GenMark Shares Surge After Roche Announces $1.8 Billion Deal for Molecular Test Maker
Shares of GenMark Diagnostics surged nearly 30% on Monday, after Roche Holdings said it would buy the U.S. maker of diagnostic tests in a $1.8 billion deal.
The Swiss drug manufacturer said it would pay $24.05 for all shares outstanding of GenMark in a deal that is expected to close in the second quarter of 2021. That represents a 30% premium over GenMark’s closing price of $18.50 on Friday.
The merger agreement, which is subject to regulatory approval, has been unanimously agreed by both boards. GenMark will continue its principal operations in Carlsbad, California.
GenMark makes molecular diagnostic tests that can detect multiple pathogens from a single patient’s sample. Those can speed up both identify the infection’s cause and a suitable treatment.
“Acquiring GenMark Diagnostics will broaden our molecular diagnostics portfolio to include solutions that can provide lifesaving information quickly to patients and their healthcare providers in the fight against infectious diseases,” said Roche Diagnostics Chief Executive Thomas Schinecker in a statement.
“Their proven expertise in syndromic panel testing provides faster targeted therapeutic intervention, resulting in improved patient outcomes and reduced hospital stays, and will contribute to Roche’s commitment to helping control infectious diseases and antibiotic resistance,” he added.
GenMark’s respiratory pathogen panels identify the most common viral and bacterial organisms linked to upper respiratory infection, including SARS-CoV-2. It will complement Roche’s portfolio of Covid-19 diagnostics solutions, the company said.
It may also give shares a boost, as Roche’s ended last year down 1.5%, while GenMark’s surged 203%.
It’s a deal that makes sense, said a team of analysts at UBS, led by Michael Leuchten: “The acquisition adds testing menu (multiplex tests) and also broadens Roche’s reach into hospitals when at the moment the majority of its diagnostics business is focused on centralized labs.
“As the Covid-19 pandemic has forced an increase in testing capacity/installed testing base and as at some point this capacity needs to find other use, having a broader presence in hospitals (that may chose to do more testing in-house) makes strategic sense in our view,” said the UBS team, which rates Roche neutral.
Roche was nearly net cash at the end of 2020, and would have managed that had it not been for pandemic-induced working capital increases, said Leuchten. As dividend yields are already “decent,” and buybacks not so straightforward, they expect possibly further capital put to use in diagnostics as well as pharma.
The deal echoes similar past tie-ups. In 2016, healthcare conglomerate Danaher bought Cepheid in a $4 billion deal. Cepheid got emergency approval in March 2020 to market a speedy Covid-19 test. Danaher shares climbed 44% last year.
A year ago, lab tools group Thermo Fisher Scientific attempted to buy Dutch molecular testing and diagnostic group Qiagen for $11.5 billion, but the deal fell apart after the U.S. company failed to get enough shareholder support.
