Sigma-Aldrich announced this week that it has signed a definitive agreement to acquire Proligo from specialty chemical giant Degussa, further advancing a wave of consolidation that has been sweeping the RNAi reagent market recently.
According to Sigma-Aldrich, Proligo, which has about 300 employees, racked up sales of $40 million in 2004. Depending on when the acquisition closes, as much as nine months of Proligo’s operating results will be added to Sigma-Aldrich’s top line in 2005, boosting its overall sales growth by 2 percent.
Specific terms of the acquisition agreement were not disclosed.
Kirk Richter, treasurer for Sigma-Aldrich, told RNAi News this week that the company expects the transaction to close early in the second quarter after German regulators approve the deal. He declined to comment on how Proligo would operate following the acquisition, and whether it would be integrated into Sigma-Aldrich or operate as a stand-alone subsidiary. He added that all options are being considered.
Richter said that the acquisition will give Sigma-Aldrich “more capabilities in what’s going on in functional genomics these days,” and will extend the company’s gene-silencing capabilities into the RNAi field.
Late last year, Sigma-Aldrich picked up the right to market a gene-silencing technology called TargeTron from Ingex. That technology, which was introduced earlier this week, involves the “specific disruption of bacterial genes by insertion of group II introns,” according to the company’s website.
Richter characterized TargeTron as “gene knockout” technology, and said that “the acquisition of Proligo gives us capabilities in gene knockdown.” He added that Sigma-Aldrich does not currently offer any RNAi-related products or services, and Proligo will give the company “a big advantage” in entering the market against entrenched competitors.
RNAi “fits into where we want to be in the life sciences market, and will [help us] continue to make sure we have a complete product line,” Richter said.
Having a complete product line seems to be a major motivating force behind the other big RNAi-related acquisitions that have happened recently. Just about one year ago, Fisher Scientific announced it would buy Dharmacon for $80 million in cash as part of its move to “expand [the company’s] presence in the life-science market,” as CEO Paul Montrone put it (see RNAi News, 2/13/2004).
Three months earlier, Invitrogen had reported its acquisition of Sequitur (see RNAi News, 11/7/2003). Invitrogen already marketed a number of RNAi-related products at the time of the deal, but did not sell siRNAs themselves.
But as important as a complete product line is, a company first needs to make certain it has freedom to operate, and in the RNAi world this means access to key intellectual property.
In order to secure this freedom, Sigma-Aldrich zeroed in on a specific piece of IP: a patent application portfolio co-owned by the Massachusetts Institute of Technology, the Whitehead Institute, the Max-Planck Institute, and the University of Massachusetts. (MIT oversees the IP for the other institutions.)
This portfolio includes US patent application No. 09/821,832; US patent application No. 10/255,568; and PCT application No. US01/10188.
According to the abstract of the primary US patent application, the technology relates to “a Drosophila in vitro system which was used to demonstrate that dsRNA is processed to RNA segments 21 [to] 23 nucleotides in length. Furthermore, when these … fragments are purified and added back to Drosophila extracts, they mediate RNA interference in the absence of long dsRNA. Thus, these … fragments are the sequence-specific mediators of RNA degradation,” the abstract states.
“A molecular signal, which may be their specific length, must be present in these 21 [to] 23 [nucleotide] fragments to recruit cellular factors involved in RNAi,” the abstract adds. “This … invention encompasses these … fragments and their use for specifically inactivating gene function. The use of these fragments (or chemically synthesized oligonucleotides of the same or similar nature) enables the targeting of specific mRNAs for degradation in mammalian cells, where the use of long dsRNAs to elicit RNAi is usually not practical, presumably because of the deleterious effects of the interferon response.”
Dharmacon, Qiagen, Ambion, and Proligo are the sole co-exclusive licensees of the patent applications. MIT recently sued Dharmacon for failing to meet its royalty obligations under their licensing arrangement (see RNAi News, 2/11/2005).
The IP, said Richter, “is a key part of being able to develop [RNAi] technology. There are only four licenses out there … [and] I don’t think [MIT is] willing to grant any more.” As such, acquiring one of the licensees was the only way Sigma-Aldrich would be able to compete effectively in the RNAi reagent market.
Now with Dharmacon and Proligo having been snapped up by large life sciences industry players, and Qiagen being too large to be a reasonable takeover target, all eyes are on Ambion to see if a merger or acquisition is in that company’s future.
“Large companies have been thinking about Ambion for awhile,” Jean-Francois Gauthier, a management consultant with TSG Partners, told RNAi News this week. “But it would be a very expensive purchase, and if [an acquirer] is not able to follow through with a further [RNAi] strategy and investment to make it a profitable acquisition, then it is not worth the price.”
According to Gauthier, to make the purchase of a company like Ambion • or Proligo, for that matter • worthwhile, a buyer needs to think of the transaction as an entry point into the RNAi marketplace, not just a business acquisition. The acquirer needs to “think about how they’re going to broaden their offering to the RNAi users so that [the acquisition] can be profitable,” he said.
“Ambion is the last [take-over target] and they’re attractive to many players, but [a company] will have to … make a commitment to enter gene silencing,” Gauthier added.
Bruce Leander, president of Ambion, declined to comment on the matter.