Invitrogen, a Carlsbad company started in its founder's garage in 1987, will become one of the world's largest biotechnology companies with its acquisition yesterday of scientific instrument maker Applied Biosystems Inc.
Invitrogen has acquired numerous companies in the past 21 years, but yesterday's $6.4 billion, cash-and-stock deal is its biggest yet. Applied Biosystems, with $2.2 billion in revenue, is bigger than Invitrogen, which had revenue of $1.3 billion last year.
Invitrogen has had a knack for buying companies that would ensure its product portfolio contains the necessary tools that research labs consume like candy – test kits, chemicals and cells – to conduct cutting-edge research. It offers more than 35,000 products.
The merger will complement those offerings with the addition of Applied's genetic testing systems, which are used in the rapidly evolving science being used to determine whether someone is likely to develop diseases such as cancer or Alzheimer's.
“Applied is the premier systems company in life sciences, and we are the premier consumables company,” said Gregory Lucier, Invitrogen's chief executive officer. “Combined, we are going to create the largest life-sciences company in the world.”
It has the makings of one of the biggest success stories for San Diego's biotechnology industry.
Invitrogen twas founded in the early days of biotech, in the garage of Lyle Turner's home. In the company's first 15 years, Turner helped nurture it to become a prosperous public company with 2,635 employees and revenue of $630 million.
The $1.9 billion acquisition of Dexter Corp. in 2000 made Invitrogen a dominant player in the field of tools used in biotechnology research.
When Lucier, former chief executive of General Electric's Medical Systems Information Technologies, took over in 2002, he said he intended to focus on globalization, new products and continuing acquisitions, which have been a hallmark of Invitrogen.
He has lived up to his word.
Yesterday's deal will expand Invitrogen's global reach from 70 countries to 100, and the combined company will employ about 10,000 people worldwide, Lucier said.
The combination of Applied's and Invitrogen's products “will realize growth opportunities greater and faster than either company could achieve independently,” said Mark Stevenson, Applied's chief operating officer.
Applied, founded in 1981 in Foster City, is best known for supplying genetic analysis machines to the Human Genome Project, a public science consortium formed to map the chain of thousands of genes in human DNA.
The latest generation of those systems competes directly with the systems made by Illumina, a San Diego company widely considered to be the current market leader in the hot field of genetic analysis.
Both companies make machines that allow scientists to map genes in many people and then analyze the differences to determine how they could be indicators for individual traits, from height and hair color to probability for developing a disease.
Rapidly developing science in the field is fueling competition. A company that may be the market leader this year could be replaced with the introduction of technology making genetic analysis faster and cheaper, and therefore accessible to more scientists.
The widely accepted goal of the industry is to map the entire genome of an individual for $1,000, which would enable the collection of genetic information from a huge swath of the population. That would provide scientists with more comprehensive information about individual genetic differences.
Lucier indicated yesterday that the merger would allow the combined companies to challenge Illumina for genetic analysis dominance.
“One thing I'm most excited about is a rebirth, a renaissance, of DNA sequencing now taking place,” he said. “(Applied's) 2.0 system, which is just getting launched now, we believe to be a real winner.
“Meanwhile, Invitrogen has had its own next-generation sequencing (system) under development. The combination of what ABI has and what Invitrogen is developing sets us along the pathway for development of the thousand-dollar genome.”
Analysts believe Illumina's systems will remain the market leader for at least the next year.
“Perhaps there is something up Invitrogen's sleeve that could enhance (Applied's) sequencing platform, but my sense is that is at least a year away,” said Zarak Khurshid, an analyst with Caris & Co. in San Francisco.
Before the local genetics duel can begin, shareholders of Invitrogen and Applied must approve the proposed merger. The companies expect the deal to close in the fall.
Under the proposed deal, Lucier would be chairman and chief executive of the combined company, which would take Applied Biosystems' name and be based in Carlsbad. Stevenson, Applied's chief operating officer, would serve as COO. Invitrogen's chief financial officer, David Hoffmeister, would retain his position.
Applied investors would receive $38 a share in cash and stock, a 17 percent premium on its closing price Wednesday. The payment is expected to be 55 percent stock and 45 percent cash, which Invitrogen borrowed in a fully underwritten debt financing from Bank of America, UBS Investment Bank and Morgan Stanley.
Ultimately, Invitrogen shareholders would own the majority of the company.
The merger started rolling several weeks ago, when executives of Applera Corp. contacted Lucier to ask whether Invitrogen might be willing to participate in a “private process.”
Since at least last summer, Applera had been considering breaking off both its divisions, Applied and Celera Genomics, into independent companies. Both currently trade as tracking stocks to the parent company.
Celera was formed in 1998 to use Applied's genetic analysis systems to become the first commercial interest to map the entire human genetic code. Hired to run it was J. Craig Venter, who now heads the nonprofit institute named after him, and Synthetic Genomics, a biotechnology company, both in Torrey Pines.
Celera has since evolved into a molecular diagnostics company.
Applied's shares rose $1.72, or 5.3 percent, to $34.16, while Invitrogen shares dropped $4.62, or 11 percent, to $38.73.
Terri Somers: (619) 293-2028; terri.somers@uniontrib.com
