NEW YORK – Diagnostics industry stakeholders are looking toward 2025 for larger mergers and acquisitions as 2024 ends with more of a whimper than a bang.
Only 20 full-company mergers or acquisitions were announced or completed in 2024 – significantly below the COVID-19 pandemic-fueled boom years of 2020 or 2021 and continuing a slowdown trend first begun in 2022. The size of 2024's deals remained low, with none topping $1.0 billion, although two deals worth more than $500 million occurred in the second half of the year: Quest Diagnostics' purchase of Canadian laboratory firm LifeLabs for about C$1.35 billion (US$937 million) in July and Tempus AI's $600 million buy of Ambry Genetics in November.
When including asset acquisitions, the number of transactions rises to 37 for the year, led largely by Laboratory Corporation of America and Quest Diagnostics snatching up outreach laboratory assets from regional health systems or testing assets from larger firms like Invitae and Opko Health subsidiary BioReference Health.
Despite many companies removing COVID-19 testing from their revenue expectations over the past year, COVID-19 is still impacting the diagnostics M&A market, according to Christoph Brandenberger, managing director at investment bank Brown Gibbons Lang & Company.
Venture capital activity and company valuations were particularly high during the peak of the pandemic, resulting in a "little bit of a no-limits time," Brandenberger said. However, "as [with] most crazy parties that lead to the hangover after," companies within the diagnostics market have had to recover and redefine themselves in a post-COVID-19 world. Investors and acquirers are no longer just looking for revenue growth, he said, but profitability or a path to profitability.
"The public markets have become very risk-averse," he said. "They're demanding a clear path and progress towards profitability for these high-growth companies that were allowed to go to market through [special purpose acquisition companies] during COVID and got massive valuations," he added. The largest SPAC deal in 2024 was the $340 million merger between OmnigenicsAI and MultiplAI Health.
Reimbursement is also a key area for companies to address if they're looking to get acquired, he noted. "Without reimbursement, it's going to be very hard to get sold," he said.
For an emerging growth company, profitability is not always a requirement but "you need to show … that your playbook works," he said, meaning that there must be proof that doctors will use the product and order it consistently, insurers will cover it, and that it has clinical value.
However, Brandenberger is hopeful for 2025, saying while he believes that the market hit "rock bottom" this year, people have been "sitting on their money for quite a while, [and] they need to be doing something."
"Companies have redefined their business plans going forward" and undergone corporate shake-ups to put themselves in better positions for the coming year, he added.
Agilent Technologies, Bio-Techne, and QuidelOrtho all changed CEOs this year and now that those CEOs have been in their roles for a few months, they may be willing to make moves in 2025, Brandenberger noted. The new CEOs "can turn around and look for growth again in new, emerging technologies," he said.
"I do think that we are through the valley," he said, but Brandenberger was careful to note that 2025 will likely not see "massive growth" in dealmaking. "I think we'll see moderate to nice uptick," but it "takes a while to get [the momentum wheel] to spin again," he said, adding "The machine is starting up again, but it's not fast."
Ryan Gilmore, a director at S&P Global Ratings specializing in medical devices, noted that the "regulatory uncertainty with respect to the change in the [presidential] administration" has contributed to some of the low deal volume. As Donald Trump enters office, the expected "more favorable regulatory environment" may cause deal volume to pick up, particularly for companies "that have built up a lot of cash and have pretty strong balance sheets," he added.
Patrick Bell, an associate director at S&P who covers the diagnostics industry, echoed the impact of regulatory concerns, noting that after the Federal Trade Commission's scrutiny of large deals, such as Illumina's $8 billion purchase of Grail,acquirers were more cautious about large M&A deals. Amid concerns from US and European regulators over the deal, Illumina eventually spun off Grail.
Bell particularly noted that concerns surrounding the US Food and Drug Administration's regulation of laboratory-developed tests may also have contributed to hesitance around dealmaking. If President Trump's administration walks some of those regulations back, there could "spur an increased appetite" for M&A within the diagnostics industry.
Bell also emphasized the importance of scalability for a large acquirer, noting that even if a company doesn't have a pathway to reimbursement for its product, if that product can complement the existing portfolio and be quickly scaled up to new markets it may be a worthy purchase for a large firm with more resources at its disposal like Abbott or Roche.
Key themes for 2025
The use of artificial intelligence has become a "massive theme" within the diagnostics industry and may provide an "opportunity for diagnostics to broaden the investor set that they can approach," Brandenberger said.
Gilmore echoed the emphasis on "any technology that's embedding artificial intelligence into testing solutions." There have already been transactions focused on adding AI capabilities into existing test products, such as Quest's $100 million purchase of select assets of PathAI's anatomic and digital pathology lab services business PathAI Diagnostics.
There is also significant interest in the neurocognitive disease space, driven largely by pharmaceutical companies developing drugs for Alzheimer's disease and other neurodegenerative conditions, Brandenberger said. Smaller companies like Sunbird Bio and C2N Diagnostics have received millions of dollars in funding to further development and commercialization of their tests for Alzheimer's disease, while larger firms like Beckman Coulter Diagnostics, Fujirebio, Quanterix, and Roche are developing and commercializing Alzheimer's tests of their own.
Companies developing companion diagnostics or assays that can be used for patient stratification in pharmaceutical clinical trials may also be options for acquisition, Brandenberger added.
Any companies making molecular assays may also see heightened interest as firms with large installed bases of molecular instruments could look for new tests to add to their menus, he said. Selling a platform is a harder bet, and companies trying to sell a platform rather than specific tests would need a "really convincing platform" that is "strikingly better."
Arthur Wong, healthcare managing director at S&P Global Ratings, noted that since the COVID-19 pandemic there has been more emphasis on remote care and telehealth, so anything that includes a digital component that can collect data remotely will likely "be earmarked for increased investment or interest."
Bell added that if patients are willing to pay for these tests without reimbursement from insurers, that interest could accelerate.
Top 5 Dx M&A Deals of 2024
| Buyer | Acquired | Price |
| Quest Diagnostics | LifeLabs | C$1.35B ($940.2 million) |
| Tempus | Ambry Genetics | $600M |
| Sonic Healthcare | Dr. Kramer and Colleagues (LADR) | €423 million ($441.7M) |
| Roche | LumiraDx | up to $350M |
| OmnigenicsAI | MultiplAI Health | $340M |