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PerkinElmer Joins High-Content Screening Fray With $30.5M Evotec Technologies Buy

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PerkinElmer will acquire Evotec Technologies, the tools and technologies division of German drug-discovery firm Evotec, for €23 million ($30.5 million) in cash, the companies said this week.
 
The acquisition, expected to close at the end of this year or at the start of 2007, will give PerkinElmer an immediate competitive position in the high-content screening and cellular analysis markets, an area in which it had been conspicuously lagging behind its competitors.
 
“The acquisition of Evotec Technologies brings us immediate scale and brand recognition in the cellular sciences space,” Mary Duseau, head of the detection and analysis systems business unit at PerkinElmer Life and Analytical Sciences, told CBA News this week.
 
“When you look at the products that [Evotec] currently has – and the Opera, in particular – they’ve got an excellent reputation, and they’ve got excellent reach, as a stand-alone company both in the drug-discovery world and in academia.”
 
For parent company Evotec, the deal completes its transformation into a full-fledged drug-development firm and drug-discovery services provider, a move that had been in the works since 2004.
 
“We said that we were going to dispose of any non-core assets, and this clearly is what we’re announcing today by the sale of Evotec Technologies to PerkinElmer,” Evotec President and CEO Joern Aldag said during an investor conference call following the announcement. “This concludes the big steps in transforming the company. While things remain to be done in terms of building the pipeline, we think that we have found in PerkinElmer an excellent partner.”
 
Evotec Tech, based in Hamburg, Germany, sells instruments for high-throughput confocal imaging, cell handling, and ultra-high-throughput biochemical screening; as well as image-analysis software.
 
PerkinElmer already has strong high-throughput screening and cell- and liquid-handling plays. It is clear, however, that the company’s primary acquisition interest is Evotec Tech’s high-throughput confocal imager, the Opera, which already has significant penetration in the high-content screening market, and is Evotec Tech’s most lucrative product line.
 
“There are some product lines that have not grown over the past year, and others that are growing,” Joern Aldag, Evotec’s president and CEO, said in an investor conference call about the acquisition. “If you just looked at the Opera business – which from PerkinElmer’s perspective is one of the key products going forward with regard to immediate product growth opportunities – this accounted for about €10 million [in revenues] this year.”
 
Overall revenues for the first three quarters of 2006 for Evotec Tools and Technologies totaled approximately €11.5 million, according to the company’s Q3 financial report.
 
“I would say that [Evotec] has excellent competencies in cellular sciences,” PerkinElmer’s Duseau said. “They do have some IP around cell sorting and selection, in addition to the success that they’re having with HCS. But their capabilities in cellular sciences – both the people and the products – is why we’re very excited.”
 
According to Aldag, PerkinElmer “intend[s] to build and forward-expand the area of imaging, and we’ll create here in Hamburg a center of excellence for this part of their product offering.” Later, in response to an analyst’s question about the Hamburg facility, Aldag said that Evotec and PerkinElmer will continue to have a “special relationship” that will benefit both companies.
 
PerkinElmer representatives “will continue to be on site here in Hamburg, and this will continue to be a growing entity,” said Aldag. “We think that we have a special relationship between the people here, with an agreement that Evotec has the first chance to see prototype business or pilot applications within its services unit …and for PerkinElmer to have a lab where they can show how their technologies are being employed in the real research world is as important as it is for us to see what Evotec Tech/PerkinElmer are doing in regard to product development in the future.”
 
Duseau declined to comment on PerkinElmer’s plans for the Hamburg site.
 
“PerkinElmer is a financially strong company with a global sales and distribution network, something that Evotec Technologies was missing, and now actually has acquired through that combination with PerkinElmer,” Aldag added.
 
A Long-Time Coming
 
The divestiture comes as little surprise to industry insiders. The company had been hinting that it would divest the business since at least 2004, maintaining that it “was no longer core” to Evotec’s overall business (see CBA News, 3/29/2005), which was to begin focusing on internal drug development and drug-discovery contract research.
 
The company, however, remained coy about its possible plans to sell Evotec Tech, maintaining that it was committed to growing the business and following suit with a number of instrument placements and industry partnerships.
 
Most notably, Evotec struck a co-development and co-marketing agreement with Fisher Biosciences subsidiary Cellomics in February 2006 (see CBA News, 2/3/2006) in which Cellomics created an interface between its informatics software and the Opera, and pledged to validate a number of its assays on the imager.
 
Still, in the wake of the Cellomics deal, rumors persisted that Evotec Tech was on the block, leading some to even believe that Fisher may have been interested in acquiring the unit.
 

“I would say that [Evotec] has excellent competencies in cellular sciences … [and] some IP around cell sorting and selection, in addition to the success that they’re having with HCS. But their capabilities in cellular sciences – both the people and the products – is why [PerkinElmer is] very excited.”

Finally, in July, Evotec Tech sold part of its business – its single-molecule detection technology – to Olympus. Evotec Tech said at the time that the deal fell in line with its goal of focusing its business more on cellular imaging and cell handling (see CBA News, 7/24/2006). However, the PerkinElmer acquisition made it clear that the Olympus deal was the first step in the complete divestiture of the Tech unit.
 
“Six to nine months ago, we had the first transaction, the first step of our exit [strategy] from our technologies business, when we sold the single-molecule detection business and intellectual property to Olympus,” Dirk Ehlers, Evotec’s CFO, said in the conference call this week.
 
Meanwhile, PerkinElmer remained an obvious candidate suitor, as the multi-tool vendor was conspicuously lagging behind life science tool rivals such as Thermo Fisher Scientific, GE Healthcare, Molecular Devices, and BD Biosciences in the high-content screening space.
 
The company had already made several moves over the past year to increase its cell-based assay play, such as introducing a slew of new products for cell-population and ion-channel screening.
 
And although it made little headway in the high-content imaging market, representatives from the company on several occasions said that cellular screening technologies were an acquisition priority.
 
“Our initiatives will be based around instrumentation, reagents, and high-throughput and high-content screening,” PerkinElmer chairman and CEO Greg Summe said at a September investor conference (see CBA News, 9/29/2006).
 
Duseau this week provided a preview of how Evotec Tech’s products would fit into and complement PerkinElmer’s existing capabilities.
 
“We’ve got a very strong presence with CellLux and LumiLux, and certainly the high content now extends that capability for us,” she said. “And then if you think about academic research in cell biology, we’ve got a very strong position with the UltraView live-cell imaging system. And this fits very nicely into both of those strategies.”
 
In addition, there may be some overlap between PerkinElmer’s expertise in the diagnostics space and Evotec Tech’s instrumentation. During the conference call, Carsten Claussen, CEO of Evotec Technologies, said in response to an analyst’s question about this overlap that “I think this is one of the big potentials we will have.”
 
According to Evotec’s Aldag, “This is something PerkinElmer would have to comment on, but I think we have found a corporate home for these technologies where this potential can more easily be exploited than in the Evotec environment.”
 
PerkinElmer’s Duseau told CBA News that the company hasn’t thoroughly investigated this potential yet, and that its focus thus far has been on the drug-discovery area.
 
“What else we can do with it is also attractive,” she added.