08 September 2021
Eleanor Doolin By Eleanor Doolin

Are M&A Trends Taking Over the Diagnostics Industry?

There is an unparalleled shift currently taking place within the healthcare and diagnostics market. More and more start-ups and MNEs are taking over, each of them contributing with innovative technologies and processes, promising a better future for the industry.

The increasing crisis of chronic illnesses, as well as the ageing population, has put a great pressure on healthcare assets worldwide. Additionally, the industry is confronted with unparalleled rising strains from stakeholders, with specialists looking for apparatuses that can advance decision-making; medical establishments seeking quicker, more exact resolutions; laboratories looking for methods to resourcefully use existing means; and health systems altering their delivery designs to diminish healthcare expenses.

In this shifting and somewhat unstable environment, the diagnostics industry is evolving as a lead driver and a key asset used to tackle these demands. Moreover, start-ups play an essential part in the growth and expansion of the diagnostics industry. They bring new, innovative ideas to the table and they also help larger, more established companies enhance their existing products and prototypes through M&A activities.

M&A Activities: The growing trend within the diagnostics sector

Even if acquisition activities are growing in popularity amongst MNEs within the diagnostics sector, it is hard to pinpoint if the start-ups have the market exit as the end goal. This kind of exit is frequently preferred by big corporations that are actively searching for complimentary skills in the market and acquiring a start-up is a safer route to designing a product or a prototype than developing it in-house.

NeoGenomics

Bigger corporations within the diagnostics sector are actively participating in this trend. For example, in 2015, NeoGenomics purchased GE Healthcare’s cancer diagnostics division Clarient for roughly $300 million and GE secured one-third of ownership in NeoGenomics, combined with a board seat in the agreement. Ever Since, NeoGenomics has included about $1 billion to its market cap, now standing at around $1.36 billion. In 2018, NeoGenomics also acquired clinical oncology laboratory Genoptix for $125 million. The two companies advertised the agreement as interdependent, combining NeoGenomics’ genetic testing services for hospitals and pathologists with Genoptix’s connections with community-based oncologists.

Thermo Fisher

NeoGenomics is not the only player participating in the M&A trends. In May 2011, Thermo Fisher  Scientific Inc. bought Phadia to develop testing for allergies and autoimmune diseases for $3.5 billion. Later on, in April 2013, following a bidding with Hoffmann-La Roche, Thermo Fisher bought Life Technologies Corporation for $13.6 billion in an agreement, increasing service lines linked with enhanced DNA sequencing and genetic testing.

Exact Sciences

Exact Sciences has recently joined the trend as well, as it completed the acquisition of Thrive Earlier Detection Corp. (Thrive) in January 2021. Exact Sciences is a provider of cancer screening and diagnostic tests and Thrive is currently developing CancerSEEK, a blood-based test that is conceived to be affordable and employed as part of routine medical consultation to identify various types of cancer at earlier stages. “Bringing Thrive into the Exact Sciences family marks a giant leap toward blood-based, multi-cancer screening becoming a reality and eventually the standard of care,” stated Kevin Conroy, the chairman and CEO of Exact Sciences.

Even if these big market players are acquiring smaller start-ups or MNEs, it is unclear how the diagnostics environment is affected. With many big corporations now dominating the field, individuals may be incentivised to join bigger companies rather than a smaller business, such as a start-up.

Patenting Issues & Monopolies

The M&A movement across the diagnostics sector promises to encourage innovation and growth through the market. However, even if that is the case, patenting issues and monopolies have stirred controversy. Notwithstanding the concerns, patents have not caused irreversible harm in diagnostics, but neither have they proven significantly beneficial. Innovation and advancements in the development stage of the prototypes/products can be decelerated down as a result of these issues. Monopoly effects on the test quality are also ambiguous. For example, in 2006, Myriad’s systems of BRCA testing were revealed to miss some DNA deletions and rearrangements. Even if test quality is a general problem, monopolies can aggravate it.

Times are changing, and the diagnostics industry is rapidly expanding, especially with the M&A trends that have recently grown in popularity. Although M&A activities may bring various benefits to a start-up, there are also concerns that are closely related to these movements, such as shares control, monopolies and patents.

Nevertheless, the question still remains, is innovation being limited or advanced by acquisitions?

If you are also working within the diagnostics industry and you are interested in M&A trends within this sector, please get in touch via eleanor.doolin@charltonmorris.com. Otherwise, if you wish to read more content about diagnostics, please visit my profile page.

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Eleanor Doolin

Eleanor Doolin works as a Business Manager broadly within IVD but has previously spent time focusing specifically in clinical chemistry and oncology, plus advances in non-invasive diagnostic testing. She is always looking to connect with innovative individuals and organisations working in this area.

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