Agilent Builds Cancer Diagnostics Biz Via Dako Acquisition For $2.2 Billion
This article was originally published in The Gray Sheet
Executive Summary
Research and testing product maker Agilent gains Dako’s c-Kit pharmDx and HER2 FISH pharmDx assays, among other cancer diagnostics, in the firm’s largest acquisition to date.
Life sciences and chemical analysis product maker Agilent Technologies Inc. will bolster its anatomic pathology and molecular diagnostics offerings through its acquisition of cancer diagnostics firm Dako AS for $2.2 billion under a definitive agreement announced May 17.
Denmark-based Dako, a leading tissue-based cancer diagnostics firm, provides antibodies, reagents, scientific instruments and software to hospital and research pathology laboratories.
The firm’s offerings also include companion diagnostic products such as its c-Kit pharmDx kits for tracking the pathogenesis of certain tumors, HER2 FISH pharmDx assays for assessing treatment options for breast cancer, and EGFR pharmDx kits for identifying colorectal cancer patients eligible for treatment with the drugs Erbitux (cetuximab) or Vectibix (panitumumab), as well as molecular pathology FISH probes for solid tumor research.
Through the purchase of Dako, Agilent “will be able to provide a wider range of products that can help in the fight against cancer,” said CEO Bill Sullivan.
Dako and its portfolio will help Agilent accelerate its growth in several rapidly expanding areas of diagnostics, Agilent CEO Bill Sullivan said during a May 17 conference call with analysts. For example, the $2.2 billion anatomic pathology market is growing at 8%-10% annually, and the $4.5 billion molecular diagnostics market is growing at 10%-15% per year, according to Agilent.
“Agilent’s strategy in acquiring Dako is about strengthening the company’s presence in life science and about revenue growth,” Sullivan said.
Dako identifies itself as a leader in the anatomic pathology market, which accounted for 85% of the firm’s 2010 sales of $340 million. Major competitors include Roche in immunohistochemistry and Abbott in the field of in situ hybridization.
“Dako will be our channel into the pathology lab,” said Agilent’s Sullivan. “Our current reach into the pathology lab is very limited,” the firm told “The Gray Sheet.”
Dako CEO Lars Holmkvist noted during the conference call that “while our channel is focused primarily on pathology and research markets, our capabilities include regulatory experience and manufacturing, which could easily be leveraged into other diagnostic areas.”
In clinical diagnostics, Agilent’s chief product is its line of SureFISH fluorescent in situ hybridization assays, which are used in an array of molecular analysis applications, including anatomic pathology and cytogenetics.
The probes are designed for the rapid identification of a wide range of chromosomal aberrations across the genome, such as the detection of aneuploidy, constitutional microdeletion syndromes and various rearrangements in oncology, the company explains.
But through the purchase of Dako – the largest acquisition in the firm’s history – Agilent “will be able to provide a wider range of products that can help in the fight against cancer,” stressed CEO Sullivan. Previously, in 2009, Agilent paid $1.5 billion for scientific instrumentation marketer Varian Inc., which expanded its presence in atomic and molecular spectroscopy. (See (Also see "Agilent/Varian, Inc. deal" - Medtech Insight, 3 Aug, 2009.).)
In addition to adding cancer diagnostics, “Dako will grow our SureFISH business and will increase its presence in emerging markets,” added Agilent Chief Financial Officer Didier Hirsch. Roughly 20%-25% of Dako’s sales are in emerging markets in the Asia Pacific, Latin America and Eastern European regions.
Beyond diagnostics, Agilent provides bio-analytical and electronic measurement instrumentation for life sciences research and other industrial applications, including applications in chromatography and mass spectrometry. The firm had total corporate sales of $6.6 billion in fiscal 2011 (ended Oct. 31). Agilent says it expects to grow Dako’s sales by 9% in fiscal 2013.
SureFISH A Sure Draw
For its part, Dako said a major draw of the Agilent deal is that it allows the firm to leverage Agilent’s existing SureFISH technology in-house.
“I think the exciting piece here is that the probe, together with the fast in situ hybridization buffer that we bring to the table, can actually revolutionize this procedure,” said Dako’s Holmkvist. For instance, the firm hopes to reduce the time necessary for hybridization, a technique for isolating specific segments of nucleic acid within tissue, from a customary 18-20 hours down to 3.5-4 hours.
“Cutting down the procedure with that amount of time, ensuring that the cancer patient actually can get the diagnosis done … that saves the patient a very, very long weekend,” Holmkvist explained.
The exec noted that Dako’s management will stay on board post-merger. The firm expects the deal, funded entirely with Agilent’s offshore cash, to close by mid-July.