BioWorld International Correspondent
Swedish instrumentation firm Pyrosequencing AB is continuing to expand, agreeing to its second acquisition in two months. The target this time round is a U.S. outfit, the automated chemistry separation and purification specialist Biotage LLC, for which Pyrosequencing will pay $35 million in cash.
Biotage is a wholly owned subsidiary of Dyax Corp., of Cambridge, Mass. The transaction is expected to close by the end of the month.
It is just three weeks since Uppsala-based Pyrosequencing completed its takeover of neighboring firm, Personal Chemistry i Uppsala, which it acquired in a stock-based transaction originally valued at about SEK185.6 million (US$22.8 million). (See BioWorld International, Aug. 13, 2003.)
The synergies between Personal Chemistry's automated, microwave-assisted chemical synthesis platform and Biotage's automated separation and purification systems were the main drivers of the deal, Pyrosequencing's CEO and chairman Jeff Bork told BioWorld International.
"Every sample that is synthesized needs to be purified before you can do anything with it," he said. "The same chemists are buying both these instruments."
The merged entity will have an opportunity to gain technological synergies in the supply of consumables and software, he said, while also it expects to realize annual cash savings of $4 million by merging subsidiaries in the UK and Germany and combining three U.S.-based organizations into one. Pyrosequencing's main U.S. base will be in Charlottesville, Va., where Biotage is located.
Biotage has 126 employees and annual revenues of $23.2 million in 2002. Pyrosequencing has 150 people on the payroll and pro forma 2002 revenues of around SEK202 million. Bork said he anticipates some job cuts in Biotage's international organization, but not in the U.S. Once the merger closes, the medicinal chemistry market would account for between 70 percent and 75 percent of the combined company's revenues, with the genomics market accounting for the remainder.
Pyrosequencing is funding the transaction from existing resources. It had about $47.5 million in cash at June 30. Its net outlay, Bork said, will be about $29 million to $30 million, as Pyrosequencing will take over a mortgage on Biotage's newly built premises.
"We will have enough cash to turn this around and survive," he said, but added, "We might not have enough cash to do another deal like this."
However, the company is eyeing other opportunities as part of a strategy to become a player with annual revenues of $100 million to $200 million.
"The [highest priority] now would probably be to find something in the genomics area to broaden the product portfolio and have more volume in the business that is represented in the old' Pyrosequencing, so to speak," Bork said.
Pyrosequencing gained almost 6.8 percent to close at SEK14.20 on the Stockholm Stock Exchange Tuesday.