Thoughts on Leica Buying Aperio

There are many angles and points to this news and one post on the matter will not do the implications for us users, consumers, clients, customers, prospects and technophlies justice.  I hope this will the first installment of many as more details emerge about the deal.

Perhaps not too surprising would be that the story on Tuesday mentioning Leica buying Aperio turned out to be only a slightly more popular post than a recent post about a 10-year old with Asperger's giving a personal medal to the Canadian Olympic team, confirming again that everyone likes a story with a happy ending (pending SEC clearance and the deal closing).

In April of last year I wrote a post entitled "Leica and Slidepath got it right" about seeing their SCN400 device along with SlidePath Digital Image Hub viewer and image analysis tools. 

Also of note was the large laboratory presence in staining, instrumentation and clinical microscopy Leica brought to the table with great optics and solid software applications. 

What was missing then as it was until a few days ago was a scanner of their own, the ability to support multiple sites on a common database, a portfolio of FDA 510K cleared image analysis applications that Aperio has in its portfolio and a polished sales and marketing staff.

A perfect fit for both companies.  Leica gains a product that can network, cleared IHC algorithms, a larger sales and marketing force very familiar with clinical, educational and research markets as well as instant major market share purchasing the leader in the space with 1100 systems deployed worldwide.

2 years ago today, Roche announced it was buying BioImagene, the sale came approximately 2 years after Dr. Ajit Singh joined the company as CEO.  When he joined the company, clearly his job was to get the company sold.

Fast forward to November of last year when Aperio appointed healthcare veteran David Schlotterbeck as CEO of Aperio following an appointment on the board and replacing founder Dirk Soeksen as CEO. Clearly his job was to get Aperio sold.  Mission accomplished.  In less than a year.

For the past couple of years and more recently in the past several months it was known that Aperio was having difficulty with cash flow evidenced by the number of times it raised money. Early this year Aperio shifted its focus to selling and promoting its newly branded ePathology solutions and partnered with Dell to create a cloud computing partnership and a global consultation network.  They were making advances in the market and needed capital to execute.  

Customers appeared to be choosing Aperio over Leica on most head-to-head deals based on proven experience and ability to define customer needs and match products and services. Leica did hot have as broad a product offering or enough boots on the ground to compete, particularly in North America. 

Some questions come to mind:

Did Aperio's market prowess impact Leica's ability to win new digital pathology business? Did a lack of IHC image analysis with FDA clearance hurt them considering reads of ER/PR/HER2 appear to be solid use cases for digital pathology? And if you can't beat 'em, buy 'em?

In the end, Leica combines a long history of laboratory products and manufacturing processes to go head-to-head with Roche for a combined solution for staining/scanning/analysis for cancer diagnostics and prognostics and Aperio gets a suitor.

Many questions remain I do not know the answer to:

How much?

Is there/Will there be measurable culture clash in this acquisition?

What will the new combined branding look like i.e. "Leica Biosystems ePathology Solutions Powered by Aperio" much like Roche/Ventana's "Powered by BioImagene" byline?

Here is where I think are now with market segments in the digital pathology space:

1.  IHC image analysis (Roche and Leica) – groups with in-house IHC, independent labs, reference labs, consultation capabilities across a network.

2.  PACS integration (Philips and GE) – large integrated health care delivery systems, hopspital owned groups and perhaps virtual IHC offerings or large consultation/referral combined networks through PACS integration.

3.  Small volume, low cost (DigiPath and Mikroscan) – coverage for remote frozen sections, FNAs, ad hoc intramural/extramural consults (low volume of slides and transactions), in-office laboratories, low cost solution for risk mitigation in low volume circumstances.