LIFE Continues Acquisition Spree

Zacks

Life Technologies (LIFE) is on an acquisition bandwagon, targeted towards building its diagnostics franchise. The company acquired Compendia Bioscience, a cancer bioinformatics player, which identifies gene targets for drug discovery and development. These services are widely used by the pharmaceutical industry. Based on the oncology data provided by Compendia, Life Technologies should be able to develop its own tests as well as collaborate with pharmaceutical companies in companion diagnostic development.

The financial terms of the deal were however not disclosed. The acquisition of Compendia is expected to be neutral to 2012 earnings and accretive to the company's overall ROIC by 2015.

Earlier, the company strengthened its diagnostics franchise with two tuck-in acquisitions – Navigenics and Pinpoint Genomics. The acquisition of Pinpoint Genomics provided Life Technologies with a 14-gene panel test, Pervenio Lung RS, a risk stratification test for early stage lung cancer. This test, launched in September, will provide immense help to a huge patient base by identifying lung cancer patients, who are at high risk of mortality following surgery, in the early stages. In addition, the test will also aid prevention and disease management.

On the other hand, the Navigenics deal brings in an established, CLIA-certified laboratory licensed throughout the US. This facility will be employed for design and validation of new diagnostics assays.

Life Technologies also has a Master Development Agreement with Bristol-Myers Squibb (BMY) for companion diagnostic projects. The collaboration with Bristol-Myers is in line with the company’s strategy to build partnerships with pharmaceutical majors for companion diagnostic development including participation in early-phase clinical trials. Other partnerships include those with GlaxoSmithKline (GSK) for MAGE-A3 cancer immunotherapy and with Gen-Probe.

Life Technologies enjoys a strong position in the life sciences market. We are optimistic about the company’s focus on its diagnostics franchise, which holds potential. However, economic uncertainties in Europe and unfavorable currency were the major headwinds for the company during the last reported quarter.

We have a ‘Neutral’ recommendation on Life Technologies. The stock carries a Zacks #3 Rank (‘Hold’) in the short term.

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