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Beckman Meets Inverness' Higher Bid For Biosite, Raising Price Tag to $1.67B

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Beckman Coulter this week matched a rival bid by Inverness Medical Innovations to acquire Biosite by offering to nab the company for $90 per share, $5 per share more than it originally planned to pay for the company [See PM 03/29/07].
 
Biosite approved the offer, which raised its selling price to $1.67 billion from $1.55 billion — and in the process temporarily spooked Beckman investors who had thought its original bid was too high. The offer runs out midnight on May 15, giving Inverness until then to make a second counteroffer.
 
The new agreement between Biosite and Beckman was disclosed on May 2, the last day Beckman had to respond to Inverness’ bid, which sought to acquire Biosite for $90 per share, or just under $1.4 billion. Biosite accepted Inverness’ bid, forcing Beckman to ante up its original offer or bow out [See PM 04/26/07].
 
In a statement, Beckman president and CEO Scott Garrett said that the opportunity to add Biosite’s technology to his company’s portfolio of immunoassay tests — an important revenue driver — was too good to pass up. Revenue from the tests has grown between 15 and 20 percent annually for the past several years, he said.
 
“This product area is where most new high-value tests come to market,” said Garrett. “Our acquisition of Biosite accelerates even further our ability to create value in this highly profitable market segment.”
 
Beckman’s offer has already received regulatory approval in the US and in Germany.
 
Calls to Inverness seeking comment were not returned, and it is unclear whether it plans to make a counteroffer.
 
A spokeswoman for Biosite declined to comment about why the company decided to accept Beckman’s offer over Inverness’ or whether it is in further discussions with that company.
 
Higher Ground
 
Beckman’s new and higher bid comes after its original offer was met with concerns by many analysts who said then that Beckman was overpaying for Biosite, and it would be years before Beckman would see a return on the investment. Indeed, shares in Beckman Coulter closed down 2 percent the day the counter-offer was announced, but quickly rebounded the following morning. The shares closed down almost 7 percent the day Beckman disclosed its original bid in March and have been down around 5.4 percent since then. Biosite’s shares, meantime, are up nearly 70 percent since Beckman made its original offer.
 
This week, even Thermo Fisher’s President and CEO Marijn Dekkers chimed in, saying he thought Beckman’s price is too high [see related article, this issue]. 
 
Garrett this week sought to mitigate Wall Street’s anxieties. “A major source of value in the transaction is our unmatched ability to leverage our global commercial infrastructure, expertise and installed base to expand sales of Biosite’s immunoassay test,” he said in the statement. “Beckman Coulter will remain a disciplined and responsible acquirer, and the price in this transaction is both full and fair to Biosite shareholders, while also creating considerable value for Beckman Coulter’s shareholders.”
 
The deal is expected to be neutral or modestly accretive to 2008 earnings per share, he said.
 

Immunoassay tests are “high-value,” and Beckman’s acquisition of Biosite “accelerates even further our ability to create value in this highly profitable market segment.”

Harry Glorickian, managing partner of Scientia Advisors, said that the price is “not insignificant,” but added that Biosite holds different appeal for Beckman and Inverness.
 
For Beckman, which already has a presence in the laboratory-based brain natriuretic peptide test market, acquiring Biosite would give it a suite of point-of-care diagnostic exams — something Beckman lacks, he said. For Inverness, Biosite represents a way to grow its presence in the cardiac point-of-care market, a market that is growing 16 percent a year and that  Inverness is just starting to explore.  
 
“Biosite has the largest swath of the cardio market right now, so it’s very well positioned and has a lot of placements,” with medical clinicians, Glorickian said. “For Inverness it’s basically an entry point into cardiac, and of course they want to acquire a leader.”
 
Biosite has protein biomarker-based diagnostic tests for congestive heart failure and cardiovascular diseases. In addition the company has tests for intestinal parasitic disease and drug screening, and is developing a sepsis test. It is working with Oxford Genome Sciences to develop a colorectal cancer test, and has an agreement with Hopitaux Universitaires de Geneve for a renal disease test.
 
Biosite is also unique among companies with proteomics-based technologies in that it has an FDA-approved and fully reimbursable product on the market.
 
Despite the maneuvering now over Biosite, Glorickian said he is not convinced the bidding war foreshadows a bullish M&A market for similar businesses. Billion-dollar takeovers are becoming increasingly common in some sectors, but in proteomics, they remain exceptionally rare.
 
While other biomarker companies are developing both protein and gene-based tests, Glorickian said that he doesn’t see much demand for such companies.
 
“Unless it’s an add-on to your already existing portfolio, I can’t see it being an overwhelming trend,” Glorickian said. “I see potentially a lot of collaborations, but just as an acquisition for a ‘pure-play’ biomarker company, the risk is still very significant.”

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