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At UBS, MDS CEO Says Firm Reevaluating JV; ABI Invitrogen Say No Changes to Mass Spec

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With the proposed Applied Biosystems-Invitrogen merger chugging toward completion, the chief executive of MDS, ABI’s mass-spec joint-venture partner left open the possibility that it is at least considering purchasing that business.
 
At the UBS Global Life Sciences Conference this week, Stephen DeFalco intimated that changes could be made to his firm’s mass-spec partnership with ABI, even as ABI and Invitrogen officials insisted that there are no plans to sell any business of either company as part of the merger, including ABI’s mass-spec business, which generated $539 million in revenue in its fiscal 2008, ended June 30.
 
Also during the conference held in New York, Bruker’s CEO said that its mass spec business had regained momentum after a period of flattening sales, while Thermo Fisher Scientific’s CEO said that the drive toward identifying protein biomarkers and continual improvements in the instruments would maintain growth in its mass spec business.
 
But as the ABI-Invitrogen deal has the potential to recalibrate the proteomics instruments-and-tools landscape, DeFalco’s comments added an additional wrinkle to an aspect of the merger that has been the subject of speculation since the deal was announced in June.
 
Because the terms of partnership between MDS and ABI are confidential, DeFalco spoke obliquely about what parts MDS may be revisiting or what post-merger snags it foresees.
 
He also was miles away from saying that MDS is actively pursuing a buyout of the mass-spec business.
 
Indeed, DeFalco was careful to say that MDS’ partnership with ABI has worked out “pretty good” for MDS’ shareholders and that most of the company’s focus is currently on technology development and getting new products to market, not on exploring alternatives to the existing partnership.
 
But he also said that as MDS ponders the future of the ABI partnership post-merger, it is exploring all options, including the purchase of the mass-spec business, dissolution of the joint-venture agreement, and recommitting to the joint-venture agreement.
 
“It’s a wide-open canvas,” commented DeFalco, in contrast to what ABI and Invitrogen have been saying.
 
Mass Speculation
 
Since the announcement of the merger between instrument vendor ABI and reagents and consumables firm Invitrogen, questions have lingered about how the mass spec business would fit in the newly combined company and a possible sale of the business [See PM 06/19/08].
 
While acknowledging that mass specs would have something of a step-child relationship to the rest of the new company, officials from ABI and Invitrogen have maintained that it is also an asset that they intend to hold onto. ABI’s mass specs are the industry leaders in terms of market share.
 
During a joint session held by both firms this week at the conference, ABI and Invitrogen executives restated their commitment to the business.
 

“You’re hard-pressed to find a business that does half-a-billion dollars [in sales] … and 20 percent operating margins.”

“We’re not going to plan for any change in ownership. … We’re going to run that business for success,” said Greg Lucier, the chairman and CEO of Invitrogen, who will take on the same roles in the new company.
 
Moving onward, the focus will be on developing new applications for the hardware and consumables for the instruments, he added. “You’re hard-pressed to find a business that does half-a-billion dollars [in sales] … and 20 percent operating margins,” he said.
 
In the new company, the mass spec business is expected to make up about 12 percent of total revenues, said Mark Stevenson, the president and COO of ABI, who will take on both positions with the new firm. In fiscal 2008, mass spec revenues represented 24 percent of total revenue for ABI. In 2007 it accounted for 25 percent of total revenue.
 
Asked about DeFalco’s comments and whether ABI was performing a similar examination of its relationship with MDS, Stevenson said that ABI and MDS are continually reevaluating the joint-venture agreement as they look for opportunities to improve technology and the business. He also reiterated that new instruments are on target for launch during the next few months.
 
Last week, ABI and Invitrogen announced the corporate structure of the new company. Among the four divisions that will make up the new ABI is one for mass spectrometry, headed by Laura Lauman, currently president of ABI’s proteomics and small-molecule division.
 
Bruker Targets Biotyper for Mid-‘09 Launch
 
In other comments made by proteomics tools firms during the conference, Bruker’s Chairman, President, and CEO Frank Laukien told ProteoMonitor that its Biotyper system for the identification and classification of microorganisms using protein fingerprints will launch in the US in mid-2009.
 
Initially introduced in early 2006, the system, based on MALDI-TOF mass spectrometry, has been available only in Europe, where it is now being used routinely in clinical settings, Laukien said.
 
“Clinicians don’t care that it’s mass spec-based,” he said.
 
In preparation of the US launch, the company will place the platform in a “couple of [undisclosed] major medical centers to deal with US clinical isolates … to make sure that our proprietary libraries are matched for the US clinical isolates,” he added.
 
At last year’s conference, Laukien said that flat sales of its mass specs had forced Bruker to look beyond proteomics into the small-molecule and applied markets. This year, he said that that strategy has been paying off, citing continued growth of the company’s “high-performance” instruments as a trend to look for during the next year.
 
“Mass spec growth in the last few quarters has been quite good already,” Laukien said. “In 2009, we hope to further accelerate [that].” In particular, he said, instruments that traditionally may have been targeted for proteomics are finding acceptance in other research fields.
 
“We’ve seen very good progress in a lot of our top-down proteomics strategy with MALDI-TOF-TOF for some of these new tools that we have for biologicals,” he said. “Proteomics is really doing quite well, but we just realized that there are other mass spec markets outside of proteomics that are also very attractive and where we can leverage our technologies,” he said.
 
MS-based Dx in Five Years?
 
Thermo Fisher Scientific President and CEO Marijn Dekkers also was bullish on the future of mass specs, saying technological improvements were continually opening up new research methods and strategies, leading to new discoveries and creating new opportunities and demand.
 
During the past five to six years, his company has continually pushed the capabilities of its instruments, resulting in an increase in market share of the instruments, he said. Today, Thermo Fisher is widely seen as the number two manufacturer behind ABI/MDS. The question he receives regularly is: When will Thermo Fisher’s growth curve in mass specs come to an end? His answer: Not in the foreseeable future.
 
Less than 20 years ago, it took scientists a year to identify one protein, he said. Today, that period has shrunk to three-tenths of a second. And “it’s not just speed [that has improved], it’s also accuracy and sensitivity that have come along with it,” he said, adding Thermo Fisher is “far from done” in furthering the capabilities of its instrument.
 
Citing all the work being done in protein biomarkers, he said that the time when mass specs will be used in the clinical setting could be approaching: The day when doctors will be able to diagnose diseases such as cancer or Alzheimer’s disease with a simple blood test is “not far away,” he said.
 
“Five years from now, mass specs will be very well-defined as a diagnostic tool, not just as a life science research tool,” he said.
 
Other drivers of mass spec business will be absorption, distribution, metabolism, and excretion testing, and toxicology testing, as well as sports doping testing, he added.  

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