Macroeconomic Worries Lead to More Subdued Omics, MDx M&A Activity in 2022

NEW YORK – After hitting an unprecedented height in 2021, mergers and acquisitions in the omics tools and molecular diagnostics space returned to a more normal level in 2022.

According to an analysis by GenomeWeb, deal volume fell by roughly half year over year, with 51 total deals notched in 2022 compared to 101 in 2021. For comparison, the space saw 53 deals in 2020 and 62 in 2019.

Values were disclosed for 18 of the 51 deals in 2022, totaling $7.85 billion. That figure does not include purchases by special purpose acquisition companies, vehicles to take a company public without going through the traditional process of an initial public offering, or deals in which a firm acquired a partial stake or discrete asset from another company.

Three transactions were reported to be worth $1 billion or more, with Thermo Fisher Scientific's $2.60 billion purchase of UK-based specialty diagnostics company The Binding Site Group leading the way. The other deals above the $1 billion mark were Werfen's acquisition of transfusion and transplant diagnostics firm Immucor for $2 billion and the pending $1.53 billion acquisition of Meridian Bioscience by a newly formed affiliate of SD Biosensor and SJL Partners. The latter deal was originally scheduled to close by the end of 2022 but was postponed until the end of January.

The 2021 M&A market was supercharged by what Donna Hochberg, a partner with Newton, Massachusetts-based healthcare consulting firm Health Advances, called "COVID cash" — the profits life science firms booked from research and testing related to the pandemic.

"[T]here were a lot of big deals as everyone had all this cash that they didn't know what to do with, frankly," Hochberg said. She noted that while many companies still have excess cash from COVID-19 revenues, they were more circumspect in deploying it throughout 2022.

This was in part due to the worsening macroeconomic conditions and the "looming recession on everybody's mind," Hochberg said, noting that this had both made companies more cautious about spending and led them to push potential M&A activity to the future in hopes of seeing valuations decline.

She added that many of the larger life science firms with more sizable cash reserves don't seem to be entirely clear what they should spend that money on.

"I think they are looking at a lot of targets and making some judgements, but really what they would be acquiring for the most part would be expanding their portfolios into adjacent areas as opposed to [adding] directly to their core areas," she said. "So I think they are taking some time to figure out what to do with the cash that they have."

Hochberg cited Thermo Fisher's purchase of Binding Site as an example of a big deal from 2022 with a clear rationale, noting that the Birmingham, UK-based blood cancer and immune disease diagnostics firm fit well with Thermo Fisher's existing assets.

"They paid a fortune for Binding Site, frankly, but it was the next thing to fit into their portfolio," she said. "It made a ton of sense. They are going to be able to get a lot of leverage with it that other companies wouldn't."

In a note to investors following the announcement of the purchase, Cowen analyst Dan Brennan wrote that the move followed Thermo Fisher's "history of acquiring specialty Dx players with interesting, leading capabilities in more targeted areas" and added that the bank expected the acquisition would "materially enhance The Binding Site's reach and commercial performance."

The year's other $1 billion-plus deals were also for diagnostics assets, as Barcelona-based Werfen scooped up Norcross, Georgia-based transfusion and transplant diagnostics outfit Immucor and the SD Biosensor and SJL Partners affiliate purchased Meridian Biosciences and its portfolio of diagnostic reagents and tests.

Outside of this trend at the top, 2022's M&A deals didn't follow any obvious patterns, with companies acquiring assets in spaces running the gamut from liquid biopsy technologies to clinical trial recruitment tools to sequencing sample prep to software and automation.

Hochberg's Health Advances colleague Daniela Hristova-Neeley said that she has seen rising interest in single-cell technologies, though she added that M&A activity was still relatively quiet in this emerging area as potential acquirers are trying to assess which technologies will become dominant.

There were, nonetheless, a handful of deals for single-cell analysis firms in 2022. In March, Chinese single-cell company Singleron Biotechnologies acquired Singapore-based Proteona, which offers single-cell biomarker discovery and multiomic analysis tools. In June, Bio-Techne agreed to acquire Mountain View, California-based single-cell sorting and dispensing firm Namocell. Finally, in December, Berkeley Lights acquired single-cell proteomics firm IsoPlexis in an all-stock deal valued at $57.8 million.

Of the firms making acquisitions in 2022, Ginkgo Bioworks, which started the year with $1.55 billion in cash and cash equivalents, was particularly active, purchasing five companies as well as agricultural biologicals assets from Bayer in a deal that was not included in the GenomeWeb M&A analysis.

At the beginning of the year, Ginkgo announced it had acquired the assets of Boston-based SARS-CoV-2 testing organization Project Beacon COVID-19 and that it would continue operating the program while integrating it into its Concentric by Ginkgo COVID-19 testing division.

In March, Ginkgo said it was acquiring Swiss contract research organization FGen, which specializes in microbial strain development and optimization. That was followed by a deal for software and automation firm Zymergen for $300 million in stock and the purchases of Oakland, California-based promoter screening firm Circularis and French company Altar, which makes instruments for adaptive engineering of microorganisms.

Cancer testing firm Exact Sciences wasn't quite as busy but still managed a pair of acquisitions, purchasing lab company PreventionGenetics for $190 million and Planegg, Germany-based plasma proteomics firm OmicEra Diagnostics for $15 million. With the former acquisition, Exact moved into the hereditary cancer testing market, while the latter will provide it with mass spectrometry-based technologies and expertise for protein biomarker discovery work.