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Proteomics Firms Will Remember 2009 for Acquisitions and Renewed Fortunes

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By Tony Fong

If 2008 was the year when the global recession dragged proteomics firms and mass spec vendors down a rabbit hole, 2009 may be remembered as the year when some of these firms went on a buying spree, and a year when one company close to death got a new lease on life.

Whether by wheeling and dealing, successful regulatory approval, or sheer persistence, proteomics companies and operations in 2009 appeared to take a sizeable step forward — whether that meant staying ahead of the competition or fending off financial collapse.

Many firms struggled during the past year and one major life-science player, PerkinElmer, opted to abandon the proteomics space in order to focus on what it believes to be more lucrative human and environmental health markets [See PM 02/05/09]. Companies also laid off workers and shut down some facilities in order to cut costs.

But in 2009, there were also signs of renewal and growth in proteomics.

Danaher's Mass-Spec Bet

The biggest news in the space was the proposed entry of a company that was virtually unknown in the proteomics community, but deeply respected by Wall Street. By making its $1.1 billion bid for the Applied Biosystems/MDS mass spec joint venture and MDS Analytical Technologies, Danaher instantly imprinted itself onto the proteomics sector and propelled itself to the top of mass spec market [See PM 09/10/09].

In the process, the deal, which is still pending, put an end to a year's worth of speculation about the fate of ABI's mass spec business that began in June 2008 when Invitrogen merged with ABI to form Life Technologies.

At the time, Life Tech officials insisted that they were keeping ABI's mass-spec operations and planned to "run it for success," but in the final equation the business did not fit into the new firm's operating model. At the same time, the business, which at one time consistently grew in the double digits, has more recently decelerated dramatically.

Also at that time, ABI's then-mass-spec-joint-venture partner, MDS, was having financial troubles: A sharp tumble in its stock price led some shareholders to call for the breakup of the firm and the sale of some of its businesses.

Though this spelled trouble for the JV, Danaher saw it as a chance to snatch up the business at a discount. Indeed, at an investor's conference in the fall of 2009, Dan Comas, Danaher's chief financial officer, acknowledged that "[w]e wouldn't have bought it for the price we did if it weren't performing the way it did."

To be sure, the ABI-MDS-Danaher transaction is not out of the woods. Last month PerkinElmer filed a Notice of Application against MDS pertaining to a joint venture between the two companies on inductively coupled plasma mass specs.

As part of MDS' plan to sell its Analytical Technologies business to Danaher, MDS would have to divest its half of the PE JV — a transaction that PE will have to approve. The company has not consented, and its Notice of Application seeks other possible remedies, including an injunction to prevent MDS from selling the Analytical Technologies business to Danaher.

How or whether this would impact ABI's side of the deal is unclear. During the summer of 2009, the parties involved said that the sale of ABI's half of the mass spec JV with MDS was a separate deal from the MDS Analytical Technologies sale to Danaher. MDS has shed no light on the issue, and in an e-mail to ProteoMonitor recently, a company spokeswoman reiterated that "the notice from PKI seeks a range of alternative possible remedies to determine the future of the joint venture before the sale of MDS Analytical Technologies closes."

A Life Technologies' spokeswoman also skirted the issue, saying only that the company continues to expect the sale of its mass spec business to be completed by the end of the first quarter.

Agilent and Varian

The other major deal of 2009 was Agilent Technologies' plan to purchase Varian for $1.5 billion [See PM 07/30/2009]. While Varian is not a major player in proteomics, it does have a fleet of LC-MS and Fourier transform mass specs that are used for proteomics and protein analysis.

The deal represents another move by Agilent to grow its footprint in the life-science space. At Pittcon in March, a company official told ProteoMonitor that after several years of pumping money into its R&D pipeline in order to build up its product portfolio, Agilent's strategy in life sciences would shift to turning a profit — meaning that a smaller percentage of its revenues would go into R&D.

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In November, the firm also began reporting Life Sciences as its own division, again reflecting the growth of that sector within its business.

Meanwhile, its acquisition of Varian is on hold. Before Christmas, the European Commission said it was extending its antitrust review of the deal to Jan. 20 from Jan. 6, though it gave no further details.

Other smaller mergers and acquisitions dotted the proteomics landscape in 2009, most notably Cell Biosciences' purchase of sample-prep company Protein Forest in December [See PM 12/11/09], and its purchase of imaging firm Alpha Innotech late in the summer [See PM 09/17/09].

Also, in October, Belgian biotech Eurogentec bought antibody firm AnaSpec to seat itself at the proteomics table. "People need to analyze proteins, and proteomics have a bright future," Eurogentec CEO Jean-Pierre Delwart said. "That's why we intend to develop Eurogentec more in the proteomics field."

Bio-Rad and Bruker

Even when firms weren't merging, they joined together in sometimes unusual ways. Early in the year, Bio-Rad Laboratories and Bruker entered into an agreement to co-develop and co-market products marrying the former's SELDI technology with the latter's MALDI-TOF/TOF platform [See PM 03/26/09].

Since acquiring the SELDI technology from Vermillion in 2006, Bio-Rad had been tweaking the system, and the deal with Bruker was an effort to make relevant again a technology that most recently has been viewed with deep skepticism by the research community.

The first fruit of the collaboration was a system called Lucid Proteomics, which allows scientists to do both top-down and bottom-up profiling of proteins from the same system with no additional hardware [See PM 06/11/09].

Reversal of Fortune

The year 2009 also saw the recovery of a company that was on the brink of financial collapse — again. As the year began, Vermillion had had its stock kicked off the Nasdaq and was awaiting a decision by the US Food and Drug Administration on its OVA1 test, which is designed to differentiate benign from malignant ovarian cancer tumors prior to surgery.

In March, with its cash reserves depleting and unable to tap into any source of financing, the firm filed for Chapter 11 protection [See PM 04/02/09]. As the summer drew to a close, its cash had dwindled to less than $65,000 and the end for the company looked imminent.

But in September, the FDA gave OVA1 510(k) clearance, making it the first proteomics-based in vitro diagnostic multivariate index assay to pass muster with the regulatory agency. With that, the vigil for Vermillion came one step closer to becoming one of proteomics most dramatic turnaround stories, though its bankruptcy fate is still with the courts [See PM 12/11/09].

While the US Bankruptcy Court in Delaware is scheduled to hold a hearing on Vermillion's Chapter 11 reorganization plan later this week, investors are embracing the company. Last week, it announced a private placement of its common stock that will net it more than $43 million [See related story this issue].

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Three months after the FDA cleared OVA1, microarray firm Arrayit Diagnostics, a newly formed subsidiary of Arrayit Corp., said it plans to file in the first quarter of 2010 its own 510(k) submission with the agency for a proteomic-based test for the early detection of ovarian cancer. The company added that a commercial launch could come as early as the third quarter.

MS Firms: Annus So-so?

Among the large mass spec firms, although 2009 was challenging, it turned out not to be the disaster that some had feared — at least when it came to instrument sales. Even amidst the worst of the economic downturn, the major mass spec vendors said that sales of their platforms were outperforming expectations, and in some instances outpacing year-ago results [See PM 06/04/09].

Helping that were major mass spec launches at the end of 2008 and through the first half of 2009 that continued to push the limits on the instruments’ mass accuracy, resolution, and data acquisition speeds.

At the American Society of Mass Spectrometry conference in May, representatives from mass spec companies said that while lower-end equipment and replacement systems suffered the most with the downturn, in proteomics, the continual need for increased capabilities was translating to ongoing demand for new technologies.

"Those things that are truly new technology — significant advances in technology allowing customers to see and analyze information that was difficult to do before because those capabilities weren't available — that sector of the market is, I think, the piece of the market that's driving the sustained performance of the MS market overall," said Gus Salem, vice president and general manager for Agilent's Biological Systems division.

Laura Lauman, president of ABI’s mass spec business, added, “New technology certainly stimulates [the proteomics] market,” and said that ABI was seeing “solid growth” in mass specs aimed at proteomics.

Some vendors also shared a belief that the worst of the “severe liquidity crisis,” as Thermo Fisher Scientific CEO Marc Casper called it, had passed, and a recovery would begin in Q4 2009.

One thing that did not contribute to mass spec businesses in general was stimulus funding. While at least $45 million in such funding had been awarded for fiscal 2009 [See PM 10/16/09], mass spec vendors were unanimous in saying that they had seen little of the funds trickle down to their level through the first three quarters of 2009 and expected little impact from stimulus funding in the fourth quarter.

The bulk of the funding is expected to hit instrument suppliers starting in the first quarter of this year, and according to investment firm Thomas Weisel Partners, once researchers start spending their stimulus grants, instrument firms, among them mass-spec companies, will be among the first to benefit [See PM 12/18/09].

Finally, while the mass spec companies characterized their pharma-based business in 2009 as difficult, other indications suggested that proteomics and protein-analysis services remained in demand at pharma.

In 2008, contract research organization Covance bought a minority stake in biomarker company Caprion Proteomics, then in early 2009 established its Biomarker Center of Excellence. In December 2009, it entered into an agreement to use Rules Based Medicine to be its exclusive third-party provider of multiplexed protein biomarker testing services.

Covance in return became RBM’s exclusive referral source for laboratory-based tests.

The moves by Covance were in response to an increase in demand from its pharma clients for biomarker services, Tom Turi, president of Covance’s BCOE, told ProteoMonitor [See PM 12/04/09].

"We're seeing a good increase in biomarker requests … and the complexity of the requests [require] multiple biomarkers in a given study,” he said. "And our aim is to help clients improve the speed and efficiency of their clinical trials.”

And in the spring, Sigma-Aldrich began offering a limited number of protein services, also in response to a growing need from biopharma [See PM 06/11/09].

With pharma and biotech firms outsourcing work in biologics to the tune of between $500 million to $1.5 billion annually, Sigma-Aldrich “felt that was a trend [that] we wanted to capitalize on … given the fact that we had core competencies within the company and certainly many relationships external to the company that we though could facilitate that,” said Susan Riley, director of international business development for the firm.

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