Interpace Diagnostics Group has acquired the BioPharma services business of Cancer Genetics for approximately $23.5 million, while concurrently the buyer will receive a $27 million investment from private equity firm Ampersand Capital Partners.
The deals are designed to expand Interpace into a leading provider of oncology testing and services across the spectrum of cancer—from assessment to drug discovery and clinical trial support—through assays, novel algorithms, and custom service capabilities.
The BioPharma business provides oncology and immuno-oncology drug developers with customized solutions for patient stratification and treatment selection through a suite of molecular- and biomarker-based testing services, DNA- and RNA-extraction and customized assay development and trial design consultation.
At the end of the first quarter, the BioPharma business was supporting more than 200 clinical studies and trials, according to Cancer Genetics.
“We do business with 9 of the 10 largest global pharmaceutical companies, as well as biotech companies that are bringing products to market specifically in oncology,” Cancer Genetics CEO John A. “Jay” Roberts told Clinical OMICs last year. “While the biopharma business fluctuates—on a month-to-month basis, and sometimes on a quarter-to-quarter basis—we like the business a lot because we have earned the right as a small company to do business with large pharma and our projects suggest there is a lot of trust put into the work we do.”
BioPharma will continue to provide its full suite of molecular and biomarker-based tests from laboratories in Rutherford, NJ and Research Triangle Park, NC, Interpace said.
Interpace reasons the BioPharma business has significant potential to add new clients and increase revenue over time by being combined with the company’s molecular diagnostics business.
Fulfilling that potential, says Interpace, will transform the company into a top-tier precision medicine company offering advanced diagnostics, molecular marker testing, data solutions, and biopharma services.
“I believe that expanding more aggressively into the growing biopharma sector with a strong product and service offering, as well as partnering with one of the leading private equity firms in this space, will be transformative for Interpace and will also benefit the patients and customers we now serve in each market,” Interpace President and CEO Jack Stover said in a statement.
Article 9 Transaction
Interpace purchased Cancer Genetics’ BioPharma Business in a Uniform Commercial Code Article 9 transaction, through which secured creditors were paid off and Interpace made an additional payment of approximately $4.5 million to Cancer Genetics, using proceeds from the initial financing provided by Ampersand.
Cancer Genetics’ junior secured lender, Partners for Growth IV (PFG) conducted a consensual private foreclosure of the BioPharma assets before selling them to Interpace, which agreed in addition to assume approximately $5 million of liabilities relating to the business, before working capital and closing adjustments.
PFG extinguished the junior secured debt and fully retired Cancer Genetics’ senior secured loan to Silicon Valley Bank. PFG also paid approximately $2.3 million to Cancer Genetics, which said it intends to use the cash to settle other liabilities.
Interpace paid Partners for Growth $13.8 million cash at closing, and issued Cancer Genetics a promissory note for $7.7 million, subject to certain post-closing adjustments. The note is due upon Interpace shareholders approving and consummating Ampersand’s investment in their company
Ampersand will carry out its investment in Interpace through two tranches of newly issued convertible preferred stock, part of which will be subject to approval by Interpace’s shareholders. Ampersand’s investment in Interpace’s preferred stock has an initial conversion price to common stock of $.80, subject to adjustment, representing a premium of approximately 14% over Interpace’s most recent closing bid price.
Also as part of the deal, Interpace also issued Cancer Genetics a $7.7 million, 6% interest bearing note due either in three years or upon Interpace’s shareholder approval followed by Ampersand’s second tranche investment—whichever comes first.
“Platform” for Growth
“Ampersand’s investment is intended to assist Interpace as it continues to add capabilities and accelerate its growth trajectory within both the clinical diagnostic and biopharma markets,” stated Herb Hooper, managing partner at Ampersand Capital Partners. “We see the opportunity for Interpace, with its strong product portfolio and commercial capabilities, to be a platform for building a leading franchise in the oncology-related molecular and biopharma laboratory services space.”
Cancer Genetics sold off the BioPharma business in one of two transactions carried out in recent days to reduce debt. The company finished last year with a net loss of $20.373 million on revenue of $27.470 million, according to a July 12 regulatory filing.
During the first quarter of this year, Cancer Genetics reported a net loss of $4.6 million, up from a $4.5 million net loss in the year-ago quarter, on revenue that slid year-over-year to $6.8 million from $7.7 million.
On July 8, Cancer Genetics consummated a sale of its clinical laboratory business assets to siParadigm, a specialty reference laboratory with expertise in hematopathology and oncology diagnostics. siParadigm agreed to pay Cancer Genetics approximately $1 million initially, plus an additional “earn-out” payment to be based on future testing volume from certain clinical laboratory customers over the next 12 months.
Cancer Genetics investors appeared to rally behind the sell-offs, sending the company’s share price on NASDAQ Capital Market Monday up from 17 to 21 cents a share the day the deals were announced.
Cancer Genetics said it is retaining its Discovery business, which the company acquired when it bought vivoPharma in 2017. vivoPharm, now a wholly owned subsidiary of Cancer Genetics, offers proprietary preclinical test systems designed to support clinical diagnostic offerings at early stages by biopharmas and academic research centers.