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MWG Biotech to Divest Microarray, Laboratory Automation Product Units

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MWG Biotech intends to sell two of its four business units in an effort to refocus the company on its core businesses.

The Ebersberg, Germany-based firm said late last week that it would divest itself of its Genomic Diagnosis business, which includes its microarrays and related products, and its Genomic Technology business, which includes its lab automation products. It will retain its Genomic Synthesis unit, which manufacturers oligonucleotides, and its Genomic Information business, which provides the firm’s core DNA sequencing services.

The firm said that management was investigating “various separation options” for the units. “At this point, they’re looking at several options for doing this, but obviously the preferred option would be having a buyer to take it over into their portfolio,” MWG spokesperson Ulrike Schramm told BioArray News. She added that a potential buyer may purchase both businesses or the businesses may be sold separately.

Schramm couldn’t provide a target date for finalizing the transaction but said MWG expects to complete the sale in the “short term.”

According to the firm, the sale will enable MWG to create the basis for long-term profitability. “The company at this point is focusing on the core competencies — that is, the things that MWG grew up with and is successful and comfortable with,” Schramm said. The oligonucleotide synthesis business and the DNA sequencing business are its core competencies, and that is why the firm is keeping them.

The Genomic Diagnosis unit brought in €2 million ($2.4 million) in sales for the first half of 2004, down significantly from €3.4 million in the first half of 2003. The firm’s Genomic Technology group rang up sales of €3.8 million for the first half of 2004, compared with sales of €4.5 million in the first half of 2003. Overall, the two units accounted for 39 percent of MWG’s total revenues of €49.7 million in 2002 and 37 percent of its total revenues of €43 million in 2003.

Sales for MWG’s Genomic Information unit have declined over the past couple of years as well. For full-year 2002, the unit generated revenues of €10.3 million, which slipped to €7.3 million in 2003. For the first half of 2004, the unit’s sales declined to €2.8 million from €4.1 million in the first half of 2003.

Sales for the Genomic Synthesis group declined slightly from €20 million in 2002 to €19.7 million in 2003, and €10.5 million in the first half of 2003 to €9 million in the first half of 2004.

According to a June report from First Berlin Equity Research, MWG management predicted the Genomic Information unit would ring up sales of €10 million, and the Genomic Synthesis unit would generate revenues of €25 million in 2004.

MWG went public in May 1999 and embarked on a path of rapid growth. Between 1999 and 2001, the firm’s revenues grew from €35.1 million to €52.4 million, and during that time its staff increased from 245 employees to 405. Meanwhile, its costs grew considerably and the firm posted losses of €16.1 million in 2000 and €18.1 million in 2001.

This was followed by losses of €25.8 million in 2002 and €12.7 million in 2003. According to First Berlin, the decline in its 2003 net loss is largely attributable to the firm’s restructuring efforts, which began in 2001 and included a 29 percent reduction in the number of employees to 335 and the replacement of its management board.

The restructuring culminated in August with the resignation of Chairman Thomas Becker. At that time, MWG described as “still realistic” the company’s 2004 goals for a moderate increase in sales, positive earnings, and break-even cash flow.

The firm’s Genomic Diagnosis unit, which was created in 2000, consists of its custom and catalog microarrays, including a 40K human genome chip; its ExpressArt mRNA Amplification Kits; a hybridization service; a bioinformatics service; and an online gene index for all of the catalog arrays’ content.

“MWG has a very considerable [microarray] portfolio, and one of the largest portfolios of catalog arrays,” Schramm said. “We’re using our own oligonucleotides, and we have a very strong bioinformatics [business] to put these arrays together.”

Schramm said customers will frequently buy catalog arrays and then come back to the company to make custom arrays. She also noted that MWG offers oligo sets for both the catalog and custom arrays.

MWG’s Genomic Technology business includes its Theonyx lab automation robot, microplate washers, the THEQ LifeCycler, and cycler validation system.

The THEQ LifeCycler, which is a PCR thermocycler, was launched earlier this year. The firm was free to sell the product in Europe after the European Patent Office revoked a patent held by Applied Biosystems covering its own PCR thermocycler.

In addition to the planned sale of the two units, MWG said that it would seek to acquire new capital. The firm declined to disclose details or provide a timeframe for obtaining the funding. Earlier this year, the company raised €3.1 million through the sale of stock to institutional investors.

MWG also opened a new production and sales subsidiary in Bangalore, India in June that was expected to offer all of MWG’s products in the Asia-Pacific region. The firm expects the India unit to generate €2.5 million in oligonucleotide sales in 2005.

One question raised by the planned sale of the units is whether this will make MWG a more attractive acquisition target. First Berlin analysts Gerard Reid and Scott McCollister speculated in June that the firm was “a good takeover candidate,” citing consolidation in the industry earlier this year. They pointed to Fisher Scientific’s acquisition of Dharmacon and GE’s purchase of Amersham as examples of competitors that have been swallowed up by larger players.

— EW

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