Roche Nimblegen easing out of microarray business

Those pesky sleuthing kids over at Wisconsin State Journal broke the story faster than the word of mouth relay. Good thing I didn’t look at the news before taking my prelim… For those who haven’t heard me plot out my project, they basically played the Montee Ball role in my data generation plans. Back to the drawing board.

Beyond personally inconveniencing me, I think this event might give us reason to think about our current model of technology diffusion and monetization. For a long time, I wondered why anyone would actually buy a stock. Obviously, there’s the “buy low, sell high” approach, where you buy a stock because you expect someone will later pay you even more to buy it from you, who in turn hope to sell for a higher price, etc. Sound familiar? It turns out there is actually a reason, as dividends and stock buybacks provide a way for companies flush with cash to make it rain for their investors. But that mostly makes sense for large, mature companies. What about smaller, newer companies? There’s always the hope that, despite its absolute lack of revenue, your company will be acquired by someone larger, thus making the founders and stock-compensated employees madly wealthy. In technology, the American dream seems to involve publicly-funded basic research, a startup cashing in on that research, a few years to demonstrate marketability, and a buy-out by a larger player with the resources to scale up the industrial side of the technology. The problem is that while profitability is enough of a reason for a small company to keep going, for larger, public companies the objective is to consistently beat expectations. So you get situations like companies spinning off a division with $2 billion in profits per year because the profit margin isn’t high enough. Now, this may be personal bias, but I think Nimblegen has Heisman-worthy very innovative manufacturing technology, which looks like it’s going to be pulled off of the market due to the decision made during global restructuring of a $135 billion company.

My question now is what happens with the technology? Is it something that will sit around until the key patents expire and anyone still making microarrays can move in? Will Roche decide to license the technology to their former competitors? In a broader sense, does the breakthrough-startup-takeover model mean that good technologies could be pulled off of the table if they aren’t profitable enough for whoever buys them?

David Duncan