A relationship reaches a crescendo
Myriad Genetics to acquire Crescendo Bioscience for $270 million
SALT LAKE CITY—Myriad Genetics Inc. has established a definitive agreement with autoimmune diagnostics leader Crescendo Bioscience Inc. by which it will acquire the South San Francisco, Calif.-based company. The transaction total comes to $270 million in cash, which will be reduced by $25 million to repay a loan made to Crescendo and customary adjustments in accordance with the acquisition agreement. The deal is expected to close before the end of Myriad’s 2014 fiscal year, subject to the completion of customary closing items and regulatory approval. Following the completion of the acquisition, Crescendo will keep its name and become a wholly owned subsidiary of Myriad.
“Crescendo has built a strong and growing position in the rheumatoid arthritis diagnostic market, and I believe Myriad will enable us to move to the next level in terms of scale and growth,” William Hagstrom, president and CEO of Crescendo, said in a news release. “We envision multiple opportunities over the next several years where, as a combined company, we can expand our presence into international markets and provide new innovative products that help improve the lives of patients suffering from autoimmune diseases.”
Ronald Rogers, executive vice president of corporate communications at Myriad, notes that the companies’ relationship goes back a few years to September 2011, when Myriad made a $25 million strategic debt investment in Crescendo, for which it gained an exclusive, three-year option to acquire the company. Per the terms of the arrangement, Myriad could exercise the option at its discretion if Crescendo reached a minimum revenue milestone during the three-year term, in which case the purchase price was to be based on a predetermined multiple of revenue based on Crescendo’s growth rate at the time of option exercise. If the milestone was not reached, Myriad would have a one-time right to exercise its option at the end of the term and acquire Crescendo for a fixed purchase price.
“The Crescendo acquisition provides Myriad with a strong presence in the autoimmune diagnostic market. It also diversifies our product revenues, and will help drive our future revenue and income growth,” says Rogers. “With Myriad RBM and now Crescendo, we are one of the only companies that has significant expertise in the discovery of novel DNA, RNA and protein biomarkers, making us the companion diagnostic partner of choice for the pharmaceutical industry.”
Crescendo’s core product, Vectra DA, is a quantitative, protein-based test that routinely assesses rheumatoid arthritis activity to offer physicians expanded clinical insights to determine the best treatment plans. More than 1.5 million people suffer from rheumatoid arthritis in the United States alone, with some 2 million afflicted in Europe, positioning Vectra DA for a global market opportunity of $3 billion.
Myriad expects a number of strategic benefits from this acquisition. Vectra DA “is currently on a revenue run rate of approximately $10 million per quarter and is growing rapidly,” which Rogers says will help diversify Myriad’s revenue stream. Myriad will be able to accelerate that growth, he adds, thanks to the company’s commercial infrastructure, including its international sales team, which will establish new market opportunities for Vectra DA and other Crescendo products outside of the United States. The addition of Crescendo truly “cements Myriad’s status as a world leader in protein-based diagnostics,” says Rogers, adding that Crescendo is also expected to provide long-term financial benefits. He explains that Myriad forecasts the acquisition to be modestly dilutive to their earnings in the next fiscal year, but accretive in fiscal year 2016 and beyond.
“Looking out a few years, we believe Crescendo will be a major driver of profitability growth for Myriad,” he concludes.