Cancer Genetics (CGI), a global, DNA-based cancer diagnostics service, will acquire substantially all the assets and operations of Los Angeles-based Response Genetics, a developer of clinical diagnostic tests for cancer. Response Genetics has filed a voluntary petition under Chapter 11 of the Bankruptcy Code in the Delaware Bankruptcy Court.
CGI plans to develop Response Genetics’ Los Angeles facility into a center of excellence in solid tumors, with a particular emphasis on lung cancer, once the purchase is finalized.
Response Genetics is expected to contribute an additional $10 million to $12 million to CGI in revenue over the next 12 months. CGI anticipates this transaction, upon close, to more than double CGI’s clinical revenue base and add an additional $6 million in contracted revenue with biopharma customers and projects. The agreement calls for CGI to acquire the assets and ongoing operations of Response Genetics for about $14 million, which will include $7 million in cash and $7 million in CGI common stock.
The asset purchase agreement constitutes a “stalking horse bid” in a sale process being conducted under Section 363 of the U.S. Bankruptcy Code. As part of the sale process, Cancer Genetics’ bid is subject to higher or better offers, as other interested parties will have an opportunity to submit competing bids. As the “stalking horse bidder,” CGI will be entitled to a breakup fee and expense reimbursement if it ultimately does not prevail as the successful bidder at a subsequent auction for Response Genetics’ assets. CGI’s role as a stalking horse bidder, and the sale itself, are subject to approval by the Delaware Bankruptcy Courts. The agreement in principle remains subject to finalization within seven days of the Response Genetics’ commencement of its Chapter 11 case. No assurance can be given that the sale will be consummated on the anticipated terms, or at all.
During this process, Response Genetics expects that its day-to-day operations will continue uninterrupted. To this end, the company is seeking approval to maintain its current employee benefits and payroll programs in addition to other matters that will enable Response Genetics to operate in the ordinary course of business.
CGI anticipates the sale will be completed within 60 days.