The blood test company Epigenomics is being taken private by its largest investor, Biochain Institute, and a Chinese private equity group, Cathay Fortune – also a shareholder – in a cash deal worth €171m ($186m). At €7.52 per share the buyers are paying a hefty 52% premium to Epigenomics’ share price at close yesterday.
Epigenomics is to be bought by a company called Summit Hero Holdings, a subsidiary of Cathay Fortune and Biochain’s parent group, Team Curis Holdings. Epigenomics would not give EP Vantage details on the proportions in which these companies own Summit Hero, and therefore the extent to which their investments in Epigenomics are increasing is unknown.
Biochain already owns 9.3% of Epigenomics’ shares, while Cathay's stake is around 2%. The rest remains in free float, according to the group’s 2016 annual report, released today. The only other named investor is Uchip Technology, a subsidiary of the Chinese VC group Summitview Capital, which has a 4% holding. All these groups have tendered their shares in favour of the deal.
The buyers are additionally investing €6.5m in Epigenomics to ramp sales of its blood test for colorectal cancer, Epi proColon. The test was approved in the US last year via the unusual strategy of the company appealing against the FDA’s second rejection (FDA finds Epigenomics appealing, April 13, 2016). “Epigenomics will increase its presence in … the US,” its chief executive, Greg Hamilton, said on a conference call.
For this to happen the company will have to secure Medicare reimbursement. It is confident that it can do so, with Mr Hamilton saying “there is no FDA-approved screening test that we are aware of that ultimately has not got Medicare coverage”.
But the need for launch capital is pressing, as shown by the fund-raising activities of other groups that have brought cancer diagnostics to market in recent years. “Since product launch, Genomic Health, Foundation Medicine and Exact Sciences have raised over $1bn collectively, and two of the three are still burning cash,” Mr Hamilton said on the call.
Since Epi proColon’s launch Epigenomics has raised $14m.
The company has ambitions beyond the colon cancer test: it is targeting the second half of this year for the launch of its lung cancer test, Epi proLung. It also wants to push into new territories, and here its new owners could be instrumental.
As well as Cathay Fortune being based in Shanghai, Biochain is already partnered with Epigenomics in China, having licensed Epigenomics’ biomarker technology and won Chinese FDA approval. It has also licensed Chinese rights for the markers used in the lung cancer test, which Mr Hamilton says could be a bigger seller in China than the US owing to the "prevalence of smoking and air pollution ... and the sheer number of patients.”
Another intriguing nugget in Epigenomics’ 2016 results was the announcement that the company has also raised €1.4m in revenue from the sale of intellectual property. The group declined to tell EP Vantage what these rights where or why or to whom they had been sold, saying only that “obviously they were not crucial to our future business”.