The rumour that Thermo Fisher Scientific is considering buying beleaguered diagnostics group Qiagen has been circulating for a week now. But no definite bid has emerged, and with Qiagen stating that it is fielding offers from several groups it is worth considering the other players that might have an eye on the same prize.
Another decent prospect for acquirer is Siemens Healthineers. Since splitting from its parent the German group has increased bandwidth for M&A and a stated intention to strike tuck-in deals. Buying Qiagen would allow Healthineers a foothold in the fast-growing molecular diagnostic market and boost its overall in vitro diagnostics sales by 17%. But there are other possibilities too, as the analysis below shows.
Qiagen’s diagnostics business is growing fast, and its overall top line is forecast to increase by a respectable 8% a year out to 2024. But it has had a turbulent time this quarter and setbacks including the departure of its longstanding chief executive have left it vulnerable to a takeout (Storm-tossed Qiagen plots a course to higher growth, October 8, 2019).
The underlying business is nevertheless attractive. Around 90% of its sales come from consumables, locking in customers to repeat orders, and of the companies that play in both molecular diagnostics and life science it is one of the last remaining in its size bracket, meaning it could be absorbed reasonably easily by several of the larger players.
In terms of its IVD sales, Thermo Fisher is the smallest of the putative buyers. Adding Qiagen would boost its sales of test products by 43%. It has a definite interest in the life sciences sector too, having in June acquired Highchem, whose mass spectrometry software is used by pharma companies to analyse data and identify small molecules.
|Qiagen and its potential buyers|
|WW annual sales ($bn)|
|Qiagen||In vitro diagnostics||0.79||0.89||+11%|
|Total medtech & healthcare supply||1.6||1.7||+8%|
|Thermo Fisher Scientific||In vitro diagnostics||3.4||3.4||+3%|
|Total medtech & healthcare supply||3.7||3.7||+3%|
|Siemens Healthineers||In vitro diagnostics||4.6||4.8||+4%|
|Total medtech & healthcare supply||16.0||16.7||+4%|
|Danaher||In vitro diagnostics||6.5||6.9||+5%|
|Total medtech & healthcare supply||16.2||18.9||+7%|
|Agilent Technologies||In vitro diagnostics||0.51||0.52||+2%|
|Total medtech & healthcare supply||5.1||5.5||+6%|
Both the molecular diagnostics and life sciences angles could appeal to Healthineers. So far the company’s interest in IVDs has been mostly expressed as an investor, with the corporate VC arm of pre-Healthineers spinout Siemens having backed diagnostics developers Seventh Sense Biosystems and Stat-Diagnostica. Siemens did buy Luxembourg-based Fast Track Diagnostics at the start of 2018.
But these deals are much smaller than any purchase of Qiagen would be. The more recent $1.1bn acquisition of Corindus shows that Healthineers is open to bigger deals, but might have depleted its reserves for now ($1bn Corindus deal gets Healthineers off the acquisition blocks, August 8, 2019).
Other players in this space might be interested. Danaher and its much smaller peer Agilent Technologies both have diagnostics and laboratory services segments, and as such might be at greater risk of running foul of antitrust regulators.
However, Qiagen is no longer as cheap as it was. Speculation late last week that a buyer will step forward has driven the share price up, from its three-year low of $27 in mid-October to its current $41 range – not far off its all-time high of $41.39 in April of this year.
The sellside differs when it comes to their expectations for any acquisition bid. Bernstein analysts think a purchase price could range from $40-45 per share, whereas those at Berenberg are more optimistic, expecting an offer to come in at around $47-50. Watch this space.