Qiagen Buys Ingenuity Systems, Biology Software Player, for $105M

Xconomy San Francisco — 

Ingenuity Systems, a 15-year veteran of the biological software business, showed today that you can make money not just by generating DNA data, but by helping scientists figure out what it means.

Redwood City, CA-based Ingenuity said today it has agreed to be acquired by Netherlands-based Qiagen for $105 million in cash. Ingenuity, a private company, was able to fetch that price after it closed last year with about $20 million in net sales, the companies said in a statement. The deal is expected to start adding to Qiagen’s profits in 2015, the companies said.

Ingenuity was founded in 1998 by Stanford University graduate students, and so it has been through a couple booms and busts in the bioinformatics world. It started gaining momentum in the market the last few years with its Ingenuity Knowledge Base, in which its people manually sort through scientific literature to form models, and computational structures, which help scientists interpret massive amounts of data they can now get from fast and cheap biological research instruments. Essentially, Ingenuity goes through published research to try to connect the dots between certain gene variations and disease.

Few companies have had success selling software to biologists, who often have very specific needs to analyze their own particular experiments and frequently go with open source software, old Excel spreadsheets, or get by with having a postdoc write custom software in spare time.  But the new automated instruments of biology now spit out so much data that many biologists are drowning in information they don’t know what to do with. Ingenuity has sought to take advantage of the trend, pitching to customers that they can get “actionable insights” from their experiments by using its software. Back in November, the company said it saw 250 percent month-over-month growth in the preceding six months, among customers using its Ingenuity Variant Analysis program, which helps researchers find tiny abnormalities in a whole genome.

Qiagen isn’t known for software, but for selling lab supplies that help scientists prepare, isolate, and process DNA, RNA and proteins they get from biological samples. It sells 500 different products, and has 4,000 employees around the world. Qiagen said it intends to keep Ingenuity’s office in Redwood City, along with many members of its senior management team, including CEO Jake Leschly. Ingenuity currently has about 120 employees.

Ingenuity’s investors include Accel Partners, Industry Ventures, QuestMark Partners, Rho Ventures, and Three Arch Partners, according to its website. The company’s most recent financing appears to have been a $15.4 million Series E equity deal in July 2010, according to a filing with the Securities and Exchange Commission.