Diagnostics & Imaging Weeks

In a move intended to broaden both its internal development efforts and its services to OEM diagnostics manufacturers, Invitrogen (Carlsbad, California) yesterday unveiled plans to acquire Dynal Biotech (Oslo, Norway), a private developer of molecular separation and purification technologies, from its majority owner, Nordic Capital (Stockholm) and a co-investor, for about $380 million (NOK 2.5 billion).

Dynal has been a leader in the magnetic bead technologies sector, with those technologies used in cell separation and purification, cell stimulation, protein research, nucleic acid research and microbiology.

Sean George, vice president of diagnostic tools and solutions for Invitrogen, said that the company "is always on the lookout for premier technologies and premier brands in our industry," and that the Dynal purchase clearly extends that strategy.

Dynal, he told Diagnostics & Imaging Week, offers "the premier brand name in magnetic bead separation. They pioneered the field of microspheres and magnetic microspheres, and we intend to take this technology and utilize it throughout our applications and product development."

He characterized Dynal's bead tech platform as "robust and versatile, able to drive through a lot of application areas."

With the addition, George said a continuing emphasis for Invitrogen will be a balance between internal new product development and acting as "a premier partner with companies engaged in developing diagnostic tools and assays and marketing those tests in hospitals."

Invitrogen has "no solid plans" at this time for organizational changes or cutbacks at Dynal, he said. Rather, the company will focus "on serving the customers we're working hard and investing in [Dynal] to supply better solutions" to diagnostic OEMs.

"We really look at our people within our company and [those] acquired as our most valuable asset," George added.

Invitrogen said the acquisition would give it bead-based isolation technologies that can be used across the company's portfolio of technology products.

Dynal manufactures the Dynabead system enabling production of highly uniform spherical microparticles that are super-paramagnetic, meaning they exhibit magnetic properties only when placed within a magnetic field. Dynal treats the surface of these particles with chemical groups and biological materials useful in research.

Greg Lucier, chairman and CEO of Invitrogen, said that, like the company's purchase of Molecular Probes (Eugene, Oregon) last year, Dynal offers the chance for new combinations with Invitrogen product offerings to create "breakthrough innovations."

He added: "The major product enhancements made possible by the use of Dynal's Dynabead system will further our mission of accelerating disease research and drug discovery, as well as our initiative to provide cutting-edge tools to diagnostic companies worldwide."

Dynabead "smart" surface technology can be applied to many of Invitrogen's products, the company said, to produce "expanded sets of matched reagent solutions around genes, antibodies, enzymes, cell culture media and detection products, with uses in various research areas, including stem cell and cell therapy applications, as well as new products supporting molecular diagnostics."

"We believe that products resulting from combining the two companies' technologies will play a key role in supporting several emerging trends in healthcare," said Lucier.

"One example of the application of Invitrogen/Dynal synergies in healthcare involves treatments that focus on strengthening a patient's own immune system," he said. "Separating specific cells that play a key role in fighting disease is a cornerstone of this immunotherapy."

Lucier added, "By coupling the Dynabead technology with targeted antibodies from Invitrogen's extensive collection, through our anticipated purchase of Zymed Laboratories [South San Francisco, California], researchers will have an efficient and effective system capable of identifying and isolating these important cells from a single blood sample."

Invitrogen said that the isolation and detection capabilities of Dynabeads also will enable it to provide new R&D targets in the areas of assay development, RNA interference, DNA cloning and proteomic analysis.

Jon Hindar, president and CEO of Dynal, said, "Becoming a part of Invitrogen is an important strategic next step that will open new possibilities and continue to strengthen our position."

The transaction is expected to close by the end of the current quarter.

Besides its bead systems and technologies, Dynal also develops tissue-typing systems used to ensure compatibility between donors and recipients in organ and bone marrow transplants.

Dynal reports holding 13 patents, 21 patent applications, 12 registered trademarks and 10 trademark applications. The company committed about 13% of revenues to R&D in 2004, surpassing Invitrogen's goal of spending 10% of revenues on R&D. Dynal employs more than 400 in Norway, the U.S., the UK and China.

Dynal is expected to generate revenues of roughly $74 million for the period April through December 2005. Invitrogen said it expects the transaction to be accretive earnings by 7 cents a share in 2005 and by 24 cents a share in 2006.

Assuming transaction close by the end of March, Invitrogen is raising full-year 2005 revenue guidance to a range of $1.164 billion to $1.184 billion, and an EPS range of $3.40 to $3.44.

Given the growth of the number of persons diagnosed with diabetes, supplies to patients in that market are a sure bet. And two companies have just added to their supply chain capabilities in the sector.

PolyMedica (Woburn, Massachusetts) said that its subsidiary, Liberty Medical Supply (Port St. Lucie, Florida), has acquired substantially all of the assets, excluding receivables, and the business of National Diabetic Assistance (NDAC; Deerfield Beach, Florida).

And large medical supplier Owens & Minor (Richmond, Virginia) reported acquiring Access Diabetic Supply (Pompano Beach, Florida), a distributor of supplies for those with the disease.

PolyMedica has agreed to pay about $13.6 million for NDAC's patient list and most of its assets, including inventory and equipment.

With the purchase of NDAC, Liberty also purchased NDAC's Deerfield Beach facility, including the land and building, for an additional $3.5 million. The acquired operations will continue to function from Deerfield Beach, and Liberty said it would hire substantially all of NDAC's employees, including the company's two founders.

NDAC provides diabetes testing supplies and respiratory medications primarily to Medicare beneficiaries throughout the country. Its revenues for 2004 were about $15 million, and, at closing, the company had a patient base of roughly 29,000.

Patrick Ryan, president and CEO of PolyMedica, called NDAC "a great addition to our company and brings us not only a significant number of new patients but a dedicated team of well-trained people who are focused on providing superior service."

He added, "The purchase of the Deerfield Beach facility provides Liberty an important back-up call-center should our other operations ever be disrupted, as they were during the past hurricane season."

Separately, PolyMedica reported that in the quarter ended Dec. 31, the Liberty Medical unit also purchased the inventory and active patient base of another, unnamed diabetes testing supplier serving about 7,500 patients.

PolyMedica is a provider of healthcare products and services to patients suffering from chronic diseases. With more than 650,000 active patients, the company bills itself as the nation's largest provider of blood glucose testing supplies and services to people with diabetes. In addition, PolyMedica provides a range of prescription medications through its mail-order pharmacy and a network of more than 40,000 retail pharmacies that honor its drug discount card.

Its Liberty Healthcare unit focuses on diabetes and respiratory care, delivering products and services to their homes. It is well known for its direct-to-consumer television commercials. By frequently communicating with patients and providing the convenience of home delivery, Liberty says it improves patient compliance to enhance the quality of their lives.

In the acquisition of Access Diabetic Supply, Owens & Minor will expand its resources primarily for supplying blood glucose monitoring devices, test strips and other ancillary products used in the day-to-day management of diabetes.

Terms of the deal were not disclosed.

Craig Smith, president and chief operating officer of Owens & Minor, said the purchase "extends our core competency of medical products distribution into the home and is consistent with our long-term strategy to expand our reach in the healthcare supply chain. This is a logical extension of our abilities into a rapidly growing market."

Access will operate as a separate entity within the corporate structure of Owens & Minor subsidiaries, and about 200 Access employees, along with company executives, will join Owens & Minor.

Launched in 2000, Access, with 2004 revenues of about $32 million, puts itself among the top 10 companies in the $1 billion, direct-to-consumer diabetic supply sector, a growing market driven by the increasing incidence of diabetes and other chronic health conditions. Americans diagnosed with diabetes total roughly 13 million, according to the American Diabetes Association (Alexandria, Virginia), with that number expected to increase to about 17 million by 2009.

Besides distributing products used for the daily monitoring of blood glucose, Access offers products serving patients with other conditions such as chronic respiratory disease. Access reports distributing its products to more than 50,000 customers across the U.S., handling reimbursements with Medicare and private insurers.

Owens & Minor is a leading distributor of national name-brand medical and surgical supplies and a healthcare supply chain management company serving hospitals, integrated healthcare systems, alternate-care locations, group purchasing organizations and the federal government.

In other dealmaking news:

Lifestream Technologies (Post Falls, Idaho), a supplier of cholesterol monitors, reported assigning the intellectual property of its subsidiary, Secured Interactive Technologies, to LifeNexus.

Upon completion of LifeNexus' financing, Lifestream will receive a 49% equity position in LifeNexus, and rights to the technology will transfer to LifeNexus.

"We are pleased to have this opportunity to receive a benefit from the transfer of our smart card technology, since our current resources are being focused on our core business," said Christopher Maus, CEO of Lifestream. "This technology, which has no material value to the company, has not been commercialized, as market conditions were not conducive to support the costs related to an effective rollout. With national attention focused on revamping the healthcare information system, we believe this sale provides the most favorable opportunity for Lifestream and its shareholders."

He added: "LifeNexus has proposed an innovative approach, a portable medical record in concert with powerful healthcare financial services, to create a viable opportunity for commercializing this technology. We look forward to profiting from its success."

Maus is required by LifeNexus to facilitate the early phase of product development, and it has entered into an independent agreement wherein Maus will receive compensation as a member of the board of LifeNexus. "I look forward to working directly with LifeNexus to make this proposition successful. It brings considerable value to consumers as it is a universal solution for the portability of medical records," he said.

LifeNexus, recently organized, describes its role as putting personal healthcare on a smart card platform that incorporates emergency medical information, emergency medical insurance, accidental life and other financial products.

Lifestream markets cholesterol monitors providing test results in three minutes to consumers and healthcare professionals for monitoring the risk of heart disease.

Laboratory Corporation of America Holdings (LabCorp; Burlington, North Carolina) reported completing its previously disclosed acquisition of US Pathology Labs (US Labs; Irvine, California), a provider of anatomic pathology and oncology testing services with a focus on the outpatient market.

The deal, first disclosed in December, called for LabCorp to acquire all of the outstanding shares of US Labs for about $153 million in cash.

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