The proposed acquisition of Molecular Devices by MDS Sciex (see page 2) will create a company with an estimated $470 million in fiscal 2006 revenues, putting it among the top 20 companies in the analytical and life science instrument industry (see IBO 4/15/06). In essence, the purchase transforms MDS Sciex into a full-blown instrument company, yet one in a rather unique position in the industry. Although the two companies would not, at first glance, appear to be perfectly aligned, MDS’s January conference call made a convincing case. Most importantly, MDS Sciex, which has long functioned as a manufacturer of instrumentation for Applied Biosystems and PerkinElmer, will gain a sales and support organization of more than 230 salespeople. As MDS President and CEO Stephen P. DeFalco put it, “This acquisition transforms Sciex from what is today a ‘category killer’ in mass spectrometry into a much broader platform for growth.” Molecular Devices’ product portfolio, anchored by its market-leading position in microplate readers and high-content screening, also includes automated electrophysiology, signal amplification and microarray reader product lines acquired when it purchased Axon Instruments (see IBO 3/31/04), as well as high-throughput imaging systems, imaging software and liquid handling products. MDS Sciex gains a direct entry into pharmaceutical and academic laboratories, where Molecular Devices has an installed base of over 100,000 instruments. Molecular Devices’ presence in the cellular screening market, one of the fastest growing areas of the drug discovery market, will benefit sales of MDS Sciex’s CellKey system, a label-free detection system for analysis of cell surface receptor activity. Molecular Devices will help establish CellKey in the market with “better penetration, greater reach and lower cost,” said Mr. DeFalco. Mr. DeFalco also stressed that Molecular Devices’ R&D organization, offshore manufacturing operations, intellectual property and “market leading gross operating margins” will contribute to MDS. With these additions and Molecular Devices’ sales infrastructure, Sciex will be able to add other product lines to grow the business. A strategy that Mr. DeFalco alluded to when he noted the ability of Sciex to now add “future bolt-on product-based opportunities.” Above all, the acquisition indicates MDS’s commitment to investing in and growing the successful Sciex business and making it a larger part of the company, a strategy consistent with MDS’s makeover of its business portfolio (see IBO 9/15/05), which has resulted in the divestment of several business units. In addition, Sciex can benefit from MDS’s knowledge of pharmaceutical research gained from its contract research organization business, MDS Pharma Services, and its diagnostic imaging and molecular imaging business, MDS Nordion. The transformation of a company is never simple. And MDS Sciex will have to respond to the recent slowdown in revenue growth for Molecular Devices (see IBO 11/30/06). But the acquisition creates many potential opportunities.