NeoGenomics Buys Clarient from GE Healthcare for Up to $275M

October 21, 2015
NeoGenomics Buys Clarient from GE Healthcare for Up to $275M
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NeoGenomics said today it has agreed to acquire Clarient and its wholly-owned subsidiary Clarient Diagnostic Services from GE Healthcare. The deal, valued at up to $275.2 million, is intended to create a larger and broader provider of precision oncology diagnostics.

NeoGenomics said the acquisition will enable it to expand its offering of cancer diagnostic tests to hospitals and physicians nationwide, as well as speed its growth in the global market for pharmaceutical clinical trials and research.

The buyer said Clarient's pathology services and capabilities in the analysis of solid tumor cancers of the breast, colon and lung were “highly complementary” to its molecular testing services and extensive expertise in testing for hematologic cancers.

NeoGenomics added that the acquisition will allow the combined company to further leverage its existing laboratory facilities and infrastructure to drive productivity and lower operating costs.

“Our vision is to become America's premier cancer testing laboratory, and this acquisition is a major step forward in achieving that vision,” NeoGenomics Chairman and CEO Douglas VanOort said in a statement. “We have always respected Clarient's outstanding capabilities, and are very pleased to be able to combine them with our own outstanding service offering.”

Clarient, a unit of GE Healthcare's Life Sciences business, has approximately 415 employees, and is based in Aliso Viejo, CA, and Houston. Clarient had 2014 revenue of $127 million and adjusted earnings before interest, taxes, depreciation, and amortization or EBIDTA of approximately $13 million.

VanOort said that absent any unexpected changes to reimbursement, Neogenomics expects its 2016 revenue to more than double to approximately $240 million to $250 million.  “Adjusted” EBITDA—not including non-recurring charges and non-cash stock-based compensation expenses—is projected to more than triple to between $33 million and $38 million on a pro forma basis.

He also acknowledged that the combined company will carry out approximately $4 million to $6 million of cost-cutting or “synergies” in 2016. That will grow by the end of year 3, NeoGenomics said, to an expected $20 million to $30 million per year of realized synergies.

“Our increased scale will also enhance our ability to innovate in new areas of precision medicine,” VanOort added. “Of all the possible acquisition candidates we have reviewed, Clarient is by far the best fit for NeoGenomics.”

NeoGenomics will acquire Clarient for $80 million in cash, $110 million in preferred stock, and 15 million shares of NeoGenomics common stock. The stock was valued at about $85.2 million based on Tuesday’s closing share price of $5.68.

The deal is subject to approval by anti-trust regulators and NeoGenomics' shareholders—and is anticipated to close during Q4 of this year.

On a fully diluted basis, assuming full conversion of the preferred stock, NeoGenomics said approximately 32% of the company will be owned by GE Healthcare.

As part of the transaction, NeoGenomics’ Board of Directors will be expanded with the appointment of a new director from GE Healthcare.

NeoGenomics added that it and GE Healthcare have also agreed to collaborate on a new bioinformatics initiative that combines their shared interest in precision oncology.