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Buying Dynal, Invitrogen Would Get a Foothold in an FDA-Regulated Market

Invitrogen said Tuesday it will spend approximately $386 million to purchase privately held Dynal Biotech of Oslo, Norway.

The proposed acquisition, which includes Dynal’s Dynabeads magnetic separation-technology business as well as its HLA diagnostics segment, would move Invitrogen for the first time into an FDA-regulated market and potentially give it access to Dynal’s in vitro diagnostics customers like Roche Diagnostics and Bayer.

While the space is new to the company, Invitrogen said it has competency in that realm — Greg Lucier, chairman and CEO came to the company from GE Medical Systems, and he told analysts on Tuesday that the company has prepared to enter the market.

“We know how to do the 510(k) dance,” Lucier told analysts. “We have brought on a regulatory team with pharmaceutical experience, and our management team has experience in the device world.”

The acquisition is the 10th and the largest deal since Invitrogen’s $500 million purchase of BioReliance in December 2003, followed by its $325 million purchase of Molecular Probes in August 2003. It comes as Invitrogen continues to drive a strategy of growth by acquisition while creating a broader product portfolio — primarily of reagents, and, to a lesser extent, instruments and services.

“This makes a lot of sense in terms of what it does for the company,” analyst Adam Chazan of Pacific Growth Equities of San Francisco told BioCommerce Week. “It is as transformative as [the Molecular Probes] acquisition, and will allow them to leverage products from both companies across both their BioDiscovery and BioProduction business segments. It gives them different avenues to push the beads to large and small customers.”

Chazan said that the combination of Dynal and Zymed Laboratories, which Invitrogen bought for $60 million in January, also gives the company a sales conduit into the diagnostics industry.

“They can push [Dynal products] or their own down that channel and sell direct in the US, Europe, and China,” he said.

Invitrogen said it expects the all-cash acquisition to close by April. The company, which will report its fourth-quarter results on Feb. 17, has a treasure chest of $1 billion, including $365 million in cash and cash equivalents on hand, as of Sept. 30.

“In terms of our strategy of linking all of our reagents and tools, Dynal is a very important transaction,” Lucier told analysts in the conference call.

Dynal, which was established in 1986 as a joint venture between Dyno and Alpharma, manufactures a magnetic bead technology marketed for cell separation and purification, cell stimulation, protein research, nucleic acid research, and microbiology applications.

The company, purchased from majority owner Nordic Capital of Sweden, supplies magnetic particles to diagnostic product manufacturers for use in high-throughput automated immunoassays as well as other diagnostic instrument systems. Nordic and Ratos purchased Dynal for $190 million in 2001.

Dynal, which has 419 employees globally, with 163 based in Norway and subsidiaries in US, UK, France, Germany, Australia, China and Japan.

It is expected to generate revenues of approximately $74 million for the period of April through December 2005, Invitrogen said in a statement.

Invitrogen expects the transaction to contribute 7 cents a share to 2005 pro forma earnings, and 24 cents per share in 2006.

Lucier told analysts that the acquisition’s potential initial contribution to Invitrogen’s top line would be mitigated as the company plans to increase Dynal’s spending.

“We will be investing in some ideas we have in R&D, and on the sales side for Dynal,” Lucier said.

Dynal produces highly uniform spherical microparticles. Dynal treats the surface of these particles with chemical groups and biological materials for use in research applications. Invitrogen said it plans to integrate Dynal’s technology into many of its product lines to produce expanded sets of matched reagent product suites around genes, antibodies, enzymes, cell-culture media, and detection products, and to enhance its products for assay development, RNA interference, DNA cloning, and proteomic analysis.

Jon Hindar, president and CEO of Dynal, will join Invitrogen’s management team, the company said. He likely will take the title of vice president and general manager of the Dynal business, which will be housed within Invitrogen’s BioDiscovery unit.

Dynal Biotech consists of Molecular Systems, Immunosystems, HLA diagnostics, Microbiology, and Dynal Particles. Molecular Systems develops products for separation, handling, and analysis of nucleic acids and proteins for use in genomics, proteomics, and in vitro diagnostics. Its top customer is Roche Diagnostics. Dynal’s immunosystems unit provides products for immunology and microbiology.

Dynal’s HLA diagnostics unit, with annual revenues of approximately $40 million, is located near Liverpool, UK, and manufactures diagnostic products related to the genetic typing of donors and recipients of solid organs and bone marrow. Operating on a PCR license from Roche, it competes with Qiagen and Celera Diagnostics, among others. The Human Leukocyte Antigen assay is part of the organ and bone marrow transplantation procedure.

Dynal Particles develops and produces its non-magnetic beads in Lillestrøm, Norway, for use in analytical chromatography and industrial separation. Amersham BioSciences, now part of GE Healthcare, is its main customer. Amersham holds a worldwide exclusive license for the application of non-magnetic Dynospheres for the purification and analysis of biomolecules. Dynal has an agreement with Amersham Biosciences to supply particles for liquid chromatography.

Lucier said that Invitrogen would honor the contract with Amersham.

Dynal holds 13 patents, Invitrogen said. Its bead patents are in the early to mid-stage of maturity, while some of the company’s earlier patents have expired.

“This is a trade-secrets game,” Lucier said. “We discussed building our own [technology] but Molecular Probes said that is a high mountain to climb. Dynal is the market leader.”

— Mo Krochmal ([email protected])

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