Friday, April 28, 2023

Molecular Diagnostics Investments: Some Bright Examples

There's a lot of news this year about pullback in valuations for biotechnology and digital health, and cutbacks in investments.  See. for example, potential Nasdaq delisting for Centogene, here, and a 33:1 reverse stock maneuver for GeneDx (formerly Sema4), whose valuation has plummeted, here.

But there are some bright spots for investments as well, especially the continuing activity in the minimal residual disease space.   

  • Haystack, an MRD company, to be acquired by Quest  for $300M-450M, here
  • Foresight Diagnostics closes a $60M investment round.  Foresight is a Stanford-spinout in the MRD space, garners $60M in Series B, here
  •  Earlier this month, Mercy BioAnalytics raised $40M in a Series A round, and picked up Myla Lai-Goldman as a board member; here, here.
And some labs are still cash-rich.  Fulgent Genetics had about $80M in cash in 2019; after the COVID emergency, it currently has about $800M cash on hand.

Changing Payor Dynamics

A current article in CAP TODAY on comprehensive genomic profiling of tumors devotes a large amount of space to discussion of ongoing reimbursement woes - entry point here.

A current deep dive article in Genomeweb (subscription; Adam Bonislawski; 2000 words) talks about how the lab industry will navigate a new era of "value based purchasing" witih payors.  Numerous interviews.  Here.   

A micro summary of Adam's article [GPT4]: Clinical labs face downward pricing pressure due to payors and industry consolidation, prompting exploration of alternatives to the traditional fee-for-service model. Clinical Lab 2.0 advocates propose leveraging testing and test data to impact patient health at the system and population level to better demonstrate value and capture a larger portion of that value.  A major payor now offers subscription services that provide lab data and insights to payors to help manage various patient populations.  Watch-out: Legal, administrative, and technical hurdles, such as anti-kickback laws, may hinder the implementation of alternative models between labs and payors.