OncoCyte Corp. has agreed to acquire a 25% stake in Razor Genomics in the form of its preferred stock for a cash payment of $10 million.
Razor Genomics markets a test to identify early-stage lung cancer patients who are at high risk versus low risk of death within five years after surgery.
The Alameda, Calif.-based biotechnology company expects to close the acquisition of the equity interest in Razor Genomics by the end of September. It will also have the option to acquire the remaining outstanding shares of Razor's common stock.
Razor's lung cancer identification test was recently recommended for coverage by the Centers for Medicare and Medicaid Services. OncoCyte will make a $1 million milestone payment resulting from the positive CMS coverage decision.
The selling shareholders of Razor are eligible to get an additional $10 million in cash and $5 million worth of OncoCyte common stock or a combination of both for all the remaining shares of Razor upon meeting certain clinical trial milestones.
Meanwhile, Razor's shareholders are eligible to receive up to $3 million of OncoCyte's common stock, or common shares and cash, based on the achievement of a clinical trial milestone. Razor's parent company, Encore Clinical Inc., will receive a $4 million cash payment from OncoCyte upon the achievement of an additional CMS coverage milestone.
Razor will set aside $4 million from the initial $10 million payment to finance a supplemental clinical trial of the test to identify lung cancer. OncoCyte has agreed to pay future clinical trial costs that exceed the $4 million reserve, subject to ceilings under a clinical trial budget.
