With 68 diagnostic M&A deals reported throughout 2022, many predicted the demand for the specialty would slow and, possibly, return to its pre-COVID-19 deal volume. Yet, the first few months of 2023 are showing higher than pre-COVID deal numbers.
According to data captured in the LevinPro HC database, with 14 acquisitions the diagnostic market accounts for 56% of the 2023 Laboratories, MRI and Dialysis M&A market. In the same time frame of 2022, 25 diagnostic acquisitions were reported, accounting for more than 84%.
The most active type of buyer is other laboratories, representing 43% of the diagnostic buyers. And most of the acquirers are public companies, also totaling approximately 43% of diagnostic acquirers.
The deal with the largest purchase price, in 2023, is Biosynex SA (EPA: ALBIO) acquiring Chembio Diagnostics, Inc. (NASDAQ: CEMI) for $17.2 million. France-based Biosynex designs, manufactures and distributes rapid tests. Chembio is a point-of-care diagnostics company focused on detecting infectious diseases, including COVID-19, sexually transmitted diseases and tropical diseases.
While many companies have shifted their attention away from COVID-19 testing, others have doubled down on investing in and growing their diagnostic capabilities.
Thermo Fisher Scientific Inc. is just one of those companies that has focused on enhancing its diagnostic offerings through acquisitions. Based in Waltham, Massachusetts, the company is a supplier of scientific instrumentation, reagents, consumables and software services. Thermo Fisher was established in 2006 through the merger of Thermo Electron and Fisher Scientific.
Thermo Fisher made its first move in the diagnostic market in January 2021 when it purchased Mesa Biotech, Inc. for $450 million. Mesa Biotech was a privately held molecular diagnostic company that developed a PCR-based rapid point-of-care testing platform for detecting infectious diseases including COVID-19, influenza A and B, respiratory syncytial virus and Strep A.
This transaction was made possible as Thermo Fisher received emergency use authorization from the FDA for a COVID-19 test. While Thermo Fisher had already launched a COVID-19 detection kit in early 2020, the acquisition of Mesa Biotech allowed Thermo Fisher to expand its molecular diagnostics at the point of care, increase its manufacturing volume and bring testing to the market faster.
Thermo Fisher’s 2021 acquisition streak continued with the purchases of Henogen S.A. and PPD, Inc. (NASDAQ: PPD) for $877.4 million and $20.9 billion, respectively. It also acquired Propel Labs’ cell sorting technology assets, which include the Bigfoot Spectral Cell Sorter for an undisclosed price.
Henogen is a viral vector manufacturing business that provides contract manufacturing services for vaccines and therapies to biotechnology and biopharmaceutical companies. It was sold by Groupe Novasep SAS. While the company does not directly fall under diagnostics, Thermo integrated Henogen into its Laboratory Products and Services Segment to help bolster its vaccine abilities.
PPD is a global clinical research organization providing broad, integrated drug development, laboratory and lifecycle management services. Its customers include pharmaceutical, biotechnology, medical device, academic and government organizations.
In addition to 2021 being Thermo Fisher’s most active year for acquisitions since 2010, it also was part of a sequence in which the company generated impressive financial results. Thermo Fisher’s Q3:22 financial results included revenue of $10.68 billion. Of that, $1.065 billion was from specialty diagnostics with $440 million of that from COVID-19 testing.
Thermo Fisher’s new growth and acquisition strategy pushed into 2022 when it purchased PeproTech for $1.85 billion and The Binding Site for $2.6 billion.
PeproTech provides bioscience reagents known as recombinant proteins, including cytokines and growth factors. It manufactures and supplies cytokine products to the life science and cell therapy markets worldwide. PeproTech will be integrated into Thermo Fisher’s Life Sciences Solutions Segment, which recorded sales of $3.72 billion in Q3:21, up 9% from the same period of 2020.
The Binding Site is a global protein diagnostics company that specializes in the research, development, manufacture and distribution of tests used for the detection of cancers and immune disorders. Its estimated revenue for 2022 was $220 million. By acquiring The Binding Site, Thermo Fisher added two blood tests for multiple myeloma called Freelite and Hevylite to its portfolio and expanded further into the U.K.
However, not everything in Thermo Fisher’s operations is on an upward swing. In February 2023, the company announced a cut of more than 200 jobs due to a “sudden downturn in demand for COVID-19 testing products,” according to Nancy Austin, vice president of human resources in Thermo Fisher’s genetic sciences group.
Thermo Fisher’s activity is indicative of an incredibly active diagnostic market, but also highlights the need for comprehensive and inclusive testing abilities. By emphasizing diagnostics across the board, Thermo Fisher was able to capitalize from the opportunities presented to the company by the pandemic and be an aggressive buyer.
While COVID-19 testing may be dropping off, other diagnostic needs are still in demand and companies are forging ahead at full steam. We foresee more diagnostic M&A activity within the next few months, albeit at a slower rate than in 2022, with a focus on specialty diagnostics outside COVID-19 testing.
