Hologic Inc. continues to strengthen its diagnostics businesses via tuck-ins, this time with the acquisition of Diagenode SA for $159 million. The Belgium-based developer of molecular assays and epigenetics products counts more than 30 real-time polymerase chain reaction (PCR) tests in its portfolio.
Marlborough, Mass.-based Hologic has been on a spending spree in recent months. In January, the company completed the acquisition of Somatex Medical Technologies GmbH for about $64 million and agreed to buy molecular diagnostics company Biotheranostics Inc. for $230 million. Somatex, which is based in Berlin, makes minimally invasive devices for tumor diagnostics, biopsy and interventional specialties. Biotheranostics has developed two PCR-based cancer diagnostics, the Breast Cancer Index and the Cancer Type ID.
The flurry of activity underscores the Hologic’s current strength and momentum in diagnostics. In the first quarter of fiscal year 2021, molecular diagnostics sales surged 457.6% to $995.3 million, as the company ramped up production to meet growing demand for its two SARS-CoV-2 assays that run on the fully automated Panther and Panther Fusion systems.
Broad menu of tests
Headquartered in Liège, Belgium, and with a subsidiary in Denville, N.J., Diagenode offers CE-marked tests for the detection of bacteria, parasites and viruses involved in sexually transmitted diseases, respiratory infections, meningitis and gastroenteritis. The company previously worked with Hologic to develop Panther Fusion assays for group B Streptococcus and Bordetella.
Additionally, Diagenode has a presence in epigenetics – with devices, kits, reagents, antibodies and services to assist in analyzing DNA and RNA.
“Acquiring Diagenode further strengthens our molecular diagnostics business by expanding our international capabilities, improving our regional time-to-market and allowing us to offer a broader, more differentiated test menu,” said Jan Verstreken, Hologic’s group president, international. Partners since 2016 in developing and manufacturing PCR-based assays for Panther Fusion, “now we look forward to accelerating and broadening those efforts to benefit our customers and patients.”
Founded in 2003, privately held Diagenode generated more than $40 million in revenue in the past 12 months. The acquisition is expected to break even with Hologic’s non-GAAP earnings per share through 2022, and be accretive thereafter.
“Our businesses are highly complementary, and we are excited that Hologic’s commercial resources and leadership in molecular automation will enable us to offer our assay menu more broadly,” said Didier Allaer, founder and CEO of Diagenode. “Being part of Hologic will help scale our products to their full potential.”
The acquisition closed March 1. Diagenode will operate as part of Hologic’s diagnostics business.
The robust diagnostic sales have given Hologic money to reinvest. Within molecular diagnostics, COVID-19 revenue reached $472 million in the first quarter of FY 2021, representing 145% organic growth. Of that, about one-third stemmed from outside the U.S. , primarily in Europe. Revenue from cytology and perinatal diagnostics also increased, growing 3.1% year over year to $124.8 million.
During last week’s virtual SVB Leerink Global Healthcare Conference, Hologic CFO Karleen Oberton said the cash and COVID-19 have strengthened the company for the future. “I think one of the great things we’ve been able to do is not only maintain our R&D activities over the past year, but actually accelerate given the profitability from COVID….And it’s allowed us to cast a wider net from an M&A perspective.
Steven MacMillan, Hologic’s chairman, echoed that theme on March 1.
Positioning for post-COVID growth
“The acquisition is consistent with our tuck-in M&A strategy, leverages our automation capabilities and provides attractive growth potential,” he said. “And combined with our recent purchase of Biotheranostics, it enables us to continue strengthening our base diagnostics business to accelerate growth post-COVID.”
During the virtual Raymond James & Associates Investors Conference on March 1, Hologic’s Michael Watts, head of investor relations, underscored some of the key benefits of the Diagenode deal. “They, for example, are big in transplant viral tests, in HAIs [hemagglutination inhibition], in syndromic panels, in addition to doing things like in women's health, like herpes and other things. So a very broad menu,” he said. “The driver here is really the opportunity to port that menu over onto Panther Fusion to accelerate the growth there.”
The acquisition not only diversifies Hologic’s assays portfolio but also broadens its customer base, as many of Diagenode’s tests are used in the acute care setting, Watts noted. Further, Diagenode has a “lower-volume” system that many of its tests run on, which “could slot in potentially below Panther for smaller customers.”
Hologic already has a European training center outside of Brussels. With both R&D and manufacturing capabilities at Diagenode’s Liège headquarters, and with a broad and growing installed base of Panthers, the testing giant should be well-positioned to speed new products to market in Europe.