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PerkinElmer to Divest Proteomics Business to Concentrate on Human, Environmental Health

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This story has been updated from an earlier version.

PerkinElmer plans to sell its proteomics product line to focus instead on developing screening and diagnostic tools and technologies for food safety and security applications, the company said last week.

It was not immediately clear whether the company plans to sell off all of its proteomics assets or to retain a portion of them, though PerkinElmer described the entire business line as “discontinued operations” during its fourth-quarter earnings statement.

According to a PerkinElmer spokesman, company officials have been traveling since last week and were not available for comment.

The disclosure came three months after PerkinElmer said it would realign its business to focus on human and environmental health [See PM 11/13/08], a reorganization that includes parts of the company’s Bio-discovery and Consumer Lighting businesses.

In total, the businesses targeted for divestiture generate about $90 million in revenue annually, PerkinElmer said.

When it originally disclosed its plans to restructure in November 2008, however, PerkinElmer said only that it had placed its specialty-lighting business under “strategic review.” The company did not mention its proteomics business as a possible target for changes.

That disclosure was made last week as it announced its fourth-quarter earnings results. In a statement, PerkinElmer said it would exit “certain product lines within the Bio-discovery business and reallocate resources to higher-growth, strategic opportunities within that business.”

In response to an analyst question during a conference call accompanying the earnings results, CEO Robert Friel said the divestitures were “fundamentally around proteomics and genomics.”

“We’re really trying to focus in probably three key areas in the Bio-discovery area,” he said: cellular analysis, biochemical screening, and detection and automation.

However, Friel conceded during the call that, because of the current global financial environment, PerkinElmer would probably be able to fetch only a discounted price for the discontinued businesses.

“Will we maximize the value for them in this environment? Probably not,” he said. “I think it would have been a better time maybe 12 or 18 months ago. Having said that, though, I think the most important thing we wanted to do was … get focused on this environmental and human-health [market] because I think that was an important … initiative we wanted to get across the company, and reorganize the company, and, quite frankly, those businesses didn’t fit.

“I still think it’s saleable,” Friel added. “I still think it’s a fairly attractive asset, or are attractive assets, and I think we have people interested in them.”

He did not identify potential buyers or disclose a target price for the divested businesses. Interim CFO Michael Battles said during the call that the product lines in the company’s Bio-discovery business slated for the auction block generate between $6 million and $7 million in revenue per year.

Dashed Ambitions

PerkinElmer’s decision to exit the proteomics market comes after a decade-long effort by the company to gain a place in the proteomics-tools market. After EG&G, a former government contractor, acquired PerkinElmer’s analytical-instruments business and the rights to the PerkinElmer name in 1999, the company had intended to become a major player in life sciences.

For proteomics, those ambitions resulted in a partnership in 2001 with MDS Sciex, now MDS Analytical Technologies, to develop the prOTOF mass spectrometer [See PM 11/19/2001].

At that time, Ian Taylor, group product manager for proteomics at PerkinElmer, told ProteoMonitor that while the company was a bit player in proteomics, its mission was “to position [it] as a serious player” in proteomics.

“We’re actually doing a great deal and bringing a lot of new products to market at this time,” he said.

Two years later, Sandra Rasmussen, the business unit leader for proteomics and array systems, said that PerkinElmer was “committed to the proteomics market specifically with TOF technology,” and might even be looking at venturing into the higher-end mass-spec market, looking for mass-spec collaborators other than MDS, and would be investigating ways to make content chips as part of its offering of protein arrays [See PM 09/19/2003].

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Among the proteomics research products it has offered are the ProXPRESS Proteomic Imaging System; Progenesis 2D image-analysis software; Phoretix 1D gel-analysis software; MultiProbe II workstation for in-gel digestion and spotting; and the prOTOF mass spec, a MALDI-TOF platform that would become PerkinElmer’s last-ditch effort to gain make a name for itself in the sector [See PM 02/10/2003].

MDS declined to comment for this story.

Nonlinear and PerkinElmer had a distribution agreement on the Progenesis 2D software that formally ended last March. In an e-mail this week, Nonlinear CEO Will Dracup said that the company will provide service support to PerkinElmer customers on the software.

He also called it a “shame” that PerkinElmer is leaving proteomics “right at the point when the proteomics community is addressing the problem of reproducibility, which has been holding proteomics back until now.”

At least one researcher, however, said he was not surprised by PerkinElmer’s decision. During the summer of 2006 Daniel Chan, director of the Center for Biomarker Discovery at the Johns Hopkins University School of Medicine, entered into a deal with the company to evaluate the prOTOF.

But a few months ago, he returned the instrument to PerkinElmer after changes in personnel and discussions with management at the company suggested that something was afoot with the company’s proteomics business, he said.

“It [wasn’t] like I was concerned about the performance of the system, but in terms of my own long-term planning and what I’m doing in biomarker discovery and so forth, we decided it would be better for us not to continue to work with their system,” Chan said. “I was aware of potentially what was going to happen.”

Some in the proteomics industry could see PerkinElmer’s decision as another sign that selling proteomics instruments remains a challenging business model.

Indeed, PerkinElmer is the most-recent company to conclude that selling proteomics instruments is not a profitable business model, at least not in the near term.

In 2007, after merging with Ecopia Biosciences to form Thallion Pharmaceuticals, Caprion Pharmaceuticals spun out its proteomics business into a separate entity called Caprion Proteomics, 80 percent of which was eventually sold to a hedge fund.

And last year Lumera closed its proteomics subsidiary Plexera when it merged with GigOptix, and Miraculins abandoned its proteomics R&D model to become a diagnostics firm, following a path laid by Vermillion, then called Ciphergen, which sold its SELDI business to Bio-Rad Laboratories in 2006.

And in the ongoing financial downturn, proteomic businesses, especially those developing and manufacturing instruments, may be facing an especially difficult future, according to two recent reports from investment bank Leerink Swann [See PM 12/18/08 and 01/08/2009]

By the Numbers

PerkinElmer announced its plans to sell off its proteomics business as it disclosed its fourth-quarter earnings. Total revenues for the three months ended Dec. 28, 2008, inched up 3 percent to $495 million from $480.7 million in the year-ago quarter.

The businesses that are being divested were reported as discontinued operations. Including revenue from those operations, company-wide revenues would have fallen 3 percent year over year.

The company reported that net profit slid 41.7 percent to $30.6 million from $52.6 million from the fourth quarter of 2007. The discontinued operations posted a $3.6 million loss.

R&D spending during the period slipped 6.5 percent to $25.1 million from $26.9 million one year ago.

For full-year 2008, total receipts rose 13.8 percent to $1.9 billion from $1.7 billion in 2007. Profits slid 4 percent to $126.4 million from $131.7 million in 2007, and R&D spending climbed 3.9 percent to $108.1 million from $104 million, PerkinElmer said.

The company said it had $179.1 million in cash and cash equivalents as of Dec. 28.

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