French Company Buys Pittsburgh-Based RedPath

ExonHit Therapeutics acquires Redpath’s proprietary molecular test and its CLIA laboratory

CEO SUMMARY: Here’s a deal that is all about proprietary molecular assays and access to new markets. With its purchase of RedPath Integrated Pathology, ExonHit Therapeutics, S.A., of Paris, France, gains a CLIA laboratory and access to the U.S. market, even as the new owner opens the door to the European market for RedPath. As announced by the two companies, ExonHit will spend $22.5 million to acquire RedPath Innovative Pathology and will pay an additional $9.5 million if RedPath achieves certain sales targets.

INVESTOR INTEREST IN PROPRIETARY MOLECULAR ASSAYS remains strong. The latest evidence is the acquisition of RedPath Integrated Pathology of Pittsburgh, Pennsylvania, by ExonHit Therapeutics, S.A., of Paris, France.

ExonHit is a publicly-traded diagnostics and therapeutics company that also has operations in Gaithersberg, Maryland. On April 26, ExonHit entered into a binding agreement to acquire RedPath for $12.5 million in cash and $10 million in ExonHit stock. If the combined companies reach specific sales targets, ExonHit will pay $9.5 million more starting in 2012, the companies said.

Sale To Close In July

The transaction is subject to approval by ExonHit’s shareholders and is expected to close before the middle of July. Privately- held RedPath has investors that include NewSpring Health Capital, CID Capital, Seneca Health Partners, and Inflexion Fund, L.P.

RedPath offers proprietary molecular assays for evaluating pancreatic cancer. These assays were developed by pathologist Sydney D. Finkelstein, M.D., who founded the company in 2004 and is Chief Scientific Officer at RedPath.

Our primary focus is in pancreatic cancer and differentiating metastatic cancer versus a new primary cancer through the use of our proprietary molecular assay, the PathFinderTG,” stated Mark D. Myslinski, President and CEO of RedPath Innovative Pathology in an interview with THE DARK REPORT. “In the case of a patient with two pancreatic tumors, clinicians want to know if these tumors are metastasizing.

“If the tumors are metastasizing, it puts them into Stage 4 cancer,” explained Myslinski. “But if each tumor is a primary, it puts them into Stage 1, which is generally curable by surgery. The PathFinderTG assay helps the clinician make a material diagnosis.

“Currently, there are no other products for diagnosing pancreatic cancer in this way,” added Mylinski. “There are traditional fluid chemistries but they are not nearly as specific or sensitive to allow the clinician to make a determination of Stage 1 versus Stage 4 cancer. Because our assay can provide that answer with a high degree of clinical confidence, it has filled an unmet need and has been successful in the marketplace.”

Products in Development

Another asset that RedPath brings to ExonHit is its CLIA-certified and CAP-accredited laboratory in Pittsburgh. ExonHit is developing proprietary technology based on the analysis of alternative RNA splicing. It wants to develop molecular diagnostic tests and therapeutics for neurodegenerative diseases and cancer indications.

One interesting element in the combination of the two companies is that RedPath’s technology is based on DNA analysis and ExonHit’s technology is based on RNA analysis. “We have some products in development but nothing specific that I can talk about right now and they have products in development,” noted Myslinski.

“RedPath will commercialize both ExonHit’s products and our new products,” he continued. “With our commercial capabilities and our DNA platform, we expect to help ExonHit move new products to market faster. Our sales force provides the conduit to introduce new molecular assays.”

Opens Door To Europe

Myslinski also pointed out that its new relationship with ExonHit opens the door for RedPath to offer its molecular tests in the European Union. “This transaction gives us access to capital and more resources to, among other things, begin offering our molecular assays in Europe. We think the clinical utility of our assays will be recognized by clinicians and patients in Europe.”

RedPath Innovative Pathology has a staff of 35, including two pathologists, along with a sales staff that operates nationwide. All employees will remain in Pittsburgh, Myslinski said.

The deal between RedPath Innovative Pathology and ExonHit not only affirms continuing investor interest in proprietary or patent-protected molecular assays, but it also shows the steady globalization of laboratory testing. It is also an further example of the ongoing consolidation taking place in the in vitro diagnostics (IVD) industry. These trends are continuing to shape the laboratory testing market, both here in the United States and abroad.

RedPath Pathology Offers DNA-Based Molecular Tests

AT REDPATH INTEGRATED PATHOLOGY of Pittsburgh, Pennsylvania, the primary product is its DNA-based PathFinderTG. The company describes the test as follows:

RedPath’s primary product is PathFinderTG, a molecular analysis of mutations in genomic DNA for cases in which traditional pathology produces an “indeterminate” diagnosis. The results of the PathFinderTG test can help resolve diagnostic dilemmas and help physicians develop a personalized treatment plan.

The patented test 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.

PathFinderTG can differentiate metastatic, synchronous, and recurrent tumors in various organs such as the breast, lung, liver, endometrium, and ovary. Also, it 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.

ExonHit is applying proprietary technology based on the analysis of alternative RNA splicing to develop molecular diagnostic tests and therapeutics for neurodegenerative and cancer indications.

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