Cancer Genetics, Inc. (CGI), an emerging leader in DNA-based cancer diagnostics, announced that it finalized and closed the purchase of the assets of Los Angeles-based molecular profiling laboratory Response Genetics, Inc. (RGI) on October 9, 2015.
Over ninety per cent of the additional $10 - $12 million in revenue that RGI will contribute to Cancer Genetics over the next year will be generated by business areas related to molecular profiling, therapeutic selection and patient monitoring in solid tumours, including lung, colorectal and skin cancers. The acquisition is also expected to add $4 million to CGI in future contract value from biopharma and clinical research clients. CGI will continue to expand the biopharma operations at RGI, which include strong historical relationships with major biopharma and pharmaceutical firms. Cancer Genetics will also continue to grow the clinical services that RGI’s Los Angeles-based laboratory provides to hundreds of medical care facilities and professionals across the country. To facilitate the transition and help develop future expansion plans, RGI’s vice president of operations, Alan Cheeks, will join the CGI management team and will be responsible for the day-to-day clinical and biopharma operations and delivery.
“The Response Genetics team is excited to become a part of the CGI family, to continue to expand our oncology-focused molecular diagnostic services and the delivery of information to improve patient insights and outcomes,” said Alan Cheeks, vice president of operations.
“The combined company will provide global resources and expertise that uniquely positions CGI in the marketplace. As we move forward to develop a center of excellence in solid tumours on the West Coast, I’m certain we will see growth in our market share. CGI will benefit from increased demand and complexity in clinical trials and from our well positioned offering for the clinical oncology community.”
Additionally, CGI will continue working with the National Cancer Institute by providing the genomic testing for the multi-year Alchemist trials, which were awarded to Response Genetics in 2014. The trials involve genetic screening of tumour specimens removed during surgery for specific gene mutations and testing of post-operative treatment with drugs that target those mutations, but have only been approved by the FDA for use in advanced lung cancer. All screening, biomarker testing, and reporting will continue to be conducted at the Los Angeles-based lab, with substantial collaborations from other biotechnology and pharmaceutical partners.
CGI will also begin to immediately offer the FDA-cleared and Medicare reimbursed Tissue of Origin test. Developed initially by Pathwork Dx, the test has been at the genomic vanguard for diagnosing metastatic, poorly differentiated, and undifferentiated cancers. This proprietary, patented and FDA-cleared test will be offered to both biopharma and clinical customers, globally. CGI estimates that the clinical diagnostic market for this test is approximately $100 to $150 million annually in the United States given that there are over 31,000 new cases of cancer of unknown origin diagnosed in the US, according to the American Cancer Society. In alignment with CGI’s vision of providing greater access to clinically relevant and actionable genomic tools, CGI will also explore partnerships and distribution arrangements whereby the Tissue of Origin test can be readily offered by a network of partners and clinical partners, globally.
In addition to the integration of RGI facilities, a majority of the RGI staff, including a highly trained and nationally distributed sales force, will be brought into CGI’s existing structure. CGI will integrate over 20 of RGI’s clinically-focused sales professionals across the US, offering both a state-of-the-art molecular hematological portfolio along with a clinically actionable and validated portfolio of tests for solid tumours. The tests include a variety of methodologies--from IHC and FISH to gene-expression, microarrays as well as next-generation sequencing (NGS). The clinical operations will report to Alan Cheeks and Dr. Gary D. Zeger, the medical director of the Los Angeles facility. Cheeks will also be a part of the leadership team at CGI and will assume responsibility for helping to develop the center of excellence focused on solid tumour genomics and molecular profiling for clinical and biopharma customers.
“We look forward to a seamless integration of the Response Genetics team and facilities,” said Panna Sharma, president and CEO of Cancer Genetics.
“Throughout the closing process, we’ve put a special focus on aligning our vision and operations to ensure that we will capture the synergies that exist between both companies. In addition to expanding our capabilities to include expertise in both solid and hematological cancers, we will also grow our national footprint significantly. Lastly, we will provide more actionable and relevant genetic information in formats that clinicians demand today. As a result of the integration, Response and CGI will offer the most complete bench to bedside oncology diagnostics in the marketplace with a unique portfolio of innovative clinical tests such as the Tissue of Origin test which will be a cornerstone of our suite of nine unique genomic tests and panels that are being offered today."
As previously announced, the purchase price was approximately $14 million, which will include $7 million in cash and 788,584 shares of CGI common stock.