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Qiagen Acquisition Strategy Remains Focused on 'Smaller' Deals

By a GenomeWeb Staff Reporter

NEW YORK (GenomeWeb News) – Qiagen's acquisition strategy remains unchanged, and the firm is more likely to make smaller deals than any sort of big, transformative transaction, a company spokesperson told GenomeWeb Daily News today.

A report from Bloomberg yesterday quoted Qiagen CFO Roland Sackers as saying that the firm is in talks with several diagnostics companies and may make an acquisition in the "three-digit million dollar" range. Such a deal would be Qiagen's largest since its September 2009 purchase of UK companion diagnostics developer DxS for up to $130 million.

However, the Qiagen spokesman said today that the Bloomberg article was missing two important words. He said Qiagen may make an acquisition "up to" the three-digit million range, and that "smaller deals are more likely."

This would place such a deal in line with the firm's acquisitions over the past few years, which have been largely focused on adding molecular diagnostics content.

Since its mid-2007 acquisition of Digene for $1.6 billion — the deal which provided it with its HPV molecular testing franchise — Qiagen has been consistent on the M&A front, making smaller deals of under $150 million.

The pace has not matched the aggressive activity of the 2004-2007 period, during which Qiagen made at least 15 acquisitions that furnished the company with complementary sample prep, assay, and molecular diagnostics technologies. The slowdown is partially due to the slump that hit the global economy in 2008 and 2009, and rising valuations for potential targets.

The smaller deals over recent years, however, have brought in technologies to help expand the firm's presence in a variety of applied markets, such as food testing and animal health, as well as bolstered its molecular diagnostics content and instrument pipeline.

Among the deals over the past few years were the 2008 acquisition of Corbett Life Science, a Sydney, Australia-based developer of a rotary real-time PCR cycler system called Rotor-Gene, for $135 million; the 2009 acquisitions of DxS and SABiosciences, a developer of disease- and pathway-focused PCR assay panels, for $90 million; and the 2010 acquisition of ESE, a privately held developer and manufacturer of UV and fluorescence optical measurement devices, for $19 million in cash.

Earlier this year, it announced that it had made equity investments in Alacris Theranostics, a startup using whole-genome sequence analysis to develop individualized cancer therapies, and EyeSense, a developer of ophthalmic diagnostic systems for glucose monitoring of diabetes patients.

While the number of deals the firm has done has slowed over the past few years, Qiagen CEO Peer Schatz said in January at the JP Morgan Healthcare Conference the he believes this year will be "more interesting."

In a research note published Tuesday, Mizuho Securities analyst Peter Lawson said that Qiagen could potentially add between $960 million and $1.4 billion to its current debt of around $873 million — compared to around $935 million in cash that it holds — to fund a larger purchase. He speculated that, based on multiples from other transactions in the molecular diagnostics space, Qiagen could acquire a molecular diagnostics firm with sales of between $250 million and $350 million with the additional debt alone, or it could use the combination of debt and cash to purchase an even larger firm with sales of up to around $650 million.

But the prospect of taking on debt to make a larger acquisition doesn't sound like a primary strategy for the firm right now.

"The healthy financial position we have supports our growth initiatives," the Qiagen spokesperson told GWDN.

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