On April 18, 2022 Fulgent Genetics, Inc. (NASDAQ: FLGT) ("Fulgent"), a technology-based genetic testing company focused on transforming patient care in oncology, infectious and rare diseases, and reproductive health, reported that it has entered into a definitive agreement to acquire Inform Diagnostics, a leading national independent pathology laboratory based in Irving, Texas, and a portfolio company of Avista Capital Partners (Press release, Fulgent Genetics, APR 18, 2022, View Source [SID1234612410]). Under the terms of the agreement, Fulgent will acquire Inform Diagnostics for a total purchase price of approximately $170 million, subject to adjustments, to be paid from cash on hand. The acquisition is expected to close during the second quarter of 2022, subject to the satisfaction of customary closing conditions, including regulatory approvals.
Schedule your 30 min Free 1stOncology Demo!
Discover why more than 1,500 members use 1stOncology™ to excel in:
Early/Late Stage Pipeline Development - Target Scouting - Clinical Biomarkers - Indication Selection & Expansion - BD&L Contacts - Conference Reports - Combinatorial Drug Settings - Companion Diagnostics - Drug Repositioning - First-in-class Analysis - Competitive Analysis - Deals & Licensing
Schedule Your 30 min Free Demo!
Fulgent Genetics continues to build upon its genomic testing platform both organically and inorganically through multiple vectors, including expanding its test menu through R&D, partnerships, and acquisitions; increasing accessibility by adding covered lives through incremental managed care contracts; broadening its geographic footprint with new lab locations; and scaling its commercial reach with an expanding sales organization. Fulgent’s scale and flexibility is made possible by its foundational technology platform, which underpins operations across the business including testing, clinical workflow, lab operations, record management, and reporting. With the addition of Inform Diagnostics, Fulgent will further expand its test menu into breast pathology, gastrointestinal pathology, dermatopathology, urologic pathology, neuropathology, and hematopathology. At the same time, Fulgent sees an opportunity to leverage Inform Diagnostics’ nationwide client base, established commercial organization, and managed care relationships as potential catalysts for expanding many of Fulgent’s existing services, including its extensive menu of customizable genomic testing offerings for over 18,400 genes across infectious and rare disease, reproductive health, and oncology.
Inform Diagnostics was founded in 1996 as Pathology Partners and has since become one of the largest national pathology laboratories in the United States with offerings across gastrointestinal pathology, dermatopathology, urologic pathology, and hematopathology, among others. The company currently provides services to approximately 1,300 clients who represent over 2,700 physicians. Inform Diagnostics is committed to providing physicians and the patients they serve with efficient, dependable, and high-quality service to facilitate faster treatment for patients and more efficient workflows for clinicians. The company’s philosophy of being a reliable, high-quality provider of pathology services aligns closely with Fulgent’s core purpose of offering the broadest menu of actionable diagnostic tests with accurate, quality results, and rapid turnaround time.
Strategic Rationale:
Test Menu Expansion: Acquisition extends Fulgent’s capabilities into the pathology testing market, with the goal of continuing to innovate healthcare by developing new Next Generation Sequencing ("NGS") based tests, among other technologies, to further serve the combined companies’ large, nationwide customer base.
Commercial Synergies: With the addition of Inform Diagnostics’ extensive testing capabilities, nationwide salesforce, and significant managed care contracts, Fulgent is better positioned to become a one-stop shop for diagnostic services throughout the healthcare continuum and across the United States. Fulgent sees valuable cross-selling opportunities with Inform Diagnostics’ national GI and GU specialist client base, including Fulgent’s newly launched liquid biopsy test for Hepatocellular carcinoma, HelioLiver, as well as an upcoming molecular test for urology, which is pending launch. In addition, Fulgent expects to offer high-value NGS-based oncology services to Inform Diagnostics’ hematology clients. Inform Diagnostics’ client relationships will enable Fulgent to access more patients along key touchpoints to provide a comprehensive suite of diagnostic products and services leading to improved healthcare.
Managed Care Relationships: Extends Fulgent’s in-network relationships with managed care organizations to over 300 million covered lives.
Geographic Reach: Expands Fulgent’s geographic footprint with the addition of CLIA, CAP, and NY State certified laboratories in New York, Arizona, Massachusetts, and Texas.
Attractive Financial Profile: Upon closing, the transaction has the potential to contribute meaningfully to Fulgent’s annual core revenue and is expected to have a positive impact to pro forma EBITDA. Fulgent now expects core revenue for FY 2022 to be approximately $175million, compared to previous guidance of $120 million, including potential revenue contribution from the proposed acquisition.
Quotes:
"We look forward to further expanding Fulgent’s genomic testing footprint with the addition of the Inform Diagnostics team, pathology capabilities, and nationwide reach of Inform Diagnostics," said Ming Hsieh, Chairman and CEO of Fulgent. "We have been impressed with the Inform Diagnostics team’s commitment to quality, turnaround time, and customer service, which we believe fits well with our priorities, culture, and focus at Fulgent. We expect to see an immediate contribution from Inform Diagnostics’ mature pathology business, while in the longer term we also believe there are numerous synergies across our organizations that will drive sustained momentum across Fulgent’s core testing business. We are excited about this opportunity to drive long-term shareholder value with this strategic acquisition."
"Inform Diagnostics has built an impressive nationwide network of customers with an excellent reputation for expertise in pathology, supported by a robust, multi-disciplinary commercial organization," said Brandon Perthuis, Chief Commercial Officer of Fulgent. "We see a meaningful opportunity to leverage Inform Diagnostics’ deep network of physician and managed care relationships across Fulgent’s existing core business, including test offerings such as HelioLiver, heme-onc NGS services, and CSI’s menu of products. We believe this acquisition brings us one step closer to our long-term vision of being a one-stop shop for many clinical specialties and biopharma organizations. We plan to continue to innovate genomics and pathology by launching novel services aimed to improve health outcomes of patients."
"Today marks an exciting and important milestone for Inform Diagnostics and we look forward to bringing our team, testing capabilities, and technological advances, onto the Fulgent platform," said Darryl Goss, CEO of Inform Diagnostics. "We believe that with Inform Diagnostics’ capabilities across hematopathology, neuropathology, and anatomic pathology, coupled with our nationwide footprint of physician and managed care relationships, we will create a truly differentiated and comprehensive genomic testing suite for physicians and patients. We are fully aligned with Fulgent in our mission to profoundly impact patient care, one diagnosis at a time, while living the same core values. Physicians and patients should continue to expect the same commitment and excellence as we offer our now expanded services at the forefront of technological innovation."
Preliminary First Quarter 2022 Results
Fulgent Genetics also provided preliminary estimated revenue results for the first quarter ended March 31, 2022, which exceed the company’s previous guidance provided on February 23, 2022. For the first quarter of 2022, Fulgent anticipates total revenue to be approximately $300 million compared to previous guidance of $245 million, and core revenue excluding COVID-19 NGS testing to be at least $22 million, consistent with previous guidance.
The above preliminary estimated financial results for the three months ended March 31, 2022 are based upon Fulgent Genetics’ estimates and are subject to completion of Fulgent’s financial closing procedures. Moreover, these data have been prepared solely on the basis of information currently available to, and are the responsibility of, Fulgent Genetics. Fulgent’s independent registered public accounting firm has not audited, reviewed, or expressed an opinion with respect to these data. This information is not a comprehensive statement of Fulgent Genetics’ financial results for this period, and its actual results may differ materially from these estimates due to the completion of its financial closing procedures, final adjustments, completion of the review of Fulgent’s financial statements and other developments that may arise between now and the time the review of Fulgent’s financial statements is completed. There can be no assurance that these estimates will be realized, and estimates are subject to risks and uncertainties, many of which are not within our control. Complete quarterly results as of and for the three months ended March 31, 2022 are expected to be announced in connection with Fulgent’s first quarter financial results earnings conference call, to be held on May 3, 2022, and included in Fulgent’s Quarterly Report on Form 10-Q for the three months ended March 31, 2022.
Full Year 2022 Core Revenue Outlook
For the full year 2022, Fulgent Genetics now expects core revenue excluding COVID-19 NGS testing of approximately $175 million, compared to previous guidance of $120 million. Fulgent will provide a formal update to its outlook in connection with its first quarter financial results earnings conference call to be held on May 3, 2022.
This guidance for the full year 2022 assumes the anticipated closing of the Inform Diagnostics acquisition in the second quarter of 2022 and includes the presently anticipated revenue contribution from the completion of the acquisition of Inform Diagnostics. See the cautionary note regarding "Forward-Looking Statements" below.
Advisors
Piper Sandler acted as exclusive financial advisor and Mintz Levin, Cohn, Ferris, Glovsky and Popeo served as legal counsel to Fulgent Genetics, Inc. and Kirkland & Ellis served as legal counsel to Inform Diagnostics in connection with the transaction.