Talk about a return on investment. A year and a half ago, Amersham purchased the CodeLink microarrays unit from Motorola for $20 million.
Last week, General Electric announced that it intends to purchase Amersham for $9.5 billion in stock in a blockbuster acquisition that rocked the life-sciences and biotechnology worlds.
Clearly GE, one of the richest companies on the planet, did not purchase Amersham just to get its hands on CodeLink, the Amersham unit that ranks third after Affymetrix and Agilent Technologies among the three current industrial-scale manufacturers of microarrays. But the acquisition of Amersham, Jeffrey Immelt, chairman and CEO of GE, said in a statement, “will allow GE to accelerate the development of molecular imaging and personalized medicine where it will be possible to predict and treat disease with therapies tailored to the individual.”
Today, personalized medicine is a vision emerging as clinical research institutions and other hospitals begin to use tests based on microarrays and other technologies to distinguish among groups of patients in order to better tailor their treatments to particular cases.
But for microarrays to drive this vision further forward, this analog technology will need to evolve toward one that will provide digital answers on the order of near-100-percent accuracy. These advances can help the technology move from the estimated $800 million research market it now encompasses to begin to approach the molecular diagnostics market, which analysts measure at $20 billion a year.
Inside the CodeLink unit, the announcement of the proposed acquisition on Oct. 10, was greeted with delight.
Officially, CodeLink represent-atives did not return BioArray News requests for comment regarding the future of the product line under the GE logo, if the acquisition, which is subject to shareholder and regulatory review, is completed.
However, a CodeLink insider, speaking on the condition of anonymity, told BioArray News: “It is a positive situation.” The CodeLink product, this source said, “is a technology that will not get lost in the shuffle.”
Sir William Castell, the chief executive officer of Amersham, in an interview with Cantos, a corporate communications firm, said the deal took two years to negotiate.
“I’ve been looking at how we develop our vision of personalized medicine very closely over the last two years and I’ve been looking to see how we would scale ourselves to undertake what is an exception-ally large task,” said the 55-year-old executive, who was knighted in June 2000 for his services to the life sciences industry. “GE was already on my radar in terms of people who had the type of technologies that we might wish to collaborate with.”
On completion of the deal, which is expected to come in mid-2004, Castell will become a vice chairman of General Electric. And, Amersham, which, as the Radiochemical Centre, was the first British company to be privatized by Prime Minister Margaret Thatcher’s government in the 1980s, will become General Electric Healthcare Technologies. It will be the first of GE’s divisions to be headquartered outside the US. Castell, who received a salary package of over £1 million ($1.6 million) in 2002, will join three other GE vice chairmen who each earned no less than $8 million a year in 2002.
Both Immelt, who had a salary of $14.5 million in 2002, and Castell spoke of synergies between the two companies. For some, that means a reduction of redundant positions. Castell quantified that as 3 percent in “our total base cost” over the next three years. Immelt said GE’s goal would be to take out costs from “both sides” and reduce duplicate infrastructure.
For insiders in Amersham’s CodeLink unit, the hope is that the emerging technology will attract a share of GE’s huge research and development expenditures.
GE Global Research is in charge of all corporate research and development for the company and employs 2,000 researchers among 15,000 total workers centered at what the company calls the “birthplace of corporate research and development” at Schenectady, NY; and at new centers in Bangalore, India, and Shanghai, China, with a yet another new center planned for Munich in 2004.
Global Research spokesmen did not return BioArray News requests for comment.
“We will invest more than $3 billion in technology, including major investments in our global research centers,” the company said in its 2002 annual report, which also tallies 70,000 patents.
In the GE’s third-quarter conference call, Immelt may have dashed expectations of a financial windfall for Amersham: “We have spent $25 million to staff up [research and development] with biologists and chemists,” he said. “We have the groundwork in place and I’m not anticipating a huge increase in expenditures, but a much more synergistic use of our resources.”
GE spent $2.6 billion on R&D in 2002 , $2.3 billion in 2001, and $2.2 billion in 2000. Amersham reported total R&D expenditures of £184.2 million ($295.2 million in Dec. 31, 2002 exchange rates) in 2002, up from £173.8 ($252.3 million in Dec. 31, 2001 exchange rates) in 2001.
Since buying the CodeLink unit from Motorola in July 2002, Amersham has invested at least $5 million in capital to build a new factory to continue manufacturing micro-arrays under the Six Sigma quality-control manufacturing processes that were, ironically, pioneered by Motorola and GE.
The company has pressed the R&D funding accelerator hard enough that CodeLink has released four new microarray products since the 2002 acquisition, including the Sept. 10 rollout of the CodeLink Human P450 SNP Bioarray, a product that joins the Affymetrix-manufactured Roche Diagnostics AmpliChip microarray (see BAN, 4/25/2003) as products with clear designs on the vision of personalized medicine.
The CodeLink Human P450 SNP Bioarray, which genotypes 110 SNPs within nine P450 genes (CYP1A1, 1A2, 1B1, 2C9, 2C19, 2D6, 2E, 3A4, and 3A5), is “designed for screening clinical trial populations to determine their toxicogenetic profiles and for the discovery of novel associations between P450 genotypes and phenotypes,” the company said in a statement.
Trevor Hawkins, vice president of development for Amersham Bioscience’s discovery systems unit, and the executive responsible for setting the strategic direction of Amersham’s genomics business, told BioArray News in August (see BAN, 8/6/2003), that the company was looking in-house, at Amersham Health, in order to approach the clinical market: “”We have been looking in the last couple of months how we could play on the strength of Amersham Health — how we can play on their products, channels, and development programs. It’s one of the reasons why we brought the business [Codelink]. There are great opportunities.”
Today, it looks like those opportunities are greater given the resources that will become available through General Electric — if Amersham stays intact after the synergies are integrated.
Amersham Health posted $1.5 billion in revenues last year, compared to Amersham Bioscience’s $1.1 billion. The discovery systems unit, which manages CodeLink, as well as the MegaBase gene sequen-cing products, TempliPhi DNA separation kits, protein analysis, and drug screening and informatics business, took in $657 million in 2002 revenues.
Andrew Carr, president of Amersham Biosciences, described the performance of the unit, which reported 70 percent of its $10 million operating loss through the end of the second quarter in net expenditures for the CodeLink line, as “disappointing.”
GE, with 315,000 employees and a market cap of $645.9 billion, posted revenues of $92 billion and net income of $11 billion for the nine months ending Sept. 30.
Going forward, CodeLink has plans to enter the whole-human-genome-on-a-single-chip battle and is slated to release a high-density array in 2004, as well as a system for automation.
Additionally, the company has “some very nice, big prospective customers that we haven’t announced yet but [with whom] we are in the final stages of closing,” Sam Raha, vice president of CodeLink, told BioArray News in May (see BAN, 5/2/03).
While the company has not announced any of these deals since May, one thing is certain: it now has one very big customer, and now boss, who “brings good things to life.”