This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
Bio-Rad Laboratories said this week that it would shell out roughly $400 million to acquire Swiss immunohematology diagnostics firm DiaMed Holding.
The acquisition would mark the first major expansion of Bio-Rad’s clinical diagnostics business since the firm’s $210 million purchase of Sanofi Diagnostics Pasteur in 1999. The deal also would greatly broaden Bio-Rad’s immunohematology and infectious disease diagnostics portfolio, but it does not provide the firm with a molecular diagnostics presence.
Bio-Rad said that it would pay 477 million Swiss francs ($391.4 million) in cash to acquire 77.7 percent of the outstanding shares of DiaMed, which holds roughly 9.6 percent of its outstanding stock as treasury shares. After the closing of the transaction, expected later this year, Bio-Rad said it would conduct a tender offer for the remaining 12.7 percent outstanding shares.
DiaMed makes reagents and instruments for blood typing and screening. Among its products are the Gel Test ID-Micro Typing System, phenotyping tests, and a variety of hematology and infectious disease tests. The firm has annual sales of roughly $200 million, according to Bio-Rad, and employs 800 people in locations worldwide.
Bio-Rad already sells its own immunohematology system, the ScanGel, and blood grouping tests. But the firm noted that DiaMed’s ID-Micro Typing System performs over a million tests daily worldwide.
The acquisition would be the first major expansion of Bio-Rad’s diagnostics business since its merger with Sanofi Diagnostics Pasteur. That acquisition brought the company a large offering of blood-borne virus and infectious disease tests.
It also provided Bio-Rad with its bovine spongiform encephalopathy test, which initially was a money-maker but now has become a drag on the firm’s life sciences business. Sales for that segment declined 2.2 percent in the first quarter to $141.6 million.
Company officials recently said that the decline in BSE sales was expected as continuing weakness in that market has forced the firm to cut its prices for the BSE test.
Meanwhile, Bio-Rad’s clinical diagnostics business is providing healthy returns. The firm recently posted first-quarter revenue gains of almost 11 percent to $177.6 million for the diagnostics segment. The firm said that in particular its blood virus and quality control products drove revenue growth.
The roughly $400 million price tag may seem like a lot of money for Bio-Rad, which has been known for years as a value buyer unwilling to pay hefty premiums for acquisition targets.
The firm lost out to Invitrogen in a bidding war two years ago for diagnostics and research reagents firm BioSource International. Bio-Rad had offered to pay roughly $82 million for BioSource, which had annual sales of around $44 million. But Invitrogen got the deal done with a $130 million offer, and acquired BioSource and its portfolio of proteins, antibodies, and cytokine reagents in late 2005 (see BioCommerce Week 7/28/2005).
While Bio-Rad will pay approximately two times sales for DiaMed, that multiple pales in comparison to the premiums other firms have been paying for diagnostic properties.
Inverness Medical Innovations, which is inching closer to sealing its acquisition of Biosite, has outbid Beckman Coulter and will pay more than five times sales for the firm (see related article). And over the past year, Siemens paid three times sales for Bayer Diagnostics and nearly four times sales for Diagnostic Products Corp., while GE Healthcare paid three times sales for Abbott’s diagnostics business (see BioCommerce Week 7/5/2006 and 1/24/2007).
All of those deals provided the acquirers with much greater market reach, expanded assay offerings, and by varying degrees, a larger presence in the emerging molecular diagnostics field.
But Bio-Rad, despite its wide array of molecular technologies for life sciences research, has yet to merge those technologies with its clinical diagnostics offerings. It also has not made any acquisitions, including the proposed purchase of DiaMed, that would move it into the molecular diagnostics space, beyond its current biomarker discovery tools.
The acquisition of DiaMed also marks a different M&A strategy for Bio-Rad than last year, when its purchases focused mainly on building its protein research portfolio. In March 2006, it acquired Israel-based ProteOptics, the manufacturer of a protein-interaction instrument, for an undisclosed sum (see BioCommerce Week 3/1/2006). Bio-Rad launched the instrument later in 2006.
It followed that deal with the August acquisition of Ciphergen’s proteomics instrument business for approximately $20 million in cash and a $3 million equity investment (see BioCommerce Week 8/16/2006).