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Molecular Devices Will Enable MDS to Market Itself As One-Stop CRO Shop and Tool Vendor

MDS’ planned acquisition Molecular Devices for $615 million in cash, announced this week, will likely transform its Sciex division into a much more diverse biomedical tool vendor by combining its existing mass spectrometry position with Molecular Devices’ cellular-analysis chops.
An equally important aspect the acquisition, however, is that it bolsters MDS’ position as part of a small but growing cohort of larger companies such as Caliper Life Sciences, Invitrogen, and Millipore that are capable of providing a broad array of life sciences research tools and contract drug-discovery research services to pharmaceutical and biotech customers.
In an investor conference call this week discussing the acquisition, MDS officials did not discuss in great detail the potential impact the buy would have on its Pharma Services division, and commented mostly on the role its CRO arm played in facilitating the deal.
“Our CRO is currently a modest-sized customer of Molecular Devices that helped us a lot in the diligence process because we had first-hand knowledge of their products and capabilities and, I think, a very strong reputation there,” MDS president and CEO Stephen DeFalco said during the call. “So I think that continues to make good sense for us, and I'm sure that those teams will find areas to work together going forward as Sciex does, also, from time to time.
“But I would also state that Molecular Devices serves a number of our CRO competitors and will continue to service them in a high-quality way, as Sciex does today,” DeFalco added.
That may be true, but having Molecular Devices’ technologies in-house could help MDS’ Pharma Services business. These technologies include the ImageXpress Micro and ImageXpress Ultra high-content screening platforms; the FLIPR instrument for high-throughput ion-channel screening; the PatchXpress system for high-throughput electrophysiology; and the Transfluor assay system for GPCR target identification and screening.
Prior to the acquisition, MDS Pharma Services, like many CROs, made no secret about its intent to beef up its capabilities in cell-based and high-content screening technologies. Last year, the company announced the availability of a micronucleus assay protocol for GE Healthcare's IN Cell 1000 and 3000 high-content screening platforms to more accurately predict genotoxicity in early-stage drug discovery (see CBA News, 5/19/2006).
In addition, the company offers cell-based functional hERG assays using Molecular Devices' PatchXpress to assess cardiac liabilities; hepatocyte-based assays to assess liver toxicity; PathTrak assays based on BioSource's phosphoELISA detection methodology for measuring changes in phospho-protein levels resulting from kinase inhibition in signaling pathways; and multiplexed cytokine profiling assays based on human peripheral blood mononuclear cells.
Throwing in the CellKey label-free screening instrument developed internally by its MDS Sciex arm, MDS Pharma Services now has a relatively complete selection of primary and secondary screening services to offer pharmaceutical customers.
Measuring Caliper
An MDS spokesperson declined to comment on how the Molecular Devices buy may reinforce its CRO capabilities, instead referring CBA News to comments provided in the conference call. But if the strategy behind the acquisition sounds familiar, it is because it echoes one recently adopted over the past year by one of MDS’ biggest competitors, Caliper Life Sciences.
“[MDS] has always been a competitor,” Caliper President and CEO Kevin Hrusovsky told CBA News this week. “But we have grown into this very differently than MDS, which was already in that field. I would say that we are primarily an instrumentation company that has looked at the diversification into services to further augment and complement that instrumentation position, whereas they would probably be considered more of a service provider that is evolving into instrumentation.
“It is kind of exciting in a way that others may see the same benefit of some of the things we’re up to,” Hrusovsky added.
Caliper’s oft-stated strategy has been to offer tools, technologies, and services that span primary biochemical and cell-based screening and in vivo animal studies. Its flagship LabChip platform and its internally developed laboratory-automation products have afforded Caliper the primary screening capabilities. Its acquisition last year of CRO NovaScreen bolstered that position and added significant cell-based assay capabilities, while its acquisition of Xenogen brought in house the small-animal imaging capabilities.

“Our whole pursuit has been: How can we provide more relevant information for our customers who are continually plagued with a lot of what we call in vitro hangover?”

“Our whole pursuit has been: How can we provide more relevant information for our customers who are continually plagued with a lot of what we call in vitro hangover?” Hrusovsky said. “They got all excited about in vitro technologies about 10 years ago — and the reason for that is they are very efficient and high throughput — but they led them down some paths sometimes that are not predictive of human outcome.
“We’re trying to build whatever business segments we can to further augment our strategic framework of just being able to provide instrumentation and services to help them get more efficient and more relevant information sooner,” he added.
If there is one area that is noticeably absent from Caliper’s portfolio, it is exactly the type of technology that MDS just picked up: high-throughput ion-channel screening platforms and high-content cellular imaging instrumentation.
Hrusovsky said Caliper sees the importance of such technologies but chose not to enter an instrumentation market that it saw as “saturated.” Instead, the company may choose to push into at least the high-content screening space through a consumables play by developing a microfluidic-based cell plate.
“We have several big pharma and biotech collaborators that we’re working with on the concept,” Hrusovsky said. “The real objective we’re trying to achieve is to allow the miniaturization of some of the cell-based assays that then could ultimately be read in [a variety of] cell-based analyzers. That consumable, in our eyes, is where we feel there is still an unmet need, particularly if we can make it so you can run a smaller number of cells and get relevant information out of it.
“We’re evolving with our own organic investment there, because we do believe that’s still a critical opportunity area,” he added. “I would say that we feel good about what [our] microfluidics [technology] can bring to that.”
Hrusovsky also said that companies such as Invitrogen, Millipore, and France’s Cerep fall into the same category as Caliper and MDS. Those three companies have little if any instrumentation offering – and in fact use both Caliper and Molecular Devices products in their contract research offerings – but do have strong reagent menus consisting of cell lines, cellular probes, and gene-expression technologies, to name a few.
“We have looked at those companies primarily as the type of competitors in the same field that we evolved into,” Hrusovsky said. “We’re a much smaller company than these types of companies, like MDS. This is a much bigger company that has a different approach and different magnitude of offering. Ours is primarily pre-clinical – we’re pretty much trying to carve out our landscape in this pre-clinical market, where we’ve got relationships and think we can bring a more complete solution to bear.”