IVD companies seek M&As to avoid Covid cliff

In-vitro diagnostic (IVD) companies are reporting significant revenue increases in the first quarter of the year, largely due to the continued sales of Covid-19 tests. Despite these strong first-quarter reported revenues, Covid-19 testing sales are expected to quickly decline in the second half of the year as many countries around the world steadily roll out Covid-19 vaccines.

According to Our World in Data, Israel currently leads with the largest share of people who have received at least one dose of a Covid-19 vaccine, at 62.5%. This is followed by the UK at 51.1%, the US at 44.2%, Germany at 29.3%, France at 23.7% and India at 9.3%.

The expected decline in Covid-19 testing is being referred to in the biotech industry as the ‘Covid cliff’. IVD companies are preparing for a reduction in sales revenues for Covid-19 tests, ranging anywhere from a steep drop-off to a more gradual downturn.

Sales related to Covid-19 tests are just one part of the picture. The Covid-19 pandemic dramatically altered the biotech landscape last year, with increases in funding to biotech, most of which were Covid-related, and many IVD companies benefited from this increased funding.

An unprecedented number of IVD companies entered the Covid-19 testing space, developing and launching products in record time and numbers. Clinical trial volumes also saw a significant increase last year.

In preparation for the Covid cliff, three major IVD companies have turned to mergers and acquisitions (M&As) to shore up their diagnostic testing portfolios. In March, Roche signed a merger agreement with GenMark Diagnostics to access GenMark’s molecular diagnostic panel tests, which are designed to detect multiple pathogens from a single patient sample.

Multiplex testing is currently gaining preference as it allows physicians to quickly diagnose a patient or rule out multiple common pathogens.

In April, Hologic made a similar move by acquiring Mobidiag, which also offers multiplex testing. Hologic said the acquisition will enable the company to enter the acute care test market, which is projected to grow after the pandemic ends.

In the same month, DiaSorin agreed to buy its US rival, Luminex, to boost its core molecular business and offset the expected drop in demand for Covid-19 tests in the second half of the year. Roche, Hologic and DiaSorin are all strong players in the Covid-19 testing space, and these M&As indicate that the market is shifting its attention to prepare for a return to a post-pandemic world.