Post by luxetvox on Apr 27, 2023 14:05:37 GMT
For those who maintain that I spend whatever lucid moments I have left roaming the corridors of the counterfactual universe, wandering aimlessly in search of data which, no matter how compelling, do not bear on matters related to Opko, allow me another bout of reverie. For those who think that facts matter, read on.
In its Q1 earnings release this morning, which the market is rewarding with a nearly 6% selloff in the stock, Quest announced the purchase of Haystack Oncology. Some interesting points about the transaction:
1. Terms: $300 million in cash, plus up to $150 million in incentives.
2. Acquisition will be dilutive for a few years.
3. Haystack was started just two years ago, with some PE funding of a research team out of Hopkins.
4. Haystack closed a Series A financing only 6 months ago, a $56 million funding led by the founding PE firm, Catalio Capital Management. Another investor was Exact Venture, the venture capital arm of Exact Sciences (EXAS). As a reminder, EXAS is the colorectal cancer screening version of My Pillow, advertising their Cologuard test on every broadcast channel 24/7. The company stock, while down from its Everest-worthy heights of a couple years ago, is currently a) trading near its 52 week high, and b) still sports a Kilimanjaro level of market cap, at $11.3 billion. Sales growth is still very healthy, now over $2 billion, but profits remain elusive. Apparently, the management of EXAS haven't yet figured out how to generate net income from their core business. But the money they've allocated to outside venture investments is paying off handsomely. With the Quest buyout of Haystack, you can bet EXAS made a very healthy return on its Series A investment just five and a half months ago.
5. From the Quest statement about the post-acquisition EPS dilution (i.e., Haystack will generate losses for quite some time), and the fact that Haystack's Series A was just last November, it's safe to conclude that Haystack has no revenue yet. They have.....a test.
6. So, Quest paid $300 million up front, and a maximum of $450 million in cash for a company with no revenues, and a test.
7. While liquid biopsy is a different business than genomics, with just a modicum of common sense, one could extrapolate what a company with a $115 million in revenue, growing at least 15%, may have fetched in cash. If only it were marketed to a company that actually had some.
8. By the way, the CFO of Haystack......came from Sema4.
Quest Diagnostics to Acquire Haystack Oncology
APRIL 27, 2023
Quest Diagnostics (NYSE: DGX), the nation’s leading provider of diagnostic information services, and Haystack Oncology, an early-stage oncology company focused on minimal residual disease (MRD) testing to aid in the early, accurate detection of residual or recurring cancer and better inform therapy decisions, today announced a definitive agreement for Quest to acquire Haystack in an all-cash equity transaction.
MRD testing is a fast-growing category of liquid biopsy tests that identify circulating tumor DNA (ctDNA) in the bloodstream of patients following surgery and treatment for cancer. Founded in 2021, Haystack has developed a ctDNA-based technology specifically for MRD detection, based on 20 years of research and development by world-renowned luminaries from Johns Hopkins University, including Drs. Bert Vogelstein, Ken Kinzler and Nick Papadopoulos. In a prospective, multi-institution study published in the New England Journal of Medicine in June 2022, an earlier version of the Haystack technology demonstrated the ability to better identify patients with residual disease for adjuvant chemotherapy after surgery for stage II colon cancer, thereby reducing chemotherapy use in the overall patient population without compromising recurrence-free survival.
Following the close of the acquisition, Quest expects to adapt the MRD test developed at Haystack as the basis for new clinical lab services available beginning in 2024. Development efforts will focus initially on MRD tests for colorectal, breast and lung cancers.
“We are excited by the opportunity to work together with Haystack Oncology, a company that we believe has developed a best-in-class ctDNA MRD technology,” said Jim Davis, Chairman, CEO and President, Quest Diagnostics. “Haystack’s liquid biopsy technology, combined with Quest’s strengths in screening, pathology and sequencing, will now position us to lead in the fast-growing MRD category. Working with Haystack, we have an opportunity to broaden access to MRD insights and potentially improve favorable long-term outcomes from cancer.”
“Combining Haystack with Quest is a major step forward in translating two decades of world-class liquid biopsy research and development into clinical laboratory services that are highly reliable and broadly accessible. Like looking for a needle in a haystack, accurately detecting MRD has been very challenging to date,” said Dan Edelstein, CEO and President, Haystack. “With Quest, we expect to increase and accelerate access to important tests that will improve the quality of cancer MRD detection and recurrence monitoring for patients. Working together, we have the potential to greatly transform the patient journey and save lives.”
The acquisition will leverage Quest’s expertise and scale in oncology, genomics and pathology. Quest employs approximately 400 pathologists through its AmeriPath specialty pathology-diagnostics business and provides approximately 7,000 patient access points in the United States for blood and other specimen collection. In addition, Quest’s expertise in next-generation tumor sequencing includes being able to identify patient-specific mutations for Haystack’s tumor-informed MRD approach. Quest also serves a broad swath of providers and connects with nearly 850 electronic health records systems, supporting convenient electronic longitudinal MRD reporting.
Under the terms of the agreement, Quest will pay $300 million in cash at closing, net of cash acquired, and up to an additional $150 million on achieving future performance milestones. The company expects the acquisition to be modestly dilutive to earnings over the next three years and accretive by 2026. The transaction is expected to be completed in the second quarter, subject to customary regulatory review.
J.P. Morgan Securities LLC acted as exclusive financial advisor to Quest, and Weil, Gotshal & Manges LLP acted as Quest’s legal advisor. Goldman Sachs & Co. LLC acted as exclusive financial advisor to Haystack, and Goodwin Proctor LLP acted as Haystack’s legal advisor.
About Cancer Care Using MRD Testing
Cancer is the second most common cause of death in the U.S., and most cancers are due to solid tumors. In 2023, 1,958,310 new cancer cases and 609,820 cancer deaths are projected to occur in the U.S.
Patients diagnosed with cancer are typically treated through a combination of surgery to remove the tumor and adjuvant chemo- or immune-therapy to eliminate microscopic molecules of cancer that may remain in the body. However, neither surgery nor adjuvant therapy necessarily eliminates residual cancer molecules.
Physicians typically monitor patients over several years for signs of cancer recurrence, using tests that include tissue biopsy, imaging (i.e., MRI) and certain laboratory tests. However, biopsies and imaging are invasive, inconvenient or expensive, while current lab tests are potentially non-specific. MRD testing provides a new way–based on a simple blood test–to monitor for residual (remaining) or recurring cancer longitudinally over time.
About Haystack Oncology
Haystack Oncology uses the next generation of ctDNA detection technology to see through the noise and uncover the lowest levels of ctDNA in blood to report residual, recurrent, or resistant disease earlier than other MRD tests. Designed by cancer genomics pioneers and liquid biopsy experts, Haystack’s tumor-informed MRD test is best positioned to deliver the right treatment to the right person at the right time. Haystack is based in Baltimore, MD, and has research facilities in Hamburg, Germany. Learn more at haystackoncology.com.
In its Q1 earnings release this morning, which the market is rewarding with a nearly 6% selloff in the stock, Quest announced the purchase of Haystack Oncology. Some interesting points about the transaction:
1. Terms: $300 million in cash, plus up to $150 million in incentives.
2. Acquisition will be dilutive for a few years.
3. Haystack was started just two years ago, with some PE funding of a research team out of Hopkins.
4. Haystack closed a Series A financing only 6 months ago, a $56 million funding led by the founding PE firm, Catalio Capital Management. Another investor was Exact Venture, the venture capital arm of Exact Sciences (EXAS). As a reminder, EXAS is the colorectal cancer screening version of My Pillow, advertising their Cologuard test on every broadcast channel 24/7. The company stock, while down from its Everest-worthy heights of a couple years ago, is currently a) trading near its 52 week high, and b) still sports a Kilimanjaro level of market cap, at $11.3 billion. Sales growth is still very healthy, now over $2 billion, but profits remain elusive. Apparently, the management of EXAS haven't yet figured out how to generate net income from their core business. But the money they've allocated to outside venture investments is paying off handsomely. With the Quest buyout of Haystack, you can bet EXAS made a very healthy return on its Series A investment just five and a half months ago.
5. From the Quest statement about the post-acquisition EPS dilution (i.e., Haystack will generate losses for quite some time), and the fact that Haystack's Series A was just last November, it's safe to conclude that Haystack has no revenue yet. They have.....a test.
6. So, Quest paid $300 million up front, and a maximum of $450 million in cash for a company with no revenues, and a test.
7. While liquid biopsy is a different business than genomics, with just a modicum of common sense, one could extrapolate what a company with a $115 million in revenue, growing at least 15%, may have fetched in cash. If only it were marketed to a company that actually had some.
8. By the way, the CFO of Haystack......came from Sema4.
Quest Diagnostics to Acquire Haystack Oncology
APRIL 27, 2023
Quest Diagnostics (NYSE: DGX), the nation’s leading provider of diagnostic information services, and Haystack Oncology, an early-stage oncology company focused on minimal residual disease (MRD) testing to aid in the early, accurate detection of residual or recurring cancer and better inform therapy decisions, today announced a definitive agreement for Quest to acquire Haystack in an all-cash equity transaction.
MRD testing is a fast-growing category of liquid biopsy tests that identify circulating tumor DNA (ctDNA) in the bloodstream of patients following surgery and treatment for cancer. Founded in 2021, Haystack has developed a ctDNA-based technology specifically for MRD detection, based on 20 years of research and development by world-renowned luminaries from Johns Hopkins University, including Drs. Bert Vogelstein, Ken Kinzler and Nick Papadopoulos. In a prospective, multi-institution study published in the New England Journal of Medicine in June 2022, an earlier version of the Haystack technology demonstrated the ability to better identify patients with residual disease for adjuvant chemotherapy after surgery for stage II colon cancer, thereby reducing chemotherapy use in the overall patient population without compromising recurrence-free survival.
Following the close of the acquisition, Quest expects to adapt the MRD test developed at Haystack as the basis for new clinical lab services available beginning in 2024. Development efforts will focus initially on MRD tests for colorectal, breast and lung cancers.
“We are excited by the opportunity to work together with Haystack Oncology, a company that we believe has developed a best-in-class ctDNA MRD technology,” said Jim Davis, Chairman, CEO and President, Quest Diagnostics. “Haystack’s liquid biopsy technology, combined with Quest’s strengths in screening, pathology and sequencing, will now position us to lead in the fast-growing MRD category. Working with Haystack, we have an opportunity to broaden access to MRD insights and potentially improve favorable long-term outcomes from cancer.”
“Combining Haystack with Quest is a major step forward in translating two decades of world-class liquid biopsy research and development into clinical laboratory services that are highly reliable and broadly accessible. Like looking for a needle in a haystack, accurately detecting MRD has been very challenging to date,” said Dan Edelstein, CEO and President, Haystack. “With Quest, we expect to increase and accelerate access to important tests that will improve the quality of cancer MRD detection and recurrence monitoring for patients. Working together, we have the potential to greatly transform the patient journey and save lives.”
The acquisition will leverage Quest’s expertise and scale in oncology, genomics and pathology. Quest employs approximately 400 pathologists through its AmeriPath specialty pathology-diagnostics business and provides approximately 7,000 patient access points in the United States for blood and other specimen collection. In addition, Quest’s expertise in next-generation tumor sequencing includes being able to identify patient-specific mutations for Haystack’s tumor-informed MRD approach. Quest also serves a broad swath of providers and connects with nearly 850 electronic health records systems, supporting convenient electronic longitudinal MRD reporting.
Under the terms of the agreement, Quest will pay $300 million in cash at closing, net of cash acquired, and up to an additional $150 million on achieving future performance milestones. The company expects the acquisition to be modestly dilutive to earnings over the next three years and accretive by 2026. The transaction is expected to be completed in the second quarter, subject to customary regulatory review.
J.P. Morgan Securities LLC acted as exclusive financial advisor to Quest, and Weil, Gotshal & Manges LLP acted as Quest’s legal advisor. Goldman Sachs & Co. LLC acted as exclusive financial advisor to Haystack, and Goodwin Proctor LLP acted as Haystack’s legal advisor.
About Cancer Care Using MRD Testing
Cancer is the second most common cause of death in the U.S., and most cancers are due to solid tumors. In 2023, 1,958,310 new cancer cases and 609,820 cancer deaths are projected to occur in the U.S.
Patients diagnosed with cancer are typically treated through a combination of surgery to remove the tumor and adjuvant chemo- or immune-therapy to eliminate microscopic molecules of cancer that may remain in the body. However, neither surgery nor adjuvant therapy necessarily eliminates residual cancer molecules.
Physicians typically monitor patients over several years for signs of cancer recurrence, using tests that include tissue biopsy, imaging (i.e., MRI) and certain laboratory tests. However, biopsies and imaging are invasive, inconvenient or expensive, while current lab tests are potentially non-specific. MRD testing provides a new way–based on a simple blood test–to monitor for residual (remaining) or recurring cancer longitudinally over time.
About Haystack Oncology
Haystack Oncology uses the next generation of ctDNA detection technology to see through the noise and uncover the lowest levels of ctDNA in blood to report residual, recurrent, or resistant disease earlier than other MRD tests. Designed by cancer genomics pioneers and liquid biopsy experts, Haystack’s tumor-informed MRD test is best positioned to deliver the right treatment to the right person at the right time. Haystack is based in Baltimore, MD, and has research facilities in Hamburg, Germany. Learn more at haystackoncology.com.