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UniLabs Scales Up Clinical Lab Testing Services Through Acquisitions

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NEW YORK (360Dx) – UniLabs has announced several acquisitions this year as part of a strategy that's likely to continue as it aims to more than double revenues within three years.

The firm's CEO Jos Lamers told 360Dx that acquisitions — including recent investments in clinical diagnostic laboratories such as Base Holding, CGC Genetics, Blufstein, and Scientific Clinical Laboratories — are an important part of its growth strategy. However, it will simultaneously seek to grow revenues organically in a shrinking overall European market for clinical laboratory and diagnostic imaging testing, he added.

Unilabs recently announced that it has increased the value of a €140 million ($165.8 million) term loan syndication, originally launched at the end of September, by an additional €50 million. Last week, the firm said it had priced an offering of €155 million of its existing 5.75 percent notes due in 2025. It expects that the offering will close on Oct. 16, and it intends to devote part of the proceeds toward financing acquisitions it announced during the past few months.

In a foray outside the European market, the firm in August inked an agreement to acquire Blufstein, an accredited, private laboratory in Peru. The Peruvian lab has a network of 31 collection centers and four hospital labs. Fernando de Górgolas, UniLabs' general manager of international business, said in a statement that the acquisition enables it to expand its services portfolio and extend its reach into the Peruvian private healthcare market.

Lamers told 360Dx that in the buildup to the acquisition, UniLabs engaged with an existing Spanish customer "that had been asked to build a couple of hospitals in Latin America, and they asked us to become their preferred lab provider."

That is an ideal way to get into the market, he said, adding, "We now see, since we've set up shop there, that additional customers want to work with a Swiss laboratory group that has high quality and that has a lot of international expertise. That is typically the way we expand into new territories —  by following our customers, setting up a base, and building from there." 

In July, in a second recent deal outside Europe, Unilabs inked an agreement to acquire a share of Scientific Clinical Laboratories, a provider of specialized laboratory services that was established in 1990 in the United Arab Emirates. UniLabs said at the time that it expected the deal would strengthen its portfolio of diagnostic services in the Middle East and give it access to UAE healthcare markets.

Also in July, Unilabs agreed to acquire Base Holding, a diagnostic company in Portugal that services customers in clinical analysis, radiology, and cardiology. Unilabs said that through the acquisition, it was expanding its portfolio of diagnostic services in Portugal to radiology and, overall, extending its presence in the country.

Base Holding employs 1,500 people, including 350 doctors. It operates 14 laboratories, 44 radiology units, and 7 cardiology units, and it has national reimbursement coverage in Portugal, UniLabs said. The company generated revenues of almost €80 million in 2016.

At the time, Lamers said the acquisition reflected Unilabs' continued commitment to Portugal as a strategic market. More recently, he told 360Dx that the company does acquisitions with the goal of becoming a top-3 player in that geographic market. Before considering an acquisition, the firm must have the potential to achieve that level of market share, he said.

"We believe that size matters in our industry because we can use our equipment in the best possible way. With volumes you get more specialties and a more interesting work environment," Lamers noted.

In June, the firm inked an agreement to acquire CGC Genetics, a medical genetics lab firm that serves customers in more than 65 countries, from private equity firm Vallis Capital Partners. Lamers said in a statement at the time that the acquisition of CGC reflects its strategic focus on reinforcing its reference and special testing portfolio.

And, in April, the firm completed the acquisition of Alpha Medical group, a full-service lab diagnostics company, from private equity firm Mid Europa Partners. Lamers said that the acquisition represented "an important foray into Eastern European markets for Unilabs."

He noted then that after a strong focus on generating organic growth, the acquisition of Alpha Medical signaled its return to "making smart acquisitions, aligned with our services portfolio and high-end quality standards."

Lamers said that the firm has "reconfirmed its ownership" by Apax, a private equity capital provider.

In August, the UniLabs reported that its Q2 revenue rose 14 percent year-over-year to €200.2 million from €176.1 million in the prior-year quarter. In 2016, it generated annual revenues of €790 million. However, including recent acquisitions, the firm's annual revenue run rate is now at more than €1 billion per year, Lamers said.

Its objective is to achieve 5 percent organic growth per year, but the rest of its growth — in its mission to reach €2 billion in revenue within three years — will come from acquisitions, he added.

Lamers said that he believes UniLabs is in the top 2 or 3 European-based laboratory services companies.

The firm said that it offers more than 2,500 diagnostic tests in its laboratories and it has 88 imaging centers. It employs more than 7,000 people worldwide, and operates laboratories and medical diagnostic imaging facilities in 14 countries.

At present, Sonic Healthcare, which employs around 33,000 people, and took in $5.05 billion in revenues in 2016, occupies one of the top market positions, based on revenue. According to Sonic, it has strong positions in the laboratory markets of eight countries, and it is the largest private operator in Australia, Germany, Switzerland, and the UK; the second largest in Belgium and New Zealand; and within the top 5 in the US.

Synlab, a second large competitor to UnLabs, has a presence in more than 30 countries, employs more than 17,000 people, and has sales of around €1.6 billion per year.

Laboratory market dynamics favor the largest service providers, Lamers noted. "We have to assume that there will be continued price pressure because governments and customers throughout the world are looking for a great healthcare service but at an affordable cost," he said, adding, "This is where a private provider such as UniLabs can help because we have more than 200 laboratories in Europe."

That kind of size gives UniLabs purchasing power, he said, and helps it in "acquiring machines and reagents. We can also fill the capacity of our laboratory network much better than many smaller players, simply because we can consolidate higher volumes into bigger lab platforms that can run 24/7 if needed."

Although the company is becoming more international in nature through acquisitions, around 97 percent of its current revenue comes from within Europe, Lamers said.

Although the company provides laboratory services for multiple test disciplines and multiple disease areas, Lamers said that he sees oncology services as an exceptional driver of imaging, in vitro diagnostics, and pathology service sales growth. The firm is also in a position to help mitigate the challenge of resource scarcities in laboratories, he said. "We see that public hospitals and smaller clinics really struggle to get high quality staff and deal with the required volumes, and we have the systems and tools to absorb the demand and do this in a high-quality manner," Lamers noted.

Among the advantages of running a large-scale operation and engaging in several acquisitions is the opportunity to identify best practices that could be implemented to accelerate growth, Lamers said.  

"On a day-by-day basis, we improve our ways of working as part of what we call a cost-leadership initiative, where we strive to provide high quality at affordable costs because that is what governments and customers want," Lamers said. "We can achieve that by benchmarking how well our labs do across all regions in Europe.

"Very different countries have very different reimbursement systems and different pricing. We can use our [geographic diversity] to see where best practices exist. When we build a lab, there is always a best practice that we can share within the group, or we can learn from a group that we have recently acquired," he added.