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SQI Diagnostics Abandons Bid to Acquire Scienion, Withdraws IPO


This story has been updated to include comments from company officials.

By Justin Petrone

Scienion this week announced the termination of its acquisition agreement with SQI Diagnostics.

Toronto-based SQI had agreed to acquire the German array company in July for $15.6 million in cash and stock (BAN 7/5/2011), but SQI, which has also withdrawn its initial public offering filing with the US Securities and Exchange Commission, was unable to raise the capital to complete the deal.

"Due to the current situation [in] the capital markets SQI was not able to raise the capital necessary for the acquisition of Scienion," Scienion CEO Holger Eickhoff said in a statement.

Eickhoff referred to the planned deal as an "interesting option," but said the Berlin-based firm will maintain its autonomy as an independent company. "The company is well-positioned and Scienion's products, services, and expertise are much in demand," said Eickhoff. "This year's business is ahead of schedule and we are preparing for major expansions, particularly in our key markets," he added.

In an interview with BioArray News following the announcement, Eickhoff said that investors had responded "very positively" to the planned deal, and viewed the firms' offerings as "complementary." He blamed the termination of the agreement solely on volatility in the market.

"The market is so lousy," Eickhoff said. "People would rather sit on their money than invest in anything."

At the time of the July agreement, SQI and Scienion characterized the pending acquisition as beneficial to both firms. For five-year-old SQI, access to Scienion's resources in array printing, surface chemistry, and automation of microarray processes blended well with with SQI's assay-development processes and analytical systems for running microarray tests, the firms said at the time.

SQI has already seen panels for rheumatoid arthritis and celiac disease cleared by Canadian and US regulatory authorizes for clinical use on its SQiDWorks microarray platform. Scienion has also launched six distinct sciFlexarrayer instruments since its founding in 2000 and offers array development and printing services through its locations in Berlin and Dortmund, Germany.

Geographic considerations were also at play in the planned deal, with SQI viewing Scienion as a gateway to Europe and Scienion seeing SQI as a vehicle to gaining more customers in North America.

The deal was, however, subject to financing, which SQI was ultimately unable to secure by the date the agreement was set to terminate. Originally set to expire on Sept. 30, the agreement was amended last week to push the termination date back a week to Oct. 5.

Moreover, the Canadian company earlier this week announced the withdrawal of its registration forms filed with regulators in the US and Canada for the proposed US IPO, through which it had planned to raise up to $30 million. The company's shares continue to trade on the Toronto Stock Exchange.

SQI CEO Claude Ricks attributed the decision to "current market conditions," and said the diagnostics firm would instead "focus on growing our business," reevaluating its strategic initiatives "on an ongoing basis."

Chief Financial Officer Andrew Morris this week told BioArray News that the company "will keep an eye" on the markets going forward, but has yet to determine whether it will refile its IPO at a later date.

Though SQI's bid to acquire Scienion fell through, both firms pledged to work together.

Scienion's Eickhoff said the firm is "still convinced that the technologies of Scienion and SQI fit together very well," and said they are "currently evaluating a variety of partnering structures allowing the two companies to develop sales opportunities of mutual interest."

More specifically, Scienion is looking to access SQI's contacts in the diagnostics arena, while SQI is interested in approaching Scienion's clients who use the German firm's instruments and arrayers to make their own laboratory-developed tests.

While no formal distribution or sales and marketing agreements are planned at the moment, Eickhoff said that both of the companies have put "a lot of energy and time into this process" and they have "known each other for a long time."

Looking toward 2012, Morris reconfirmed SQI's intentions to roll out more tests, with panels for vasculitis and lupus in development. The company also has a benchtop system, called SQiDLite, which it plans to release as a research use product this fall, before obtaining regulatory clearance for the system's clinical use sometime next year BAN 8/30/2011.

Eickhoff said that despite market conditions, Scienion's business is going "very well," and that the company will "take some significant moves in addressing markets in Asia and North America" in the coming year. Scienion also plans new products that will serve diagnostics companies looking for new multiplex formats for their tests. He did not elaborate.

Have topics you'd like to see covered in BioArray News? Contact the editor at jpetrone [at] genomeweb [.] com.