Castle Biosciences To Buy AltheaDx For Up To $140 Million

Castle Biosciences To Buy AltheaDx For Up To $140 Million

Castle Biosciences To Buy AltheaDx For Up To $140 Million

Castle Biosciences (Friendswood, TX) has agreed to acquire AltheaDx (San Diego, CA) for $65 million in initial consideration consisting of $32.5 million in cash plus $32.5 million in stock. In addition, Castle could pay up to $75 million more in cash and stock if AltheaDx hits certain revenue targets over the next three years and gets expanded Medicare coverage for its IDgenetix
test. The deal is expected to close this summer.

AltheaDx markets a laboratory-developed pharmacogenomic test under the brand name IDgenetix. The cheek-swab test analyzes a panel of 15 genes to help doctors make prescription recommendations for patients with depression. The test is performed at AltheaDx’s CAP-accredited laboratory in San Diego. The Medicare program has covered IDgenetix since the fall of 2020 at a rate of $1,569 (CPT 81479: unlisted molecular pathology procedure).

AltheaDx, which has 40 employees, generated revenues of less than $1 million in 2021. Castle anticipates that AltheaDx will record $1-3 million of revenue in 2022.

Privately-held AltheaDx’s largest investors include Alma Life Sciences, Ally Bridge Group and WuXi Healthcare Ventures. AltheaDx filed for an initial public stock offering in December 2014, but shelved the proposed stock sale in early 2015.

Castle, which has 345 employees, is headquartered in Friendswood, Texas (near Houston) and operates CLIA-certified labs in Phoenix and Pittsburgh. Its lead testing product is DecisionDxMelanoma, which analyzes 31 genes to predict metastatic risk in patients diagnosed with cutaneous (skin) melanoma. DecisionDx-Melanoma is an Advanced Diagnostic Laboratory Test (ADLT) that is reimbursed by Medicare at $7,193 (CPT 81529).

For the full year ended December 31, 2021, Castle reported a net loss of $31.3 million versus a net loss of $10.3 million in 2020; revenue increased by 50% to $94.1 million.

High Claims Denials for Pharmacogenomic Testing

To date, pharmacogenomic testing for medication selection has been a tough market for labs providing this service. The volume of allowed Medicare Part B carrier claims for four key codes used to bill for pharmacogenomic testing (aka cytochrome p450; CPT 81225, 81226, 81227 and 81231) declined from a combined total of 959,398 allowed claims in 2014 to 33,706 allowed claims in 2020, according to data from the coding and reimbursement firm CodeMap (Chicago, IL). Furthermore, CodeMap data show that denial rates for these pharmacogenomic testing codes ranged from an average of 26% (2014) to 85% (2019) over the seven-year period. This compares with average claims denials rates of less than 10% for most routine clinical lab tests.

Quest Diagnostics Pays $85 Million For Labtech

Quest Diagnostics Pays $85 Million For Labtech

Quest Diagnostics Pays $85 Million For Labtech

The latest 10K annual report from Quest Diagnostics revealed that the company paid $85 million for its acquisition of Labtech Diagnostics (Anderson, SC). The deal, which closed on December 13, 2021, included cash consideration of $80 million and contingent consideration of $5 million dependent upon certain test volume goals. Labtech is an independent clinical lab specializing in allergy testing that serves physicians and patients primarily in South Carolina, North Carolina, Georgia and Florida. Labtech, which has 200 employees, was founded by its CEO/Owner Joseph Labash in 2011.

Labcorp Completes Acquisition of PGDx

Labcorp Completes Acquisition of PGDx

Labcorp Completes Acquisition of PGDx

Labcorp completed its previously announced (see LE, January 2022) acquisition of Personal Genome Diagnostics Inc. (PGDx-Baltimore, MD) on February 18. PGDx markets an FDA-cleared comprehensive tumor profiling test, PGDx ELIO tissue complete, that is covered by Medicare under the PLA code 0250U at a rate of $2,950. Labcorp paid $450 million in cash at closing
and will pay up to an additional $125 million based on PGDx achieving future performance milestones. The $575 million purchase price, including contingent performance payments, is equal to 14.4 times PGDx’s expected revenue of $40 million in 2022.

PathGroup Acquires Pathology Consultants in South Carolina

PathGroup Acquires Pathology Consultants in South Carolina

PathGroup Acquires Pathology Consultants in South Carolina

 PathGroup (Brentwood, TN) acquired Pathology Consultants Inc. (PCI-Greenville, SC) for an undisclosed sum in January. PCI operates a CAP-accredited pathology lab in Greenville, South Carolina. It has approximately 100 employees, including 31 pathologists.

PCI’s biggest client is Prisma Health System of South Carolina (Greenville, SC). Prisma Health is the largest health system in South Carolina, formed by the merger of Palmetto Health and the Greenville Health System in November 2017. Prisma Health includes 18 hospitals and 270 physician practices. Its largest hospitals are Greenville Memorial Hospital (746 beds) and Richland Hospital (641 beds).

Pathology Consultants was founded by Arthur Dreskin, MD, and Don Kilgore, MD, in 1959. The group is currently led by David Schammel, MD, President and Medical Director, and Jesse Stafford, MD, who is Chief Clinical Officer for Laboratory Services at Prisma Health.

Ben Davis, MD, Chief Executive at PathGroup, says the PCI lab in Greenville will remain fully operational and that Drs. Schammel and Stafford will continue in their respective leadership roles at PCI.

The acquisition of PCI represents PathGroup’s sixth deal since Pritzker Private Capital (Chicago,IL) took a majority stake in the company in the summer of 2016.

PathGroup now has more than 2,600 employees, including more than 225 pathologists, serving 100+ hospital contracts and thousands of physician clients. Annual revenue is now estimated to be more than $500 million.

Exact Sciences Acquires PreventionGenetics For $190 Million

Exact Sciences Acquires PreventionGenetics For $190 Million

Exact Sciences Acquires PreventionGenetics For $190 Million

Exact Sciences (Madison, WI) paid $190 million, including 50% in Exact common stock and 50% in cash, for PreventionGenetics (Marshfield, WI) in early January. PreventionGenetics operates a CLIA-certified lab that performs proprietary next-gen sequencing tests, including PGnome Health Screen (list price $2,290) and PGxome Prenatal (list price $2,860).

Labcorp Completes Acquisition of PGDx

Labcorp To Buy PGDx For $575 Million

Labcorp To Buy PGDx For $575 Million

Labcorp (Burlington, NC) has agreed to acquire Personal Genome Diagnostics Inc. (PGDx-Baltimore, MD) for $450 million in cash at closing plus up to an additional $125 million based on future performance milestones. The transaction is expected to close in the first half of 2022.

PGDx was founded in 2010 by two cancer scientists, Luis Diaz, MD, and Victor Velculescu, MD, PhD, from Johns Hopkins University. The company received FDA clearance to market its comprehensive tumor profiling test kit, PGDx ELIO tissue complete, in May 2020. The test analyzes 505 genes
from FFPE tissue samples from advanced cancer patients to inform treatment decisions for 35 solid tumor types. PGDx ELIO is covered by Medicare under the PLA code 0250U at a rate of $2,920.

PGDx, which has 114 employees, recorded revenue of approximately $22 million in 2021. Revenue is expected to grow nearly 82% to $40 million in 2022. Labcorp expects the acquisition of PGDx to negatively impact its earnings slightly over the next couple of years, but provide returns in excess of the cost of capital by year five.

PGDx had raised more than $200 million from outside investors, including New Enterprise Associates, Bristol-Myers Squibb and Cowen Healthcare Investments.