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Osmetech Acquires Motorola s CMS in Effort To Build Molecular Diagnostics Position


London-based Osmetech has acquired Clinical Micro Sensors from Motorola, and is moving ahead with its plans to commercialize CMS' microarray-based detection system and accompanying diagnostic assays by November, a company official told BioArray News last week.

By acquiring Clinical Micro Sensors, Osmetech will be able to commercialize its eSensor Detection System and two diagnostic assays, which Motorola was unable to do according to Osmetech CEO James White. White said these products are almost ready for the global diagnostics market, which his firm has been targeting over the past year.

He also confirmed that his company acquired CMS on July 26, by which Motorola invested £3.7 million ($4.6 million) into Osmetech and retained the option to buy 78 million shares in the company at an issue price of 1.75p ($3) before July 2010.

"What you want to make sure you have if you are trying to supply into that market [is] the instrumentation platforms that cover the array of things that could be coming down the line."

Rather than an outright sale, Osmetech is actually taking CMS off of Motorola's hands while Motorola gets to become a significant shareholder in Osmetech, White explained, adding that Motorola is now a 16 percent shareholder in Osmetech.

"What's happened is they've invested in us and we're giving them $2.5 million in warrants. So that's $7 million dollars altogether. The upside for them is the warrants and the investment they've made into Osmetech," he said.

White said that CMS itself is probably worth about $400 million dollars.

According to a document issued to Osmetech shareholders and posted on the firm's website, "CMS is being disposed of by Motorola as it is considered to be non-core to its business." White said that Motorola no longer saw CMS as "core to its business."

Motorola did not reply to questions about the acquisition by press time. Motorola similarly divested its CodeLink bioarray product line in 2002 when it sold the business to Amersham Biosciences for $20 million (See BAN 8/2/2002).

It is unclear what remaining microarray-related IP or products Motorola has after the sale of CMS, but it appears that the move ends the electronics giant's short-lived stint in the life sciences market.

"Because it was non-core they were keen to make an exit and do it as quickly as possible," White explained.

According to White, Osmetech is purchasing CMS to appeal to more users in the molecular diagnostics space. The firm already has a PCR-based system called Opti Gene that it plans to introduce later this year with assays for identification of biomarkers for Chlamydia and thrombosis, and White said that his firm believes the eSensor system will permit users to run more complicated diagnostic assays.

"When you put those two instrument platforms together, it gives you a very good coverage of some of the genetic markers that could be coming down the pipe over the next 5 to 10 years," White explained.

"The Opti Gene product that we are preparing to launch in November is very good for analysis of one or two genetic markers, whereas the CMS product is good for a high number or, I suppose, a medium-density chip array," he said.

Osmetech purchased the technology that forms the basis for Opti Gene last year when it acquired Molecular Sensing, a provider of thermocyclers. Now, the firm is ready to proceed in the market, hoping that it has all its bases covered, White said.

He added that he believes that it is impossible to predict which assays will become the most successful, but that it made sense for Osmetech to have a flexible product portfolio.

"What no one can really tell us today is whether [the more successful tests] are going to be simple assays with one or two genetic markers or complex stuff like the CYP450, or cystic fibrosis. But what you want to make sure you have if you are trying to supply into that market [is] the instrumentation platforms that cover the array of things that could be coming down the line," White said.

The eSensor system comprises the eSensor 4800 reader, which uses electrochemical detection to register results from a customizable single-use eSensor bio-chip disposable cartridge, and is marketed towards the research market. The first assays in the pipeline for commercialization are a test for identifying cystic fibrosis carriers and a CYP450 test for assessing drug metabolism in patients, White said. Both will be marketed in the clinical diagnostics space.

"We have a CF test, which has been developed, and we will be taking it to the [US Food and Drug Administration]. The CYP450 test is in development. Those are the two that are closest to market," White said. Both are expected to launch in 2006, he said. It was unclear when the firm wishes to begin its dialogue with the FDA.

White also said that "clinical trials have been completed for cystic fibrosis carrier screening at two hospitals and one reference laboratory in the United States to support a 510(K) submission to the FDA."

Once approved by the FDA, White said that he believes the system and its assays will fit nicely into a distribution network that the company has built around its flagship blood gas analyzer product, Opti.

"We have 4,000 installations around the world, so we have a pretty good distribution network," White said, adding that the company's systems are divided evenly between Europe, Asia, and North America. "We have 50 distributors around the world and we are direct in the USA and Germany," White said.

Legal Issues 'Resolved'

By acquiring CMS, Osmetech has also received the company's extensive IP portfolio, which, according to a statement "includes, at present, 49 issued US patents and four granted European patents. The portfolio also includes many issued patents in countries outside the US and Europe."

While the significant IP acquisition may be a boon for Osmetech's future, it does come with a litigious past.

Oxford Gene Technology, the UK-based firm that manages the IP of microarray pioneer Edwin Southern, filed suit against Motorola in 2002, alleging that it had infringed upon the Southern patents concerning oligonucleotide arrays when it developed the eSensor DNA Detection System (See BAN 8/2/2002).

The lawsuit was settled, under undisclosed conditions, a week before OGT and Motorola were due in court in July 2004. Motorola officials declined to discuss the agreement at the time (See BAN 7/14/2005).

Last week, Osmetech's White declined to comment on any IP issues CMS may have had in the past "suffice to say that, between [Osmetech] and Motorola, I think we've got resolution on that."

Future of CMS

In addition to its large distribution channels, Osmetech will now have two offices in Pasadena, Calif., courtesy of the recent acquisition. Spun out of the California Institute of Technology in 1994, Clinical Micro Sensors was acquired for $280 million by Motorola in 2000, and, according to Osmetech, the company currently has 60 employees, most of whom will retain their current positions, White said.

"We have taken on all staff there, and we are looking to build that team as we take the product through commercialization, so that may mean acceleration in terms of more scientists coming on board and/or more sales," he said.

To lead CMS through its commercialization phase, Osmetech appointed Bruce Huebner, the former president and chief operating officer of San Diego-based molecular diagnostics company Nanogen (see story, this issue) as the firm's incoming president. Huebner left Nanogen last year (See BAN 6/9/2004).

Huebner told BioArray News last week that CMS would continue to operate as an independent firm within Osmetech and that it would not be absorbed into the larger company. "We are operating as a separate unit within Osmetech. We are in the family of companies," Huebner said.

Huebner also said that he did not foresee any lay offs and that CMS had "a good group of people for moving this thing forward."

— Justin Petrone ([email protected])