Abbott Laboratories is acquiring Alere Inc. for $5.8 billion, positioning itself as the leader in the fast-growth market of point-of-care diagnostic testing.
Point-of-care tests — often more expensive than off-site laboratory services — deliver results faster than traditional lab tests and offer insight to doctors in minutes. They can be done right inside the doctor's office or even at home.
Alere, which is headquartered in Waltham, Massachusetts, creates tests for infections including HIV, malaria, dengue, influenza, and tuberculosis. It makes $2.5 billion in annual sales.
A NASDAQ report revealed that Abbott will pay $56 per share, a 51 percent premium to Alere's closing price last Friday.
In 2015, Abbott had a diagnostic segment that collected $4.65 billion in global sales, which represented almost a quarter of its $20.41 billion total revenue in that year. Around 10 percent of its diagnostics earnings were within Alere's specialization, or testing done while a patient is at a clinic or doctor's office undergoing treatment.
The diagnostics business worldwide is about $60 billion strong, growing 5 percent overall and sets the stage for the consolidation of numerous smaller firms, said Goldman Sachs.
It is led by Roche Holding AG with its 19 percent, followed by Abbott with around 11 percent. The latter expects its diagnostics business to soar to more than $7 billion after the acquisition.
"Demand for point-of-care testing is accelerating as health-care providers and consumers look for better ways to get fast, accurate and actionable information," said Abbott's chief executive Miles White at a Monday conference call with analysts.
While costlier than centrally located lab tests, point-of-care tests more rapidly diagnose disease which can cut further costs along the way.
Growing quickly via several acquisitions, Alere lately sold some of its non-core functions for disease management. It faced challenges in 2015 partly out of issues in its HIV and malaria testing in Africa. It was subpoenaed by the Securities and Exchange Commission in August for its tax policies.
Abbott shares went up 1.6 percent and Alere shares climbed 45 percent last Monday.
Analysts expressed optimism over the new deal. "We view the deal positively as we think point-of-care testing is the fastest-growing segment in the diagnostic market," said S&P Capital analyst Jeffrey Loo.
Photo: Herry Lawford | Flickr
