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Invitrogen Nabs BioSource in Bid to Bolster Proteomics; Jilted Bio-Rad Remains in Game

Taking another step to build up its proteomics offering, Invitrogen has signed a deal to acquire BioSource International, a provider of proteins, antibodies, and reagents for cytokine and signal transduction assays, for $130 million in cash.

Invitrogen said the acquisition, hatched a few months after BioSource directors roundly rejected a cheaper bid by Invitrogen rival Bio-Rad Laboratories, is designed to bolster its protein and antibody offerings and could help it enter new markets in immunology, oncology, and neurodegenerative disease.

Invitrogen also said that it expects to expand BioSource's reach in Europe and Asia, and that there is room for BioSource's products to grow in the academic market, where Invitrogen has a strong presence.

"BioSource brings to us very important product technologies in the overall areas of cytokines and signal transduction application capabilities," CEO Greg Lucier said in a conference call following the announcement.

The purchase price, equivalent to $12.50 per outstanding BioSource share, represents a nearly 10-percent premium to BioSource's closing stock price of $11.40 the day before the deal was announced. BioSource's shares closed at $12.32 on Tuesday. The price also is substantially higher than a bid in April by Bio-Rad Laboratories, which offered $82 million, or $8.50 per share, to buy BioSource.

At the time, BioSource's directors rejected the proposal unanimously. But later that month, Bio-Rad increased its ownership in BioSource from 5 percent to 6.8 percent, citing its "continuing interest" in acquiring the company.

Reached by telephone this week, Ron Hutton, Bio-Rad's treasurer, told BioCommerce Week, "We're reviewing the situation and evaluating our alternatives." When asked if Bio-Rad was considering raising its offer, he said the firm was "not ruling anything out at this time."

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Since the day before Bio-Rad's failed April bid, BioSource's shares have climbed 82 percent (see graph). Yet, Invitrogen believes BioSource is worth the premium it is willing to pay.

"In terms of valuations, it's certainly within the range of what we've paid for other important strategic deals in the past," said Lucier. "I think relative to other proteomics companies on the market … this is a fair price."

Another Piece for the Emerging Proteomics Business

In particular the acquisition, coming on the heels of its Zymed and Caltag buys, represents another signal of Invitrogen's commitment to the proteomics space.

"BioSource represents one more piece of the strategic plan that was put in place more than 18 months ago to build out our [position] in the cytokine growth factor and antibody markets," said Cheri Walker, Invitrogen's vice president of proteomics, during the conference call.

With the $60 million acquisition of Zymed earlier this year, Invitrogen entered the pathology space as a reagents, assays, antibodies, and diagnostic tools provider (see BioCommerce Week 1/13/2005).

A few months later, it took steps to enhance its protein-related offerings by acquiring Caltag Laboratories for $20 million in cash (see BioCommerce Week 5/19/2005). Caltag makes antibodies and other reagents for immunological assays, focusing on multi-color assays for flow cytometry. Its products include a range of monoclonal antibodies for the detection of human, mouse, and rat cell surface and intracellular markers.

"We needed to add more proteomics and protein capability, and BioSource gives us that," Lucier said.

Lucier noted that there are a lot of competitors in the proteomics field that are bigger than Invitrogen. "We see lots of space for us to be a value-added contributor into that overall part of the research business," he said. "Our [protein-related] business now with BioSource is well north of $100 million and growing very fast, and it's one of our most important growth engines right now."

Bio-Rad is "reviewing the situation and evaluating our alternatives." Asked whether it would raise its offer, Bio-Rad said it is "not ruling anything out at this time."

According to Lucier, Invitrogen's extensive global distribution network also could help BioSource's products reach new customers and markets. "BioSource has had more of a direct model of distribution already, but we can leverage their team with our overall global footprint of people selling, and really we hope to accelerate the sales of BioSource products through the Invitrogen distribution system," he said.

BioSource, which has 246 employees worldwide, derives roughly 50 percent of its revenue from the US market, 30 percent from Europe, and the rest from Asia, according to Lucier. He said Invitrogen expects to expand BioSource's presence in Europe and Asia, and that there is room for BioSource's products to grow in the academic market, where Invitrogen has a strong presence.

Invitrogen expects the acquisition will have no impact on its 2005 financial results, as it will likely close late this year. The deal will add roughly 40 R&D employees to Invitrogen's roster of nearly 600 employees in that area. "We're clearly investing a lot in proteomics," Lucier said, "it's a key focus for us. Relative to other businesses we have, I would say a lot more R&D is going into this area."

For the past 12 months, BioSource had sales of $47.3 million. About half of BioSource's total revenue is from assays, and 25 percent is from biologics, including cytokines and antibodies, Walker said.

On the same day the pact with Invitrogen was announced, BioSource reported $13 million in net sales and $751,000 in net income for the second quarter. The firm had $7.1 million in cash and cash equivalents at the end of the quarter.

Invitrogen will report its second quarter financial results July 28. Analysts expect the firm to report revenue of roughly $301 million, which would be an 18.5 percent improvement year over year.

— Edward Winnick ([email protected])


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