A deal with heart
Cleveland HeartLab partners up to scale its mission to save lives
Who: Cleveland HeartLab
What: Acquired by Quest Diagnostics to catapult CHL’s groundbreaking efforts to reduce heart attacks and strokes
Why it matters: At scale, CHL’s inflammation testing could eliminate billions in health care costs
Jake Orville is on a mission to dethrone cardiovascular disease as the nation’s leading killer – of men and women. So when he sold Cleveland HeartLab to $7.5 billion Quest Diagnostics, he stayed focused on his mission, even in the toughest moments.
“It tends to be like a U curve,” Orville says. “You start off very excited about the high-level strategic marriage that you’ve agreed to top to top. Then you dive quickly and aggressively into every little detail of the company. You’re diving down the U very quickly and aggressively all the way down to the depths of every part of the business.”
As intense as the talks were, Orville stayed focused on what he wanted to accomplish and the $94 million cash deal got done. CHL will be the base for Quest’s first national center of excellence in cardiometabolic disorders with a focus on services that help patients and physicians nationwide identify hidden risks of heart disease.
Here’s a look at how both companies did what needed to be done to finalize a transaction that can save lives.
A labor of love
Orville started CHL in 2009 as a spinoff of the Cleveland Clinic. It grew from eight to 200 employees and along the way, developed a robust R&D program to accelerate the clinical use of scientifically proven and medically relevant biomarkers in the battle against heart disease. The goal is to provide a more complete picture of heart disease risk that allows clinicians to deploy personalized medical programs and interventions to reduce that risk. CHL’s work has been published in more than 100 peer-reviewed journals. This was a labor of love in the truest sense to help people live longer.
As Orville looked to the future, however, he was concerned about what it would take to continue to scale the business and fulfill the potential of the opportunity his team had created.
“We were growing exponentially and we felt we had a solution that could be utilized much more broadly,” Orville says. “But to build out the infrastructure, gain all the relationships with the commercial payers and put draw stations all over the country to make sure you have access points, that’s pretty daunting for a small, emerging company. We were successful, but in the big scheme of things, still pretty small.”
Growing businesses often face this pivotal moment in the lifecycle of their organization. You can continue to invest and raise capital for your business. Or you can explore potential mergers and acquisitions.
“We had a high-end service that was clearly working very well and growing in a market that tends to see 1 to 2 percent growth,” Orville says. “We were growing at 30 to 40 percent. We were approached often and frequently with opportunities. For us, we wanted to make sure it was the right synergy, the right marriage, the right opportunity to ensure the high value that we created was truly going to be realized.”
The seeds of a partnership
Enter Quest Diagnostics. Orville had built a strong partnership with Quest over the years.
“We had a long history of either working in collaboration or working in the market side by side much more than competing with Quest,” Orville says. “We would find ourselves servicing a clinician and that clinician wanted what both of us had to offer. The customer was using both of our services, even though we weren’t connected directly together.”
Orville saw an opportunity with Quest to obtain access and coverage, two critical components that would be needed to enable CHL to reach a wider audience.
“We have a solution that works well,” he says. “It addresses the No. 1 clinical need out there — cardiovascular disease. So you have a solution that works in a market that is in dire need of a solution. That’s not the hard part.
“Access and coverage is where the rubber meets the road and where you see ultimate adoption and success. That’s what this marriage brings together. It gets us into this awesome infrastructure, awesome access points and very good relationships with payers to be able to fulfill that solution in the market. That you just can’t do on your own. The capital you would need or the time you would need to execute on that would be near impossible.”
It all made perfect sense and ultimately, the two sides reached a deal that they hope will take heart disease prevention to a whole new level. But getting there was not easy.
“We were in dialogue for a while to make sure we truly would get this right,” Orville says.
A foundation of trust
The negotiations took about a year. As the talks began, Orville wanted to be certain that the high-value approach CHL had brought to market would be accelerated and advanced rather than tucked in and/or diluted.
“We didn’t have to be acquired,” he says. “The challenge was really around the confidence and assurance that we would be able to do this successfully without being tucked in or assimilated into everything else. We wanted to be assured we could continue to tap into the market and grow the business as we had prior to the acquisition.”
At the same time, Orville understood it was a two-way street. Quest had questions to ask and assurances it needed that this would be a wise acquisition for the company to make.
“It was their job to confirm everything that we believed in,” Orville says. “That lasted several months. There were streams of people and intense deep dives. It was a very difficult time for the company to be able to navigate the process, but also run the operation. Those were the most challenging times of the deal.”
It gets back to the U-curve analogy that Orville mentioned earlier. People tend to be excited about the potential of a deal when it is first conceived and they likely feel great satisfaction when the work is done and the deal is closed. It’s the time in between when all that work has to get done that can be tough to endure.
“Now you have teams of people that are out there to confirm this agreement that you made when you were doing more high-level presentations,” Orville says. “We agreed top to top that this makes sense. Now our job is to go validate it, prove it or candidly, find areas where maybe it’s not the case. Those become very intense times and that’s where you see deal fatigue.”
The good news is both Quest and CHL had built up great trust, comfort and confidence in the other.
“We were much more positioned for a successful acquisition and integration because we have that historical trust and confidence with each other,” he says. “If we didn’t have that, this deal probably wouldn’t have gotten done. We had the benefit of years of history together.”
Eyes on the prize
The deal to buy CHL closed on Dec. 1. In addition to establishing an entity focused on heart disease diagnostics within CHL’s 25,000-square-foot clinical laboratory in Cleveland, Quest and Cleveland Clinic have finalized a strategic collaboration intended to speed the commercialization of emerging innovations at the Clinic, including its Lerner Research Institute. The two entities also intend to collaborate on trials to demonstrate the clinical and economic value of these and other biomarkers.
Completing a successful business transaction often comes down to your ability to keep your eyes on the prize, says Orville, who is now general manager of the cardiometabolic franchise within Quest that includes Cleveland HeartLab.
“In a process that lasts a long time and in a process that can get very intense and with an integration that will also last a long time, it’s easy to lose focus of the original excitement you had with the deal,” he says. “You have to have a charter. You have to continue to remind everyone why you did this and you have to pull people out of the weeds and get back to the bigger opportunity. Saving a penny here, but losing a dollar of growth there is not why you did this deal in the first place. That’s an important aspect to be reminded of all the way through to integration.”