French testing group Eurofins scouts for acquisitions in Asia

French diagnostic and testing group Eurofins is scouting for acquisitions in Asia and the field of genetic diagnostics as it seeks new opportunities after a pandemic-related sales boom.

“The most interesting market is Asia,” said chief executive Gilles Martin. “Access to tests is not very developed there yet.”

Boosted by a worldwide surge in testing, Eurofins entered France’s CAC40 index last year. But as the pandemic receded, it was hit by falling demand as governments scrapped health and travel restrictions.

After two years of double-digit growth fuelled largely by the Covid-19 pandemic, analysts expect stagnating annual revenue of about €6.7bn this year, according to Refinitiv data. Shares are down more than 40 per cent this year to about €63, half their peak in September 2021. The company announced last week that it would buy back up to 2 per cent of its shares over the next year.

Martin, who founded the company in 1987 but expanded into medical diagnostics only seven years ago, plans to further build this part of the business by replicating the acquisition strategy that took Eurofins from a small French laboratory to a leading food, pharmaceutical and environmental testing player.

Eurofins spent €197mn buying 33 companies in the first half of this year — more than twice the amount it allocated to acquisitions at the same time last year. The group bought the Japanese prenatal genetic analysis group Genetic Lab last December and is on the hunt for similar targets.

Martin, an engineer with a PhD in artificial intelligence, believes genetic analysis and engineering will allow the development of many new tests over the next 20 years. The group is also interested in personalised medicine.

“More and more people see their health as their capital which they want to preserve and learn about [by] documenting themselves,” said Martin.

Eurofins said the US was the first big market for genetic diagnostics, such as prenatal tests that detect foetal genetic abnormalities.

Sales of kidney transplant tests, which also use genomics, more than doubled in North America in the first half of the year. But rather than expanding in the US to try to compete with testing giants such as LabCorp and Quest Diagnostics, Eurofins said it wanted to create “new markets through innovation” in Asia.

Although Asia accounts for less than 10 per cent of group revenue, it posted the fastest revenue growth in the first half of this year.

Martin said he wanted Eurofins to expand “everywhere [in Asia] on a big scale except for China where it will be on a small scale”. Chinese companies had local advantages over foreign companies, he added. The government also restricts foreign companies from collecting genetic data on Chinese citizens.

In addition to diagnostics, Eurofins plans to expand its food and environmental testing business in Asia. It has about 100 laboratories in the region, compared with about 600 in Europe.

It is already active in genomic testing in Europe, where it performs 150,000 prenatal tests a year.

The Martin family owns 33 per cent of the business.

Société Générale analysts said the group would benefit from new board members with international experience. Its current leadership was also “very centralised”, they added. Martin, who heads the company’s executive committee is also the acting chair of its board of directors. His brother — formerly the group’s chief technology officer — is a non-executive board member.

Other analysts have raised questions about succession planning given Martin’s longstanding role — he has been chief since he founded the business 35 years ago. Asked about his plans, Martin said that Eurofins, which he founded by buying the rights to his parents’ patented wine analysis technology, had “very traditional values and of continuity”.

“My children and my brother’s children aspire to be good shareholders, not necessarily executives, but they wish to be shareholders in the long term,” he said.