Why Celera’s Buyout Makes Sense (CRA, DGX, HGSI, AFFX, GHDX, GNOM, ROSG, HLCS)
If you would have said ten years ago that Celera Corporation (NASDAQ: CRA) would be acquired by Quest Diagnostics Inc. (NYSE: DGX), most investors would have said that you were off your rocker. Celera was a leader in genomics at the time and it had a huge mountain of cash that made up much of its value.
Celera’s Berkeley HeartLab unit has a proprietary lipid testing technology, esoteric testing capability, advanced therapy guidelines and patient support services. The company is also focused on personalized disease management where it is “developing tests and services that identify a person’s inherent risk for a disease and may also characterize its biological basis, aiding selection among treatment options and monitoring treatment effectiveness.”
The value of the buyout is $657 million based upon an $8.00 buyout price. Interestingly enough, the buyout cost is actually much lower because Celera has roughly $327 million in cash and short-term securities on its balance sheet. Quest expects only a 1% revenue boost in 2011 revenues.
Celera was deemed by some to have some of the next-generation testing that goes back to when investors were all gung-ho on genomics. Think testing for personalized medicine. That day is not yet here but it is getting closer. The promise goes back to the late-1990s and early 2000s.
What Quest is getting is a deal on the cheap that could offer huge upside when you consider that Quest is much more dominant and prominent than Celera. Quest was almost 20-times its size in market cap and somewhere around 50-times its size in revenues.
We would perhaps highlight several other genomic stocks out there based in part on this deal. Human Genome Sciences, Inc. (NASDAQ: HGSI) is now in the drug phase and we all know that it has risen from the ashes back to the genomics days.
Affymetrix, Inc. (NASDAQ: AFFX) is in genetic analysis in the life sciences and clinical healthcare markets and it has been considered a buyout target in the past.
Genomic Health Inc. (NASDAQ: GHDX) has breast cancer testing and is worth $675 million in its market capitalization.
Complete Genomics, Inc. (NASDAQ: GNOM) develops and commercializes a DNA sequencing platform for human genome sequencing and analysis and it worth nearly $190 million in market cap.
Rosetta Genomics Ltd. (NASDAQ: ROSG) develops microRNA-based diagnostic and in Israel, but its market cap is so small that most may forget that it is even there.
HELICOS BIOSCIENCES (HLCS) is pink-sheet listed now, but it is the one that was aiming for the $1,000 genome map.
JON C. OGG
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