Quest Strengthens Its Hand
Quest Diagnostics' purchase of American Medical Laboratories for $500 million in cash (including assumption of $160 million in debt) is one of a string of acquisitions made by large national laboratories in recent years. While it is by no means Quest's biggest or most strategically critical deal, it gives the nation's largest clinical laboratory a presence in two markets in which it was weak or had no presence, and shores up its rapidly growing esoteric testing business. The deal also eliminates a competitor.
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LabCorp.'s proposed purchase of Dianon Systems, followed by the announcement of Welsh Carson's bid for AmeriPath, reflect different paths taken by two fierce competitors.They are also the inevitable consequence of rapid laboratory consolidation at the national level. LCA wants Dianon so that it can expand its position in cancer testing. Welsh Carson, in contrast, is a financial buyer who would have to "clean up" AmeriPath, which has run into difficulties due to its physician practice management business model.
Quest and Laboratory Corp. of America, two Wall Street favorites for several years, seem to be bumping up against a wall when it comes to growth. Their growth is heavily dependent on acquisitions--but there aren't many big labs left to buy. Lab Corp.'s just announced offer for Dianon not withstanding. Quest's bid to buy California-based Unilab, is under FTC scrutiny--although Wall Street is betting the deal will fly. Lab Corp. faces intense regional competition, which it claims it is addressing. Still, the bigger these companies get, the tougher it is to maintain growth.
The Phase III FIDELIO trial of finerenone has been a success but analysts want to see some actual data before declaring it an unqualified one.