With DxS, Qiagen Moves into Personalized Medicine

Qiagen has bought up DxS, a private UK-based provider of molecular tests including one for the mutant oncogene KRAS. Like the June 2009 deal by Labcorp. for Monogram Biosciences, it shows how IVD companies with very different business models are moving towards a common ground in personalized medicine and disease management.

Qiagen NV's $1.42 billion acquisition of Digene Corp. in mid-2007 surprised the industry. [See Deal] With a business model geared towards high-volume, platform-oriented economies of scale rather than high-value, focused content like Digene's molecular diagnostic HPV test, the Dutch sample prep and assay specialist was not seen as a major player in the evolving molecular space. Now, Qiagen has bought up Qiagen Manchester Ltd., a privately held UK-based provider of molecular tests including one for the mutant oncogene KRAS, the companion diagnostic featured as of July 2009 on the labels of the EGF receptor targeting drugs panitumumab (Vectibix) and cetuximab (Erbitux) (cetuximab) for metastatic colon cancer, from Amgen Inc. and Bristol-Myers Squibb Co. and partner ImClone Systems Inc. (part of Eli Lilly & Co.), respectively. [See Deal] [See Deal] [See Deal]

Qiagen is paying $95 million in cash for DxS, with the promise of an additional $35 million conditioned on achievement of commercial and other milestones. [See Deal] Like the June 2009 deal by Laboratory Corp. of America Holdings (LabCorp) for Monogram Biosciences Inc., it shows how IVD companies with very different business models--in LabCorp's case, a pure test-focused sales model and in Qiagen's, an orientation towards assay development and services--are moving towards a common ground in disease management and, presumably, the evolution of a specialist physician-focused sales model. Qiagen believes its historical focus on sample prep gives the company leverage: "More and more, sample preparation is seen as an integral part of the process, especially in molecular diagnostics," says Jean-Pascal Viola, Qiagen's VP, Corporate Business Development, Asia Pacific, whose group worked on the DxS deal. Qiagen has been visible in efforts to standardize sample prep across the EU: for example, it is heading up a joint industry-academic program launched in January 2009 to standardize the collection and handling of blood, tissue, and tumor samples.

In addition to KRAS-related companion diagnostics collaborations with BMS/ImClone (Erbitux) and Amgen (Vectibix), DxS has been working with several other pharmas including AstraZeneca PLC and Boehringer Ingelheim GMBH on EGFr mutation companion diagnostics--a potential $100 million market. Qiagen projects revenues of $30 million from DxS products and $0.02 per share dilution in 2010, with the deal becoming accretive thereafter. It also completed a $546 million stock offering shortly after announcing the DxS deal, in part to fund the acquisition and, presumably, more purchases in the future. [See Deal]

With the addition of DxS, Qiagen will have upwards of 15 collaborations with pharma companies to market or develop companion diagnostics, according to the company. Most are from DxS, and mark the company's entrée into the front lines of personalized medicine. It already had a platform with which DxS' tests are compatible, Viola points out: In 2008, it acquired Australia's Corbett Life Science Pty. Ltd., for $66 million plus $65 million in potential milestones, giving it a real-time PCR technology. Then in October 2008 it obtained pyrosequencing sequence analysis technology when it bought up the bioscience assets of Biotage AB, for $53 million.

Although until DxS, Qiagen had not made any major acquisitions for test content post-Digene, and the price of DxS is only a tenth of what it took to get Digene's HPV test franchise, its entry into molecular diagnostics has been "deliberate and comprehensive," says consultant Manfred Sholz, lining Qiagen up to compete with Roche and potentially Novartis AG, which for the past year has been setting up a personalized medicine diagnostics unit. Not coincidentally, Roche Diagnostics Corp. launched its hostile bid for Ventana Medical Systems Inc. the same month Qiagen bought Digene. [See Deal] (See "Does Roche Have It Right?" IN VIVO, July 2007 (Also see "Does Roche Have It Right?" - In Vivo, 1 Jul, 2007.).)

Genomic Health Inc. is an oft-talked about acquisition target, but appears too rich with a current market cap over $500 million--especially as there appear to be several good companion diagnostics opportunities in the $100 million range as evidenced by DxS and also LabCorp's purchase of Monogram Biosciences in June for $107 million plus assumption of debt to obtain HER2 gene-expression tests as well as a companion diagnostic to Pfizer Inc.'s HIV drug Selzentry. Breast cancer diagnosis, the forte of Genomic Health, Monogram, and pathology specialist Ventana, for that matter, remains a fertile area of M&A. Several analysts expect Agendia BV, with the first FDA approved gene expression profiling system for breast cancer to be next on someone's shopping list. (See "Her2 Testing: What's Old Is New," IN VIVO, December 2008 (Also see "Her2 Testing: What's Old Is New" - In Vivo, 1 Dec, 2008.).) At some point, Qiagen itself, with a market cap just north of $4 billion, could also attract attention.

--Mark L. Ratner