Response Genetics ($RGDX) has reached the end of the road, filing for bankruptcy and handing itself over to Cancer Genetics ($CGIX) in a deal valued at $14 million after years of slumping sales and losses.
Los Angeles, CA-based Response selected Cancer Genetics (CGI) as its "stalking horse" bidder in an auction sale to acquire "substantially all" of its assets, the company said in a statement. The deal isn't finalized yet, and "no assurance can be given that the sale will be consummated" at all, CGI said in a statement. But Response is counting on the company to emerge as the highest bidder, filing for chapter 11 bankruptcy to ease things along.
If all goes according to plan, CGI will pay $7 million in cash and another $7 million in its common stock to finalize the deal. Meanwhile, business at Response will continue as usual, the company said in a statement.
"We took this action today with the goal of securing Response Genetics' future," Response 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."
The acquisition also stands to benefit CGI, as it looks to expand its industry footprint and make a bigger splash in cancer diagnostics. Under the terms of the deal, the Rutherford, NJ-based company will inherit Response's molecular diagnostic solid tumor tests for cancer, and an FDA-approved test for tumors of unknown origin, TOO, that Response picked up from Pathwork Diagnostics in 2013.
When all is said and done, the combined company will have "significant expertise" in solid and hematological cancers, a greater national sales presence and an industry leading biomarker and genomic portfolio in more than 8 of the top 10 cancers, CGI said in a statement. CGI will also get Response's 27,000-square-foot CLIA-certified lab as part of the deal, which the company plans to build develop into a center of excellence in solid tumors with a particular focus on lung cancer.
|Cancer Genetics CEO Panna Sharma|
CGI is expecting big things from its acquisition of Response. The company figures the deal will add about $10 to $12 million in revenue over the next year. And acquiring Response will double its clinical revenue base and add another $6 million in revenue through contracts with biopharma customers and projects, CGI said in a statement, expanding its presence in a competitive market.
"The combined company will have significant revenue, operating and service synergies, allowing CGI to provide the most complete, oncology-focused molecular diagnostics services to clients across the country," CGI CEO Panna Sharma said in a statement. "Our company will be uniquely positioned to lead this segment of the rapidly evolving and high-growth oncology market."
- read Response Genetics' statement
- here's Cancer Genetics' statement