TWO ACQUISITIONS FURTHER consolidated the clinical laboratory testing industry in recent weeks. The acquired companies were Sequenom and Cepheid.
Sequenom went first. On July 27, Laboratory Corporation of America announced an agreement to acquire Sequenom for a purchase price of about $371 million.
It was Cepheid’s turn next. Just 11 days later, on Sept. 6, Danaher Corporation disclosed an agreement calling for it to pay approximately $4 billion to buy Cepheid.
San Diego-based Sequenom had revenue of $120 million in 2015. It offers proprietary tests in the women’s health and oncology markets. Founded in 1994, the company has struggled financially in recent years. It says it expects about 170,000 accessions for non-invasive pre-natal testing (NIPT) in 2016.
LabCorp Shifts Its Test Mix
For LabCorp, the acquisition of Sequenom adds higher-cost proprietary assays to its test mix. Both of the two national laboratory companies are working to increase the proportion of reference, specialty, and esoteric tests they perform. This is important because of the expected multi-year price cuts that the federal Centers for Medicare & Medical Services is expected to implement to the high-volume, automated tests on the Medicare Part B clinical laboratory fee schedule beginning in 2018.
Cepheid is a different company than Sequenom in the respect that it manufactures and sells molecular testing systems to clinical laboratories and research programs. It is profitable and has grown at a steady pace in recent years, in the range of 8% to 9% per year. Based in Sunnyvale, Calif., Cepheid posted revenue of $538 million in 2015. The company is on track to increase annual revenue to $618 million this year.
Danaher Builds IVD portfolio
By acquiring Cepheid, Danaher adds to its existing portfolio of in vitro diagnostic (IVD) companies. It already owns Beckman Coulter Corporation, AC Sciex, Radiometer, HemoCue, and Leica Microsystems. Danaher now ranks as the world’s fourth largest IVD company, with approximately $5 billion in annual revenue from its IVD businesses.
Another reason Danaher may have been interested in Cepheid is its product line for point-of-care and near-patient infectious disease testing. Hospitals are putting more effort into managing hospital-acquired infections and using lab testing to support better utilization and stewardship of antibiotics.
Both acquisitions continue the trend of consolidation, which means the largest companies continue to get bigger.