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Now a Stand-alone Firm, AB Sciex to Invest Further into R&D, Explore Acquisition Opportunities

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This story originally ran on Feb. 1 and has been updated to include comments and additional information.

By Tony Fong

The completion of its sale to Danaher will allow AB Sciex to invest further into development of its mass specs and to acquire new technologies to strengthen its technology portfolio, company officials said on Tuesday.

"[W]e … have an opportunity for far greater success than if we had continued under our previous structure," according to Andy Boorn, who will serve as co-president of the new firm. "We have a greater opportunity to chart our own course and build for a stronger future … leading to a more agile company."

Boorn, who had been president of MDS' Analytical Technologies, will run the shop with Laura Lauman, who was president of Life Technologies' mass spec division.

Without going into specifics, Boorn added that AB Sciex will "be able to further invest in new technologies, create new levels of operational efficiencies and enhance our existing customer relationships while we build new ones."

According to Lauman, the new corporate structure "enables us to make strategic investments and partnerships as well as identify and acquire emerging technologies that are complementary to our business."

"Danaher is a large company that's known for expanding its portfolio, and that is something we'll consider as well," she added.

Lauman and Boorn made their remarks during a conference call with reporters, one day after Danaher announced the completion of its $1.1 billion purchase of the Applied Biosystems/MDS mass spec joint venture from Life Technologies and MDS to create AB Sciex, dedicated solely to the instruments.

Headquartered in Foster City, Calif., and Concord, Ontario, AB Sciex, which takes its name from the brand under which its mass specs were sold, has approximately 1,400 employees in 31 countries, the company said.

In the conference call, Lauman and Boorn outlined the structure and operations of AB Sciex and what being part of the Danaher conglomerate brings with it.

As part of Life Tech, the mass spec business had been seen as a bad fit, a fact that even Greg Lucier, Life Tech's CEO, acknowledged.

Meantime, its model as a joint venture operated by two companies under separate roofs was seen as outdated, clumsy, and ultimately inefficient.

While neither Lauman nor Boorn said during the call that the mass spec operations under the Life Tech/MDS ownership was short-shrifted, their remarks nevertheless indicated that AB Sciex's new place within Danaher — one that does not require the firm to share resources with other business units — is a liberating change.

"What this really does is [it] allows us to make investment decisions across the business probably in a far more efficient way," Lauman said. "Certainly, our goal and commitment is to invest in R&D and we will continue to do that even at an accelerated pace."

Boorn added that Danaher will provide "significant investment" to AB Sciex and explore other opportunities to expand the company. "Rest assured that there is a very rich and exciting pipeline of new products [that will be] coming to the market" from the new company.

Later this year, he and Lauman said, a new technology platform will be launched, though they did not provide specifics.

AB Sciex will focus on three core markets: protein biomarker research; food safety, environmental, forensics, and clinical research; and pharma and small molecules.

According to Lauman, less attention will be paid to those mass spec-based research areas in which AB Sciex does not have a presence, such as GC-MS platforms. The first order in hand, she said, is to take care of the company's existing customers and areas of strength.

"Does this present an opportunity, being part of a much larger company? Certainly, but our first priority is to our customers [of] today," she said.

One concern under the old JV was that being jointly run on opposite sides of the continent presented physical challenges to the business. Under its new iteration, AB Sciex retains that arrangement, with sales, marketing, and administration run out of Foster City, and research and development based out of Concord. According to Boorn, that will not be an issue since AB Sciex is a global firm that isn't tied geographically to any one or two locations.

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"We don't think about it as having a single center. We have key executives who are part of the combined leadership team" throughout its global locations, he said. There are no plans to consolidate the company into one headquarter, Lauman added.

No layoffs are expected from the changes, either she said.

Rejuvenation

Danaher's acquisition of ABI and MDS' mass spec assets, announced in late summer [See PM 09/10/09], has the potential to rejuvenate a business that not long ago was the top dog in the mass spec space, but that more recently has ceded market share to its rivals.

When the merger of ABI and Invitrogen was first announced in 2008, it was roundly speculated that it was only time before ABI's mass spec business would be shipped out [See PM 06/12/08 and 06/19/08]. Life Tech, the company that emerged from that deal, was focused on next-generation sequencing and the reagents and consumables business. Mass spec was the odd-man out.

Shortly after the sale to Danaher was announced, Lucier, who had maintained for a year that it was retaining the business, acknowledged at an analyst conference that it was"a great business [for us], but it was a better business to be owned by another company." [See PM 09/24/09]

At that conference, Daniel Comas, Danaher's CFO, said that the firm had paid a bargain for the mass spec business, which was made possible only because of its recent lukewarm revenue performance.

"We wouldn't have bought it for the price we did if it weren't performing the way it did," he said.

Up until about three years ago, the business consistently grew at a double-digit clip for several quarters in a row. Most recently, however, revenues steadily began to recede, and last week Life Tech said that for full-year 2009, mass spec revenues shrank 2 percent to $492 million. Fourth-quarter revenues climbed 14 percent year over year to $130 million.

Comas also said at the analyst conference that the business had been under-managed but that it had "a lot of good foundations." He identified the R&D pipeline as one area that suffered recently under the ABI/MDS joint venture.

Danaher is not a major player in the life sciences. Leica Microsystems, which develops microscopes, histology systems, instruments for materials testing, and reagents, is its other major life-science brand. On Monday, Danaher also completed the acquisition of MDS' Analytical Technologies business, which was formed into a company separate from AB Sciex called Molecular Devices.

Danaher paid MDS $650 million in cash for the Analytical Technologies business and its half of the mass spec joint venture with ABI, and paid Life Tech $450 million in cash for its half of the joint venture.

Both the acquisition of the mass-spec JV and of Analytical Technologies faced a potential hold-up when PerkinElmer alleged in a lawsuit that MDS and ABI infringed on a PE patent that covers a mass spec technology.

PE also sought to block the transfer to Danaher of a joint venture it had with MDS on ICP-MS platforms. Last week, however, PE dropped its IP challenge and settled with MDS on its ICP-MS JV dispute, clearing the way for Danaher to compete its acquisitions [See PM 01/29/10].

With the mass spec business now in its fold, Danaher may be looking for additional acquisitions to complement AB Sciex. Isaac Ro, an analyst at Leerink Swann, told ProteoMonitor in the fall that he does not expect Danaher to idle in the mass spec space now that it has made its initial foray there.

"I think what you'll see over the next two or three years is Danaher acquiring further assets around this business in life sciences" in the form of capital equipment and consumables, he said.

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