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Exiqon to Acquire Dx Shop Oncotech as US Office Ramps Up Staff, Manufacturing

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Exiqon this week announced plans to acquire Oncotech, a privately held cancer diagnostics firm based in Tustin, Calif., through a $45 million share transaction slated to close on Jan. 1, 2008.
 
Exiqon, based in Copenhagen, Denmark, said it plans to combine its internally developed miRNA cancer biomarkers with Oncotech’s existing diagnostics infrastructure with the goal of launching miRNA-based tests by the end of 2008.
 
Oncotech currently develops and markets diagnostic tests to optimize treatment selection for cancer patients. The company offers its services to a network of more than 7,000 oncologists and approximately 1,200 hospitals, including Cedars-Sinai, Memorial Sloan-Kettering, Johns Hopkins, UCLA, the Mayo Clinic, and Massachusetts General, Exiqon said. Additionally, Oncotech operates a Clinical Laboratory Improvement Amendments-approved oncology laboratory, a human tumor bank, and a genomic R&D platform, all of which make it an attractive acquisition from Exiqon’s perspective.
 
Exiqon tapped Oncotech solely for its development and marketing capacity as it looks toward marketing its line of miRNA-based tests. Currently, none of Oncotech’s cancer diagnostic and prognostic assays use miRNA biomarkers, but Exiqon views the company’s infrastructure and experience in dealing with US regulatory bodies as a useful vehicle for its entry to the North American testing market.
 
Lars Kongsbak, president and CEO of Exiqon, wrote in an e-mail to BioArray News this week that the combined entity will be a “leader” in the field of miRNA diagnostics and that he expects the company to release its first miRNA-based product in 2008. Kongsbak did not discuss what the assay will be for.
 
“Together with Oncotech we will master the entire flow of diagnostic product development including assay development [and] biomarker screening,” he said. He cited Oncotech’s biobank of around 150,000 samples, its CLIA facility, and its broad customer base as particular strengths.
 
Exiqon, which sells a number of different products for miRNA screening including microarrays and qPCR assays, has long had a goal of bringing miRNA markers into the clinical market. Following his company’s $470 million initial public offering in June, Kongsbak told BioArray News that the firm was creating an R&D group to create diagnostic or prognostic assays for use in treating cancer, metabolic disorders, and neural disorders (see BAN 6/26/2007).
  
Last month, the firm signed a cooperative research and development agreement with the US National Cancer Institute to identify miRNA-expression signatures associated with the onset and progression of colon cancer, and to develop diagnostic tools for identifying patients so that they can receive the appropriate clinical course of treatment.
 
According to Kongsbak, Exiqon’s internal diagnostics work is “going as planned.” The company increased its workforce “significantly” during the year and also upgraded its facility in Copenhagen for array screening of biological samples, he said.
 
“During the year we have been very focused on getting access to the right biological material for our biomarker-screening programs. Access to high-quality biological material with clinical relevant data is a competitive parameter,” Kongsbak said.
 
The Acquisition
 
In a statement, Exiqon said that the transaction will help it overcome “a number of the most significant
challenges in entering the molecular diagnostic market,” including access to biological materials and associated clinical information, certified laboratory facilities, sales and marketing, reimbursement, and regulatory affairs.
 
Under the terms of the deal, Oncotech shareholders will receive 6.2 million shares of newly issued Exiqon stock with an estimated value of $45 million. Oncotech is being assisted in the deal by Cowen and Company while Exiqon is being assisted by Allen & Co. After the acquisition is concluded, Oncotech will retain its brand name and be a subsidiary of Exiqon.
 

“Right now the debate is whether people should go for arrays or qPCR and it is too early to choose which platform we are going to use in diagnostic.”

The acquisition will add around 100 staffers to Exiqon’s workforce, bringing the combined firm’s headcount to more than 200 employees in Copenhagen, Boston, and Tustin.
 
The agreement means that the majority of Exiqon’s employees will now be based in the US. The firm expects that 60 percent to 70 percent of its future revenues will be generated in the North American market. Diagnostic development will take place in Copenhagan and in Tustin.
 
The company expects the transaction to close early next year. It said that it does not expect the acquisition to impact its financial forecast for 2007 nor will it compromise Exiqon’s financial goal of reaching profitability by 2011. The firm said earlier this year that it expects its 2007 revenues to be around DKK 55 million ($11 million). The company did not provide any guidance on how the transaction will affect 2008 revenues.
 
Exiqon said it plans to follow its upcoming miRNA-based test with further miRNA-based diagnostics that will focus on “treatment selection within oncology and tumor recurrence for colon, lung, ovarian, breast and other high incidence cancers,” according to the firm.
 
Exiqon will use its miRcury line of miRNA microarrays to screen through Oncotech’s human tumor bank to develop biomarker signatures that will be used in future tests. However the firm is undecided about the role arrays will play in its diagnostics program.
 
“Right now the debate is whether people should go for arrays or qPCR and it is too early to choose which platform we are going to use in diagnostic,” wrote Kongsbak. “We will have to return to that later.”
 
Kongsbak pointed out that the company recently secured a license from Rosetta Inpharmatics to offer qPCR assays for miRNA testing. It also offers in situ detection as well as bead-based screening through an agreement with Luminex. “We are basically able to master assays for all platforms,” wrote Kongsbak.
 
The firm estimated the market for nucleic acid analysis-based diagnostics within oncology to be approximately $450 million in 2007 with an annual growth rate of 48 percent.
 
Meanwhile, in Boston ...
 
Outside of diagnostics, Exiqon has also been focused on expanding its US office in Boston, which it opened in 2006. “We have added laboratory facilities to our US operation which will be used for an application laboratory,” Kongsbak said.
 
The company will use this facility to showcase its products and to help customers with application development, he said. In addition, he said the company plans to move “parts” of its manufacturing operations from Copenhagen to Boston “in order to strengthen our supply chain.”
 
Michael Kallelis, president of Exiqon’s US arm, told BioArray News in an e-mail this week that the firm recently moved into a new office in Woburn, Mass., where it occupies 15,000 square feet of lab and office space.
 
The new facility will “assume responsibility [for] the manufacture of Exiqon’s LNA miRCURY product line,” Kallelis said.
 
During 2007, the US office nearly doubled to 17 employees and there are plans to add additional staff next year. “The new production team was put into place over the last few months and will be online by the end of this year,” Kallelis wrote.  
 

“Additionally, we are expanding our technical support staff to handle the growing number of customer inquiries,” he added. The firm will also be creating an application group to cater to the needs of its diverse customer base.

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