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Transgenomic Scoops Up Clinical Data's Genetic Tests, PGx Products at 'Fair Price' of $15.4M

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By Turna Ray

Just two weeks after Clinical Data disclosed that its genetic testing business was up for sale, the company has found a buyer: Transgenomic.

This week, Transgenomic said that it will acquire Clinical Data's diagnostics business, including proprietary genetic tests, biomarker assays, and CLIA-certified laboratory, for $15.4 million.

The purchase gives Transgenomic 11 marketed tests for inherited heart diseases under the Familion brand, PGxPredict tests gauging drug response, tests targeting Fc gamma receptor biomarkers, and a Plavix response test under development.

Under the deal, Transgenomic will also gain Clinical Data's contracts with private and government health insurers for test reimbursement for various genetic tests; established academic and medical society guidelines supporting the adoption of Clinical Data's genetic tests; marketing resources; as well as intellectual property rights.

Transgenomic CEO Craig Tuttle said in a statement that the purchase is expected to bring "a substantial and established revenue base and validated new biomarker assays along with a talented diagnostic team."

He added that the acquisition provides the Omaha, Neb.-based firm with "multiple growth opportunities through continued growth of the 11-test Familion product portfolio of molecular assays for inherited cardiac disorders plus several proprietary assays for testing patients' response to important cancer treatments and patients’ drug metabolism of a variety of drugs."

According to Tuttle, Transgenomic has been "constantly evaluating" various acquisition targets. The company settled on purchasing Newton, Mass.-based Clinical Data's genetic tests and lab because they came at a good price and complemented Transgenomic's existing molecular diagnostics business in the areas of oncology, cardiology, hematology, inherited disorders, and aging-related diseases, he said.

Clinical Data's genetic testing assets "made good strategic sense for both companies [and] was priced fairly," Tuttle told PGx Reporter. In addition, he said it "provides sound short-term cash flow from the accounts receivables and includes key proprietary biomarkers that could have significant future value for both pharmacogenomic and clinical products."

The $15.4 million sale price for Clinical Data's genetic testing assets is an 18 percent premium to the group's revenue for fiscal year 2010, ended March 31. For that period, Clinical Data reported $13.1 million in revenues, all of which was derived from the business sold to Transgenomic.

The purchase price includes $6 million in cash and $8.5 million in a three-year note issued to Clinical Data bearing interest of 10 percent per year on a principal repayment schedule beginning in May 2012. Under the purchase price, Transgenomic will also provide $932,000 to Clinical Data for facility improvements made to the CLIA-certified laboratory at 6.5 percent interest for a 12-month period.

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Under the terms of the deal, Clinical Data is entitled to receive milestone payments upon the successful development and commercialization of multiple new products; royalty payments on certain reimbursements received by the Clinical Data linked to the performance of certain biomarker assays; a percentage of certain accounts receivables collected during the 18-month period following the closing of the acquisition, and a percentage of the aggregate proceeds received by the Clinical Data related to certain transfers of biomarker assay technology.

Griffin Securities acted as financial adviser to Transgenomic in this deal.

Although Clinical Data is selling all its assets related to the genetic testing business, it is for the time being keeping the PGx Health brand name. "We are not selling the brand with the asset purchase agreement," a Clinical Data spokesperson told PGx Reporter this week.

Eyeing Growth in PGx

The acquisition of Clinical Data's assets appears to complement Transgenomic's existing molecular diagnostics business and is in line with its efforts to grow its presence in the pharmacogenetics space.

Transgenomic's current molecular diagnostics business includes its DNA tools and instrument division, a CLIA-certified lab division focused on childhood neurology diagnostics, and a PGx business based on DNA mutation detection technologies. "In this regard, the asset purchase from Clinical Data will expand our tools and capabilities and extend our reach into cardiac disease," Tuttle said.

Transgenomic also has biomarkers in development that, if proven clinically, "would be relevant additions to the cardiac panel and expertise held by Clinical Data's diagnostic group," Tuttle said. "And conversely this transaction brings us a very key biomarker, Fc Gamma, which should expand our reach into oncology and consolidate a reasonable and strategic oncology menu that we have for our pharma, CLIA-lab, and tools and kit business."

Given that the new tests that Transgenomic is getting from Clinical Data are all laboratory-developed tests, Transgenomic said it has the capability to distribute these tests as LDTs or develop them as test kits.

"We can offer some of the proprietary biomarkers through our pharma CRO lab for early testing of these biomarkers and then broadly commercialize these biomarkers through our CLIA labs as well as produce them in kit form for global commercialization," Tuttle said.

Test kits need to be approved or cleared by the US Food and Drug Administration under a premarket approval or 510(k) application, respectively. The agency is currently in the process of extending its oversight over all LDTs (PGx Reporter 07/21/10).

Tuttle emphasized that the acquisition will provide Transgenomic "with enough short- and longer-term assets to fuel faster overall growth."

Tuttle would not discuss how many Clinical Data employees will be transferred to Transgenomic under the acquisition and did not say whether there will be layoffs. "We are excited about the high-performing team that will come to us when the transaction closes," he said, noting that the purchase is expected to close by year end.


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