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Buying Evotec Technologies, PerkinElmer Jumps into High-End Cell Screening Market

In an effort to expand into the high end of the cell-analysis tools market, PerkinElmer last week agreed to acquire Evotec Technologies, the tools and technologies division of German drug-discovery firm Evotec, for €23 million ($30.5 million) in cash.
 
The acquisition, expected to close at the end of this year or at the start of 2007, will give PerkinElmer an immediate competitive position in the high-content screening and cellular analysis markets, an area in which it has been conspicuously lagging behind its rivals in the life sciences instrumentation market.
 
Following the acquisition, PerkinElmer will own a well-established screening platform that will enable the firm to compete more broadly against other BCW Index firms such as Thermo Fisher Scientific, GE Healthcare, Molecular Devices, and BD Biosciences in the high-end, high-content screening space.
 
The newly acquired instruments could also strengthen PerkinElmer’s diagnostics position, which an Evotec Tech official called “one of the big potentials we will have.”
 
“The acquisition of Evotec Technologies brings us immediate scale and brand recognition in the cellular sciences space,” said Mary Duseau, global sales leader of molecular medicine at PerkinElmer Life and Analytical Sciences. “When you look at the products that [Evotec Tech] currently has – and the Opera, in particular – they’ve got an excellent reputation, and they’ve got excellent reach, as a stand-alone company both in the drug-discovery world and in academia.”
 
She said that Evotec has “excellent competencies” in cellular sciences as well as “some IP [covering] cell sorting and selection. But their capabilities in cellular sciences — both the people and the products — is why we’re very excited,” said Duseau.
 
Extending Cell-Analysis Portfolio
 
Evotec Tech, based in Hamburg, Germany, sells instruments for high-throughput confocal imaging, cell handling, and ultra-high-throughput biochemical screening; as well as image-analysis software.
 
PerkinElmer already has strong high-throughput screening and cell- and liquid-handling plays, and the firm sells the CellLux and LumiLux instruments for cell-population experiments, said Duseau.
 
“We’ve got a very strong presence with CellLux and LumiLux, and certainly the high content now extends that capability for us,” she said. “And then if you think about academic research in cell biology, we’ve got a very strong position with the UltraView live-cell imaging system. And this fits very nicely into both of those strategies.”
 
It is clear that PerkinElmer’s primary acquisition interest is the Opera high-throughput confocal imager, which already has significant penetration in the high-content screening market and is Evotec Tech’s most lucrative product line.
 
According to Joern Aldag, Evotec’s president and CEO, the Opera business accounted for about €10 million in revenues this year. Overall revenues for Evotec Tech in the first three quarters of 2006 were approximately €11.5 million, according to the company’s Q3 financial report.
 
“With the high-content screening, you have the ability to look subcellular,” Duseau told BioCommerce Week. She said that the same customer base that buys PerkinElmer’s LumiLux and CellLux instruments would buy the Evotec system. “They’re just looking at different applications within that space.”
 
According to Duseau, the customer mix for the HCS system is roughly 60 percent pharma and 40 percent academic.
 
“We’re very excited about how well Evotec Technologies has done in both of those spaces,” said Duseau. “For the high-end market, they have the premier position in high-throughput high content with the Opera system, and in both assay development and screening in the pharma world.”
 
She also said that despite the higher cost of the Opera instrument compared with PerkinElmer’s other cell analysis instruments, the academic market is still fertile ground. “Given its performance in sensitivity, speed, and software … people are willing to make the investment,” said Duseau.
 
Evotec has said that its Opera system can cost as much as $855,000 for a fully equipped version. In comparison, GE's IN Cell 1000 costs approximately $450,000 (it doesn't disclose pricing for its 3000 system), and Cellomics' ArrayScan typically sells for $250,000 to $350,000, depending on the configuration of the system. Molecular Devices also said earlier this year that it would sell the fully loaded version of its ImageXpress Ultra confocal imaging system for just under $500,000, while less equipped models — for example, those with fewer lasers — would sell for less (see BioCommerce Week 2/8/2006).
 
Diagnostics Tie-In?
 
There also may be some overlap between PerkinElmer’s expertise in the diagnostics space and Evotec Tech’s instrumentation. During a conference call last week, Evotec Technologies CEO Carsten Claussen said in response to an analyst’s question about this overlap that “I think this is one of the big potentials we will have.”
 
And Evotec’s Aldag said, “I think we have found a corporate home for these technologies where this potential can more easily be exploited than in the Evotec environment.”
 
PerkinElmer’s Duseau, however, was a bit more cautious. “It’s a bit too early for us to understand what the fit is” between the HCS technology and PerkinElmer’s current diagnostic offerings, particularly in the genetic and neonatal screening markets, where the firm holds a large market share, she said.
 
“This acquisition has been done through the molecular medicine group, and from a research perspective, it fits nicely with the portfolio we have. Although we haven’t denied there is [a diagnostics] potential, we haven’t spent the time on it yet,” she said.
 
PerkinElmer will gain an undisclosed number of sales and application staff through the acquisition, though Duseau could not say what the firm’s intentions are regarding Evotec’s staff until after the acquisition is completed. “I think it’s a good fit because we have similar products … and we have both the sales and application expertise, although I would say we are excited about what Evotec Technologies brings, which is very strong application support,” she said.
 

“The acquisition of Evotec Technologies brings us immediate scale and brand recognition in the cellular sciences space.”

In addition to the acquisition, PerkinElmer “intend[s] to build and forward-expand the area of imaging, and we’ll create here in Hamburg a center of excellence for this part of their product offering,” said Aldag during the conference call. Later, in response to an analyst’s question about the Hamburg facility, Aldag said that Evotec and PerkinElmer will continue to have a “special relationship” that will benefit both companies.
 
PerkinElmer representatives “will continue to be on site here in Hamburg, and this will continue to be a growing entity,” said Aldag. “We think that we have a special relationship between the people here, with an agreement that Evotec has the first chance to see prototype business or pilot applications within its services unit …and for PerkinElmer to have a lab where they can show how their technologies are being employed in the real research world.”
 
Duseau declined to comment on PerkinElmer’s plans for the Hamburg site.
 
On the Block
 
Evotec had been hinting that it would divest the ultra-high throughput screening business since at least 2004, maintaining that it “was no longer core” to Evotec’s overall business, which was to begin focusing on internal drug development and drug-discovery contract research.
 
The company, however, remained coy about its possible plans to sell Evotec Tech, maintaining that it was committed to growing the business. It even struck a co-development and co-marketing agreement with Fisher Biosciences subsidiary Cellomics in February 2006, in which Cellomics created an interface between its informatics software and the Opera, and pledged to validate a number of its assays on the imager (see BioCommerce Week 2/1/2006).
 
Beside Fisher, which recently merged with Thermo Electron (see BioCommerce Week 11/15/2006), PerkinElmer was an obvious suitor candidate for Evotec Tech. The company had already made several moves over the past year to increase its cell-based assay play, such as introducing a slew of new products for cell-population and ion-channel screening.
 
Although it made little headway in the high-content imaging market, representatives from the company on several occasions said that cellular screening technologies were an acquisition priority.
 
“Our initiatives will be based around instrumentation, reagents, and high-throughput and high-content screening,” PerkinElmer chairman and CEO Greg Summe said at an investors’ conference in September.
 
Ben Butkus contributed to this article.
 

Another version of this article appears in the current issue of BioCommerce Week sister publication Cell-Based Assay News.

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