Inverness Medical Innovations Inc. is cutting ties with Thermo Fisher Scientific Inc., a decision that will likely cost Thermo Fisher $100 million in sales next year.
Thermo Fisher said its Waltham, Mass.-based neighbor Inverness is terminating a contract that had Thermo Fisher working as a third-party seller of its Biosite product lines. The pact is expected to generate about $200 million in revenue for Thermo Fisher this year and should produce another $100 million to the company in 2010 before its July 1 termination, according to a regulatory filing.
Thermo Fisher said a recently inked a deal with another, as-yet-unidentified manufacturer of diagnostic products could generate $40 million in sales next year, helping to offset a portion of the loss caused by Inverness moving on.
Inverness purchased San Diego-based Biosite Diagnostics” in June 2007 for about $71 million, and in the process, also acquired Biosite’s long-standing distribution agreement with Fisher Healthcare. That contract was last extended in July for another two years, but also allowed Inverness to opt out of the deal with 180 day’s notice if Thermo Fisher failed to reach certain sales targets.*
Through its Houston-based Fisher Health Care subsidiary, the company marketed several Inverness-produced products to hospitals and other facilities, including drug screens and tests to find blood clots or signs of congestive heart failure. Fisher officials last month estimated that 2009 sales in its healthcare channel, included as part of the company’s laboratory service segment, would be off by at least $60 million from 2008 levels.
Overall sales at Thermo Fisher were down about 7 percent through the first nine months of 2009, falling to $7.27 billion from $7.81 billion during the same nine months in 2008. But the lab services segment appeared to have largely stabilized in recent months, with third-quarter sales climbing $21 million to $1.63 billion despite a $16 million decline in healthcare-related sales.
Sales of professional diagnostic products at Inverness were up $86.5 million, or 34 percent, to $334 million during the third quarter, boosted roughly equally by increased sales of flu-related tests and revenues from acquired companies.
*Correction, 11/11/2009: Due to a reporter’s oversight, this article incorrectly reported the date, location and some of the terms for Inverness Medical Innovations’ 2007 acquisition of Biosite Diagnostics. Return to the corrected sentence.