Recent acquisitions in the diagnostics in the industry have been notable, not for being of blockbuster size, but rather because they represent a trend toward continued focus on strategic growth and, increasingly, divestiture of assets not core to the company’s franchise. “Broadly speaking diagnostics is an area of faster growth, relative to the rest of health care, and players are looking to seal up a leadership position in a certain space or get into a faster-growing piece of that space, which is molecular,” says Nicholas Jansen, an associate health care analyst at the investment firm Raymond James and Associates. “But there is probably much more of a laserlike focus on what makes a good acquisition target than five years ago.” An examination of transactions in the first quarter of 2013 reflects strategic acquisitions likely to improve the leadership position of the acquirer in a specific market and an opportunity for the seller to consolidate its resources on its most promising channels. For instance, Quest Diagnostics (Madison, N.J.) announced at the end of February that the company signed a definitive agreement to sell its HemoCue diagnostic products business to Radiometer Medical ApS (a Danaher company, Denmark) for approximately $300 million. HemoCue is focused on point-of-care hemoglobin and glucose testing systems and will complement Radiometer’s portfolio of acute-care point-of-care products. Quest CEO Steve Rusckowski said at the time of the announcement that the divestiture, along with Quest’s sale of its dental OralDNA unit in December 2012, was part of the company’s strategic plan to refocus its efforts on diagnostic information services. Similarly, HYCOR (Garden Grove, Calif.), a maker of diagnostic products for the allergy and autoimmune markets, sold its urinalysis business to private equity firms Laurel Crown Partners and StoneCreek Capital in mid-February. Financial terms of the deal were not disclosed, but the urinalysis business will be renamed Kova International, after its flagship Kova system of urinalysis products. In a statement, Dick Aderman, CEO of HYCOR, said the divestiture will better position HYCOR to grow its pipeline of allergy and autoimmune products, which share “important synergies” including common platform and the same target users, both in the clinic and in the laboratory. J&J Looks to Divest Ortho Clinical Notably Johnson & Johnson (New Brunswick, N.J.) said in late January that it is interested in divesting itself of its Ortho Clinical Diagnostics business, either through a sale or a spinoff of the company. The Raritan, N.J.-based unit had 2012 sales of $2.07 billion, a 4.4 percent drop compared to 2011, J&J reported. The Ortho Clinical Diagnostics business unit, which includes a portfolio of chemistry and immunodiagnostic systems for clinical laboratories as well as blood screening diagnostics, is No. 5 in the diagnostics market based on its sales, Reuters reports. J&J does not believe the diagnostics unit will contribute strongly to its overall future growth. “When you look at diagnostics, we have good technology and a lot of good businesses, but they are not No. 1 or 2 in the market,” J&J CEO Alex Gorsky told an investor conference when reporting the company’s 2012 financial results. Jansen says J&J is looking to “monetize the asset” and deploy the resources in an area where they are a market leader. While in totality these sales mark individual company needs and not an exodus from the diagnostics space, Jansen does expect acquisitions to reflect this trend toward continued concentration on establishing scale and leadership within specific diagnostics markets. Hologic’s (Bedford, Mass.) announcement in early January that it entered into a definitive agreement to sell its transplantation diagnostics unit LIFECODES to Immucor (Norcross, Ga.) provides further evidence of this trend. LIFECODES, which specializes in pretransplant human leukocyte antigen typing, had previously been part of Gen-Probe, which Hologic acquired in August 2012. The $85 million cash acquisition (with an additional $10 million in milestone-related payments) solidifies Immucor’s leadership position in the transfusion area by broadening its reach to organs and stem cells. At the same time the deal allows Hologic to concentrate on the portion of the Gen-Probe portfolio most interesting to it—the women’s health segment as well as the Tigris and Panther systems.

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