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The ultimate test of a relationship
August 2011
by Lloyd Dunlap  |  Email the author


TORONTO—In a move that takes square aim at the diagnostic tests market, SQI Diagnostics Inc. has agreed to acquire all of the shares of Scienion AG, a German-based microarray manufacturing equipment and microarray print and development services company.  
Scienion, located in Dortmund and Berlin, develops and commercializes microarray printing and production systems and provides contract microarray print and development services for the life sciences industry. An early objective of the new combined entity will be to "accelerate the commercialization of our combined pipeline of custom microarray diagnostic products through the use of Scienion's microarray print expertise, arrayer equipment and experience with complete print solutions with SQI's automated microarray platforms," according to a press release released by the companies.  
In addition, Scienion's equipment sales will benefit from SQI's strength in North America, while Scienion's sales and engineering support will be used to market SQI's suite of diagnostic products and services in Europe. SQI will pay $15.6 million in cash for Scienion and issue 735,294 common shares "in the capital of SQI." The closing of the transaction is subject to a number of customary closing conditions and regulatory approvals, and is subject to financing.
In its preliminary short-form prospectus, SQI states that its SQiDworks is the "only FDA-cleared, fully-automated, microarray system and multiplexing solution in our target markets, which can perform qualitative or quantitative testing for multiple biomarkers simultaneously." The company adds that it is also developing a fully automated benchtop diagnostic platform and a small, semi-automated system.  
SQI plans to continue to develop and seek regulatory approval for additional diagnostic tests, based on the assumption that expanding its test menu will drive adoption of its platform and products. The addition of Scienion's "industry-leading print technologies" will enable the new entity to "become a leader in sales of end-to-end microarray-based diagnostic systems, microarray printing and assay development services," the company states.  
At stake is a global immunoassay diagnostic test market that SQI estimates will reach $10.3 billion in 2012. Of that, SQI is strategically focusing on a "directly addressable market of approximately $4.5 billion, which includes immunological tests for autoimmune disease, infectious disease and allergenecity." These markets are estimated to be $1.5 billion, $2.4 billion and $0.6 billion, respectively. SQI is targeting these markets because multiple biomarkers are measured to aid in the diagnosis and therapeutic monitoring of these diseases, these markets are comprised of large, high-volume facilities which are typically underserved by fully automated, high-throughput, multiplexed systems, and the tests usually qualify for reimbursement by public and private insurers in the United States, Canada and the European Union.  
First up will be the autoimmune segment, which SQI sees as the low hanging fruit for a number of reasons. The company notes that only 10 disease states command most of the blood testing revenues for the entire autoimmune test segment and that the most common tests for autoimmune diseases currently evaluate about 70 biomarkers or seven per disease. In addition, these tests are generally run at high volumes at larger test facilities and in batches—not run on a one-off basis.  
Finally, the company notes that "each of the autoimmune diagnostic tests we are developing has predicate technologies with FDA clearance on older, single biomarker, manual titer plate technology that we intend to replace, and regulatory clearance for the majority of autoimmune assays is through the FDA 510(k) process, which is well established."
Code: E081115



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