Response Genetics ($RGDX) snatched up the remnants of a defunct rival and gained an FDA-cleared, revenue-generating test in the process.
The Los Angeles company said it now owns "the key assets" of Pathwork Diagnostics, acquired with $200,000 in cash, plus 500,000 shares of Response Genetics common stock. The big prize: a diagnostic test cleared in June 2010 to spot metastatic tumors and cancers whose origin is hard to determine.
Response Genetics chairman and CEO Thomas Bologna said in a statement that the deal reflects the company's ongoing goal to grow "both organically and through a series of acquisitions."
In particular, acquiring the assets of a company that went out of business gives Response a cost-effective way to grow and generate revenue. Response develops and sells molecular diagnostic tests for cancer, so the deal represents a good fit on that level alone. But the company now has an instant, FDA-cleared test that has already obtained Medicare reimbursement, something increasingly hard to come by these days for diagnostics makers.
Response bills the acquisition as a big deal, in part because use of the Pathwork test had been growing, and it reached "mid-seven-figure" sales in 2012. And so the test could be a real revenue generator. Response Genetics has focused on boosting revenue this year, with $5.3 million booked in its fiscal 2013 second quarter, though losses continues as the company ramps up its sales force and pursues wider marketing of its products.
The test uses a proprietary microarray platform and proprietary software to compare the expression of 2,000 genes in a patient's tumor with a panel of 15 known tumor types covering most cancers, the company explains.
And Response Genetics is drawing interest from Big Pharma. Last year, GlaxoSmithKline ($GSK) acquired 5 million newly issued shares in the company. The deal built on an ongoing relationship in which Response conducts companion diagnostic tests for GSK's immunotherapy and cancer pipeline drug candidates.
- read the release
- here's Response's recent Q2 financials