Mid Europa showed us that well executed market consolidation can be a very successful strategy that adds a lot of value. We are proud of what we have achieved together.
- Jakub Swadzba, CEO & Founder, Diagnostyka
Supporting the Polish Healthcare System
Drawing on its deep healthcare experience, MidEuropa recognised the attractive consolidation opportunity for laboratory services in Poland to create the #1 Polish clinical laboratories chain
The highly fragmented diagnostics market had been crying out for professionalisation and offered significant benefits through economies of scale. Since MidEuropa’s 2011 investment, Diagnostyka has completed over 90 follow-on acquisitions, which, combined with strong and consistent organic growth, have created an undisputed market leader.
For over a decade, MidEuropa had identified patient diagnostics, both imaging and laboratory, as very promising, long-term growth sub-sectors within the healthcare services market. This was because of significant under-penetration and the relatively low long-term cost of providing services which have a high positive impact on healthcare outcomes by emphasising early detection and preventive treatments.
In early 2011, MidEuropa acquired a strategic stake in Diagnostyka with a view to consolidate the highly fragmented clinical laboratories and imaging diagnostics market in Poland. The investment thesis was based on the recognition that the Polish population is underserved by the underfunded public system, there is growing demand for testing as part of preventive medicine, and evolving expectations of an increasingly affluent and ageing population is driving growth in private health services in Poland.
Diagnostyka is unique among its European peers in that it sources its patients though a well-diversified mix of referral and payor channels:
- It serves patients through a capillary nation-wide network of close to 1,100 collection points, where patients can access the testing services and pay for them either directly out-of-pocket or through private insurance,
- It provides outsourced testing services to the private sector chains of healthcare clinics and hospitals, as well as to individual GPs throughout Poland,
- It selectively offers laboratory outsourcing services to public hospitals.
Diagnostyka is the partner of choice for the most prominent medical chains in Poland because it boasts the highest quality standards, the broadest service offering and the convenience of the only true nationwide coverage – all supported by rapid and reliable logistics.
Strong organic growth supplemented by market consolidation
MidEuropa’s investment unlocked Diagnostyka’s ability to source, analyse, structure and finance new add-on targets and evolve into a very credible institutional buyer on the clinical laboratory market. Following its significant acquisition of Fryda Laboratories shortly after its 2011 partnership with MidEuropa, Diagnostyka rapidly developed the expertise and reputation for successfully acquiring and integrating a number of targets, expanding geographic coverage as well as service offering portfolio. Despite this fast-paced consolidation over the past decade, more than half of the market remains highly fragmented, leaving ample space for further dynamic acquisitive growth.
The buy-and-build strategy works to supplement the uniquely strong organic growth of the Polish medical testing market: As the domestic market continues to lag Western Europe and parts of Central Europe in testing penetration and in value of tests, the market is expected to continue to expand in volume and value over the long term.
Integrating businesses post-acquisition is an essential part of the value creation plan. For Diagnostyka, a big lure of the companies it acquires is the in-house laboratory experts, and Diagnostyka has made a priority of attracting and retaining this talent through the integration process. New businesses are seamlessly integrated into the Company’s proprietary IT system to enable them to operate as a part of the broader network immediately post-acquisition.
Diagnostyka is constantly optimising its laboratory footprint to improve efficiency. There are five central laboratories across Poland that can process large volumes in a very cost-efficient way, while local laboratories are retained to enable quick responses to the most urgent tests that need to be performed on-site. In 2021, the Company launched a new state-of-the-art facility in Warsaw, and at 13,000 square meters and the ability to process 100,000 tests daily, it is one of the largest and most modern clinical laboratories in CEE.
Management’s laser focus on revenue growth, quality of medical outcomes and maintaining cost efficiency has allowed Diagnostyka to generate impressive growth and market-leading margins despite charging some of the lowest prices in Europe. The company has great ongoing prospects owing to its uniquely attractive business model and very consistent track record of growth during its partnership with MidEuropa for 10 years and counting.