Novacyt Group acquires Southern Cross Diagnostics

Novacyt, a UK-based molecular diagnostics firm, has announced the acquisition of Southern Cross Diagnostics, an Australian distributor of diagnostic tools, for an initial consideration of AUD 8.5 million (£4.45 million). The acquisition aims to bolster Novacyt's presence in the Australian market, an area demonstrating strong growth potential. The deal is structured through Novacyt's subsidiary, Novacyt Holdings UK, and involves the purchase of the entire issued share capital of the Sydney-based company.

Southern Cross Diagnostics, established in 2008, distributes molecular diagnostics, serology, and laboratory consumables and has been a distribution partner for Novacyt's Yourgene Health since 2019. The firm reported revenues of £6.7 million for the year ending June 2025, a significant rise from £2.4 million two years prior, alongside a net profit of approximately £0.8 million. The company serves major pathology and laboratory customers across Australia and operates with a gross margin of 39% within the same period.

The acquisition is anticipated to be immediately earnings and revenue accretive for Novacyt. However, approximately £2 million of annual revenue—representing current direct sales from Novacyt to Southern Cross—will be excluded from the combined financials. The strategic rationale centers on providing Novacyt with direct market access in Australia, supported by positive reimbursement developments for its key assays. This position is further strengthened by Southern Cross's existing relationships with strategic accounts and potential for expanded distribution of third-party products in other territories.

Australia's clinical diagnostics sector is poised for expansion, with an estimated compound annual growth rate of 8.5% from 2025 to 2030. The acquisition aligns with Novacyt's strategy to leverage these market dynamics, particularly in light of growing demand for its cystic fibrosis and DPYD assays. The deal's contingent consideration includes up to AUD 16.5 million in future payments, conditional on achieving specific EBITDA targets over four years.

Completion of the acquisition, expected by the end of February, is contingent upon a pre-sale reorganisation involving the transfer of Southern Cross's issued capital to Ardenna, trustee for The Thliveris Family Trust. Following completion, a preferential subscription rights issue will be launched, with the vendor agreeing to subscribe up to AUD 0.8 million in new Novacyt shares. This acquisition marks a critical milestone in Novacyt's geographical expansion strategy, with particular emphasis on regions with favorable market conditions and regulatory environments.