Affymetrix Scoops up eBioscience - Analyst Blog
December 06 2011 - 7:00AM
Zacks
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
worth $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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