In vitro to in vivo

Seeking to bridge gap between in-vitro assays and in-vivo results, Caliper acquires CRi for $20 million

Amy Swinderman
HOPKINTON, Mass.—Since Caliper Life Sciences Inc., adeveloper of microfluidics, lab automation, liquid handling and optical imagingtechnologies, evolved into its own entity in 2003, the company has grown about21 percent annually.
 
With the lofty goal to become a $240 million company by2014, Caliper is continuing that rapid growth by deploying what it calls an"I-to-I Bridge" strategy, one that that aims to help its customer "bridge" thegaps that exist in bringing in-vitro assays to in-vivo results—andthat strategy recently manifested itself in the form of Caliper's acquisitionof Cambridge Research & Instrumentation (CRi), a privately held companythat develops optical imaging systems to advance biomedical research andmolecular-based drug and diagnostic development.
 
Underthe terms of the acquisition agreement, announced Dec. 9, Caliper will acquireWoburn, Mass.-based CRi for $20 million, including net debt. In exchange forall of CRi's outstanding equity securities, Caliper will issue common stockvalued at approximately $10.5 million, pay cash of approximately $7.5 millionand assume CRi indebtedness of approximately $2 million.
 
Accordingto Kevin Hrusovsky, Caliper's president and CEO, CRi's patented preclinical andtissue-based multiplexed analysis systems will expand Caliper's life sciencestools portfolio, particularly as it bridges into clinical research, pathologyand clinical market applications.
 
 "CRi'sadvanced platforms add an important new dimension of capability to our suite ofnext-generation life science tools, and positions Caliper to further addressbiomarker discovery and companion diagnostics solutions for personalizedmedicine development programs," says Kevin Hrusovsky, Caliper's president andCEO.
 
Theacquisition also extends the reach of Caliper's proprietary offerings along thein-vitro to in-vivo bridge by filling the gap in tissueanalysis platforms, he adds.
 
"Fiveyears ago, we had a lot of customers tell us that they were getting phenomenalresults with in-vitro assays, thinking they had a great drug, butwhen they moved into testing on small animals, they found all kinds of sideeffects," says Hruosovsky. "They needed testing platforms to expand thatcontinuum."
 
That'swhen Caliper made the decision to acquire Xenogen Biosciences, a provider of in-vivopreclinical CRO services, in 2006.
 
"Afterthat happened, one of my customers at Johnson & Johnson called me to ask,'what are you doing buying Xenogen? You should be buying CRi. It has aphenomenal fluorescence technology that would be a great complement to yourofferings,'" Hruosvsky says. "Over the last few years, we could see thetechnologies CRi was building out, and could see them fitting into ourlong-term quest to become a major companion diagnostics partner for BigPharma."
 
CRibrings to the table $12 million in expected revenues for 2010, and Caliperexpects its technologies to deliver a 20 percent growth rate once it has beenabsorbed into Caliper's portfolio and operations. Those technologies includeNuance and TRIO for multispectral imaging on brightfield and fluorescencemicroscopes; inForm automated image analysis software; Vectra forhigh-throughput slide imaging and analysis; and Maestro for in-vivo opticalimaging.
 
Ultimately,Caliper's entry into the emerging digital and multiplexed pathology marketsegment has the potential to deliver a substantially greater growth profile,Hrusovsky says.
 
"Similarto the approach we used in our successful commercialization of other disruptivetechnologies such as microfluidic LabChips and whole-animal optical imagingsystems, we see an opportunity to leverage CRi's advanced multiplex technologytowards unmet needs in a rapidly changing market, in this case thebillion-dollar tissue imaging and digital pathology clinical research market,"he says. "With CRi's technologies in our toolkit, we will be able to offer amore comprehensive suite of tools and services to address the importantemerging trend toward personalized medicine."
 
Hrusovskyalso notes that CRi has relationships with several universities, medicalinstitutions and pharmaceutical and biotechnology companies. Pfizer, Merck,Novartis, the Dana Farber Cancer Center, Stanford and Baylor College ofMedicine are a few stand-out customers that have used CRi's products to performhigh-throughput, quantitative imaging of intact tissue, simultaneous analysisof multiple biomarkers and multispectral imaging of small animals.
  "Whenwe look at that customer list, it's duplicative to the list we have today,"Hrusosvky says. "So it's not so much that this acquisition opens us up to newmarkets, but creates more one-stop shopping for our customers."
 
Bymid-2011, CRi's headquarters and manufacturing operations will be consolidatedinto Caliper's facilities in Hopkinton, Mass., and CRi's Woburn facility willclose. Nearly three-quarters of CRi's 49 employees will be offered employment withCaliper.
 
CRidid not respond to a request for comment. In a statement announcing the deal,George Abe, president and CEO of CRi, said, "Caliper's market leadership andextensive corporate relationships within the biotech and pharmaceuticalindustries, coupled with its rich culture of nurturing and commercializinginnovative technologies, make Caliper the right partner to fully realize themarket potential of CRi's portfolio of multiplexed imaging technologies."
 
Abewill join Caliper as senior vice president of cellular and tissue analysis andwill be responsible for directing the growth and strategic direction of thetissue analysis business.
 
Overall,Caliper expects to incur restructuring, integration and initial capitalinvestment costs of approximately $2.5 million, occurring mainly in 2011, inorder to achieve anticipated business combination synergy cost benefits of  $2.5 million to $3 million per year,which will be fully phased in by the end of 2011. The transaction is expectedto be EBITDA accretive in 2011.
 
Hrusovsky hints that this acquisition may soon be followed by others, asCaliper sets its sites on becoming a $240 million company within the next threeyears.
 
"Whatwe need to do to achieve that is do some other acquisitions in the range ofanother $40 million during that period," he says. "What we're most interested in doingis finding a reagents company to be part of this family. And as our value goesup, it is going to be easier to acquire one of these companies."
 

Amy Swinderman

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