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Invitrogen Deal to Acquire ABI Leads to Mass Speculation About Mass Spec Business

NEW YORK (GenomeWeb News) - As the dust settles from last week’s announcement of Invitrogen’s bid to acquire Applied Biosystems for $6.7 billion, questions continue to swirl around Invitrogen’s rationale for keeping ABI’s mass spectrometry business, and whether the company has plans to quickly jettison the segment.
While ABI is the current industry leader in mass spec sales, it is in the midst of a sharp slowdown that has raised concern about ABI’s ability to turn the unit around, particularly as competitors such as Thermo Fisher Scientific and Waters move to take the lead in technological innovation and Agilent Technologies takes market share away with its continuing push into the space.
During last week’s conference call announcing the proposed deal, Invitrogen CEO Greg Lucier was opaque when discussing plans for the new company’s mass-spec business. When asked whether he was open to selling it if the opportunity was there, he declined to comment on that possibility and said, “We’re going to run that business. We’re going to run it for success with our partner, and it is business as usual.”
Lucier said that while 90 percent of the acquisition is “an absolutely perfect fit,” mass specs are not. The ideal situation, he said, would be a sales flow in which customers would need to buy large amounts of reagents for use on the newly acquired instruments. Only, “a mass spec instrument doesn’t quite fit that description,“ Lucier said. “So my comment was 90 percent of [the deal] is a perfect fit, and the 10 percent [remaining] is still a very good business, and we intend to run it,” he said.
That has done little to quell Wall Street’s worries that ABI’s flagging mass-spec business could hurt the deal. Peter McDonald, an analyst at Wall Street Access, told GenomeWeb Daily News sister publication ProteoMonitor this week that the lack of any new meaningful mass spec platform from ABI in recent years is a particular concern for investors.
“Everyone’s been waiting for a new instrument and they haven’t had anything in the near term,” he said.
Aware of this, ABI plans to replenish its instrument portfolio and recently company officials said new mass specs will be hitting the market in coming months. During last week’s conference call, Mark Stevenson, president and COO of Applied Biosystems, said that those plans will proceed.
Plateauing mass-spec sales in recent quarters have also been bad news for ABI. For the past six consecutive quarters, sales growth for the instruments has steadily declined, and in the last completed quarter, ending March 31 – ABI’s fiscal third quarter – mass spec sales grew less than 1 percent.
Ross Muken, an analyst with Deutsche Bank, wrote in a research note that the key reason for Invitrogen’s interest in ABI is to acquire its SOLiD sequencing platform and gain access to the next-generation sequencing market.
Invitrogen’s desire to keep the mass-spec business, however, is “a head-scratcher,” Muken wrote.
“As you look at mass spec within the new [company] it’s a clear standout that does not fit,” Muken said to ProteoMonitor. “And it really has no complementary pieces with the rest of the Invitrogen/ABI combination.”
Invitrogen is also limited in its ability to improve ABI’s mass-spec business, Muken added, because ABI has a joint-venture agreement with MDS Analytical Technologies on the instruments and depends on the Canadian firm for mass spec R&D.
Indeed, the effect of the proposed acquisition on ABI’s partnership with MDS is unclear. Neither Invitrogen nor ABI officials provided any insight into the matter during the conference call.
Janet Ko, a spokeswoman for MDS, told ProteoMonitor in an e-mail that it will continue to do business as usual. MDS views the deal “as good news for our [joint-venture] partner [and] believes Invitrogen has an excellent management team, and we look forward to working with them to grow the ABI/MDS joint venture,” she said.
Meanwhile, speculation has begun that the new company, which will adopt the Applied Biosystems name, will eventually sell the mass spec business, perhaps as quickly as within 18 months. But with an estimated price tag of between $1.3 billion to $1.5 billion, the list of potential buyers is limited, Muken said.
“It’s an attractive asset but there’s not a long list of people who can afford it or would be in a position at this point to be able to do something to transact it,” he said.
The consensus view is that MDS appears to be the most likely bidder to buy out ABI if the combined company decides to divest its mass-spec business, although MDS currently doesn’t have the resources to make such a purchase, analysts have said. Other potential buyers could include Agilent, Thermo Fisher, or foreign firms, such as Hitachi or Shimadzu.

A more comprehensive version of this article appears in this week's issue of ProteoMonitor.

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