Biotech Holiday Shopping: Solexa, Tanox and KOS Bought Out

by: H.S. Ayoub

Shares of gene analysis systems maker Solexa Inc (SLXA) jumped 30% on Monday as Illumina Inc (NASDAQ:ILMN) offered $600 million in stock for stock swap merger agreement.

At the core of the buy-out is Solexa's 1G Genome Analyzer, the company next generation gene sequencing product. Illumina will become a provider of both analog and digital genetic expression products and services.

Solexa had almost $60 million in cash and equivalents, while having a marginal debt level. But the little company had only $4 million in revenue and lost more than $29 million during fiscal 2005. Investors took note of the week sales as Illumina shares dropped more than 11% on the day.

It would be interesting to see how Illumina will integrate Solexa's products into its commercial lineup, and how long it would take to have positive effect on its bottom line.

This recent merger agreement is just the latest of the many buy-outs of little biotechnology companies. Friday, biotech giant Genentech (Private:DNA) announced that it had offered over $900 million to acquire Tanox inc (TNOX). Last Monday Abbott Laboratories (NYSE:ABT) offered $3.7 billion to buy KOS Pharmaceuticals (KOSP).

It is expected that a few more biotech buy-outs will take place before December, as little companies look for various ways of generating funding before the dead months of December and January.

SLXA 1-yr chart: