Invitae Expands NIPT Footprint with Two Acquisitions

August 1, 2017
Invitae Expands NIPT Footprint with Two Acquisitions
Invitae says its acquisitions of CombiMatrix and Goog Start Genetics, which total $72 million, will expand its diagnostics menu across every stage of an individual's life. [Source: ©FotolEdhar/Fotolia]

In separate deals intended to expand its diagnostics footprint across all stages of an individual's life, Invitae said it plans to acquire two diagnostics developers, CombiMatrix and Good Start Genetics, for a combined $72 million in cash and stock.

Nearly half of that total is the approximately $33 million that Invitae will shell out for CombiMatrix, which focuses on diagnostics for prenatal diagnosis, miscarriage analysis and pediatric developmental disorders. The remainder will be spent for Good Start Genetics, which specializes in molecular diagnostics for preimplantation and carrier screening for inherited disorders.

 “By acquiring Good Start and CombiMatrix, Invitae intends to create the industry's first comprehensive genetic information platform providing high-quality, affordable genetic information coupled with world-class clinical expertise to inform healthcare decisions throughout every stage of an individual's life,” Invitae CEO Sean George said in a statement yesterday.

Also yesterday, Invitae said separately it will sell $73.5 million of its stock through a private placement to be led by existing investors with “significant” participation from multiple new investors, all unnamed.

Proceeds from the private placement are intended, Invitae said, to support its strategic growth plan by actively pursuing acquisitions that can provide access to new markets, expanding the company's test menu, and contributing positively to cash flow after two to three quarters.

Headquartered in Cambridge, MA, Good Start has processed 1.7 million tests since its commercial launch in 2012. Through a next-generation sequencing (NGS) platform designed to simplify workflow and lower costs while maintaining quality, Good Start combines customer care and access to genetic counseling with tests that fall within three primary product lines:

  • Recently-launched VeriYou delivers physician-ordered, at-home carrier screening via an affordable test service with genetic counseling. VeriYou is available through Amazon.com.
  • Flagship in-clinic carrier screening service, GeneVu, includes a comprehensive diagnostics menu intended to assess known and novel mutations that cause inherited genetic disorders.
  • A proprietary and advanced preimplantation genetic screening test, EmbryVu, based on technologies exclusively licensed from Johns Hopkins University School of Medicine. EmbryVu is designed to provide an affordable testing service for individuals using assisted reproduction toward a healthy pregnancy.

Invitae will acquire Good Start by issuing up to approximately 1.65 million shares of Invitae common stock, subject to a partial hold-back to cover indemnification liabilities, and paying approximately $18.3 million cash to eliminate Good Start's outstanding secured debt, and paying or assuming approximately $6 million in Good Start pre-closing and closing-related liabilities and obligations.

The planned Good Start acquisition is expected to close in the first part of this month, subject to customary closing conditions.

Invitae said its acquisition of CombiMatrix will complement its own offerings and those of Good Start by creating a diagnostics menu comprehensive enough to give women, their partners, and clinicians the genetic information needed for reproductive health decisions.

Irvine, CA-based CombiMatrix focuses on miscarriage analysis testing and DNA-based testing designed to detect genetic abnormalities beyond what can be identified through traditional methodologies used in preimplantation genetic diagnostics, carrier screening, prenatal diagnosis, miscarriage analysis and diagnosing pediatric developmental disorders. CombiMatrix combines technologies such as single nucleotide polymorphism chromosomal microarray analysis, and NGS with expertise handling challenging sample types.

CombiMatrix finished last year with $12.8 million in revenue, up 28% over 2015, and has seen 2017 revenues continue to climb year-over-year, rising 27% in the first quarter—an increase driven by a 32% jump in its reproductive health business.

“This combination of CombiMatrix, a recognized leader in genetic testing for miscarriage analysis, with one of the fastest growing genetic information companies in Invitae provides a tremendous opportunity to accelerate the growth of both companies,” added CombiMatrix President and CEO Mark McDonough.

Upon completion of the deal CombiMatrix would become a wholly-owned subsidiary of Invitae.

Invitae agreed to pay $27 million in shares of Invitae common stock to holders of currently outstanding shares of CombiMatrix common stock, as well as currently outstanding restricted stock units and in-the-money options. That payment will be based on the 30-trading-day trailing average closing price immediately preceding the agreement date, or approximately 2.85 million shares, subject to adjustment based upon a net cash calculation for CombiMatrix at the time of the acquisition.

Invitae plans to offer up to approximately $6 million worth of its shares—approximately 0.63 million shares—in exchange for at least 90% of CombiMatrix Series F warrants as a condition to carrying out the acquisition. In a separate statement, CombiMatrix said the offer is based on $2.90 per warrant and 2,067,076 Series F warrants currently outstanding, as well as on a fixed price per share of Invitae's common stock of $9.49.

Should the Series F warrants not be exchanged, and they are either exercised or assumed as part of the deal, Invitae added, its purchase price for CombiMatrix could rise by up to approximately $15 million in shares of Invitae, or approximately 1.58 million shares, subject to adjustment based upon a net cash calculation for CombiMatrix at the time of the acquisition. Exercise proceeds from the Series F warrants could amount to approximately $10.7 million if all such warrants were exercised.

The planned CombiMatrix acquisition is set to close in the fourth quarter, subject to customary closing conditions, including CombiMatrix stockholder approval, as well as the warrant exchange participation threshold.

“This is a transformative moment for Invitae, for our industry, and—importantly—for patients,” George added.

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