Continuing a trend of regular acquisitions, Nanogen last week set its eyes on the European market by announcing plans to acquire Amplimedical, the diagnostics subsidiary of Italian firm Amplifon, for €8.1 million ($10 million).
Following the acquisition, planned to close May 1, the company will move its existing Dutch office into the newly acquired Italian base to form a new subsidiary called Nanogen Advanced Diagnostics, the company said.
Amplimedical has been a distributor for Nanogen's microarray systems, the Molecular Biology Workstation, and the recently launched NanoChip 400 System, for five years. Yet what really may have sealed the deal for Nanogen is the firm's portfolio of RT-PCR and molecular diagnostics products most of which are CE Marked in Europe and its location.
"Prior to this about 15 percent of overall sales were in Europe," Rob Saltmarsh, Nanogen chief financial officer, told BioArray News last week. "Because of this transaction about 30 percent of our overall revenues will be in Europe."
Though Nanogen has had a presence in Europe, mostly through an office in the Netherlands and several European distribution channels, it has been lagging in its European sales compared to rivals in the life sciences market.
For example, Affymetrix last month reported that it earned 31 percent of its product-related revenues in 2005 in Europe. And Applied Biosystems reported in July 2005 that 36 percent of its net revenues were generated in Europe
Though Nanogen has had a presence in Europe, it has been lagging in its European sales compared to rivals in the life sciences market.
"Our revenues are usually around $3 million per quarter, and [we have had] no more than $500,000 per quarter in Europe, a really small presence really," Saltmarsh said. "So this [acquisition] will more than double the presence."
Around 85 percent of Amplimedical's current revenues are from Italy, but Saltmarsh said that once Nanogen Advanced Diagnostics opens shop, it will greatly expand its European footprint.
"We intend to take these products that are CE marked in Italy and take them to Germany, France, and wherever," Saltmarsh said.
In addition to adding Amplimedical's RT-PCR portfolio to the Nanogen family of products and gaining a strategic foothold in Europe, Nanogen will also be growing its current head count by 40, bringing to 320 its total number of employees. Saltmarsh said Nanogen's Dutch personnel will now report to its Italian subsidiary
In addition, Saltmarsh said Amplimedical's head of operations and head of finance will be joining Nanogen, though he declined to provide their names.
"We are getting a significant number of people and management capabilities as well, which will better allow us to evaluate the support and what goes on in Germany, France, the UK, Turkey wherever," Saltmarsh said. "We sort of look at it as a beachhead for getting into Europe. You need critical mass to really succeed in Europe, and that's what I think [the] Amplimedical acquisition will do, not just from a product standpoint, but from a management and presence standpoint."
The company also said in a statement that the new Nanogen Advanced Diagnostics subsidiary would serve as a focal point for selling into the Asian, Middle East, and African markets.
Though Nanogen's array technology has figured prominently in its relationship with Amplimedical, the company is now most focused on integrating Amplimedical's RT-PCR products into its existing menu, according to a statement from Howard Birndorf, chairman and CEO of Nanogen.
"Amplimedical's … position in the real-time PCR market, combined with our MGB Alert real-time PCR products, will give Nanogen one of the most extensive product lines available for the global molecular diagnostics market," Birndorf said.
Nanogen picked up its current RT-PCR products through its December 2004 acquisition of Epoch Biosciences (see BAN 12/22/2004).
Amplimedical and Nanogen have collaborated in the past to develop multiplexed reagent kits that are sold in Europe, including a set of reagents to detect mutations in the GJB2 gene for the diagnosis of hereditary deafness, and a set of reagents to test for genetic causes of beta thalassemia, a type of inherited blood disorder that can cause anemia.
Saltmarsh said that the company is "pretty well set" with regards to RT-PCR products and that it was likely a "period of digestion" would follow the acquisition. So it seems that RT-PCR will place higher than arrays in Nanogen's priority list for Europe for the time being.
"Amplimedical is the Italian distributor for the NC 400," Saltmarsh said. "They did a nice job selling the MBWs and they bought some NC400s, so they'll continue that business obviously, but that was a small portion of their business."
"The only way this will affect our array business is through the strengthening of the management, which is in Italy," he said.
Justin Petrone ([email protected])