In 2021, the big news in diagnostics services was small deals. Top players—including Hologic, ThermoFisher, and Veracyte—led the charge in M&A by making a series of small acquisitions. Other players, such as Myriad Genetics, divested assets to make room in their portfolios for new acquisitions.
The buying spree, motivated by an insatiable demand for innovation, reflect a continuation of the trends we identified at the start of the year.1 This includes a changing role of diagnostics services. Historically, these companies have operated in the shadow of biopharma. That changed with the pandemic.
Not only did COVID-19 put diagnostics test platforms and reagents at the front lines of healthcare, it also created the need for innovations such as point-of-care testing, direct-to-consumer testing, and liquid biopsy, as well as other less-invasive sampling options for COVID-19 and other diseases.
These changes are here to stay, making access to innovation essential for building competitive advantage, driving M&A activity.
Through the end of Q3’21, the number of acquisitions in the diagnostics services subsector was already 31 percent higher than for all of 2020. Similarly, 2021 deal values through Q3’21 were 116 percent higher than all of 2020. These deals were concentrated in three high-growth areas:
- Oncologic genetic testing and liquid biopsy: This area has seen the highest multiples and total acquisition spend. For example, Neogenomic paid $390 million to buy Inivata, the developer of a liquid biopsy platform. Capabilities in this area are important not only for cancer detection and profiling, but also for personalized precision medicine and tumor assessment during treatment. There has been a big push to combine these capabilities with cancer biopsy screening and next-generation sequencing (NGS) genomic profiling.
- Automated multiplex molecular diagnostics: Infectious disease detection and advancement in multiplexing technology have been major drivers of deal making. For example, in one the year’s largest deals, Roche acquired GenMark Diagnostics for $1.8 billion.
- Portable, rapid point-of-care rapid testing: COVID-19 has been a huge driver of growth in this area, with offerings in antigen and antibody testing widely available. In addition, advancements in PCR testing—the gold standard for accuracy—have enabled results in 30 minutes, allowing it to join the “rapid” category. Mesa Biotech, a manufacturer of a rapid PCR-based test, was acquired by Thermo Fisher for $550 million.
Looking ahead, all signs indicate that ensuring customer access to convenient, safe, and rapid testing will continue to fuel deal making in diagnostics services. In addition to liquid biopsy, NGS profiling, and portability, CRISPR-based detection in IVD, among other innovations, will motivate industry leaders to make small deals to access big innovations.
1 Source: KPMG, The COVID-19 catalyst: How 2020 shaped M&A in diagnostics, January 2021.