Applied Bio buys Ambion’s research products business for $273 million, portion of proceeds to fund new company
FOSTER CITY, Calif.—March 2, 2006—Applied Biosystems Group announced it had completed its acquisition of the Research Products Division of Ambion Inc., including its R&D, manufacturing and other operations, as well as about 300 employees based in Austin. "We welcome Ambion's employees and anticipate a smooth integration of product lines and personnel as we accelerate the delivery of more complete workflow solutions to our global customer base," said Catherine M. Burzik, Applied Biosystems president.
AUSTIN, Texas—In a move designed to provide start-up capital for a new diagnostics venture, Ambion Inc. in late December agreed to sell its research products division to Applied Bisosytems Inc. for $273 million in cash. After the close of the sale, expected by the end of this month, Ambion founder and CEO Matt Winkler will use approximately $35 million of the proceeds to fund the start up of a new cancer diagnostics company to be called Asuragen, which will incorporate the remaining diagnostic and research portions of Ambion not sold in the transaction.
For Applied Biosystems, the purchase of the RNA reagents and kits business, which racked up $52 million in sales last year, helps rev up its stated strategy of building a significant presence in the life sciences consumables business.
"This [acquisition] is quite remarkable and compelling across their whole line," says Peter Dansky, VP and general manager of molecular biology consumables for Applied Bio. "It is not just a basket of consumables, as we are already focused on the applications and platforms that these products support Includeing PCR expression and Array platforms in the RNA field."
This combination, he notes, should create a compelling marketing story. "The ability of us to match and mate our existing products together to more complete workflows allows us to cross-sell products to their existing customers and vice versa. Having all these products together will drive even more potential upside."
Current plans call for the roughly 300 Ambion employees in the acquired division to remain in their current location here and for the bulk of employees to stay with Applied Bio. Bruce Leander, president of Ambion, who will stay on with Applied Bio says, "in terms of acquisitions I believe this will be one of the best, since we were set up so well from the beginning. The company is a growth company and one that has a record of R&D innovation and that is what made it an attractive acquisition."
The impetus for the sale came from Winkler's desire to further develop the company's research and diagnostics divisions. Despite a robust annual growth rate that Leander reported at more than 20 percent annually, Ambion was not generating enough cash to fund further development of the diagnostics business. "Matt was exploring options for funding, at a greater pace, the diagnostics business," says Leander. "It occurred to him that he could sell the reagents portion of the business to fund the diagnostics business. And the timing for the sale was right, considering the growth in the market and our spectacular performance over the past few years."
One possibility Winkler explored before the sale was to spin off the diagnostics division, but he was finding it hard to attract venture capitalists to invest in the new venture, most of which are located on the East and West coasts.
"What really drove the decision to sell was the work we were doing with microRNA, and we werern't going to be able to fund it properly given our profit objectives," says Winkler. "Plus it was going to be complicated with our research products division keeping it separate from our other business."
While the diagnostics business only has $3.5 million in sales, it employs 90 people. Current diagnostic products to help jump start sales of Asuragen include one for leukemia translocation and another for cystic fibrosis. Winkler estimates that the initial $35 million investment in Asuragen will fund the operation for roughly three years. He also intends to raise additional funds in the coming years and believes many who invested in Ambion will also be willing to put money in his new venture.