Diagnostics firm Cancer Genetics goes public

Cancer Genetics, a diagnostics firm focused on developing genomic-based oncology tests, made its initial public offering at a time of rapid growth in the diagnostic testing market.

The Rutherford, N.J.-based company, which is developing tests that target hematological, urogenital and HPV-associated cancers, announced Friday the pricing of its IPO of 600,000 shares of common stock at $10 per share. The offering is expected to close April 10.

“We believe our ability to rapidly translate research insights about the genetics and molecular mechanisms of cancer into the clinical setting will improve patient treatment and management and that this approach will become a key component in the standard of care for personalized cancer treatment,” Cancer Genetics said a securities filing.

Both payers and providers have said that using diagnostic testing in cancer treatment and prevention may improve outcomes and reduce broader healthcare costs.

However, there are still questions about the impact of high-cost treatments that have been recently approved by the Food and Drug Administration as well as concerns about the quality and correct utilization of certain diagnostic tests.

According to its securities filing, two looming issues for Cancer Genetics are the reimbursement of diagnostic tests and the adoption of its technology by pathologists and oncologists.

The payer mix for the company's tests and services is varied. More than a third of its revenue comes from direct bill customers, while 30% stems from private insurers and other third-party payers and 18% comes from Medicare and Medicaid. The rest of its revenue is attributed to grants and sales of its DNA probes.

Changing traditional referral methods or behavior may be difficult, Cancer Genetics said. In addition, a range of both new and established healthcare companies offer or are developing cancer-based technologies that look at genes, gene expression and protein biomarkers.

“We expect that pharmaceutical and biopharmaceutical companies will increasingly focus attention and resources on the personalized diagnostic sector as the potential and prevalence increases for molecularly targeted oncology therapies approved by FDA along with companion diagnostics,” Cancer Genetics noted in its filing.

The company generates the majority of its revenue from laboratory services and has established a number of research collaborations with well-known hospitals, including Memorial Sloan-Kettering Cancer Center in New York and the Cleveland Clinic in Ohio.

It also plans to expand an affiliation agreement with the Mayo Foundation for Medical Education and Research to form a joint venture that will focus on developing oncology diagnostic services and tests utilizing next-generation sequencing.

The 50/50 venture has not been formally established but both organizations have agreed to its development, a Mayo spokesman said. Cancer Genetics will provide capital investments and Mayo will contribute scientific and laboratory expertise.

“We recognize the transformative power of these tools and are committed to using every resource at our disposal to bring individualized medicine to our patients,” said Dr. Gianrico Farrugia, a Mayo Clinic gastroenterologist and director of Mayo's Center for Individualized Medicine in an e-mailed news release. “That is why this joint venture is so important.”

Cancer Genetics' shares are expected to be quoted on the OTCQB Marketplace. The ticker symbol is CGIX.