With its $13.6 billion acquisition of Life Technologies Corp. (LIFE), Thermo Fisher Scientific Inc. (TMO) is expected to enter the competitive but growing market for genetic sequencing--the one area of laboratory equipment it has shied away from while growing into the world's largest maker of life sciences tools.

The addition makes strategic sense for Thermo Fisher as it looks to broaden its array of product offerings, giving the company greater purchasing power and scale to take market share from competitors. As sequencing technology becomes cheaper and more accurate, it will increasingly become used to diagnose and treat diseases like cancer, and could eventually grow to become a $3.6 billion market in the U.S., according to Jonathan Groberg, an analyst at Macquarie Capital Inc.

"We're very enthusiastic about the potential of Life Technologies' next-generation sequencing platform," said Thermo Fisher Chief Executive Marc Casper during a conference call with analysts. "We like the prospects of the next-gen[eration] sequencing business and understand that it's a No. 2 player, but that it has been gaining share recently and has a very exciting technology pipeline."

But the new business also carries risks, including the need for continual and large investments in research and development to keep up with market leader Illumina Inc. (ILMN). In addition, the dream of personalized medicine fueled by genetic analysis is still years away, many observers said, adding uncertainty for investors.

"Since the technology is still in its early stages, it's very hard to predict who will win among the existing players," said Alex Morozov, analyst with Morningstar Inc. (MORN).

Thermo Fisher's Mr. Casper, who became chief executive in 2009, is known for his focus on spending discipline and operational efficiency. Life's next-generation sequencing business, by contrast, is estimated to comprise a third of the company's research and development budget but less than 10% of sales and is not yet profitable.

Life's sequencing technology, which it acquired through the 2010 acquisition of Ion Torrent Systems Inc., has had setbacks in meeting expectations for accuracy and cost, but it is also considered among the most promising in so-called next-generation sequencing. With its computer chip technology, the company has said its machines will benefit from Moore's law, the theory that the processing power of semiconductors doubles roughly every two years.

Meanwhile, sequencing also could be a hedge against threats to Thermo Fisher's more traditional diagnostics and biomarkers business, which use biochemical analyses of substances like urine to test for susceptibility to disease and responsiveness to different drugs. Advocates of sequencing believe that genetic testing will eventually supplant many of the tests that Thermo now makes.

"Thermo has a lot of technologies today in diagnostics that over the years could end up being cannibalized by sequencing," Macquarie's Mr. Groberg said. "So it's always better to have a product yourself than to have someone else take that share from you."

In an interview, Thermo Fisher's Karen Kirkwood, vice president of communications, said the company hoped to add sequencing to its clinical services division. The division, which assists in early-stage studies of new drugs for pharmaceutical and biotechnology companies, comprises roughly a quarter of the company's $12.5 billion in annual revenue.

Genetic analysis could help make drug development more effective and efficient by pinpointing which patients have genetic mutations that are likely to respond to experimental drugs. The tests, known as companion diagnostics, also could be used once the drugs go to market.

"We think it could really have a profound impact on healthcare in the long-term, in areas like companion diagnostics' and others, Ms. Kirkwood said. "Those are future ideas, but next-generation sequencing is a huge step for us to go in that direction."

Just how quickly sequencing will deliver "personalized medicine" is still unclear. Many physicians and analysts predict it could be as many as five to 15 years before the tools are used effectively in clinical settings. Part of the problem is that sequencing machines are capable of mapping a whole genome, the entirety of a person's genetic code, but are still too expensive to be done a regular basis.

Meanwhile, scientists are still unable to make sense of the majority of data produced by genome analysis. While there has been progress in sequencing technology, it hasn't been as rapid as many predicted when the first human genome was sequenced more than a decade ago.

"We haven't sequenced enough genomes yet, and we don't know what to do with the data we've already got," said Les Funtleyder, a health-care strategist at Poliwogg Holdings, Inc. "It hasn't lived up to the very high hopes people had in 2000, and everyone's a little gun shy about predicting when the next big thing will happen."

Write to Joseph Walker at Joseph.Walker@dowjones.com

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