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Qiagen Expands Molecular Dx Arsenal By Acquiring Genaco's Multiplex Assays

Building off of last year’s acquisitions of Artus and Shenzhen PG Biotech, Qiagen has made another bid to expand its molecular diagnostics portfolio through the acquisition of Genaco Biomedical this week.
 
The acquisition provides Qiagen with a PCR-based multiplexing technology and a handful of assays that will be paired with the quantitative molecular diagnostic products the firm gained through its earlier acquisitions. It is only the second acquisition this year for Qiagen, following the nine purchases it made last year, but fits the firm’s ongoing strategy to expand its molecular diagnostics play.
 
Qiagen acquired Huntsville, Ala.-based Genaco for $22 million in cash, plus 125,000 shares of restricted Qiagen stock that was issued to Genaco’s founder and chief scientist. Qiagen said that it also agreed to pay up to $18 million in milestones, which will be triggered when the firm receives certain anticipated grants and comparable funding.
 
Privately held Genaco has developed a proprietary PCR-based multiplexing technology, called Tem-PCR, which is used in developing molecular diagnostic tests. According to a Qiagen spokesperson, Genaco currently sells 11 test panels. The firm’s tests include panels for respiratory, hospital-acquired, and bacterial infections, and are currently sold for research use only.
 
Qiagen also noted that Genaco is finishing clinical studies on its H5N1 avian flu assay, which is part of its ResPlex III panel, and plans to file for US Food and Drug Administration 510(k) clearance.
 
The Qiagen spokesperson said the firm expects that the Templex panels will primarily be used to qualitatively detect potential targets that will later be quantitatively tested by assays developed by Artus.
 
The Tem-PCR technology employs a combination of nested primers and SuperPrimers that Qiagen believes gives the assays an edge over competing technologies. According to the spokesperson, the Tem-PCR technology increases sensitivity and uniform efficiency by using only one pair of highly concentrated generic SuperPrimers with an elevated affinity to Taq polymerase.
 
In addition, Qiagen said that although the assays can be used on a variety of detection instruments, they are currently optimized and marketed for use on Luminex’s bead-based platform. Qiagen has been selling its LiquiChip system, which is a modified version of Luminex’s platform, since 2000.
 
The firm believes the acquisition will enable it to provide an automated, complete molecular diagnostics multiplexing option to its customers in the research, diagnostics, and applied testing markets.
 
Qiagen’s spokesperson said that multiplexing has “huge potential” in the future molecular diagnostics market. “The opportunity to test for several targets with just one test will become increasingly important,” the spokesperson wrote in an e-mail to BioCommerce Week.
 
According to the firm, multiplex molecular diagnostic tests for genetic and human leukocyte antigen testing have been widely adopted. For example, PerkinElmer, the world’s leading genetic test maker, signed a deal earlier this year to standardize its multiplex assay development on Luminex’s xMAP platform.
 
But Qiagen also is betting that infectious diseases, such as influenza and hospital-acquired infections, are a key growth market for multiplexing.
 
Genaco has 15 employees, who are all expected to join Qiagen. The acquisition is expected to add $200,000 in revenue to Qiagen’s sales in the fourth quarter, and $3 million in sales for all of 2007.
 
Qiagen expects to incur one-time charges of roughly $.02 per share in the fourth quarter related to in-process research and development and the write-off of certain assets. The firm also expects the transaction to be dilutive to 2007 EPS by up to $.03, primarily due to the cost of clinical trials and filing for regulatory approval of the infectious disease panels.
 
Another Piece for the Molecular Dx Biz
 
Qiagen has been rapidly building its molecular diagnostics business both through internal development efforts and acquisitions over the past two years. The firm generated molecular diagnostics sales of approximately $115 million in 2005, and company officials estimate that that part of its operations is growing twice as fast as the company’s overall business.
 

Genaco is finishing clinical studies on its H5N1 avian flu assay, which is part of its ResPlex III panel, and plans to file for US Food and Drug Administration 510(k) clearance.

The Genaco purchase follows last year’s acquisitions of Artus and Shenzhen PG Biotech, which had formed the cornerstone of the firm’s molecular diagnostics strategy.
 
Qiagen acquired Artus and its portfolio of over 60 PCR-based assays at the end of May 2005 for $39.2 million (see BioCommerce Week 6/2/2005). That acquisition marked the first time Qiagen would sell assays, rather than just sample preparation products, to the molecular diagnostics field.
 
The firm followed that purchase a few months later with the $14.5-million acquisition of Shenzhen PG Biotech, which brought Qiagen several molecular diagnostic assays cleared for marketing in China, as well as an established sales channel and regulatory expertise in that market (see BioCommerce Week 9/29/2005).
 
The Genaco acquisition provides complementary technologies to the firm’s previous acquisitions and also fits with Qiagen’s acquisition strategy of focusing on smaller, niche players.
 
Earlier this year, Qiagen CEO Peer Schatz explained that the firm’s acquisition strategy is “not necessarily served by being big, and that has always been our choice to not sacrifice speed for size. For us, if you look at the trend of acquisitions we've done — and we have done transactions that were south of $50 million in consideration — the value generation we saw there was just spectacular,” he said (see BioCommerce Week 5/10/2006).
  

Focusing on smaller players, with fewer products and employees, has also enabled the firm to thus far escape some of the integration issues facing rival Invitrogen, which has been struggling with a variety of problems regarding its salesforce, the large number of products it has rapidly added to its portfolio, and an IT infrastructure overhaul (see article in this issue).

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