LabGenomics② Pursuing Second US Clia Lab Acquisition... Executing Bolt-On Strategy

LabGenomics, the first domestic diagnostic company to acquire a mid-to-large-sized CLIA Lab in the United States, announced on the 28th that it will proceed with the acquisition of a second CLIA Lab.

The day before, LabGenomics announced that it had signed an acquisition agreement for the U.S. CLIA Lab QDx Pathology Services. Since last year, LabGenomics has thoroughly reviewed the business viability and profitability of more than 30 CLIA Labs from multiple perspectives.

They selected the CLIA Lab that could create the greatest business synergy with LabGenomics based on factors such as the target company's sales scale, insurance network, and diagnostic service portfolio, completed due diligence, and successfully finalized the acquisition agreement.

Following the establishment of a stable operational strategy for the mid-to-large-sized CLIA Lab, which was the first acquisition in the domestic diagnostic industry, LabGenomics stated that it is ready to execute the plan for acquiring a second CLIA Lab. They are implementing a Bolt-on strategy to establish a solid growth foundation in the U.S. market.

QDx, the company acquired by LabGenomics this time, was established in 2006 and is known to provide comprehensive diagnostic services to patients and hospitals in 28 states based on its long-standing experience. It has particular strengths in respiratory, urology, gynecological diseases, and pathology. As of last year, it recorded stable performance with sales of 66.5 billion KRW and operating profit of 10.2 billion KRW. The proportion of COVID-related sales is below 20%, indicating stable revenue from other portfolio areas. The company employs 214 staff members, including diagnostic specialists and pathologists.

Having operated the business for a long time, QDx has secured many excellent specialists in various fields, including pathology experts. It also has a strong sales network with top U.S. private insurance companies such as AETNA, United Health Care, CIGNA, and BCBS.

U.S. CLIA Labs tend to specialize in specific testing areas. This is interpreted as being due to the large market size, which allows sufficient performance generation from specific testing fields alone. In contrast, LabGenomics has secured competitiveness to provide tests for various diseases such as metabolic diseases, infectious diseases, genetic diseases, and cancer, combining its long-term experience operating a central lab in Korea with R&D capabilities. Accordingly, LabGenomics plans to add testing lineups to QDx immediately after the acquisition is completed.

By adding LabGenomics’ diverse diagnostic lineups for genetic diseases, cancer, and infectious diseases to QDx’s existing diagnostic services for respiratory, urological, and gynecological diseases, explosive external growth is expected. Additionally, QDx’s existing in vitro diagnostic (IVD) products will be replaced with LabGenomics’ lab-developed test (LDT) products, which have significantly lower costs, greatly improving profitability.

LabGenomics plans to expand its product lineup by supplying additional services to the insurance network held by QDx, leveraging its diagnostic services with global-level technology and lower prices. It also intends to maximize profitability by providing high value-added services such as next-generation sequencing (NGS), which QDx currently does not perform. Finally, by transplanting the optimized central lab operation system from Korea, operational efficiency is expected to improve, reducing lab operating costs and labor expenses.

These synergy effects are expected to be carried out through LabGenomics’ U.S. subsidiary, LabGenomics USA LLC. Since the business is conducted through a local subsidiary, it can create various business models and respond quickly and accurately according to local circumstances.

Moreover, LabGenomics’ diagnostic services can be supplied to CLIA Labs through LabGenomics USA LLC, generating sales and securing stable volume. Based on this, products produced by LabGenomics USA LLC can be directly supplied to QDx and, in the long term, to other CLIA Labs as well.

Furthermore, there is an expectation to create opportunities to develop new products tailored to the needs of the U.S. diagnostic market, laying the groundwork for market dominance. Through strategic alliances with domestic diagnostic companies possessing high value-added content, LabGenomics aims to serve as a forward base for the entry of the K-diagnostic industry into the U.S. market.

The synergy effects from the CLIA Lab acquisition are expected to gradually stabilize and be fully reflected in the performance growth of LabGenomics USA LLC starting in 2024. LabGenomics aims to generate operating profits exceeding 20 billion KRW through QDx from 2024 onward.

A LabGenomics official stated, “Through long-term market research, studies, and M&A experience, we expect to accelerate the acquisition of the second CLIA Lab. We are targeting the acquisition of labs that do not significantly overlap with LabGenomics and QDx in diagnostic areas, aiming for greater synergy.”

This content was produced with the assistance of AI translation services.