Industry Buzz: 2017-The Year in DX Mergers & Acquisitions

Meh. That word best describes the state of 2017 merger and acquisition activity in the clinical laboratory space, where firms continue to prefer alliance to absorption at a rate of over 3 to 1. But while the M&A year was relatively light in both volume and drama, it was not without its points of interest.

The Abbott Bookends
As it did in 2016, Abbott stole this year's headlines with its bookend acquisitions of St. Jude Medical ($25 billion) in early January and Alere in October. But impactful as they were, these deals were really just consummations of transactions negotiated in 2016.

But one of those closings was anything but routine. The Abbott- Alere merger announced in February 2016 stood on the precipice with the parties poised for litigation by year's end.

After months of posturing, the parties announced in mid-April that the onagain off-again deal was back on again. In addition to dropping their lawsuits, both sides agreed to new terms essentially giving Abbott a discount to compensate for the erosion in equity value that Alere incurred since the original deal was announced by cutting the purchase price to $5.8 billion.

Both sides also had to divest strategic assets to gain regulatory approval for the merger with Alere selling its triage MeterPro and BNP (B-type Naturietic Peptide) businesses to Quidel for $680 million and its Epocal point-of-care blood diagnostics unit to Siemens Healthineers for an undisclosed price.

Thermo Fisher Gobbles Up Patheon
In terms of dollar volume, Thermo Fisher's $7.2 billion purchase of contract development and manufacturing organization (CDMO) Patheon in September was the year's biggest M&A deal (other than the $25 billion St. Jude deal which closed on Jan. 4). Acquisition of the North Carolina-based provider of drug development support for pharmaceutical firms, secures Thermo Fisher access to the $40 billion CDMO market and create $120 million in synergies ($90 million in cost and $30 million in revenues synergies). Thermo Fisher absorbed Patheon's 9,000 employees and $1.9 billion in annual revenues into its Laboratory Products and Services division.

The Didn't-See-That-One-Coming Award
In perhaps the most surprising—and intriguing—M&A deal of the year, Konica Minolta plunked down $1 billion in cash for genetic testing firm Ambry Genetics. Almost overnight, the Japanese technology giant known for its business products became a major player in the global precision medicine market and acquiring a vehicle for commercializing high-sensitivity tissue immunostaining technology for clinical pathology and pharmaceutical trials.

The Other Billion-Dollar Deals
The only other nine-figure M&A DX deals to close in 2017 were:

• Grifols' $1.85 billion buyout of Hologic's blood screening assets, a move that seems to have worked out for both sides by goosing Grifols' revenues blood screening revenues 7% while leaving Hologic, its former partner in the realm, free to concentrate on its core women's diagnostics business;

• PerkinElmer's $1.3 billion cash acquisition of Euroimmun Medical Laboratory Diagnostics, which establishes PKE as a global leader in autoimmune testing and bolstering its position as a provider in infectious disease and allergy testing in China and other leading markets; and

• LabCorp's purchase of UK contract research organization Chiltern for $1.2 billion, creating a CRO unit of 20,000+ employees and strengthening its Covance business in the biopharma market.

LabCorp v. Quest
As usual, LabCorp and rival Quest Diagnostics were among the most active players. But while the two have been waging a kind of M&A arms race for years, LabCorp flipped the script in 2017 by acquiring Mt. Sinai Health System outpatient labs and the ownership interests of Washington-based Pathology Medical Laboratories, LLC (PAML) in five different outreach lab joint ventures (Colorado Laboratory Services, Kentucky Laboratory Services, MountainStar Clinical Laboratories, PACLAB Network Laboratories and Tri-Cities Laboratory). In the past, LabCorp has focused on acquiring specialty labs to bolster the sophistication of its product lines, while the strategy of acquiring health system outreach labs has largely been Quest's modus operandi. Sure enough, Quest made seven more such acquisitions during the year, including Cleveland HeartLab, MedFusion, Cape Cod Health Care, to name a few.

Other firms with the largest number of purchases during the year included:

• LabCorp, which in addition to the above noted PAML, Mt. Sinai and Chiltern deals acquired health and nutrition test firm ChromaDex;

• Thermo Fisher Scientific, which in addition to the big Patheon acquisition, acquired a trio of smaller firms including Linkage BioSciences, Core Informatics and Finesse Solutions;

• Invitae, which acquired AltaVoice, CombiMatrix, Good Start Genetics and software maker Ommdom; and

• Bruker, which a few months after announcing the acquisitions of SCiLS and InVivo Biotech Services on the same day, picked up Merlin.

NEW FDA APPROVALS

Note: Only includes deals in which price and other financial terms were disclosed.