Dive Brief:

• Prenetics will merge with a special purpose acquisition company (SPAC) in a deal that values the company at $1.25 billion to step up its attack on markets targeted by companies including 23andMe, Exact Sciences and Invitae.
• Hong Kong-based Prenetics will be publicly traded in the U.S. market as part of the merger. The company, which is set to pocket $459 million through the deal, is looking to expand in markets including consumer genetics, colorectal cancer screening and COVID-19 travel testing to grow sales from $65 million last year to $640 million in 2025.
• Acquisitions are a key part of the strategy, with Prenetics pointing to how Exact Sciences and Invitae grew through bolt-on takeovers to show how it plans to raise its value using the SPAC funding. The combined entity following the merger is valued at $1.7 billion, and the combined companies will be traded on the Nasdaq under the symbol "PRE," according to the announcement. The deal is expected to close in the fourth quarter of 2021 or the first quarter of 2022.

Dive Insight:

Prenetics is one of a number of diagnostics companies catapulted forward by the pandemic. In 2019, Prenetics' sales totaled $9 million, all of which came from the disease prevention side of its business. Prevention sales ticked up to $14 million last year but the big change was the creation of a COVID-19 testing business. 

The COVID-19 business pulled in $51 million last year and $54 million in the first quarter of 2021 as Prenetics benefited from its laboratories at airports in Hong Kong and the U.K., and its role as testing partner to the English Premier League soccer teams.  

While some COVID-19 testing companies have seen sales fall as the virus is brought under control, Prenetics expects its presence at airports to enable it to benefit from increased travel as societies get back to pre-pandemic habits. Prenetics is forecasting its COVID-19 screening sales to stay elevated until 2023.

By then, Prenetics expects its other businesses to have started growing, enabling it to weather the loss of COVID-19 sales without suffering a dip in overall revenues. Circle HealthPod, a home testing system that Prenetics compares to Cue Health's product, is key to the post-pandemic growth plan. Prenetics has already launched the device in Hong Kong. Talks with potential European partners are underway. In the U.S., Prenetics is aiming to win emergency use authorization early next year.

"Every single household should have a HealthPod because the next time you or your family have a cough, fever or sore throat, you certainly want to test yourselves for COVID to protect yourself and your colleagues," Prenetics CEO Danny Yeung said on a call with investors to discuss the merger.

Cue Health, Quidel and others are placing similar bets on the rise of at-home testing.

Yeung also highlighted other use cases such as hospitals and clinics, hotels, apartments, schools, sports and entertainment. In that regard, Yeung sees synergies with the activities of Adrian Cheng, the Hong Kong businessman that set up the SPAC Prenetics is merging with.

Other products Prenetics expects to grow in the coming years include consumer genetic test Circle DNA, colorectal cancer screening kit ColoClear, annual at-home health check Circle SnapShot and genetic test Circle Medical. Companies such as 23andMe, Exact Sciences, Everlywell and Invitae are active in each of the targeted areas, but Prenetics framed the incumbents as examples of how big it can grow rather than impediments to its plans.

That framing partly reflects Prenetics' plans to target ex-U.S. markets. For example, the initial goal for ColoClear is to replicate the success Exact Sciences' Cologuard has achieved in the U.S. in Hong Kong and other parts of Southeast Asia. Similarly, Prenetics initially plans to grow sales of Circle SnapShot and Medical in Asia and Europe, rather than go head-to-head with Everlywell and Invitae in the U.S.