PHARMA GIANT ROCHE TO BUY GENMARK FOR $1.8B
Carlsbad company provides tests for COVID-19, other illnesses
Swiss pharmaceutical giant Roche is buying Carlsbad’s GenMark Diagnostics for $1.8 billion — highlighting how the COVID-19 pandemic sparked demand for rapid, single-sample testing platforms that can distinguish between multiple respiratory illnesses.
The companies announced the transaction on Monday, which calls for Roche to pay $24.05 per share in cash for GenMark. That’s a 43 percent premium over the North County company’s share price on Feb. 10 when Bloomberg first reported that it was an acquisition target.
Roche will make a tender offer to GenMark shareholders — a majority of which must agree to sell their shares for the deal to proceed. It is expected to be completed this spring.
GenMark has developed technology for hospital labs that tests for a broad range of viral and bacterial infections using one patient sample — say a nose swab or blood draw. Results come back in about 90 minutes.
With its latest respiratory panel, for example, GenMark can test for up to 21 common ailments — including COVID-19, multiple influenza strains, respiratory syncytial virus and others. The panel received Emergency Use Authorization from the U.S. Food and Drug Administration.
“We’ve had the opportunity to speak with several lab directors over the past few months, and all have indicated that the COVID-19 pandemic has shed light on the value of multiplex testing, given the similar symptoms that can present for different
respiratory diseases,” said Max Masucci, an analyst with Canaccord Genuity.
The samples are analyzed on GenMark’s ePlex molecular PCR machines, which are currently installed in about 800 hospital labs in North America.
Along with identifying different viruses, GenMark also can pinpoint COVID-19 variants,
including the U.K., Brazil, South African and California strains.
Beyond respiratory tests, GenMark has FDA-cleared blood culture panels to uncover bacterial infections, particularly strains that have developed resistance to certain antibiotics. Its pipeline of future products includes panels that target gastrointestinal ailments.
GenMark employs more than 600 workers globally. Most of them are based at its
Carlsbad manufacturing facilities.
Last year, revenue surged 94 percent to $171.6 million, led by COVID-19 demand. The company narrowed its net loss to $18.6 million last year, compared with a $47 million loss in 2019.
GenMark officials were not available to answer questions on Monday. But in a statement to employees, Chief Executive Scott Mendel said it’s business-as-usual at the company. He stressed
that Roche is buying GenMark because of its growth prospects.
“Roche’s interest in acquiring our company is about the ability to enhance innovation, accelerate our goals and priorities, and address the unmet medical needs of customers around the world,” wrote Mendel. “While I understand that news like this can be distracting, I know you will remain focused on our goals and plans because those remain the same.”
Andrew Cooper, an analyst with Raymond James, said while Roche has many molecular and non-molecular testing platforms that it sells to hospital labs, it has yet to offer syndromic testing capabilities like GenMark’s, which makes the acquisition a strategic fit and unlikely to be driven by opportunities to cut costs.
“We expect Roche to continue to drive the penetration of syndromic testing globally as well as to expand the (testing panel) menu on ePlex,” said Cooper in a research report. “We suspect the ability to leverage Roche’s infrastructure as GenMark grows is a key part of the value opportunity.”
The transaction was announced before markets opened on Monday. GenMark’s shares surged 30 percent to close at $23.98 on the Nasdaq exchange.