm based in Cleveland, Ohio, that has been involved in the biochemical and molecular biology research field for several decades. The firm’s three primary product lines include molecular biology enzymes and kits, biochemical reagents, and membrane protein research tools.
 
It sells a wide variety of sample preparation reagents for PCR-based applications, purification, DNA sequencing, miRNA detection, and RNA analysis. Affymetrix did not disclose USB’s revenues or other financial details.
 
The acquisition, which is expected to close in the first quarter of 2008, "will greatly accelerate our ability to develop and commercialize more complete customer solutions," Affymetrix President Kevin King said in a statement.
 
He said that the acquisition is a “strategic fit” for Affy’s growth strategy and that the company expects the deal to be modestly accretive to its 2008 earnings per share before transaction-related charges.
 
The firm responded by e-mail to questions from BioCommerce Week but declined to say what new genetic analysis solutions it plans to develop or what potential new markets the firm is targeting.
 
“USB brings new manufacturing capabilities and an extensive line of molecular biology and biochemical reagent products,” it said in the e-mail. “Customers will benefit from the continued development of more integrated whole-product solutions.”
 
Affy also said that the acquisition of USB “presented a great opportunity to broaden our current reagent product portfolio and expand our potential in other new, high-growth genetic analysis markets.
 
“There were clear synergies in expanding the reagent business opportunity and leveraging USB’s key enzyme manufacturing capabilities into emerging areas over the long term,” the firm added. “Over the next few months, we will determine how to best leverage our strengths to bring a more complete solution to our customers.”
 
USB’s roots date back to the 1970s when it was known as United States Biochemical. After Amersham Life Science purchased United States Biochemical in 1993 and then merged with Pharmacia Biotech in 1997, USB’s management team bought the company’s three main product lines back from Amersham Pharmacia Biotech to create USB in 1998.
 
Affy said it will provide further details about the acquisition during its fourth-quarter 2007 conference call, which is scheduled for Jan. 31, 2008.
 
Whatever Affy’s intentions are for using the reagents to expand its business, it is clear that the acquisition is another piece in its plan to diversify its revenue base and keep pace with competitors, such as Illumina, Applied Biosystems, and Agilent, all of whom have made acquisitions over the past couple of years aimed at branching out into adjacent markets.
 
Affy has been the long-dominant player in the gene expression microarray market. But with growth rates for gene expression revenues hovering in the low single digits, Affymetrix has focused on growing its genotyping business. Earlier this year, the firm launched its 6.0 Array, which contains more than 1.8 million copy number probes and SNPs, and sells for 50 percent higher cost than the previous SNP chip.
 
The firm faces tough competition in the genotyping market from Illumina, which also launched a 1 million SNP chip this past summer, but right now those two firms are the top players in the genotyping market (see BioCommerce Week 7/4/2007).
 
Affy also has placed an increasing importance on the molecular diagnostics space, with its ongoing collaboration with Roche and other partners who want to develop diagnostics based on the firm’s GeneChip platform. In addition, earlier this year, the firm launched its Affymetrix Clinical Services Lab, a 10,000 square-foot lab in Sacramento, Calif., used for clinical trial and patient testing based on its chip technology.
 
Even though the firm is bullish on its opportunities in the genotyping and molecular diagnostic markets, company officials have said that Affy is looking for other ways to diversify its revenue streams.
 
“We need new markets and new products to keep growing,” King, who was recently promoted to president of the company, said during the breakout session following his presentation at the UBS conference in September (see BioCommerce Week 9/26/2007).
 
Among those new products, which are expected to launch soon, is the firm’s pharmacogenomics service offering based on its Drug Metabolism Enzyme and Transporter panel, known as D-MET. Affy plans to launch the panel as a service during the fourth quarter of this year, followed by the launch of a catalog product next year.
 

In addition to the D-MET service and product launch, Affy has inked an alliance with personal genetics firm Navigenics, a startup funded by well-known venture capital firms Kleiner Perkins and Sequoia Capital. The goal is to provide consumers with an understanding of their genetic predisposition for developing certain medical conditions. The service will compete with similar recently launched offerings from Decode Genetics and 23andMe (see BioCommerce Week 11/21/2007).

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