Life Sciences Tools & Diagnostics Industry Update Q1 2024
Read more about M&A activity and trends in this sector
Public Markets Update
Since the start of the year, the life sciences tools and diagnostics (LSTDX) sector has underperformed the broader indices given numerous industry-specific challenges, including on ongoing repositioning due to COVID-19, lower private/public/government funding, decelerating growth in China, and new regulatory initiatives, especially in Europe and the US. Nonetheless, select companies in the sector continue to perform well and industry stakeholders remain broadly optimistic.
As to specific performance data, the S&P 500 index has seen a significant uplift, increasing by 22.5% in the last six months, the date of our last published LSTDX newsletter. The large-cap LSTDX index is up 11.7% while the mid and small/emerging-cap LSTDX groups are down 2.7% and 3.0%, respectively
Despite the relative performance of the LSTDX sector, the group continues to trade at strong valuations, with the large-cap group currently trading at an average of 18.5x LTM EBITDA and the mid-cap segment trading at and average of 15.5x LTM EBITDA.
Life Sciences Tools & Diagnostics M&A Overview
Deal Volume
| Financial Buyers |  | FY'23: 26.9% | Q1-24: 22.7% |
| Deal Volume (% of total) | FY'22: 28.7% | Q1-23: 29.3% |
| Strategic Buyers |  | FY'23: 73.1% | Q1-24: 77.3% |
| Deal Volume (% of total) | FY'22: 71.3% | Q1-23: 70.7% |
M&A Exit Multiples: Average EV / LTM EBITDA exit multiples are 14.6x for FY’23 versus 17.3x for FY’22.
Public Co Multiples: Current EV / LTM EBITDA large-cap multiples are 18.8x versus an average of 17.1x.
Deal Value ($bn)
M&A Market Update & Sector Discussion
2023 finished on a slower note with Q4-23 recording 33 deals with an associated deal value of $4.7 billion. This slowness continued into Q1-24 as the quarter saw only 22 deals with an associated deal value of $1.8 billion.
The FDA's proposed regulation of lab tests may impact patient access and product costs – In October 2023, the FDA proposed that laboratory-developed tests (LDTs) should fall under their regulatory oversight to protect patient health and safety by guaranteeing the accuracy and reliability of tests developed in individual laboratories. Although the FDA aims to finalize their regulatory proposal by April 2024, leaders from the industry and patient groups anticipate potential trade-offs, fearing that enhanced FDA scrutiny of LDTs might hinder or delay patient access to innovative diagnostic solutions..
Shifting deal structures amidst a mixed macroeconomic backdrop – While the sector has seen a handful of larger deals (Danaher acquiring Abcam, Thermo Fisher acquiring Olink) over the last year, the market has observed a continuing trend towards smaller and/or asset-only transactions amid macroeconomic uncertainties. Notable examples of this trend include Roche's acquisition of LumiraDx's point-of-care testing technology for $295 million upfront (plus $55 million for development funding) and Cytek Biosciences' purchase of the flow cytometry business from Luminex for $44.9 million.
Precision Medicine is a rapidly evolving market that will continue to impact the sector and M&A – Technologies such as liquid biopsy, next generation sequencing, and new early cancer detection assays are set to change treatment paradigms and improve clinical outcomes for patients. These novel technologies translate into new opportunities but also challenges for diagnostic and life science tools companies, who must make important strategic choices in how they structure their businesses via divestiture, acquisition or partnership to ensure that they can meet the future needs of their markets.
Download the document
Q1 2024 Life Sciences Tools & Diagnostics Newsletter
Download PDFMeet our team
In today’s market, you need an advisor with objective insight at every step of the transaction process. We work with you throughout the full deal cycle to create value and successfully execute your deal strategy.
