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Peer Schatz on Qiagen s Emerging Protein Offerings and Acquisition Strategy

Qiagen has been among the most aggressive acquirers in the multi-platform molecular biology tools space. The firm has made six acquisitions since April, with a particular focus on proteomics and molecular diagnostic applications. This week, Qiagen CEO Peer Schatz spoke with BioCommerce Week about the firm's rapidly expanding portfolio and its acquisition strategy.

Qiagen has now added several new technologies for the protein sample prep area through the acquisitions announced this week as well as the Nextal purchase. Why has there been such a strong focus on the protein area for Qiagen?

In 2004, we spent a lot of time planning what we wanted to be and where we wanted to go, and we created some long-range plans. Clearly, we have a very strong brand in the pre-analytical space, and we wanted to maximize that going forward. And there were three areas of initiatives that we defined. The first was dissemination. We see molecular biology disseminating very rapidly. Molecular biology is moving out of the typical research lab and moving into areas where it had not been used before. Diagnostics is clearly a first area, but we're seeing our friends in veterinary testing, manufacturing, QC, personalized medicine, border control, food testing, these types of things coming. But also geographical dissemination. We wanted to boost our activities in certain areas. We created separate marketing efforts in those areas, and we also geographically expanded both in India and China, [where] we acquired some business to base out of.

The second initiative was defined standardization. I'm not a believer in standardizing around a brand. I believe in standardizing around something that really provides benefit for innovation. What we are clearly seeing is standardization starting to kick in, both in the laboratory, but especially in the pharma area, standardizing translational medicine from discovery into diagnostic routine use, and especially in diagnostics with a big regulatory initiative that we started. We were the first to launch the first 510(K)s in our space. In this area we saw that to have the ability to combine the analytical, or the assay itself, with the pre-analytical product provides a huge benefit for somebody who wants to sell an analytical platform. With Artus, we acquired a full range of IP and capabilities and also OEM networks in addition to about 25 of our own partners, mostly overlapping. But it allows us to take a diagnostic company that has never been in the molecular space and gives them the capability to go molecular within a very short period of time.

We believe that at some point and time you will have the sample, collection, preparation, stabilization, and assay set-up all built into something like that, and you would plug it into a standardized platform. That's our vision in that space.

The third area I have case study on is the systems biology area. We clearly see that our customers are working with DNA, RNA, proteins, metabolites and cells and everything in concert. And the protein chemist is starting to move out of the pure protein chemistry lab and coming more into molecular biology and vice versa, and you're seeing a lot more overlapping. In the protein area we were not very present. As a sample preparation provider, we had some capabilities in affinity chromatographies. We saw that in 2004 and started working on it. In January, we launched eight fractionation products under the QProteome line. We launched another four now. We're twice as big as anybody else in this space. We launched in vitro translation and in vivo expression products in the July launches that just came out a few days ago. The affinity chromatography products were rejuvenated and relaunched in July with new capabilities, and crystallization we were looking at for quite some time but we saw that there was this one company, Nextal, which had created something really fascinating and had a tremendous following among the hardcore crystallization guys, and we decided to join teams with them. The ability for us to work with them has opened great opportunities in this very tight-knit crystallization user group. The last area that we still had to address was mass spec, the tool of choice for proteomics, and we needed an offering there. In looking at mass spec, it is a very tedious sample preparation process. We looked around and were quite uncertain how to address that. But a year ago we saw [LumiCyte] come out with its first products that use these nanostructures, these monolayered surfaces, to, on the same chip, bundle fractionation and concentration. That's revolutionary for any mass spec user. A little bit later we discovered SuNyx, which had just started launching its products for LC mass spec for low-abundance proteins, also using nanostructured surfaces, and allowing an extreme concentration on the chip. Those two in tandem were worked on and ultimately closed last Monday.

But we're not going to get into conventional chromatography. We think that's an area GE addresses extremely well with a huge market leadership.

Are there any other types of pre-analytical protein technologies that you would like to add to your current offerings, or do you think you've fulfilled that?

I think we have a very good offering to start out with. Certainly, we're not there yet. I think in a fast-moving technology area no one should ever claim to have a complete and finished offering. So, we will continue to build it, and the capabilities will going forward will broaden in this space. I wouldn't want to mention a specific target right now, but I think the pipeline will be quite attractive.

Invitrogen has made a strong push over the last year into the protein area as well. Do you see this as putting pressure on Qiagen to make these acquisitions and broaden your offerings here?

I think that the strategic initiatives are in a different direction. I think the direction that Invitrogen has taken, as far as I have the details on it, is a different direction. We are a pre-analytical company. Mostly we would come upstream. In this space we have a brand recognition and a strength and capabilities that are unmatched. I wouldn't say that we are acting on any competitive pressures. I think vice versa, we see an opportunity and we are aggressively moving into it.

Do you anticipate more acquisitions going forward this year and into next year?

I think this was really just the start. We did six or seven acquisitions the last few months. I'm not a big believer in adding a business just to have a business. I'm not a big believer in size. A customer looks through that, especially if you sell to a very innovative customer who is running at the forefront of science. We see ourselves as extremely focused on a space, and we're enjoying very rapid growth based on this focus. Going forward, we will continue to add businesses. Most of the deals we have done have been catalytic. Our organic growth rate is significantly higher than most of the industry players; it's running in the low teens at the moment. We're also looking at larger things — the whole universe. We just know very well where want to go, and acquisitions are a big part of that as well.

When does a contribution become considered organic growth? For example, Nextal's contribution to Qiagen?

Excellent question. That's a number that is very confusing at the moment. If we look back, Qiagen actually divested companies in 2004. We sold off 10 percent of our business. I just didn't think we should be in primers and probes. We did a lot of readjusting and closed a lot of research initiatives that I didn't think belonged to our focus. It somehow seems to have emerged in the industry that one year after acquisition everything becomes more organic. I would more look at it like three years. That's the measure we're using here internally, because really after three years you have the next-generation product that you bring to the market, and at that point and time you're really putting your own activities to a product.

Do feel like you're exposed a little bit greater to integration risks by adding so many pieces in such a short amount of time?

The integration risk has to be taken extremely seriously. The thing that works for us, and the types of deals that we've been doing is that the companies are smaller in size, and they have typically a core competence that is extremely close to Qiagen. So, most of the companies have been pre-analytical companies. They're used to cleaning up samples and purifying them. In the case of Artus, we had been working together for many years and we knew the folks there extremely well. So, culturally it is often easier if the company is smaller or if there is an existing relationship. Again, we're not looking for size. We're typically looking for catalytic events. The best thing to do here is to create certain standards on how to integrate. The biggest danger is always uncertainty, and that's something that standards help remove.

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