By Turna Ray
LabCorp this week announced plans to acquire Monogram Biosciences for $107 million — a deal that will add to its portfolio several oncology pharmacogenomic tests and a companion diagnostic that is often held up as one of the best examples of drug/diagnostic co-development.
In a statement, LabCorp said it plans to acquire all of the outstanding shares of Monogram for $4.55 per share for an equity value of approximately $106.7 million, or $155 million including the assumption of debt.
The acquisition is expected to close in the third quarter of this year.
Following the acquisition announcement, two law firms — Levi & Korsinsky and Law Offices of Howard G. Smith — announced they were investigating Monogram's board of directors on behalf of shareholders "for possible breaches of fiduciary duty and other violations of state law in connection with their attempt to sell the company" to LabCorp.
According to a statement from Levi & Korsinsky, the investigation was initiated because LabCorp's acquisition price "appears unfair, given that Monogram shares traded over $5.00 per share as recently as September 2008 and at $7.20 per share in August 2008 (on a split-adjusted basis) and at least one analyst set a $6.00 price target for Monogram shares."
Looking at more recent numbers, LabCorp's proposed purchase price represents a significant premium over Monogram's closing price of $1.68 on June 22, the day before the acquisition was announced. The company's shares soared on June 23 to close at $4.52.
The strategic details surrounding the acquisition are sparse. In an e-mail to Pharmacogenomics Reporter, Alfred Merriweather, Monogram's chief financial officer, said that the deal was not a result of Monogram seeking acquisition offers.
"LabCorp approached us," Merriwearther said, adding that he could not discuss any further details about the chronology of the process until a statement is filed with the Securities and Exchange Commission.
"LabCorp views Monogram as an important element of its strategy in personalized medicine, and views our HIV revenues and market leading products and our oncology technology as very important parts of this strategy," Merriweather said.
Monogram's portfolio includes the Trofile assay, the companion diagnostic to Pfizer's HIV drug Selzentry (maraviroc).
Pfizer used Monogram's Trofile assay to select patients for enrollment in clinical trials of Selzentry. In May 2006, Pfizer and Monogram announced a non-exclusive collaboration to make the Trofile assay available for patients worldwide. At that time, Pfizer invested $25 million in Monogram [see PGx Reporter 05-10-05].
Monogram introduced in August Phenosense HIV Integrase, a phenotypic resistance test designed to detect susceptibility to the new class of integrase inhibitors, such as Merck's Isentriss.
These pharmacogenomic tests in the infectious disease space are a complement to LabCorp's assay for screening HIV patients for the HLA-B*5701 allele before initiating treatment with the drug abacavir (GlaxoSmithKline's Ziagen).
Also in Monogram's portfolio is the HERmark test, based on its VeraTag platform. The company recently announced it was planning to add new markers to the breast cancer test, and ink more collaborations with drug makers in order to embed its VeraTag assays in cancer drug trials [see PGx Reporter 02-25-2009].
According to the companies' statement, Monogram has several tests in development based on its VeraTag platform that measure certain protein markers that could guide treatment for "a broad range of cancer drugs."
"The potential oncology pipeline associated with this technology is a natural extension of LabCorp's existing oncology offerings for both clinical trials and commercial clients," the companies said in a statement.
LabCorp did not respond to requests for an interview prior to deadline. However, LabCorp CEO David King called the acquisition a "significant step" in the firm's strategy for the personalized medicine market.
"By utilizing LabCorp's national infrastructure to build on Monogram's already strong sales, we will advance our leadership in infectious disease and cancer testing, companion diagnostics and personalized medicine," King said in a statement.
In its attempt to navigate the path toward personalized medicine, LabCorp has had some missteps.
Last October, when LabCorp launched the ovarian cancer detection test OvaSure, based on technology licensed from Yale University School of Medicine, the US Food and Drug Administration warned it for marketing a test the agency deemed "misbranded" because certain parts of the assay were not developed by the company [see PGx Reporter 10-29-2008].
A year before it received the OvaSure warning letter, LabCorp was implicated in a similar regulatory issue. In 2007, FDA issued Exact Sciences a warning letter notifying the company that the homebrew stool-based colorectal cancer assay it was developing with LabCorp required pre-market approval [see PGx Reporter 01-23-2008].
Having had these hiccups with two licensing agreements, it could be that LabCorp officials have decided an acquisition would give the company more control over the regulatory, marketing, and scientific aspects of its personalized medicine products. The Monogram acquisition certainly gives LabCorp much-needed access to a portfolio of molecular diagnostics and pharmacogenomic tests that are validated and are sound from a regulatory perspective.
"LabCorp has an exciting vision of the role of molecular diagnostics in personalized medicine, and we are excited to see Monogram's technology and employees become a part of that vision," Monogram CEO William Young said in a statement. "We expect the transaction will significantly accelerate the development of products that will improve treatment outcomes for patients with infectious diseases and cancer."