SurModics last week acquired GE Healthcare’s CodeLink Activated Slide business for an undisclosed amount, the final piece of the CodeLink business that GE retained when it sold the CodeLink bioarray products and assets to Applied Microarrays last year.
SurModics has played a large role in the manufacture of the CodeLink slides since Motorola first developed them in the late 1990s. The Eden Prairie, Minn.-based firm makes the PhotoLink technology that is used to create a three-dimensional matrix that enables the attachment of biomolecules, including DNA, RNA, and proteins, to the slides.
A SurModics official said that the firm decided to acquire the CodeLink slide business because it is convenient for both GE and SurModics to have the slide manufacturer sell and support the product. SurModics also believes the slide technology will augment its growing in vitro technologies business unit.
“It really was a mutual decision,” Doug Astry, general manager of SurModics’ in vitro business, said of the deal with GE. “Motorola, Amersham, GE — none of them were in the blank slides business, and I don’t think anyone thought blank slides was their business,” Astry told BioArray News. “If someone is using a surface, they need to work with the person who is making the surface. That way they can customize the surfaces and make adjustments, et cetera.”
While the company has always manufactured CodeLink slides, SurModics will now also be the face to the customer, an important distinction, according to Astry. “From a customer-service point of view, we are the people that can solve all problems for customers,” he explained.
Astry said that SurModics, founded in 1979, has core competencies in both surface chemistry and drug delivery. The in vitro technologies business was established to provide components for in vitro diagnostic test kits and specialized surfaces for cell culture and microarrays. Last year, SurModics acquired BioFX Laboratories, a substrate manufacturer, for $11.3 million to build its in vitro technologies unit.
SurModics, which generated $73 million in revenues last year, has two other business units: “drug delivery” and “hydrophilic and other.” The in vitro tech unit generated $20 million in FY’07, compared to $26.5 million generated by drug discovery and $26.5 generated by hydrophilic.
“We have focused and invested in the business and last year we acquired a company that sells substrates to grow that business,” Astry said. He said that SurModics believes that the CodeLink slides business will continue to drive growth in the in vitro business, especially as SurModics modifies the platform and it is used more frequently in regulated environments, such as in laboratory-developed tests or US Food and Drug Administration 510(k)-cleared diagnostic assays.
“The coating technology we use for these [surfaces] is the least sophisticated that SurModics uses,” Astry said. “And to be successful as this technology continues to develop, it makes sense to have us directly connected to the folks that are creating the tests and devices,” he said. “We have grown the in vitro business, SurModics has invested in it, and we think the quality of the surface is going to be very important in instruments and assays that are used routinely,” he added.
According to Astry, the slide business will also benefit from SurModics sales and distribution infrastructure. “As we invest in the in vitro business, we have added direct sales and growing distribution capabilities as we have added more products,” he said. Selling CodeLink slides “isn’t a reach for us in terms of a channel system,” he said.
SurModics’ purchase marks the latest in a string of transactions involving the CodeLink business over the last several years. Motorola sold CodeLink to Amersham Biosciences in 2002, which was acquired by GE in 2004. However, like its predecessors, GE deemed CodeLink to be not core to its business, and sold the platform and its assets, minus the slides, to Tempe, Ariz.-based Applied Microarrays in April 2007 (see BAN 5/8/2007).
Today, when it comes to buying microarray substrates the choices are abundant. The competition between existing players like Corning, Schott-Nexterion, Whatman (now owned by GE), and others is intense.
“If someone is using a surface, they need to work with the person who is making the surface.”
Alistair Rees, microarray product manager for Schott-Nexterion, told BioArray News recently that the coated microarray slide market is “very competitive” and that there “is a lot of resistance to change slide suppliers among the self-printing microarray community” (see BAN 9/2/2008).
Rees said that slide vendors cannot rely solely on “catalogue sales channels” to reach customers, and added that all sales of coated slides are “technical sales” that force companies to put resources into setting up effective sales and distribution organizations.
“Schott has expended a lot of effort setting up a dedicated sales and distribution system that consists of direct sales operations in the major self-printed microarray slide markets, such as the US, Europe, and Japan, and dedicated third-party life-science distributors in other countries,” Rees said.
Astry said he is aware that SurModics will face challenges from rivals, but said that the company’s expertise in the area, coupled with CodeLink’s “positive reputation” will both serve as advantages in the market.
“This platform has passed from hand to hand, but one constant over the years has been that this is a great surface, and everyone has wanted the surface,” said Astry. “It hasn’t been available in a flexible way for a long time for folks who just want this flexible surface,” he pointed out.
The SurModics’ business model is that we have our surfaces and surface technology, but we work with the end user to tailor those surfaces to meet their specific needs,” he said.
According to Astry, this expertise plus flexibility might help SurModics compete against larger companies for whom surfaces are not a core business. “I think our size can make us flexible,” he said. “For big companies, selling blank slides has not in recent years been a huge focus.”
The View from Tempe
Applied Microarrays CEO Alastair Malcolm said this week that AMI did not acquire the CodeLink slides because it did not want to enter the slide business. Instead, AMI has focused on building an original equipment-manufacturer business on the foundation of the CodeLink bioarray assets.
“With our array business model there was never any intent to acquire any one particular slide business or be limited to any specific surface chemistry,” he told BioArray News.
“In the AMI business we are now working with many formats, including slides, microtiter plates, membranes, and lab-on-chip. We also use many surface chemistries tailored to the requirement of the application,” Malcolm said. “The SurModics surface chemistries are excellent for many applications, and we will continue to use them. There are also other chemistries from other suppliers that have particular advantages, and we apply them to our customers’ applications.”
According to Malcolm, AMI acquired the CodeLink business with the “strategic intent of applying their design, development, manufacturing and business, quality systems, and assets to OEM partnerships for custom nucleic acid, protein, and special purpose microarrays, such as circulating tumor cell capture and food pathogen detection.”
He said that by “outsourcing array production and logistics to AMI, our customers avoid the costs of establishing and running an internal microarray factory, reduce the technical risk and learning curve, and accelerate their time-to-market.” Malcolm told BioArray News in May that such OEM deals already account for around three-quarters of the firm’s business, with the remaining revenues coming from legacy CodeLink expression bioarray products (see BAN 5/13/2008).