Invitrogen’s plan to buy Applied Biosystems, disclosed last month, is making some array customers anxious about how the marriage could affect their research.
A number of customers who use array and array-related products made by both firms said that they are concerned that the combined entity, which will be called Applied Biosystems, will consolidate product lines, possibly raising reagent prices and hurting customer service.
However, they said the $6.7 billion cash and stock deal, anticipated to close this fall, is unlikely to have a significant impact on the availability of the products they use.
“We think the prices of everything will go up, but overall, we are not expecting any major changes,” David Willoughby, a senior scientist at Ocean Ridge Biosciences, an expression profiling-service provider, said this week.
ORB, based in Palm Beach Gardens, Fla., offers microRNA expression profiling on Invitrogen’s NCode miRNA array platform. Willoughby said that because of possible product consolidation between the two companies — the firms haven’t disclosed the merger plans in such detail — a jump in reagent pricing was particularly likely.
“I think there will be less competition and that will drive up the pricing,” he said. “The price of reagents has already increased over the past year, and part of that is due to inflation, but also the result of, I think, a lack of competition.”
Willoughby said that he doesn’t expect the merger will “affect NCode in any way because there already is a lot of competition in the miRNA array market.” He added that consolidation might not actually be bad for ORB, as it could give newer companies an opportunity to expand their market share if ABI decides to raise its prices.
Invitrogen and ABI offer a number of products that are widely used by array users. Though Invitrogen has avoided the gene-expression and genotyping markets, it does offer protein and miRNA arrays, as well as a number of reagent kits that are used in array experiments, including kits for DNA and RNA purification, amplification, and labeling.
ABI continues to support customers of its array-based 1700 Chemiluminescent Expression Analysis System, which the firm began phasing out last October (see BAN 10/30/2007), and sells its own miRNA array platform, gained through its 2006 acquisition of Ambion (see BAN 3/7/2006).
“When two companies of that size combine, it is theoretically impossible that it wouldn’t have some effect on their customers.”
Besides arrays, ABI offers a suite of RT-PCR TaqMan assays for gene expression and genotyping that array users often use to validate results.
Invitrogen this week declined to discuss the potential impact the combination of the two firms could have on array users because the deal is still subject to shareholder and regulatory approval.
Last month the two firms announced the creation of a team to lead the integration. An ABI spokesperson said it was too early in that process to talk about individual product lines. She declined to comment further.
Christian Gülly, director of the molecular biology core facility at the Medical University Graz in Austria, which still offers array services on the ABI 1700, said he is also concerned that the deal will result in higher prices.
“I think there is some overlap between their products and hopefully both of their product lines will survive this merger,” he said last week. “With respect to prices, I would have preferred that they didn’t merge.”
To be sure, not all customers are wringing their hands over potential price increases.
“From our perspective, we don’t think it will have much of an impact on us,” said Shawn Levy, director of Vanderbilt University’s Microarray Shared Resource. “In talking with the sales reps, it appears that they are not expecting substantial changes either.”
Moreover, Levy warned that it would be a “mistake” for post-acquisition ABI to raise prices on reagents kits. ”It would be an interesting decision to radically change pricing due to the acquisition because if you compare it with the competitors’ offerings, ABI’s stuff is at a reasonable price,” he said.
“A significant price increase of 15 to 20 percent could drive longstanding customers to look into other opportunities and at other platforms,” said Levy. “I don’t know how much room there is to absorb that kind of increase in the market; it would be controversial considering the overall marketplace for genomics assays.”
Andrew Brooks, director of the Bionomics Research and Technology Center at Rutgers University’s Environmental and Occupational Health Sciences Institute and a customer of both companies, said that it is possible that reagent costs “may very well go up,” but that he is more concerned about how the integration of ABI and Invitrogen may affect the service he receives in his lab.
“The general question is, ’Who will be driving who?'” Brooks said this week. “Even though ABI is bigger, technically it is Invitrogen that is buying ABI and I think it is unclear who will be the brand and who will drive it.”
According to Brooks, the quality of customer support is “better on the ABI side than at Invitrogen,” and his main concern is not pricing but “how this deal will affect the quality of support for our instruments.”
Brooks noted that there are certain redundancies in the product lines of both companies, and he said that it is likely that the challenges of integrating those product lines and sales and support teams would inevitably hit the firms’ customers.
“They are going to have some problems and people are going to spend a lot of time figuring it out,” he said. “When two companies of that size combine, it is theoretically impossible that it wouldn’t have some effect on their customers.”
In terms of specific product lines, users said that it was unlikely the deal would affect Invitrogen’s ProtoArray protein array products or its NCode array. Michael Snyder, director of Yale University’s Center for Genomics and Proteomics, said that it’s possible that ABI’s mass-spectrometry business could actually complement Invitrogen’s ProtoArray platform.
“If anything, there are plenty of opportunities for the two technologies to be used together,” he said this week. “They could adopt mass-spec readouts to protein arrays, for example.”
Snyder, who consults for Invitrogen, added that Invitrogen is “interested in getting more involved in the proteomics space,” and that ABI’s competency could be seen as “an opportunity to design more kits for this area, so it's a win-win situation.”