Courtesy of Invitrogen
When Invitrogen recruited General Electric Medical Systems executive Gregory Lucier to be its new CEO in May 2003, it looked like the biotechnology toolmaker was ready to take some lessons out of the big corporate textbook. Years in top positions at the old-economy giant had imbued Lucier with ideas such as financial discipline and operational efficiency, which don't always come naturally to companies pushing the cutting edge of science. Perhaps most importantly, however, the new CEO was schooled in the art of the deal, GE-style, and ready to step up the pace of the acquisition run on which Invitrogen had already embarked.
Within a few months of taking the helm, he led and closed the $303.9 million (US) acquisition of Eugene, Ore.-based Molecular Probes, the fast-growing, research-driven maker of fluorescent probes and reagents for biomedical research. Less than six months later, Lucier launched a $48-per...
"I think the market is incredibly fragmented for the supply of reagents and experimental kits," Lucier says. "There is a very robust pipeline of acquisitions that we can make. We have reached the critical size where we represent the one-stop shop." What the one-stop shop target means to Invitrogen is obvious: It makes the company a player in the big leagues of toolmakers, improving its chances of survival in an industry where buying patterns have become volatile and size means stability.
Courtesy of Invitrogen
GIBCO products are part of Invitrogen's large inventory of research supplies, thanks to its many mergers and acquisitions.
"We view the life and analytical sciences industry as consisting of about 150 companies, the top 10 of which account for 40% to 50% of the total revenue," says Daniel Sutherby, spokesman for PerkinElmer. The Boston-based supplier of drug-discovery and research tools believes industry consolidation is a necessity. "There isn't enough growth to go around," he says, adding that it's also a fact of economic life. In a situation where too many suppliers are available to a slow-growing universe of research institutions, large companies have the resources to survive price wars and other competitive pressures, but smaller companies do not. "The tools space has very much consolidated, and there are very few big guys left," says Lucier.
But is the one-stop shop concept a good one for scientists in the laboratory? Doesn't it suppress competition, put a lid on creativity, and drive prices up? The dangers of consolidation have drawn criticism in many other industries, from banking to retailers of office supplies, where market strength can mean the power to dictate prices and block new and interesting rivals from gaining ground. Things could change if research supplies ever become a seller's market.
But laboratory managers are not worried yet about the threat of being dominated by a vendor. "I have not seen price increases, and it's nice to have all your supplies come from one place," says Kassie Koleckar, laboratory coordinator at Stanford University School of Medicine's department of microbiology and immunology. "The way we have to do it now is we're constantly calling around. It would save time and energy if we could only make one or two calls."
"It used to be if you walked through an academic research laboratory, it looked like a tornado blew through, dropping all kinds of unrelated equipment," says Tycho Peterson, a life sciences analyst for J.P. Morgan. "There was always a list of about 600 different tech support numbers on the wall, but if something broke, it was impossible to figure out who to call."
FOCUS ON TECH SUPPORT
Peterson credits Lucier not just with Invitrogen's broader, deeper product line, but with a concentration on technical support that has formed the backbone of the integration process. "Invitrogen is not just a distribution center. They have been hiring PhDs to answer questions," the analyst says.
Also MBAs and even an MD, says Heather Hull, interim manager of Invitrogen's technology services group. When she joined the company four years ago, Invitrogen had between eight and 12 dedicated troubleshooters in tech services at its Carlsbad, Calif. headquarters. Currently, 50 people are located across North America, including the tech services groups of some acquired companies, says Hull. "We merge the technologies, but that takes time. At Molecular Probes, they are the specialists there and we like to have them handle those calls," she says.
Cross-training is part of the merger integration process she adds, and that means hands-on, in-the-lab experience with Invitrogen products and those of the acquired companies. Skimping on service would be out of character for Lucier, whose first assignment at GE Medical systems was running the multibillion dollar global equipment service business.
The need for service expertise is one of the things that makes shopping for supplies for scientific research a far cry from shopping for checking accounts or aspirin, says Jeff Chapman, a business manager for the systems biology group at Beckman Coulter. "Selling tools was selling the hard way," he says. "Selling pH meters, spectrophotometers, and other tools with no connection other than that they were multiple products going into the same organization was no way to offer benefits to the customers."
A research laboratory enthralled by the latest in hardware, software, or chemistry might invest heavily, only to find itself overloaded with data at one point of the research, but with no way to move ahead, he says. "At one time, it was much more a technology type of sale, but now people in the laboratories have returned to the focus on the biology at hand," Chapman says. "They're focusing on their science, and we need to map to their workflow, integrate and link to their processes."
Thinking, selling, and creating in flow and systems is second nature to Lucier, whose second assignment at GE Medical Systems business was as president and CEO of the information technologies division. "My background is systems engineering for research and development," Lucier says, adding that he brought like-minded individuals to Invitrogen. The hodge-podge of technologies in many research laboratories, he says, made no sense to them. "We came into this industry of science very much saying... 'You guys have got to connect the dots.' This does not suppress innovation. There is this fear that if you start connecting the dots this will suppress innovation. This is about accelerating discovery," Lucier says.
For those worried that Invitrogen's buying spree was moving it far from its swift and smart biotech roots, consider the April buy of Protometrix. The Branford, Conn.-based developer of proteomics technologies gave Invitrogen bragging rights to protein microarray creations from the laboratory of Michael Snyder, professor and chairman of molecular, cellular, and developmental biology at Yale University. Such acquisitions, coupled with a huge sales force primed to invite laboratory scientists to share their research challenges, keep the creativity in Invitrogen's critical mass, its CEO says. "Some of the greatest ideas that we get from scientists come from our customers," Lucier says.
POPULAR MOVE ON REACH-THROUGH
As for demonstrating his own creativity, the CEO swore off "reach-through" licensing, the rights that many toolmakers claim in order to collect royalties from scientific discoveries produced using their equipment. The bane of university technology-transfer offices, reach-through claims are a constant threat that one day, three or four, or eight vendors who helped equip a laboratory that turns out a blockbuster might demand a share of the profits. "In the past, Invitrogen had a policy like many biotechs so that if you ended up discovering some big hit drug, we would ask for a license," Lucier says. "This limited the potential."
Courtesy of Invitrogen
In June, Invitrogen showcased its new policy by way of an agreement with the National Human Genome Research Institute and the National Cancer Institute to allow open access to its Gateway DNA cloning technology. Academic and government researchers who buy the technology will have free rein to distribute clones connected to the mammalian gene collection program, a National Institutes of Health-funded effort to generate a public pool of sequenced cDNA for all human and mouse genes, and a set of rate genes.
"We totally eradicated reach-through licensing." Lucier says. "This industry is plagued with that and we are eradicating it, so when you do business with Invitrogen, you can really accelerate."