11011 North Torrey Pines Road
La Jolla, California 92037
Telephone: (858) 535-5400
Fax: (858) 535-0071
Web site: http://www.stratagene.com
Incorporated: 1984 as Stratagene Holding Corp.
Sales: $69.7 million (2003)
Stock Exchange: NASDAQ
Ticker Symbol: STGN
NAIC: 334516 Analytical Laboratory Instrument Manufacturing; 511210 Software Publishers
Stratagene Corporation is a developer, manufacturer, and marketer of specialized life science research and diagnostic products, including reagents, kits, cell-derived products, nucleic acid purification and analysis products, and gene-sequencing software and analysis tools. Stratagene's life sciences research division supports advances in science by inventing, manufacturing, and distributing products that simplify, accelerate, and improve research. These products are designed for academic, industrial, and government research applications in fields spanning molecular biology, genomics, proteomics, drug discovery, and toxicology. The company's diagnostic division develops and manufactures products for urinalysis as well as advanced automated instrument and reagent systems that use blood samples to test for more than 1,000 different allergies and autoimmune disorders. By combining its expertise in diagnostics and molecular biology, Stratagene Corporation pursues opportunities to expand its range of products to include molecular diagnostics kits and instrumentation.
Founded in 1984, Stratagene became the first company to develop and commercialize a new technology that promised to replace standard monoclonal antibody technology. Anticipated to have a significant effect on the pharmaceutical industry, the new technology enabled researchers to produce monoclonal antibodies inexpensively, in less time, and without the sacrifice of thousands of animals. The technology used recombinant DNA in bacterium E. coli to create collections of millions of distinct monoclonal antibodies, which were screened to uncover monoclonals with the greatest potential for important diagnostic and therapeutic uses. The new bacterial technology allowed researchers to produce pure human antibodies, replacing reliance on foreign animal protein that could elicit a more dangerous immune response.
The technology was invented by Dr. Richard A. Lerner of the Research Institute at Scripps Clinic and Dr. Joseph Sorge, founder of Stratagene. Sorge earned his B.S. degree in biology and chemistry at the Massachusetts Institute of Technology and an M.D. degree at Harvard Medical School. He received post-doctoral training in molecular biology at Cold-Spring Harbor Laboratories, was an assistant member at the Scripps Research Institute, and was an adjunct member of Scripps Clinic and Research Foundation. As a result of the Lerner and Sorge breakthrough, Stratagene formed a subsidiary in 1989 called Stratacyte Corporation to commercialize, license, and pursue applications for the new technology. Stratacyte intended to apply the technology to the development of therapeutic agents for cancer, autoimmune and infectious diseases, the refinement of diagnostic tests, and the development of enzymes for medical and industrial processes.
In March 1992, the company settled litigation with the biotechnology firm Ixsys, Inc. and its vice-president and chief scientific officer, Dr. William D. Huse, a former scientist at Stratagene. The litigation involved ownership rights over the newly developed method of creating recombinatorial libraries of monoclonal anti-bodies, the so-called "magic bullet" of the immune system. Under the terms of the settlement, the parties agreed that the two companies, together with the Scripps Research Clinic, could freely pursue this technology on their own. In addition, Stratagene granted to Ixsys a non-exclusive license under the patents governing the recombinant antibody technology. In return, Ixsys agreed to pay Stratagene royalties on any revenues received under the license.
In May 1993, Stratagene and GenPharm International Inc. of Mountain View, California, announced the development of a new transgenic mouse for mutagenesis and tumorigenesis research. The "new" transgenic mouse provided flexibility and new opportunities for study in the fields of toxicology, molecular biology, and medicine, enabling scientists for the first time to discern the relationship between DNA frequency and the development of tumors within the same animal model. It was also another achievement for a worldwide biotechnology company that had developed over 1,000 gene characterization and transfer products and instruments for laboratory research in the fields of molecular biology, biochemistry, cell biology, immunology, and biomedical science. This development was one of many that represented a fundamental shift away from conventional studies to the use of transgenic animals as models to investigate disease processes, develop new therapeutic drugs, and screen toxic and mutagenic substances. The use of animal models carried the enormous benefit of being low risk in a market that was anticipated to grow well into the next century.
In May 1995, Stratagene and the Perkin-Elmer Corporation signed an agreement authorizing Stratagene's RoboCycler temperature cyclers to be used in the patented polymerase chain reaction (PCR) process. Under the agreement, Stratagene became Perkin-Elmer's first U.S. supplier of thermal cyclers, which were used in the PCR process with authorized reagents (enzymes), including Stratagene's Taq, TaqPlus, and Pfu DNA polymerases. In June 1998, Stratagene also entered into an exclusive distribution agreement with Lexicon Genetics Incorporated. The agreement provided that Stratagene distribute Lexicon's 50-plus gene targeting products in the Americas, Europe, and Asia.
In the late 1990s, Stratagene initiated major organizational changes to better coordinate research and development, improve and expand manufacturing capabilities, and more efficiently allocate sales and marketing resources. Beginning in 1997, the company significantly increased recruitment of experienced sales representatives for its domestic and overseas sales territories. Stratagene also reorganized its European operations by establishing a centralized office in the Netherlands and expanding its direct sales efforts. In 1998, the company began moving its storage and shipping operations, and most of its production and customer service operations from La Jolla, California, to a new facility in Austin, Texas. The move to Austin, completed in 1999, was made because of the quality of the labor pool in the area. Stratagene also significantly increased funding in research and development. This was done primarily to develop new capabilities and products in the areas of nucleic acid purification and analysis and genomics and bioinformatics.
In 1997, Stratagene began pursuing the discovery and cataloging of unique single nucleotide polymorphisms. Because this field represented a departure from its core business, Stratagene formed a new company, Phenogenex, to pursue research and development opportunities in this area. When it became clear that other firms with greater resources were entering the field, however, Stratagene discontinued the project in 1999.
In June 1999, Cambridge Antibody Technology (CAT) announced that it signed a settlement agreement with Stratagene and the Scripps Research Institute concerning interference with patent applications in the United States owned by the Medical Research Council (MRC). The parties agreed the patent applications would be co-owned by the MRC, Scripps, and Stratagene. In addition, the parties agreed that CAT would be the sole exploiter of all the parties' intellectual property rights under the various patent applications, subject to certain rights reserved by the MRC, Scripps, and Stratagene and their pre-existing licensees. The settlement also provided that CAT pay $1.25 million to Stratagene and Scripps.
In July 2000, Stratagene signed a strategic licensing agreement for worldwide exclusive rights to sell Avigen, Inc.'s kits for making recombinant adeno-associated virus (AVV) vectors for research purposes. As a global leader in the discovering, engineering, and supplying of biotechnology research regeants and with a direct sales force in the United States and a network of independent distributors worldwide, Stratagene was well positioned to market Avigen's technology. In November 2000, Stratagene also considered going public but abruptly withdrew due to pronounced declines in the stock market. Stratagene became a casualty of the nation's ailing IPO market that only months earlier had been flooded with over priced initial public offerings, some of dubious value. With the beginnings of the stock market decline in 2000, technology investors fled pricey internet stocks, some into biotechs, causing an enormous run up in their share prices. In 2000, biotechnology companies raised approximately $36 billion compared to $7.7 billion in 1999. In addition, between October 1999 and September 2000, 55 biotech companies raised $5.5 billion alone through IPOs. By late fall of 2000, however, the IPO market was vanishing along with the fortunes of the stock market.
Stratagene is a worldwide leader in developing innovative products and technologies for life science research. We support advances in science by inventing, manufacturing, and marketing products that simplify, accelerate, and improve research. Since 1984, our products have been used throughout the academic, industrial, and government research sectors in fields spanning molecular biology, genomics, proteomics, drug discovery and toxicology.
Nonetheless, by 2000 the company was marketing its products in 45 countries worldwide. Stratagene sold its products directly to customers in the United States, Canada, Germany, France, the United Kingdom, and 14 other countries. In addition, the company used specialized distributors in more than 25 other countries. Stratagene's customers included most of the major pharmaceutical and biotechnology companies, such as Merck, Pfizer, Amgen, and Genentech. The company also served leading academic research laboratories, including Harvard University, Stanford University, and the University of California system. In addition, Stratagene continued to develop new products, including its Mx4000 multiplex quantitative PCR instrument system, which was introduced in February 2001. The Mx4000 system was designed to create a new standard for genotyping and gene expression analysis in the rapidly developing field of genomics.
In June 2000, Stratagene was sued in U.S. District Court by Invitrogen Corporation, which alleged infringement on one of its patent claims concerning R Nase H minus reverse transcriptase enzymes. Invitrogen's motion for a preliminary motion was denied, and the case was stayed pending trial in a related action involving Invitrogen and a third party concerning the same patents. Invitrogen appealed the denial of an injunction and the stay to the Federal Circuit Court of Appeals. In February 2002, the Court of Appeals upheld the district court's decision. In March 2001, Invitrogen also sued Stratagene for patent infringement related to the making, using, and selling competent e.coli cell products, but the courts found in favor of Stratagene.
In July 2003, Stratagene and Hycor Biomedical Inc. of Garden Grove, California, a developer, manufacturer, and marketer of clinical diagnostic instrument systems and reagents, announced the signing of a definitive merger agreement. With the acquisition of Hycor, concluded in June 2004, the company offered diagnostic products and life sciences research tool products to the international academic, pharmaceutical, clinical, and government laboratory markets. The agreement provided for Hycor to operate as a wholly owned subsidiary of the new company. In the stock-for-stock transaction, shareholders of Hycor received 0.6158 of a share of Stratagene Corp. for each share of Hycor Biomedical. By acquiring the publicly traded Hycor, the company became a public company with 21.9 million common shares outstanding and changed its name to Stratagene Corporation in September 2004.
Upon closing the Hycor deal, Stratagene acquired all the assets of BioCrest Holding (BCH), a limited liability company that was treated as a partnership for income tax purposes. In exchange, Stratagene forgave all of the outstanding intercompany indebtedness owed by BCH and its subsidiaries to Stratagene of approximately $5.5 million. As part of the acquisition, Stratagene acquired BCH's interests in its subsidiaries, which included Phenogenex, LLC, Iobion Informatics, LLC, and an investment in a joint venture consisting of a 49 percent interest in a limited partnership that operated a research lab. As a result of the acquisition, Stratagene owned 100 percent of Phengenex and about 78 percent of Iobion
In September and November 2004, Stratagene was sued by Third Wave Technologies, Inc. and Applera Corporation in separate actions. Third Wave's suit claimed patent infringement concerning its invasive cleavage structure chemistry used to analyze nucleic acid, the foundation of genetic materials and infectious agents. As a result, Third Wave sought a court order that would block the sale of certain Stratagene products. Applera's suit alleged patent infringement covering instruments for the performance of real-time PCR, including Stratagene's Mx4000 and Mc3000P instruments and certain related reagents. Aside from the specifics of each case, the lawsuits represented a highly competitive environment in which rapid technological change and frequent new product introductions were typical. Stratagene looked to its future knowing that sustaining its success would depend on continuous, timely development of new products that addressed evolving markets in the life sciences field. Many of Stratagene's competitors possessed greater financial, operational, and sales and marketing resources as well as more research and development experience. Nonetheless, Stratagene had a record of innovation and seemed well positioned to capitalize on future opportunities.
Hycor Biomedical Inc.
Applied Biosystems Broup; Bio-Rad Laboratories Inc.; Qiagen N.V.
Crabtree, Penni, "Tepid Market Sours Elitra; S.D. Biotech Files to Cancel $86 Million IPO," San Diego Union-Tribune , November 22, 2000.
"Dr. Huse and Ixsys Win Appeal Dismissing Stratagene's Suit against Them," PR Newswire , May 22, 1991.
"Gertzen, Jason, "Madison, Wis.-based Biotechnology Firm Files Suit Against California Company," Milwaukee Journal Sentinel , September 16, 2004.
"Hycor and Stratagene Announce Definitive Merger Agreement," Business Wire , July 24, 2003.
"Hycor and Stratagene Complete Merger," Business Wire , June 2, 2004.
"Invitrogen Patent Limited by Court; Stratagene Files Counterclaims," Business Wire , September 24, 2001
"Lexicon Signs Exclusive Distribution Agreements with Stratagene and Takara Shuzo Co., Ltd. for Gene Targeting Reagents, Business Wire , June 11, 1998.
"Perkin-Elmer Authorizes Use of Stratagene RoboCycler Temperature Cyclers in PCR Process," Business Wire , May 2, 1995.
Somers, Terri, "La Jolla, Calif-Based Firm Acquires Hycor Biomedical, Goes Public," San Diego Union-Tribune , June 3, 2004.
——, "Merger in Works for Stratagene, Hycor Biomedical," San Diego Union-Tribune , July 26, 2003.
"Stratacyte Succeed in Producing Human Anti-Body Fragments in Bacteria," Business Wire, October 14, 1990.
"Stratagene and Ixsys Announce Settlement of Technology Litigation," PR News , March 24, 1992.
"Stratagene Announces Invitrogen's Reverse Transcriptase Patent Severely Limited," Business Wire , October 23, 2001.
"Stratagene Announces Launch of Mx4000 Multiplex Quantitative PCR System," PR Newswire , February 21, 2001
"Stratagene Spinoff to Commercialize Third-Generation Monoclonal Anti-Bodies," Business Wire , December 8, 1989.
"Texas Court Holds That Stratagene's Competent Cell Products Do Not Infringe Invitrogen Patent," Business Wire , November 8, 2001.
"Third Wave Files Patent Infringement Suit against Stratagene," PR Newswire , September 15, 2004.
—Bruce P. Montgomery