Bio-Techne acquires Advanced Cell Diagnostics

According to Tory C. Harrison, executive vice president of Financial Communications & Capital Markets at Edelman, the Bio-Techne deal with ACD reinforces continued interest in mergers and acquisitions in the life-sciences, tools and diagnostics sectors.

Founded in 2006 by Drs. Yuling Luo and Steve Chen, ACD has a product line of more than 9,000 probe reagents and reagent kits for manual and automated use that are sold worldwide, and achieved annual revenues of approximately $25 million for the last 12 months, with an annualized growth rate of approximately 50 percent. The company expects this deal to be slightly dilutive to its adjusted earnings per share for its fiscal year 2017, and accretive in the following years.

ACD develops and commercializes proprietary consumables for genomic analysis, and says it has reinvented the widely used in-situ hybridization technique. ACD’s highly sensitive RNA in-situ hybridization (RNA-ISH) technology, commercialized under the RNAscope brand name, enables users to visualize expression of almost any gene in individual cells while retaining valuable tissue morphology information. This molecular detection of biomarkers, and other key genetic information at the single cell level, is far more informative than the bulk cell population analysis provided by traditional gene amplification approaches, the company noted in a press release.

ACD’s reagents also have potential applications in the diagnostic and companion diagnostic fields. The company’s proprietary technology could give pathologists more robust reagents capable of specifically detecting transcripts of expressed genes, noncoding RNAs, as well as more subtle genetic details such as gene splice variants, gene fusions, copy number variations and single nucleotide polymorphisms. At the core of its technology apporach is the greatly enhanced detection sensitivity of RNA-ISH. RNAscope is a patent-protected target hybridization and signal amplification technology enabling the detection of single RNA molecules in single cells.

According to Leerink Partners analysts Dan Leonard, Kevin Chen and Michael Sarcone, this deal will expand the breadth of Bio-Techne’s offerings to new clinical applications. The RNAscope technology will expand Bio-Techne’s single-cell capabilities by layering RNA analysis onto protein analysis, as they also acquired the Zephyrus platform in March.

“Our main reservation on the deal is the offer price,” wrote the Leerink Partners analysts. “We view the deal offer of approximately 10x last-12-months (LTM) revenue considerably higher than recent sub-$1B deals, which ranged from approximately 2x-5x (e.g. Clarient, Nanosphere, Seahorse Bioscience). Even applying the 50-percent annualized LTM growth rate experienced by ACD puts the deal at around 6.7x forward-12-months revenue. That said, we do think TECH can leverage its existing infrastructure to grow the ACD offerings, especially in international markets such as China, where ACD currently has minimal presence.”

Charles R. Kummeth, president and CEO of Bio-Techne, commented, “We are very pleased to have ACD as part of Bio-Techne Corporation. First of all, ACD marks Bio-Techne’s entry into the genomics field and market. Second, and more importantly, its innovative and versatile technology has the potential to change pathology practices. RNA-ISH is a transformative technology facilitating and improving the monitoring of gene expression patterns at the single cell level––while retaining the morphological context of the tissue being analyzed.”

“ACD’s technology serves both research and diagnostic markets, expanding Bio-Techne’s presence in the clinical lab setting. With broader adoption of the technology in the diagnostic arena, it has the potential to revolutionize the choice of reagents in diagnostic practices, such as oncology, infectious diseases and others. As we continue to expand the portfolio of products and technologies we bring to our customers, we view the leading-edge ACD products as a natural and complementary extension of the Bio-Techne product offering, with the ultimate goal to more completely address our customers’ varied needs in the research and clinical space,” Kummeth concluded.

ACD CEO Dr. Yuling Luo added, “Strategically, the fit between the two companies is excellent. Both companies share the passion to empower cutting-edge science with innovative quality reagents. Both ACD and Bio-Techne are dedicated to improving life-science research and healthcare by providing customers with the best possible tools and reagents. The combined business represents a one-stop shop for our customers and positions us well to compete and expand in the global market.”

Fredrikson & Byron P.A. is serving as Bio-Techne’s legal counsel for these proceedings. Jefferies LLC acted as exclusive financial advisor to ACD for the deal, with Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP is serving as ACD’s legal counsel.