Extra! Extra! Read all About it! – LIMS industry consolidates
Extra! Extra! Read all About it! – LIMS industry consolidates
by: Ephraim Gadsby – contributing author
Innaphase has been acquired by Thermo. What’s next?
Not to long ago, Innaphase acquired the LIMS division of Beckman; Perkin Elmer acquired Labworks and RTS acquired a small but popular LIMS company known as Telecation which has since changed hands back to a small software company.
It appears that the LIMS industry is in a constant state of musical chairs. With the acquisition of Innaphase, Thermo is serious about not only maintaining its position as the largest LIMS provider but a very serious player in the pharmaceutical informatics market, leaving even respected providers like Labware as a very distant second. Keep in mind that second is not so bad if you are profitable.
Does this acquisition mean the beginning of an industry wide consolidation trend??? This question was posed a number of years ago, but obviously, the attempts to consolidate were premature. You need look no further than this web site to see all of the LIMS and laboratory informatics companies that are in the market place. In the LIMS category alone, there are 134 companies. Labvantage made many acquisitions a few years ago. We all know how successful that process was. Much of the business gained by those 134 LIMS companies came from replacement of Labvantage systems in the government sector. I guess this is only natural considering that Labvantage has focused its attentions to the highly lucrative Life Sciences and pharmaceutical markets and left the government sectors to other, more specialized LIMS providers.
What’s wrong with this picture?
How is it that the so called LIMS market is $200 – $300 million per year and yet there are 134 LIMS companies? Well, I don’t have an answer for this but something is wrong. If this is true, then these companies are living on peanuts. I suspect that the market is larger than what is being accounted for. As you can see from the Thermo press release, they were willing to pay $65 million in cash for a company that has revenues of $26 million. If Innaphase were so fortunate as to be making money at the rate of 25%, that would give an annual income of $6.5 million. If Thermo is lucky, they will get their money back in 10 years. Let’s all hope this investment works out better than that. I know that Thermo will say that this acquisition was “Strategic”. That may be true but history has shown that “Strategic” has been a Harvard MBA graduates euphemism for “I paid too much for that muffler”.
So What’s Next?
Your guess is as good as mine… However, I suspect that the press release from Thermo is going to agitate their competitors. The Thermo competition is now in a very distant second place position in the pharma market. If they are going to compete profitably and effectively with Thermo, they will have to acquire or be acquired. The pharmaceutical industry cannot afford to be adventurous with such highly critical and regulated areas like LIMS and choosing Thermo will now be an easy and safe choice. Thermo will have the features, functions, people and references to get most any pharma customer that they want. The competition will not be able to say the same without consolidating with other companies. The only other choice is to compete on price and that will not play significantly in the high margin pharma business.
Let’s hear what you think…
You know… this LIMSfinder site purports to be an on-line, interactive LIMS magazine. Let’s hear your voice on this subject. All you need to do is login, if you have an account and you can post a comment about this article. If you don’t have an account, then register for one, it only takes a minute and it is free. I have given my opinion, now let’s hear yours.
Thanks,
Ephraim Gadsby, Bertie’s alter ego
