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With Cellomics on Board, Fisher Enters Unfamiliar Territory to Compete in HCS


As part of its ongoing effort to increase its presence in the life sciences instrumentation market, laboratory supply and service giant Fisher Scientific will acquire high-content screening pioneer Cellomics for approximately $49 million in cash, Fisher said last week.

The acquisition, which is expected to close later this month, could be an important boost for Cellomics' technology. Though cellomics has amassed a strong market position and IP portfolio in HCS since it was founded nearly 10 years ago, it lacks an extensive sales and marketing team. Cellomics also has the distinction of being the last notable privately held HCS shop to be acquired by a big life-science player.

Insiders say that Fisher, which had already been selling at least seven assay kits made by Cellomics, will enable the company to "play with the big boys" in the HCS market. These include GE Healthcare, Molecular Devices, Becton Dickinson, and Beckman Coulter, which have each snatched up high-content screening platforms in the past few years, and Evotec subsidiary Evotec Technologies.

Fisher might have three immediate advantages entering the HCS market. First, a number of these rivals currently license certain Cellomics IP for their own HCS instruments.

"I think that Cellomics is worth a lot more money than that. I'm not saying this based on sales, I'm saying it based on IP and market position."

The company also has a strong reagent play, and one goal will be to develop additional reagents for Cellomics. "One of the top requirements to continue to drive this technology is better reagents, more reagents, and more validated reagents," Cellomics president and CEO Dan Calvo told CBA News last week.

Lastly, the acquisition could be bolstered by Fisher's RNAi play, which started growing after acquiring Dharmacon last year. Dharmacon sells siRNA reagents and related products, and, lately, siRNA and HCS have gone hand in hand in research laboratories hoping to perform target ID and validation studies, as well as functional genomics research.

Fisher disclosed the Cellomics acquisition — as well as the completion of its acquisition of McKesson BioServices and the planned acquisition of Lancaster Laboratories — in its second-quarter earnings release last week.

"We've said that we plan to further expand our biosciences platform," Paul Montrone, Fisher's chairman and CEO, said during an investor conference call following the release last week.

Montrone also hinted during the conference call that Fisher's recent spate of acquisitions may only be a sign of things to come, though he did not specify which market niches Fisher might pursue. "Clearly our pace of acquisition activity has heated up," he said. "And we will continue to … pursue strategic opportunities."

Microscopy giant Carl Zeiss, Cellomics' largest shareholder, said that it has sold its shares to Fisher, making Cellomics a wholly owned Fisher subsidiary. Fisher and Zeiss both said in statements that the two companies would continue to closely collaborate on high-content screening product development, and that Zeiss would continue distributing Cellomics products in the academic and biotech marketplaces. Cellomics' flagship HCS platforms, the ArrayScan and KineticScan plate readers, are enabled by Zeiss optical technology.

Fisher and Zeiss spokespeople declined to provide additional details about how Fisher and Zeiss might collaborate in the future.

It was unclear at press time whether there would be any restructuring within Cellomics following the acquisition.

Last in Line

Although Cellomics is widely credited with creating the concept of high-content screening in the early 1990s, it was the last company offering an automated cellular imaging platform to be snatched up by a bigger, publicly traded entity. Cellomics did, however, withdraw an attempted $60 million IPO in October 2001.

Ahead of Cellomics in the acquisition queue were Universal Imaging, which Molecular Devices bought in 2002; Beckman Coulter's late-2003 purchase of Q3DM; GE Healthcare's 2004 acquisition of Amersham Biosciences; and BD Biosciences' purchase of Atto Bioscience last year. Evotec Technologies is the other major player in the automated imaging field, and it is a subsidiary of the much larger Evotec OAI drug-discovery firm, which developed its HCS platform in house.

There was widespread speculation in the industry about how long Cellomics would be able to survive on its own, despite having a firm hold on the high-content screening patent estate and a large, if not dominant, portion of the HCS market share. Cellomics also has its distribution partnership with Zeiss, which helps it reach out to broader markets, and has recently begun efforts to expand into Europe and Asia. Cellomics, which employs 60 people, simply does not have the marketing power, however, to compete with giants such as GE Healthcare, Molecular Devices, Beckman Coulter, and BD Bioscience.

"I think that there is no question that for Cellomics, after being a private company for 10 years and creating this field and market, and having to suffer through the slow growth of acceptance — slower than we had originally expected — it was time to become part of a bigger organization, and to have more muscle," Lansing Taylor, founder, former chairman and CEO, and current board member of Cellomics, told CBA News last week.

"Now [HCS] is becoming more of a standard field, and there are competitors," added Taylor, who at the moment is CEO of HCS startup and Cellomics customer Cellumen. "It's hard to go up against big companies with small, private-company horsepower, and there is no public market, and probably won't be for a couple of years. We made the decision this past year that the company had gotten stronger, the market was emerging, and now was the time."

Cellomics last year had approximately $13 million in revenues and employed about 60 people at the end of 2004 following a round of layoffs (see CBA News, 10/12/2004). Fisher employs some 17,500 people worldwide, and its annual revenues in 2005 are expected to exceed $5.5 billion. So, while the deal is essentially a drop in the bucket for Fisher financially, the boost to Cellomics' business in terms of marketing and R&D support could be substantial.

In comparison, GE Healthcare pulled in about $14 billion in revenues last year; BD about $5 billion; Beckman about $2.4 billion; and Molecular Devices about $150 million.

Despite the stiff competition in the HCS market, Cellomics has a strong patent portfolio, and owns the relevant IP for most high-content screening methods and practices. Among others, BD Biosciences and GE Healthcare have licensed Cellomics' IP to enable their customers to conduct HCS on their respective instruments. Fisher now inherits this position, and some industry insiders speculated that it may have gotten a good deal.

Gus Rosania, an assistant professor at the University of Michigan College Of Pharmacy, and a former Cellomics research scientist, told CBA News that he thought the $49 million price tag "was a great deal for everybody."

"I think that Cellomics is worth a lot more money than that," Rosania said. "This is a great deal for Fisher. I would have expected somebody else to jump at this opportunity before Fisher [did]. I'm not saying this based on sales, I'm saying it based on IP and market position."

Another industry insider told CBA News that he was "surprised" at the acquirer's identity, adding that "this is not the type of business I would traditionally associate Fisher with. "They have a huge marketing presence, but I don't associate Fisher with high-content screening," he added.

It is unclear whether Cellomics had fended off acquisition bids prior to this, or if no other entities were all that interested in acquiring the company; however rumors have circulated for some time that the company was an acquisition target.

Fisher's Weakness

It remains to be seen how Fisher will integrate Cellomics into its business. Of all the companies to have acquired high-content screening platforms in the past few years, Fisher is the only one without an HCS instrumentation legacy, so this is clearly a brand new avenue for the company.

"It's hard to go up against big companies with small, private-company horsepower, and there is no public market, and probably won't be for a couple of years."

As a result, one of the near-term challenges facing Fisher is deciding whether to hire marketing and sales reps to supplement any employees retained from Cellomics, or to train its current marketing team to deal in instrumentation in addition to reagents and laboratory ware.

A Fisher spokesperson declined to comment on the company's plans to integrate the Cellomics business, adding that Fisher would provide more details after the acquisition closes.

Fisher's Montrone provided a clue during last week's investor conference call.

"[Cellomics has] been running the business largely as an equipment sales business, so there is instrumentation," Montrone said in response to an analyst's question about the acquisition. "The real issue is to generate long-term usability … [and] development of additional reagents for the business, which is our key strength, and that is what will drive the business. The real interesting aspect of this business is that it basically allows researchers to get a lot more information than they currently get, much faster."

Cellomics' Calvo echoed this sentiment, telling CBA News last week that the acquisition made sense for Cellomics considering Fisher's strong reagents portfolio.

"I think the immediate thing is that Fisher has tremendous reagent capabilities," Calvo said. "We certainly believe this combination is in a position to attack that market need very well."

The most obvious overlap between Cellomics' HCS prowess and Fisher's reagent expertise may lay with Fisher subsidiary Dharmacon, which Fisher acquired in February of 2004 for $80 million. Calls to Dharmacon were not returned in time for this publication.

— Ben Butkus ([email protected])

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