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Invitae Acquiring Genosity for $200M; Investment Group Provides Firm $1.15B in Senior Notes

NEW YORK – Invitae on Monday announced a $200 million deal to acquire New Jersey-based Genosity and use its software and lab solutions to accelerate the development and decentralized market launch of somatic and germline oncology test offerings.

Separately, a group of investors led by Softbank Group subsidiary SB Management will make a $1.15 billion investment in Invitae in convertible senior notes that it will put toward growth initiatives, such as adding new tests and acquiring complementary tests and companies. The convertible senior notes will have an initial conversion price of $43.18 per share of Invitae's common stock, which represents a 20 percent premium to the company's five-day, volume-weighted average price as of April 1. The notes will mature on April 1, 2028, unless redeemed earlier, and bear 1.5 percent interest per year.

To purchase Genosity, Invitae will put up $120 million in cash and around $80 million in shares of its common stock based on the average closing price of its stock before the date the deal closes, factoring in Genosity's debt and transaction expenses. The acquisition is slated to close in the second quarter and has been approved by the board of directors of both firms. Cowen was Genosity's financial advisor in the acquisition.

"Each individual cancer is unique. The way we diagnose and treat it must be as well," Robert Nussbaum, Invitae's chief medical officer, said in a statement. "Our goal is to move as quickly as we can toward the day where each cancer patient receives timely, comprehensive genetic information that is used to guide their care from diagnosis to monitoring for disease recurrence. Together with Genosity, we believe our combined novel capabilities and capacity will help us reach that day sooner for patients around the globe."

Specifically, according to Invitae, Genosity's software and data management platform for next-generation sequencing will help it quickly advance several tests in development, including the Personalized Cancer Monitoring (PCM) platform, a test for the early detection of cancer recurrence that it intends to take through regulatory review through the US Food and Drug Administration as an in vitro diagnostic. 

"If approved for use, [this test] will be augmented by Genosity technology and capabilities to distribute PCM globally, increasing accessibility and reducing turnaround time," San Francisco-based Invitae said in a statement. "With this capability, we believe Invitae will be uniquely able to meet the needs of cancer patients worldwide, whether their clinicians send out to a central testing service or rely on tests that are completed locally by in-house laboratories."

As part of the acquisition, Invitae will grant restricted stock units (RSUs) valued at up to $15 million to certain employees of Genosity who continue at Invitae under its 2015 Stock Incentive Plan. The RSUs, which Invitae's board approved for use as inducement grants, will vest annually for three years.

Unrelated to the Genosity deal, Invitae also reported inducement grants associated with the acquisition of certain assets and key personnel from IntelliGene Health Informatics. The  California-based company specializes in software capabilities and technologies that Invitae obtained for around $2.7 million through an asset purchase agreement in December and plans to use to advance its oncology offerings.

As part of this deal, Invitae granted RSUs valued up to $6.23 million to certain employees and consultants of IntelliGene who joined Invitae. These RSUs, which were approved by Invitae's board, will vest in two installments of 12 months and two years after the acquisition of IntelliGene's assets.

Investment bank Oppenheimer upgraded Invitae's shares on Monday following the announcement of the Genosity acquistion to an Outperform rating from a prior Perform rating. In a research note, analyst Kevin DeGeeter gave a target price for Invitae's shares of $48 and noted that since Jan. 31, Invitae's stock has risen almost 21 percent compared to a 3.1 percent gain for the Nasdaq. He also noted that while his upgrade is not based on the $1.15 billion investment from Softbank, "we would generally view balance sheet expansion sufficient to fund operations to profitability as supportive of revenue multiple expansion."

DeGeeter did not mention the acquisition of Genosity in his note.

In morning trading on the Nasdaq, Invitae's shares were up about 8 percent at $42.15.

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