Genaissance will soon become a part of the small-laboratory toolmaker Clinical Data.
Earlier this week, the two companies announced Clinical Data's plans to acquire Genaissance in an all-stock transaction valued at $56 million — a move that Clinical Data hopes will catapult it into the molecular diagnostics arena, while providing a larger market for Genaissance's products.
The deal gives some insight into Genaissance's exit strategy after several months of stock-price ups and downs, and a cash shortfall that led the company to warn in a March SEC filing that it was examining "alternatives" to financing its operations, including the potential sale of the company [See PGx Reporter 05-05-05].
The acquisition also comes as the firm faces delisting from the Nasdaq exchange. On June 20, the day before it announced the deal with Clinical Data, the company said it received a notice from Nasdaq that its share price had closed below the minimum $1.00 per share for 30 consecutive trading days required for continued listing.
The company said it has 180 calendar days, or until Dec. 19, to regain compliance. To regain compliance, Genaissance shares must close at or above $1.00 per share for a minimum of 10 consecutive trading days.
In a 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.
The companies tout the combined entity's ability to enter the molecular diagnostics end of "theranostics," but how the two firms plan to work together is, at present, not completely obvious. Clinical Data sells blood-chemistry analysis equipment, but no molecular diagnostics.
"We're helping them to get to the next business opportunity in diagnostics, and they're helping us by having an even bigger and more solid company," said Rakin. The fact that Genaissance actually has molecular diagnostic products on the market made the company more attractive than its competitors for acquisition, he said.
The terms of the acquisition were unanimously approved by the boards of both companies, and the deal should close within the fourth quarter, the firms said in a statement. Genaissance stockholders will receive .065 shares of Clinical Data stock for each of their own shares, which equates to a price of about $1.33 per Genaissance share, based on the companies' closing prices on June 20. The total transaction is valued at around $56 million.
Genaissance shares closed at $1.06 on June 20 and at $1.16 June 21. The company's market capitalization is $41 million, and it has a cash position of $5.9 million.
When the transaction is complete, Genaissance common and preferred stockholders will own about 40 percent of the combined company, the firms said. The transaction is still awaiting stockholder approval.
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," said Mark Shooman, Clinical Data senior vice president and CFO.
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, he said.
Genaissance and Clinical Data are "not yet" collaborating on a product, said Shooman.
In deals penned announced in February and April with Japanese pharmaceutical giant Daiichi Pure Chemicals, Clinical Data began offering a C-reactive protein assay and a prostate-specific antigen assay, respectively, for use on its blood-chemistry analyzers. The company's major competitor is the clinical-chemistry company Alfa Wasserman, but Bayer also has a presence in the blood-chemistry market, and "there are a couple of other small manufacturers" in the space, said Shooman.
Clinical Data would be "one of the first" companies of its kind to approach molecular diagnostics, Shooman said.
Wasserman has no molecular diagnostics offerings, but Bayer sells a raft of them
Not lost on Genaissance is the broader distribution that Clinical Data offers, as well as its access to clinicians. "They have some major operations in Europe, they have a number of distributors in other companies" and in the United States, Rakin said. "More and more physicians in the US are doing basic clinical chemistry testing in-house, and [Clinical Data supplies] all that expertise," he said.
Asked about how the two companies' products complement each other, Shooman chose not to focus on existing products. "It's a case of developing new diagnostic tests and distributing them into the marketplace," he said. "As these tests become more commonly used, we see them moving into the marketplace."
Both firms appear to overlap in the cardiovascular disease area, but they have approached it from very different ends of the spectrum. If that overlap is any guide to the combined company's efforts, its future might involve products based on Genaissance's genetic cardiovascular markers.
At present, Genaissance has only one diagnostic in cardio, its Familion genotyping test, which is intended to spot patients at risk of Long-QT syndrome, a potentially fatal abnormal heart rhythm sometimes triggered by the administration of certain drugs. The company has only one other diagnostic for sale, a TPMT-genotyping test.
Other cardio offerings from Genaissance can be found in its services and intellectual property. The company performs in-house testing in its CLIA lab for Factor V Leiden, which is linked to thrombophilia, and it offers tests for polymorphisms in six CYP450 genes, some of which affect cardiovascular-drug metabolism, such as CYP450 2C9, which is largely responsible for warfarin breakdown.
The company published an article in the December issue of Atherosclerosis showing that certain haplotypes in the APOE gene, which it genotypes as a service, correlate with levels of C-reactive protein. And in its effort to change the schizophrenia drug clozapine from a third-line drug to a second-line drug, the firm is employing markers linked to the risk of agranulocytosis, a dangerous white blood-cell depletion that can occur in some patients taking the drug.
Shooman declined to comment on whether a product made by the combined company would be related to cardiovascular diseases.
The remaining tests in Genaissance's services stable include diagnostics for genes related to: Alzheimer's disease; Parkinson's disease; alcoholism; some types of leukemia; cancer-drug susceptibility; and colorectal cancer risk.
Because of its Familion test, whose sales appear to be growing, Genaissance would "definitely" continue to focus on cardiovascular diseases, Rakin said. During a May conference call with investors, Rakin said the test brought in more than five samples per week. According to the company, the most common Familion procedure, an index test for five genes related to Long-QT syndrome, costs about $5,700 per sample, while a follow-up that tests family members for the presence of a single gene variant costs about $900.
Genaissance is also working on a way to resubmit the drug vilazodone, a selective serotonin inhibitor, for US Food and Drug Administration approval. Rakin said in September that he hoped to have Phase II data with validated markers and a marketing and development partner for the drug.
"That looks good," Rakin said this week, but he declined to disclose more information about the drug's status.
— Chris Womack ([email protected])