The other day The Lab Man ran across this headline in C&E News: "Duarte & Palo Alto, CA - Calando Pharmaceuticals Inc., a majority-owned subsidiary of Arrowhead Research Corporation, has selected Agilent Technologies to manufacture the active siRNA component in its lead RNAi product, CALAA01". What's this, I thought? Agilent isn't in the business of manufacturing pharmaceuticals or pharmaceutical components - they make instruments and lab devices. Well, I was wrong. Upon digging deeper, I discovered that Aglient purchased Synpro, a contract-manufacturing supplier of active pharmaceutical ingredients, in April of 2006. The initial reason was to supply oligonucleotides for Agilent's array business, but as this headline indicates, Agilent has broader aims to become a part of the pharmaceutical supply chain.

Shortly afterwards, I saw another headline: "HOPKINTON, Mass., April 9 /PRNewswire-FirstCall/ -- Caliper LifeSciences, Inc. (Nasdaq: CALP) today announced an agreement with Pfizer Inc.(NYSE: PFE) under the terms of which Caliper's Discovery Alliances Services division will conduct certain in vivo profiling experiments for Pfizer. These will enable Pfizer to explore new indications for some compounds in its research and development pipeline". Again, my first thought was that Caliper is an instrument/device company, not one that is involved in the profiling of potential new drug compounds. It turns out that in January of this year Caliper rolled out their new services organization created from the integration of NovaScreen Biosciences and Xenogen Biosciences, so yes - they are now prepared to take an active service role in a niche of the drug discovery process.

The more The Lab Man looked, the more similar news he found: "Thermo Electron to Present at the 2006 UBS Global Life Sciences Conference". Biotech or pharma companies usually do such presentations! Well, through its spate of acquisitions, Thermo Fisher now owns Dharmacon, a provider of RNA oligonucleotides, small interfering RNA (siRNA) and related RNA-interference (RNAi) products and technologies. They own Maybridge, which designs and produces innovative chemical Building Blocks and Screening Compounds, and provides Medicinal Chemistry for the drug discovery industry. And they own HyClone, a manufacturer of cell culture media, sera and bioprocess container systems.

Corporate goliath General Electric has formed GE Healthcare Life Sciences, headquartered in Uppsala, Sweden. This division produces technology for drug discovery, biopharmaceutical manufacturing and cellular technologies. It also makes systems and equipment for the purification of biopharmaceuticals. Some time ago, GE purchased Amersham Biosciences. At the time, there was speculation that GE would not stay in the services-to-drug discovery business, but they have quietly continued to grow that niche, most recently purchasing Wave Biotech LLC including its subsidiary Wave Europe Pvt. Ltd., to expand it's offering of products and services for the manufacture of biopharmaceuticals such as antibodies and vaccines.

And let us not ignore the Microsoft Digital Pharma Initiative! During a recent strategic update call with Wall Street analysts and shareholders, Microsoft CEO Steve Ballmer hinted, yet again, about Microsoft's plans. When itemizing future growth opportunities for Microsoft, Ballmer said: "Last but certainly not least is the efforts we're making in healthcare. Some of you probably don't even have it on your radar screen, but I'm kind of jazzed up about what we're doing there".

So, what is going on here? It would seem that many of the long-time providers of laboratory automation and technology are in various ways entering more directly into the life sciences product and services stream. Business must grow to thrive and survive, so is the life sciences niche that opportunity? Is a likely outcome/goal for some such companies to eventually be acquired by their pharma/biotech collaborators, as was the case with Merck and Rosetta Inpharmatics, or Vertex and Aurora Biosciences? Or will technology companies morph into services companies and then into drug discovery companies, as in the case of Amphora? To seek enlightenment, The Lab Man talked with Kevin Hrusovsky, President and CEO of Caliper Life Sciences, about this trend. Kevin confirmed that The Lab Man is not hallucinating, there is indeed a trend, but he feels that the motivation and goals of companies varies.

In the case of his company, Kevin says they have no intention of becoming a budding pharma company, or even letting their services business become the majority of their business. The services business enhances their technology business by serving a proving ground and demonstration platform for their technology, and provides a way for customers to get to know and become comfortable with that technology before buying. This effort can also spawn new technology ideas and help refine existing technologies since the services lab is essentially using the technology as a customer would. All of this helps give the company an all-important method of differentiating itself among the competition, and the services program generates revenue as well. Not a bad deal.

Kevin indicates that he does know of some technology companies that felt the way to maximize shareholder value was to actually migrate into being a pharmaceutical discovery company. The disadvantage of that approach, he points out, is that their pharma customer companies may begin to see such a "transforming" company as potential competition and become wary of teaching such a company too much during a collaboration. He feels that if a technology company takes such a path, they really have to be looking at that direction as an exit strategy, because the valuation of the company becomes dependent (and usually increases) on the promise of the organizations long-term drug discovery future, rather than on the short-term cash generating technology business. There is no going back once those expectations are set.

Even for companies whose business goal is to remain a technology company, Kevin feels that the level of partnering between such companies and their customers is higher than ever before, and will continue to grow. It's a great way for technology providers to fully understand their customer's needs. The Lab Man would also point out that such partnering arrangements often tend to mitigate the risk to both technology provider and technology buyer.

On a completely different subject, Kevin has high hopes that Ohio State will overcome a tendency to settle for #2 in the 2007-2008 sports season. The Lab Man, being a Big Ten alum, wishes Ohio State great success with the exception of contests with the Boilermakers of Purdue!

Domo Arigato, Mr. Roboto!