DIAGNOSTIC DEALS

Diagnostic Deals: Lab Corp & Quest to Continue Targeting Small and Independent Labs for Acquisition

PAMA price cuts were supposed to drive consolidation in the lab market. The expectation was that price pressures would make it impossible for smaller labs to remain independent, rendering them juicy targets for the likes of lab giants Quest and LabCorp. And that’s largely what happened in 2018. But it didn’t continue in 2019. While PAMA did drive smaller and independent labs out of business, the volume of M&A deals during the year was much less than expected. During the recent J.P. Morgan Healthcare Conference, we got some clues about what happened and what to expect in 2020.

M&A Deals Are Getting Harder to Make

What we learned is that LabCorp and Quest wanted to do the deals but they couldn’t. At least that’s how new LabCorp CEO Adam Schechter explained things during his presentation at the J.P. Morgan event. Simply stated, M&A deals are becoming harder to close. “It’s surprising to me on how long it takes,” Schechter said. “It’s a lot of discussions, hospital by hospital and department by department. Trying to get people to move fast has been harder than I would have anticipated.” Schechter said. Apparently, Quest encountered similar frustrations.

But LabCorp and Quest are not giving up. On the contrary, both companies revealed during the Conference that acquisition of local and hospital labs remains a key element of their respective post-PAMA growth strategies. Schechter acknowledged that LabCorp has “a long list of potential” targets. These acquisitions “make a lot of sense and I would do as many of them as I could,” Schechter explained. “We can be accretive in the first year. We can return our cost of capital within two years, typically.”

Schechter’s Quest counterpart, CEO Steve Rusckowski echoed similar sentiments. “It’s still a very fragmented marketplace and there’s plenty of opportunity for us to consolidate it,” he noted during the conference.

Signs of an M&A Thaw?

Both CEOs also suggested that continued PAMA pricing pressures and hospital consolidation will make acquisitions of independent labs easier in the coming year. Schechter said his team is already “starting to see people consider” selling to LabCorp rather than continuing as independent labs.
Quest, too, seems to be encountering less resistance and has already announced its first independent lab acquisition of 2020, namely, the outreach lab division of Memorial Hermann Health Systems consisting of 21 hospital labs in the Houston area.


Here’s a summary of the key M&A and other strategic diagnostic deals announced during January:

MERGERS, ACQUISITIONS & ASSET SALES
Acquiring Company Target(s) Deal Summary
Masimo NantHealth
  • Price: $47.3 million cash
  • Status: Expected to close by end of Q1
  • Masimo to buy NantHealth’s medical device interoperability assets including DCX device connectivity system, VCX patient vitals software, HBox connectivity hub + Shuttle interoperability cable
Clayton, Dubilier & Rice investment funds Cynosure (owned by Hologic)
  • Price: $205 million cash (of which Hologic will net $138 million)
  • Status: Expected to close before end of 2019 pending regulatory approval
  • Hologic sells off medical aesthetics business it acquired for $1.6 billion in 2017 after $732 million value write down
  • Sale enables Hologic to concentrate breast health and molecular diagnostics core businesses
Quest Diagnostics Blueprint Genetics
  • Price: Undisclosed (all cash)
  • Status: Closed
  • Acquisition of genetic testing firm enhances Quest’s capacity to serve pediatric + academic hospitals + other providers specializing in rare diseases + neurology
Definitive Healthcare PatientFinder
  • Price: Undisclosed
  • Status: Closed
  • Definitive secures foothold in genomics market by acquiring producer of technology to identify patients groups who might benefit from various drugs, medical devices + services
OncoCyte Insight Genetics
  • Price: $7 million cash + $5 million OncoCyte common shares + 10-year revenue share of up to 10% net collected revenues for current IG pharma service offerings + tiered revenue share percentage of net collected revenues through end of lifecycle of new cancer tests developed using IG’s technology + contingent consideration of up to $6 million cash and/or common shares
  • Status: No closing date announced
  • OncoCyte acquires IG lung cancer immunotherapy test in development + access to IG’s existing pharma services infrastructure, including a CLIA-certified + CAP-accredited lab + menu of single-gene tests for various biomarkers
NeoGenomics Human Longevity
  • Price: $37 million cash
  • Status: Closed
  • NeoGenomics acquires Human Longevity’s oncology division which performs NGs services for pharmaceutical customers + had about $10 million in revenue in 2019
Calibre Scientific Qiagen
  • Price: Undisclosed
  • Status: Closed
  • Acquisition of Qiagen’s NeXtal Biotechnologies structural biology products line
Todos Medical Provista Diagnostics
  • Price: Undisclosed
  • Status: No closing date announced
  • Todos Medical gets exclusive option to acquire company developing Videssa blood test for breast cancer
NuProbe Global (spinout from Harvard University’s Wyss Institute) CarrierGene Biotech
  • Price: Undisclosed
  • Status: Closed
  • Merger with new entity to continue operating as NuProbe in the US + offer target enrichment assays for NGS-based tests based on toehold probes
  • Newly merged entity partners with Illumina to develop molecular diagnostic kits for nucleic acid extraction + library construction for use on Illumina’s sequencing platform
Psomagen-Macrogen Consortium uBiome
  • Price: $7.05 million
  • Status: Closed
  • Psomagen acquires all key assets of microbiomics company that declared for bankruptcy in 2019
Algimed Trade Novacyt
  • Price: €400,000 ($446,000) +10% royalty on sales in certain markets
  • Status: Closed
  • Novacyt sells off Novaprep business to focus on core Primerdesign and Lab21 reagent development + manufacturing business
Abcam Expedeon
  • Price: €120 million ($130 million) cash
  • Status: Expedeon shareholders approve deal
  • Abcam to acquire Expedeon’s core proteomics business + immunology-focused subsidiaries (Innova Biosciences + TGR Biosciences)
  • Expedeon plans to change its name + focus on genomics operations
  • Expedeon to keep its San Diego-based operations
STRATEGIC ALLIANCES, PARTNERSHIPS & COLLABORATIONS
Partner 1 Partner(s) 2+ Deal Summary
Illumina Roche
  • Objective: Increase use of NGS assays for oncology
  • Dynamic: 15-year, non-exclusive gives Roche rights to develop + distribute in vitro diagnostic tests on Illumina NextSeq 550Dx System + future Dx-branded sequencing systems, including forthcoming NovaSeqDx
  • Roche to collaborate with Illumina to expand claims for Illumina’s comprehensive pan-cancer assay TruSight Oncology 500 (TSO 500)
Illumina Archer DX
  • Objective: Broaden access to NGS oncology testing
  • Dynamic: Develop ArcherDX tests for therapeutic selection, personalized monitoring + new recurrence surveillance
  • Co-market new tests, starting with the ArcherDX Stratafide companion diagnostic, alongside Illumina’s NextSeq 550Dx + MiSeq Dx instruments
  • Deal is latest in series of co-development agreements between companies
Illumina Genomics England
  • Objective: Sequence up to 300,000 genomes over 5 years
  • Dynamic: Illumina to deliver up to 300,000 “whole genome equivalents”
  • Illumina Laboratory Services to perform sequencing using NovaSeq 6000 sequencer
Roche Inotrem
  • Objective: Commercialize mechanism-based companion diagnostic test using soluble plasma protein sTREM-1 to identify patients likely to respond to Inotrem’s treatment, nangibotide, a TREM-1 inhibitor
  • Dynamic: Worldwide license building on current collaboration to develop test for measuring sTREM-1 in plasma samples of septic shock patients
Evotec Indivumed
  • Objective: Form drug discovery + development alliance focused on non-small cell lung cancer
  • Dynamic: Use Evotec’s bioinformatics analysis platform + drug discovery technologies + Indivumed’s IndivuType database, which integrates patients’ clinical information with genomic, transcriptomic, proteomic + digital histopathology data from biospecimens
Dolomite Bio S2 Genomics
  • Objective: Automate library preparation of tissue samples for single-cell RNA sequencing
  • Dynamic: Combine S2 Genomics’ Singulator instrument for automated solid tissue preparation with Dolomite Bio’s Nadia single-cell sample prep platform
Amgen Qiagen
  • Objective: Develop tissue-based companion diagnostics for Amgen’s investigational treatment AMG 510 for non-small cell lung cancer (NSCLC)
  • Dynamic: Therascreen CDx test will use real-time PCR to identify cancer patients that have the KRAS G12C mutation
  • Qiagen to seek FDA premarket + global regulatory approvals
Amgen Guardant Health
  • Objective: Develop + commercialize global blood-based companion diagnostic test for AMG 510 investigational oral therapy
  • Dynamic: Guardant to seek FDA + global approval of its Guardant360 CDx assay as companion diagnostic to AMG 510 in metastatic NSCLC patients with the KRAS G12C mutation
LabCorp SpeeDx
  • Objective: Codevelop new molecular tests
  • Dynamic: Leverage SpeeDx’s technology to create tests starting with assays for women’s health + infectious diseases
Personal Genome Diagnostics Eisai
  • Objective: Develop a liquid biopsy biomarker discovery tool
  • Dynamic: Create kitted NGS technology enabling researchers + biopharma companies to do biomarker discovery work on patient blood samples collected during clinical trials
Personal Genome Diagnostics Mayo Clinic
  • Objective: Improve clinical diagnostic oncology solutions
  • Dynamic: Combine Mayo Clinic’s clinical knowledge + expertise in oncology with PGDx’s genomic technology experience
Telo Genomics Mayo Clinic
  • Objective: Evaluate + validate Telo’s telomere analytics as prognostic solution for multiple myeloma
  • Dynamic: Conduct studies using Telo’s telomere analytics to predict progression of multiple myeloma precursors to full stage multiple myeloma + predict patient responses to first-line therapy at the point of diagnosis
Genomic Testing Cooperative C2i Genomics
  • Objective: Develop liquid biopsy tests for solid tumor staging + monitoring
  • Dynamic: GTC to sequence samples + help with technical + clinical validation
  • C2I responsible for AI-based analysis of data, recruitment of samples + clinical trial activities
  • Initial focus on lung, colon + breast cancer + melanoma
 Swift Biosciences MGI Tech (subsidiary of BGI Group)
  • Objective: Jointly market Swift’s library prep products in Europe + Asia Pacific
  • Dynamic: Partnership to make Swift’s library prep kits compatible with MGI’s DNBSEQ sequencers, starting with 2S Turbo DNA kit for whole-genome and targeted sequencing + Rapid RNA + Methyl-Seq DNA Library kits
Horizon Discovery Mammoth Biosciences
  • Objective: Develop new generation of genetically engineered CHO cells for production of biotherapeutics
  • Dynamic: License agreement giving Horizon access to Mammoth’s CRISPR platform
  • Companies to collaborate on optimizing certain CRISPR tools to rapidly develop proprietary CHO cell lines in which selected genes will be knocked out to improve performance parameters like productivity or purification
Veravas Tymora Analytical Operations
  • Objective: “Explore the integration of their respective technologies”
  • Dynamic: Use those respective technologies to enrich + measure circulating biomarkers for use in Alzheimer’s disease diagnostics
Adaptive Biotechnologies Genentech (subsidiary of Roche)
  • Objective: Use Adaptive’s ClonoSeq assay to assess minimal residual disease (MRD) in patients in Phase III clinical trial
  • Dynamic: Genentech to use ClonoSeq assay to assess MRD in response to venetoclax treatment for patients newly diagnosed with chronic lymphocytic leukemia (CLL)
  • Agreement also covers use of ClonoSeq in future venetoclax studies for CLL
Biocartis AstraZeneca
  • Objective: Demonstrate capacities of Biocartis’ Idylla platform in reducing complexity + turnaround time of biomarker testing for lung cancer patients
  • Dynamic: Widen current tissue-based lung cancer study to additional countries + develop companion diagnostic covering any type of indication or biomarker
  • Launch new project to evaluate if liquid biopsy testing using Idylla ctEGFR mutation assay may offer further benefits to tissue-based EGFR molecular testing
Veracyte Acerta Pharma
  • Objective: Support Acerta’s development of oncology therapeutics
  • Dynamic: Veracyte to provide genomic information to hematology research + development arm of AstraZeneca
Sebia Sanofi
  • Objective: Develop diagnostic test to mitigate potential interference from Sanofi’s investigational antibody, isatuximab, in patients with multiple myeloma
  • Dynamic: Agreement covers development of Hydrashift 2/4 isatuximab IVD kit to be used in conjunction with Sebia’s Hydragel immunofixation electrophoresis assay
Bio-Techne Fresenius Kabi
+
Wilson Wolf
  • Objective: Provide support for researchers + biopharm companies in field of cell + gene therapy
  • Dynamic: Create joint venture company to provide scalable manufacturing technologies + processes for developing + commercializing new cell + gene therapies
Genialis Oncologie
  • Objective: Evaluate biomarkers for gastric cancer
  • Dynamic: Use Genialis’ Expressions software to model gene expression signatures that might predict potential treatments for gastric cancer
DISTRIBUTION, SALES & MARKETING AGREEMENTS
Property Owner Distributor Deal Summary
 Exosomics LCM Genect
  • Products: Exosomics’ SelectEV-DNA and SortEV-RNA kits
  • Territory: Italy
PredictImmune Cambridge Clinical Laboratories
  • Products: PredictImmune’s PredictSure IBD test
  • Territory: UK, Ireland, Middle East, Balkans
  • CCL to oversee PredictSure IBD order fulfillment, + receive and process test samples, on a nonexclusive basis in UK + Ireland + exclusively in Middle East + Balkans
Osteolabs Eurofins LifeCodexx
  • Products: Osteolabs’ osteoporosis early detection test
  • Territory: Germany
Osteolabs BioGen Medical
  • Products: Osteolabs’ osteoporosis early detection test
  • Territory: Turkey
Ark Diagnostics Siemens Healthineers
  • Products: Ark Diagnostics’ ARK Fentanyl Assay
  • Territory: Undisclosed but assay has been cleared in both US and Europe
SphingoTec Sysmex Suisse
(Sysmex subsidiary)
  • Products: SphingoTec’s Nexus IB10 point-of-care immunoassay platform
  • Territory: Switzerland
  • Exclusive
SphingoTec Hitado
(Sysmex subsidiary)
  • Products: SphingoTec’s Nexus IB10 point-of-care immunoassay platform
  • Territory: Germany
  • Exclusive
Celsee Kindstar Global
  • Products: Celsee’s Genesis single-cell isolation platform
  • Territory: China
T2 Biosystems Undisclosed
  • Products: T2 Resistance, T2Bacteria, and T2Candida panels
  • Territory: Israel
  • Exclusive
Euformatics Alliance Global
  • Products: Euformatics’ bioinformatics software
  • Territory: Middle East, Asia, Africa
  • Exclusive
IncellDx Biolidics
  • Products: IncellDx bioINK PD-L1 CTC Core Kit along with Biolidics’ ClearCell FX1 system
  • Territory: Undisclosed
LICENSES
Licensor Licensee Deal Summary
RNAssist Quality Control for Molecular Diagnostics
  • QCMD gets right to use VivoPhix biomolecule stabilization technology to develop new reagents for use with its own molecular infectious disease proficiency testing solutions
Rutgers University Horizon Discovery
  • Horizon exercises option to exclusively license novel base editing technology for therapeutic, diagnostic and service purposes
ERS Genomics Daiichi Sankyo
  • Japanese pharmaceutical company gets access to ERS’ CRISPR-Cas9 genome editing technology patents to support its own R&D initiatives addressing areas of unmet medical need
ERS Genomics New England Biolabs
  • NEB gets rights to sell CRISPR-Cas9 tools + reagents from ERS’ CRISPR IP portfolio to researchers
Codexis Roche
  • Roche gets worldwide rights to include Codexis’ EvoT4 DNA ligase in its own nucleic acid kits, sequencing products + workflows
MilliporeSigma Promega
  • Promega gets right to use CRISPR genome editing technology to create new research products for investigating endogenous biology, including for drug development
NEW CLINICAL STUDIES
DX Partner Other Partner(s) Description of Study
Natera
  • BESPOKE CRC nationwide multi-center prospective registry study to measure clinical impact of serial testing with its Signatera cell-free DNA blood test in colorectal in patients with stage II or stage III colorectal cancer
Interpace Diagnostics (subsidiary of Interpace Bioscience) University of North Carolina
  • UNC to evaluate effectiveness of Interpace’s BarreGen test in Barrett’s esophagus patients undergoing radiofrequency ablation (RFA) in predicting resistance or relapse after RFA
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