Lots of IVD Acquisitions as Buyers Spend Money

Slew of deals and the variety of buyers reveal a strong demand for molecular diagnostics firms

CEO SUMMARY: Biggest deal in recent weeks was the $1.55 billion Beckman Coulter paid to acquire BioSite and its Triage BNP test. But the most interesting news may be the entry of 3M Corporation into clinical diagnostics, based on its acquisition of Acolyte Biomedica Ltd., a company which offers a five-hour rapid culture-based MRSA test. Announced in rapid-fire order, these deals demonstrate the hot interest in molecular diagnostics.

CONSOLIDATION CONTINUES among in vitro diagnostics (IVD) companies. A growing list of acquisitions was announced over the past few weeks.

A sampling of these deals shows the wide scope of interest. In no particular order, here are some of the more notable acquisitions, with buyer, seller, price to be paid, and date of the announcement.

Beckman Coulter Corporation is to buy Biosite Incorporated for $1.55 billion, announced on March 25. Carl Zeiss MicroImaging purchased the instrument systems business of Clarient, Inc., including Clarient’s ACIS and Trestle product lines, for a price of $11 million with an additional $1.5 million in post-closing contingencies, disclosed on March 8.

Just last Thursday, March 29, Roche Holdings disclosed that it will acquire 454 Life Sciences, a majority-owned subsidiary of CureGen Corporation. Purchase price will be $140 million to the shareholders of 454 Life Sciences.

One particularly interesting deal was the purchase, by 3M Corporation, of Acolyte Biomedica Ltd. of Salisbury, United Kingdom. No purchase price was disclosed. Following the February 14 news of the acquisition, 3M announced in March that it had formed a new business division in medical diagnostics.

Access to molecular technology is a key motivator in most of these deals. It shows how the IVD industry’s major players are jockeying to bolster their line-up of products and to maintain a strong offering in molecular and other types of advanced diagnostics.

Over the past four years, Beckman Coulter and Biosite have collaborated in several ways. In purchasing Biosite, Beckman Coulter says it will improve the company’s position in immunoassay testing and cardiac diagnostics. It also plans to expand international sales of Biosite’s assays outside the United States. Currently, about 85% of Biosite’s $300 million in annual revenue is generated by sales within the United States.

Paid 20 Times Cash Flow

If there was any criticism of the Biosite deal by Wall Street, it centered around the price offered by Beckman Coulter. It paid a 53.5% premium over the market share price prior to announcement of the deal. One analyst noted that Beckman was paying more than 20 times cash flow for Biosite and would take on considerable debt to finance the transaction.

In the past 18 months, Beckman Coulter had done two other acquisitions. One was of Diagnostic Systems Laboratories Corporation (DSL) of Webster, Texas. This company, with about $34 million in annual sales, is a provider of specialty immunoassays including proprietary technology for reproductive endocrinology and cardiovascular risk assessment.

Beckman Coulter’s other acquisition was of Lumigen, Inc., based in Southfield, Michigan. For $185 million, Beckman acquired Lumigen’s “proprietary chemiluminescent chemistry” which Beckman uses in its Access family of immunoassay systems. Lumigen’s annual sales were about $33 million, of which 40% were to Beckman.

Clarient’s sale of its instrument systems to Carl Zeiss MicroImaging, based in Frankfurt, Germany, is interesting because it gives Zeiss MicroImaging pathology imaging and information management systems. These products can be matched to its laser dissection offerings and microscopes, giving pathologists the ability to capture images, then apply software tools to analyze these images.

Clarient retains access to the intellectual property represented by the ACIS and Trestle systems. Both companies intend to work jointly on developing new assays and other uses for this technology. Carl Zeiss MicroImaging noted that the acquisition advances its capabilities in clinical cancer diagnostics and cancer research.

Ultrafast Genome Sequencing

With its purchase of 454 Life Sciences, Roche is acquiring technology in ultrafast genome sequencing. Roche is familiar with the company and its products because its Roche Diagnostics division is the exclusive worldwide distributor for 454 Life Sciences’ instruments and tech- nology. The deal gives Roche access to use the 454 Life Sciences technology for in vitro diagnostics applications. 454 Life Sciences is based in Branford, Connecticut.

3M Corporation is using its acquisition of Acolyte Biomedica Ltd. as the backbone of its newly-announced 3M Medical Diagnostics business unit. Based in the United Kingdom, Acolyte produces what it describes as “rapid microbiology products.” Early last year, Acolyte launched BacLite Rapid, a culture-based MRSA test that can produce a result from clinical samples in under five hours.

Entering Clinical Diagnostics

Angela Dillow, Ph.D., who is Global Business Manager of the new business unit, noted that, “3M Medical Diagnostics is a natural extension of our infection prevention platform and enables us to offer hospitals a full spectrum of products that detect, prevent and treat infections in the hospital setting.”

As these deals show, consolidation is alive and well in the in vitro diagnostics industry. Further, the elephant in the room is Philips Corporation, the imaging giant which many experts believe may want to buy its way into lab testing, just as its two main competitors, Siemens and General Electric, have done.

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