December 19, 2007
Well, I was right that Affymetrix (Nasdaq: AFFX ) was planning to use the proceeds from sales of its senior notes to purchase a company, but I guessed wrong in which way it was going to expand.
Yesterday, the Rule Breakers pick and biochip maker announced that it was purchasing laboratory-reagent maker USB for about $75 million in cash. The privately held USB makes enzymes and molecular purification systems that compete with the likes of Invitrogen (Nasdaq: IVGN ) and QIAGEN (Nasdaq: QGEN ) . Its products are distributed by General Electric's (NYSE: GE ) health care division, but there's no word yet if Affymetrix will integrate the products into its own distribution system or stick with the status quo.
Frankly, I'm a little surprised at the move. I thought Affymetrix was going to let rival Illumina (Nasdaq: ILMN ) stick with expanding into other laboratory supplies and instead concentrate on its diagnostics business. Expanding its laboratory products does have one advantage for Affymetrix: In my experience, a lot more laboratories use the types of products that USB sells than Affymetrix's biochips. The USB purchase gets Affymetrix a foot in the door to these other labs, where it can extol the virtues of biochips, thus expanding the biochip market and its market share at the same time.
But I still think that Affymetrix should concentrate on its diagnostics business. Given Roche's repeated attempts to purchase Ventana Medical Systems (Nasdaq: VMSI ) , it's clear to me that diagnostics is the next wave of personalized medicine. Of course, even after subtracting out the $75 million, Affmetrix still has cash to make other purchases, so a pickup in the diagnostics arena isn't out of the question. Investors will have to wait until the end of next month at Affymetrix's year-end earnings call to get the full scoop on the direction the company is headed.
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