Lab Market Update

Surprisingly Low Price Paid for Miraca’s AP Lab Is a Warning

Buyer’s low-ball offer is market signal to pathology groups, other labs looking to sell

EVEN INTO THE MID 1980s, coal miners used canaries as an early-detection system for the presence of carbon monoxide and other toxic gases. In this way, canaries served as a sentinel species to save miners’ lives.

Clinical laboratories and pathology groups don’t have a sentinel species to warn them about trouble ahead, but they do have a sentinel event: the recent sale of Miraca Life Sciences for $175.6 million, including $40 million in debt the buyer is acquiring.

On Sept. 22, Avista Capital Partners purchased Miraca Life Sciences from Miraca Holdings, a Japanese company. The surprisingly low price is almost $500 million less than Miraca paid just six years ago! This is a signal that the market is reducing the price it is willing to pay for anatomic pathology groups and clinical lab companies. Pathologists and lab owners looking to sell their AP practices or labs may find prices are sharply lower today compared to even a few months ago.

The reason: the multi-year sharp declines in the reimbursement for clinical and anatomic pathology testing services, compounded by the prospect of much steeper-than-expected cuts to the final 2018 Medicare Part B Clinical Laboratory Fee Schedule as published by Medicare officials last Friday.

Today, Miraca Life Sciences is one of the nation’s largest independent anatomic pathology laboratories. MLS serves 3,000 physicians and 5,500 patients each day.

Some lab professionals expected that the lab would be worth a much higher price, given that Miraca Holdings purchased MLS for $725 million just six years earlier. In October 2011, Miraca Holdings Inc., Japan’s largest clinical diagnostics and laboratory testing company, agreed to pay Caris Life Sciences $725 million, including the repayment of the existing debt.

A ‘Major Chop Job’

“When you consider that Miraca sold MLS for $175.6 million after paying $725 million to buy the company in 2011, that’s a major chop job to that investment,” stated Joseph Plandowski, co-founder of In-Office Pathology, a consulting firm in Lake Forest, Ill., that works with physicians to develop their own in-house pathology, toxicology, and immunology clinical labs.

“In just six years, the market value of Miraca Life Sciences fell by almost onehalf billion dollars,” observed Plandowski. “One big reason why the price for MLS is so much lower today is that CMS has aggressively cut what it pays for lab testing services,” explained Plandowski. “The other factor is that competition among pathologists and independent labs is tough and getting tougher.”

Contact Joe Plandowski at 847-840-3077 or iopathology@gmail.com.

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