NeoGenomics to Pay $275M for Clarient

More on this recent news to follow on thoughts about implications for pathology market as a whole and digital pathology (including GE-Omnyx).  GE paid $587 million for Clarient in an announcement 5 years ago today.

NeoGenomics, a biotech company specializing in genomic cancer diagnostics, has announced the acquisition of Clarient, a unit of General Electric (GE) Healthcare’s Life Sciences business. The deal, which equals $275 million in combined cash and stock options, is expected to diversify NeoGenomics’ portfolio, accelerate its growth in the clinical trial and research market, and solidify a future collaborative relationship with GE.

Under the terms of the agreement, NeoGenomics will pay $80 million in cash, $110 million in preferred stock, and 15 million shares of common stock. After three years, GE will have the option to convert the preferred stock into common stock, effectively giving it a 32 percent share of the company.

In a NeoGenomics press release, CEO Douglas VanOort estimated that without unexpected changes, the company’s revenue would double in 2016 to between $240 million and $250 million, and its adjusted EPITDA would triple to between $33 million and $38 million. After three years, VanOort said he expected annual cost-savings to jump as high as $20 million to $30 million.

Analysts for The Motley Fool noted that the acquisition dramatically elevates NeoGenomics’ “small player” position in the market, and Andrew Hill, a Naples-based investment advisor, told News-Press that a potential ownership stake by GE would provide a significant boost to the biotech’s industry credibility. All in all, said Hill, the deal is a “double thumbs up.”

“Our vision is to become America’s premiere cancer testing laboratory,” said VanOort in a press release, “and this acquisition is a major step forward in achieving that vision.”

Last month, NeoGenomics signed a lucrative national group purchasing agreement with Premiere, Inc., the largest group purchasing organization (GPO) in the U.S., which unites an alliance of 3,600 U.S. hospitals and 120,000 other providers. The three-year agreement will make NeoGenomics the preferred in-network lab option for all of Premier’s member hospitals, cancer centers, pathology groups, and oncologists — the first specialized oncology reference laboratory to secure that distinction.

Along with an expanded geographic foothold, NeoGenomics will offer a comprehensive portfolio of cancer tests, built upon NeoGenomics’ expertise in blood cancer and Clarient’s experience in solid tumor analysis for lung, breast, and colon cancers.

Clarient CEO Cindy Collins commented that the combined businesses would give her team the “benefit of focus” while allowing GE to return to its core areas of long-term growth: bioprocessing, cell therapy, and disease imaging.

In the future, VanOort said that NeoGenomics plans to collaborate with GE on a new bioinformatics initiative that would combine data from genomic testing and bio-imaging — targeting the companies’ shared interest in precision oncology — an aim VanOort said would improve patient care while reducing healthcare costs.