Monday, April 30, 2012

Gen-Probe sale validates molecular future

Hologic, the "Woman's Health Company," announced today that they're betting the company on genomics.

Well, that's not exactly what HOLX announced, but practically speaking, when a $5B company with a mild amount of DX exposure decides to pay $3.75B to buy a nucleic acid testing firm (Gen-Probe), they're really betting the company on genomics.

I like the deal for both HOLX and GPRO - HOLX gets exposure to growing markets and technologies which nicely complement their core business. (Tthe combination of HOLX's focus on women's health and GPRO's HPV tests is a perfect fit.) GPRO - who's growth was slowing - gets a nice bump in valuation, and probably a good amount of independence.

It'll be interesting to see what becomes of the non-women's health applications of Gen-Probe. Will HOLX punt the cancer testing business to QGEN or Clarient (GE)? Since the deal is all-cash, HOLX might want to later de-lever by punting the cancer tests or other assets.

Two unfortunate side effects of the acquisition: Gen-Probe is/was the largest, most prominent molecular DX pure-play. With Gen-Probe losing its' independence, we're losing both a bellwether for MDX, and losing a buy-side specialist. Gen-Probe is/was in excellent position to commercialize interesting DX coming from smaller players, as is the case of their PCA3 product sourced from Diagnocure.

One other impression from the HOLX-GPRO deal: re-reading Roche's rationale for their pursuit of Illumina, it sure seems to me that Gen-Probe would have been a better fit for Roche instead of Illumina. I wonder if they'll try to top HOLX's offer. (Or maybe GE or Danaher will.)

No comments:

Post a Comment