On January 18, 2022 Sema4 (Nasdaq: SMFR), an AI-driven genomic and clinical data intelligence platform company, and OPKO Health, Inc. (Nasdaq: OPK) ("OPKO"), a multinational biopharmaceutical and diagnostics company, reported that they have signed a definitive agreement for Sema4 to acquire OPKO’s wholly owned subsidiary, GeneDx, Inc. ("GeneDx"), a leader in genomic testing and analysis, from OPKO (Press release, Opko Health, JAN 18, 2022, View Source [SID1234605547]). The acquisition strengthens Sema4’s leadership, growth, and scale for its market-leading health intelligence and genomic screening offerings. Together, Sema4 and GeneDx will be one of the largest and most advanced providers of genomic clinical testing in the U.S., with a projected $350 million in pro forma 2022 revenue.

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Following completion of the acquisition, Sema4 will be optimally positioned to partner with health systems and biopharma companies to further transform the standard of care throughout the patient health journey. GeneDx’s leadership in rare disease diagnostic and exome sequencing services brings more than 300,000 clinical exomes and over 2.1 million expertly annotated phenotypes to strengthen Sema4’s 12 million de-identified clinical records for Centrellis, its proprietary integrated health intelligence platform, and Traversa, its comprehensive genomic analysis platform for optimizing health screenings. Sema4 plans to leverage this combined health information database to transform patient care and therapeutic development and enable precision medicine for all.

"This acquisition gives us the opportunity to accelerate the use of genomics as standard of care by providing a deeper menu of precision medicine solutions to our health system partners to better meet their clinical needs," said Eric Schadt, PhD, Founder and CEO of Sema4. "Adding GeneDx’s comprehensive dataset and capabilities to our offerings enables us to inform on an even broader range of diseases, further closing the gap between the practice of medicine and the availability of more clinically actionable guidance. GeneDx’s operational prowess and market-leading cost structure in exome and genome sequencing will also help accelerate our path to improved gross margins and profitability. I am also delighted to welcome Katherine to our leadership team. She and her team’s world-class expertise will be critical to our continued growth and success."

Katherine Stueland, President and CEO of GeneDx and former CCO of Invitae, will be appointed as Sema4 co-CEO and is expected to join the Sema4 Board of Directors upon completion of the acquisition. She brings significant commercial and operational experience and will lead overall operational excellence and business planning, and will focus on the diagnostics business. Dr. Schadt will continue to serve Sema4 as co-CEO and as a member of the Board of Directors focusing on leading R&D and the IT platform components of Sema4, the strategic development of Sema4’s health intelligence capabilities, and partnerships with health systems and biopharma companies. Together as co-CEOs, Dr. Schadt and Ms. Stueland will drive overall strategy and direction of the company.

"We are excited to join forces with Sema4, a market leader in using genomic and clinical data to deliver precision medicine," said Ms. Stueland. "The complementary fit between our teams, missions, and capabilities is strong. We are eager to put those strengths to work and to make it easier to use data-driven insights to improve healthcare for all. I’m looking forward to partnering with Eric to create an unrivaled family health and health intelligence company, supporting patients making healthcare decisions throughout their lives, from pregnancy and newborn health to adult rare disease, risk assessment, and cancer care."

As part of the transaction, Sema4 has also announced that it has entered into definitive agreements for a $200 million private placement of Sema4 Class A shares from a syndicate of institutional investors, including Pfizer. The acquisition and the private placement (together, the "Transaction") are expected to close concurrently in the first half of 2022, subject to a Sema4 stockholder vote and other conditions to closing set forth in the definitive Transaction documents.

Dr. Schadt added: "We are excited to announce this investment with the support of several key institutions, including Pfizer. We believe that genomics and data, when harnessed in partnership with health systems, can be a powerful tool to enable precision medicine by bringing novel therapies to patients faster and more effectively. We hope that this investment may serve as a foundation for potential future collaborations."

Phillip Frost, MD, Chairman and CEO of OPKO, added: "We believe the sale of GeneDx to Sema4 will unlock untapped value and maximize the value of GeneDx for the benefit of OPKO shareholders. In addition to bolstering our cash position, we will have a significant equity stake in Sema4 at closing, ensuring OPKO and our shareholders continue to participate in the rapidly growing genomics market through a continued investment in GeneDx, which we believe is well positioned to deliver long-term success."

In conjunction with the Transaction, Jason Ryan, a member of Sema4’s Board of Directors, former CFO of Foundation Medicine and most recently Chief Operating and Financial Officer of Magenta Therapeutics (Nasdaq: MGTA), will assume the role of Executive Chair of Sema4’s Board of Directors. Mr. Ryan has outstanding leadership experience in the life sciences and biotechnology sectors, and an impressive background in finance and scaling businesses. Mr. Ryan succeeds Joshua Ruch, who will continue to serve on Sema4’s Board of Directors as the Chairperson of its Compensation Committee.

Based on Sema4’s closing stock price as of January 14, 2022, the purchase price is approximately $623 million, including in total upfront cash, stock consideration, and contingent consideration upon commercial milestones.

Sema4 Standalone Fiscal Year 2022 Guidance

Sema4 expects total revenue for fiscal year 2022 to be in the range of $215 million to $225 million, implying 23-29% growth excluding revenue associated with COVID-19, and Sema4 also expects to result over 350,000 tests in 2022 excluding COVID-19 tests. On December 15, 2021, Sema4 announced that it has decided to discontinue COVID-19 testing services by March 31, 2022 and therefore the company expects an immaterial amount of revenue from COVID-19 in 2022.

Acquisition Terms

Under the terms of the agreement, Sema4 will acquire GeneDx for an upfront payment of $150 million in cash plus 80.0 million shares in Sema4, with up to an additional $150 million revenue-based milestones over the next two years (which will be payable in cash or Sema4 shares at Sema4’s discretion). Based on the closing stock price of Sema4 as of January 14, 2022, the total upfront consideration represents approximately $473 million, and the total aggregate consideration including potential milestones is approximately $623 million. The acquisition, which has been unanimously approved by the Boards of Directors of both Sema4 and OPKO, is expected to close in the second quarter of 2022, subject to customary closing conditions including approval by the stockholders of Sema4.

Private Placement

In connection with the acquisition, Sema4 has also entered into definitive agreements for a private placement financing to sell $200 million in Class A common stock at a price of $4.00 per share from a syndicate of institutional investors, including Pfizer.

The private placement is expected to substantially close concurrently with close of the acquisition, subject to the satisfaction of customary closing conditions.

Advisors

Goldman Sachs & Co. LLC. acted as financial advisor and Fenwick & West LLP served as legal counsel to Sema4 on the Transaction. J.P. Morgan acted as lead financial advisor and Cowen acted as financial advisor to OPKO on the Transaction. Greenberg Traurig, P.A. served as OPKO’s legal counsel. Goldman Sachs & Co. LLC. served as lead placement agent on the private placement. Jefferies LLC, Cowen, and BTIG, LLC also served as placement agents.

Conference Call and Webcast Details

Management will host a conference call and webcast today at 8:00 a.m. ET to discuss the transaction. Following prepared remarks, management will respond to questions from analysts, subject to time limitations.

The live webcast of the call and slide deck may be accessed by visiting the investors section of Sema4’s website at ir.sema4.com. A replay of the webcast and conference call will be available shortly after the conclusion of the call and will be archived on Sema4’s website.