The last two weeks have been rife with speculation about Qiagen takeover by Thermo Fisher. The Dutch group announced that they are considering strategic alternatives after receiving several conditional, non-binding indications of interest related to its acquisition.
Qiagen provides mainly consumable kits (~90%) to healthcare providers, pharma, biotech, and academia. It is one of the few independent companies in its size to be active in both diagnostics and life sciences domains. Recent data reveals 80% of its sales are coming from North America and Europe/Middle East/Africa (EMEA) (See Figure below).
Qiagen’s global patent portfolio reveals a primary interest in the US, Europe followed by the Asian markets - Japan, Australia, and China (see Figure below). Missed revenue targets in recent times, restructuring around the Illumina deal, and weak outlook of China-based business has led to speculation surrounding its future. Here we discuss briefly Thermo Fisher and some other companies that may be interested in acquiring Qiagen.
The following entities were shortlisted based on patent portfolio similarity, revenue and market relevance: 1) Roche Holding 2) Thermo Fisher Scientific (Life Technologies, Affymetrix, Invitrogen, etc.), 3) Hologic, 4) GSK, 5) Illumina, 6) Agilent, 7) Merck, 8) GE Healthcare, 9) Abbott, 10) Becton Dickinson (BD), 11) Bio-Rad, 12) Novartis, 13) Siemens Healthineers, and 14) Danaher. Ten of the Fourteen companies are US-based. GSK, Siemens Healthcare, Novartis and Roche are headquartered in Europe (See Figure below).
The shortlist includes entrenched players as well as buyers who may be looking to expand their footprint in the diagnostics and life sciences space via the acquisition. The shortlisted companies were further segmented into three groups based on their patent portfolio, global revenue in the year 2018 and synergy to Qiagen’s portfolio (See Figure below).
Group 1 companies have a relatively low market cap and focused patent portfolio. Bio-Rad, Hologic and Illumina are amongst the companies comparable to Qiagen both in terms of patent portfolio and market cap. A merger between these companies will see significant consolidation in portfolio and revenue. Qiagen and Illumina have recently signed a 15-year deal on developing next-generation sequencing (NGS) tests which will result in Qiagen dropping future development into NGS instrumentation and focusing on NGS kits. Further, Illumina has an ongoing investigation by the UK Competition and Markets Authority on its planned acquisition of Pacific Biosciences. Agilent sells instrumentation, software, and consumables spread across the diagnostics and life sciences markets. Agilent and Illumina each hold 6 approved nucleic acid-based companion diagnostic tests. Qiagen holds 7 approved tests that are PCR-based kits for cancer detection.
Group 2 companies have a lower market cap and less diverse patent portfolio compared to the Group 3 companies. Thermo Fisher has been part of the Qiagen acquisition discussions. The company’s largest acquisition till date is the Life Technologies purchase for $13.6 billion in 2014. If Thermo Fisher were to indeed acquire Qiagen it will become one of its largest acquisitions in recent times. Danaher and BD also have strong synergies based on their focus on diagnostics and life sciences. Finally, Siemens Healthineers and GE healthcare may be interested in Qiagen’s diagnostics and life sciences business following their separation from Siemens and General Electric, respectively.
Group 3 represent entities with relatively large market cap and consolidated holdings who may be interested in acquiring Qiagen for strengthening one of their subgroups/divisions. Amongst these, Roche and Abbott have a strong synergy with Qiagen’s portfolio. Roche and Abbott each have 14 approved nucleic acid-based companion diagnostic tests.
It is estimated that 70-90% of M&A transactions do not deliver the promised value. Matching the needs of a buyer with a potential target is key for success of both parties. Analyzing disparate sources of information such as financials, business (partnerships, product pipeline, etc.), regulatory approvals, clinical trials, and patent information is critical in an M&A situation to assess your options and avoid costly mistakes.
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