It’s been two years since NeoGenomics, Inc. (NASDAQ: NEO) announced an acquisition, but now the time clock has been reset. On October 23rd, the cancer-focused genetic testing company made public its purchase of Genoptix, Inc., a privately held clinical oncology laboratory specializing in hematology and solid tumor testing.
Genoptix has well-established relationships with community oncology practices, a sales force and pathologists that are experienced in serving oncologists, and customized reports that are considered to be the gold standard among community oncologists. Oncology practices are an important, and under-penetrated, channel for promoting NeoGenomics’ capabilities in next-generation sequencing and liquid biopsy.
The price, approximately $138.2 million, consists of $125 million in cash and 1 million shares of NEO common stock worth about $13.3 million. That makes a 1.6x price-to-revenue multiple.
The acquisition is expected to contribute $85 million of revenue and break-even EBITDA in year one, $25 million of cost synergies over time, and 25% EBITDA margin by the end of year three.
Back in October 2015, NeoGenomics picked up Clarient Inc. and its wholly owned subsidiary, Clarient Diagnostic Services, from GE Healthcare (then NYSE: GE). Clarient, a provider of comprehensive cancer diagnostic testing to hospitals, physicians and the pharmaceutical industry, was a unit of GE Healthcare’s Life Sciences business.
The $272.5 million price consisted of $80 in cash, $110 million in preferred stock at $7.50 per share and 15 million shares of NeoGenomics common stock ($85.2 million, based on the prior-day closing price of $5.68 per share). The multiples break out to 2.2x revenue and 21.2x EBITDA.