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US healthcare group Abbott Laboratories has bet on rapid cancer testing to boost growth, striking a $23bn deal to buy Exact Sciences in its biggest acquisition in almost a decade.
Exact’s main product — Cologuard — is a non-invasive test that screens for colorectal cancer, the second deadliest form of cancer in the US. It has been used 20mn times since it was first approved by the US Food and Drug Administration in 2014.
The deal to buy Exact marks Abbott’s biggest acquisition since its $23.6bn takeover of device maker St Jude Medical in 2017 and comes amid a frenzy of large deals, particularly in the healthcare sector. In the past month, private equity groups TPG and Blackstone struck an $18.3bn deal to buy Hologic, and Novartis bought biotech Avidity Biosciences for $12bn.
The transaction now brings the number of merger and acquisition transactions in excess of $10bn so far this year to 61, just one shy of equalling the record for “megadeals” set in 2015, according to LSEG data.
With $42bn in annual sales, Abbott’s portfolio spans everything from medical devices to diagnostics to nutrition products. In recent years, the company has contended with a volley of lawsuits over claims that its infant baby formula increased the risk of bowel disease, an allegation it denies.
Abbott chief executive Robert Ford had previously signalled that he was open to a diagnostics deal. He said on Thursday that Exact’s “strong brand and customer-focused execution are unrivalled in the cancer diagnostics space, and its presence and strengths are complementary to our own”.
As part of the deal, Abbott will pay Exact shareholders $105 a share, a nearly 50 per cent premium to Exact’s unaffected share price on Wednesday. The deal ascribes Exact an equity value of $21bn and an enterprise value of $23bn.
Abbott’s diagnostic division manufactures tests for infectious diseases, such as HIV and tuberculosis, as well as making blood glucose monitoring devices for diabetics. It was boosted by huge demands for Covid-19 tests during the pandemic but that has since fallen away. Similarly, Exact generated huge investor interest during the pandemic, surging to a market capitalisation of $30bn in early 2021.