2013 Medtech M&A Review: Several Notable Diagnostics Transactions

By Clyde A. Burkhardt

BioMerieux, a global in vitro diagnostics leader based in France, announced an agreement to acquire U.S.-based Biofire Diagnostics, a molecular biology company that over the past 20 years has developed and marketed several automated molecular biology systems that it licensed to Roche Diagnostics. BioFire recently developed Film Array, a highly innovative revolutionary multiplex system, which upon further development is expected to make possible the detection of more than 70 disease agents responsible for respiratory, gastrointestinal, and blood infections. The acquisition substantially enhances the bioMerieux leadership position in infectious disease diagnostics. The proposed price is $450 million (5.6x projected 2014 sales of $80 million.)

Immucor, a leading producer of detection systems for the analysis of blood before transfusions, acquired the Lifecodes business of Hologic Inc., a leading provider of molecular and antibody assays for transplant diagnostics, specialty coagulations, and transfusion medicine. The price was $85 million plus another $10 million if certain financial targets are met in 2013. Hologic had acquired Lifecodes as part of its 2012 acquisition of GenProbe for $3.8 billion, but it did not fit with the company’s womens’ health diagnostics focus.

A large proposed transaction in the transfusion medicine space, announced in November, is Novartis AG’s sale of its diagnostics unit for a proposed $1.7 billion to Grifols, a company based in Spain. The acquisition is a good fit with Grifols, one of the leading suppliers of tests used in blood transfusions. The acquisition also helps accomplish Grifols’s announced goal of establishing a more significant presence in the United States.

Another diagnostics strategic divestiture was Quest Diagnostics’s sale of its Hemocue diagnostics products operation to Radiometer Medical ApS, a Denmark-based producer of diagnostic products that measure hemoglobin, glucose, and white blood cells, for $300 million. Quest had reportedly acquired Hemocue from a private equity fund for $450 million in 2007. Hemocue’s instruments are small and easy to use, thereby allowing for testing close to the patient rather than sending samples to a laboratory.

In February, Alere Inc., a producer of a diverse portfolio of patient diagnosis and monitoring products with $2.7 million in sales, acquired privately held Epocal Inc., a provider of technologies for blood gas and electrolyte testing. Epocal has a family of microchip diagnostic test cards and wireless card readers that perform a range of acute-care tests on a blood analyzer at a patient’s side. The transaction supports Alere’s announced mission of providing doctors with information to improve decision making to result in better patient outcomes. The price was $166 million, plus initial potential milestone payments of $15 milion and additional milestone payments up to $75.5 million related to new product offerings based on Epocal’s platform.

Also in the diagnostics space, Roche acquired U.S.-based, private-equity-backed Constitution Medical Investors for $220 million plus potential milestone payments. The acquisition will enhance the hematology offerings of Roche’s Diagnostics unit. Constitution is developing a fully automated system to increase efficiency and save lab space by replacing server work stations with a single compact unit. The system will be used to diagnose blood diseases such as anemia and leukemia. Roche has stated that the laboratory hematology testing is an estimated $2 billion business.

Clyde A. Burkhardt is senior managing director of HT Capital Advisors LLC (New York City), a private investment banking firm. He leads HT Capital Advisors' groups focusing on the medical device, healthcare services, and precision component industries. Contact Burkhardt at [email protected].