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Clinical Data to Acquire Troubled Icoria for $12.5M, Will Pair Metabolomics with Genaissance Offerings

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With the ink barely dry on its deal to acquire Genaissance, announced in June, Clinical Data said this week that it plans to acquire Icoria in an all-stock transaction valued at approximately $12.5 million.

The move is another step along Clinical Data's path to molecular diagnostics. "Icoria's biomarker discovery platform is an excellent fit with our molecular diagnostics business model while their metabolomics and genomics capabilities complement the pharmacogenomics capabilities we will be gaining in our pending acquisition of Genaissance Pharmaceuticals," said Clinical Data's president and CEO Israel Stein in a company statement.

In a similar statement from June, Stein described his company's acquisition of Genaissance as a "strong strategic fit." That acquisition will serve his company's plan to produce "proprietary tests and services serving broad markets," he said.

Under the current acquisition agreement, which still requires approval by Icoria's shareholders, Clinical Data will issue 0.0139 of its own shares for each share of Icoria common stock, representing a price of $.32 per Icoria share based on the closing price of Clinical Data's stock last Friday.

Icoria's stock closed at about $.18 on September 19, the day before Clinical Data announced it would buy the company.

The acquisition is expected to close late this year or early in 2006. The aggregate purchase price could fluctuate, depending on Clinical Data's common stock price, but will in no case be less than $10 million or more than $12.5 million.

Clinical Data's acquisition of Genaissance is expected to close in the fourth quarter.

Clinical Data sells small- and mid-size lab equipment for blood-chemistry analysis, coagulation, and hematology, but it sells no molecular diagnostics. "We sell into the physicians' office laboratory market and the clinic and hospital markets around the world," Mark Shooman, Clinical Data senior vice president and CFO, told Pharmacogenomics Reporter in June.

Clinical Data estimates that between 5,000 and 6,000 medical practices make up the current US market for its products. "We believe the market is actually much bigger," with a potential of 10,000 to 15,000 doctors' offices, Shooman said. Genaissance and Clinical Data are "not yet" collaborating on a product, said Shooman.

In a June statement, Kevin Rakin, Genaissance CEO, said the firm "is aligning itself with a financially stable company," and told Pharmacogenomics Reporter that the acquisition is about more than shoring up Genaissance's finances. "Ultimately, they like [our] products, like Familion, and the fact that we have an engine producing more of these products," he said.

Genaissance said this week that it will apply its HAP technology to identify genetic markers related to drug response in a research collaboration with Otsuka Pharmaceutical of Japan. Both companies will own intellectual property resulting from the collaboration and will be eligible for royalties on revenues from diagnostic products that come out of the project.

Troubled Icoria reported a 21-percent decline in second-quarter revenues to $5 million from $6.3 million during the year-ago quarter. Healthcare revenues grew 11 percent, to $2.5 million, and agriculture revenues declined by 39 percent, to $2.4 million, mainly due to the sale of Icoria's agricultural genomics business to Monsanto earlier this year.

Icoria's second-quarter net loss fell 16 percent, to $3 million, or $.08 per share, down from $3.6 million, or $.10 per share, for the same period last year. R&D expenses declined to $5.5 million from $6.8 million during the second quarter of last year.

The company's second-quarter earnings report came about two weeks after its stock was delisted from the Nasdaq SmallCap Market on June 30 for failing to raise its share price above $1 minimum listing for 180 days. Icoria did not ask for a 180-day extension from the exchange. The company's stock now trades over the counter on Over the Counter Bulletin Board under the ticker symbol ICOR.OB.

Genaissance received a delisting warning letter from Nasdaq on June 20, only one day before announcing its acquisition by Clinical Data.

"The second quarter was a period of transition for Icoria, and our financial results reflect this," said Douglas Morton, Icoria's interim CEO, in a July statement. Following the sale of its agricultural unit in March, Icoria changed its focus to biomarker discovery. "We are working to restructure our cost base and to minimize our burn rate without impairing the operations and research activities on which Icoria is building its future."

But the company has succeeded somewhat in attracting business. Icoria unit Paradigm signed three gene-expression contracts worth $1.1 million early this month with Duke University, the US Environmental Protection Agency, and an undisclosed biotechnology company, and in August the company signed a deal with Isis Pharmaceuticals to use its metabolomics platform to identify biomarkers of toxicity in animal models.

Also in August, Icoria was awarded a $1.2 million Small Business Innovation Research grant from the National Institute of Environmental Health Sciences to discover biomarkers for drug-induced liver injury.

— Chris Womack ([email protected])

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