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Invitrogen's Absorption of Eugene, Ore.-Based Molecular Probes Proves Tricky

Posted on: Monday, 13 October 2003, 06:00 CDT

Oct. 13--After the excitement of announcing in July that it would buy Eugene's Molecular Probes, Invitrogen now is tackling the drudge work of actually combining the two biosciences companies.

Many key details, such as whether Invitrogen will cut or expand Molecular Probes' 240-employee work force or change employee compensation, and whether Invitrogen will buy or lease Molecular Probes' west Eugene site, have yet to be revealed.

As it absorbs Molecular Probes and other recent acquisitions, Invitrogen will review several aspects of its business, said Augie Sick, an Invitrogen veteran recently named general manager of the Eugene site.

Sick said he expects Invitrogen to complete the reviews by the end of the year. As part of the procedure, Invitrogen is:

--Working on a plan for developing new products and how to market them.

--Examining the brands it has acquired and deciding which to keep and which to wrap into the Invitrogen name.

--Surveying employee wages and benefits to try to align compensation for employees who have the same job titles and responsibilities across the organization, whether the employees work at Invitrogen's Carlsbad, Calif., headquarters or at its subsidiaries. That review could enhance salaries and benefits for Eugene employees, Sick said.

Invitrogen has its hands full. From February to July, the publicly traded company spent $422 million buying three companies; Molecular Probes, purchased from Eugene-based owners Richard and Rosaria Haugland in July, accounted for most of that ($325 million).

Invitrogen's core business is developing and selling chemical kits for analyzing and cloning genes.

Molecular Probes brings to Invitrogen's product line thousands of fluorescent dyes that researchers use to track cell functions and activities of genes and proteins.

Typically after an acquisition, Invitrogen aggressively tries to cut costs, and Molecular Probes will be no exception, said Aaron Geist, a research analyst with Robert W. Baird & Co. in Milwaukee, Wis.

Research and development and manufacturing employees are the most likely to be kept, he said. But departments such as operations and financial accounting would probably be eliminated, he said.

When Invitrogen announced in July plans to buy Molecular Probes, Invitrogen's new CEO, Greg Lucier, said he wanted to keep Eugene "as a center of excellence ... and really expand it." But he also said "back-office work" -- typically such functions as payroll and human resources -- would be integrated with similar work at Invitrogen to save money.

Invitrogen will try to make the Eugene operation more efficient, Sick said. "But we're not going to do anything that would put at risk growth, revenue and achieving customer satisfaction," he said.

The transfer of a homegrown privately owned business to an out-of-state publicly traded company raises some concerns about the long-term future of the company in Eugene and in Oregon.

"It's great for the state as long as Invitrogen stays there," said Jim Hicks, chief technical officer for Virogenomics, a Portland-based biotech company.

Hicks said he uses Molecular Probes products extensively in his research of genes and cancer.

But Hicks said he isn't reassured by Invitrogen's statements that it plans to stay in Eugene.

"All companies ... say that when they acquire smaller companies, but the problem is if they end up in a financial crunch a year from now -- probably for something completely unrelated -- somebody who doesn't have any spiritual or scientific relationship to Molecular Probes will make the decision of what to cut back," Hicks said. "It's dancing with the devil to get acquired."

What's the track record of Eugene technology start-ups that have been sold to out-of-area firms?

Dynamix, a local startup that made computer games, was bought by Sierra Online based in Bellevue, Wash., and then shut in 2001 as part of a Sierra restructuring.

Rosen Products, which made flat-panel display screens for autos and planes, was sold by local founder John Rosen to the Berwind Group, a Philadelphia conglomerate. Berwind initially expanded Rosen quickly, but then shut the Eugene operation in September 2002.

Some of Invitrogen's past acquisitions haven't gone as smoothly as hoped, said Adam Chazan, an analyst who covers Invitrogen for Pacific Growth Equities in San Francisco.

Chazan said he expects that to change under Lucier, who oversaw 16 acquisitions in three years as an executive at General Electric's medical systems information technologies unit.

"Lucier's expertise and experience will hopefully translate into a more successful, smoother, less traumatic transition" for Molecular Probes, Chazan said.

Lucier has brought a lot more focus and discipline to the process of integrating new firms, Sick said.

Juggling acquisitions How is the company handling so many acquisitions at once?

"It's really a matter of having the right people in all these areas -- having the right leadership," Invitrogen spokesman Greg Geissman said.cq In Eugene, the leadership team is Sick and Gordon Brown, director of operations. Sick, 40, has worked for Invitrogen for 13 years, most recently as vice president of business development, where he focused on mergers and acquisitions, and obtaining technology through licensing.

Brown has 12 years of experience with Invitrogen and was director of operations in Carlsbad.

To maintain the "scientific integrity" that Molecular Probes has engendered since its founding in 1975, co-founder Richard Haugland has signed a three-year consulting contract with Invitrogen's Eugene R&D group, Sick said.

"Hopefully we can extend that," he said.

But even after the Hauglands completely retire from the firm, they'll leave behind a deep talent pool, Sick said.

"Dick and Rosaria had planned pretty well for this day," he said. "They assembled a winning team."

Eugene isn't a biotech hub like San Diego, but that hasn't prevented the Hauglands from bringing in top-notch people, Sick said.

The acquisition is being well received by employees, Sick said. "People are very excited about being part of Invitrogen," he said.

Under the Hauglands, Molecular Probes emphasized the importance of family, continuing education and innovation.

Many employees enjoyed working flexible hours and attending seminars in the company's large auditorium.

Invitrogen also offers an employee-focused workplace, Sick said. The company promotes education and career development, and many jobs lend themselves to flexible hours, he said.

"The Eugene site operated as a close-knit family, and I think we want to be able to continue that in talking about being part of the Invitrogen family," Sick said.

Linking forces with Invitrogen will open up new markets for Molecular Probes products.

Molecular Probes mainly sold its dyes through its catalog and through newsletters and the Internet. Molecular Probes had no salespeople, while Invitrogen has a worldwide sales force of 300 people, said Mary Cassoni, cqan Invitrogen spokeswoman.

"Invitrogen has all the infrastructure in place, so it's just a matter of adding the Molecular Probes product offering and technological expertise to a broader audience through the Invitrogen sales force," Chazan said.

Sick said Invitrogen intends to expand the market for Molecular Probes products without jeopardizing customer service or alienating loyal Molecular Probes customers. "We're going in with the objective not to lose a single customer," he said.

But Hicks, the Molecular Probes customer, is skeptical. Hicks said he likes the choice offered by a variety of diverse firms and he fears that industry consolidation will narrow his choices.

"At a certain point, the convenience of having only one catalog to go to is going to be a limitation," he said.

"Right now, we probably order from 200 companies that range from companies of one or two people to six or seven that are major suppliers," Hicks said.

"I'd hate to lose the variety of the small ones because they provide specialized products sometimes you don't even know you're going to need."

ACQUISITIONS BY INVITROGEN:

Molecular Probes is just one of seven firms that Invitrogen has bought

since it went public four years ago.

Here are the others, with the purchase date, company location and price:

--July 2003: Genicon Sciences Corp., San Diego, Calif., $2 million.

--February 2003: Vertex Pharmaceuticals Inc.'s PanVera unit, Madison,

Wis., $95 million.

--December 2002: InforMax, Bethesda, Md., $42 million.

--September 2000: Dexter/Life Technologies, Rockville, Md., $1.9 billion.

--February 2000: Research Genetics Inc., Huntsville, Ala., $221 million.

--August 1999: NOVEX, San Diego, $70 million.

The shopping spree is central to Invitrogen's strategy.

"It wants to be a supermarket to the life sciences researcher," said

Aaron Geist, a research analyst with Robert W. Baird & Co. in Milwaukee,

Wis.

Invitrogen develops, makes and sells research kits to analyze and clone

genes. The company has almost $700 million in cash, and will likely buy more

firms.

"Once you're on the treadmill there's really no way to get off it," said

August Sick, general manager of Invitrogen's Eugene operation.

Invitrogen's quest is to better understand disease, so the company is

always on the lookout for technologies to do that, he said.

"We're not going to be able to do it all as a closed company," Sick

said. "There's lots of brilliant people out there developing some really

great things."

-----

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(c) 2003, The Register-Guard, Eugene, Ore. Distributed by Knight Ridder/Tribune Business News.

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