Nightingale launches expansion into genetics through an acquisition

Translation: Original comment published in Finnish on 1/19/2022 at 6:08 am.

Nightingale Health announced that it acquires the Finnish genetic testing company Negen and launches an international center for genomic data analysis. The background of the acquisition and expansion into genetics is the company’s objective to consider genetic factors next to current lifestyle-related disease risks. The transaction is small considering the size class of the company. However, it substantially expands the company's offering and enables offering more comprehensive disease risk prediction and related services to consumers in the long term. The press release is interesting for the company's long-term story, but it does not have immediate impact on our view of the company.

Strategically, genetic testing works well next to blood tests

Nightingale's current blood test offering, and technology are built on the assessment of biomarkers that indicate lifestyle choices and the resulting disease risks. Next to lifestyle choices, human genetics is a key factor in disease risks. Thus, we find it logical for the company to expand into genetic tests and it complements its tools in predicting disease risks.

The deal is the first step in Nightingale’s expansion into genetic data analysis

Nightingale acquires the genetic testing company Negen Oy that provides proprietary genetic tests directly to consumers and via its healthcare partners. In the deal, Nightingale acquires the core functionality in direct-to-consumer DNA testing, genomic data processing pipeline and polygenic risk algorithms for, e.g., cardiovascular disease and type 2 diabetes. Negen is an early-stage technology company that has, however, established partnerships with several private healthcare providers in Finland.

Nightingale is planning to launch products combining blood analysis and genetics already in the second half of 2022, which we consider to be a very fast schedule. We estimate that the acquisition is a key enabler in rapidly building an offering around genetics. In addition to the acquisition, Nightingale will launch an international center for genomic data analysis to further develop and expand Nightingale’s integrated preventative health products. The company has close relations with biobanks, and to our understanding genetic data is already analyzed on several biobanks’ samples next to Nightingale's blood tests. We believe that the company's current biobank relationships enable it to rapidly start research that combines lifestyle choices and genetic data with disease risks.

Strategic importance of transaction clearly greater than its small size

Negen’s revenue prior to the transaction has been around EUR 50,000–150,000 annually. According to the press release, the purchase price was not significant compared to Nightingale’s cash position. We estimate that successful integration of genetic testing as part of the risk predictions for diseases would, in the longer term, lead to a stronger overall offering for Nightingale. We are positive about the transaction but expect its effects to become more clearly visible in the company's offering and figures only in coming years. Thus, the press release does not change our view of the company.