Mercifully, Celera has closed the last chapter in its 40-month saga of missed opportunities for its novel yet neglected KIF6-StatinCheck assay.
Last week Quest said it would shell out $671 million — a transaction valued at $344 million net of cash and short-term investments — to buy Celera, the parent company of Berkeley HeartLab, which performs the genotyping LDT designed to predict the risk of coronary heart disease and statin response. (That could explain part of the $1.25 billion debt offering Quest announced today.)
Hinting at the KIF6 test, Quest CEO Surya Mohapatra said the deal “will further strengthen our leadership position in molecular diagnostics discovery and development” — an ongoing goal of the reference lab (see here, here, here, here, and here).
“We will gain immediate access to an impressive range of proprietary tests and products, and a strong pipeline of biomarkers for the future,” he added.
With BHL as part of the buy-out booty, Quest will immediately add to its esoteric and gene-based testing services, particularly for its four principal indications: cancer and cardiovascular, infectious-disease, and neurological diseases.
Besides BHL, Celera itself sells IVDs and reagents for transplantation genetics, cystic fibrosis, HIV drug resistance, and Fragile X syndrome.
But to me the meat of the matter is that with Quest’s marketing muscle behind KIF6 — in Celera’s words the “cornerstone” of BHL’s growth potential — may finally begin to see some light at the end of the tunnel.
‘Broadly Available’
I’ve been kvetching for more than a year that Celera has been keeping too-tight a leash on KIF6 — which is well-regarded by most lab managers and cardiologists — that BHL has performed almost exclusively in its Alameda, Calif.-based CLIA lab since July 2008.
Sure, Celera has allowed a thimbleful of other labs either to license the assay or offer it on a send-out basis (see here, here, and here, for examples). But that was no way to make BHL’s crown jewel “broadly available,” as Celera spokesperson David Speechly put it to me last December.
Celera, which reported $128 million in revenue in 2010 (around $80 million of which was from BHL), had also been trying to eke out market traction by selling KIF6 on its own — but with strict geographic and other limitations — and had hired around two dozen sales reps nationwide to pound the pavement.
In the end none of the efforts worked, and BHL’s revenues last year were proof-positive that the lab, and by extension the coveted KIF6, needed better marketing.
Although, ironically, BHL’s fourth-quarter 2010 revenue, released the same day Celera announced the Quest acquisition, increased 4.7 percent year over year, Celera’s selling skills had nothing to do with it.
According to the company, the increase was “primarily due to a higher-than-average price per sample” and “despite lower sample volume.”
By comparison, BHL’s third-quarter revenue fell nearly 16 percent, second-quarter receipts plummeted 22 percent, and first-quarter revenue plunged 39 percent.
And equally limp revenue and testing volume over the previous two years may have contributed to a class-action lawsuit filed against Celera last June.
If Celera’s ability to sell KIF6 was as good as its ability to spin news, the assay, despite some naysayers, could have had a different past and future. Explaining BHL’s lackluster financial performance over the past several quarters, on March 18 Celera said its “discovery and validation of new biomarkers has exceeded our capacity to commercialize them.”
Aw, shucks.
In a statement that day announcing the Quest acquisition, Celera CEO Kathy Ordoñez’s spinning may have been dizzying, but her company’s résumé — first as the vendor that beat an armada of multinational, government-backed research centers to sequence the first human genome, followed by a tireless pursuit of druggable biomarkers — has numbed some of my skepticism.
“Combining Celera’s expertise in genetics with Quest Diagnostics’ medical leadership, market access, and scale is expected to speed the realization of our vision to personalize medicine,” said Ordoñez, who will land at Quest with an as-yet unknown management gig.
The acquisition shouldn’t seem too surprising. Almost exactly one year ago Celera had known, and publically disclosed, that BHL was in trouble. On March 4, 2010, Celera conceded that neither it nor BHL had the resources to grab the “sizeable market potential” for the lab’s cardiovascular genetic-testing assets. Sound familiar?
As a result, Celera began “assessing options to better leverage” them. At the time this included penning “a broader partnership or alliance.”
Talking to shareholders during her company’s fourth-quarter earnings call last Friday, Ordoñez noted that the opportunities in the cardiovascular genetic-testing market exceed Celera’s current commercial reach. Up until then, BHL had run more than 200,000 KIF6 tests.
“We’re therefore assessing options to better leverage our scale and expand our commercial reach … in order to better address the sizeable market potential associated with these assets,” she said.
Other than KIF6, BHL offers HDL and LDL lipoprotein analyses; 9p21, a genotyping test designed to predict the risk of early onset myocardial infarction; and an LPA genotyping assay meant to predict the risk of coronary heart disease and aspirin response.
Quest said it expects the acquisition to close next month.
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