Diagnostic Deals: Lab Corp & Quest to Continue Targeting Small and Independent Labs for Acquisition

PAMA price cuts were supposed to drive consolidation in the lab market. The expectation was that price pressures would make it impossible for smaller labs to remain independent, rendering them juicy targets for the likes of lab giants Quest and LabCorp. And that’s largely what happened in 2018. But it didn’t continue in 2019. While PAMA did drive smaller and independent labs out of business, the volume of M&A deals during the year was much less than expected. During the recent J.P. Morgan Healthcare Conference, we got some clues about what happened and what to expect in 2020. M&A Deals Are Getting Harder to Make What we learned is that LabCorp and Quest wanted to do the deals but they couldn’t. At least that’s how new LabCorp CEO Adam Schechter explained things during his presentation at the J.P. Morgan event. Simply stated, M&A deals are becoming harder to close. “It’s surprising to me on how long it takes,” Schechter said. “It’s a lot of discussions, hospital by hospital and department by department. Trying to get people to move fast has been harder than I would have anticipated.” Schechter said. Apparently, Quest encountered similar frustrations. But LabCorp and Quest are not giving up. On the contrary, both companies revealed during the Conference that acquisition of local and hospital labs remains a key element of their respective post-PAMA growth strategies. Schechter acknowledged that LabCorp has “a long list of potential” targets. These acquisitions “make a lot of sense and I would do as many of them as I could,” Schechter explained. “We can be accretive in the first year. We can return our cost of capital within two years, typically.” Schechter’s Quest counterpart, CEO Steve Rusckowski echoed similar sentiments. “It’s still a very fragmented marketplace and there’s plenty of opportunity for us to consolidate it,” he noted during the conference. Signs of an M&A Thaw? Both CEOs also suggested that continued PAMA pricing pressures and hospital consolidation will make acquisitions of independent labs easier in the coming year. Schechter said his team is already “starting to see people consider” selling to LabCorp rather than continuing as independent labs. Quest, too, seems to be encountering less resistance and has already announced its first independent lab acquisition of 2020, namely, the outreach lab division of Memorial Hermann Health Systems consisting of 21 hospital labs in the Houston area.

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Here’s a summary of the key M&A and other strategic diagnostic deals announced during January:

MERGERS, ACQUISITIONS & ASSET SALES
Acquiring Company	Target(s)	Deal Summary
Masimo	NantHealth	Price: $47.3 million cash Status: Expected to close by end of Q1 Masimo to buy NantHealth’s medical device interoperability assets including DCX device connectivity system, VCX patient vitals software, HBox connectivity hub + Shuttle interoperability cable
Clayton, Dubilier & Rice investment funds	Cynosure (owned by Hologic)	Price: $205 million cash (of which Hologic will net $138 million) Status: Expected to close before end of 2019 pending regulatory approval Hologic sells off medical aesthetics business it acquired for $1.6 billion in 2017 after $732 million value write down Sale enables Hologic to concentrate breast health and molecular diagnostics core businesses
Quest Diagnostics	Blueprint Genetics	Price: Undisclosed (all cash) Status: Closed Acquisition of genetic testing firm enhances Quest’s capacity to serve pediatric + academic hospitals + other providers specializing in rare diseases + neurology
Definitive Healthcare	PatientFinder	Price: Undisclosed Status: Closed Definitive secures foothold in genomics market by acquiring producer of technology to identify patients groups who might benefit from various drugs, medical devices + services
OncoCyte	Insight Genetics	Price: $7 million cash + $5 million OncoCyte common shares + 10-year revenue share of up to 10% net collected revenues for current IG pharma service offerings + tiered revenue share percentage of net collected revenues through end of lifecycle of new cancer tests developed using IG’s technology + contingent consideration of up to $6 million cash and/or common shares Status: No closing date announced OncoCyte acquires IG lung cancer immunotherapy test in development + access to IG’s existing pharma services infrastructure, including a CLIA-certified + CAP-accredited lab + menu of single-gene tests for various biomarkers
NeoGenomics	Human Longevity	Price: $37 million cash Status: Closed NeoGenomics acquires Human Longevity’s oncology division which performs NGs services for pharmaceutical customers + had about $10 million in revenue in 2019
Calibre Scientific	Qiagen	Price: Undisclosed Status: Closed Acquisition of Qiagen’s NeXtal Biotechnologies structural biology products line
Todos Medical	Provista Diagnostics	Price: Undisclosed Status: No closing date announced Todos Medical gets exclusive option to acquire company developing Videssa blood test for breast cancer
NuProbe Global (spinout from Harvard University’s Wyss Institute)	CarrierGene Biotech	Price: Undisclosed Status: Closed Merger with new entity to continue operating as NuProbe in the US + offer target enrichment assays for NGS-based tests based on toehold probes Newly merged entity partners with Illumina to develop molecular diagnostic kits for nucleic acid extraction + library construction for use on Illumina’s sequencing platform
Psomagen-Macrogen Consortium	uBiome	Price: $7.05 million Status: Closed Psomagen acquires all key assets of microbiomics company that declared for bankruptcy in 2019
Algimed Trade	Novacyt	Price: €400,000 ($446,000) +10% royalty on sales in certain markets Status: Closed Novacyt sells off Novaprep business to focus on core Primerdesign and Lab21 reagent development + manufacturing business
Abcam	Expedeon	Price: €120 million ($130 million) cash Status: Expedeon shareholders approve deal Abcam to acquire Expedeon’s core proteomics business + immunology-focused subsidiaries (Innova Biosciences + TGR Biosciences) Expedeon plans to change its name + focus on genomics operations Expedeon to keep its San Diego-based operations
STRATEGIC ALLIANCES, PARTNERSHIPS & COLLABORATIONS
Partner 1	Partner(s) 2+	Deal Summary
Illumina	Roche	Objective: Increase use of NGS assays for oncology Dynamic: 15-year, non-exclusive gives Roche rights to develop + distribute in vitro diagnostic tests on Illumina NextSeq 550Dx System + future Dx-branded sequencing systems, including forthcoming NovaSeqDx Roche to collaborate with Illumina to expand claims for Illumina’s comprehensive pan-cancer assay TruSight Oncology 500 (TSO 500)
Illumina	Archer DX	Objective: Broaden access to NGS oncology testing Dynamic: Develop ArcherDX tests for therapeutic selection, personalized monitoring + new recurrence surveillance Co-market new tests, starting with the ArcherDX Stratafide companion diagnostic, alongside Illumina’s NextSeq 550Dx + MiSeq Dx instruments Deal is latest in series of co-development agreements between companies
Illumina	Genomics England	Objective: Sequence up to 300,000 genomes over 5 years Dynamic: Illumina to deliver up to 300,000 “whole genome equivalents” Illumina Laboratory Services to perform sequencing using NovaSeq 6000 sequencer
Roche	Inotrem	Objective: Commercialize mechanism-based companion diagnostic test using soluble plasma protein sTREM-1 to identify patients likely to respond to Inotrem’s treatment, nangibotide, a TREM-1 inhibitor Dynamic: Worldwide license building on current collaboration to develop test for measuring sTREM-1 in plasma samples of septic shock patients
Evotec	Indivumed	Objective: Form drug discovery + development alliance focused on non-small cell lung cancer Dynamic: Use Evotec’s bioinformatics analysis platform + drug discovery technologies + Indivumed’s IndivuType database, which integrates patients’ clinical information with genomic, transcriptomic, proteomic + digital histopathology data from biospecimens
Dolomite Bio	S2 Genomics	Objective: Automate library preparation of tissue samples for single-cell RNA sequencing Dynamic: Combine S2 Genomics’ Singulator instrument for automated solid tissue preparation with Dolomite Bio’s Nadia single-cell sample prep platform
Amgen	Qiagen	Objective: Develop tissue-based companion diagnostics for Amgen’s investigational treatment AMG 510 for non-small cell lung cancer (NSCLC) Dynamic: Therascreen CDx test will use real-time PCR to identify cancer patients that have the KRAS G12C mutation Qiagen to seek FDA premarket + global regulatory approvals
Amgen	Guardant Health	Objective: Develop + commercialize global blood-based companion diagnostic test for AMG 510 investigational oral therapy Dynamic: Guardant to seek FDA + global approval of its Guardant360 CDx assay as companion diagnostic to AMG 510 in metastatic NSCLC patients with the KRAS G12C mutation
LabCorp	SpeeDx	Objective: Codevelop new molecular tests Dynamic: Leverage SpeeDx’s technology to create tests starting with assays for women’s health + infectious diseases
Personal Genome Diagnostics	Eisai	Objective: Develop a liquid biopsy biomarker discovery tool Dynamic: Create kitted NGS technology enabling researchers + biopharma companies to do biomarker discovery work on patient blood samples collected during clinical trials
Personal Genome Diagnostics	Mayo Clinic	Objective: Improve clinical diagnostic oncology solutions Dynamic: Combine Mayo Clinic’s clinical knowledge + expertise in oncology with PGDx’s genomic technology experience
Telo Genomics	Mayo Clinic	Objective: Evaluate + validate Telo’s telomere analytics as prognostic solution for multiple myeloma Dynamic: Conduct studies using Telo’s telomere analytics to predict progression of multiple myeloma precursors to full stage multiple myeloma + predict patient responses to first-line therapy at the point of diagnosis
Genomic Testing Cooperative	C2i Genomics	Objective: Develop liquid biopsy tests for solid tumor staging + monitoring Dynamic: GTC to sequence samples + help with technical + clinical validation C2I responsible for AI-based analysis of data, recruitment of samples + clinical trial activities Initial focus on lung, colon + breast cancer + melanoma
Swift Biosciences	MGI Tech (subsidiary of BGI Group)	Objective: Jointly market Swift’s library prep products in Europe + Asia Pacific Dynamic: Partnership to make Swift’s library prep kits compatible with MGI’s DNBSEQ sequencers, starting with 2S Turbo DNA kit for whole-genome and targeted sequencing + Rapid RNA + Methyl-Seq DNA Library kits
Horizon Discovery	Mammoth Biosciences	Objective: Develop new generation of genetically engineered CHO cells for production of biotherapeutics Dynamic: License agreement giving Horizon access to Mammoth’s CRISPR platform Companies to collaborate on optimizing certain CRISPR tools to rapidly develop proprietary CHO cell lines in which selected genes will be knocked out to improve performance parameters like productivity or purification
Veravas	Tymora Analytical Operations	Objective: “Explore the integration of their respective technologies” Dynamic: Use those respective technologies to enrich + measure circulating biomarkers for use in Alzheimer’s disease diagnostics
Adaptive Biotechnologies	Genentech (subsidiary of Roche)	Objective: Use Adaptive’s ClonoSeq assay to assess minimal residual disease (MRD) in patients in Phase III clinical trial Dynamic: Genentech to use ClonoSeq assay to assess MRD in response to venetoclax treatment for patients newly diagnosed with chronic lymphocytic leukemia (CLL) Agreement also covers use of ClonoSeq in future venetoclax studies for CLL
Biocartis	AstraZeneca	Objective: Demonstrate capacities of Biocartis’ Idylla platform in reducing complexity + turnaround time of biomarker testing for lung cancer patients Dynamic: Widen current tissue-based lung cancer study to additional countries + develop companion diagnostic covering any type of indication or biomarker Launch new project to evaluate if liquid biopsy testing using Idylla ctEGFR mutation assay may offer further benefits to tissue-based EGFR molecular testing
Veracyte	Acerta Pharma	Objective: Support Acerta’s development of oncology therapeutics Dynamic: Veracyte to provide genomic information to hematology research + development arm of AstraZeneca
Sebia	Sanofi	Objective: Develop diagnostic test to mitigate potential interference from Sanofi’s investigational antibody, isatuximab, in patients with multiple myeloma Dynamic: Agreement covers development of Hydrashift 2/4 isatuximab IVD kit to be used in conjunction with Sebia’s Hydragel immunofixation electrophoresis assay
Bio-Techne	Fresenius Kabi + Wilson Wolf	Objective: Provide support for researchers + biopharm companies in field of cell + gene therapy Dynamic: Create joint venture company to provide scalable manufacturing technologies + processes for developing + commercializing new cell + gene therapies
Genialis	Oncologie	Objective: Evaluate biomarkers for gastric cancer Dynamic: Use Genialis’ Expressions software to model gene expression signatures that might predict potential treatments for gastric cancer
DISTRIBUTION, SALES & MARKETING AGREEMENTS
Property Owner	Distributor	Deal Summary
Exosomics	LCM Genect	Products: Exosomics’ SelectEV-DNA and SortEV-RNA kits Territory: Italy
PredictImmune	Cambridge Clinical Laboratories	Products: PredictImmune’s PredictSure IBD test Territory: UK, Ireland, Middle East, Balkans CCL to oversee PredictSure IBD order fulfillment, + receive and process test samples, on a nonexclusive basis in UK + Ireland + exclusively in Middle East + Balkans
Osteolabs	Eurofins LifeCodexx	Products: Osteolabs’ osteoporosis early detection test Territory: Germany
Osteolabs	BioGen Medical	Products: Osteolabs’ osteoporosis early detection test Territory: Turkey
Ark Diagnostics	Siemens Healthineers	Products: Ark Diagnostics’ ARK Fentanyl Assay Territory: Undisclosed but assay has been cleared in both US and Europe
SphingoTec	Sysmex Suisse (Sysmex subsidiary)	Products: SphingoTec’s Nexus IB10 point-of-care immunoassay platform Territory: Switzerland Exclusive
SphingoTec	Hitado (Sysmex subsidiary)	Products: SphingoTec’s Nexus IB10 point-of-care immunoassay platform Territory: Germany Exclusive
Celsee	Kindstar Global	Products: Celsee’s Genesis single-cell isolation platform Territory: China
T2 Biosystems	Undisclosed	Products: T2 Resistance, T2Bacteria, and T2Candida panels Territory: Israel Exclusive
Euformatics	Alliance Global	Products: Euformatics’ bioinformatics software Territory: Middle East, Asia, Africa Exclusive
IncellDx	Biolidics	Products: IncellDx bioINK PD-L1 CTC Core Kit along with Biolidics’ ClearCell FX1 system Territory: Undisclosed
LICENSES
Licensor	Licensee	Deal Summary
RNAssist	Quality Control for Molecular Diagnostics	QCMD gets right to use VivoPhix biomolecule stabilization technology to develop new reagents for use with its own molecular infectious disease proficiency testing solutions
Rutgers University	Horizon Discovery	Horizon exercises option to exclusively license novel base editing technology for therapeutic, diagnostic and service purposes
ERS Genomics	Daiichi Sankyo	Japanese pharmaceutical company gets access to ERS’ CRISPR-Cas9 genome editing technology patents to support its own R&D initiatives addressing areas of unmet medical need
ERS Genomics	New England Biolabs	NEB gets rights to sell CRISPR-Cas9 tools + reagents from ERS’ CRISPR IP portfolio to researchers
Codexis	Roche	Roche gets worldwide rights to include Codexis’ EvoT4 DNA ligase in its own nucleic acid kits, sequencing products + workflows
MilliporeSigma	Promega	Promega gets right to use CRISPR genome editing technology to create new research products for investigating endogenous biology, including for drug development
NEW CLINICAL STUDIES
DX Partner	Other Partner(s)	Description of Study
Natera	--	BESPOKE CRC nationwide multi-center prospective registry study to measure clinical impact of serial testing with its Signatera cell-free DNA blood test in colorectal in patients with stage II or stage III colorectal cancer
Interpace Diagnostics (subsidiary of Interpace Bioscience)	University of North Carolina	UNC to evaluate effectiveness of Interpace’s BarreGen test in Barrett’s esophagus patients undergoing radiofrequency ablation (RFA) in predicting resistance or relapse after RFA