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A Buyer's Market in Diagnostics

Executive Summary

Deal activity in diagnostics has been way down in 1999 and while a few strategically sound deals are getting done, the scale has been very small. With financing and M&A options drying up, smaller diagnostics companies are more squeezed than ever. A plucky few have snared good deals. Here's how.

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Unsurprisingly, Cytyc Buys Digene

As a small company with a strong presence in its niche, Cytyc receives a high multiple for its revenues, which gives it the equity for M&A. And both it and Digene, another player in cervical cancer screening, knew they could realize strategic synergies by combining and leveraging product offerings and marketing and distribution channels. But whether or not Cytyc succeeds in driving the growth of Digene's test for HPV, the cause of cervical cancer, and uses Digene's Hybrid Capture platform technology to enable a broader play in women's health, Cytyc is demonstrating an ability to craft potentially transforming deals-the kind a larger diagnostics or medical device company can't easily make by acquiring line extensions in niche markets.

Dade Behring's Recap Plans

For more than a year, Dade Behring has been wading through a financial morass that is likely to lead to bankruptcy, a sale of assets, or a reorganization of capital structure. As concerns mount about its long-term prospects, Dade Behring and its lenders are seeking to restructure the company's burdensome long-term debt. While stubborn lenders have been unwilling to accept less than a near-to-full return on their investment, several events this spring seem to be motivating them to be more flexible.

Beckman Coulter's Play for High Growth

With the Coulter integration successful, Beckman Coulter looks for high-growth opportunities outside of its traditional businesses. Beckman, through internal efforts in its life sciences business and a series of small alliances, is making a play in genomics and proteomics. In addition to building up near-term revenues, the aim is to find new "content" in the form of assays for its clinical business.

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