Inside Amarantus’s $10.9M Merger with DioGenics: MSPrecise in the Spotlight

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In today’s biotech world, it’s usually only the mergers involving therapeutics that make the headlines. Pfizer (PFI) just inked a deal with Hospira (HSP) for $15 billion to get access to biosimilar drugs with much fanfare. Last year, Abbvie (ABBV) nearly inked a deal with Shire (SHPG) for $54B for its specialty pharma business. This year, Merck (MRK) completed its acquisition of Cubist (CBST) for $8.1B for its acute care division with investor cheers.

While the attention these deals get certainly makes sense, the enormous price tags that come with them tend to overshadow smaller niche deals in biotech that have nothing to do with therapeutic pharmaceuticals proper, but could still end up fundamentally changing vast segments of today’s healthcare market. Take, for example, a small underreported deal finalized on January 12 between Amarantus Biosciences (AMBS) and DioGenix. This was a $10.9M deal that did not center on therapeutics, but rather diagnostics, and few seemed to notice. Let’s face it: biotech mergers centering on diagnostics are just not as “sexy” as blockbuster drugs. If it doesn’t cure or at least treat a disease, it just doesn’t get much attention. This drives down awareness, and hence the price tag of these mergers, but not the potential of them.

The deal between Amarantus and Diogenix centers around a multiple sclerosis diagnostic called MSPrecise. Multiple sclerosis is one of the most common, as well as one of the most misdiagnosed autoimmune diseases in the world. Currently, a global patient population of 2.5M is being diagnosed with a battery of tests developed in the late 1950’s involving cerebrospinal fluid (CSF) together with MRI’s with a combined accuracy level as low as 54%. Both false negatives and false positives plague current MS diagnostic prodedures due to the nature of the disease as well as its being similar to many other neurodegenerative diseases.

The 2.5M MS patient market is treated with an estimated $14B of drugs annually, which means a false positive is extremely expensive, especially for insurance companies. False negatives become expensive as well because when the disease is identified late, the cost of treatment goes up, not to mention quality of life deteriorates significantly.  

How does MSPrecise Work?

MS testing currently involves extraction of CSF from the spinal column, and MSPrecise is designed to test that medium as well. The difference is what the test looks for. MS is an autoimmune disease involving antibodies synthesized from a patient’s own immune cells attacking the myelin sheath of nerve cells throughout the body. Immune cells are designed to synthesize a myriad of different antibodies by recombining antibody genes in different combinations. In fighting a disease, an immune cell will continually recombine gene sequences at random until it synthesizes an antibody that fits into a given pathogen. After a match is found, memory immune cells form that specialize in synthesizing the matching antibody.

For reasons currently unknown, sometimes an immune cell will recombine antibody genes in such away as to synthesize antibodies that attack the myelin sheath, leading to MS. MSPrecise is designed to recognize the specific recombinant gene sequences that lead to MS, so it is able to diagnose on a molecular level from within the genes themselves, and is therefore able to differentiate MS from other neurodegenerative diseases which do not show these specific gene sequences.

 Test Results

The latest results for MSPrecise involved a test of 334 subjects, 59 of which were predetermined definitively as having MS or not having MS, but rather other neurodegenerative diseases with similar symptoms. Scores for 52 of the 59 predetermined patients were definitive with an 81% accuracy level with MSPrecise as a standalone test. When combined with current diagnostic standard which also centers on CSF analysis, overall accuracy improved to 92%, a far cry from the 54% accuracy rating of today’s 1950’s diagnostic technology.

CLIA approval of MSPrecise is expected in the second half of 2015, with initial sales expected at the end of the year. Amarantus estimates peak sales at $300M with a targeted marketing campaign centered on the 200 specialized MS clinics throughout the United States.

 Merger Financials

Though the deal is valued at $10.9M, the out-of-pocket expense for Amarantus will be much less. $8M of the deal will be settled in stock to the owners of DioGenix, with $2M in sales milestone payments. Only $900,000 in merger costs will be paid by Amarantus. To help finance the deal, Amarantus is expected to sell a $7.45M tax credit granted to DioGenix by the State of New Jersey for the planned establishment of a laboratory, which is no longer in the works since the acquisition.

This merger comes within the context of advances in Amarantus’s wider diagnostics program. LymPro, the company’s Alzheimer’s blood test, is also slated for CLIA approval this year with its first sales to the investigational use clinical trials market expected this quarter.

Taken together, MSPrecise and LymPro may not be your traditional therapeutic drug blockbusters, but the amount of money they are designed to save both insurance companies and patients in terms of false positives far exceeds the $1B annual blockbuster threshold. With CLIA approval expected this year for both and sales beginning this quarter for LymPro and next year for MSPrecise, the prospect of a significant revaluation for Amarantus from today’s $60M seems relatively decent.

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