DNA biotech

Cancer Genetics Announces Agreement in Principle to Acquire the Assets of Response Genetics, Inc. and Its Strong Franchise In Solid Tumor Molecular And Genomic Testing

Rutherford-based Cancer Genetics, Inc., an emerging leader in DNA-based cancer diagnostics, announced that it has entered into an agreement in principle to act as a “stalking horse” and acquire substantially all the assets and operations of Los Angeles based Response Genetics, Inc. As part of the transaction, Response Genetics has filed a voluntary petition under chapter 11 of the Bankruptcy Code in the Delaware Bankruptcy Court.

Response Genetics has an established core business in solid tumor molecular diagnostics, particularly in lung cancer, colorectal cancer and melanoma that help determine a patient’s response to cancer therapy. The combined entity will have significant expertise in both solid and hematological cancers; have a national geographic and sales footprint, and be able to serve larger customers, healthcare groups and biopharma companies. The combined company will have an industry leading biomarker and genomic portfolio in over 8 of the top 10 cancers, including an FDA-approved test for tumors of unknown origin, TOO, which Response Genetics acquired from Pathwork Diagnostics.

Response Genetics’ 27,000 square foot CLIA-certified and CAP-accredited laboratory located in Los Angeles, California, has performed oncology diagnostic testing for over 3,000 unique physician, laboratory and hospital sites across the United States. In 2014, the company was awarded the multi-year ALCHEMIST Trial contract, with the National Cancer Institute (NCI), focused on biomarker-based treatment for lung cancer.  Cancer Genetics plans to develop RGI’s Los Angeles facility into a center of excellence in solid tumors, with a particular emphasis on lung cancer once the purchase is finalized.

The acquisition will allow Cancer Genetics to serve Response Genetics clients and fulfill contracts with both biopharma customers and clinical ordering sites, primarily throughout the Western and Southeastern United States. These biopharma clients, which include the NCI ALCHEMIST trial, add to Cancer Genetics’ existing client base. Response Genetics provides CGI with an immediate opportunity to offer existing clients an expanded test menu in solid tumors as well as an FDA approved, and Medicare reimbursed test for tumors of unknown origin. Upon closure of the transaction, the company expects that the joint clinical sales force will have national reach and be among one of the largest oncology-focused clinical sales groups in molecular diagnostics.

“The proposed acquisition of Response Genetics represents a unique opportunity for CGI and our shareholders by furthering our mission to impact cancer diagnosis and treatment globally,” said Panna Sharma, CEO of Cancer Genetics. “The combined company will have significant revenue, operating and service synergies, allowing CGI to provide the most complete, oncology-focused molecular diagnostics services to clients across the country. Our company will be uniquely positioned to lead this segment of the rapidly evolving and high-growth oncology market.“

Response Genetics is expected to contribute an additional $10 to $12 million to CGI in revenue over the next 12 months.  CGI anticipates this transaction, upon close, to more than double CGI’s clinical revenue base and add an additional $6 million in contracted revenue with biopharma customers and projects. The agreement calls for CGI to acquire the assets and ongoing operations of Response Genetics for approximately $14 million, which will include $7 million in cash and $7 million in CGI common stock.

The asset purchase agreement constitutes a “stalking horse bid” in a sale process being conducted under Section 363 of the U.S. Bankruptcy Code.  As part of the sale process, Cancer Genetics, Inc. stalking horse bid is subject to higher or better offers, as other interested parties will have an opportunity to submit competing bids.  As the “stalking horse bidder,” CGI will be entitled to a break-up fee and expense reimbursement if it ultimately does not prevail as the successful bidder at a subsequent auction for Response Genetics’ assets.  CGI’s role as a stalking horse bidder, and the sale itself, are subject to approval by the Delaware Bankruptcy Courts. The agreement in principle remains subject to finalization within seven days of the Response Genetics’ commencement of its chapter 11 case.  In addition, the agreement is proposed to be subject to the satisfaction of a number of closing conditions, including Bankruptcy Court approval and the absence of certain material adverse events.  No assurance can be given that the sale will be consummated on the anticipated terms, or at all.

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