Health-care cos chase growth in diagnostics

By Susan Kelly - Analysis

CHICAGO (Reuters) - The promise of preventative medicine is driving an acquisition boom in the diagnostics sector that is expected to stay hot as would-be acquirers with cash to deploy chase a dwindling list of potential targets.

Established companies with mature product lines are eyeing smaller developers of promising tests and technologies as both an investment in the future of health care and a relatively painless way to boost cash flow nearer term, analysts said.

"The big players are starting to notice we have this highly lucrative field that is somewhat underexposed," said Morningstar analyst Alex Morozov. "There are a lot of tests out there that could be breakthrough technologies that could be a significant source of growth in the years to come."

Swiss drugmaker Roche's (ROG.VX: Quote, Profile, Research, Stock Buzz) willingness to pay a healthy premium for Ventana Medical Systems Inc. VMSI.O, which specializes in tissue-based testing, pushed up shares of several diagnostics makers on Tuesday as investors speculated who could be next.

Roche, already a top player in medical testing, on Monday announced a hostile $3 billion takeover bid for Ventana.

Gen-Probe Inc. (GPRO.O: Quote, Profile, Research, Stock Buzz), a maker of tests to diagnose infectious diseases and to screen donated blood, hit a new all-time high on Tuesday and closed up $3.19, or 5.72 percent, at $59.00.

Cepheid Inc. (CPHD.O: Quote, Profile, Research, Stock Buzz) climbed 10.02 percent to $13.72, Quidel Corp. (QDEL.O: Quote, Profile, Research, Stock Buzz) climbed 5.3 percent to $17.10, and Luminex Corp. (LMNX.O: Quote, Profile, Research, Stock Buzz) rose 5.09 percent to $12.17.

Shares of Immucor Inc. (BLUD.O: Quote, Profile, Research, Stock Buzz), Dade Behring Holdings DADE.O, OraSure Technologies (OSUR.O: Quote, Profile, Research, Stock Buzz), Meridian Bioscience (VIVO.O: Quote, Profile, Research, Stock Buzz), Hologic Inc. (HOLX.O: Quote, Profile, Research, Stock Buzz) and Inverness Medical Innovations Inc. (IMA.A: Quote, Profile, Research, Stock Buzz) all gained.