Strategic Deals in DX Space Remain Low in Number, but High in Impact

Merger & acquisition (M&A) deals involving labs and diagnostics companies in 2022 have been noticeably down in numbers. However, the deals that are coming to fruition tend to be larger in impact. Thus, two of the only seven transactions that were announced or closed in November were billion-dollar deals, including:

• Thermo Fisher Scientific’s agreement to acquire UK-based specialty diagnostics company The Binding Site Group for £2.25 billion ($2.60 billion) in cash; and
• Barcelona, Spain-based Werfen’s acquisition of transfusion and transplant diagnostics firm Immucor for $2 billion.

Larger Healthcare M&A Trends

The diagnostics segment’s current trend of decline in M&A deal numbers and increase in deal impact is consistent with what’s taking place across the wider healthcare industry. Thus, according to a report from financial advisory firm Kaufman Hall, there were only 10 hospital and health system M&A transactions in the third quarter of 2022, more than the seven posted in the same quarter last year, but still nowhere near the 19 posted in 2020 or the 25 in 2019. However, the $8.3 billion in total value of the deals that were made was the second highest for a third quarter in seven years:

Hospital & Health System M&A During Financial Third Quarter, 2016 - 2022

Year	Total Deals	Total Deal Value
2022	10	$8.3 billion
2021	7	$5.2 billion
2020	19	$7.4 billion
2019	25	$8.1 billion
2018	19	$10.8 billion
2017	26	$7.6 billion
2016	24	$6.6 billion

According to Kaufman Hall, while UChicago Medicine’s acquisition of a controlling interest in AdventHealth’s Great Lakes Region hospitals for an undisclosed price was the largest strategic M&A deal in Q3 2022, there were also a pair of what the firm describes as “mega transactions” in which the smaller party’s annual revenue was above $1 billion:

• Pure Health’s purchase of a minority equity stake in Ardent Health Services for $500 million; and
• Prime Healthcare’s purchase of nine hospitals and two medical office buildings in four different states from Medical Properties Trust, Inc. under a tenant lease purchase option.

Consolidation and acquisition of hospitals by healthcare systems has come under fire for reducing competition and care quality and leaving many communities without adequate access, particularly in rural areas. In 2021, President Biden issued an executive order calling on the US Departments of Justice and Commerce to crack down on hospital and health insurance consolidation.² (See, “Biden Orders Feds to Target Health Care Consolidation but Deals Continue,” LIR, August 26, 2021.)³

References:

1. https://www.kaufmanhall.com/sites/default/files/2022-10/KH_MA-2022-Q3-Activity-Report.pdf
2. https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/  
3. https://www.g2intelligence.com/biden-orders-feds-to-target-health-care-consolidation-but-deals-continue-2/

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Here’s a summary of the key M&A diagnostic deals that were signed or closed in November 2022: 

Mergers, Acquisitions, & Asset Sales

Acquiring Company	Target(s)	Deal Summary
Leica Biosystems	Cell IDx	• Price: Undisclosed • Status: Closed • Danaher subsidiary acquires California company which provides multiplex staining panels, tissue staining, and imaging and analysis services • Cell IDx’s technology for translating complex multiplex IHC signatures into three and four biomarker panels can be automated on Leica Biosystems' Bond Rx platform
Fulgent Genetics	Fulgent Pharma	• Price: $100 million • Status: Agreement to acquire with no closing date announced • Combined (and reunited) company to offer vertically integrated solution against cancer with potential to unlock long-term upside for both the therapeutic and diagnostic businesses
Werfen	Immucor	• Price: Approximately $2 billion, funded with a mix of cash on hand and new senior credit facilities • Status: Agreement to acquire with no closing date announced • Acquisition of transfusion and transplant diagnostics firm enables Werfen to expand its specialized diagnostics solutions offerings for labs and hospitals
Myriad Genetics	Gateway Genomics	• Price: $67.5 million cash upfront and up to $32.5 million in cash in 2023 and 2024 if performance milestones reached • Status: Closed • Acquisition of consumer genetics company and producer of SneakPeek Early Gender DNA Test, designed to reveal a baby's gender at 6 weeks into pregnancy with 99 percent accuracy
Thermo Fisher Scientific	The Binding Site Group	• Price: £2.25 billion ($2.60 billion) cash • Status: Signed agreement with no closing date announced • Acquisition of UK-based specialty diagnostics company with more than 1,100 worldwide employees, which provides specialty assays and instruments for blood cancers and immune system disorders
Biocare Medical	Empire Genomics	• Price: Undisclosed • Status: Closed • Acquisition of spinout from the Roswell Park Cancer Institute that produces molecular probes for cancer research and diagnostics development
Hamilton Bonaduz	BioFluidiX	• Price: Undisclosed • Status: Closed • Acquisition of Freiburg, Germany-based microdosing company which owns patented processes enabling precise dispensing of liquid in the nanoliter and picoliter range