Winding down COVID testing, Sema4 to make $623M acquisition
As Sema4 ends its COVID testing partnership with the state this month, the Stamford company announced Tuesday it would acquire another genomic-testing firm — a deal worth about $623 million that company officials said would create one of the country’s largest and most-advanced providers in its industry.
Sema4’s purchase of Marylandbased GeneDx — which is a subsidiary of pharmaceutical-and-diagnostics provider OPKO Health — will be its largest-ever deal. It will include an upfront payment of $150 million in cash, plus 80 million shares in Sema4, as well as up to $150 million in “revenue-based milestones” during the next two years.
The deal reflects the growing use of genomic testing, a crucial tool for detecting and treating many diseases such as various types of cancer. Sema4 officials cited GeneDx’s sequencing and clinical reporting of more than 300,000 exomes, referring to the protein-coding regions of the genome. They also cited GeneDX’s 2.1 million “expertly annotated” phenotypes. A phenotype represents an individual’s observable traits, such as height, eye color, and blood type, according to the National Human Genome Research Institute.
GeneDx’s trove of data will strengthen Sema4’s approximately 12 million clinical records, including more than 500,000 with “genomic profiles.”
“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,” Sema4 founder and CEO Eric Schadt said in a statement. “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.”
During the past two years, Sema4 has become one of Connecticut’s largest providers of COVID-19 testing services. It announced last month, however, that it planned to discontinue those services by March 31 and would stop providing them to its home
state by the end of this month.
The company’s contracts with the state have sparked controversy because Sema4’s investors include Oak HC/FT, a Greenwich-based venture capital firm co-founded by Gov. Ned Lamont’s wife, Annie. Oak has invested twice in Sema4, which has received millions of dollars from the state to perform COVID-19 testing.
Sema4 also announced Tuesday that, as a result of the acquisition, GeneDx Chief Executive Officer and President Katherine Stueland will become co-CEO of Sema4, alongside Schadt.
GeneDx employs approximately 700, while Sema4 employs about 1,200. In their announcement, the companies did not indicate they would make any layoffs.
“We are excited to join forces with Sema4, a market leader in using genomic and clinical data to deliver precision medicine,” Stueland said in a statement. “The complementary fit between our teams, missions, and capabilities is strong. We are eager to put those strengths to work and to make it easier to use data-driven insights to improve health care for all. I’m looking forward to partnering with Eric to create an unrivaled family health and health intelligence company, supporting patients making health care decisions
throughout their lives, from pregnancy and newborn health to adult rare disease, risk assessment, and cancer care.”
Also Tuesday, Sema4 announced agreements with a group of institutional investors, including pharmaceutical giant Pfizer, for a $200 million “private placement” of Class A shares of Sema4. In that transaction, Sema4 will issue 50 million shares, at $4 per share, to those investors.
The acquisition and the private placement are expected to close concurrently in the first half of this year.
“We are excited to announce this investment with the support of several key institutions, including Pfizer,” Schadt said. “We believe that genomics and data, when harnessed in partnership with health systems, can be a powerful tool to enable precision medicine by bringing novel therapies to patients faster and more effectively. We hope that this investment may serve as a foundation for potential future collaborations.”
On Tuesday, Sema4 shares closed at $3.45, down nearly 15 percent from their previous closing total.
Sema4 was founded in 2017 when it was spun out of the Mount Sinai Health System into its own company. It services include hereditary-cancer
testing, prenatal testing and newborn screenings.
Last July, Sema4 completed its transformation into a publicly traded company. It did so by combining with a “special purpose acquisition company,” which created a business worth about $3 billion. The SPAC process provided an alternative to an initial public offering.
For the 2022 fiscal year, Sema4 expects revenue to total between $215 million to $225 million — annual growth of 23 percent to 29 percent that would exclude revenue associated with COVID-19 services. For 2022, it expects to process more than 350,000 tests, excluding COVID-19 tests.
Sema4’s main offices are located at 333 Ludlow St., in the South End of Stamford. In addition, it operates laboratories in Stamford and Branford.
To support the growth of its workforce in Connecticut, Sema4 has received $15.5 million in loans from the state Department of Economic and Community Development. So far, $4.5 million of that amount has been forgiven, while the company could earn up to $7.5 million in additional forgiveness.