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GEN News Highlights : Feb 5, 2014
Myriad Buys Crescendo for $270M
Myriad Genetics said it entered into a deal to acquire Crescendo Bioscience for $270 million cash—to be lowered $25 million for repayment of a 2011 loan to Crescendo—in an acquisition the buyer said would diversify its revenue while complementing its existing molecular diagnostic tests.
Myriad said the deal was expected to close before the end of its 2014 fiscal year, which is June 30, subject to customary closing items and regulatory approvals. Should the deal close as planned, Crescendo will operate as a wholly owned subsidiary of Myriad Genetics, retaining its name and its home base of South San Francisco.
The seeds of the Crescendo deal were planted late last year, when Myriad said in a regulatory filing it told Crescendo of its “preliminary, nonbinding interest” in acquiring the company. That interest followed Crescendo telling Myriad that it had attained a minimum revenue milestone, triggering an acquisition option Myriad secured in 2011, in return for the $25 million loan.
Founded in 2002, Crescendo focuses on molecular diagnostics for inflammatory diseases and autoimmune diseases. The company has successfully launched software products for physicians. These products include VectraView™, which allows a comprehensive overview of all rheumatoid arthritis (RA) patients’ level of disease activity and trends, and MyRA®, a patient tracking and communications tool.
Crescendo’s core product, Vectra® DA, is a quantitative, protein-based test designed to assess RA disease activity, while the company’s development pipeline includes products for a variety of diseases and conditions managed by rheumatologists. During the fourth quarter of 2013, Crescendo tested 27,000 RA patient samples—a 23% increase over 22,000 in Q3 2013, and 69% above 16,000 in Q2.
Last year, Vectra DA was approved for reimbursement by the Centers for Medicare and Medicaid Services (CMS) and is now working to obtaining coverage from private insurers. Typically, a patient with RA may undergo a Vectra DA test at least twice per year.
The prospect of additional revenue through reimbursement is one reason why Myriad expects Crescendo to generate significant operating profits in the future and add to its earnings beginning in its 2016 fiscal year, which begins July 1, 2015. Vectra DA alone represents a $3 billion global market opportunity, according to Myriad.
Long-term financial benefit was one of five advantages articulated by Myriad for its acquisition of Crescendo. The other four:
Myriad said it will use cash on hand to acquire Crescendo, yet remain with enough cash to carry out its current $300 million share repurchase program.
“I really believe that the combined strength of Myriad's operational expertise and Crescendo's outstanding products will bring our business to new heights over the next few years,” William Hagstrom, president and CEO of Crescendo Bioscience, said yesterday.
Hagstrom spoke during Myriad’s quarterly conference call following release of results for the fourth quarter of 2013—the second quarter of the company’s 2014 fiscal year. Myriad enjoyed a 44% year-over-year jump of 44% in quarterly net income, to $50 million, on revenues that zoomed 37% compared with the year-ago quarter, to a record $204 million. The company’s earnings per share rose 57% to 66 cents compared to 42 cents in Q4 2012
Myriad raised its guidance to investors, to a revenue range of $740 million to $750 million for FY2014, representing 21 to 22% growth, and earnings per share of $2.09 cents to $2.12, representing 18 to 20% growth.
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