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GE Healthcare to Buy Biacore in Bid to Expand Protein Offerings, Add Analytical Instruments

Looking to provide protein researchers with more tools and expand its presence in the market, GE Healthcare this week said that it would acquire Biacore International for approximately SEK2.9 billion ($390 million).

GE officials said during a conference call this week that Biacore's complementary products will enable the firm to offer enhanced packages of research tools to customers. It also provides the medical products giant with its first analytical instruments for protein research, putting GE Healthcare in more direct competition in the market with Applied Biosystems, Bruker BioSciences, and PerkinElmer, among others.

"Life sciences is clearly one of the strong growth platforms for GE Healthcare going forward, and we intend to continue the growth of the business," said Peter Ehrenheim, CEO of GE Healthcare Life Sciences, during a conference call this week. "The bid on Biacore is clearly one of our key steps forward, particularly in terms of growing our protein sciences business."

Biacore's technology, which is focused on protein-protein interactions, "is extremely useful for the analysis of [the] effectiveness of a molecule on [an] antibody, for example," said Ehrenheim. "It's also very useful for studying the basic functions of proteins, and we think that it will be an excellent complement to our brands in lab chromatography and electrophoresis."

"Clearly, there are opportunities for us to accelerate the sales of Biacore's products, but we also think there are significant opportunities to accelerate the sales of our own products that … are adjacent to the Biacore portfolio."

He said that Biacore's portfolio "is an important third leg into our protein sciences business" — adding on to GE's protein purification and electrophoresis-based protein analysis products. "By adding the analytical dimension of Biacore, that will give us a set of competencies we didn't have," he said.

Adding Analytical Instruments

GE's current protein research products include reagents and instruments for sample prep, image analysis, and spot processing for mass spectrometry analysis. The portfolio is part of the assets GE gained through the $10.3 billion purchase of Amersham in April 2004.

In acquiring Biacore — GE Healthcare's first acquisition since Amersham — GE gets a variety of protein-interaction analytical instruments aimed at the academic and pharmaceutical markets. Among its products are the A100 Protein Interaction Array system, the Biacore T100 and 3000 systems, and the recently introduced Flexchip array-based system that monitors protein-peptide, protein-protein, and protein-nucleic acid interactions.

Biacore claims that the Flexchip system, which it acquired for $4 million in March 2005 from HTS Biosystems, can simultaneously profile up to 400 protein interactions.

HTS also was the development partner for GE Healthcare rival ABI for its 8500 Affinity Chip Analyzer, a protein interaction instrument launched a couple of years ago. Like Biacore's instruments, the 8500 is a surface plasmon resonance-based system.

Eric Walldén, president and CEO of Biacore, said during the conference call that the firm launched three new systems in the last year, and is seeing "healthy top-line growth."

In early May, Biacore reported that revenues for the quarter ended March 31 increased 19 percent to SEK137.9 million ($18.8 million) from SEK116 million in the comparable period of 2005. The firm attributed the revenue growth to "very strong performance in Europe and the Americas," where sales increased by 53 percent and 41 percent, respectively, offsetting a 61-percent decline in the Asia-Pacific market. Its net income for the quarter surged 58 percent to SEK18.9 million from SEK12 million in the year-ago period.

Biacore posted 2005 revenue of roughly $65 million, a tiny slice of GE Healthcare's 2005 revenue of $15.1 billion. General Electric, the parent of GE Healthcare posted 2005 revenue of $150 billion.

Earlier this year, Biacore officials told BioCommerce Week's sister publication BioArray News that the firm intended to invest heavily in building its sales and marketing force this year, particularly in the US (see BAN 1/17/2006). But the global reach of GE Healthcare provided a far greater opportunity for Biacore to get its products into the hands of customers.

Integrating Technologies

The transaction will enable GE to put together "bigger packages" for its customers, Ehrenheim said during the call. GE has a strong franchise in biomanufacturing and drug discovery labs, from which Biacore will benefit, he said.

"In general, GE Healthcare is buying businesses to grow them," said Ehrenheim. "We see most of the synergies here being top-line. Clearly, there are opportunities for us to accelerate the sales of Biacore's products, but we also think there are significant opportunities to accelerate the sales of our own products that … are adjacent to the Biacore portfolio," he said.

Ehrenheim said that in evaluating acquisition targets, "we're always looking at a number of different options. I think one of the key reasons we like Biacore so much is that it has a very strong customer franchise, it has a very solid product line, and there are definitely some synergistic effects with our current portfolio, and it's easy to integrate," he said.

Unlike several of its competitors in the BCW Index, GE Healthcare does not sell any mass spectrometers. Asked by BioCommerce Week why GE did not buy a mass spec player to expand its presence in the protein research market, Ehrenheim said, "Most of the companies in mass spec that have sort of the same franchise [as Biacore] would demand quite a bigger transaction. I wouldn't exclude such a transaction in the future, but we're not ready to make such" a move right now.

Ehrenheim said that by combining Biacore with GE Healthcare's current resources in Uppsala, Sweden, the firm will "create a de facto center of excellence for our R&D." he said that Biacore has about 70 to 80 people in R&D, while GE has around 350 in R&D in Uppsala.

"It will give us an opportunity to build a really strong protein sciences center here in Sweden," said Ehrenheim. "In general, I think this is going to be a great growth platform for us."

According to terms of the agreement, GE will acquire all of the outstanding shares of Biacore for SEK330 per share, a 17 percent premium over Monday's close of SEK282 on the Stockholm Stock Exchange. The firms expect the deal to be completed by August 15.

Pfizer Health is Biacore's largest shareholder, holding approximately 4 million shares, or 41 percent of the company. Pfizer has "irrevocably and unconditionally committed to accept the offer," the companies said. Management and members of Biacore's board of directors hold approximately 0.3 per cent of the company, and have also committed to accept the offer.

GE management refused to take questions from analysts or investors during the conference call, saying that the transaction "is not material to GE."

— Edward Winnick ([email protected])

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