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On the right path for MDx growth
June 2010
by Amy Swinderman  |  Email the author
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PITTSBURGH, Pa.— Acting on its strategy to become an internationally recognized player in molecular diagnostics, ExonHit Therapeutics SA, a therapeutics and diagnostics developer based in Paris, announced April 26 that it will acquire RedPath Integrated Pathology Inc., a privately held molecular diagnostics company focused on cancer.  
 
ExonHit will pay $12.5 million cash and $10 million in stock up front to acquire RedPath, which brings to the table a Clinical Laboratory Improvement Amendments (CLIA)-certified, College of American Pathologists (CAP)-inspected laboratory, experienced management, regulatory and reimbursement expertise and an established sales force. RedPath will become part of ExonHit's U.S. operations, and its 35 employees will be retained. Starting in 2012, RedPath's current shareholders may receive additional payments of up to $9.5 million if specific sales targets are met. Subject to shareholder and other customary approvals, the transaction is expected to close by mid-July.  
 
Dr. Loïc Maurel, president of ExonHit's management board, says the acquisition is a complementary fit between ExonHit's RNA platform and RedPath's DNA platform, as it directly links the significant role DNA mutations play in altering the regulation of alternative splicing.  
 
ExonHit's proprietary technology, based on the analysis of alternative RNA splicing, aims to develop innovative molecular diagnostic tests and therapeutics for neurodegenerative and cancer indications. In December 2009, the company launched its first product, AclarusDx, a blood-based biomarker that identifies patients suffering from Alzheimer's disease (AD), as a "research use only" product. This test is designed to discriminate AD patients from healthy individuals. ExonHit anticipates a CE marking in Q4 2010, and is preparing the launch of AclarusDx in the clinical in vitro diagnostic (IVD) market with laboratory partners for a European launch in Q1 2011. ExonHit has also initiated discussions with the U.S. Food and Drug Administration (FDA) to define the exact regulatory pathway to meet IVD requirements.  
 
RedPath's PathFinderTG technology, a molecular analysis of mutations in genomic DNA for cases where traditional pathology results in an "indeterminate" diagnosis," uses a broad panel of microsatellite markers to perform mutational analysis on many types of pathology specimens. Unlike tests for inherited genetic predisposition to cancer, it is an analysis of acquired genomic damage in an individual patient's tumor. According to RedPath, this objective information can help resolve diagnostic dilemmas and lead to a more personalized treatment plan.  
 
According to the companies, more than 10 percent of all described human gene mutations directly impact splicing. The combined approach will allow for the possibility of more accurate diagnostic tests with a strengthened IP position.  
 
"We believe we are building a molecular diagnostic powerhouse," Maurel says. "I believe we will be the only company with RNA and DNA capabilities in- house. RNA and DNA research is something we both believe is going to be very interesting in the future, which is one of the areas where we see a lot of synergies."
 
Of equally important consideration to ExonHit in this transaction was that it gives the French company an opportunity to establish a commercial presence in the United States—a market that represents 55 percent of the multi-billion-dollar molecular diagnostics market, Maurel says.  
 
"In combining the two companies' strengths, we are increasing revenues through our products which have already been launched, while also expanding and strengthening our diagnostic portfolio in cancer," he says. "We also have the opportunity to launch RedPath's products in Europe."   Founded in 2004 by a pathologist from the University of Pittsburgh Medical Center to commercialize molecular technology integrated with an anatomical pathologist workflow, RedPath has to date been funded by angels and venture capitalists. The company was in the process of raising another round of venture capital when it was approached by ExonHit, says Mark D. Myslinski, RedPath's president and CEO.  
 
"They were attracted to our expertise in DNA and the clinical applications of our technologies, as well as our foundation of success," says Myslinski, who will lead ExonHit's global diagnostics division and join the company's management board upon closing of the transaction. "The acquisition gives us access to European markets, different platforms and additional products, and of course, the funding that will allow us to continue to build value in our company."  
 
PathFinderTG can differentiate metastatic, synchronous and recurrent tumors in various organs, such as breast, lung, liver, endometrium and ovary. PathFinderTG works with a wide variety of standard pathology specimens, even minute, solid samples and small fluid volumes from specimens such as histology slides, cytology slides, fluid aspirates and brush samples.   RedPath has successfully developed, launched and earned reimbursement for the PathFinderTG molecular diagnostic assay for pancreatic cancer. A second assay to differentiate primary from metastasis tumors is being launched. The company's other service lines include two programs in late-stage development and several earlier stage development programs in oncology.  
 
"The transaction is good news for both the investors and the entire RedPath team, who will remain highly involved in the development and commercialization of the PathFinderTG line and constitute a key asset for the commercial success of AclarusDx in the U.S.," Myslinski says. "Additionally, the company is eager to bring the clinical solutions to the EU patients and clinicians who will benefit from the clinical utility of the assays."  
 
As the two companies work to integrate their teams, ExonHit has its eye on securing other partners, Maurel says.
 
"We want to create a strong new player in the molecular diagnostics field, and growing by acquisition is definitely something in our plans," he says.
 
 
Code: E061012

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