As the world's premier measurement company, Agilent (NYSE:A) offers the broadest range of innovative measurement solutions for industry with four major divisions: Chemical Analysis, Life Sciences, Diagnostics and Genomics, and Electronic Measurement.
Agilent's roots date back to 1939, when Bill Hewlett and Dave Packard started the company that helped shape Silicon Valley and the technology industry. The two founders were renowned for their visionary approach to management and for their commitment to making products that contribute to advances in science and technology.
Agilent was spun off from the Hewlett-Packard Company in 1999.
Agilent acquired Dako, a Danish company specializing in diagnostic tests, for $2.2 billion in the first half of 2012.
Personalized medicine calls for personalized diagnostic tests.
Personalized medicine was brought on by the ever increasing sophistication in genomic research. More and more new drugs are helpful only to a select group of patients who have a certain genetic irregularity.
Diagnostic tests help the physician to select the right drugs for the right patients.
More new drugs therefore are approved by the FDA with a companion diagnostic test that is usually selected by the manufacturer of the drug.
Companion diagnostics serve a vital role in big pharma's plans to sell expensive new drugs for specialty markets. The payers could not agree more as the tests confirm that the expensive new med has a good shot at working for a patient.
The Swiss giant Roche is most anxious to integrate its diagnostics and pharma arms, pursuing more than 200 biomarker and companion diagnostics projects internally. CEO Severin Schwan, himself a veteran of the diagnostics unit, has said that in the future more than 60 percent of Roche's pipeline drugs will be paired with companion diagnostics.
Bayer has signed an agreement with Qiagen (NASDAQ:QGEN) for companion diagnostics to use with Bayer's solid tumor treatments, and Bristol-Myers (NYSE:BMY) has set up a partnership with California's Life Technologies (NASDAQ:LIFE), initially in cancer and then branching out into other therapeutic areas. GlaxoSmithKline (NYSE:GSK) has an agreement with Response Genetics (NASDAQ:RGDX) and has expanded its interest by purchasing shares in the company.
The FDA's draft guidance on companion diagnostics in July 2011 further encouraged the trend.
The patients are winners in the process. Companion diagnostics ensure that they get the most effective treatment for their specific type of disease, and reduce the number of ineffective or potentially harmful treatments they may receive. For doctors the tests make it easier to match patient and treatment, especially as the drug choice in certain diseases such as cancer become dizzyingly complex.
Kadcyla, previously known as T-DM1 from Roche (OTCQX:RHHBY), is a recently approved breast cancer treatment that analysts predict will pull in between $2 billion and $5 billion a year.
Now, Dako's two assays, HercepTest and HER2 IQFISH pharmDx, are FDA approved to be sold alongside the targeted drug.
Dako, a division of Agilent, teamed up with Roche's Genentech subsidiary last year to develop the tests and submit them for FDA approval.
It is noteworthy that Roche, with its multibillion-dollar diagnostics division, opted against developing the assays in-house and chose instead to farm it out to Dako.
The Kadcyla pairing is Dako's fourth big pharma partnership in a year, as the company has signed on with Pfizer (NYSE:PFE), Eli Lilly (NYSE:LLY) and Amgen (NASDAQ:AMGN) to develop diagnostics for oncology drugs.
When Agilent acquired Dako in the largest deal ever in the company's history, Dako was already a star in the companion diagnostics world, boasting partnerships with AstraZeneca (NYSE:AZN), Bristol-Myers Squibb and Quintiles.
Dako's HercepTest and HER2 IQFISH pharmDx will serve as diagnostic tools to identify cancer patients with HER2-positive metastatic breast cancer to select patients who may be eligible for Kadcyla treatment.
HercepTest uses immunohistochemistry (NYSE:IHC) analysis for the detection of HER2 protein over-expression in breast cancer.
HER2 IQFISH pharmDX is a direct fluorescence in situ hybridization (FISH) assay. FISH is used to examine gene copy number variation in the tumor.
Because the results of the IHC test can sometimes be ambiguous, many doctors suggest the FISH test for a second opinion. Tumors that are 3+ positive by IHC and those that test positive by FISH are most likely to benefit from HER2-inhibitors like Kadcyla.
Dako has recently introduced its new IQISH technology in the U.S. The technology will reduce the turnaround time for cancer evaluation from two days to three and a half hours. This will ease the waiting time and associated anxiety for the patient and allow physicians to more quickly initiate targeted cancer treatments.
"Every second counts when waiting for test results that will indicate how to treat your cancer most effectively," said Lars Holmkvist, CEO of Dako and senior vice president, Agilent.
The HER2 gene encodes a protein called human epidermal growth factor receptor 2 (HER2), which promotes the growth of cells. In about one of every five breast cancers, the cancer cells make an excess of HER2 due to a HER2 gene mutation.
HER2-positive breast cancers tend to be more aggressive than other types of breast cancer. As they are also less responsive to hormone treatment, medical treatments that specifically target HER2, like Roche's Herceptin and Kadcyla, are often considered.
"The new protocol yields very distinct signals," said Professor Giuseppe Viale, medical director at Istituto Europeo di Oncologia, Milano, Italy. "With a protocol duration of only three and a half hours, it will be much easier to plan laboratory time and handle urgent cases."
IQFISH is also nontoxic, as it replaces a hazardous formamide buffer used in the previous version of the test, with a safer ethylene carbonate, contributing to a healthier work environment in the pathology lab.
HER2 IQFISH pharmDx has been sold in Europe and countries working with CE labeling, since February 2012. It is now available in the U.S.
Biotherapeutics have enormous potential to improve human health. The number of approved protein and antibody therapeutics are increasing every year around the world as they address unmet medical needs.
But discovery and development of biopharmaceuticals is not easy, besides science, tools, equipment, chemicals and tremendous engineering skills are needed to get an idea trough trials and into the clinic.
At every stage in the process, from disease research to testing and manufacturing, Agilent sells the tools and everything else a pharmaceutical firm may need to succeed. Agilent is the invisible miracle worker in the background.
Dako, a new member of the group, is one of the leading global providers of cancer diagnostics tools and it should significantly increase Agilent's recurring revenues.
Diagnostics and Genomics is a growing market with growth rate projected somewhere between 8% and 10% a year over a longer period of time.
Agilent Technologies reported revenues of $1.68 billion for the first fiscal quarter ended Jan. 31, 2013, 3 percent above one year ago. First-quarter net income was $179 million, or $0.51 per share, which compares to last year's first-quarter net income of $230 million, or $0.65 per share.
The Life Sciences division's revenues were up 2 percent over a year ago, with operating margins 15 percent. The Diagnostics and Genomics division grew 145 percent with operating margins 13 percent.
Agilent generated $245 million of cash from operations in the first quarter.
For the fiscal year of 2013, Agilent expects revenue of $6.9 billion to $7.1 billion and earnings of $2.70 to $3.00 per share.
At the end of January the company held cash and cash equivalents of $2.45 billion. The share price's 52-week range was $35.32 - $46.28.
Agilent is a strong company that deserves investor's attention. The addition of Dako, especially with its growing, worldwide diagnostics business, will make it even stronger.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.