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As Omic Technologies Head Toward Global View, Multi-Platform Firms Align for Change

The quest to understand and interpret the human genome has fueled the development of a unique set of companies within the molecular biology tools sector.

These companies provide multiple technologies across the sequencing, genomics, proteomics, and metabolomics markets. All of these companies are wrestling with the financial demands of growing their businesses in a market that is moving as fast as 21st century science and innovation will allow.

With more than one technology area to exploit, these companies are brainstorming on how to meet new market demands that are largely undefined but quickly accelerating. This market is being created by a small but growing number of life-sciences researchers who already have an installed base of genomics and proteomics tools, and have now targeted a need for innovative and powerful tools to create a new layer of additional biological information and analyze the massive amounts of disparate data that these new techniques are producing.

The term systems biology is freighted with baggage, but — without taking sides, or making any suppositions — this market is evolving around the idea of creating a “global” view of molecular biology. Toolmakers are calculating the investment it will take to transform the rapid advances of the genomics era into new tools and new revenue streams while, at the same time, supporting their current offerings.

Certainly, the recent reorganization of Applied Biosystems provides at least one example of how the power players in this market are repositioning their strategies and resources (see article above).

But ABI is not alone. Agilent Technologies in March created a new Integrated Biology Solutions unit within its Life Sciences and Chemical Analysis group. The new group hands the reins of the company’s gene-expression, proteomics, and reagents businesses to a 23-year veteran of the company, Fran DiNuzzo. Agilent has since rolled out several new products under this unit’s umbrella, announced plans to acquire a software company, and solidified its relationship with strategic partner Rosetta Biosoftware.

Agilent and ABI, as well as 13 others, form BioCommerce Week’s initial Index of Diversified Molecular Biology Tools Companies (see below). The list includes Becton Dickinson, Beckman Coulter, Bio-Rad Laboratories, Bruker BioSciences, GE Healthcare, Harvard Bioscience, Invitrogen, Molecular Devices, PerkinElmer, Sigma-Aldrich, Stratagene, Thermo Electron, and Waters.

BioCommerce Week screened the large universe of companies covered by the GenomeWeb family of publications to create an initial list of companies that are leaders in commercializing more than one category of “omics” tools. These companies are already starting to staff the help desks of the future to address the questions that high-end and multi-platform customers are asking as they develop a systems approach to molecular biology research. Some of these companies are creating new systems biology units, appointing managers and shifting staff, and training sales forces in how to make a new kind of product sale.

Certainly, one of the companies to watch in this collection is General Electric. With a $10.3 billion acquisition of Amersham PLC in April, GE established a UK-based GE Healthcare unit containing Amersham’s suite of molecular biology tools and GE’s portfolio of in vivo imaging tools and information technology assets — as well as opening access to its well-heeled global research and development resources. In doing so, the company created a formidable set of tools that it is aiming at the molecular diagnostic marketplace. While a corporate spokesperson for this new unit hesitated to characterize these moves as an entry into the emerging “global view” or systems biology market, no doubt GE Healthcare will have to grapple with the challenge of bridging technologies, and acquiring or developing the new tools that clinical researchers, patently first-adopters, are already putting on their wish lists.

There are others. Becton Dickinson, with $4.5 billion in sales in 2003 and a $12 billion market capitalization, is investigating systems biology applications in its BD Technology research and development operations in Research Triangle Park, NC.

There is no question that mass spectrometry is one of the key tools driving the rapidly developing proteomics market. This instrument is also being developed for application in metabolomics or small-molecule assays. As a result, the instrument makers Bruker, Thermo, and Waters, as well as ABI, can be seen as key indicators of the growth of the overall molecular biology tools market.

Bio-Rad, Harvard Bio, Stratagene, and Molecular Devices also occupy positions on the index for their tools portfolios, as well as for their function as rollups for the field.

Just this year, Bio-Rad bought the assets of Hematronix in March, and purchased MJ GeneWorks for $32 million in August, after posting more than $1 billion in sales for 2003.

Harvard Bio, which in 2003 acquired Amersham’s Hoefer branded electrophoresis business for $5.3 million; BioRobotics for $3.2 million; and saw its wholly owned subsidiary Genomic Solutions unit purchase GeneMachines for $8.3 million, then reported consecutive quarters of shrinking revenues in 2004.

Stratagene, formerly a privately held company, on June 2 closed on the acquisition of Hycor and on June 3, began trading on the Nasdaq national market, effectively completing a reverse merger to access the public markets.

Molecular Devices bought Axon Instruments for a total of $132.7 million in cash and stock in July.

Three other companies on the list — Beckman Coulter, Invitrogen, and PerkinElmer — are all multiple-platform providers with billion-dollar market capitalizations, and nearly all with billion-dollar yearly sales.

The BCW Index Companies’ Performance So Far

Overall, the BCW Index companies individually averaged $1.7 billion in sales, with aggregate sales of $25.6 billion in 2003. Together, they spent $2.3 billion on research and development in 2003, down from $2.5 billion in 2002, but still averaging $159 million each for R&D spending during 2003.

Together, at the start of September, these companies had an aggregate market capitalization of $61 billion, or about $4 billion each (see chart below).

The index price for this group of companies is pegged to July 15, the start date for the preparatory work for this publication.

— Mo Krochmal ([email protected])

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