Medicare decision may have serious repercussions for RedPath acquisition

ExonHit is evaluating the potential impact and putting shareholder meeting about acquisition on hold

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PARIS—Updating its shareholders on the acquisition-in-progress of  Pittsburgh, Pa.-based RedPath Integrated Pathology, ExonHit Therapeutics says that the extraordinary shareholders' meeting scheduled on June 28 to decide on the acquisition project may be postponed. This is in light of information that has come to light as of June 16 from RedPath that Highmark (the Medicare reimbursement regional antenna for the states of Delaware, District of Columbia, Maryland, New Jersey and Pennsylvania) announced its intention to discontinue coverage for RedPath's molecular diagnostic test for pancreatic cancer.

Highmark's intention is preliminary and is based mainly upon data from 2006. RedPath has until July 9 to file a response to support coverage of its product. ExonHit reports that RedPath is currently putting together documentation that will contain the most recent medical data on the test to respond to Highmark's concerns.

If the information filed by RedPath was considered satisfactory, Highmark would continue coverage. If Highmark considered, according to its criteria, that these elements were insufficient, coverage would be discontinued as of Sept. 29.

The acquisition agreement between ExonHit, a leading French diagnostics and therapeutics biotech company, and RedPath, a cancer molecular diagnostics company, called for an upfront payment of $12.5 million in cash and $10 million in stock, and starting in 2012, subsequent additional payment up to $9.5 million dependent on the achievement of sales targets. RedPath would become part of ExonHit's U.S. Operations if the acquisition still goes through.

The acquisition of a revenue-generating diagnostics service provider, with a fully operational CLIA-licensed laboratory, would allow ExonHit to establish an immediate diagnostic presence in the United States.

"This acquisition is a significant milestone in ExonHit's strategy to become an internationally recognized player in molecular diagnostics. This transaction will strengthen our presence in the USA which represents 55 percent of the molecular diagnostics market," said Dr. Loïc Maurel, president of the management board at ExonHit, when the acquisition deal was announced in April. "RedPath provides a strong strategic and business fit with ExonHit. We are looking forward to working with the talented RedPath team and believe that this strategic move will give ExonHit a new dimension, with an innovative offering in oncology, the fastest-growing segment in molecular diagnostics."

For its part, RedPath has been looking forward to the acquisition because of the potential for the agreement to "benefit patients, clinicians and the employees of RedPath. Combining ExonHit's and RedPath's respective technologies, know-how and resources [to help] maximize the potential of both PathFinderTG and ExonHit's RNA-based AclarusDx platforms," said Mark D. Myslinski, president and CEO of RedPath in April. "The transaction is good news for the entire RedPath team who will remain highly involved in the development and commercialization of the PathFinderTG line and constitute a key asset for the commercial success of AclarusDx in the U.S. The influx of capital will enable RedPath to expand its Pittsburgh facilities, hire additional personnel and take advantage of future growth opportunities. Additionally, the company is eager to bring our diagnostic solutions to EU patients and clinicians who will benefit from the clinical utility of our assays."

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