By Debbie Strickland

Associate

Just four months after going public with a $108 million IPO, Packard BioScience Co. is making its first acquisition, a $120 million purchase of the life sciences division of GSI Lumonics Inc. The move fills a gap for Packard by providing a complementary laser-scanning and bioinformatics platform for its genetic microarrays, or biochips.

The deal consists of $40 million in cash and $80 million in Packard BioScience stock, and is expected to close this fall. Packard expects the transaction to have a nominal effect on earnings per share in 2000 and 2001 and be accretive to EPS beginning in 2002. Packard reported sales of $264.9 million in 1999, and GSIL Life Sciences recorded sales of $17 million over the past four quarters.

Shares of GSI Lumonics (NASDAQ:GSLI) rose $1.312 to $26.125, and Packard BioScience (NASDAQ:PBSC) closed at $21, down 12.5 cents.

What Packard gains specifically through the deal are GSIL's software-controlled confocal scanning systems for the analysis of fluorescently labeled microarray biochips under the ScanArray and QuantArray trade names. Applications include gene expression, genotyping, mapping, high-throughput screening and drug discovery.

"We had been talking to GSI Lumonics for two years and were certainly interested in a strategic alliance," said Staf Van Cauter, vice president for business development at Meriden, Conn.-based Packard. "Timing-wise, this was very good for our company, since we expect to commercialize [the biochips] in the first quarter of next year.

"Their system is pretty much compatible with our biochips," Van Cauter added. "That's one of the reasons we were always interested in what GSIL was doing."

The move also made sense for GSIL, of Kanata, Ontario, which had advanced the scanning and analysis technology to the point where the company needed either to make a larger commitment to life sciences or spin off the business. "Genomics is a rapidly growing field, but outside our core competency," said Vic Woolley, vice president of strategic planning for GSIL. "It was our feeling that, in order to be successful in this business, we would need to develop internally or acquire a broader scope of products."

The life sciences division, though expected to grow at a rate of 50 percent a year, accounts for just 5 percent of GSIL's sales and 75 of the company's approximately 1,400 employees. The core markets for GSIL's laser systems and components are the semiconductor, electronics, automotive and telecommunications industries, Woolley said.

Packard Targeting Market Dominated By Affymetrix

Packard is testing its chips with 15 premarket-release customers before it makes a play in a market currently dominated by Affymetrix Inc., of Santa Clara, Calif., which posted revenues of $96.9 million last year as sales grew 135 percent. Packard is aiming to join Affymetrix and Incyte Genomics Inc., of Palo Alto, Calif., as one of the leaders in the microarray business.

"We will certainly be among the top three," said Van Cauter. "We believe we are poised to play in the No. 2 spot." In addition to the currently well-established and growing markets for DNA detection chips, Packard is targeting the burgeoning proteomics market with development of protein chips.

"Ultimately, customers will start looking at proteins," said Van Cauter. "Today, scientists want to look at multiple genes simultaneously, and later they will want to look at many proteins simultaneously to measure the action of a drug."

Looking ahead, the company is exploring deals with "content providers," companies that are discovering genes, which can bring genetic information to array on Packard's chips as part of strategic alliances.

The microarray effort is part of a larger life sciences instrumentation business at Packard BioScience comprising the fields of high-throughput screening, genomics and biochips/proteomics. Key products include microwell plate readers, imaging systems, automated liquid handling systems, laboratory robotics, bioanalytical spectrometers, and biochemicals and related supplies.

The Packard BioScience corporate umbrella also shelters - for the time being - Canberra Industries, which produces instruments and systems for radioactivity detection, quantification and monitoring in nuclear and related industries. Packard BioScience reported in its second-quarter report, released earlier this month, that it had retained Robert W. Baird & Co. "to assist in exploring strategic alternatives for Canberra," allowing Packard to sharpen its focus on the life sciences business.

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