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Qiagen Plans to Have Aggressive M&A Stance In '07; Inks Dx Deals With Pathway, Sequenom

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
SAN FRANCISCO — Qiagen plans to be aggressive in the mergers and acquisitions market this year and the firm believes the rapid emergence of molecular diagnostics will drive greater sales growth, CEO Peer Schatz told BioCommerce Week in an interview last week.
The company also said it has penned two new agreements with Pathway Diagnostics and Sequenom that aim to expand its molecular diagnostic footprint.
Qiagen, which was very aggressive on the M&A front in 2004 and 2005, made only two buys in 2006. But according to Schatz, “that’s more a coincidence. We continue to be very aggressive and we’re looking at a lot of things.”
Over the past few years, Qiagen focused on two areas in its acquisition strategy: assay technologies and molecular diagnostics, and sample preparation. All of its 15 transactions in the past few years fit into one of those two categories, Schatz said.
“That is something our investors give us very positive feedback on,” he said. “They basically think they can digest and understand an acquisition very quickly because of the track record and the clear rationale.
“I always believe that acquisitions are not a strategy, per se, but are only a supplement and ingredient to strategies,” said Schatz. “If that gets turned around, it often goes wrong. For us, there was never an acquisition budget where we wanted to spend certain amounts of money. There was never a target in terms of the number of opportunities that we wanted to close in on. But there is definitely an internal strategy that can, if the right opportunities arise, resort to acquisitions.”
In a presentation here this week to investors at the JP Morgan Healthcare Conference, Schatz stressed that Qiagen has been very selective in its acquisition strategy.
“In 2005, we had a strong emphasis on protein sample preparation … and [in 2006] we did two deals, and we spent about half of what we spent [in 2005], but I would say that’s more a coincidence,” he told BioCommerce Week. “We continue to be very aggressive and we’re looking at a lot of things.
“Acquisitions are certainly important, and we have been very aggressive in terms of the number of targets and the way we’ve gone about doing acquisitions,” said Schatz. “That won’t change going forward. But I don’t necessarily think it is a winning strategy to try to attract investors by putting out a lot of press releases with closed transactions. That is often very short-sighted.”
Qiagen made only two acquisitions last year for a total cost of $60 million. In May, the firm acquired Gentra Systems for $38 million (see BioCommerce Week 5/10/2006). In October, Qiagen acquired Genaco Biomedical for $22 million, but that total could climb to $40 million if certain milestones are met (see BioCommerce Week 11/1/2006).
The Genaco acquisition, in particular, builds on last year’s acquisitions of Artus and Shenzhen PG Biotech, which reflects Qiagen’s plan to expand its molecular diagnostics portfolio (see BioCommerce Week 6/2/2005 and BioCommerce Week 9/29/2005). Schatz told investors this week that Qiagen brought in $115 million in molecular diagnostic sales in 2005, and it expects that number to continue growing rapidly.
The acquisition of Genaco provided 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. In November, the company said it would seek US Food and Drug Administration clearance this year to market two PCR-based multiplex panels developed by Genaco (BioCommerce Week 11/15/2006).
Though company executives said that they are prioritizing which panels they would initially push through the US regulatory process, it is highly likely the first will be an avian influenza panel. They also said that the tests could eventually be applied to a point-of-care platform, which would be able to provide results much more quickly than lab-based instruments.
In 2007, “we’ll continue to see a rapid emergence of molecular diagnostics,” said Schatz. “We’re seeing phenomenal opportunities for us there. And the dissemination of [molecular biology] technologies is most exciting. We are active in areas such as veterinary testing, quality controls, and food testing, and these types of businesses.”
Six months ago, Schatz said during a presentation to analysts and investors in New York that the applied testing markets will represent a $5 billion opportunity by 2008 (see BioCommerce Week 7/5/2006), and this week noted that he expects those markets to grow strongly over the next 15 to 20 years.
New Dx Deals

“Acquisitions are certainly important, and we have been very aggressive in terms of the number of targets and the way we’ve gone about doing acquisitions. That won’t change going forward.”

The JP Morgan conference frequently kicks off dealmaking in the industry, and Qiagen used the event to announce two new agreements with Pathway Diagnostics and Sequenom.
Under the agreement with Malibu, Calif.-based Pathway, Qiagen said the companies will offer customers a bundled solution of Qiagen's assays and Pathway's clinical development and testing services. Qiagen said it will use its sales force to "develop project opportunities" for the companies to address jointly.
The company said in a statement that it hopes the partnership will enhance the "clinical utility of new biomarkers through comprehensive assay development, sample-to-result qualification and clinical validation of genetic, pharmacogenomic, metabolomic and toxicogenomic biomarkers."
Schatz told conference attendees that the alliance will enable Qiagen to offer its pharmaceutical clients testing services that it couldn’t offer on its own while ensuring those same clients continue to use Qiagen reagents and assays. He told investors that the real value of Qiagen’s technologies is in molecular profiling in the drug-development process.
Separately, Qiagen said that it would work with Sequenom to develop a preanalytical solution to enrich nucleic acids for prenatal diagnostics. Qiagen said the goal of the Sequenom partnership is to develop reliable reagents for the enrichment of small nucleic acid fragments, such as those found in maternal plasma, for analysis of cancer and other disorders.
Sequenom will retain commercial rights to any tests the companies develop under the partnership. “Sequenom intends to develop a viable and robust platform initially for non-invasive prenatal diagnostics that can be leveraged to other applications based on the detection and characterization of small nucleic acids,” Sequenom President and CEO Harry Stylli said in a statement.
When Sequenom begins selling the platform it will face an uphill battle to take market share from PerkinElmer, which is known as the market leader for pre-natal and neonatal tests, as well as a number of other mass spectrometry makers that are jumping into the field.
Financial terms of the agreements were not released.

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