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Defining cancer by pathways
February 2010
by Lloyd Dunlap  |  Email the author
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ALISO VIEJO, Calif.—Clarient Inc. has announced that it has acquired privately held, Huntsville, Ala.-based Applied Genomics Inc. (AGI) after a careful vetting process over the past year that covered the landscape of similar companies that might have been attractive.   
 
The all-stock merger is valued at up to $17.6 million, if all conditions and milestones set forth in the agreement are successfully met. As a result of the merger, AGI has become a wholly owned subsidiary of Clarient, which expects to launch a key lung cancer diagnostic panel in the first quarter of 2010 based on AGI's development engine.  
 
Called Pulmotype, the five antibody immunohistochemistry (IHC) test can be used to aid in the histological distinction between adenocarcinoma and squamous cell carcinoma in non-small cell lung cancer (NSCLC) tumor specimens. The histologic classification of NSCLC tumors has gained clinical relevance because newly developed targeted therapies show different clinical effectiveness or toxicity dependent upon the histology of the tumor. There is currently no other widely accepted molecular-based tool to help distinguish the different histological types, says Clarient CEO Ron Andrews.  
 
In addition to its active development engine for new diagnostic and prognostic cancer tests, AGI brings a near-term product pipeline, an eastern U.S. development lab to support the company's pharmaceutical services initiative, and access to a working network of the top academic and industry validation resources to Clarient's portfolio.  
 
Following Pulmotype into the cancer diagnostic market will be Pulmostrat, which will aim at defining the risk of recurrence, and Pulmotax, a "theranostic" that may predict the response of a patient's cancer to taxane therapy. The taxane class of chemotherapeutic agents is widely used, and understanding a patient's propensity to respond before administering this powerful drug will provide clinicians with a much-needed tool to aid in personalizing cancer treatment.  
 
Clarient was launched in 2005 on the shell of a bankrupt instrument company and did $495,000 in sales its first month, Andrews says. The company now occupies a 78,000 square-foot building, boasts 372 employees (Andrews cites the exact number with evident pride) and has hit the $100 million mark in sales.  
 
A Georgia native, Andrews tells how his grandmother suffered and died from cancer after having to endure repeated trips from her home to distant Emory University. Now, he says, the technology that resides at Clarient in California is available nationwide over the Internet via a process he calls virtual pathology.  
 
"We practice personalized medicine every day," he adds, "processing 150 breast samples a day. Candidly, someday cancer may well be defined by pathways, not locations. Having a test that provides us access to the primary lung tumor block much earlier in the diagnostic process will allow Clarient to provide pathologists with critical information at the early stages of therapy decision. It also strengthens our position to gain a greater share of the rapidly increasing epidermal growth factor receptor (EGFR) mutation testing market. The development of lung cancer diagnostics has been slow relative to other cancers; however, we now have a powerful foundation upon which to build a market-leading lung cancer franchise."  
 
Commenting on AGI's development engine, Rob Seitz, company CEO says, "Historically, we have been able to develop these products through collaborations with academic institutions. Now, as part of Clarient, we will have the ability to offer our tests and capabilities to community pathologists and their patients across the country. The new combined organization will also continue to assist pharmaceutical companies which can use our technologies to improve and speed clinical trials. These companies can now identify new and important patient subtypes, while Clarient gains proprietary biomarker content to create generations of new products."  
 
Pursuant to the terms of the merger agreement, Clarient acquired all of the outstanding capital stock of AGI in exchange for up to an aggregate of 7.6 million shares of Clarient common stock. The total consideration consists of 4.4 million shares of Clarient common stock issued to the former AGI stockholders at closing and up to 3.2 million additional shares of Clarient common stock issuable to the former AGI stockholders contingent upon the satisfaction of certain clinical, commercial and revenue milestones set forth in the merger agreement. The shares issued at closing will be reduced by 440,000 shares that will be placed into an escrow account to cover future indemnity claims.

 
Code: E021014

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