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In Bid to Expand Genetic Testing Business, PerkinElmer Launches $300M Bid for ViaCell

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
Just a few days after PerkinElmer officials said that the firm’s acquisition priorities begin with expanding its genetic testing business, the firm this week agreed to buy ViaCell, a Cambridge, Mass.-based specialty stem cell company, for around $300 million.
 
After focusing on building its cell analysis business through a series of acquisitions earlier this year, PerkinElmer has shifted its attention to expanding its market-leading neonatal and genetic screening business. The firm is targeting up to 20 percent growth for that part of its business over the next few years.
 
ViaCell focuses on collecting and preserving umbilical cord blood stem cells, and PerkinElmer said it expects the acquisition to significantly expand its neonatal and prenatal screening business.
 
Company officials predicted during a conference call this week that with the acquisition of ViaCell, PerkinElmer can grow its genetic screening revenue to around $500 million by 2010, up from roughly $270 million from the combined business of PerkinElmer and ViaCell in 2007.
 
Under the terms of the agreement, PerkinElmer will acquire all of ViaCell’s outstanding shares for $7.25 a share, for a total purchase price of $300 million, or $260 million net of cash.
 
ViaCell’s ViaCord business allows families to preserve a baby's umbilical cord blood at the time of birth for potential medical use by the child or a related family member. ViaCord sales are expected to be around $60 million in 2007, and PerkinElmer estimates that the US market for cord blood banking could reach more than $1 billion.
 
“They’re also doing very important development work on cell-based therapies,” Greg Summe, chairman and CEO of PerkinElmer, said during the conference call. However, he said that since therapeutics are not a focus for PerkinElmer, the firm expects to divest that portion of ViaCell’s business.
 
PerkinElmer’s neonatal screening business currently tests for more than 50 genetic disorders, according to PerkinElmer President and COO Robert Friel. He added that “a growing number of disorders” are treatable using cord blood stem cells, and that “bringing both the screening and therapeutic benefits of these two businesses together … can offer a more comprehensive solution to patients and practitioners."
 
The boards of directors of both companies have approved the acquisition, and PerkinElmer expects the deal to close by the fourth quarter of 2007.
 
Lehman Brothers analyst Charles Butler said in a research note following the announcement of the acquisition that ViaCell will likely expand PerkinElmer's reach in the neonatal and prenatal markets.
 
"The deal should provide for sales and marketing channel synergies and for increased opportunities in neonatal and molecular diagnostics," Butler wrote. "PerkinElmer's rationale for this transaction seems to be primarily a desire for a national distribution channel through which to expand its diagnostics business."
 
ViaCell has 55 field sales representatives and “regularly calls on more than 17,000 obstetricians and interacts monthly with hundreds of thousands of prospective parents,” according to a statement from PerkinElmer.
 
Friel said during the call that in addition to strengthening PerkinElmer’s distribution channel to obstetricians, the deal adds a direct-to-patient channel. PE had previously focused its genetic screening sales efforts primarily on commercial and state-run labs.
 
PerkinElmer also believes that there is a largely untapped global market for ViaCell’s products, which are currently offered only in the US.
 
“In the future, a combination offering cord blood banking with an optional panel of future laboratory tests should provide us with the opportunity to more rapidly grow in this area,” said Friel. “What we believe ViaCell will help us to do is to sort of reach those customers that will do supplemental tests in addition to what’s mandated by their state.”
 
For example, he said some states mandate only 20 tests, while PerkinElmer offers more than 50 tests.
 

“In the future, a combination offering cord blood banking with an optional panel of future laboratory tests should provide us with the opportunity to more rapidly grow in this area.”

Building on Earlier Buys
 
The acquisition also adds to PerkinElmer’s portfolio of testing products that it gained through last year’s acquisitions of NTD Labs and Spectral Genomics.
 
Spectral Genomics sells a molecular karyotyping technology used for evaluating chromosomal abnormalities, and since the acquisition has launched PerkinElmer’s first platform for comparative genomic hybridization, which combines Spectral Genomics’ high-density array with PerkinElmer’s ScanArray scanner, reagents, and software.
 
The acquisition of NTD Labs marked the firm’s entry into the lab testing arena (see BioCommerce Week 8/2/2006). But it also provided PerkinElmer with NTD’s UltraScreen, a screening test that when used with ultrasound and maternal demographic data provides clinicians with a patient-specific risk probability for fetal abnormalities.
 
Friel noted that PerkinElmer has historically focused on genetic screening. But with the purchase of Spectral Genomics, the firm moved closer to diagnostics. He said the purchase of ViaCell would add “a third dimension to our growth strategy.”
 
The acquisition of ViaCell also marks a shift in PerkinElmer’s acquisition pattern this year. The firm made three purchases since the beginning of the year that broadly expanded its cell analysis business.
 
It acquired Evotec Technologies and Euroscreen Products in January (see BioCommerce Week 12/6/2006 and BioCommerce Week 1/3/2007), and cell-imaging software maker Improvision in April (see BioCommerce Week 4/4/2007).
 
But after focusing on that part of its Life and Analytical Sciences business, Friel said last week at the UBS Global Life Sciences Conference in New York that there would be a pause in pursuing deals that would add to PerkinElmer’s biopharma portfolio (see related article in this issue). He said the genetic screening market tops PerkinElmer’s acquisition priorities, followed by the medical imaging and environmental markets.
 

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