The Tecan Group has acquired NuGEN Technologies for $54.5 million, in a deal designed to expand the buyer’s dedicated solutions offerings into next-generation sequencing (NGS) reagents.
Based in San Carlos, CA, NuGEN is a provider of NGS kits and genomic sample preparation solutions for customers in life science research and applied markets.
Tecan reasons that as a part of its Life Sciences Business, NuGEN will benefit from Tecan’s global presence, customer base and competitive position through its offerings of automation platforms optimized for NGS sample preparation—while Tecan expects to benefit from increased overall recurring revenues.
“With further dedicated solution offerings in one of the fastest growing market segments in life sciences, we will be able to enhance the above market average growth of Tecan in years to come,” Tecan CEO David Martyr, Ph.D., said in a statement. “NuGEN will become our center of excellence for NGS reagents and we are delighted to welcome the new colleagues into Tecan.”
Established in 2000, NuGEN provides genomic sample prep for NGS and microarrays for a broad range of sample types including RNA and DNA from whole tissues, preserved and prepared tissue samples (FFPE, Formalin-Fixed Paraffin-Embedded), single cells and liquid biopsies such as from blood samples.
In February, NuGEN launched its Celero™ DNA-Seq with NuQuant library system, designed to provide researchers with a simplified library preparation workflow with integrated quantification for DNA sequencing.
Tecan plans to leverage its automation expertise and competitive position within the market for genomic instruments to offer complete solutions for NGS library preparation—consisting of dedicated workstations, accompanying consumables and differentiated NGS reagents.
Tecan added that it sees an opportunity to expand NuGEN through an increased presence in North America, Europe as well as expanding sales capabilities in China.
NuGEN’s acquisition price of $54.5 million represents a valuation of less than four times expected fiscal year 2018 sales of NuGEN.
However, Tecan has committed to tripling NuGEN’s sales over the next five years—to more than CHF 75 million ($75.4 million) by 2023—by carrying out a broad genomics-focused strategy that includes leveraging its global presence and expanding sales capabilities in key regions, as well as launching new dedicated workstations now under development.
“NuGEN's innovative NGS kits and genomic sample preparation solutions are an excellent complement to our industry-leading automated workstations for genomic applications,” NuGEN CEO Nitin Sood added.
Tecan expects the transaction to add to its earnings per share (EPS) before transaction-related amortization by 2022—but acknowledged that the acquisition was “modestly loss making” at present.
The deal is set to close “within the coming weeks,” Tecan said. Exactly when that occurs will determine the impact of the NuGEN acquisition on Tecan's 2018 financial results, the company said in announcing half-year results on August 16.
While the acquisition could boost Tecan’s sales by “a low single-digit million Swiss franc amount,” Tecan said: “Initial integration costs in a low single-digit million Swiss franc amount together with reduced margins associated with the acquisition are expected to lower the communicated Group EBITDA margin outlook by around 50 to 75 basis points.”
Tecan reaffirmed its investor guidance for 2018, which projects organic sales growth “in the mid-single-digit percentage range in local currencies,” as well as earnings before interest, taxes, depreciation, and amortization (EBITDA) margin that will continue to exceed 19% of sales in 2018. Tecan finished the first half of 2018 with sales of CHF 273.5 million ($275.1 million), up 8.4% from CHF252.2 million ($253.7 million) a year earlier.
Tecan’s Life Sciences Business accounts for more than half (51.4%) of total sales, with CHF 140.5 million ($141.3 million) during the first six months of this year, up 1.7% from CHF138.2 million (about $139 million) during January-June 2017.