Dive Brief:

• Roche announced on Monday a deal to buy GenMark Diagnostics for roughly $1.8 billion or $24.05 per share, the latest in a wave of M&A in the sector.
• The deal, expected to be completed during the second quarter, will give the Swiss company access to GenMark's novel technology for testing a broad range of pathogens with one patient sample. Analysts said they did not expect any antitrust issues.
• GenMark, whose competitors include BioFire, Luminex, and Qiagen, sells proprietary multiplex technology that Roche sees as a complement to its diagnostic portfolio and "addressing a broad range of infectious disease testing." William Blair analysts said Monday they expect a "massive wave" of consolidation across small- and mid-cap life sciences companies in coming quarters with "some potentially intense bidding wars."  

Dive Insight:

Roche's deal to buy GenMark is the latest in a sector off to a busy dealmaking start in 2021, boosted by the COVID-19 testing boom. Thermo Fisher Scientific announced in January that it plans to purchase point-of-care molecular diagnostics firm Mesa Biotech for $450 million. That same month, PerkinElmer said it will acquire Oxford Immunotec for about $591 million.

William Blair analysts in a Monday note said they expect there to be a "massive wave" of consolidation across small- and mid-cap life sciences companies over the coming quarters.

"By our count, there are no less than 15 companies that will be competing for assets across infectious disease, point-of-care diagnostics, precision oncology, and tools. With this many companies, all flush with cash from sales of products related to COVID-19 or through capital offerings in 2020, we would expect some potentially intense bidding wars for a growing pool of assets, both public and private," the analysts wrote.

Roche's tender offer to acquire all outstanding shares of GenMark's common stock represents a premium of approximately 43% to its closing price on Feb. 10 which it noted was the "last trading day before a media report was published speculating about a potential sale process." 

Shares of GenMark rose early last month following a Bloomberg report citing unnamed sources that it was exploring a sale after the Carlsbad, California-based company was approached by potential buyers. At the time, Cowen analyst Doug Schenkel called GenMark "an attractive takeover target for larger diagnostics companies."

Schenkel observed prior to news of the Roche acquisition that GenMark was the "only remaining publicly traded pure-play syndromic testing company of scale" and that that market "remains underpenetrated and should continue to be one of the fastest growing sub-segments within infectious disease molecular diagnostics for the foreseeable future."

William Blair analysts said the Swiss company's acquisition of GenMark will "fill a hole as it has no multiplex testing capabilities today, which is a market that has been growing over 15% annually." 

Roche said in Monday's statement that GenMark's respiratory pathogen panels identify the most common viral and bacterial organisms associated with upper respiratory infection, including SARS-CoV-2, complementing its own portfolio of COVID-19 diagnostics products.

Last month, Roche reported 28% growth in fourth quarter sales at its diagnostics division, continuing the momentum it built up earlier in 2020 as COVID-19 products began to compensate for the downturn in routine testing. The company expects demand for diagnostics to remain elevated in 2021, particularly in the first half of the year.

With PCR, antigen, antibody and IL-6 tests, Roche has products across the COVID-19 market. However, demand could change in the second half of the year as the rollout of vaccines reduces the need for testing.

"I think the first half year is very clear. This is where we have most of our ... COVID sales for 2021. And then in the second half year, we'll see how certain things develop," Thomas Schinecker, CEO of Roche Diagnostics, told investors last month.