Beckman Coulter (Fullerton, California), a developer of products that automate complex biomedical tests and operating in 130 countries, and Biosite (San Diego), a biomedical company commercializing proteomics discoveries for diagnostics, reported entering into a merger agreement under which Beckman Coulter will acquire Biosite’s outstanding common stock in a cash tender offer of $85 a share, about $1.55 billion on a fully diluted share basis.
Beckman Coulter said the blockbuster transaction is expected to accelerate its revenue growth, improve operating margins and be accretive to earnings in 2008 and beyond.
“This is an exciting transaction which adds significant capability, content and breadth to our organization. This positions us for continued profitable growth with some compelling near-term economics,” Scott Garrett, Beckman Coulter’s president/CEO, said in a conference call on the deal.
The deal is expected to close in 2Q07, Garrett said.
“Financing has been fully committed by Morgan Stanley and Citigroup,” he said. “Long-term, the financing is likely to be a combination of convertible and term debt.”
Garrett described the combined entity as “the leading U.S. immunoassay complementing Beckman Coulter’s leadership positions in U.S. chemistry and hematology.” Biosite, he said, is the “top developer of novel tests” and has “set the standard for market and product development in our industry.” He called the two companies “a natural fit,” and in fact, the deal builds on an existing relationship between the two companies.
The transaction grew out of Beckman Coulter’s relationship with Biosite over the past four years in the area of B-type Natriuretic Peptide (BNP), a test that aids in the diagnosis, risk stratification and assessment of severity of heart failure and the risk stratification of patients with acute coronary syndromes. It combines Beckman Coulter’s instrument systems, each of which delivers a “predictable recurring revenue stream based on sales of consumables, revenues from service and payments on operating-type leases,” with Biosite’s near-patient tests.
Garrett said that on revenues of just over $2.5 billion for Beckman Coulter in 2006, about 76% could be “characterized as recurring.”
“This high percentage of recurring revenue provides a growing and reliable stream of earnings and cash flow,” he said.
“Biosite utilizes third-party distributors, and more than 85% of sales come from within the United States. A major source of value in the transaction is our ability to leverage our global commercial infrastructure and installed base to expand sales of Biosite’s immunoassay tests, including BNP.”
Biosite, he said, grew its high-margin recurring revenue to more than $300 million in 2006, “almost all of which is attributed to consumables.” About 80% of 2006 revenue came from the cardiovascular disease area, including tests designed to enable the diagnosis of a “range of conditions, including congestive heart failure, chest pain and heart attack,” as well as pulmonary embolism.
The Biosite pipeline Garrett described as “extensive,” with products planned for the assessment of acute kidney injury, sepsis, abdominal pain, acute coronary syndrome” and others.
Garrett added: “We remain on track to achieve our full year 2007 outlook, as stated in our February 8 earnings release, excluding any impact from the Biosite acquisition. We expect significant revenue growth resulting from the improved effectiveness of our global commercial franchise selling BNP along with other cardiac markers. . . . Everyone at Beckman Coulter looks forward to expanding our collaboration with the Biosite team in San Diego and elsewhere, as we maintain and grow the center of excellence that Biosite has established.”
Beckman Coulter will commence a tender offer for all of Biosite’s common stock. The offer is conditioned upon at least a majority of the outstanding Biosite shares being tendered, as well as the satisfaction of customary conditions. Approval of the transaction by Beckman Coulter’s shareholders is not required.
Jeffrey Frelick, VP and diagnostic devices and laboratory equipment analyst at Lazard Capital Markets, issued a buy rating on Beckman Coulter, citing positives and slight negatives of the deal.
On the positive side, Frelick said the “point-of-care market could provide opportunities for Beckman beyond the central laboratory. In our opinion, as labs continue to be faced with personnel challenges, point of care use should rise, not just because of its rapid turnaround time, but also because it doesn’t require laboratory staff to perform the tests.”
However, Frelick characterized the price that Beckman Coulter is paying for Biosite as “a bit rich, given that sales grew only 7% last year and are expected to hover around the same single-digit growth over the next few years.”
• Millipore (Billerica, Massachusetts) reported a collaboration with Dr. Gerry Shaw from the University of Florida (Gainesville, Florida) and EnCor Biotechnology (Gainesville) to develop and license an enzyme-linked immunosorbent assay (ELISA) kit to measure the levels of pNF-H, a biomarker of axonal injury, in homogenates of tissues as well as samples of serum, CSF and other bodily fluids.
The neurofilament ELISA kit can be used to detect the extent of spinal cord and brain injuries and for finding axonal degeneration in neurological diseases. The kit measures upregulation of pNF-H in a variety of damage, intoxication and disease states. This assay functions on all mammalian species tested so far, including rat, mouse, rabbit, cat, pig, cow and human.
“We believe collaborations like this will accelerate discovery and therapy in the field of degenerative diseases, and Millipore is committed to further partnering with scientists at leading academic, biotech and government institutions to supply research tools worldwide which will accelerate breakthroughs in medicine and therapies,” said Kumar Bala, marketing director for Antibody Technology at Millipore.
Shaw, a professor of neuroscience at the McKnight Brain Institute at the University of Florida College of Medicine, founded EnCor in December 1999 to manufacture antibodies and proteins. In 2004, EnCor, Shaw and a collaborator at the National Institutes of Health reported a patent pending on the ELISA assay.
Millipore’s Bioscience provides tools, services and biological reagents that drive advancements in biomedical and academic research as well as support the discovery and development of new pharmaceuticals.