JIM BAIRD / Union-Tribune Research associate Eppie Dizon purified antigens in one of Biosite's laboratories in Sorrento Valley. The diagnostic company was acquired last year by Inverness Medical Technologies after a bidding war.

Those small companies are ripe for acquisition by larger biotechs and larger, older pharmaceutical companies, especially when a soft stock market means going public is not a likely option for early investors who want to cash out.

In the past, the feisty little biotechs that had been acquired were generally allowed to carry on with their Friday afternoon beer parties and other habits that made working there more attractive to employees than button-downed pharmaceutical companies. But some industry insiders with firsthand experience say acquisitions are starting to take on a more aggressive, hostile tone.

The result is that the sector's employees can be left fearing for their jobs, and promising products in the research pipelines might never make it to market.

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Gone are the days when most acquisitions were handled gently: Acquire the biotechnology company but let it continue to exist as its own entity, said Kim Blickenstaff, a co-founder and former chief executive of Biosite.

“When a merger or acquisition is financially driven, and cost-cutting is predicted ... it can be undesirable to the board and the culture of a company. It's brutal,” said Blickenstaff, whose diagnostic company was acquired last year by Inverness Medical Technologies.

Blickenstaff and Nick Roelofs, vice president and general manager of the Life Sciences Solutions Unit at Agilent Technologies, were recent guest speakers at a meeting of San Diego biotechnology insiders sponsored by Biocom, the trade group for biotech in Southern California.

Blickenstaff is intimately familiar with hostile takeovers. He said it was clear from the outset that Inverness was interested in adding Biosite's products to its pipeline, and not too keen on keeping its costly research programs running.

Roelofs knows acquisitions from the friendlier side. Agilent acquired San Diego-based Stratagene last year, and kept the company's research and discovery operations intact and pushing forward.

There are two basic kinds of mergers and acquisitions, Blickenstaff and Roelofs said. Both have an effect on a community's work force and on consumers' health care, they said.

One type of acquisition is a consolidation in which the acquiring company buys the products of another company and is not as interested in its research pipeline.

The second type is when the acquiring company really wants the research minds of the company it is acquiring. Often in these transactions, the acquiring company goes to great lengths to allow its acquisition to keep its culture to avoid killing the goose that lays the golden egg, Roelofs said.

For instance, Agilent in Santa Clara acquired a smaller biotech company, Velocity 11, in December.

Velocity's culture was more relaxed and freewheeling than Agilent's, Roelofs said. Employees could bring their dogs to work, and there was a kennel on-site. Velocity's employees also enjoyed beer parties on Fridays.

So Agilent, which was moving Velocity to its headquarters site, built the smaller biotech its own building and allowed dogs on campus as well as beer parties, Roelofs said.

Biosite had been looking for a similarly smooth and friendly acquisition with Beckman Coulter, a company with which it had collaborated on products. The two companies knew each other's operations and liked each other, Blickenstaff said.

Teams of executives from both companies met secretly for several weeks to plan merging their operations. But the announcement of the merger, which told the world Biosite was for sale, ignited a bidding war that included buyers with different intentions.

Inverness was the winner, with a tender offer of $92.50 a share.

Blickenstaff said Inverness didn't get a big integration team involved in the acquisition. He said it was quickly apparent that the goals were cutting costs and scaling back research and development.

Biosite employees learned about those plans through Wall Street analysts' reports. It was paralyzing for them.

“Fear was never a very important engine at Biosite,” Blickenstaff quipped.

Another indicator of how unfriendly the biotech acquisition landscape has become is the presence of billionaire investor and corporate raider Carl Icahn, Blickenstaff said.

Icahn is known for buying a stake in a company and forcing changes on management. He calls himself an activist investor, angling to bump up the share price so that he can make a profit.

Last year, he bought shares of Maryland-based Medimmune, whose investors had been pushing for the sale of the company. He also bought shares of Imclone, where he now serves as chairman. Also last year, he purchased shares in Biogen Idec, then tried to force its sale. He is now suing the company, claiming management did not try hard enough to find a buyer.

In San Diego, Icahn has purchased shares of Adventrx Pharmaceuticals and Amylin Pharmaceuticals. Amylin executives recently revealed that they have met with Icahn, who is pushing to increase shareholder value. That is the same goal of Amylin's management and board, said Dan Bradbury, the company's chief executive.

From a consumer standpoint, a consolidation's downside is a reduction in the diversity of products on the market if research and development is eliminated, Roelofs said.

The upside is that it can reduce costs to the consumer, he said.

If Ford and Chevrolet were to consolidate, the downside could be that you could get a Mustang but not a Camaro, Roelofs said. The upside could be that with twice as many Mustangs being produced, they could be cheaper to make.

But if Ford is left with no competition for its product, the price could go up, Roelofs said.

Many times, consolidations occur because a company is not growing quickly and doesn't have many products in its pipeline, said Paul Grossman, senior vice president of strategy and corporate development at Carlsbad-based Invitrogen.

If a company is growing quickly, it's hard to make the economics work for consolidation, Grossman said.

Invitrogen has aggressively acquired companies over the past decade. Its most recent deal was announced Thursday, when it agreed to pay $6.4 billion in cash and stock for scientific instruments maker Applera's Applied Biosystems Group.

Grossman disagreed with the premise that acquisitions are getting more aggressive. As the industry matures, more deals are consolidations, he said.

Roelofs agreed that maturity is a factor. Biotech is still young enough that there is plenty of discovery happening, he said.

A biotech consolidation can also be difficult for a community if it means sweeping job losses, such as with Biosite, where more than 100 jobs were eliminated.

But consolidations have also been good for San Diego's work force.

Invitrogen, which makes tools for use in drug discovery, has often eliminated jobs in other states after its acquisitions, only to move the positions to California.

The company learned its lessons through some of its earlier acquisitions, when it allowed brainpower to walk out the door, Grossman said.

Moving forward, the leaders of San Diego's biotechnology community need to decide their goals for the direction of the industry, Roelofs said. San Diego's density of small startup companies makes it an incubator for the industry at large, he said.

It's the way the community has evolved in San Diego since the founding of its first biotech company, Hybritech, and its eventual acquisition by Eli Lilly & Co. Generally, emerging companies have been acquired and their technology and jobs moved elsewhere, Roelofs said.

But there have been enough companies on the other end of the spectrum, such as Invitrogen and genetics technology maker Illumina, that are hiring in San Diego, he said. Meanwhile, new small companies are being spun off from the academic research institutes in San Diego.

Does the region want to become home to larger biotech employers like in the San Francisco Bay Area and the Boston area? If so, it needs bigger venture funds and big corporate backers such as Bank of America and JP Morgan, Roelofs said.

It also needs five-acre sites where million-square-foot companies can build, and a more mature, experienced work force, he said.

However, some evolutionary factors that will control San Diego's biotech cluster over the next 20 years are outside local control, Roelofs said, pointing to Austin, Texas, as an example.

Twenty years ago, Austin was an incubator for the computer industry. It looked like the San Diego of electronics, Roelofs said.

Today, the computer industry in Austin has changed, he said, and computer maker Dell is cutting back there.

 Terri Somers: (619) 293-2028; terri.somers@uniontrib.com