Clarient acquired by NeoGenomics: fairness opinion by Houlihan Lokey
Deal terms
Aggregate purchase price of approximately $301.4 million (based on NeoGenomics' closing stock price on November 10, 2015) for all outstanding shares of Clarient, Inc. held by GE Medical Holdings AB, consisting of $80.0 million cash, 15,000,000 NeoGenomics common shares and 14,666,667 shares of NeoGenomics Series A convertible preferred stock (conversion price $7.50/share). NeoGenomics may elect to increase the cash portion by up to $110.0 million with a corresponding reduction in preferred shares.
Opinion of Houlihan Lokey to the acquirer board
Discounted cash flow assumptions
Implied equity value reference range of approximately $163 million to $253 million for Clarient without Synergies and approximately $326 million to $470 million with Synergies, compared to Transaction consideration of ~$282 million (one-month average NEO closing price) and ~$278 million (October 16, 2015 closing price).
Selected public companies (11)
Cancer Genetics, Inc. · Enzo Biochem Inc. · Foundation Medicine, Inc. · Genomic Health Inc. · Laboratory Corp. of America Holdings · Myriad Genetics, Inc. · NeoGenomics, Inc. · Quest Diagnostics Inc. · Sequenom, Inc. · Sonic Healthcare Limited · Veracyte, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Revenue | 1.7x | 2.6x | 6.3x | 1.5x–2.5x | — |
| EV / NFY Revenue | 1.7x | 2.3x | 5.3x | 1.5x–2.5x | — |
| EV / NFY+1 Revenue | 1.5x | 2.1x | 3.5x | 1.3x–2.3x | — |
Selected precedent transactions (13)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2015-06-04 | Bio-Reference Laboratories Inc. | Opko Health, Inc. | — |
| 2014-11-03 | Covance Inc. | Laboratory Corp. of America Holdings | — |
| 2014-07-08 | Path Logic, Inc. | NeoGenomics, Inc. | — |
| 2014-02-04 | Crescendo Bioscience, Inc. | Myriad Genetics, Inc. | — |
| 2013-10-22 | PLUS Diagnostics, Inc. | Miraca Life Sciences, Inc. | — |
| 2013-06-25 | CML Healthcare Inc. | LifeLabs, Inc. | — |
| 2013-03-06 | Althea Technologies, Inc. | Ajinomoto Co., Inc. | — |
| 2013-01-30 | BioClinica, Inc. | JLL Partners | — |
| 2012-06-04 | MEDTOX Scientific Inc. | Laboratory Corp. of America Holdings | — |
| 2011-09-08 | Caliper Life Sciences, Inc. | PerkinElmer Inc. | — |
| 2011-01-24 | Genoptix, Inc. | Novartis Finance Corporation | — |
| 2010-09-13 | Esoterix Genetic Laboratories, LLC | Laboratory Corp. of America Holdings | — |
| 2010-02-04 | Medhold NV | Sonic Healthcare Limited | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| Transaction Value / LTM Revenue | 0.6x | 2.2x | 4.3x | 1.6x–2.3x | — |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Selected Companies Analysis — implied equity value reference ranges | Approximately $191 million to $318 million (LTM revenue multiples), approximately $186 million to $310 million (NFY revenue multiples) and approximately $170 million to $306 million (NFY+1 revenue multiples) for Clarient, versus Transaction consideration of ~$282 million / ~$278 million. | — |
| Selected Transactions Analysis — implied equity value reference range | Approximately $204 million to $286 million for Clarient based on 1.60x–2.25x LTM revenue, versus Transaction consideration of ~$282 million / ~$278 million. | — |
| Historical trading / contribution review | Houlihan Lokey reviewed current and historical market prices and trading volume for NeoGenomics' publicly traded securities and those of other relevant companies, and compared the relative contributions of NeoGenomics and Clarient to certain financial statistics of the combined company on a pro forma basis. No implied value range disclosed. | — |
Aggregate fee of $350,000; a portion payable upon execution of the engagement letter and the balance payable upon delivery of the opinion. No portion contingent upon successful completion of the Transaction. Expense reimbursement and indemnity also provided.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $145M | $155M | $168M | $184M | $199M | 8.3% |
| Revenue growth | 6.5% | 6.8% | 8.6% | 9.4% | 8.3% | |
| EBITDA | $20.0M | $25.0M | $25.8M | $28.7M | $30.3M | 10.9% |
| EBITDA growth | 16.3% | 25.0% | 3.2% | 11.2% | 5.6% | |
| EBITDA margin | 14% | 16% | 15% | 16% | 15% | |
| Implied EV / EBITDA | 12.4x | 9.9x | 9.6x | 8.6x | 8.2x |
Year-1 growth is against LTM at announcement ($136M revenue, $17.2M EBITDA); later years are year over year.
The proxy disclosed Adjusted Clarient Projections for fiscal years 2015E through 2025E, prepared by GE Medical/Clarient management as adjusted and extrapolated by NeoGenomics management: revenue of $123.8 million in 2015E rising to $265.9 million in 2025E, EBITDA of $9.5 million in 2015E rising to $34.4 million in 2025E, and EBIT of $(2.1) million in 2015E rising to $16.4 million in 2025E. NeoGenomics management also prepared estimated synergies, with total net annual savings growing from $0.0 million in 2015 (3-month stub) and $6.0 million in 2016E to $33.0 million in 2025E and terminal (net after-tax savings of $18.0 million in 2025E and $20.1 million terminal, using a 39.0% tax rate). Houlihan Lokey also reviewed NeoGenomics management projections for NeoGenomics for fiscal years 2015 through 2025.
Process notes
Other Diagnostics / Life Sciences fairness opinions
- Pall / Danaher 2015 · 20.5x EV/EBITDA
- Bio-Reference Laboratories / Opko Health 2015 · 12.1x EV/EBITDA
- FEI / Thermo Fisher Scientific 2016 · 15.1x EV/EBITDA
- Sequenom / Laboratory Corporation of America 2016
- Corgenix Medical / Orgentec Diagnostika 2014 · 8.4x EV/EBITDA
- Advanced Accelerator Applications / Novartis 2017
All Diagnostics / Life Sciences opinions → · Houlihan Lokey opinions