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Will Hologic's Bid for Gen-Probe Spur MDx M&A Activity?

NEW YORK (GenomeWeb News) – Following Hologic's $3.7 billion agreement to acquire Gen-Probe, the molecular diagnostics space may be on the verge of some industry consolidation, according to investment analysts.

Yesterday, Hologic announced the $82.75 per-share offer for Gen-Probe, concluding a search Gen-Probe began a year ago for a buyer. The deal has some industry observers considering which other MDx firms may be ripe for a deal.

David Ferreiro of Oppenheimer told GenomeWeb Daily News by e-mail that even before the deal was announced, "established molecular diagnostic companies with platform technologies were at a premium, and now more so."

In general, M&A activity among life science tools and 'omics-related technologies firms has been in a bit of a lull. In 2011, there were 58 deals, the same as in 2010. But the number of deals in 2012 would fall short of that figure at the current rate. Through the first four months of the year, 15 deals have been announced or completed, including one deal in the MDx space — Signal Genetics' purchase of ChipDx. Both firms are privately held.

Within the tools and 'omics-related space, though, M&A interest in molecular diagnostics firms have held steady, Quintin Lai, an analyst at RW Baird told GWDN.

Hologic's proposed purchase of Gen-Probe "is another example of how valuable successful molecular diagnostic companies are to strategic buyers," Lai said in an e-mail, adding that even though Roche's recent $6.7 billion bid for Illumina was unsuccessful, the Swiss drug maker and diagnostics firm's interest in adding Illumina's next-generation sequencing technology to fortify its diagnostic pipeline showed that "interest is very high for molecular diagnostics."

Still, it took Gen-Probe a year to get acquired, despite being one of the more valuable properties in the MDx market.

William Quirk at Piper Jaffray said that he does not anticipate a new wave of MDx acquisitions to follow the Hologic/Gen-Probe deal, but if deals are to be done, it may be smaller private firms that get targeted. He noted that there are "a number of relatively early-stage private companies out there that have interesting platforms."

Among them, Quirk said, is Great Basin, which today announced it received clearance for its C. difficile molecular test from the US Food and Drug Administration.

In addition to companies developing platforms, others developing tests could attract M&A interest, he said, pointing to M&A deals over the past couple of years, such as the purchase of Clarient by GE Healthcare, Genoptix by Novartis, and Celera by Quest Diagnostics.

In addition, "lab service companies have obviously been acquisition targets in the past," he said, and "the business model does not necessarily reduce M&A interest per se."

The most obvious acquisition targets are Qiagen and Cepheid. The list of potential buyers of MDx firms includes the usual suspects: Roche, GE Healthcare, Danaher, Siemens, Novartis, and Abbott.

Quirk added to that list Life Technologies, which has a "more pronounced emphasis on diagnostics in the future." He noted the firm's hiring of Ronnie Andrews, who has extensive experience in the diagnostics space and was the former CEO of Clarient and segment leader of GE Molecular Diagnostics, three months ago as president of Medical Sciences.

Illumina similarly has the platform capabilities and eventually may look at an acquisition to establish a distribution channel into the MDx space, he told GWDN.

In seeking to acquire Gen-Probe, Hologic — which entered the molecular diagnostics and HPV market with its buy of Third Wave Technologies in 2008 — claimed the deal would create the largest diagnostics company focused on women's health.

In a research note, Mizuho Securities' Peter Lawson suggested that the Hologic/Gen-Probe transaction could provide an impetus for Becton Dickinson to do a deal. Hologic is the leading provider in cervical cancer testing and Gen-Probe provides it an "emerging HPV player."

BD, meanwhile, is the number two firm in chlamydia/gonorrhea and cervical cancer cytology but has no HPV presence. As a result, BD, Lawson said, "should be seriously considering its options in HPV testing."

Qiagen, the market leader in HPV testing along with a "multitude of options in their expansive molecular diagnostic franchise," and Cepheid with its expansion into women's health and STD testing, would be acquisition targets for BD, he said.

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