Boom! Sonic Healthcare makes a head-turning acquisition. Pic via Getty Images
Health & Biotech
At its AGM last month, Sonic Healthcare (ASX:SHL) said it was poised for acquisitions with a bulging cash balance – and true to its word the pathology and radiology group will outlay around €423 million ($700 million) on a German acquisition.
The target is LADR – Laboratory Group Dr. Kramer & Colleagues (LADR) – one of the Teutonic nation’s top five medical laboratory groups.
Sonic expects LADR’s calendar 2024 revenues to be around €370 million, with earnings before interest, tax, depreciation and amortisation (ebitda) of around €50 million.
The payment is by way of Sonic shares with a maximum value of around €222 million, with the balance funded by Sonic’s existing cash kitty as well as debt.
The deal is expected to improve Sonic’s earnings per share from day one, with high single-digit gains after three years when synergies are considered.
Sonic expects costs savings from more efficient procurement, eliminating laboratory overlaps and in the specialised testing, logistics, equipment maintenance and supplying medical consumables.
“Synergies will develop incrementally and are expected to reach their full level within three years of settlement,” the company says.
Established in 1945 – when quite a few things were going on in Germany – LADR has been owned by the Kramer family (now in its third generation) ever since.
Based in Geesthacht near Hamburg, LADR has a national network of labs, as well as presence in Poland and Finland (via a small joint venture interest).
LADR also has a 15% interest in a separate German laboratory business and Sonic has the option of buying out the remainder of the business and is likely to do so at a cost of around €55 million (in calendar 2027).
Medical laboratory revenue accounts for more than 80% of LADR’s group revenue and more than 90% of its profit, with the remainder coming from medical supplies trading, logistical services and clinical services.
Subject to antitrust (competition) clearance, the transaction is expected to close in the June half.
The purchase follows Sonic’s recent $655 million acquisitive splurge, acquiring smaller practices in Germany, Switzerland and the US. Currently Sonic derives about one-quarter of its revenue from the US, so bolstering its European presence seems prudent in these uncertain Trumpian times.
At its November 19 AGM, Sonic said had grown revenue in the first four months of the financial year (July to October) and affirmed full year ebitda guidance of $1.7-1.75 billion, up to 10% higher than the previous year.
Last year Sonic grew revenue by 16% to $8.9 billion, albeit with a “dramatic” but expected decline in pandemic-related turnover, from $485 million to $62 million.
Cost pressures resulted in a 25% net profit slump to $511 million, but management said “inflationary pressures and other costs” are easing.
Meanwhile, local rival Healius (ASX:HLS) has sold its imaging business to private equity for around $800 million.
Sonic shares edged up 0.5% to $28.73.
Reflecting their strong share runs, Echo IQ (ASX:EIQ) and Clarity Pharmaceuticals (ASX:CU6) have been promoted to key stock market indices, effective from December 23.
In the case of Clarity, the company joins the ASX S&P 200 index, displacing utility Spark New Zealand.
The elevation reflects Clarity’s powerful 57% share surge between the start of the year and October 2 $8.70 , although the stock has abated since. The shares have more than doubled year to date.
Clarity is developing a copper-based isotope as imaging agents – and possible therapy – for a range of tumours, starting with prostate cancer.
Echo IQ joins the technology index, displacing 4DS Memory.
Echo IQ in October won US Food & Drug Administration assent for its algorithmic tool Echosolv, to detect aortic stenosis.
In bigger news for Echo IQ, the company has been granted a so-called ‘miscellaneous’ US reimbursement code which assigns a per test rate of US$100 to US$150 ($154-230), well above the expected US$68.
The code means that hospitals and clinics that have integrated Echosolv can work directly with payers (insurers) to obtain the reimbursement.
The company is still working on securing a full Current Procedural Terminology code, which streamlines how US healthcare providers communicate with the private payers – and how they obtain reimbursement.
Meanwhile, Echo IQ is scouring for clients and partners, having last month signed on Boston’s Beth Israel Deaconess Medical Center (Harvard Medical School’s main teaching hospital).
EIQ shares this morning surged 9.6% to 28.5 cents and Clarity shares rose 4.3% to $5.76.
Recce Pharmaceuticals (ASX:RCE) has been given the green light by Indonesia’s drug gatekeeper (Badan POM) to launch a phase III trial of its antibiotic gel to treat diabetic foot infections.
Given that 19 million Indonesians have diabetes and hard-to-treat infections, rustling up the 300 patients should not be too difficult.
Recce has been granted fast-track status for the double-blinded, placebo-controlled study, which will put its candidate RCE-327G through its paces.
“Approval in Indonesia means approval across 10 ASEAN countries and a population of 680 million, bringing forward commercial opportunities,” says Recce CEO James Graham.
“The dataset is then commonly accepted across the Middle East, Africa, South America and potentially the UK.”
The first patients are expected to be dosed this month, with results in late 2025 and a commercial launch in the second half of 2026.
In the first half of 2025 Recce also plans local phase III trial, building on its late-stage phase II trial for bacterial skin and skin-structure infections trial for all topical wounds (including diabetic foot ulcer infections).
With Australia accounting for only about 3% of the market, this one is pitched mainly at supporting a US approval application.
Recce shares gained 4.2% to 49 cents.
At Stockhead, we tell it as it is. While Recce is a Stockhead advertiser, it did not sponsor this article
Health & Biotech
Health & Biotech
Health & Biotech
