Roche Holding AG will acquire Genmark Diagnostics Inc. for $24.05 per share in cash for a total of $1.8 billion on a fully diluted basis. The transaction will give Basel, Switzerland-based Roche access to Genmark’s molecular diagnostics portfolio. The deal is expected to close in the second quarter of 2021.
The price represents a 43% premium on the Carlsbad, Calif.-headquartered diagnostics company’s share price as of Feb. 10, prior to media speculation about a potential acquisition. At the time, Cowen Equity Research Analyst Doug Schenkel noted that Genmark was an “attractive takeover target for larger diagnostics companies as the last remaining publicly traded pure-play syndromic testing company.”
“Acquiring Genmark Diagnostics will broaden our molecular diagnostics portfolio to include solutions that can provide lifesaving information quickly to patients and their health care providers in the fight against infectious diseases,” said Thomas Schinecker, CEO Roche Diagnostics.
Acquisitions of syndromic or molecular diagnostics companies have picked up sharply in recent months as the pandemic increased awareness of the value of broad-based testing capabilities. In just February and March 2021, Hologic Inc. announced it was buying Diagenode SA, C2i Genomics Inc. bought Qna Dx LLC, Bio-Techne Corp. purchased Asuragen Inc., Agilent Technologies Inc. purchased Resolution Bioscience Inc., Oncocyte Corp. announced the acquisition of Razor Genomics, Exact Sciences Corp. bought Ashion Analytics LLC from The Translational Genomics Research Institute (TGen), Veracyte Inc. picked up Decipher Biosciences Inc., and Diasorin SpA is rumored to be weighing the purchase of Luminex Corp.
The global molecular diagnostics market is projected to reach a value of $16.32 billion by 2025, with growth boosted by the myriad diseases faced by a rapidly aging population, the rise of multi-drug resistant pathogens, and the increased need for rapid identification of infections made clear by the exponential growth of COVID-19 in waves across the globe.
Speaking to increasing concerns over infectious disease in light of the pandemic and the dwindling number of effective drugs against a number of infectious pathogens, Schinecker noted that Genmark’s “proven expertise in syndromic panel testing provides faster targeted therapeutic intervention, resulting in improved patient outcomes and reduced hospital stays, and will contribute to Roche’s commitment to helping control infectious diseases and antibiotic resistance. The rapid identification of bloodstream infections and the detection of antimicrobial resistance genes are more essential than ever for hospitals and their patients.”
Genmark’s syndromic panel testing portfolio will build out Roche’s current offerings. Demand for Genmark’s Respiratory Pathogen Panels, which identify common viral and bacterial organisms responsible for many upper respiratory infections, including SARS-CoV-2, will complement Roche’s COVID-19 diagnostics. On the flip side, the much larger Roche network will enable greater distribution of Genmark’s tests.
The benefit of greater exposure was obvious to Genmark’s executive team. “As a part of Roche, we can accelerate our mission to enable rapid diagnosis of infectious disease to improve patient outcomes. Together with Roche’s diagnostics health care solutions, we will be able to provide a full suite of molecular diagnostic solutions to customers around the world,” said Scott Mendel, CEO of Genmark Diagnostics.
Genmark benefited from its position as a diagnostics leader throughout 2020, with the pandemic leading to a 155% increase in year-over-year revenues from its Eplex testing, according to the company’s fourth quarter earnings release. At $152.6 million, Eplex accounted for nearly 90% of the company’s total 2020 revenues.
Roche stands likely to benefit even more. “An acquirer with more operational/manufacturing prowess should unlock value by meaningfully improving [Genmark’s] margin profile,” said Schenkel. “It’s worth noting that many of the larger diagnostics companies are flush with cash due to COVID-19 tailwinds. The timing would also make sense, as we expect [Genmark] revenue to grow robustly for the foreseeable future, especially after accelerated instrument placements in the COVID-19 environment – a future acquisition could be pricier.”
Genmark will continue to operate out of its California location after the acquisition, the companies said.