Sema4 Buys GeneDx in Bid to Expand Genomic Database and Testing

Sema4, a Connecticut-based personalized medicine company, announced it will put the proceeds from its recent SPAC deal to work. It will acquire GeneDx, a subsidiary of OPKO Health, for over $600 million.

Sema4 analyzes genomic and clinical data using proprietary artificial intelligence and machine learning platforms to design personalized health solutions. However, to improve and expand its analytics platforms, large amounts of patient data are required. Buying GeneDX will give it access to more than 300,000 clinical exosomes and 2.1 million annotated phenotypes.

“This acquisition gives us the opportunity to accelerate the use of genomics as standard of care by providing a deeper menu of precision medicine solutions to our health system partners to better meet their clinical needs,” said Eric Schadt, Ph.D., Founder, and CEO of Sema4.

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Treasure Trove of Exomes and Genome Sequences for Testing  

Founded by two scientists from the National Institutes of Health (NIH) over 20 years ago, GeneDx is a leader in genomic testing and offers a comprehensive suite of testing services. However, one of the most valuable aspects of GeneDx is its enormous database of exome and genome sequences. 

Its exome sequencing technology and analyses result in a definitive diagnosis in 20% more cases. Furthermore, a significant number of genetic disorders diagnosed today include gene-disease relationships originally identified by GeneDx.

Eric Schadt said “Adding GeneDx’s comprehensive dataset and capabilities to our offerings enables us to inform on an even broader range of diseases, further closing the gap between the practice of medicine and the availability of more clinically actionable guidance. GeneDx’s operational prowess and market-leading cost structure in exome and genome sequencing will also help accelerate our path to improved gross margins and profitability. I am also delighted to welcome Katherine to our leadership team. She and her team’s world-class expertise will be critical to our continued growth and success.”

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Terms of the Deal 

Sema4 will pay OPKO, GeneDX owner, $150 million in cash plus 80 million shares in Sema4. Additionally, OPKO is eligible for up to $150 million based on milestones. Together, the deal is worth up to $623 million, and it is expected to close in the second quarter of 2022. 

Additionally, Katherine Stueland, CEO of GeneDx, will be appointed as Sema4 co-CEO. She will also join Sema4’s Board of Directors.

To pay for the acquisition, Sema4 entered a private placement financing with a group of institutional investors, which included Pfizer. Sema4 will sell $200 million in Class A common stock. 

Without acquiring GeneDx, Sema4 is projected to generate $215-$225 million in total revues for 2022. However, this deal is expected to boost revenues over $100 million with a new projected revenue of $350 million.

The new source of revenue comes at a critical time. Sema4 was one of the largest providers of COVID-19 tests for the state of Connecticut; however, it announced it will cease testing services as of March 31, 2022. 

Even with the prospects of growth and a new source of income baked in the deal, Wall Street did not seem too enthusiastic. Sema4’s stock closed 14.6% lower. In comparison, the NASDAQ Biotechnology Index lost only 3.85%.

Author

Daniel Ojeda