Invitrogen Corp., a maker of chemical kits used in scientific experiments, has agreed to acquire struggling Bethesda software maker InforMax Inc. for $42 million, a price that amounts to little more than the cash InforMax has in the bank.
The deal announced yesterday pairs a money-losing seller of software for scientists with a Carlsbad, Calif., company that has been looking for acquisitions to bolster development and sales of its scientific tools.
The plan is to sell InforMax's software - used to design and analyze experiments - to the molecular biologists who buy Invitrogen's chemical kits to do experiments.
"Both companies will drive the sales of each other's products," Invitrogen Chief Executive Officer Lyle C. Turner told investors in a conference call.
The announcement sent shares of InforMax up 76 cents, or 135.7 percent, to $1.32 yesterday. Shares of Invitrogen lost $1.24, to $31.74.
Analysts opinions on whether the idea will work were mixed. They also differed on how extensive layoffs at InforMax will be.
Invitrogen has garnered a bad reputation among some in Maryland because it slashed more than 500 in-state jobs at Life Technologies Inc. after acquiring that Rockville company two years ago. Invitrogen has 154 employees at a plant in Frederick.
"I think certainly a lot of people were not real pleased at the way that was handled, but this may be a different situation in that [InforMax's software] is not similar to a product line they already have," said C. Robert Eaton, executive director of MdBio Inc., a promoter of the state's biotechnology industry.
Eaton said it is too soon to tell whether the acquisition would be good, bad or neutral for Maryland. But he said it might be positive if Invitrogen can help InforMax sell its products.
InforMax has 170 employees, including 140 in Bethesda, after laying off 60 in the first half of this year.
The company is the latest in a string of money-losing bioinformatics businesses to change strategies, be acquired or fail. The problem appears to be that numerous bioinformatics companies - which sell software for sifting biological information - are going after a relatively small number of big-money customers, Boston Consulting Group Vice President Oliver Fetzer has said. There are about 25 major pharmaceutical companies and 10 major biotechnology companies worldwide.
Yesterday, InforMax said it expects third-quarter revenue of $3.1 million, down from $4.7 million in last year's third quarter. It expects a quarterly loss of $5.2 million after losing $5.4 million a year ago. InforMax hopes sales will be reinvigorated by a number of new and upgraded products it just introduced.
The all-cash acquisition, which is expected to close by year's end, amounts to $1.36 a share on a fully diluted basis, meaning that all stock options, warrants and convertible securities are included.
Turner said the price amounts to $10 million once cash on InforMax's balance sheet is considered. How the $10 million figure was arrived at wasn't clear: InforMax projects that it will have about $41 million in cash at year's end.
"From my point of view, it's a questionable acquisition for Invitrogen," said Cheri L. Walker, an analyst with Deutsche Bank in Baltimore. "There may be some product synergies, but it's not clear."
Analyst John L. Sullivan of Stephens Inc. said he likes the strategy of selling software for planning experiments to the microbiologists conducting them. Because Invitrogen doesn't have an extensive, similar product line, he said, few in Maryland are likely to lose their jobs.
The companies declined to comment yesterday on potential job losses, saying they have just formed a committee to look at how to combine the two companies. InforMax CEO Andrew P. Whiteley will stay on as president of InforMax, which will be an Invitrogen subsidiary.
Walker, the Deutsche Bank analyst, said she expects layoffs at InforMax. "My guess is they'll keep a small office" in Maryland, she said.