Dive Brief:

• Wall Street analysts are pouring cold water on a Bloomberg report that point-of-care diagnostics company Quidel is in preliminary discussions to combine with molecular test maker Qiagen. Bloomberg cited sources familiar with the matter who asked not to be identified.
• The report said Quidel approached Qiagen to gauge interest in a potential deal as it faces "long-term growth concerns" with the inevitable decline in COVID-19 testing demand. Qiagen has been mentioned in other takeover speculation ever since Thermo Fisher Scientific's failed $11.5 billion acquisition of the Netherlands-based company fell through in August.
• Both firms would not comment on rumors but Quidel CEO Doug Bryant went a bit further: "As we've said on many occasions, we continue to look at opportunities that would leverage our global infrastructure, or that contribute to our interest in digital and telehealth. Further we've said that we will not enter into an agreement that isn't an obvious strategic fit. Beyond that, we will not comment on rumors and will not comment further."

Dive Insight:

Quidel and Qiagen have both benefited enormously from strong demand for COVID-19 testing. Quidel announced last month it expects revenues in the fourth quarter of 2020 to be in the range of $808 million to $810 million, up from $476 million in the prior quarter.

Similarly, Qiagen announced in December that it has raised its full-year 2020 outlook for growth of net sales and adjusted earnings per share and is "looking forward to another strong performance" in 2021.

Quidel developed and manufactured one of the first PCR assays to meet the growing demand for COVID-19 testing, with its Lyra assay getting an FDA EUA in March. Yet, the most significant development in 2020 was the company’s rapid point-of-care antigen test which in May became the first such diagnostic to get an FDA nod.

Still, Quidel's longer term growth prospects could be impacted with the roll out of vaccines and the potential for less demand for testing.

Nonetheless, several Wall Street analysts said the deal makes no sense from several angles.  

Craig-Hallum analyst Alex Nowak wrote in a Tuesday note that while a mashup would be a "surprise" the "plausible, though far-fetched" combination would potentially create a global diagnostics company merging Quidel's antigen and Qiagen's molecular test capabilities. However, Nowak said that besides the obvious size deferential between the two companies, there are "plenty of questions" about the wisdom of a potential deal.   

Nowak points out that Quidel "has been hitting the cap" of its supply chain ever since the pandemic began and that if Qiagen could help increase manufacturing capacity, either through reagents, swabs or other testing supplies, it could potentially speed up Quidel's ramp-up.

But he noted in addition to the "lack of obvious revenue or operating synergies" in a potential Quidel-Qiagen combo, Qiagen is more of a life sciences company that specializes in supplying raw materials, reagents and assays for molecular analysis with a "diagnostics tilt."

William Blair analysts similiarly quashed the sense of a deal.

"After playing out all the scenarios we could come up with, we became confident that this made no sense and this was confirmed by Quidel," citing Bryant's statement, William Blair's Brian Weinstein wrote.

"There was no scenario we came up where a combination of the different call points, geographies, salesforces, and perhaps most importantly, two extraordinarily different cultures would lead to synergy," Weinstein continued.

Qiagen is set to release its fourth quarter and 2020 financial results today and hold an investor conference call on Wednesday. Quidel on Feb. 18 will report its fourth quarter and full-year 2020 results.