Abbott Laboratories announced this week that it will acquire StarLIMS Technologies for $123 million in a move designed to solidify its current presence in the diagnostic market while helping it expand into new sectors, such as forensics, microbiology, and public health.
Under the terms of the agreement, Abbott will acquire the 160-employee Tel Aviv, Israel-based laboratory informatics firm for $14 per share in an all-cash transaction valued at $123 million.
StarLIMS shares closed at $9.50 on Dec. 14. After the agreement was announced following the close of market, shares soared more than 40 percent to close at $13.89 on Dec. 15.
StarLIMS specializes in web-based LIMS and other laboratory informatics systems, and has a presence in a number of markets, including life-science research, clinical, environmental, food and beverage, forensics, manufacturing, and public health.
The company generated revenues of $25.2 million in 2008 and $23.8 million in 2007. It currently has around $18 million in cash on hand.
Abbott expects the transaction to close in the first quarter of 2010.
All of StarLIMS' current employees will be joining Abbott. It will operate as a separate business unit within the larger firm and its current CEO, Itschak Friedman, will continue to lead the StarLIMS business.
Friedman will report to Ed Michael, executive vice president of diagnostics at Abbott.
The acquisition "offers Abbott entry into new market segments, such as forensics, microbiology, and public health, which are new and complementary to Abbott’s existing diagnostics businesses," Scott Goss, global marketing director for informatics at Abbott, told BioInform via e-mail.
"We will continue to expand StarLIMS' presence in their existing non-clinical segments, as well as continue to provide outstanding solutions for our clinical laboratory customers," he said.
Abbott said it expects the deal to strengthen its current position in the diagnostic market by "providing advanced web-based applications to help laboratories efficiently store, retrieve, and analyze a significantly increasing volume of clinical, managerial and administrative data."
The company plans to integrate the StarLIMS products into its existing portfolio of laboratory information management products.
Goss said that this portfolio includes "laboratory middleware, interface engines, regional [laboratory information systems], reagent management, and quality control solutions."
StarLIMS contributes a user-friendly, web-based system that Abbott can use as a backbone to provide a "more complete solution" for customers, according to Abbott spokesman Don Braakman. "Right now we have a number of technologies that this will help us build upon," he said, without elaborating.
Braakman noted that the web-based approach would help the firm roll out updates for instrument software globally rather than instrument by instrument. Goss added that StarLIMS' products offer a good amount of "flexibility for future feature expansion" that will also help the firm deliver "tailored solutions" for customers.
"The base informatics infrastructure will deliver configurable solutions to Abbott Diagnostics, Abbott Molecular (including Ibis), and Abbott Point of Care," Goss said.
As far as why a diagnostic giant like Abbott would want to get into the LIMS business, Goss said that the company's market research found that "customers have consistently indicated that improved informatics capabilities will be a key factor in their choice of diagnostics system suppliers in the future."
He added that StarLIMS "has a proven track-record of entering new [vertical] markets and configuring their product based on a deep understanding of customer needs."
Michael Elliott, CEO of Atrium Research, a consulting firm that tracks the LIMS and electronic laboratory notebook markets, agreed that Abbott would likely benefit more by acquiring StarLIMS than it would in a partnership agreement.
"The LIMS market hasn't had an especially good track record for those partnerships having sustainability in the long term," he said. "They have a tendency to be opportunistic and short lived."
Elliott added that from Abbott's perspective, "when you've got skin in the game by actually acquiring somebody, you've got much more control over their direction and their focus and servicing the customer base" than would be the case in a partnership.
The acquisition shouldn't impact the overall LIMS market very much, Elliott noted, since StarLIMS will still be selling into the same markets it was prior to the acquisition.
"Abbott is planning a two-pronged approach where they're going to have StarLIMS sell their products to the general market as they're doing right now, and then [Abbott is] going to leverage their technology in terms of going after the hospital market," he noted. As a result, competitors like LabWare, LabVantage, and Thermo Fisher Scientific are unlikely to see much change to their businesses.
He added, however, that the potential for this agreement to introduce "more research-oriented LIMS" into the hospital setting "is an interesting dynamic."
Elliott noted that the acquisition is a sign that consolidation in the lab informatics market will likely continue.
Earlier this year, Life Technologies sold its SQL*LIMS business to LabVantage for an undisclosed amount [BioInform 07-06-2009].
In addition to that agreement, "a number of the [electronic laboratory] players have been acquired, and now there's further consolidation in the LIMS market, so I think it really points to a continued direction of rollup strategies," Elliott said.