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Danaher to acquire Cepheid

Molecular diagnostics firm will join Danaher’s refocused science and technology business

by Ann M. Thayer
September 7, 2016 | A version of this story appeared in Volume 94, Issue 36

Cepheid at a glance

Headquarters: Sunnyvale, Calif.

Founded: 1996

2015 sales: $539 million

2015 net loss: $48.5 million

2015 R&D spending: $116 million

Employees: 1,700

Business: Molecular diagnostics to identify organisms; genetic-based diseases for clinical and nonclinical applications.

Danaher has agreed to acquire Cepheid in a deal that values the molecular diagnostics maker at about $4 billion. The purchase will add to a Danaher now focused on life sciences, diagnostics, dental products, and environmental services following the July 2 spin-off of its industrial instrumentation and equipment business as a new company called Fortive.

Sunnyvale, Calif.-based Cepheid will join Danaher’s diagnostic business, which has about $4.8 billion in annual sales. Already part of that business are Beckman Coulter, Leica Biosystems, and Radiometer—all Danaher acquisitions over the past 12 years.

Cepheid plays within the $6 billion-per-year molecular diagnostics market with products such as its GeneXpert instruments, tests, and reagents for genetic testing and identifying infectious disease agents. Despite reporting a sizeable loss in 2015, the 20-year-old company’s sales grew by 15% and are predicted to do so again this year.

Consequently, Danaher is willing to pay a 54% premium over Cepheid’s recent stock price. Cepheid boasts of having installed more than 11,000 of its systems and delivered tens of millions of tests, and CEO John Bishop sees an opportunity to reach more customers through Danaher’s 3,000-plus person sales force.

At the same time, Cepheid’s integration into Danaher will come with $200 million in cost “synergies,” split evenly between expanding revenues and reducing expenses, Goldman Sachs stock analyst Isaac Ro said in a report to clients. Some of the cost reductions are expected to come in the manufacturing area and in general operating expenses.

Danaher is no stranger to integrating acquisitions. In 2015 alone, it made 12 deals, including its $13.6 billion purchase of Pall Corp. Pall is now part of Danaher’s life sciences business along with the mass spectrometry supplier Sciex and the microscope maker Leica Microsystems. Life sciences is Danaher’s largest business, with about $5.2 billion in annual sales. It made Danaher second among life sciences and analytical instrumentation suppliers in C&EN’s most recent survey.

Looking ahead in a call with stock analysts, Danaher managers said the company still has $1 billion in “balance sheet flexibility” and a preference for small- to medium-sized acquisitions.



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