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M&A Activity in Omics Tools/MDx Space Down 14 Percent in First Half of 2017

NEW YORK (GenomeWeb) – Mergers and acquisitions in the omics life science tools and molecular diagnostics industries slowed in the first half of 2017, down 14 percent from H1 2016.

According to an analysis by GenomeWeb, the first six months of the year saw the announcement of 30 deals, down from 35 completed deals in H1 2016. This brings the number of deals so far this year back down to H1 2015 levels.

The second half of 2016 saw the completion of 16 deals, bringing the total for 2016 to 51 mergers or acquisitions.

Although the number of deals has gone down, acquisition prices have not. The first half of 2017 has seen two billion-dollar deals, and has been marked by some companies making multiple buys. Bruker announced its purchases of Scils and InVivo Biotech Services on the same day; PerkinElmer has made two acquisitions in H1, including its $1.3 billion of Euroimmun; and Thermo Fisher Scientific has also made two deals, including its $7.2 billion buy of contract development and manufacturing organization Patheon.

Invitae and Eurofins also joined the group of companies that made multiple buys in the first half.

Canaccord Genuity analyst Mark Massaro told GenomeWeb that the pace of deals so far this year is on par with what he expected to see. He also noted several trends of interest, including what seems to be a move from Asian companies to invest in precision medicine through M&A activity.

"Asian companies [are] acquiring or making material investments in US companies to better position themselves in precision medicine," Massaro said. "SoftBank led a $360 million Series E round for liquid biopsy leader Guardant Health [in] May 2017. On a much smaller scale, Cathay Fortune acquired colon cancer screening company Epigenomics" for €171 million ($186.3 million) in April.

Massaro also pointed to the $1 billion acquisition of Ambry Genetics by Konica Minolta earlier this month as a continuation of this trend into the second half of the year.

He has further noticed a lot of movement in the diagnostics space. "Another trend is lab leaders Quest Diagnostics and Laboratory Corporation of America both making plays in acquiring hospital outreach businesses and playing for professional lab service agreements," Massaro said. "Quest has been doing more, but LabCorp seems to be on their heels."   

H1 2017 also differed from H1 2016 in the lack of dramatic tension underlying large deals. This time last year, analysts were talking about Abbott's deal with Alere, which was marked by lawsuits, missed financial statements for Alere, and some contentious statements from both companies. Thermo Fisher's acquisition of Affymetrix was marked by competing offers from previous Affy executives and its own lawsuits. Even Qiagen's acquisition of Exiqon had some hiccups as the firm was forced to amend the terms of the deal three times in order to meet the shareholder acceptance threshold.

However, not only have the deals in 2017 seemed to go smoothly so far, even the Alere-Abbott deal looks like it's almost finished. Abbott proposed amended merger terms earlier this year, and Alere's shareholders approved those terms in early July. The amended acquisition has a price tag of about $5.3 billion, down from $5.8 billion under the original deal.

For the second half of 2017, Massaro thinks it's likely that Abbott will take advantage of the closing of its Alere deal to get back into the market as a buyer. "Abbott needs to close and integrate Alere," he said. "After Alere is integrated, Abbott is likely to strike again." He also pointed to Danaher and Roche as likely buyers in H2 2017.

However, Massaro also noted that several companies in the space are signaling that they may file IPOs, which could affect the level of M&A deals in the second half of the year., for example, recently filed an S-1 shelf registration with the US Securities and Exchange Commission. "We could see an influx in IPOs in 2H/17 which may cool down the level of M&A seen in 1H/17," he said.