After more than a decade as a supporting player, Qiagen has decided to become a molecular diagnostics company.
Before the acquisition, Qiagen had no molecular diagnostic assays available for anything but research purposes. But with Artus in the fold, the combined company is counting on merging its existing sample-preparation products with the new diagnostics, along with the PCR license that comes with them, to smooth its entrance onto the scene.
Well known as a maker of nucleic acid sample-preparation products, Qiagen signaled its new direction with the planned acquisition of Artus, a Hamburg, Germany-based diagnostics firm specializing in real-time PCR applications capable of running on several companies' platforms. Qiagen, which is based in the Netherlands, said it will pay $39.2 million in cash for the company.
When the acquisition is final, Qiagen will have inherited "a substantial regulated pipeline" from Artus, with the first [US Food and Drug Administration]-cleared product coming onto the market in May, said Peer Schatz, Qiagen CEO, in a conference call with investors this week. Over at least the last two years, the European Agency for the Evaluation of Medicinal Products has awarded Artus CE Mark approval for more than 30 of its approximately 60 products, which focus mostly on pathogen detection, including assays for influenza and SARS, Noel Doheny, Qiagen vice president of molecular diagnostic solutions, told Pharmacogenomics Reporter.
Beginning with Artus' focus on respiratory pathogen assays, Qiagen hopes to continue selling Artus' OEM diagnostics to Abbott and others, while expanding its offerings further into respiratory pathogens and pharmacogenomics, according to Qiagen officials.
In addition to the approximately 60 assays Artus offers, other projects are underway to produce new diagnostics for "the typical respiratory suspects," but the Artus was "not in a position" to pursue clinical trials for FDA clearance before the acquisition, Doheny said. "But several have been discussed, which is sort of the FDA way of doing things now," he said. "One should be making the preparations at this time of the year for active trials in the fall," due to the seasonal nature of Artus' disease area specialties, he said.
The plan is to avoid direct competition with Roche and Abbott, to whom Artus sells its assays as OEM products, and to focus on competition with smaller, less well-established players with few offerings in pathogen detection, said Doheny. He declined to name any competitors.
Third Wave Technologies and Celera Diagnostics, and a handful of others, compete with Artus in common disease assays such as HCV and HIV detection, but respiratory virus detection is not as popular. The French company BioMerieux has a license to use Affymetrix' GeneChip technology to develop assays for bacterial strain typing, hepatitis C, respiratory infections, and central nervous system infections, but its product stable includes only histological tests for some of these disease areas, according to the company's website. No commercial molecular diagnostic competitors could be contacted before this issue went to press, partly due to time constraints related to the Memorial Day holiday in the US.
Absent competition from similar firms, Artus will go after other markets. "We see the growing need to replace [cell] culture with molecular methods, especially in the reference lab markets globally," Doheny said, in answer to an analyst's question during the call. The company wouldn't turn down an order from LabCorp or Quest, Doheny told Pharmacogenomics Reporter, and securing those two giants as customers is "high on the list of 'to dos,'" he said.
The company also has no plans to produce a companion diagnostic to accompany a pharma's drug, said Doheny, although Qiagen "would love" such an arrangement.
As of the beginning of this new relationship, Qiagen's pharmacogenomics offerings are a bit slim. The company has inherited four pharmacogenomic diagnostics from Artus' stable: DPD, MTHFR, NAT2, and TPMT. "I would expect that we would be in collaboration with other companies on some real pharmacogenomic efforts, ones that would involve a broader range than the original four [Artus pharmacogenomic products]," Doheny said.
But Qiagen seems to be interested in the idea of pharmacogenomics, at the very least. As proof, Doheny touts the company's membership in the Personalized Medicine Coalition, as well as its involvement in various standardization and quality control committees, Doheny said.
What Comes with Artus?
Despite a seeming advantage in pathogen identification, and perhaps to dissuade current OEM customers from coming up with their own molecular diagnostics in this field, Qiagen wants to meld its specialty with Artus'. That is, it wants to create a kind of cradle-to-grave diagnostic product that accepts a raw sample, extracts nucleic acids, and ends with real-time PCR.
This kind of vertical integration in the lab "allows [customers] to fill their menu very efficiently without having to optimize anything on the chemistry or the hardware," said CEO Schatz during the conference call.
The acquisition will also give Qiagen a "full global [PCR] license for molecular diagnostic applications" inherited from Artus, said Schatz. "But this is really the big one, and the one that you would [need] to have a full molecular diagnostics business," he said. "For insiders, they clearly see the value of this."
The company "will pay approximately $39.2 million in cash in exchange for all of the outstanding capital stock of Artus," said Qiagen CFO Roland Sackers, during the conference call. "Approximately $11.6 million of this consideration will be paid into escrow and will be released subject to its achievement of certain [undisclosed] milestones," he said.
Artus expects to make $15 million in net sales and between $1.5 million and $2 million in net income in 2006, the company said this week in a statement. The company projected it would make $11 million in net sales in 2005.
Sackers said the company intends to increase R&D in Artus' products, with operating income reaching 30 percent of the company's budget, but that total R&D expenses for Qiagen would probably not stray far from the 7-percent-of-sales range the company usually spends.
-- Chris Womack ([email protected])