Quest and DiaSorin to Focus on Key Markets Following Acquisition Deal

Quest and DiaSorin to Focus on Key Markets Following Acquisition Deal

This blog post reviews aspects of DiaSorin’s acquisition of Focus Diagnostics from Quest Diagnostics that are relevant to markets reviewed in Kalorama Information reportsThe World Market for Infectious Disease Diagnostic Tests, Clinical Laboratory Services Market, andMergers and Acquisitions in the IVD Market.

At the end of March, Quest Diagnostics and DiaSorin S.p.A. announced the latter’s acquisition of Quest subsidiary Focus Diagnostics, Inc. for $300 million. The deal assists Quest Diagnostics’ business streamlining and DiaSorin’s market expansion as they further commit to respective key strategic markets in “diagnostic information services” and infectious disease diagnostics. The deal continues internal trends for both companies: divestiture of non-core business units by Quest Diagnostics and DiaSorin’s market diversification outside of its traditional core non-infectious lab immunoassay products. Higher growth opportunities await the companies following Quest Diagnostics’ refinement of its business development model and DiaSorin’s bolt-on acquisition.

In 2013, Quest began its sell-off of business units ancillary to its primary operations in reference lab testing and other clinical and life science research services. The two point-of-care (POC) IVD businesses divested were Enterix (fecal immunochemical tests) and HemoCue (hematology); the latter was sold to Danaher and subsequently organized under POC diagnostics player Radiometer. The recently sold Focus Diagnostics offered immunoassay and molecular assay products for infectious disease testing. Quest Diagnostics retained its Focus-branded diagnostic information service laboratories in San Juan Capistrano serving hospitals and biopharmaceutical companies. In recent years, Quest has leveraged its leading internal database of clinical lab results into healthcare IT (HIT) solutions for providers, payers, accountable care organizations (ACOs), and industry including life science research and biopharma.

The addition of Focus Diagnostics allows DiaSorin to further develop expansion businesses in molecular diagnostics and infectious disease diagnostics as well as the company’s presence in the U.S. market. DiaSorin launched its molecular diagnostics platform, the CE-marked LIAISON Iam analyzer, in 2012 using Eiken Chemical’s Q-LAMP or loop-mediated isothermal amplification (LAMP) technology. The Iam analyzer requires external sample amplification, which can be performed on the LIAISON Ixt instrument, but otherwise integrates simple molecular test procedures. The small-footprint system makes it amenable to smaller clinical labs, including in hospitals. However, the Iam analyzer is limited by its lack of FDA approval and relatively esoteric current assay menu of BK virus, parvovirus, Toxoplasma, HSV 1&2, VZV, and CMV. Focus Diagnostics offers its Simplexa molecular test kits for the 3M Integrated Cycler. The kits allow simplified performance of nucleic acid amplification tests (NAATs) for C. difficile, flu-RSV (CLIA moderate complexity), strep A (moderate), and HSV (moderate).

The addition of Simplexa products is expected to significantly expand DiaSorin’s current molecular business which has yet to surpass $5 million in sales. Focus Dx’s Cypress, CA facilities will also serve as the headquarters for DiaSorin’s molecular diagnostics division. Focus offers experience in PCR test kit design which will complement DiaSorin’s own LAMP assay experience. The Focus Dx acquisition could prefigure approval and marketing of the Iam analyzer to U.S. hospitals or even the development of a moderately complex molecular diagnostic platform serving specialty testing needs in the decentralized or POC molecular diagnostics market space.

Agreements with LabCorp and Quest Diagnostics have stabilized the U.S. market for DiaSorin and opened opportunities for growth. The company’s traditional key market of lab immunoassays for vitamin D testing has consistently declined in recent years due to pricing pressures, but was shored up by a recent five-year agreement with Quest Diagnostics. A prior agreement with LabCorp saw reference lab placements of DiaSorin’s high-throughput chemiluminescent immunoassay (CLIA) LIAISON XL systems and uptake of infectious disease assays. DiaSorin hopes to expand sales with additional clients in a similar fashion, building off of its leadership in vitamin D testing to introduce additional LIAISON platform assays. The acquisition of Focus Diagnostics serves DiaSorin’s plans to target the U.S. hospital market - the U.S. subsidiary’s customers include 200 large hospitals. Focus Diagnostics’ annual sales of roughly $80 million are predominately in the United States (>75%). Large hospital labs represent target placements for the LIAISON XL system; smaller hospital labs and outpatient points of testing in the United States are targets for DiaSorin’s smaller LIAISON XS in development.