M&A and Strategic Deals: Thermo Fisher, BD, and Quest Use M&A to Advance Post-COVID-19 Strategies

Diagnostics companies that cashed in on the COVID-19 test boom used their unprecedented profits to make strategic acquisitions. Now that the well has run dry, many of the firms that invested so heavily in COVID-19 products are relying on M&A transactions to restructure and transition from pandemic to endemic conditions. This month, three of the industry’s biggest companies—Thermo Fisher Scientific, Quest Diagnostics, and Becton Dickinson (BD)—announced or closed significant deals. 

Thermo Fisher Strengthens Clinical Research Capacity with CorEvitas Buy

In 2021, Thermo Fisher Scientific paid $550 million to ramp up its COVID-19 production capacity by acquiring three San Diego test-making facilities from Mesa Biotech. What seemed like a wise investment at the time came up lemons when demand for COVID-19 tests plummeted. In 2022, the company’s year-over-year total COVID-19 revenues declined approximately 60 percent from $9.23 billion to $3.11 billion in 2022 —with Q4 bringing in only $37 million.^1,2 After a series of job cuts, Thermo announced in May that it was closing the three San Diego test-making facilities for good in June.³

On July 6, the diagnostics powerhouse began its move forward by announcing that it has reached an agreement to acquire data intelligence firm CorEvitas for $912.5 million in cash. Adding CorEvitas, a provider of regulatory-grade evidence for biotech and pharma companies with an expected $110 million in 2023 revenues, will complement Thermo’s clinical research business, noted Thermo CEO Marc Casper in a statement. “There is strong market demand for real-world evidence which improves decision-making and reduces the time and cost associated with drug development.”⁴

Becton Dickinson Sells Off Sterilization Instruments Business

BD is another billion-dollar diagnostics giant seeking to recover from the crash of the COVID-19 test market. The firm had been one of the most active players in M&A dealmaking in recent years—but, after a series of acquisitions in 2022, including the $1.5 billion buyout of Parata Systems, BD has turned into a seller. On June 21, the New Jersey-based medical technology company announced  that it was selling off its surgical instrumentation unit, including its V. Mueller, Snowden-Pencer, and Genesis product lines, to medical equipment company STERIS. As part of the sale, the sterilization and surgical instrument manufacturer will also acquire three of BD’s manufacturing facilities located in Missouri, Ohio, and Germany. The $540 million purchase price is more than triple the $170 million the BD unit is expected to generate in 2023.⁵

Since taking over in January 2020, CEO Tom Polen has worked to transform BD  into a faster-growing, higher-margin company. The STERIS sale is part of the restructuring and, according to a company statement, “advances the ‘Simplify’ pillar of the BD 2025 strategy and is an important step in simplifying BD’s product portfolio and manufacturing network,” as well as further advancing the company’s focus on high-growth areas. The sale reduces, but doesn’t eliminate BD’s surgery business, which at $1.4 billion in sales achieved 8 percent year-over-year growth in 2022, the second highest of any BD division.^5,6

Quest Boosts Personalized Cancer Testing Position via Haystack Acquisition

Although Quest has remained active in the M&A space during the post-COVID-19 slowdown, most of its acquisitions have been hospital outreach health system lab add-ons. Now, the company has made a potentially significant strategic deal by acquiring former Johns Hopkins personalized cancer testing spinout Haystack Oncology for $300 million in cash up front and up to $150 million more in future milestone payments.⁷

Announced on April 27, the recently closed acquisition advances Quest’s personalized oncology aspirations, specifically the dynamic minimal residual disease (MRD) liquid biopsy testing segment.⁸ The gem of the deal is Haystack’s ctDNA-based MRD detection technology, which can help identify patients who might benefit from adjuvant chemotherapy for stage II colon cancer after surgery.⁹ Quest will begin furnishing MRD testing based on the Haystack technology in 2024, with the initial focus on colorectal, breast, and lung cancers.

References:

1. 1. https://ir.thermofisher.com/investors/news-events/news/news-details/2022/Thermo-Fisher-Scientific-Reports-Fourth-Quarter-and-Full-Year-2021-Results/default.aspx

1. 1. https://ir.thermofisher.com/investors/news-events/news/news-details/2023/Thermo-Fisher-Scientific-Reports-Fourth-Quarter-and-Full-Year-2022-Results/default.aspx

1. 1. https://www.fiercebiotech.com/medtech/thermo-fisher-lays-another-218-workers-3-covid-test-making-sites-shutter

1. 1. https://ir.thermofisher.com/investors/news-events/news/news-details/2023/Thermo-Fisher-Scientific-to-Acquire-CorEvitas/default.aspx

1. 1. https://investors.bd.com/news-releases/news-release-details/bd-sell-surgical-instrumentation-platform-steris

1. 1. https://news.bd.com/2021-11-12-BD-to-Highlight-Progress-Against-BD-2025-Strategy-and-Plans-for-Long-Term-Growth

1. 1. https://newsroom.questdiagnostics.com/2023-04-27-Quest-Diagnostics-to-Acquire-Haystack-Oncology,-Adding-Sensitive-Liquid-Biopsy-Technology-for-Improving-Personalized-Cancer-Care-to-Oncology-Portfolio

1. 1. https://ir.questdiagnostics.com/press-releases/press-release-details/2023/Quest-Diagnostics-Completes-Acquisition-of-Haystack-Oncology-Adding-Sensitive-MRD-Liquid-Biopsy-Technology-to-Cancer-Diagnostics-Portfolio/

1. https://www.nejm.org/doi/10.1056/NEJMoa2200075

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Here’s a summary of all the key M&A diagnostic deals announced or closed in late June through July 2023:      

Mergers, Acquisitions, and Asset Sales