Sonic Healthcare to acquire Swiss-based Dr Risch as it eyes expansion

The ASX-listed pathology group has bought Dr Risch as it looks to expand its presence in Switzerland after interim profit dived 47 per cent.

Sonic Healthcare has bought Swiss laboratory group Dr Risch. Picture: Gillianne Tedder/Bloomberg

Sonic Healthcare has bought laboratory group Dr Risch for 117 million Swiss francs ($202m) as the ASX-listed pathology group looks to expand its presence in Switzerland.

The purchase price for Dr Risch will include the issue to the sellers of Sonic Healthcare ordinary shares with a value equivalent to Sfr30m, with the balance to be funded in Swiss francs from Sonic’s existing cash and debt ­facilities.

Sonic Healthcare last month reported that its interim profit fell 47 per cent in the first half to $202m, and it told investors it was considering further acquisitions and contract opportunities. Since July, Sonic had secured about $500m in new annual revenue through acquisitions and major contract wins.

Sonic Healthcare chief executive Colin Goldschmidt said the acquisition of Dr Risch would allow the company to strengthen its existing position in the Swiss market.

“We look forward to working with this highly experienced and respected group to enhance and strengthen our service offering to clinicians and their patients across Switzerland,” he said.

“While an important strategic step for Sonic Healthcare in Switzerland, the transaction is not considered to be material.”

Investors appeared unfazed by the acquisition, with shares in Sonic falling 0.2 per cent to $27.29 on Wednesday. This has taken total losses since the start of the year past 15 per cent, and the shares are well off their record high of $46.95 hit in late 2021.

Dr Risch employs about 650 staff in 13 clinical laboratories across Switzerland and a laboratory in Vaduz, Liechtenstein.

In 2023, the Swiss laboratories generated revenue of Sfr94m, with a further Sfr8m of revenue generated by the laboratory in Liechtenstein.

The integration of Dr Risch with Sonic’s existing Swiss operations, including the recently acquired Synlab Suisse – now called MediSyn – laboratories, will be led by Sonic’s existing Swiss leadership team together with Dr Risch’s management team, which will continue with Sonic into the future.

The transaction is expected to be earnings per share accretive from 2025, and the return on invested capital will significantly exceed Sonic’s cost of capital once synergies are achieved.

Significant synergies are expected in multiple areas of infrastructure and operations (includ­ing procurement).

Dr Goldschmidt told investors at Sonic’s half-year results last month that in addition to seeking out acquisition opportunities, the company had several programs under way that would provide a strong tailwind in the near future.

“Over the last two years, we have invested around $350m in carefully selected synergistic ­diagnostic technologies which, while not currently providing a ­financial return, have very ­material future earnings potential,’’ he said.

Dr Goldschmidt said the use of AI in pathology and radiology in particular was “expected to cause step changes in efficiency, quality and capacity in coming years, and Sonic will be a major beneficiary’’.

The ASX healthcare sector has underperformed the ASX 200 by 480 basis points as a result of weak margins stemming from persistent subdued volumes and limited pricing power to offset ­ inflation.

“We see significant risk of pathology companies meeting their guidance ranges given subdued trading conditions in February where revenue growth guidance in the second half was lowered,” E&P Capital said in a note.

“The sector is a victim of sticky costs post-Covid, high labour inflation and lower GP attendances, which is impacting volumes. We believe the market needs to see evidence of stronger industry volumes to get confidence on the strong second half skew.”

Sonic expected the transaction to close by the end of the month.