Roche GenMark Deal – COVID-19 Makes Respiratory Segment and mPOC More Valuable

A recent deal in the news cements the viability of the respiratory segment and the use of small molecular systems to test for them.  First introduced in 2013, PCR and other NAAT-based molecular systems have become a central part of testing for ailments such as flu, strep, RSV and COVID-19.  They remain in competition with immunoassay systems which on the whole still field better installed base numbers.  It was though antibotic resistance would be the key issue to propel these systems, but COVID-19 has proved to be the situation where they were best suited, as we had predicted when COVID-19 was not yet present in the United States last year.

As Roche has inked a $1.8 billion acquisition agreement with GenMark Diagnostics, the case for mPOC has been moved forward.   The deal is expected to close in the second quarter of this year.  GenMark designs molecular diagnostic tests that identify multiple pathogens from a single patient sample, Roche said. Its syndromic panel testing portfolio will complement Roche’s molecular diagnostic portfolio, according to the firm.

Kalorama’s mPOC report can be found here:

Once the transaction is complete, GenMark Diagnostics will continue to operate out of its current location in Carlsbad, CA.

What’s obvious about the deal is that it is not just about the company’s current business.  The deal is multiples of the company’s revenue.  But it’s about the future, and a future that was evident in the companies fourth quarter.   Just shy of 10 percent of the company’s new systems came from the last quarter of 2020.   For example, the company placed 70 net new ePlex analyzers in the quarter, which the company said was out of 792 total systems.
We think it’s the end year success and not so much the past business is what Roche is betting will continue.   Clearly you are seeing COVID-19 influence strategy, if not for this wide scale infection, then possibly to be in position for the attractive respiratory market, or for the next pandemic.
GenMark’s ePlex system also has a Blood Culture Identification (BCID) Panel product that can provides broad coverage of organisms that can lead to sepsis along with their resistance genes. This broad coverage means that about 95% of currently identified bloodstream infections can be detected early with the ePlex BCID Panels, compared to other panels that detect significantly fewer sepsis-causing bacteria and fungi.  The original goal of many of the molecular point of care systems were to get to a faster syndromic test.