LabCorp inks $150M takeover of Myriad Genetics autoimmune testing unit

Dive Brief:

LabCorp has struck a deal to buy Myriad Genetics' autoimmune testing business for $150 million.
The autoimmune business provides the Vectra rheumatoid arthritis assay. LabCorp already handles a "meaningful portion" of Vectra tests, leading analysts at William Blair to predict the acquired assets will be "relatively straightforward to integrate."
LabCorp discussed M&A last week, outlining plans to use the up to $2 billion in free cash the company expects to generate this year to strengthen its businesses through acquisitions.

Dive Insight:

LabCorp highlighted longer-term trends in its explanation of the takeover. To date, more than 1 million Vectra tests have been performed and, with CDC forecasting growth in doctor-diagnosed arthritis in the U.S., LabCorp expects use of the assay to rise in the coming years.

The assay, which came to market in 2010, is a blood-based test that analyzes 12 biomarkers such as IL-6 and CRP to give an objective measure of disease activity on a 100-point scale. Researchers have shown the score correlates with disease activity. Remission based on the score significantly predicts radiographic non-progression, enabling physicians to monitor patients using a blood test.

At LabCorp, Vectra will slot into an existing range of in-house tests. LabCorp already sells tests for markers such as anti-CCP and the 14-3-3 eta protein that are used to diagnose rheumatoid arthritis and identify patients whose condition is likely to deteriorate rapidly. Brian Caveney, president of LabCorp Diagnostics, said in a statement the goal is to be a "single-source diagnostics solution for RA providers."

LabCorp has the financial firepower to bolster other parts of its business in the coming months. Last week, LabCorp raised its free cash flow outlook for the year by $100 million on the top and bottom end. The revision, which reflected growing confidence in the non-COVID-19 diagnostic business, puts LabCorp on track to generate $1.8 billion to $2 billion in free cash this year.

Some of the money will support share repurchases but LabCorp CFO Glenn Eisenberg has also talked up "a strong pipeline of M&A transactions." The William Blair analysts expect the pipeline to deliver more deals that position LabCorp to counter falling COVID-19 sales.

"While $150 million is a relatively small deal, it is a nice start to offsetting some of the material drop-off in COVID revenue that we anticipate in 2022. The company has enough capacity to complete additional similarly sized deals (or larger) in 2021, and we believe this is likely not the last '2022 estimate-increasing' corporate action to take place this year," the analysts wrote.