I find it hard to see the synergy too. Surely, the deal benefits Qi far more than it benefits CST because it will strengthen the former's presence in diagnostics. Presently Qi is in molecular diagnostics only where there is considerable competition. To achieve synergy with a test for cell-mediated immunity, surely one needs serological antibody-based testing which is a very large field, but one in which Qi, as far as I'm aware, has no presence. Some expertise in general clinical immunology would really benefit CST because it would help in the development of tests from other conditions, but I can't imagine Qi is strong in this area. There is some benefit in using Quantiferon alongside molecular testing, but I would not have said it was a natural fit and the machines required for the 2 types of testing are generally quite different. I had thought the synergy might be in point of need testing, but now I'm not so sure because such a test will need considerable development and, besides, Qi 'hires out' its PON technology to whoever wants it. Perhaps they have favoured Qi because Qi was willing to keep the management intact and a company like Roche might not have been. Presumably, the 'heavy negotiations' included the terms relating to current management's future employment. I can't help thinking a higher offer will emerge because the current one is so unattractive. Why would we want to sell at 3.55 having borne all the risk of getting the product established over many years only to have Qi come in, bearing virtually no risk and start profiting outright after just one year? Anyhow, the higher dollar might discourage this and I am happy to hold on to my shares. In particular, I am interested to see the effect of the recent CDC guidelines on the next couple of years' results.
CST Price at posting:
$3.42 Sentiment: Hold Disclosure: Held
