US Bankruptcy Court Okays Cancer Genetics' Purchase of Response Genetics

Last Friday, Cancer Genetics (NASDAQ:CGIX) announced that the US bankruptcy court in Delaware has approved its plan to purchase the assets of recently bankrupted Response Genetics (OTCMKTS:RGDXQ).
Response Genetics is a CLIA-certified clinical laboratory that works to develop and market molecular diagnostic cancer-testing services. The company’s process involves extracting and analyzing genetic information from tumor cells.

Short-term history

The relationship between Response Genetics and Cancer Genetics began in August, when Response Genetics announced that it had filed for Chapter 11 bankruptcy protection and entered into an asset purchase agreement with Cancer Genetics.

At the time, Response Genetics CEO Thomas Bologna commented, “we took this action today with the goal of securing Response Genetics’ future. The Company has implemented various strategic initiatives and considered numerous options. We believe that this process is the best and most efficient course of action to serve our customers.”
According to Genome Web, the deal between the two companies is worth $14 million — $7 million in cash and $7 million in stock. For the stock portion, Cancer Genetics will issue 788,584 shares of its common stock to Response Genetics.

US bankruptcy court approval

As mentioned, this past Friday, the companies received approval for the deal from the US bankruptcy court in Delaware. As part of the transaction, Cancer Genetics has agreed to assume certain of Response Genetics’ liabilities. The company also intends to take over Response Genetics’ 27,000-square-foot lab in Los Angeles, turning it into a center for research on solid tumors; its focus will be on lung cancer.
In addition, Cancer Genetics will take over Response Genetics’ ALCHEMIST trial contract. Through this contract, the company will use tumor sequencing and genetic markers to figure out whether lung cancer recurrence can be deterred by therapies targeting genetic alterations. The company’s solid tumor molecular diagnostics offerings are also anticipated to expand into new arenas.

Future view

Ultimately, Cancer Genetics will have expertise in hematologic and solid cancers, and will hopefully increase its presence in the genetics space. The company intends to provide its services to large-scale clients in the biotech and pharmaceutical sectors. 
The company’s deal with Response Genetics is expected to close by October 9. If it goes through, Cancer Genetics expects to gain an additional $10 to $12 million in revenues over the next year.
 
Securities Disclosure: I, Morag McGreevey, hold no direct investment interest in any company mentioned in this article.