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Insight & Intelligence : Dec 29, 2011
This Year’s M&As Among Life Science Tool Firms Show Interest in Molecular Diagnostics
Coming in at number one is Danaher’s purchase of diagnostic maker Beckman Coulter for $6.8 billion.!--h2>
This past year, several life science instrument companies expanded their franchises through acquisitions, as they execute long-term strategic plans or hedge against fewer projected instrument purchases by research labs.
Many of these acquisitions reflect the industry trend toward moving into diagnostics and personalized medicine, allowing them to offer a wider array of more comprehensive products in a rapidly growing sector. The market for personalized medicine is forecast to grow 11.56% annually to reach a total of $148.4 billion by 2015. Industry analysts expect the fastest growth to come from the proteomics and genomics segment.
Here, GEN takes a look at five of the biggest mergers and acquisitions among biotech tool providers in 2011.
Danaher/Beckman Coulter—$6.8 billion
This June, in a deal more about money shuffling than company building, Danaher paid $6.8 billion in cash, including debt assumed,for medical-test maker Beckman Coulter. The diversified manufacturer is looking to gain a stronger foothold in the growing diagnostics industry. Danaher, which relies on acquisitions to beef up its slow-growing revenue base, preys on underperforming companies and has obtained a reputation for “ringing out margin-expansion results after deals.”
At the time of the Beckman takeover, The Wall Street Journal quoted Danaher chief executive H. Lawrence Culp Jr. as saying, “Danaher doesn’t believe additional large deals are needed to give it a strong life sciences and diagnostics business, although future smaller-scale, bolt-on deals are possible.”
This May Thermo Fisher Scientific paid $3.5 billion for Phadia, a privately owned Swedish diagnostics maker. Thermo Fisher said the transaction will generate a total of $35 million in cost and revenue synergies in 2014, with $10 million generated in 2012.
Thermo Fisher plans to report Phadia’s financial performance as a new specialty diagnostics segment. “The acquisition of Phadia is a major step forward in our strategy to enhance Thermo Fisher’s global presence in specialty diagnostics, one of our key growth platforms,” said CEO Marc Casper.
“This transaction will provide Thermo Fisher with leading allergy and diagnostic testing technologies that expand our specialty diagnostics autoimmunity offerings.”
PerkinElmer further established itself as a player in the personalized medicine arena through its September acquisition of Caliper Life Sciences for $600 million. Leaders of both companies expressed similar sentiments in commenting on the acquisition.
Robert F. Friel, Perkin Elmer’s chairman and CEO, said, “The integration of Caliper into our organization will further strengthen PerkinElmer’s position in personalized medicine. The acquisition will enhance our ability to provide customers with the complementary technologies, services, and knowledge they need to drive innovation from in vivo to in vitro imaging and provide expanded offerings across our biomedical, diagnostics, environmental, and food safety end-markets.”
Kevin Hrusovsky, Caliper’s former president and CEO, told GEN, that the combined forces of both companies create an opportunity to revolutionize the medical industry. “We will further strengthen PerkinElmer’s position in personalized medicine,” he told GEN. Hrusovsky will lead the newly combined $500 million business, which integrates the former Caliper organization with PerkinElmer’s existing research business.
The Caliper acquisition is a logical step in a series of acquisitions aimed at enlarging PerkinElmer’s clinical medicine fiefdom across the board from diagnostic services to instrumentations likely to play a role in personalized medicine. In July 2006, PerkinElmer bought ViaCelNTD Labs of Long Island, NY, specializing in prenatal screening, and the following year renamed the company ViaCord.
Then in 2008, PerkinElmer scooped up Pediatrix Screening, a laboratory specializing in screening newborns for various inborn errors of metabolism. It renamed the laboratory PerkinElmer Genetics.
While PerkinElmer has established itself as a market leader, especially in genetic screening, one financial analyst cautions that it operates, like similar companies, in a highly competitive industry characterized by rapid technological change and evolving industry standards. As a result, PerkinElmer must continue to make large R&D investments to maintain a competitive pipeline.
On November 30, Affymetrix announced it intended to buy privately held eBioscience for $330 million, provider of flow cytometry and immunoassay reagents for immunology and oncology research and diagnostics.
The acquisition is expected to boost Affymetrix’ position in the fast-growing immunology, oncology, and translational medicine markets, representing nearly a $3 billion annual opportunity. It is also expected to diversify the company’s revenue base and expand its reagent product range.
“This transaction places Affymetrix at the forefront of immunology and oncology, two of the fastest-growing segments of molecular and translational medicine,” said Stephen P. A. Fodor, Ph.D., founder and chairman of Affymetrix. “eBioscience complements our traditional businesses of genomics and cytogenetics and dramatically strengthens our foundation in molecular diagnostics.”
On December 2, Agilent Technologies acquired Halo Genomics, a provider of sequence-selective sample preparation solutions for next-generation sequencing.
“Halo Genomics’ unique technology and talented R&D team will expand Agilent’s solutions for emerging sequencing applications and accelerate our entry into the rapidly growing next-gen clinical sequencing market,” said Gustavo Salem, vp and GM of Agilent’s biological systems division within the life sciences group.
Several surveys hold that research institutions will put off purchases of expensive instrumentation, particularly DNA sequencing equipment, leaving manufacturers with diminished revenues. The coming year will no doubt see increasing merger and acquisition activity as tools and services companies look to move further into more profitable areas including personalized medicine. Holding the competitive edge in an industry based on rapid technological change, however, will remain challenging.
Patricia F. Dimond, Ph.D. ([email protected]), is a principal at BioInsight Consulting.
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