Abbott’s roughly $21 billion acquisition of cancer screening firm Exact Sciences lays out the company’s future strategy. Analysts said the acquisition not only marks Abbott’s foray into cancer diagnostics, but it also denotes a shift toward preventive care, mirroring broader industry trends and Abbott’s corporate priorities.
The planned purchase, announced Thursday, is the largest medtech deal this year, and would be the largest under Abbott CEO Robert Ford’s tenure, Stifel analyst Rick Wise wrote in a research note
“We have been waiting and expecting that a clearer picture of ‘what’s next’ strategically for Abbott to emerge,” Wise wrote.
He added that Exact Sciences’ portfolio of cancer screening tests could be Abbott’s next major business opportunity, giving the company access to a roughly $60 billion total addressable market in the U.S.
Exact Sciences’ flagship product, Cologuard, is a stool-based test for colorectal cancer screening. The company is in the process of rolling out a newer version of the test, Cologuard Plus, RBC Capital Markets analyst Shagun Singh wrote in a research note.
Cologuard accounts for about 13% of the $18 billion colorectal cancer screening market, Singh added.
Exact Sciences also makes a tumor profiling test used in breast cancer, and recently launched a multi-cancer early detection test and a molecular residual disease test.
Growth of diagnostics business
Abbott expects Exact Sciences to generate more than $3 billion in revenue this year. The medtech giant plans to integrate the company as a subsidiary, bringing sales in its diagnostics business above $12 billion.
UBS analyst Danielle Antalffy wrote in a research note that a deal makes sense because Abbott has the cash on hand and experience selling to primary care offices with its Libre glucose sensors. Antalffy added that the acquisition could also help performance in Abbott’s diagnostics business, which has been weak over the last year.
Currently, the companies expect about $100 million in pre-tax synergies by 2028, but the analysts see more opportunities. Since most of Exact Sciences’ sales are in the U.S., Stifel’s Wise said that Abbott could help grow its international footprint. Support from Abbott could also help speed up innovation initiatives at the company.
Looking to the long-term, Abbott may face questions about the future of Exact Sciences’ Cologuard franchise as competitors introduce blood-based cancer tests, BTIG analyst Marie Thibault wrote in a research note. Abbott views blood-based tests as expanding the broader market, and Exact Sciences also has an exclusive licensing agreement with Freenome for its blood-based colorectal cancer screening.
