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First-Half 2007 M&A Activity Heavily Focused On Dx; Big-Money Trend Continues From 2006

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
Among the firms covered by BioCommerce Week there were 16 mergers or acquisitions signed or completed for a total of at least $15.15 billion during the first half of 2007 (see table below). More than half of that total dollar amount comes from General Electric’s agreement to buy Abbott’s diagnostics business for $8.13 billion.
 
The M&A activity during the first half of the year was heavily weighted toward the diagnostics industry. With traditional research-tool vendors seeking higher-growth opportunities, many have turned to standard in vitro diagnostics and molecular diagnostics players to get a slice of the multi-billion dollar opportunities those markets offer.
 
The multi-billion-dollar deals over the past six months continued a trend from last year, when Thermo Electron and Fisher Scientific merged in a $10.6 billion deal (see BioCommerce Week 11/15/2006), and Siemens acquired Bayer Diagnostics for $5.26 billion and Diagnostic Products Corp. for nearly $2 billion (see BioCommerce Week 7/5/2006).
 
In comparison to this year’s numbers, firms covered by BioCommerce Week spent at least $13 billion on 13 M&A deals during the first half of 2006, and at least $2 billion on 13 deals in the first half of 2005.
 
Big Bets on Dx
 
While the research tools market has had its share of high-priced deals over the past six months — in the hundreds of thousands of dollars — it is clear that the big spending is in the diagnostics market.
 
General Electric started the year with an agreement to acquire the diagnostics business, minus the molecular diagnostics portion, of Abbott for $8.13 billion in cash (see BioCommerce Week 1/24/2007).
 
The acquisition immediately transforms GE Healthcare from a firm with no in vitro diagnostics component to the world’s second-biggest in vitro diagnostics player behind Roche. It also enables the company to more effectively compete with long-time rival Siemens and its similar plans for converging in vitro and in vivo diagnostic technologies.
 
Roche has recently engaged in a flurry of acquisition activity designed to close gaps in its diagnostics portfolio and enhance its offering of research tools. Just last week the firm launched an unsolicited bid to acquire Ventana Medical Systems for $3 billion (see BioCommerce Week 6/27/2007).
 
If the acquisition is completed, Roche would gain a tissue-based diagnostics platform, which it currently lacks and sees as an important piece of the oncology diagnostics and pharmacogenomics market. That bid also came just as Roche completed the acquisition of another diagnostics firm, BioVeris, for $600 million.
 
Roche also acquired next-generation sequencing firm 454 Life Sciences for $155 million (see BioCommerce Week 4/4/2007) and a couple of weeks ago agreed to acquire microarray firm NimbleGen Systems for $272.5 million (see BioCommerce Week 6/20/2007). While Roche officials have stated that these acquisitions will bolster its research products portfolio, both bring technologies that could be used in the future for molecular diagnostic purposes.
 
After a relatively slow 2006 in the M&A market for Qiagen, the firm jumped back in with two deals in the first half of 2007. Adding to its multiplex capabilities for molecular diagnostics, Qiagen in April inked a deal to acquire eGene for $34 million (see BioCommerce Week 4/18/2007).
 
It followed that pact with an agreement in early June to acquire Digene for $1.6 billion (see BioCommerce Week 6/6/2007). The deal will give Qiagen ownership of the only molecular diagnostic test for human papillomavirus cleared for marketing in the US and European Union. It also provides a bridge between Qiagen’s virology test portfolio and Digene’s oncology products.
 
Bio-Rad Laboratories, which has been known for years as a value buyer unwilling to pay hefty premiums for acquisition targets, announced in May that it would spend around $400 million to acquire DiaMed, a Swiss immunohematology diagnostics firm (see BioCommerce Week 5/16/2007). The acquisition marks the first major expansion of Bio-Rad’s clinical diagnostics business since its $210 million purchase of Sanofi Diagnostics Pasteur in 1999.
 
The deal greatly broadens Bio-Rad’s immunohematology and infectious disease diagnostics portfolio, but it does not provide the firm with a molecular diagnostics presence. Despite having the tools to play in the molecular diagnostics field, Bio-Rad has yet to make the jump.
 
Two firms that are banking on molecular diagnostics sales are Luminex and Cepheid, both of which made acquisitions during the first half of the year intended to drive revenue growth in the market.
 
In February, Cepheid acquired Sangtec Molecular Diagnostics for $27 million (see BioCommerce Week 2/21/2007). The acquisition gave Cepheid a portfolio of real-time PCR-based assay kits for a variety of infectious diseases that affect immunocompromised patients. Cepheid said it would introduce Sangtec’s assays into the US market initially for research-use-only and eventually seek US Food and Drug Administration clearance for the tests.
 
Meanwhile, in March Luminex completed its $44 million acquisition of Canadian molecular diagnostics maker Tm Bioscience (see BioCommerce Week 12/20/2006). Tm, which has been renamed Luminex Molecular Diagnostics, was already selling DNA-based tests that run on Luminex’s xMAP platform.
 
For Luminex, the acquisition was a transformative event, moving the company beyond its established partnership model and diversifying its revenue stream with a variety of proprietary assays developed by Tm.
 
Beckman Coulter made a bid to expand its presence in the near-patient diagnostics market and gain access to a variety of cardiovascular markers with an agreement in March to acquire Biosite for roughly $1.55 billion. However, Beckman was outbid by Inverness Medical Systems, who completed its purchase of Biosite this week for $1.72 billion (see BioCommerce Week 5/16/2007).
 
PerkinElmer, MDS Focus on Cell Analysis
 
While diagnostic acquisitions were very much the trend, PerkinElmer kicked off the year with two acquisitions focused squarely on expanding its cell analysis product line.
 
In January, the firm completed its acquisition of Evotec Technologies for $30.5 million (see BioCommerce Week 12/6/2006). The acquisition provided PerkinElmer with high-content screening tools, particularly the Opera confocal imager, which has significant penetration in the high-content market.
 
The Euroscreen acquisition, which was announced a few weeks later, gave PerkinElmer a greater presence in the GPCR-screening market (see BioCommerce Week 1/3/2007).
 
It followed these deals with the April purchase of Improvision, a privately held developer of cell-imaging software (see BioCommerce Week 4/4/2007).
 
MDS also acted on its belief that the cell-screening and -analysis markets offer a high-growth opportunity by snatching up Molecular Devices for $615 million (see BioCommerce Week 1/31/2007). The acquisition provided MDS unit MDS Sciex with a well-established line of products for the high-end cell-analysis market and a sizeable sales force that it hopes will boost sales of its CellKey secondary screening tool.
 
Agilent Technologies went for a much more broad-based research products play, acquiring Stratagene for $250 million (see BioCommerce Week 4/11/2007). Agilent gained a portfolio of instruments and chemistries for a wide variety of research applications, as well as a rapidly developing molecular diagnostics product line.
 
Invitrogen, which is still recovering from a difficult 2006 that included a portfolio review, an IT overhaul, facilities consolidation, and the eventual sale of its struggling BioReliance unit for $210 million (see BioCommerce Week 2/14/2007), made one small purchase in the first half of the year. The firm acquired privately held Cascade Biologics, a company that specializes in developing primary cells and specialized media, for an undisclosed amount.

 
 
First-Half 2007 M&A Activity Among
Firms Covered by BioCommerce Week
Acquirer Aquiree Month Closed Price
Roche Ventana Medical Systems Close Pending $3 billion
Roche NimbleGen Systems Close Pending $272.5 million
Qiagen Digene Close Pending $1.6 billion
Bio-Rad DiaMed Close Pending $391.4 million*
Qiagen eGene Close Pending $34 million
General Electric Abbott Diagnostics Close Pending $8.13 billion
Roche BioVeris June $600 million
Agilent Technologies Stratagene June $250 million
Roche 454 Life Sciences May $155 million
PerkinElmer Improvision April Undisclosed
Invitrogen Cascade Biologics April Undisclosed
MDS Molecular Devices March $615 million
Luminex Tm Bioscience March $44 million
Cepheid Sangtec Molecular Diagnostics February $27 million
PerkinElmer Evotec Technologies January $30.5 million
PerkinElmer Euroscreen Products January undisclosed
* The price reflects the initial purchase of a 77.7 percent stake. The final price will be determined when Bio-Rad purchases the remaining shares of DiaMed.
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