By Jof Enriquez,
Follow me on Twitter @jofenriq
Days after saying the company is looking for "opportunities" in the diagnostics space, Abbott announced an agreement to acquire point-of-care (POC) diagnostics company Alere for $5.8 billion. The deal will push Abbott's total diagnostics sales beyond $7 billion and make it the biggest POC provider in the global market, according to Abbott.
"The combination of Alere and Abbott will create the world's premier point of care testing business and significantly strengthen and grow Abbott's diagnostics presence," stated Abbott CEO Miles D. White. "We want to offer our customers the best and broadest diagnostics solutions. Alere helps us do that."
White told investors in a recent earnings call that Abbott’s diagnostics business, which grew 7 percent in sales in the preceding quarter, could be expanded, saying, "That’s a business where we don’t really have to but if we had opportunities we will."
Abbott says buying Alere will make the company the largest provider in the $5.5 billion point-of-care testing segment, by expanding Abbott's platforms to include benchtop and rapid strip tests. Abbott's main point-of-care product is the i-Stat handheld blood analyzer, which drove sales in the company’s POC diagnostics business up nearly 9 percent last quarter, according to figures cited in the call. Combining this with Alere's portfolio "will offer the broadest point of care menu of infectious disease, molecular, cardiometabolic and toxicology testing."
Abbott says more than half of Alere's $2.5 billion in sales are in the U.S., where there is increasing usage of point-of-care devices both in traditional care settings and home use. However, acquiring Alere also gives Abbott extended reach in emerging markets, where Alere has a significant and growing presence. These markets typically lack large laboratory infrastructure, and point-of-care testing creates a viable alternative for health providers.
The combined company is expected to see pretax savings of $500 million a year by 2019, according to the Wall Street Journal. Under the agreement, Abbott will pay about $4.8 billion for Alere’s common stock, with the rest of the deal covering restricted stock units, options and preferred shares. Also, Abbott will assume or refinance Alere's net debt, currently $2.6 billion. Alere will become a subsidiary of Abbott at the close of the transaction.
"Our leading platforms and global presence in point-of-care diagnostics, combined with Abbott's broad portfolio of market-leading products, will accelerate our shared goal of improving patient care," said Alere CEO Namal Nawana in a statement.
Point-of-care testing could revolutionize the way clinicians treat patients by providing reliable, on-the-spot lab results that are typically processed only by a few, large laboratories concentrated in large urban centers. It mitigates the risk for the patient, and could slash turnaround times and healthcare costs.
“POC test devices have contributed significantly to the growth of the overall diagnostics market over the past 10 years. POC testing appears to be headed for an even bigger role in diagnosis and monitoring patient care,” states Research and Markets’ report The World Market for Point of Care (POC) Diagnostics. “New technologies are allowing POC devices to produce quantitative lab-quality test results that can be transferred automatically to an information system, a remote caregiver service for consultation, or an electronic medical record.”