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Invitrogen Acquisition Spree to Continue Unabated as it Eyes Molecular Dx Growth

Invitrogen expects to continue its aggressive acquisition strategy through the remainder of the year, but it is possible after a string of relatively small purchases that the firm may be ready to add a "transforming" piece to its business, CEO Greg Lucier suggested during a webcast last week.

Lucier was one of several members of Invitrogen's management to address attendees of the company's 2005 investor meeting at its headquarters in Carlsbad, Calif.

Invitrogen has acquired several firms over the past two years (see sidebar). Many of them were smaller purchases that were non-dilutive to earnings. But that could change.

When Lucier was asked by an analyst at the meeting whether the company might be looking to acquire larger businesses, he responded, "We're always going to be making those small acquisitions. I think what will potentially change in the future is we're also going to take some bigger swings now."

"There will be more financing moves that will be announced, and our goal, we think, is to accelerate the amount of acquisitions we will be making relative to what we've done the last two years," Lucier said.

Lucier said, "In the past few years, we've been very focused on accretive acquisitions, or at least not making them dilutive. Going forward, if we were to make a bigger acquisition, I don't want to rule out the possibility it could be dilutive. I would just say that that would be up on the table for consideration if we thought it was truly transformational to the business."

The firm recently raised $350 million through an offering of senior notes, and its acquisition strategy was a primary motivator for that financing. "We have an incredibly robust acquisition pipeline. With this money, plus what we have in the bank, we're back above $1 billion again," Lucier said.

And the molecular biology tools industry's most acquisitive player may not only make a bigger purchase this year, it may actually buy at a greater pace.

"There will be more financing moves that will be announced, and our goal, we think, is to accelerate the amount of acquisitions we will be making relative to what we've done the last two years," Lucier said.

With all of the pieces the firm has added over the past couple of years, and with plans to add even more, integration issues are an obvious concern for investors. So far, Invitrogen has managed to avoid any blow-ups, Lucier said. "I don't ever want to dismiss integration risk." However, "I don't necessarily see a lot of risk in integration. I do always see risk in buying the wrong company," he said.

Horizontal Integration with
Diagnostics in Focus

Lucier stressed that pieces that are added to the company must be integrated horizontally, as the firm aims to bundle more and more products together. But that message isn't solely for customers and investors. "We have trained product managers and product teams to be incredibly vertically focused, so learning that trick horizontally is still an issue we have to get better at," Lucier said.

In addition to acquisitions, the company has plans to grow its business through investment in R&D, sales and marketing, and improved interaction with customers. Invitrogen recently embarked on an ambitious global effort to meet potential clients and make its pitch as a partner and a one-stop shop for molecular biology tools (see BioCommerce Week 5/12/2005).

Besides Lucier, various division heads participated in last week's webcast, offering an overview of the technologies they are developing and the partnerships that they expect will drive growth for the company both near and long-term. Most of those efforts appear to be shifting Invitrogen's focus away from earlier-stage research and toward the patient.

Invitrogen's Diagnostic Solutions unit has already begun building its business off of the acquisitions of Zymed and Dynal (see BioCommerce Week 1/13/2005 and 2/10/2005), which provided the firm with HLA typing and CISH (chromogenic in situ hybridization technology) pathology products. But perhaps most importantly, the Dynal acquisition provided Invitrogen with a magnetic bead technology that the firm expects will work well in molecular diagnostic applications.

There are plans to grow the diagnostics part of the company first as an OEM partner to other diagnostic firms and eventually by selling its own tests. Invitrogen currently has about a dozen salespeople serving the diagnostics market and that will likely increase.

Invitrogen has been an incredibly aggressive acquirer over the past couple of years. Though not shy about acquiring other firms and technologies beforehand, the firm’s buying spree accelerated immediately following the appointment of Greg Lucier as president and CEO in May 2003.
Purchase Price
Molecular Probes
August 2003
$325 million
February 2004
$500 million
April 2004
$20 million
May 2004
DNA Research Innovations
October 2004
$35 million,
but could reach $65 million based on milestones
Bio Asia
December 2004
$8 million
January 2005
$60 million
April 2005
$391 million
May 2005
$20 million

Lucier also said, "Undoubtedly there are technologies we can add to enhance our ability to perform in this business model." But for now, Invitrogen plans to aggressively pursue deals as an OEM supplier and take market share from the other reagent makers.

Invitrogen will let its larger diagnostic partners handle the regulatory process, while the firm sticks to its role as a supplier, according to Lucier.

The firm also plans additional collaborations on biomarkers, such as the partnership with the Mayo Clinic signed this past December (see BioCommerce Week 12/9/2004), and is negotiating a similar collaboration with a well-known, yet undisclosed, cancer research center. The company expects to announce that deal in the second half of this year.

Another major consideration for the firm in playing in the molecular diagnostics space is its sample-preparation portfolio, and this was the key reason Invitrogen purchased DNA Research Innovations and its ChargeSwitch nucleic acid-purification technology in October. With this technology, the firm is taking aim at competitor Beckman Coulter, which enhanced its own sample-prep abilities with the recent purchase of Agencourt Biosciences (see BioCommerce Week 5/5/2005).

Invitrogen also fired a salvo across the bow of competitors saying that its sample-prep technology can work well on a variety of molecular diagnostic platforms. "There are a lot of different existing installed base platforms out there right now, and we want to put our chemistries across as many of them as possible, including entrenched competitors who might not necessarily want us to do that," Lucier said.

There are also plans in the works to collaborate with an established imaging technologies partner on molecular imaging products, though company officials wouldn't name any potential candidates.

In a somewhat unusual move, Illumina sent a representative to the meeting to provide an update on the oligonucleotide collaboration between Invitrogen and Illumina. The firms reiterated their plan to launch the platform, based on Illumina's Oligator technology, and snatch up market share by providing lower-cost oligos through Invitrogen's expansive customer base (see BioCommerce Week 12/23/2004).

Lucier suggested that the partnership with Illumina could command a 50-percent market share in the next three to four years. The firms will be competing with the likes of IVT, Sigma-Aldrich, and Operon Biotechnologies.

One other noteworthy piece of information that was revealed during the webcast was that Invitrogen is evaluating adding instrumentation to its offerings. During a Q&A session, Shawn Smith, director of Invitrogen's BioProduction unit, said, "Do we want to have a specific application platform that's automated within our own offering? The answer to that is, 'Yeah.' I think that's inevitable. I think we have to have the ability to offer the complete offering. It's a broader product portfolio than just the chemistries exclusively."

Company officials declined to elaborate on what kind of instrument that might be.

— Edward Winnick ([email protected])

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