Caliper Life Sciences this week announced that it will acquire small-animal imaging firm Xenogen in a bid to broaden its palette of drug-discovery tools and hopefully generate what it estimates to be 10 percent to 15 percent top-line growth for the combined company.
The $80 million deal provides Caliper its first taste of an imaging platform for drug discovery, and falls in line with the company's strategy to be a complete pipeline drug-discovery tools and service vendor.
It also gives Caliper a gateway to incorporate other types of imaging platforms, such as high-content screening — a tool it doesn't currently have. Plans are already in the works, however, to enter this market, too, Caliper CEO Kevin Hrusovsky told CBA News this week.
At first glance, Caliper's acquisition of Alameda, Calif.-based Xenogen may seem an odd fit, given that Caliper has traditionally focused on microfluidic-enabled biochemical and cellular assays, while Xenogen's forte is small-animal biophotonic imaging.
"There is a correlation challenge between in vitro results, in that once they go into in vivo animal models, they find that things don't start stacking up the way they thought they were going to."
According to Hrusovsky, however, Xenogen's capabilities fit into a larger strategy being pursued by Caliper: to offer drug-discovery products and services spanning the entire continuum from in vitro biochemical assays to in vivo small-animal testing.
"In talking with senior executives from the [drug-discovery] industry, one of the biggest issues is that in vitro testing, which has been somewhat of a silver bullet for the last 15 years, is in fact helping them, but it's not helping them enough," Hrusovsky told CBA News this week. "There is a correlation challenge between in vitro results, in that once they go into in vivo animal models, they find that things don't start stacking up the way they thought they were going to.
"So we've got a lot of interest in, for instance, kinase profiling, to understand enzymatically, in vitro, what is happening; and then going into cellular tests, to see how the kinase performs in the cell; and then from there going to tissue and mouse models," Hrusovsky added. "That's really the strategic technology game plan that we have with this merger."
With Xenogen onboard, Caliper now offers tools for three of four key stages in the pre-clinical drug-discovery pipeline: high-throughput biochemical assays and high-throughput cellular assays; high-content cellular and/or tissue imaging, and small-animal testing.
Caliper addresses high-throughput biochemical and cellular assays with its flagship microfluidic LabChip platform, and will now be able to tackle small-animal imaging with Xenogen's technology.
The only area that seems to be missing is high-content cellular assays, but Caliper has plans in the works to address that, too.
According to Hrusovsky, the company has a model for a microfluidic plate that would be specifically designed to use very low numbers of cells, which is important as researchers begin to move toward more relevant, but also more expensive primary cells in drug discovery. The new plate would have 96 wells, with microfluidic channels feeding each of those wells, and microfluidic reaction chambers in each well.
This is essentially the same microfluidic technology on which Caliper's flagship LabChip platform is based. Hrusovsky said that LabChip similarly already enables small amounts of cells to be consumed in assays for GPCR activation and calcium screening.
"We're trying to get to the benefit of using primary cells in drug discovery, and we've already shown this with the LabChip 3000," Hrusovsky said. "But we want to now do that for high-content screening."
"It's a piece of the continuum we don't have, but we at least have what we think is a microfluidic consumable technology that would enable a much more relevant high-content screen."
And although Caliper is not entertaining thoughts of entering the high-content cellular assay market from the instrumentation platform side, it feels that the development of this technology will help it gain access to the burgeoning field and complete its in vitro to in vivo continuum strategy.
"We think that's a way for us to enter [HCS] without an imaging technology," Hrusovsky said. "In fact, we really would prefer to work with Evotec, Molecular Devices, Cellomics, Becton-Dickinson, GE — whoever has high-content imaging platforms — to make this plate so it can work in all of those platforms.
"It's a piece of the continuum we don't have, but we at least have what we think is a microfluidic consumable technology that would enable a much more relevant high-content screen," he added.
Still, imaging of any sort is relatively foreign to Caliper, so challenges surely lie ahead for Caliper's sales and marketing force.
This is compounded by the fact that Caliper's and Xenogen's customer bases do not overlap significantly. According to Hrusovsky, Caliper sells about 85 percent of its products into the commercial drug-discovery sector, with only about 15 percent going to academia. Xenogen, meanwhile, is almost exactly the opposite, selling about 85 percent into academia and 15 percent commercially.
"That's exactly where the LabChip was two and a half years ago," Hrusovsky said, "and in [that time] we've moved it completely into the commercial space."
Hrusovsky said that 75 percent of big pharma companies use LabChip, including Pfizer, Merck, J&J, Bristol-Myers Squibb, Sanofi-Aventis, and Novartis.
"We've moved [LabChip] successfully into all those companies in the last 24 months, and … we know that's one of our fortes," Hrusovsky said. "We see that this particular technology is even more ready for prime time: the data that you collect from imaging technology is very relevant to the same type of testing platforms we're doing in vitro."
Of course, Caliper sees the potential for revenue from the Xenogen deal, and said that company's revenue growth was one of its most attractive features. "The company has had 30 to 40 percent top-line growth," Hrusovsky said. "The challenge is that their losses have been growing, as well. We've got a pretty good prescription for how we'll convert what we'll call transformative technologies into profitability — to really utilize our commercial engine, our senior-level relationships with the industry, and get good adoption in the commercial sector."
Lastly, the acquisition plays into another of the company's recent acquisitions: Hanover, Md.-based drug-discovery service firm NovaScreen. That purchase marked Caliper's first major foray into the services business, and also somewhat increased its high-throughput cell-based assay play (see CBA News, 9/12/2005).
And, according to Hrusovsky, with Xenogen aboard, the NovaScreen arm might serve as a proving ground of sorts for Caliper's new in vitro-to-in vivo pipeline. Xenogen does already have a service play itself, based in Cranston, NJ, that contributes about 25 percent of the firm's revenues. The other 75 percent of its business is related to actual imaging platforms and associated reagents, he said.
"We're going to have that service organization be able to provide all the way through the continuum to in vivo," Hrusovsky said. "If there are some compounds of interest, we're going to be able to move those forward into a mouse and do compound profiling. We think that service business will become a very significant opportunity for pharma to try out some of our concepts."
— Ben Butkus ([email protected])