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Cellomics May Turn Fisher Into Multi-Platform Rival; Will Dharmacon s RNAi Give It an Edge?

As part of its ongoing effort to increase its presence in the multi-platform life sciences instrumentation market, laboratory supply and service giant Fisher Scientific will acquire high-content screening pioneer Cellomics for approximately $49 million in cash, Fisher said last week.

The acquisition is the latest in a series of steps Fisher has taken to embed itself in the multi-platform research tools space. Known primarily for its lab equipment and sizable distribution network, the firm, over the past couple of years, has been moving into more high-tech areas and is increasingly a competitive threat to many of the firms in the BCW Index.

And although Fisher has been selling at least seven assay kits made by Cellomics, the purchase might enable Fisher to more broadly compete with GE Healthcare, Molecular Devices, Becton Dickinson, and Beckman Coulter, which have their own HCS products.

Cellomics has been "running the business largely as an equipment sales business, so there is instrumentation. The real issue is to generate long-term usability … [and] development of additional reagents for the business, which is our key strength, and that is what will drive the business."

A main advantage for Fisher in entering the HCS market is Cellomics' strong patent portfolio. It owns the relevant IP for most high-content screening methods and practices. Among others, BD Biosciences and GE Healthcare have licensed Cellomics' IP to enable their customers to conduct HCS on their respective instruments.

In addition, Fisher could have an edge over its rivals because of its RNAi position courtesy of Dharmacon: siRNA and HCS have been like peas and carrots in research labs performing target identification and validation and functional genomics research.

But it remains to be seen how Fisher will sell Cellomics' relatively complex instruments in a specialty market in which it has little experience. One of the near-term challenges facing Fisher is deciding whether to hire marketing and sales reps to supplement any employees retained from Cellomics, or to train its current marketing team to deal in instrumentation in addition to reagents and laboratory ware.

A Fisher spokesperson declined to comment on the company's plans to integrate the Cellomics business, adding that Fisher would provide more details after the acquisition closes.

Paul Montrone, Fisher's chairman and CEO, said during a conference call last week, "[Cellomics has] been running the business largely as an equipment sales business, so there is instrumentation. The real issue is to generate long-term usability … [and] development of additional reagents for the business, which is our key strength, and that is what will drive the business."

Cellomics' largest shareholder is microscopy firm Carl Zeiss, which has already sold its shares to Fisher — making Cellomics a wholly owned subsidiary of Fisher. Zeiss and Fisher said in separate statements that they would continue to closely collaborate on high-content screening product development, and that Zeiss would continue distributing Cellomics' products in the academic and biotech marketplaces. Cellomics' flagship HCS platforms, the ArrayScan and KineticScan plate readers, are enabled by Zeiss optical technology.

Fisher and Zeiss spokespeople, however, declined to provide additional details about how the firms might collaborate in the future.

Cellomics reported approximately $13 million in revenues last year and employs about 60 people. It is unclear whether all of the firm's employees will join Fisher, which has roughly 17,500 staffers worldwide. But the size of Fisher's organization and its sales and marketing muscle were undoubtedly a key reason for Cellomics' decision to join the firm.

"It's hard to go up against big companies with small, private-company horsepower, and there is no public market, and probably won't be for a couple of years," Lansing Taylor, founder, former chairman and CEO, and current board member of Cellomics, told BioCommerce Week sister publication Cell-Based Assay News (see CBAN 8/8/2005). "We made the decision this past year that the company had gotten stronger, the market was emerging, and now was the time."

Putting the Pieces Together

Fisher could theoretically bolster Cellomics by playing up its RNAi position, which started growing after it acquired Dharmacon in February 2004 for $80 million. Dharmacon sells siRNA reagents and related products, and, lately, siRNA and HCS have gone hand in hand in research laboratories hoping to perform target ID and validation studies, as well as functional genomics research.

Fisher acquired Dharmacon to expand its presence in the life sciences market and add more higher-margin proprietary products. The acquisition put the company in direct competition with BCW Index firms Invitrogen and Qiagen, as well as Sigma-Aldrich, which purchased RNAi firm Proligo earlier this year (see BioCommerce Week 2/24/2005).

But the Dharmacon purchase wasn't Fisher's first foray into the molecular biology tools space. Two years ago, Fisher entered the proteomics field with the acquisition of Swedish reagent supplier Perbio for more than $700 million in cash.

Further acquisitions in the molecular biology tools market would not be surprising. Vice Chair Paul Meister said at the Banc of America Securities Health Care Conference in May that the firm would consider higher-growth consumable plays in the molecular biology tools field as potential acquisitions. He said Fisher expects $400 million in cash flow this year, which would ensure the company is flexible for any potential acquisition targets that come its way.

In addition to the Cellomics purchase, Fisher also announced last week that it would acquire testing lab Lancaster Laboratories for $150 million in cash, and that it had completed the acquisition of McKesson BioServices, a company managing biological specimens and clinical trial material, for $60 million on July 31.

The firm also reported that revenues for the second quarter increased 33 percent to $1.4 billion from $1 billion during the year-ago quarter. Excluding currency effects, organic revenues grew by 5.2 percent. Sales of scientific products and services accounted for 74 percent of its total revenues in the quarter.

Fisher posted second-quarter net income of $101.4 million, or $.80 per share — more than double the $44.7 million, or $.64 per share, reported for the same period last year. This quarter's income included $16 million associated with discontinued operations, among them the sale of Atos Medical.

As of June 30, Fisher Scientific had $155.2 million in cash and cash equivalents.

— Ben Butkus ([email protected])
and Edward Winnick ([email protected])

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