TRENDS & PERSPECTIVES
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The Cobas 6000 by Roche
Diagnostics (Indianapolis).
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Roche Diagnostics (Indianapolis) is making two acquisitions that will further increase its stronghold in life sciences. In early April, Roche announced it would acquire BioVeris Corp. (Gaithersburg, MD), a maker of healthcare diagnostics, for about $600 million. A few days before, Roche had announced it would acquire CuraGen Corp.’s subsidiary, 454 Life Sciences (Branford, CT), a developer of sequencing technology, for up to $154.9 million.
While still subject to regulatory and shareholder approvals and other closing conditions, the BioVeris transaction is expected to close by the third quarter of this year. The 454 Life Sciences transaction does not require shareholder approval and was to have closed by the second quarter.
Roche has a history with both companies. Since 1996, Roche has had a limited license to utilize BioVeris’s detection technology in its Elecsys immunochemistry product line. Roche’s Elecsys product line is already the fastest growing portfolio of its lab diagnostics business, according to company reports. By acquiring BioVeris, which has about 200 employees, Roche will be able to expand its ECL business into new market segments.
“We licensed the technology for use in human diagnostics testing,” says Mary Beth Myers, director of marketing and communications for Roche’s centralized and molecular diagnostics divisions. “Once we acquire BioVeris, we will own all the ECL patents, which means we will be able to expand our immunoassay business. Segments including life science research, life science development, patient self-testing, veterinary testing, drug discovery, drug development, and clinical trials all become open once we own the patents.”
The clinical trials segment alone is about $333 million and growing at about 10% a year, thanks to an increasing number of clinical trials and larger numbers of patients enrolled in those trials. An increasing number of Roche’s IVD customers are also expanding their business into the area of clinical trials, Myers notes.
Roche has also been acting as the exclusive worldwide distributor of the 454 Life Sciences’ Genome Sequencer systems and associated reagents to all markets with the exception of regulated diagnostics. Through this acquisition, Roche will obtain access to 454 Life Sciences’ future generations of sequencing products and the use of 454 Sequencing in regulated diagnostic applications, says Tim Harkins, a spokesman in marketing applied sciences at Roche.
Harkins says the acquisition is a natural evolution for the two companies. “Many different segments within Roche were talking to people within 454 … so it’s just formalizing and strengthening a very strong working relationship we already had,” he says.
Harkins adds that the acquisition is significant because it will allow Roche to go after existing and emerging markets in genetic sequencing technologies. The traditional sequencing market is valued at around $700 million; including forensics, it is valued at about $1 billion, he says.
454 Life Sciences’ technology enhances genomic data and sequencing applications, enabling the discovery, development, and clinical testing of new vaccines and drugs, and allowing personalized medicine to become a reality, Harkins says. Roche plans to maintain the 454 Life Sciences facility in Branford with its 167 employees as a fully integrated part of the Roche organization.
The acquisitions by Roche are not surprising to industry analysts. “Roche has generated a tremendous cash position and has been actively seeking to deploy capital for strategic acquisitions,” says Jeffrey Ellis, head of diagnostics M&A for CrossTree Capital Partners (Tampa, FL.)
Ellis adds that the BioVeris and 454 acquisitions are “logical steps to bring in-house proven products and technologies with which Roche already has a significant vested interest.” While the transactions are not transformative acquisitions as were the recent acquisitions of IVD companies by General Electric (Milwaukee) and Siemens Medical Solutions (Malvern, PA), they point to a trend of continued consolidation in the IVD industry, Ellis notes.
Doyia Turner, a spokeswoman for Roche Diagnostics, confirms Roche’s acquisitions were not in response to industry competition from those well known for their diagnostic imaging systems. “While we do look at them as important competitors, we have been in this space for a long time,” she says. “They may have the experience with imaging, but we have the experience with the clinician and the lab, and that is going to be new for them.”
Ellis expects more acquisitions for Roche and its competitors. The combination of “large, cash-rich IVD companies and a surge in innovative new IVD companies will lead to more mergers and acquisitions for those smaller players that can prove commercial success,” he says.
