Stemonix Inc. has agreed to a merger with Cancer Genetics Inc., a publicly traded pharmaceutical company based in Rutherford, N.J., the companies announced Monday.
Stemonix will receive about 78% of Cancer Genetics' 2.31 million outstanding shares, making it the majority owner of the company. At Cancer Genetics's press time share price of around $7, the transaction will be worth $12.6 million to Stemonix. The deal is expected to close in the fourth quarter of this year.
Jay Roberts, Cancer Genetics' CEO, will lead the combined company.
Maple Grove-based Stemonix uses stem-cell technology to create "micro-organs," like heart cells or parts of the brain, for pharmaceutical companies to use in drug testing and development. It has about 30 employees and dozens of customers including half of the top 25 pharmaceutical companies in the world.
When Stemonix won the Minnesota Cup, the state's largest startup competition, in 2016, it had just one top 10 pharmaceutical customer, said CEO Ping Yeh. He remains grateful for the support the state's startup ecosystem has shown Stemonix.
"We wouldn't be able to get to this point without the support of the community," Yeh said.
Stemonix's four-year path from startup darling to the public market was relatively fast, especially in the often-slow-paced world of biotech and pharmaceuticals.
"For an industry that moves rather slowly, the traction was faster than expected," Yeh said.
The Stemonix brand will be retained as a subsidiary of Cancer Genetics through the merger, as will Stemonix's operations in Minnesota, he said.
Cancer Genetics share price shot up well over 100% on the news, from a previous close of $2.91. It was as high as $10 earlier on Monday.
"The process of discovering and developing a new drug candidate takes years and comes with a price tag of hundreds of millions - or even billions - of dollars. However, we are at unique time in the drug discovery industry as the convergence of technological innovations in both biology and software will transform conventional workflows in time and accuracy. Given that our strategy and approach are strongly aligned with those of Stemonix, we are pleased to have moved forward with this proposed transaction," said Roberts said in a statement.
Cancer Genetics posted a net loss of $1.7 million for the second quarter of 2020 on revenues of $1.4 million. The company sold its research and development arm last year, but still supports preclinical trials through its discovery services arm. At the end of the second quarter, it only had $2.9 million in cash.
Stemonix raised a $14.4 million Series B round of funding in 2019. It's currently working on a round of funding that could be as large as $10.9 million, according to a filing with the SEC, though Yeh said the exact size of the round is yet to be determined.
