Genetic products maker
Affymetrix
(
AFFX
) recently announced that it has agreed to acquire privately-held
eBioscience, a global leader in immunology and oncology flow
cytometry reagents, in a deal w orth $330 million.
San Diego, California-based eBioscience offers a vast selection
of antibodies, enzyme-linked immunosorbent assays (ELISAs) and
proteins for life science research and diagnostics. It is an
industry leader in flow cytometry (a technique for analysing
microscopic particles) and immunoassay reagents for immunology and
oncology research and diagnostics.
The transaction, which is subject to customary closing
conditions, is expected to consummate in late fourth-quarter 2011.
Affymetrix will fund the acquisition using a combination of roughly
50% in cash and balance in committed debt. The purchase price
represents roughly 4.5 times of eBioscience's revenues for 2011,
which is forecast to exceed $70 million.
The acquisition will significantly boost Affymetrix's foothold
in the fast-growing immunology, oncology and translational medicine
markets, representing nearly $3 billion annual opportunity. It will
diversify the company's revenue base, expand its product range (to
include a vast array of reagents) and reinforce its growing
molecular diagnostics business.
Affymetrix is a leading provider of microarray-based products
and services to the global research community. Along with
Illumina Inc
. (
ILMN
), it is one of the two major providers of microarray technologies,
primarily used in the field of genetic research. Affymetrix holds a
leading position in the gene expression products and services
market.
Affymetrix is pursuing a number of strategies (including
expansion into new markets such as cytogenetics and cancer
research) aimed at expanding its top line. The company is shifting
its R&D focus from discovery and exploration markets to the
faster-growing validation and routine testing markets.
However, Affymetrix is operating in an intensely competitive
industry and faces risks associated with lower R&D spending by
its customers due to a soft economy and government actions
including budget cuts.
Affymetrix is exposed to a volatile funding environment. Decline
in government research grants may substantially affect the
company's revenues. We are currently Neutral on Affymetrix, which
is in tandem with a short-term Zacks #3 Rank (Hold).
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