Novacyt, Lab21 to Combine in Stock-For-Stock Transaction

Novacyt plans to combine in a stock-for-stock transaction with Lab21, the Cambridge. The transaction agreements signed today have been approved by the Boards of Directors of each company and the shareholders of Lab21, including some renowned medical and life-science venture capital and private-equity institutions. Completion of the transaction is subject to approval by the Novacyt shareholders at the extraordinary general meeting (EGM) on June 13, 2014.

The combined group will create an emerging diagnostics leader with a portfolio of cancer and infectious diseases diagnostic products and services. It will benefit from significant complementary strengths with Novacyt’s R&D capacities and the commercial infrastructure, manufacturing and extensive network of collaboration partnerships of Lab21. This will result in operations based in France, UK, China and Australia and distribution covering over 100 countries, across Europe, the Americas, and Asia-Pacific, including China.

Immediate revenues will come through the sale of the proprietary screening platform developed by Novacyt, NovaPrep® and the existing Lab21 oncology and infectious disease business. Future revenues will come through the increased distribution of NovaPrep® and a number of new products developed by the combined group.

The NovaPrep® platform is a new generation liquid-based cytology screening platform which has significant clinical, operational and economic benefits. Since its launch in 2008, Novacyt has performed in excess of 1,500,000 patient tests which have been reimbursed by healthcare authorities. The Novaprep® benefits from CE-IVD marking in Europe and has received marketing authorizations in a number of countries such as Russia, South Korea and Morocco.

Within the combined business, significant synergies are expected involving manufacturing, distribution and R&D. Lab21 will manufacture some of NovaPrep® consumables bringing a major revenue source for the Novacyt technology in-house, control of its supply chain and therefore driving significant gross margin improvements. Furthermore, Lab21’s market and distribution channels are expected to open up new sources of business to Novacyt. Lab21’s successful ability to partner with major corporates in diagnostics and pharma, is expected to provide significant opportunities for rapid growth of the Novacyt technology.

Under the terms of the proposed share capital increase of Novacyt 2,523,059 Novacyt shares will be issued to Lab21 shareholders at an exchange ratio of 0.925 Novacyt share for one Lab21 share, as remuneration of the Lab21 shares contribution in kind. Upon completion of the proposed transaction, 54% of Novacyt fully diluted share capital will be held by Novacyt’s actual shareholders and 46% by the current Lab21 shareholders. The total transaction value upon completion is expected to be ca. €40m. The new Novacyt shares will be traded on NYSE-Alternext.

Graham Mullis, currently Chief Executive Officer of Lab21, will become Chief Executive Officer and Eric Peltier will become Chief Innovation Officer of Novacyt.

Graham Mullis, CEO of Lab21, said: “This transaction significantly improves the commercial outlook of both companies. Novacyt has developed an excellent cytology platform, which has been proven to be highly effective. This, combined with Lab21’s global reach and existing partnerships will enable the newly combined business to reach new markets, and continue its commercial success. Ultimately, this transaction is expected to drive significant value for both sets of shareholders.”

Eric Peltier, currently Chairman and Chief Executive of Novacyt, said: “The transaction with Lab21 will allow Novacyt to access its international distribution channels, and coupled with its access to major corporate partners, will allow us to rapidly commercialise our cytology platform. I am also looking forward to the potential of combining proprietary technologies from both companies to develop new diagnostics products in the future.”