Veracyte to Acquire Allegro Diagnostics

Veracyte, Inc. has announced an agreement to acquire Allegro Diagnostics Corp. based in Maynard, Mass., for $21.0 million, comprised of $7.8 million in cash and $13.2 million in Veracyte common stock. Allegro is a privately held company focused on developing genomic tests to improve the preoperative diagnosis of lung cancer.

Veracyte plans to commercially launch Allegro’s lead lung cancer test in the second half of 2015, with meaningful revenue expected in 2017.

Allegro’s lung cancer test is designed to help physicians determine which patients with lung nodules who have had a non-diagnostic bronchoscopy result are at low risk for cancer and can thus be safely monitored with CT scans rather than undergoing invasive procedures. The gene expression test uses Allegro’s proprietary “field of injury” genomic technology platform to circumvent the traditional challenge of obtaining accurate lung nodule samples for testing, without surgery or other invasive, risky and expensive procedures.

“With Allegro and its novel, clinically validated lung cancer test, we plan to accelerate our entry into the pulmonology market, enabling us to improve care for patients with lung nodules while creating long-term growth opportunities,” said Bonnie H. Anderson, Veracyte’s president and chief executive officer. “Allegro is a natural fit for us and we believe this move further establishes our leadership in molecular cytology, using genomics to resolve diagnostic ambiguity preoperatively and thus spare patients from unnecessary invasive procedures and reduce associated healthcare costs.”

Allegro’s technology detects molecular changes that occur throughout the respiratory airways in response to smoking - the cause of almost all lung cancers - and that are correlated with disease. These changes can be detected in a gene expression signature from cytologically normal airway cells and indicate the presence of malignancy or disease processes from distant sites in the lung.

The lung cancer test is performed on cytology samples obtained through bronchoscopy, a minimally invasive procedure that enables a physician to access airways in the lung. The molecular classifier’s performance has been established in two prospective, multicenter clinical validation studies, involving 25 centers and nearly 1,000 patients.

“We are excited for our lead test to become available to patients, helping to reduce unnecessary diagnostic surgeries and other procedures among the hundreds of thousands of patients with lung nodules who undergo bronchoscopies each year in the U.S to rule out cancer,” said Michael D. Webb, president and chief executive officer of Allegro Diagnostics. “We believe Veracyte is uniquely poised to commercialize and gain reimbursement for our test, given the rapid success the company has achieved with its Afirma® solution in endocrinology.”