Interview – Lab21 finds a cervical cancer screening partner

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A €40m ($54m) Anglo-French tie-up is on the cards as the UK diagnostics company Lab21 intends to combine with a Paris-listed cytology specialist, Novacyt, in a stock-for-stock transaction. “Lab21 has been looking for some technologies to acquire for quite some time,” the company’s CEO, Graham Mullis, tells EP Vantage. “We came across Novacyt in the latter part of last year and I was very impressed with their technology platform.”

But with the advent of HPV vaccines and tests, the cervical cancer cytology market will shrink in years to come. The new company – it is likely to have an entirely new name after the deal closes, Mr Mullis says – will have to wring what it can from this sector while the going is good.

Technically it is Novacyt that will acquire Lab21, issuing 2,523,059 new shares to Lab21 investors, resulting in 54% of the new entity being held by Novacyt’s current shareholders.

The new Novacyt shares will be traded on NYSE-Alternext, and Mr Mullis will become chief executive. Novacyt’s current CEO, Eric Peltier, will become the new company’s chief innovation officer.

Friday 13th

Lab21’s backers, which include Clydesdale Bank and Medicis Capital, have already thrown their support behind the deal, which now depends only on the approval of Novacyt’s shareholders at an EGM on June 13. If they say yes – Mr Mullis is “very confident” that they will – Lab21 will become a 100% subsidiary of Novacyt.

Mr Mullis insists that the deal is not a takeover. “It is more a merger of equals. Novacyt has contributed substantial R&D, which is what we’ve been looking for, and Lab21 contributes commercial and manufacturing assets and knowhow. It’s a very nice combination.”

This kind of merger is a new type of move for Lab21, which usually prefers to buy, Mr Mullis says. “Historically we’ve made acquisitions of products and assets – we’ve never really invested heavily in R&D ourselves.” The group will take on a new identity to reflect the fact that neither company is exactly buying the other.

Front and centre of the new company’s product offering will be NovaPrep, a liquid-based cytology screening platform developed by Novacyt. The new company will use this to create a portfolio of cancer and infectious diseases diagnostics with Lab21 manufacturing some of the consumables used with it.

“As well as the synergies between the two companies in R&D, manufacturing and commercial efforts, we are also looking at developing new products for the NovaPrep platform,” Mr Mullis says. “Some of that IP will come from Lab21 – we have some antibody technology which we will apply to the NovaPrep platform. That was another key rationale for the merger.”

More markets

NovaPrep is CE marked in the EU but not yet approved in the US. Mr Mullis says there is already “a plan to roll out the NovaPrep platform technology across all markets”, but will not be drawn further on when the technology might reach the other side of the Atlantic.

The new company will produce tests for several cancers and other disorders, but will be heavily concerned, at least initially, with liquid cytology tests for cervical cancer. These are distinct from, but similar to, the standard Pap smear.

The advent of non-cytologic tests for human papillomavirus – Roche’s Cobas HPV test is now approved as a first-line screen in the US – and even HPV vaccination programmes will inevitably cut into the enlarged company’s potential market.

“In the very long term we hope that HPV vaccines will have a significant effect for patients, but there will always be a role for cervical cancer screening by cytology methods,” Mr Mullis says. “The way to diagnose cervical cancer is primarily driven through cytology methods today, and there is a strong partnership between the increase in HPV testing and cervical cancer cytology testing alongside.”

It will certainly take time for HPV vaccination programmes to have an effect, and even for new testing techniques to be widely adopted (Roche’s HPV test could become routine cervical cancer screen – eventually, March 13, 2014). But the company formed by Lab21 and Novacyt might do well to diversify into other areas.

To contact the writer of this story email Elizabeth Cairns in London at elizabethc@epvantage.com or follow @LizEPVantage on Twitter

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