I recently attended a press event where the joint venture between Applied Biosystems (AB) /MDS Analytical Technologies launched its next-generation mass spectrometry systems, the AB SCIEX Triple Quad™ 5500 and the AB SCIEX QTRAP® 5500. After the product webcast, featuring, among others, Mark Stevenson, president and COO of AB, I decided to take the opportunity to ask some questions that have been on my mind since the June 12 announcement that Invitrogen intended to acquire Applied Biosystems for $6.7 billion.
On November 21, Invitrogen and Applied Biosystems reported the successful completion of their merger transaction. The new company, Life Technologies, will be traded on the NASDAQ Global Select Market under the ticker symbol "LIFE" beginning November 24, 2008.
Q. What is the current status of the acquisition by Invitrogen?
A. The merger is proceeding on schedule. We secured our financing for the deal from U.S. and non-U.S. banks on October 3, despite the turmoil in the financial markets.
Q. Has the recent turmoil in the worldwide financial markets had a negative impact on the acquisition?
A. The turmoil in the financial markets has been a distraction, but has not, at this time, affected our syndication of lenders. It has affected the interest rate we are paying because our term loans are tied to LIBOR (London Interbank Offered Rate). Other than that, our customer base is driven by the challenges and issues of drug discovery and development and life science research. Both are somewhat removed from the turmoil seen on Wall Street. We are confident that in the combined company we will be better suited to service the needs of our customers.
Q. Were there any problems with getting the approval of the European regulatory agencies or with the AB shareholders that will impact completion of the acquisition process and integration of AB into Invitrogen?
A. On October 7, we filed with the European securities commission, which approved the merger on November 11. In early November, the shareholders from both companies provided overwhelming approval for the merger. All stockholders believe there is tremendous upside to the formation of the new company.
Q. Have you picked a name for the new parent company?
A. We chose the name Life Technologies to represent the new parent company because it best describes our charter. We are focused on making life better through technology-based solutions, including personalized medicine and delivery of innovative research capabilities. The stock will trade on the Nasdaq Stock Market under the ticker LIFE, and a new logo will emerge over time. For continuity and market recognition, our instrument products will maintain their Applied Biosystems brand and the reagents products will maintain the Invitrogen brand name.
Q. Any thoughts on how the outcome of the recent Presidential election will impact your business?
A. We are anticipating improved market conditions with the election of Barack Obama. Funding of the NIH, which has been flat through the Bush years, will likely see a significant increase. Also, we look to see an increase in government support for underfunded research areas including stem cell research.
Q. What is your role in the new company?
A.Greg Lucier [president and CEO of Invitrogen] and I have studied our options and chosen a co-leadership model for the new organization. In this model, we will each focus on our individual strengths for the benefit of the organization. Greg will be outwardly facing, dealing with the investment community, while I will be inwardly facing, dealing with the daily operations of the business units.
Q. What is to become of your partnership with MDS Analytical Technologies and BioTrove upon completion of the acquisition?
A. We will continue to work closely with MDS Analytical and BioTrove now and after completion of the merger. They both represent alternative business models that have enabled AB to stay at the front of technology innovation and develop solutions for our customers in a timely manner. We will continue to work with small companies that are often the best innovators of new technologies. Whether we invest in those companies via an equity investment, formation of strategic partnerships, establishment of a joint venture, or outright purchase all depends on what’s best for the parties concerned. Each situation will be handled on a case-by-case basis.
Q. Is there anything you will be able to do now in the new company that you couldn't do before?
A. As a consequence of scale, we will have the ability to devote more resources to R&D than ever before. The pro-forma R&D spending of the new company is planned to be approximately $300 million. This level of investment enables a significant amount of technology development and innovation. Nevertheless, we can’t be arrogant and think that we can do it all ourselves. We will be ever vigilant to be on the lookout for new innovative solutions that can positively impact our customers. As mentioned previously, we will continue to seek and nurture technology innovation on all fronts.
In addition, we’re following our pharma customers to China and India where they are setting up manufacturing facilities and outsourcing some of their screening activities, utilizing local CROs in those regions. To better position ourselves in those areas, we’ve set up a new demo lab in China and Invitrogen has set up a R&D center in India. Both facilities are active and providing key customer support functions for the region.
Q. Does a fee-for-service-based business model make sense for any of your business units offering instrument solutions?
A. While we work closely with our customers in a support role, we also work closely in development of new innovative solutions for addressing real issues that confront and sometime confound them on a daily basis. The latter approach led to the development of the two new mass spec instruments we launched recently. We continually explore all business models for each area of our business, but at this time we have not adopted or seen the value in a fee-for-service business model.
Q. Tell me about your ongoing efforts in the area of next-gen sequencing? Will there be a change in the systems solution for the next-gen sequencing from AB in the new organization?
A. We purchased Agencourt PGS back in 2006 and launched the first generation of ligation-based sequencing, the SOLiD platform in June 2007. We then launched 2.0 in May of this year, and we’ve now just launched 3.0 in October. SOLiD 3.0 provides our customers with a huge boost in throughput with a significant increase in throughput for rapid, cost-effective analysis of entire genomes and a systems-biology approach to the study of organisms.
With the launch of 3.0 we’ve reach another key milestone, enabling our customers to reach the $10K genome. As you might imagine the data output from this instrument requires a significant amount of support and bioinformatics capability. Our service organization works closely with our customers to help them sift through the data to glean the information they seek. We have established user groups and other support systems to enable the advance of data capture, analysis, and storage.
Q. Given the synergies between AB and Invitrogen, is there anything missing in the portfolio that you can't offer your customer base?
A. This merger brings the broad chemistry and consumables portfolio from Invitrogen and the solutions-based instrumentation portfolio of Applied Biosystems together in one organization. There are few gaps in our combined portfolio with the possible exception of synthetic or constructive biology. But as mentioned before, we are always on the lookout for innovative technical solutions that can benefit our customers.
Q. What is to become of the skunk works going on within Invitrogen?
A. The next-generation sequencing skunk works at Invitrogen will be rolled into the AB business unit for a coordinated effort that will deliver the $1,000 genome in the next several years.
Q. How do you deal with competitive threats from Roche's 454 Life Sciences, Illumina, Pacific Biosciences, and others?
A. We encourage the efforts from our colleagues at 454, Illumina, and Pacific Biosciences as they bring alternative technological advances to the marketplace. Together we’ll all get to that $1,000 genome and maybe realize the use of sequencing in molecular diagnostics.
Q. What is the plan to move from the offering of solutions in the life science market to the offering of solutions or products in the clinic?
A. There is still a lot of work and research to be done at the genomics level, and we just received FDA 510(k) clearance for a new real-time PCR instrument for use with new flu test from CDC.
I personally think that the future of molecular diagnostics and disease state focus will require the validation and verification of protein biomarkers as well.
Translational medicine, the understanding of the disease state at the molecular level, will focus on the early diagnosis and prevention of disease. Personalized medicine, though based on the underlying genomic makeup, will be monitored and treated at the level of the protein in many cases.
Our investment in mass spec supports the view that this is where the battle will be won. We now have the kind of instrumentation that will enable the tracking of innovative therapeutic approaches like microdosing based on sensitivity and scan speeds.