In what continues to be a busy acquisition period, another set of publicly held analytical instrument companies is set to become one. On September 8, PerkinElmer announced an agreement to acquire Caliper Life Sciences for an estimated $600 million in cash (see page 2). The companies’ complementary product lines and end-markets are a logical combination, and one that gives PerkinElmer a greater presence in genomic, molecular imaging and diagnostic markets.

Caliper’s 2010 organic sales increased 10% to $120.1 million, and its adjusted operating loss was $0.9 million. Its end-markets are evenly split between pharmaceutical/biotechnology and academic/government markets. The company has 460 employees and is based in Hopkinton, Massachusetts, near PerkinElmer’s headquarters. Fifty-five percent of company revenues are from instrument sales, and the remainder is from recurring revenue (including service contracts and licensing). In 2010, gross margin was 51.9% of sales.

This is the latest expansion for PerkinElmer’s life science research business, which has grown in recent years to include bioinformatics (see IBO 3/31/11, 5/31/11) and molecular imaging (see IBO 8/15/11). Caliper will add microfluidics technology, tissue imaging technology and contract testing services. Caliper also has a sizable intellectual property portfolio related to microfluidics and in vivo animal imaging, as well as microfluidic OEM agreements with Agilent and Bio-Rad Laboratories.

On the conference call discussing the acquisition, Perkin­Elmer Chairman and CEO Robert Friel commented: “In addition to the added breadth and scale, their capabilities open up additional high-growth markets, particularly in the areas of genomics and proteomics applications, tissue imaging, ADME/TOX services, and QA/QC in vaccines and biologics.” Two research areas in which PerkinElmer will add particular expertise via the Caliper purchase are genomics and preclinical imaging.

Asked about how the acquisition fits with PerkinElmer’s strategy for genomics, Alan E. Fletcher, PhD, vice president of Strategy & Business Development at PerkinElmer Bio-discovery, highlighted Caliper’s products for next-generation sequencing (NGS). “We believe that Caliper’s focus on NGS workflow is an ideal fit with PerkinElmer’s NGS service as well as our Geospiza software,” he said. Caliper’s NGS workflow encompasses multiple steps in NGS sample preparation, including DNA fractionation and quality control and automation of sample extraction and library generation. Earlier this year, PerkinElmer launched a NGS service and NGS data analysis business, utilizing Geospiza’s Lab Edition NGS LIMS. PerkinElmer subsequently acquired Geospiza (see IBO 5/31/11).

PerkinElmer and Caliper are each providers of in vivo molecular imaging systems for preclinical research. Within this market, both companies specialize in optical techniques. PerkinElmer’s offering consists of the former VisEn imaging systems (see IBO 8/15/10), which utilize Fluorescence Molecular Tomography for deep tissue imaging of small animals as well as fluorescence imaging agents. Caliper’s in vivo imaging products encompass bioluminescence, fluorescence and X-ray-based systems. As PerkinElmer noted on the conference call, its extensive offerings of in vivo imaging reagents will add to Caliper’s instrument offerings.

The acquisition is also expected to contribute to Perkin­Elmer’s portfolio for cellular analysis applications and automation. The Caliper Discovery Alliances & Services (CDAS) business offers cell analysis and testing, while its automation systems can be used for the automation of imaging and microscopy laboratories for cell research. In fact, both companies offer liquid handling systems, creating some product overlap.

Another growing market for both companies is diagnostics. In July, Caliper’s LabChip Dx electrophoresis system for developing molecular diagnostic tests received the EU’s CE IVD mark. The product generated 40 orders in the first half of this year. Earlier this year, the company partnered with Seegene to run its SeePlex multiplex assays on the LabChip Dx and to comarket the product. Last year, Caliper acquired Cambridge Research & Instrumentation, which expanded its in vivo animal imaging business, and added tissue imaging technology for multiplex tissue diagnosis (see IBO 12/15/10), expanding Caliper’s opportunities in companion diagnostics.

As noted on the conference call, PerkinElmer’s diagnostic infrastructure, which includes reagents and services, should accelerate the development of Caliper’s molecular diagnostic technology. In addition, Caliper’s automation and sample preparation products for NGS are positioned to serve NGS diagnostic applications.

Although Caliper will join the Human Health business within PerkinElmer, its technology is also expected be applied to segments of PerkinElmer’s Environmental Health business. “The LabChip technology allows the separation and purification of small quantities of biological contaminants in food and water,” Dr. Fletcher told IBO. “Coupled with PerkinElmer’s detection technologies such as MS, UV-Vis and spectrophotometry, we will be able to increase our portfolio in applied markets.”

Caliper is also anticipated to contribute to PerkinElmer’s OneSource service business. As Dr. Fletcher explained, “Caliper Life Sciences has an installed base of over 10,000 Twisters, 1,200 IVIS imaging systems and 600 LapChip Systems. Caliper has not had the reach to be able to provide the world-class service capabilities provided by PerkinElmer’s One Source Team.”

PerkinElmer’s distribution is expected to help grow the sales of Caliper products worldwide. In 2010, Asia accounted for 12% of Caliper revenues, and other countries, outside of the US and Europe, accounted for only 2%. In 2010, Caliper’s fastest growing regional market was Asia, where sales increased 3%.

Caliper’s organic sales are on track to grow 11%–15% this year (see page 3). According to the company’s second-quarter conference call, Microfluidics sales are estimated to increase the fastest this year, growing 26%–30%. Automation sales are expected to rise 8%–13%, and Imaging revenues should grow 6%–10%. Services revenue will be down 5% to up 1% due to difficult year-over-year comparisons.

Regarding the integration timetable, Dr. Fletcher said, “PerkinElmer tries to integrate companies as rapidly as possible to ensure maximum productivity from both companies. The actual integration will not start prior to the formal close, which is expected to take several months.”

 Pie Graph: Caliper Life Sciences 2010 Rev.

 Imaging                    50%

 LabChip                    25%

 Automation                 18%

 Services                    7%

 Column Chart: Caliper Life Sciences Rev. by Region (Millions)

          US     Europe    Asia    Other

 2008    $77      $38      $16      $3

 2009    $72      $36      $21      $2

 2010    $65      $36      $22      $1