Neogenomics Inc. (NASDAQ: NEO) is leading the bulls in Wednesday’s trading session on news of an acquisition. The company announced that it has reached an agreement to acquire Clarient and its wholly-owned subsidiary Clarient Diagnostic Services.

Clarient is a unit of GE Healthcare’s Life Sciences business based in Aliso Viejo, California, and Houston, Texas, with over 400 employees. The company had 2014 revenue of $127 million.

Ultimately, this acquisition will allow NeoGenomics to broaden its offering of cancer diagnostic tests to hospitals and physicians across the country, and to accelerate its growth in the fast-growing worldwide market for pharmaceutical clinical trials and research.

As for the terms of the agreement, the transaction purchase price includes $80 million in cash, $110 million in Preferred Stock, and 15 million shares of NeoGenomics Common Stock.  The Preferred Stock will be issued at $7.50 per share and is redeemable at the option of NeoGenomics at any time over its ten year term along with any accrued dividends at the original issue price with certain incentives for early redemption.

After three years, GE Healthcare will have the option to convert the Preferred Stock and any accrued dividends to NeoGenomics Common Stock at $7.50 per share if the volume weighted average price of NeoGenomics’ Common Stock is above $8.00 per share for thirty consecutive trading days. However, upon the tenth anniversary, the Preferred Stock and any accrued dividends will automatically convert into common stock at $7.50 per share.

Douglas VanOort, Chairman and CEO of NeoGenomics, commented on the acquisition:

Our vision is to become America’s premier cancer testing laboratory, and this acquisition is a major step forward in achieving that vision. We have always respected Clarient’s outstanding capabilities, and are very pleased to be able to combine them with our own outstanding service offering. Hospital, physician, and pathology clients will benefit from our ability to offer the “best of the best” products and services available from each company. We are particularly pleased to add Clarient’s sizable and fast-growing clinical trial support business to further strengthen our own initiatives in this area.

He added:

Providing there are no unexpected changes to reimbursement in 2016, we expect our revenue to more than double to approximately $240 – $250 million and our Adjusted EBITDA to more than triple to between $33 and $38 million on a pro forma basis in 2016. This will be a deliberately executed integration, and we expect synergy realization to begin modestly with approximately $4-6 million of realized synergies in 2016. However, by the end of year 3, we expect $20-$30 million per year of realized synergies as we strive to be the high-quality and low-cost provider in cancer genetic testing. Our increased scale will also enhance our ability to innovate in new areas of precision medicine. Of all the possible acquisition candidates we have reviewed, Clarient is by far the best fit for NeoGenomics.

Shares of Neogenomics were recently trading up 23% at $7.00, with a consensus analyst price target of $7.45 and a 52-week trading range of $3.33 to $7.29.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.