CEO SUMMARY: In an announcement released before the end of 2021, Quidel said it had signed an agreement to acquire Ortho Clinical Diagnostics (OCD) for $6 billion. Laboratories that are customers of either company should expect changes after the deal closes as Quidel moves to integrate OCD. One IVD expert says Quidel will become more prominent in chemistry, immunoassay, and immunohematology product lines.
ONCE AGAIN, A BIG IN VITRO DIAGNOSTICS (IVD) COMPANY WILL GET BIGGER because of an acquisition. This time, it is Quidel Corporation, which announced on Dec. 23 that it had a definitive agreement to acquire Ortho Clinical Diagnostics.
Quidel, a San Diego-based company and developer of point-of-care (POC) diagnostics and rapid testing, plans to buy Ortho Clinical Diagnostics in Raritan, N.J., for $6 billion. Quidel said “the transaction is expected to close during the first half of fiscal year 2022, subject to customary closing conditions.”
Clinical laboratories that use Ortho Clinical products should anticipate possible changes in customer support, sales, and marketing later in 2022, once the merger is final and Quidel can begin to consolidate the two companies and integrate their product lines and support teams.
Another significant fact about this acquisition is that it continues the trend of consolidation in the IVD industry. Since the 1990s, larger IVD corporations have regularly bought up small and mid-sized IVD companies as a way to grow. Often these acquisitions conveniently removed a competitor from the marketplace or allowed the acquiring company to gain access to patients and proprietary technology that they believed they could use to good advantage with their own product mix of instrument systems and test kits.
“The transaction is not unexpected. Quidel—with its windfall revenue from COVID-19 testing—has the resources to fill out its product offerings,” said Lawrence Worden, Principal at IVD Logix in Dallas, in an exclusive interview with The Dark Report. “The benefit to Ortho Clinical is that its merger with Quidel gets them into other markets, including immunohematology, in a big way.”
Two Growing Companies
The deal highlights a case of two similarly-sized companies combining their arsenal. Ortho Clinical provides hospitals, clinical labs, and blood banks worldwide with technology and tests. The Dark Report (TDR) ranked Ortho Clinical 11th on its list of the world’s top 11 IVD companies in 2020. (See TDR, “2020 Rankings of the World’s Largest IVD Corporations,” Sept. 7, 2021.)
In recent reporting about IVD companies’ record sales in 2021, we noted Ortho Clinical’s revenue was $508.9 million in the third quarter, up 13.2% from Q3 2020. (See TDR, Dec. 20, 2021.) By comparison, Quidel’s Q3 2021 revenue was $509.7 million, up 7% from the prior year, according to an earnings report.
The combined company will have work to do if it wants to challenge other top IVD firms, Worden said. “While Quidel will have access to chemistry, immunoassay, immunohematology, and other markets Ortho Clinical serves, it is not in a fully-competitive position with some of the top IVD companies.”
Worden added that Ortho Clinical Diagnostics, with its patented dry-slide technology, has served “low- to moderate-size accounts” in the chemistry and immunoassay markets. In a presentation to its investors, Quidel noted the deal presents a $50 billion market opportunity after the acquisition—including $23 billion in POC services, $25 billion from automation in clinical labs, and $2 billion in transfusion medicine.
In that presentation, Quidel listed reasons why the acquisition was desirable:
- Improved global reach.
- A broad portfolio to meet testing needs at all points of the care continuum, such as reference labs, hospitals, physicians’ offices, and retail locations.
- Enhanced research and development opportunities.
Seventh Largest IVD Vendor
The combined company envisions becoming the seventh largest IVD vendor. In the investors presentation, Quidel noted $3.9 billion in Q3-2021 revenue for the trailing 12 months (TTM), which reflected a combination of $1.9 billion in Quidel Q3-2021 TTM revenue and $2 billion in Ortho Clinical Q3-2021 TTM revenue.
“We expect the combined company will emerge as a global player with top-tier research and development capabilities, a more diverse product pipeline, and a broader geographic footprint,” said Douglas Bryant, Quidel’s President and CEO, in the news release. Bryant will serve as CEO at the combined company.
Plans for Ortho Clinical
The deal is aimed at uniting technologies and platforms related to clinical chemistry, immunoassays, molecular diagnostics, immunohematology, donor screening, and POC services, according to the company.
“Quidel will have the ability to bundle more products together to penetrate laboratories that they may not have been able to compete in previously,” Worden said. “Having a fuller product line is always going to be a benefit in a competitive process. For example, there may be an opportunity for Quidel to bundle its technology on a bench in the lab with chemistry or other Ortho Clinical offerings.”
A report by Reuters said the acquisition is an indicator of ongoing growth in the diagnostics market, particularly because demand for COVID-19 testing continues. Reuters further noted that, on a call with analysts, Quidel shared expectations that its Savanna PCR test (for diagnosis of two types of influenza and COVID-19) had strong prospects for growth as a result of Ortho-Clinical’s international market.
As with all large corporate acquisitions, the companies involved will take time to figure out combined services and overlaps. Customers of Quidel and Ortho Clinical should expect changes in how products are sold, and potential new reps to deal with within sales and marketing at the combined entity.
As Worden notes, most of the larger IVD corporations are flush with cash, generated by the still-surging demand for automation, analyzers, primers, and test kits used for SARS-CoV-2 testing. Because of that, there may be more acquisitions within the diagnostics sector that further consolidate the IVD industry.
That may also prove true in the developing market for artificial intelligence-powered tools for analyzing digital pathology images. One or more of the bigger IVD companies may do such an acquisition to acquire that technology.
Contact Lawrence Worden at email@example.com.
At-a-Glance: Quidel, Ortho Clinical
HERE’S A BRIEF LOOK at the companies involved in Quidel’s purchase of Ortho Clinical Diagnostics:
- CEO: Douglas Bryant
- Founded: 1979
- Industry: In vitro diagnostics
- Revenue: $1.7 billion for 2020
- Core products: Cardiac immunoassay; rapid immunoassay; specialized diagnostics, such as direct fluorescent antibodies; molecular diagnostics
- Market reach: Installation of 70,000 Sofia analyzers for immunoassay testing as of March 2021
Ortho Clinical Diagnostics
- CEO: Chris Smith
- Founded: 1939
- Industry: In vitro diagnostics
- Revenue: $1.8 billion in 2020
- Core products: Digital chemistry systems; immunodiagnostics systems; transfusion medicine instruments
- Market reach: Installation of 20,000 instruments
Several Blockbuster IVD Acquisitions Brought Significant Changes to Clinical Lab Marketplace
WHEN QUIDEL COMPLETES ITS ACQUISITION OF ORTHO CLINICAL DIAGNOSTICS later this year, the $6 billion deal will be one of the largest purchases involving an in vitro diagnostics (IVD) company in recent years.
It was in the 1990s when large IVD corporations began to use acquisitions as a way to grow, to add missing products to its offerings, and to acquire diagnostic technology and patents. An added benefit was that these consolidations often removed a pesky competitor.
The first of the two biggest IVD consolidation deals of the 1990s happened in May 1997 when Roche Holdings acquired Corange Ltd., parent company of Boehringer Mannheim. Roche paid $11 billion and, once the deal closed, eclipsed Abbott Laboratories as the world’s largest diagnostics company, a position it still holds today. (See TDR, “Roche Holdings, Ltd. Acquires Behringer Mannheim in Merger,” June 2, 1997.)
Another blockbuster IVD consolidation deal happened just months later. On Sept. 3, 1997, Beckman Corporation announced its acquisition of Coulter Corporation. Beckman paid $1.5 billion and, post-aquisition, the company was renamed Beckman Coulter Corporation. (See TDR, “Lab Market Trends Drive Beckman-Coulter Deal,” Oct. 6, 1992.)
Similarly, Siemens, a huge global player in radiology and imaging, used acquisitions to enter the IVD market in a big way. On April 27, 2006, it spent $1.86 billion to buy Diagnostics Products Corporation (DPC), closing the sale on June 28. (See TDR, May 22, 2006.)
Then, a day later, Siemens disclosed a deal to pay $5.21 billion to buy Bayer Diagnostics from Bayer Healthcare AG. (See TDR, July 3, 2006.)
The following year, on July 25, 2007, Siemens acquired Dade Behring in a deal priced at $7 billion. (See TDR, Aug. 6, 2007.) These three acquisitions cost Siemens $14 billion and immediately positioned it with Roche and Abbott Laboratories as one the world’s three largest IVD corporations.