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Supply Chain Management of Invitrogen Corporation -
January 11th, 2011
Invitrogen Corporation develops, manufactures, and markets more than 10,000 products for customers involved in life sciences research and the commercial manufacture of genetically engineered products. The company's research kits are used to simplify and improve gene cloning, gene expression, and gene analysis. Invitrogen also is involved in cell structure activities, which provides customers with the material to grow cells in the laboratory and to produce pharmaceutical and other materials made by cultured cells.
Although Invitrogen occupied a dominant position in the biotechnology industry at the end of the 1990s, its rise to the industry's elite started fitfully. The company began as a partnership formed in California in 1987, before incorporating in 1989. The company's founders included researchers from the San Diego area, members of the scientific community who worked for local companies such as Syntro Corp., Mycogen Corp., and Scripps Clinic. One member of the founding group rose to the fore, a graduate of the University of California at San Diego's chemistry department named Lyle C. Turner. Turner was attempting to shape Invitrogen into a developer of biomedical research kits used for genetic research. His efforts were hampered early on, however, during the initial, critical phase of the company's development.
In late 1989, founding partner Bill McConnell left the organization to form his own company, called McConnell Research. McConnell's departure forced Turner to use most of Invitrogen's capital to purchase the departing founder's interest in the company. The leveraged buyout left the fledgling company in a precarious position. Without the collateral required to secure a bank loan, Turner searched for another source of financing and found aid from the California Export Finance Office (CEFO). CEFO was a division of the World Trade Commission, an organization chartered to help small and mid-sized California businesses who needed capital to expand into foreign markets. The aid provided by CEFO resolved Invitrogen's financial crisis, enabling the young company to gain its footing and expand internationally. By 1990, the company's distributors were located in eight countries: Canada, the United Kingdom, Germany, Switzerland, Italy, The Netherlands, Sweden, and Japan. Sales, which had totaled $2 million in 1989, were expected to reach $4 million in 1990. The company's payroll, which began with three employees in 1987, had swelled to 42 employees by 1990.
The encouraging growth recorded by Invitrogen as it entered the 1990s provided a stable foundation for the company's progress throughout the decade. As Invitrogen developed, it targeted two main markets, the life sciences research market and the commercial production market. Invitrogen's customers in the life sciences research market included laboratories, medical research centers, government institutions such as the National Institutes of Health, and companies involved in biotechnology, pharmaceutical, energy, chemical, and agricultural activities. Within the life sciences market, Invitrogen positioned itself to address the needs of two disciplines, cellular biochemistry and molecular biology. Cellular biochemistry included the study of genetic functioning and the biochemical composition of cells, yielding information that was used in developmental biology. Molecular biology involved the study of deoxyribonucleic acid (DNA) and ribonucleic acid (RNA)--the genetic information systems of living organisms. Invitrogen's involvement in the commercial production market centered on serving industries engaged in the commercial production of rare or difficult to obtain substances through genetic engineering. A broad collection of industries was involved in such activity, ranging from the biotechnical industry to the food processing and agricultural industries.
Invitrogen's essence was its development, manufacture, and marketing of research tools in kit form that simplified and improved gene cloning, gene expression, and gene analysis techniques. These techniques were used to promote gene-based drug discovery, the success of which was expected to be greatly aided by the Human Genome Project. A multiyear, global effort, the Human Genome Project sought to identify the three billion building blocks of the human genetic code. The project, which was nearing completion at the dawn of the 21st century, was endeavoring to provide the blueprint of humanity. With such a blueprint, scientists were expected to develop new medicines that would be safer and more effective than any pharmaceutical products on the market.
Although Invitrogen marketed scores of products, one stood out among the rest. The company's patented TOPO Cloning technology dramatically accelerated the cloning process, reducing the time it took for one step in the process from 12 hours to five minutes. With the success of its patented cloning technology and the litany of other Invitrogen products, the company was able to record respectable growth throughout the 1990s, moving well beyond the $4 million recorded at the beginning of the decade. By the company's tenth anniversary, it had eclipsed the $50 million-in-sales mark, generating $55.3 million in revenues. Much of Invitrogen's financial growth arrived later in its development, coming via acquisition. Invitrogen's acquisition spree exponentially increased its revenue volume and its product portfolio, engendering a company that within a few short years was fast in pursuit of the $1 billion-in-sales mark.
Acquisitions in the Late 1990s
The launch of Invitrogen's acquisition campaign coincided with its conversion to public ownership. In 1999, the company completed its initial public offering (IPO) of stock, debuting on the NASDAQ. In August 1999, the company completed its first pivotal transaction, merging with San Diego-based NOVEX, a developer of products used for gene and protein analysis, in a $52 million deal. NOVEX developed and manufactured precast electrophoresis gels, which was a technique used to visualize the results of many different types of molecular biology experiments. Next, in December 1999, the company signed a letter of intent to acquire Huntsville, Alabama-based Research Genetics, Inc., a leading supplier of products and services for gene-based drug discovery research. (At roughly the same time, the Human Genome Project celebrated a major breakthrough, when scientists succeeded in mapping the entire genetic pattern of a human chromosome.) In anticipation of Research Genetics' inclusion within the Invitrogen fold, Turner explained the impact of the acquisition in a December 13, 1999 interview with the San Diego Business Journal. "We will now be able to serve customers from the earliest phases of gene identification and target validation," he said, "and continuing through the various stages of cloning, protein expression, and analysis." The acquisition was completed on February 2, 2000, making Research Genetics, a $23 million-in-sales company prior to the acquisition, an Invitrogen subsidiary.
Financial growth, which had occurred at a measured pace throughout much of the 1990s, exploded as Invitrogen exited the decade and entered the 21st century. Acquisitions fueled the increase in the company's revenue volume, lending worldwide recognition to the Carlsbad, California-based company. While the final details of the Research Genetics deal were being hashed out, the company centered its sights on its next target, an Israeli company named Ethrog Biotechnologies Ltd. Ethrog had developed and patented a system for the electrophoretic separation of macromolecules. Invitrogen spent $15.1 million to acquire Ethrog, completing the deal in June 2000. The purchase of Ethrog was followed by an acquisition of astounding scale for a company of Invitrogen's size, its inclusion vaulting Turner's company toward market dominance.
Acquisition of Life Technologies in 2000
On the heels of the $15 million Ethrog acquisition, Invitrogen announced a cash and stock merger valued at $1.9 billion. In July 2000, Invitrogen neared the end of negotiations to acquire Dexter Corporation. Under the terms of the agreement, Dexter was to be dissolved, marking the end of the oldest company listed on the New York Stock Exchange. Dexter traced its roots back to a decade before the American Revolution, to Seth Dexter II, who began operating a sawmill along the Connecticut River in 1767. Dexter's business had evolved far beyond sawmill operations in the intervening years, growing to include the molecular biology operations of Life Technologies, Inc., the object of Invitrogen's desire. Founded in 1983, Life Technologies developed, manufactured, and supplied products used in life sciences research and the commercial manufacture of genetically engineered products. Invitrogen's merger with Life Technologies promised to add to the Carlsbad company's already powerful presence in the gene cloning, expression, and analysis market.
The life sciences community applauded the merger, which was expected to create the largest competitor in the molecular biology reagent business. One analyst, in a July 17, 2000 interview with Chemical Market Reporter, assessed the impact of the business combination, saying, "This will enable Invitrogen to become the leader in supplying researchers in all aspects of molecular biology from basic bench labwork to cutting-edge genomic and protemics." Another analyst, in the same article, added, "We view the proposed transaction as confirmation of Invitrogen's continued emerging role as the industry's leading consolidator of enabling research tools and technologies." The effect of the merger on Invitrogen's stature was immense, adding Life Technologies' $409 million in 1999 sales to create a company with more than $500 million in sales and operating income ranging between $80 million and $100 million annually. Upon completion of the merger, the company's product portfolio would swell to more than 5,500 products, its employee ranks would increase by 2,300 workers, and it would control about 40 percent of the market for kits and products used in gene cloning, gene expression, and gene analysis.
The merger was completed in September 2000. The following month, Invitrogen reorganized its business into two divisions as part of the formidable task of integrating Life Technologies within the company's operations. The molecular biology division was formed to spearhead the company's involvement in gene cloning, gene expression, and gene analysis. Invitrogen's chief operating officer, Lewis Shuster, was tapped to head the new division. At the same time, Invitrogen's cell culture division was formed to focus on the markets for cell culture media and serum production. Stark Thompson, Life Technologies' president and chief executive officer, was selected to lead the cell culture division, which was expected to generate one-third of Invitrogen's annual revenues. The bulk of the company's revenue-generating capabilities fell to the molecular biology division, which was expected to contribute three-quarters of Invitrogen's total sales. In the years ahead, the molecular biology division was expected to record 21 percent annual growth, while the cell culture division was expected to record more modest annual growth of 4 percent.
Invitrogen's sales increased to roughly $630 million in 2001, the first full year of Life Technologies' inclusion within Invitrogen. The total represented a more than sixfold increase over that recorded before the company's IPO sparked its acquisition campaign. In 2002, the process of dealing with the merger was still underway, as the company endeavored to consolidate its operations. In May, Invitrogen announced that it planned to close the Huntsville, Alabama, facility it gained from the Research Genetics acquisition. Production was to be shifted to several of the company's other facilities, a move that was expected to save as much as $10 million annually. The company also was in the process of shuttering both Invitrogen and Life Technologies facilities in The Netherlands as part of a general restructuring of European operations. Additional integration efforts included the elimination of product lines that Invitrogen's management determined were not compatible with the company's strategic goals. The company expected to discontinue product lines representing as much as $55 million in annual sales, most of which were obtained from the merger with Life Technologies.
As Invitrogen celebrated its 15th anniversary and planned for the future, it was expected to continue playing the role of industry consolidator. An indication of its commitment to growth via acquisition occurred in October 2002, when the company announced a $42 million agreement to acquire Informax, which developed software that helped to design, manage, and interpret research kits for gene identification and cloning. Whatever the company's future development engendered, Invitrogen's management could take pride in its achievements during the first 15 years of existence. The company, as it pressed ahead with future plans, enjoyed widespread esteem within the biotechnology industry. In April 2002, a market research firm, BioInformatics LLC, conducted a survey of 1,799 pharmaceutical researchers. The scientists were asked to name the first company they thought of for products and services in drug discovery. The answer supplied by the majority of the pharmaceutical researchers was Invitrogen.
Principal Subsidiaries: Research Genetics, Inc.; Life Technologies, Inc.
Principal Divisions: Molecular Biology; Cell Culture.
Principal Competitors: Affymetrix, Inc.; Applied Biosystems Group; Clontech Laboratories, Inc.
Last edited by netrashetty; January 11th, 2011 at 11:19 AM..