San Francisco — In dissecting the many presentations and breakout sessions at the JPMorgan Healthcare Conference here last week, it became clear that in 2006 the multi-platform research tool providers will likely be as active on the acquisition front as they were in 2005, and they will be looking to expand their current product offerings into new applications.
Following a busy 2005, in which BCW Index firms spent more than $2.4 billion on 22 mergers and acquisitions, it appears competing shops that didn't partake in the feast will seek incremental additions rather than transforming deals this year. Many firms also disclosed plans to expand the use of their existing products into higher-growth applications, such as cell analysis and molecular diagnostics.
ABI, BD Step Out of the Box
Undoubtedly, the two biggest pieces of news from multi-platform tool firms to come out of the conference was ABI's decision to sell its 50-percent stake in Celera Diagnostics to Celera Genomics, and Becton Dickinson's acquisition of GeneOhm Sciences for $230 million plus up to $25 million in additional incentives.
ABI sold the stake in Celera Diagnostics to its sister company in exchange for a "package of considerations" that includes $30 million in cash and the right to sell instruments to end-user diagnostic customers. ABI believes the deal will enable it to capitalize on its existing platforms and customer base, rather than starting from scratch in developing and selling diagnostic instruments (see BioCommerce Week 1/11/2006).
BD, which formerly was a member of the BCW Index until it sold its Clontech business to Takara Bio in July, had some conference attendees scratching their heads when it announced it would pay up to $255 million for a little-known company with only $5 million in revenue in 2005.
In a breakout session following the firm's presentation, BD Biosciences President Vince Forlenza justified the price, citing the market potential of GeneOhm's tests and the firm's strong intellectual property, which BD would have had to license if it were to develop competing tests. Forlenza also noted that GeneOhm had poured some $80 million into R&D for its initial tests (see briefs for more on the deal).
Invitrogen Targets 'Consumable' Instruments
ABI and BD weren't the only firms to announce fairly significant news at the conference. Invitrogen, which frequently receives BCW coverage for its aggressive acquisition strategy, said that it was developing "consumable" instruments. Chairman and CEO Greg Lucier said the instruments would be based on the "unique abilities" of the firm's reagents. Specifically, he cited the technology the firm gained through its acquisition of Quantum Dot as a possible base for the development (see BioCommerce Week 1/11/2006).
Lucier also commented on Invitrogen's acquisition plans for 2006, reiterating earlier statements that the firm had spent around $500 million each of the last two years on acquisitions and that it probably would spend around that amount again in 2006, though it would probably be spent on fewer companies.
Thermo, PerkinElmer, Agilent to Shun Big Buys
Customers and investors shouldn't look for Thermo Electron, PerkinElmer, or Agilent to pursue big acquisitions this year.
"There's not a huge gap in the portfolio we need to fill," said Thermo President and CEO Marijn Dekkers. "There is really no need to do an acquisition of significant size."
Dekkers told conference attendees that the firm may consider smaller acquisitions, but will likely devote its resources to upgrading its mass spec software products and getting more involved in the biomarker discovery business, which he said is "in our sweet spot of capabilities."
Meanwhile, Greg Summe, chairman and CEO of PerkinElmer, said that the firm was unlikely to pursue major acquisitions this year. He said that the company would look for selective technology acquisitions and partnerships to expand its range of offerings — and he would prefer to bring in products that are closer to applied use rather than in early stages of development.
CFO Rob Friel added, "There aren't too many bargains out there."
Summe said the firm would make "tough decisions" about products in the research market that may not have higher-growth potential and would "reposition" its mix in 2006. Sales for some applications have flattened out, he said, and are considered candidates for sale or divestiture. He said it would be unfair to customers to discuss which products may be dropped, but such decisions would also be based on the firm's market share in any given area.
PE has been shifting into higher-growth areas, such as cell analysis. The firm does not intend to be a major mass spec player, Summe said, but will use the technology for discovering biomarkers and couple that with its genetic screening business.
Agilent officials also reiterated at the conference that they have no plans to pursue a big acquisition, despite the $2.66 billion windfall from the recent sale of its semiconductor business (see BioCommerce Week 11/17/2005). The firm currently has more than $2 billion in cash on hand, according to Bill Sullivan, Agilent's president and CEO.
He said Agilent still intends to buy back $1.2 billion in company stock, and that the firm would consider smaller technology-related purchases, such as its recent acquisition of Molecular Imaging (see BioCommerce Week 12/1/2005). He also was quick to remind investors that 70 percent of large acquisitions fail.
Chris van Ingen, head of Agilent's Life Sciences and Chemical Analysis unit, also noted during the company's breakout session that the firm planned to launch a microRNA analysis product during the year, but he declined to provide any details. He said the company's plans for the molecular diagnostics market would focus first on its microfluidics platform.
However, van Ingen stressed that Agilent will remain focused on the research market, including expanding its market share in the chromatography market. The firm has plans to release a new liquid chromatography instrument this year to challenge Water's Acquity UPLC, which was launched last year. Indeed, Sullivan said one of Agilent's key goals is to surpass Waters as the top liquid chromatography vendor on the market.
— Edward Winnick ([email protected])
Smaller — But Entrenched — Rivals Discuss Plans for 2006
Affymetrix, which is currently not part of the BCW Index but competes against some of the firms in the microarray space, will be a rival to many in the molecular diagnostics space as these bigger shops delve deeper into the field with their respective technologies. Keeping these firms at arm's length, Affy CEO Stephen Fodor said that the company would open a clinical lab business next year with an eye toward growing its molecular diagnostics business.
Affymetrix Clinical Laboratories will be based in Sacramento, Calif., and will develop CLIA-certified tests for diagnostic partners based on the firm's GeneChip technology. Fodor said the tests would enable partners to get their assays on the market quicker than developing tests that have to be cleared by the US Food and Drug Administration's 510(k) process.
Officials from Illumina, another gene expression and genotyping player, also said that they are currently negotiating molecular diagnostic partnerships based on technology it gained through last year's acquisition of CyVera. But the firm's primary efforts are on building its market share in the genotyping space and its oligo supply pact with Invitrogen.
Serologicals, another competitor to several of the firms in the BCW Index, intends to be more aggressive than it has been over the past 18 months on the acquisition front, according to company officials at the conference. Bud Ingalls, CFO of Serologicals, said the firm would look to fill gaps in adjacent product areas and target ADME-Tox for expanding its product line. The company currently offers products for kinase, stem cell, nuclear function, antibody, gene expression, and protein profiling research.
Promega officials said they were targeting growth in the cell analysis and proteomics areas and would look at selective business and technology acquisitions. Currently, 42 percent of Promega's sales are for genomic applications, 31 percent for proteomics, 11 percent for cell analysis, 9 percent for genetic analysis, and 2 percent for molecular diagnostics. Company officials said its diagnostics business is growing rapidly thanks to partnerships with LabCorp and Abbott Laboratories.