Invitrogen Corp. aims to create a "desktop to lab bench" tool set with its buyout of InforMax Inc. in an all-cash transaction valued at $1.36 per share, or about $42 million for the fully diluted equity.
Shares of InforMax (NASDAQ:INMX) skyrocketed on the news, closing Tuesday at $1.32, up 76 cents, or 135.7 percent. Invitrogen's stock (NASDAQ:IVGN) ended the day at $31.74, down $1.24.
The cash tender offer is expected to begin in the next 10 days, run for 20 days and close by the end of the year, making InforMax, of Bethesda, Md., a wholly owned subsidiary of San Diego-based Invitrogen.
Lyle Turner, president and CEO of Invitrogen, noted that InforMax has about $47 million in cash. After transaction costs, Invitrogen will be paying about $10 million for the company, he said, and most of that will be accounted for as tangible assets.
John Sullivan, analyst with Stephens Inc. in Little Rock, Ark., called the deal "low risk" for Invitrogen.
"They're mostly buying this with InforMax's money," he said. "That $47 million was as of June 30," he added. "They spent some money in the third quarter and will be spending some in the fourth quarter. So [the amount when the deal is finished] will be south of that $47 million."
Eric Winzer, chief financial officer for Invitrogen, said in a conference call with analysts that the accounting for the transaction will be "very straightforward," with a "modest" dilution of earnings per share in 2003 - between 2 percent and 4 percent - and "break-even to modestly accretive" in 2004, with only accretion after that.
Turner said he expects "both companies [to] drive the sales of each other's products."
InforMax has Vector NTI and the recently introduced Vector Family of Products for experimental design, management and interpretation, which Invitrogen said it will use for simplifying the use of its kits for gene identification, cloning, expression and analysis.
Specifically, InforMax's Vector NTI Advance allows for sequence and protein analysis, Vector Xpression does the same with microarray gene expression data, and Vector PathBlazer works with biological pathways and protein-protein interactions.
Invitrogen, operating in molecular biology and cell culture, offers reagents and research kits as well as cell culture products.
Ultimately, customers will be able to "seamlessly order Invitrogen products at any and every step of their experiments," Turner said. They could conduct experimental design using the software, then proceed with kits and reagents, and then analyze data using the software again.
Sullivan told BioWorld Today that Invitrogen "has long held the belief that the way it can get closer to molecular biologists is to develop software to help them design their experiments - to provide the notepad on which they are going to work [them] out."
Turner, asked by an analyst about potential competition with the information business of Applied Biosystems Group, of Foster City, Calif., said, "We don't see ourselves competing with [Applied Biosystems] in any way."
Vector NTI's suite of products, he said, is "specifically focused on molecular biology wet-lab experiments that are focused on our reagent sets. That's why the product lines fit together so well. There may be some overlap with some of the reagent sets that [Applied Biosystems] has, although I'm not clear about that."
After the takeover, Andrew Whiteley, InforMax's president, chairman and CEO, will become president of InforMax, which will become a wholly owned subsidiary of Invitrogen. Whiteley formerly was vice president of bioinformatics at Amersham Pharmacia Biotech, of Piscataway, N.J.
Whiteley called the deal "truly a pivotal and exciting milestone" that grew out of InforMax's efforts starting a few months ago, which consisted of a "rigorous process of approaching potential strategic partners. We were introduced through our respective banks."
Turner said a decision has yet to be made regarding the transfer of technology or staff from Maryland to San Diego.
"We just met the full employee base this morning, and we haven't finalized any plans yet," he said. "We expect that those will come out of the integration team, and we'll be able to communicate the whole plan in the next 45 to 60 days."
Further out, Turner said, the acquisition of InforMax is expected to help the company meet its spending of 10 percent to 15 percent of revenues per year.
"Our whole job is to supply cutting-edge tools, and if you don't continuously evolve those tools, you're headed for the dinosaur heap," he said, adding that Invitrogen is "tracking along at 4 [percent] or 5 percent of revenues [spent] on R&D right now."
Sullivan said InforMax, "like a lot of small companies, raised enough money to develop a couple of products and some sales and service capability, but they didn't have enough to drive their business plan all the way to profitability," which is a problem across the sector.
"The bioinformatics industry has yet to identify a model that makes money," he said. "The best way is to add value within a product company."