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Roche Official Says Firm Bought NimbleGen To Complement 454; Affy Deal Unaffected

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Roche is acquiring NimbleGen Systems because it complements 454 Life Sciences, which the Swiss giant bought last month, and because NimbleGen’s stage of development will make it relatively easy for Roche’s global sales and marketing resources to integrate it, a company official told BioArray News this week.
 
Furthermore, the deal, announced last week, should have no impact on Roche’s longstanding relationship with array market leader Affymetrix, according to Lonnie Shoff, senior vice president of applied science and molecular diagnostics at Roche Diagnostics.
 
Shoff said that one of the main rationales for courting NimbleGen is that Roche views the company’s array platform as a sister research tool to 454’s DNA sequencing instrument.
 
Roche acquired 454 for $154.9 million in May. It plans to pay $272.5 million in cash to buy NimbleGen (see BAN 6/19/2007).
 
“One of the things that made NimbleGen so attractive is this enhancement that they’ve added to the 454 technology,” Shoff said. “The combination of the two with [chromatin immunoprecipitation (ChIP)-on-chip] and sequencing was very attractive to us. And there are certainly some advantages to the arrays in the marketplace that we felt we could add to,” she said.
 
According to Shoff, the 454 and NimbleGen acquisitions are similar in that both firms had commercialized their technology but had yet to build a strong, global sales force in order to penetrate their respective markets.
 
Founded in 1999, NimbleGen had principally operated as a services company until last year when it secured a licensing agreement with Affymetrix that enabled it to begin selling catalog arrays — a move that allowed it to build a larger and more direct sales and marketing team (see BAN 3/20/2007). But the S&M muscle was still weak by Roche’s standards.
 
“One of the things that we look for, like with 454, is a company that has a great technology but doesn’t have a well-established channel into the market,” said Shoff. “We have a very broad distribution and service network — sales, marketing, technical support. If we can take a technology that we believe in and push it through that channel, we believe we can add significant value to that technology.”
 
One factor that separates the 454 deal and the NimbleGen agreement is price. According to an S-1 filed with the US Securities and Exchange Commission, NimbleGen posted $13.5 million in revenues last year. The company had hoped to file an initial public offering valued at $75 million in March. That plan has now been scuttled. Either way, Roche appears to have thought that NimbleGen’s technology represents an untapped opportunity either on its own or in some sort of combination with its existing portfolio. Shoff declined to discuss the price of the NimbleGen acquisition.
 
While Roche has provided limited details on how NimbleGen will be integrated into the company, it has maintained that NimbleGen’s manufacturing facilities and R&D facilities will remain an autonomous business unit of Roche Diagnostics and will continue to operate out of its facilities in Madison, Wis., and Reykjavik, Iceland. The firm is also expected to maintain its branding, like 454 Life Sciences has done so far.
 
Shoff said that one area where there is agreement on how the acquisition will impact NimbleGen is in sales, marketing, and distribution. Specifically, she said that Roche will definitely integrate NimbleGen’s sales team and local marketing into Roche’s team, which is based in Indianapolis.
 
“How that will happen we don’t know yet,” she said. “We really need to look at what customers we are serving, what are our targets, what stage of market penetration each technology we have is and decide how we can integrate it and decide if we have enough resources even with the combined teams to move forward, and to decide if we need more resources if we feel it will give us more traction in the market.” Roche currently has direct sales and marketing operations in 153 countries, Shoff said.
 

“I am not all knowing, but I would be very surprised if this has any effect on our Affy relationship.”

Roche spokesperson Doyia Turner told BioArray News earlier this week that Roche will be entering the array market with limited market share as it begins flexing its muscles to sell NimbleGen’s chips. However, the company feels that the array market, which Roche estimates was worth about $620 million in 2006, is too large for its genomics research segment to ignore.
 
Turner said that Roche already sells RT-PCR assays as well as the 454 sequencing platform, so arrays are a natural addition to the company’s portfolio.“We feel like the three together will really be an advantage for our life sciences group. Arrays are one of the remaining large segments of the genome research market where Roche Applied Science so far has had no significant position,” she said.
 
Turner also said that Roche estimates that the array market is growing at about 10 percent yearly and that Affymetrix retains a 43-percent share of that market, compared to 26 percent for Illumina and 11 percent for Agilent.
 
“Currently we have got no [significant] position on that market, but that is the market we are entering,” she said. She noted that Roche generated these estimates internally and that they could vary widely in terms of market share and size. For example, Illumina CEO Jay Flatley recently valued the gene expression market alone at $800 million (see BAN 6/19/2007). 
 
Affy Relations Unaffected
 
Though having NimbleGen under its wing will make Roche an Affymetrix rival in the research market, the acquisition will have no effect on Roche’s diagnostic partnership with Affymetrix, Shoff said. Affy and Roche developed an array-based drug metabolism test called AmpliChip CYP450 that was cleared for clinical use by US and European regulators in 2004 (see BAN 1/5/2005).
 
Roche and Affy have similar AmpliChip tests in the pipeline for leukemia, which will help physicians categorize patients according to disease subtype, and a pharmacogenomic test for P53, which will be used to assess treatment for cancer. Both tests are supposed to reach the market within the next two years. Shoff said that Roche will continue to work with Affy on that development and that its research market interests and diagnostics endeavors are mutually exclusive.
 
“The product that we have on the AmpliChip, like the CYP450 [chip], has been approved by the FDA, and it is clearly unlikely that we would go back and redo the studies just to resubmit [the test on another array platform], including the instrumentation and software. I do not see that happening,” Shoff said this week.
 
“I am not all knowing, but I would be very surprised if this has any effect on our Affy relationship,” she said. Moreover, “future test development will not be changed.”
 

Shoff also said that the leukemia chip and the p53 chip are growing nearer to market entry. “Those are very far along,” she said. “I know customers on the diagnostics side that have participated and used the product. So we are in a very late stage there, so that will not change.”

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