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Invitrogen to Buy InforMax for $42M; Substantial Cuts in SG&A Costs Foreseen

This article has been updated from a previous version.


NEW YORK, Oct. 15 - Fulfilling a promise made in January to acquire an informatics company in the near future, Lyle Turner, CEO of Invitrogen, said his company will buy InforMax for $42 million.


Though Invitrogen said it has "no concrete plans" about any potential restructuring--the companies said a transition team will form a strategy in 45 to 60 days--President and CEO Lyle Turner conceded in a conference call that there will be substantial reductions in sales, general, and administrative costs. Of InforMax's 175 employees, 25 work in SG&A, the company said.


Turner declined to say how many other companies had courted InforMax; detail how Invitrogen, based in San Diego, will integrate Bethesda, Md.-based InforMax; or disclose how the acquisition will help increase Invitrogen's R&D spending from 5 percent, which it is currently, to 15 percent, which is where Turner said he'd like to see it. "We'll know more in 45 to 60 days," said Turner, in a refrain that became familiar throughout the call.


The deal, set to close by the end of the year, throws InforMax a lifeline, ensures beefier marketing muscle for its technology, and gives Invitrogen the IT tools that may "simplify" some of it lab kits.


"By leveraging Invitrogen's strong global life sciences market presence, sales team, and marketing know-how, we believe this transaction will serve to accelerate the growth" of the firm's Vector NTI product, said President and CEO Andrew Whiteley, who will become president of the newly acquired company.


"Our existing customers stand to benefit from the expanded range of products, services, and exceptional technical and scientific talent resulting from this merger," Whiteley added.


Turner added: "InforMax's software enhances our product line's value and technology platform even further. Vector NTI and the Vector family of products ... simplify the use of Invitrogen's kits for gene identification, cloning, expression, and analysis."


Both companies' boards have already approved the acquisition, which will call for the purchase of all of InforMax's outstanding shares for $1.36 apiece. Invitrogen will commence a tender offer within the next 10 days, the company said.


The acquisition, which has been in the works for the past two months, comes at a critical time for InforMax. The company, like most of its compatriots in the bioinformatics space, has suffered in a market plagued by decaying customer interest and virulent competition. In recent months the company has been handed a deficiency letter from the Nasdaq exchange for failing to keep its share price above a minimum target.


In addition, second-quarter revenues have slumped, losses have mounted, and R&D spending has receded. The company also forecast it will record $3.1 million in the third-quarter revenues, down 35 percent from the same quarter in 2001. It currently has around $47 million in cash on hand.


Invitrogen, by comparison, had reported an increase in second-quarter revenue, though the firm, too, has trimmed its R&D budget. The company had $745 million in cash and cash equivalents as of June 30.

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