Small cap NeoGenomics to buy GE cancer diagnostics biz Clarient for $300M

Oncology genomics player NeoGenomics ($NEO) is slated to buy GE cancer diagnostic unit Clarient Diagnostic Services in a cash and stock deal worth about $300 million. That's an impressive feat given that NeoGenomics' market cap was less than $350 million prior to the deal announcement.

But the industrial conglomerate isn't giving up its interest in cancer diagnostics entirely. GE Healthcare ($GE) will own roughly one-third of NeoGenomics after an anticipated fourth-quarter deal close. GE is also gaining a NeoGenomics board seat in the deal.

Clarient Diagnostic Services CEO Cindy Collins

"The business will benefit from the focus that will come from being part of NeoGenomics, while allowing GE Healthcare Life Sciences to focus on its core long-term growth areas in bioprocessing, cell therapy and disease imaging," said Clarient Diagnostic Services CEO Cindy Collins in a statement.

In addition, the two companies have agreed to collaborate on a precision oncology bioinformatics initiative aimed at integrating genomics and imaging data with the goal of reducing costs and improving patient care. GE acquired Clarient in December 2010 for $587 million and reportedly hoped to build it into a billion-dollar business, an achievement that hasn't come to pass.

Investors embraced the acquisition, sending NeoGenomics shares up about 20% in early trading on the news to more than $6.80. The deal includes $80 million in cash, $110 million in preferred stock and an additional 15 million common shares.

NeoGenomics expects the purchase will broaden its cancer diagnostic test offerings and its geographic reach. Clarient is based in Aliso Viejo, CA, and Houston, TX. It had $127 million in 2014 revenues and adjusted earnings for that year of about $13 million. It has about 415 employees.

"Our vision is to become America's premier cancer testing laboratory, and this acquisition is a major step forward in achieving that vision," said NeoGenomics chairman and CEO Douglas VanOort. 

"Hospital, physician, and pathology clients will benefit from our ability to offer the 'best of the best' products and services available from each company. We are particularly pleased to add Clarient's sizable and fast-growing clinical trial support business to further strengthen our own initiatives in this area," he added.

NeoGeomics highlighted Clarient's solid tumor analysis for breast, colon and lung cancers as complementary to its own testing capabilities for hematologic cancers. This is expected to enable the company to leverage existing labs to expand productivity and lower operating costs.

Without any changes to reimbursement, NeoGenomics expects $240 million to $250 million in 2016 revenue--which would be more than double the prior year's amount. It anticipates 2016 adjusted earnings of $33 million to $38 million on a pro forma basis. The company also expects to realize $4 million to $6 million in synergies in 2016, with a total of $20 million to $30 million in synergies after three years.

- here is the announcement

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