Sector Snap: Invitrogen deal lifts life sciences

On Thursday, Carlsbad, Calif.-based Invitrogen said it would buy its Foster City, Calif.-based peer in a cash and stock deal worth $38 per share, marking a 17 percent premium to Applied Biosystems' closing price Wednesday.

That sparked a rally in the sector, pushing shares of Farmingdale, N.Y.-based Enzo Biochem up more than 10 percent, and Waltham, Mass.-based companies PerkinElmer Inc. and Thermo Fisher Scientific Inc. about 2 percent each.

Both Invitrogen and Applera focus on the medical research industry, making advanced laboratory equipment, cell and genetic kits used for drug development, and software. Their products, with Invitrogen being more systems heavy and Applera more consumables heavy, are used both by drug developers and by companies outsourcing development.

"It's the first time you have a major consumables player combined with a systems player and its going to bring much larger integrated solutions to the market," said Dr. Kevin Hrusovsky, chief executive and president of Hopkinton, Mass.-based Caliper Life Sciences Inc.

The move could spark more partnerships and/or more mergers as biotech, pharma and research partners look to one-stop-shop for their development product needs, he said.

The deal, expected to close in the fall, will nearly double Invitrogen's consumables business, which include chemical reagents and enzymes used by medical researchers. The combined company will be named Applied Biosystems.

Deutsche Bank-North America analyst Ross Muken places the combined company's annual revenue at about $3.5 billion. That would make it bigger than rival PerkinElmer, which had revenue of about $1.79 billion in 2007, and place it within range of Madison, N.J.-based Quest Diagnostics and Burlington, N.C.-based Laboratory Corp. of America Holdings, which had revenue of $6.7 billion and $4.07 billion respectively.

Muken cited intensified competition, specifically with Thermo Fisher and Milford, Mass.-based Waters Corp., as key risks to the new Applied Biosystems.

In late afternoon trading, shares of Invitrogen fell $4.54, or 10.5 percent, to $38.81 on 10 times average volume; Applera shares rose $2.72, or 8.4 percent, to $35.16.