BioWorld International Correspondent

GE Healthcare, a division of GE Corp., is looking to enter the real-time label-free protein interaction analysis market by acquiring Biacore AB for SEK330 per share, an offer that values the company at SEK3.2 billion (US$435.9 million) or about SEK2.9 billion net of Biacore's cash reserves.

The offer represents a premium of 19 percent over the company's closing share price Monday, and a premium of 35 percent on the stock's weighted average over the past month.

Pfizer Inc., of New York, which holds a 41 percent stake in Uppsala, Sweden-based Biacore, is backing the bid. So, too, are Biacore's management and board, which hold 0.3 percent of its equity. GE needs to obtain acceptances from holders of more than 90 percent of the company's stock to make the offer irrevocable.

Pfizer has granted a call option to GE, of Fairfield, Conn., entitling it to purchase its shares at any point up to September, a factor likely to act as a "poison pill" for any other rival bidder, Matthias Haggblom, analyst at ABN Amro in Stockholm, Sweden, told BioWorld International. "If the offer fails for any reason, GE seems quite certain to get a hold of 41 percent of the shares, at least."

Reaction among Swedish investors has been "vaguely positive," he said. "There could be some room for price discussions," Haggblom said. He had a target price on the stock of SEK325, based on the company operating as an independent entity. ABG Sundal Collier AB, also of Stockholm, had a target price of SEK300.

The offer price therefore barely takes account of synergies that could be obtained post-merger, Haggblom said. Although Biacore enjoys high gross margins, both its selling, general and administration (SG&A) expenses and its R&D costs are well above industry averages, he said. Last year, it spent SEK53 million on SG&A, for example.

"I'm not sure how much of that will be necessary going forward," he said.

"Economically, it's a good deal for our shareholders," Biacore chairman Donald Parfet told BioWorld International. "I think the whole impetus for the transaction was actually driven by GE's life sciences group and their desire to continue to expand and broaden their product offerings."

Pfizer gained its position in the company through its 2002 acquisition of Pharmacia Corp., of Peapack, N.J. Biacore was founded in 1984 as Pharmacia Biosensor AB, and did not change its name until its 1996 initial public offering. "I've been a bit surprised that this type of transaction hasn't happened sooner," Haggblom said. "GE could have bought them two years ago for a third of the price, or something like that."

The company reported SEK569 million in sales, an increase of 15 percent from 2004, and SEK191.2 million in net income. The latter figure included a one-off tax credit of SEK96.7 million associated with the transfer of the company's corporate headquarters and operations from Switzerland to Sweden. In the first quarter, it reported net income of SEK18.9 million on sales of SEK137.9 million.

The company introduced its first analytical instrument based on surface plasmon resonance (SPR) technology in 1990, and last year it introduced its first array-based SPR system.

"Right now, Biacore is clearly the dominant player in real-time label-free protein analysis," Steven Bodovitz, principal and co-founder of San Francisco-based consultancy BioPerspectives Inc. "A number of companies are eyeing up that space. A number have entered or are entering," he added. They include large players such as Corning Inc., of Corning, N.Y., and ForteBio Inc., of Menlo Park, Calif., both of which are developing optical-based detection systems. But, for now, Biacore remains "the gold standard," he said.