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Quiet 2007 for Proteomics as M&A Deals, Race for Technology, Gov’t Funding Slow

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Progress typically happens slowly in proteomics. In 2007, movement was glacial.
 
Agilent Technologies’ expanding profile in the field, a worsening government funding environment, and the continued crawl toward standardized research methods were some of the top trends in the field last year.
 
The period was missing much of the headline-grabbing events of 2006 when one merger created a life science behemoth (Thermo Fisher Scientific) and a divestiture took a once well-known proteomics company (Ciphergen, now called Vermillion) out of the vendor space. Instead, 2007 was largely left to let ‘06 deals settle and to reevaluate the field’s direction.
 
Commercially, proteomics continued to be a mixed bag of successes and setbacks. While some of the major players trumpeted growing businesses, others reported disappointing results. Also, technology development seemed to take a nap as machines released during the year tended to be updates to existing tools.
 
Meanwhile, the clarion call for quantification continued to accelerate as did research into biomarkers as leaders in the field, speaking at the Human Proteome Organization’s annual conference in Seoul in October, called for greater biomarker-validation work and pressed for a more organized effort to bring clinical relevance to proteomics.
 
Minding the Market
 
From the vendors’ perspective, the proteomics picture in 2007 was murky. Some of the major tool and consumable makers reported improving trends throughout the year, in particular Waters’ CEO Douglas Berthiaume, who sounded a bullish note in 2007.
 
After laying low for several years following a settlement with Applied Biosystems/MDS over several mass-spectrometry patents, Waters reemerged in the mass-spec space in 2006. In 2007, the company continued rebuilding that business.
 
During his company’s third-quarter conference call, at which Waters’ revenue swelled 17 percent to $352 million, Berthiaume told analysts that through the first nine months of this year “it’s clear to us that there is healthy momentum for spending for mass spectrometry technology, and that we are increasingly well positioned with our recent … product launches to gain share in this market.” He also predicted that the upward trend will continue for the balance of the year [See PM 10/25/07].
 
During the period, instrument sales rose 12 percent and a key driver to that growth was a gradual thawing of pharmaceutical spending. After a terrible 2005 and only slightly better 2006, drug manufacturers loosened their purse strings in 2007. The resulting increase in capital-equipment buys rippled through the entire mass spec industry [See PM 08/09/07].
 
No tool maker moved more quickly up the proteomics ladder than Agilent, which until 2006 was seen as a formidable liquid-chromatography vendor but only a minor player in the mass-spec space with single-quadrupole, time-of-flight, and ion trap instruments, all considered lower-end tools.
 
With the introduction of its 6410 triple-quadrupole mass spec and the 6510 Q-TOF in January 2006, the company became a player in the high-end space. While the company does not break out sales figures for its mass specs, its Bio-analytical Measurement division, which includes its mass spec business, grew 20 percent during its fiscal 2007 ended Oct. 31, to $2 billion.
 
While it still trails ABI and Thermo Fisher in sales and, depending on whom you ask, innovation, Agilent has nonetheless gotten the attention of its competitors, which throughout 2007 acknowledged its presence has changed the mass spec landscape [See PM 11/08/07].
 
Another company that saw its fortunes rise this past year was Invitrogen, which rebounded from a $191 million loss in 2006. Changes in management, compensation structure, and sales commission implemented during the second half of 2006 showed results in 2007: Through the first nine months of the year, the company posted a profit of more than $102 million.
 
The year was not upbeat for everyone. In September, Bruker BioSciences CEO Frank Laukien said that the company’s Daltonics division was continuing to look outside proteomics to grow its business. The mass-spec space, he said, had become increasingly crowded, “and we have begun investing three, four years ago [outside of] proteomics in order to sustain and re-accelerate our Daltonics growth.” [See PM 09/13/2007]
 
A notable drop-off in its mass-spec sales was experienced by ABI in 2007. After four consecutive quarters of double-digit growth in the space, the streak came to an end during the quarter ended June 30. At the time, Laura Lauman, president of ABI’s proteomics and small-molecule division, warned that the slowdown could continue.
 
In its most recent quarter, her prediction came true when the company reported a 4 percent rise in mass spec sales. By comparison, sales of the instruments rose 19 percent during the year-ago period.
 
ABI ended 2007, which corresponds to the close of its second fiscal quarter, by naming a permanent president, Mark Stevenson, who had been executive vice president at ABI since the summer. He succeeds Cathy Burzik, who left the company suddenly in October 2006.
 
On the liquid-chromatography front, Waters and Agilent remained the market leaders. According to a report released in September by Jon Wood, an analyst at Bank of America, Waters has 26 percent of the LC market while Agilent has 21 percent.
 
During a conference call accompanying the release of his company’s third-quarter financials, Berthiaume cited a 30 percent jump in sales of Waters’ Acquity UPLC platform. While sales of the platform still make up only a small fraction of sales of all HPLC’s, he boasted it was taking market share away from competitors.
 
“We still don’t think that there’s really good, meaningful competition [for Acquity],” he said at the time. “That’s what our customers continue to tell us.”
 
Meanwhile, Agilent also reported healthy acceptance of its 1200 Series Rapid Resolution LC instrument introduced in January 2006. By February 2007, the company exuberantly reported it had shipped the 1,000th unit of the system.
 

“The rate of growth [in NIH funding] has slowed down for some years, which is one thing. But they’ve actually gone down for the first time in 35 years.”

Meanwhile, Thermo Fisher’s LC plans progressively slowed as the year passed. The company started 2007 by saying it was looking to pump up its share of the LC market, and last January it purchased SwissAnalytic, an LC pump and software manufacturer. By year’s end, however, Thermo hardly mentioned its LC ambitions, though it ended 2007 by purchasing La-Pha-Pack, a German manufacturer of chromatography consumables, including liquid chromatography filters and vials.
 
Geographically, India and China remained fecund growth markets in 2007 for life sciences in general, and for proteomics shops in particular, as tool manufacturers reported double-digit growth in both countries throughout the year. As a percentage of total sales, the US market continued to be the engine driving the proteomics revenue train.
 
Missing in 2007 were any major M&A plays. The $10.6 billion marriage of Thermo Electron and Fisher Scientific in 2006 — a watershed event in any year — gave way to smaller deals. Even smaller deals such as Bio-Rad Laboratories’ purchase of Vermillion’s surface enhanced laser desorption ionization platform, had no equivalents in 2007.
 
Instead, the big players mostly were content to add companies with complementary technologies to their existing proteomics portfolios, and even with that, the number of acquisitions were scant.
 
A particularly pertinent transaction was Caprion Pharmaceuticals’ merger with Ecopia BioSciences in January for an undisclosed amount, which resulted in the creation of Thallion Pharmaceuticals.
 
Caprion was once positioned to be a leading protein-services firm, but by the time of the transaction, it had already begun shifting directions, becoming a company focused on developing biologics for infectious diseases and oncology [See PM 01/11/07].
 
As a result of the merger, Caprion spun out its proteomics business, and in July hedge fund Great Point Partners bought an 80 percent stake in the company for CA$30 million [$28.4 million].
 
Last year will also be remembered for the dearth of major technological breakthroughs introduced. At the American Society for Mass Spectrometry conference in June ­– which has been the traditional showcase for new proteomics instruments – Thermo Fisher, Agilent, and Waters each introduced new mass specs and/or protein-identification platforms, but rather than being revelations, the new tools resemble premium upgrades to existing technologies [See PM 06/07/07 here and here].
 
Standards Still in Process
 
On the research side, standardization remained a major theme during the year. At HUPO’s annual conference in the fall, the organization and Invitrogen released a protein standard mixture, the second such mixture to be made commercially available after Sigma-Aldrich’s product, which debuted in 2006.
 
Also this year, HUPO’s Proteomic Standards Initiative released its first implementation module, “The minimum information required for reporting a molecular interaction experiment,” or MIMix, along with a paper describing its work creating standards for the proteomics community called “The minimum information about a proteomics experiment,” or MIAPE [See PM 08/16/07]. Papers geared specifically to proteomics experiments are being prepared for publication possibly early this year.
 
On the 2D gel front, HUPO’s Industry Advisory Board tackled a major complaint about the technology by reporting that as long as proper protocols are followed, they can be duplicated [See PM 11/15/07].
 
The quality of work being done by proteomics researchers also was scrutinized during the year. In creating its protein standard mixture, HUPO discovered that only six of the 24 labs that participated in the task were able to identify all 20 equimolar proteins properly without help from HUPO [See PM 09/06/07 and 10/11/07].
 
The results mirrored those of the Association of Biomolecular Resources, which earlier in the year had also found mixed results in the ability of scientists to identify and quantify proteins [See PM 04/05/07]. While many of the missteps and omissions made by scientists in the HUPO effort were easily fixed, according to HUPO officials, the results did not reflect well on the research community.
 
Indeed, implicit during a panel discussion on clinical proteomics at HUPO’s annual conference was criticism of the quality of experiments being done, particularly in the field of biomarkers, which has become the single hottest area of proteomics research.
 
Calling biomarker research the “Wild West,” Sam Hanash of the Fred Hutchinson Cancer Research Center said limited funding and other resources have left many scientists ill-equipped to do the work, resulting in sloppy science [See PM 10/11/07].
 
“It’s really chaotic,” Hanash told the audience.
 
In fact, funding was a topic much in discussion throughout the year as researchers and vendors frequently alluded to a stingy government-funding environment, which according to anecdotal evidence has affected basic community trends, such as interest among young scientists. At an analyst conference in September, Invitrogen CEO Greg Lucier said that while he believes funding from the US National Institutes of Health will improve, current levels had already deflected many young scientists to other careers.
 
“Biomedical investment by the federal government has not kept up with inflation,” he told the audience in the fall.
 
Joshua LaBaer, director of Harvard Medical School’s Institute of Proteomics, told ProteoMonitor during the summer that proteomic researchers “can’t even get their R01’s funded. A lot of people are going to be leaving science, quite honestly, because it’s turning out to be a very difficult field to stay in.”
 

NIH funding for fiscal 2008, which began Oct. 1, 2007, is still being hashed out in Washington. President Bush has before him a bill that would fund the agency with $29.2 billion for the year, a slight increase above the $28.5 billion NIH received in FY 2007 and higher than the $28.7 billion he proposed in his fiscal 2008 budget, but $800 million less than what Congress had originally proposed.

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