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Response Genetics Files for Chapter 11 Protection; Enters $14M Deal to Sell Assets to Cancer Genetics

NEW YORK (GenomeWeb) – Response Genetics said today it has filed for Chapter 11 bankruptcy protection and entered into a deal to sell all of its assets to Cancer Genetics. 

Los Angeles-based Response Genetics filed for Chapter 11 reorganization on Sunday in US Bankruptcy Court for the District of Delaware in order to facilitate the asset sale to Cancer Genetics, it said. Cancer Genetics is a so-called "stalking horse" bidder for the assets, and other potential buyers will be able to submit competing bids for Response Genetics' assets. The highest or best bid will require approval from bankruptcy court. 

Cancer Genetics said that its bid comprises $7 million in cash and $7 million in its stock for a total price of $14 million. 

Response Genetics said it anticipates the sale to be completed within 60 days. 

In court documents, the firm said that it had total assets of approximately $10.8 million and total debts of $15.7 million as of March 31. In its Form 10-Q for the first quarter ended March 31, it said that it had an accumulated deficit of $83 million. 

Response Genetics said in a statement that during the reorganization process, it anticipates that its day-to-day operations will continue uninterrupted. It is seeking court approval to maintain its current employee benefits and payroll programs, as well as other business operations, it added. 

SWK Funding has agreed to provide the firm $3 million in financing to fund the current business, Response Genetics said. 

"We took this action today with the goal of securing Response Genetics' future," Response Genetics CEO Thomas Bologna said in a statement. "The company has implemented various strategic initiatives and considered numerous options. We believe that this process is the best and most efficient course of action to serve our customers." 

Separately, Cancer Genetics said that if its bid is approved, the combined entitiy "will have significant expertise in both solid and hematological cancers, have a national geographic and sales footprint, and be able to serve larger customers, healthcare groups and biopharma companies."

It added that it plans to develop Response Genetics' Los Angeles facility into a center of excellence in solid tumors with an emphasis on lung cancer. 

The deal would add $10 million to $12 million in revenue to Cancer Genetics during the next 12 months, the Rutherford, New Jersey firm said. If approved, the deal would more than double its clinical revenue base and provide $6 million in contracted revenue with biopharma customers and projects, it added. 

Response Genetics was incorporated in September 1999 as Bio Type and provided molecular profiling services of tumor tissue. It changed its name in August 2000. 

Its primary products are the Response DX cancer pharmacogenomics tests. Its technology extracts DNA and RNA from tumor specimens, enabling single-biomarker analysis by PCR, as well as global gene interrogation by microarray-based methods and fluorescence in situ hybridization. 

Response Genetics also provided pharmacogenomic clinical trial testing services to drug manufacturers. 

In Q1, it posted a 3 percent decline in revenues, along with a net loss of $4 million, or $.10 per share. Early last month, the company's shares were delisted from the Nasdaq for failing to meet a listing requirement calling for a $1 minimum bid price. Response Genetics also had been notified by the exchange that it did not meet another requirement calling for a minimum $2.5 million in stockholders' equity.