Casting a clinical eye

Agilent to acquire Dako for $2.2 billion as it looks to growth in clinical diagnostics market

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SANTA CLARA, Calif.—Agilent calls its acquisition ofGlostrup, Denmark-based Dako, a cancer diagnostic company, the "next step inAgilent's growing role in clinical diagnostics" but it's also one of thecompany's biggest steps in general, with a price tag of $2.2 billion—Agilent'slargest acquisition so far.
"Agilent's strategy in acquiring Dako is about strengtheningthe company's presence in life science and about revenue growth," said AgilentPresident and CEO Bill Sullivan in a news release, characterizing Dako as oneof the world's leading providers of cancer diagnostics tools. "Dako employsextremely talented people with specialized expertise that we highly value.Their knowledge and experience will be very important as we move forwardtogether. In the rapidly growing diagnostics market, Dako's products andcapabilities are a strategic complement to Agilent's existing offerings."
Sullivan predicts that together, the combined companies willbe able to develop a wider range of products to aid in the fight againstcancer.  
According to Sullivan, one of the reasons Agilent is eager tomake this plunge is that its biggest long-term growth opportunities continue tobe in life sciences, and he adds, "This is a $21 billion industry with 4percent to 6 percent in annual growth, where Agilent is currently a $1.8billion player. Dako is one of the leading global providers of cancerdiagnostic tools, and the addition of Dako and its portfolio will help Agilentto accelerate our growth in several rapidly expanding areas of diagnostics.These include the $2.2 billion anatomic pathology market, growing at 8 percentto 10 percent annually, and the $4.5 billion molecular diagnostic market,growing at 10 percent to 15 percent per year. Dako has an established channeland regulatory experience, which provides Agilent with an immediate entry intothese markets."
He notes that more than 90 percent of Dako's business is inreagents and services, and as a result, Agilent expects to see an immediateincrease in its recurring revenues from 25 percent to 30 percent of totalrevenues. In turn, Agilent provides Dako with Agilent's broad range oftechnologies and strong global presence.
"This is particularly true in emergingmarkets, where Dako has a significant opportunity for further penetration,"according to Sullivan. "This acquisition is primarily about revenue synergies,not cost synergies. While we expect to realize some cost synergies, we are mostexciting about what Dako can do to add to Agilent's profitable growth."
Lars Holmkvist, CEO of Dako, predicts the combination of thetwo companies "is going to be a very exciting journey" and adds that the entireexecutive team has chosen to go along on that journey subsequent to theacquisition being finalized.
"Like Agilent, Dako has a long history as a leader inscientific advancement and a culture that values discovery and innovation, saidLars Holmkvist, CEO of Dako, as he looked at complementary strengths possessedby the two companies. "We believe that Agilent and Dako are a winningcombination."  
"This deal appears to make sense as Dako is considered anattractive asset in tissue diagnostics, a market with robust underlyingfundamentals," wrote Doug Schenkel, an analyst at Cowen & Co., shortlyafter the announcement of the deal, adding that Agilent has some $3.9 billionin cash outside the United States, and that money could be used for morelife-science and diagnostic deals in other countries to avoid U.S. taxes.  
At the time of the announcement, the acquisition wasexpected to close in June or July, subject to the satisfaction of customaryclosing conditions, and Agilent expects the acquisition to be immediatelyaccretive to corporate earnings on a non-GAAP basis.   
Dako provides antibodies, reagents, scientific instrumentsand software primarily to customers in pathology laboratories "to raise thestandards for fast and accurate diagnostic answers for cancer patients,"according to the companies. Dako also collaborates with a number of majorpharmaceutical companies to develop new potential pharmacodiagnostics, orcompanion diagnostics, which may be used to identify patients most likely tobenefit from a specific targeted therapy. Dako's products are sold in more than100 countries employing more than 1,000 people, and in 2010 its annual revenuewas approximately $340 million.  
Agilent expects Dako to generate sales $373 million infiscal year 2013, and noted that it will probably report Dako sales as aseparate segment. If Agilent's predictions of immediate gains from theacquisition hold true, it could be a good boost for the company, given that thelife-science part of Agilent was responsible for roughly one-third of thecompany's 2011 revenue of $5.58 billion. 

NIH grant willfurther Agilent's toxicology work
SANTA CLARA, Calif.—Agilent Technologies Inc. and a team ofscientists and investigators from six leading research organizations, are usinga $6 million grant from the National Institutes of Health (NIH) to pioneertransformative research in toxicology, according to an announcement made by thecompany in May.
Funding for the project comes from the Common Fund's NIHDirector's Transformative Research Projects Program, which is designed tosupport exceptionally innovative, high-risk, original and/or unconventionalresearch that has the potential to create or overturn fundamental scientificparadigms.
The consortium has been funded to map and providequantitative dose-response models for selected pathways of toxicity. Its goalis to establish a public data resource to share the results of new testingstrategies for assessing human health risks.
The project is initially focusing on endocrine disruptionpathways as a first step toward mapping the complete human toxome. This effortwill, in turn, improve accuracy, while lowering costs and reducing the timeneeded to predict the toxicity of new compounds.
Agilent will develop and contribute to the consortium newstrategies for data management as well as software for data analysis andvisualization. This software will be built using Agilent's GeneSpringmulti-omics analysis platform. In addition, much of the data will be collectedusing Agilent microarrays and mass spectrometers.
"The NIH award to the consortium underscores the importanceof major stakeholders working together to create this community resource andultimately to advance toxicity testing," says Gustavo Salem, vice president andgeneral manager of Agilent's Biological Systems division. "Agilent is committedto this vision. Our expertise in bioinformatics software and bioanalyticalplatforms will provide the tools for the consortium to collect, organize, shareand analyze the generated data in conjunction with established databases ofbiochemical and toxicological knowledge."
The consortium is led by Dr. Thomas Hartung, director of theJohns Hopkins Center for Alternatives to Animal Testing. Agilent's leadinvestigator is Dr. Michael Rosenberg, director bioinformatics in the company'sLife Sciences group.
Other principal investigators include: James Yager,professor in preventive medicine at the Johns Hopkins Bloomberg School ofPublic Health; Robert Kavlock, director of the National Center forComputational Toxicology at the U.S. Environmental Protection Agency; MelAndersen, associate director of the Hamner Institute for Health Sciences; KimBoekelheide, professor of medical sciences at Brown University; and Albert J.Fornace Jr., molecular cancer research chair at Lombardi Comprehensive CancerCenter at Georgetown University Medical Center.


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