(UPDATE: The merger is dead.)
Pittsburgh’s Precision Therapeutics, a biotech working on diagnostics designed to identify the best chemotherapy for cancer patients, appears to have dropped its planned IPO and instead went public via a reverse merger with Oracle Healthcare Acquisition — a “blank check” acquisition firm that appears to be no relation of the database-software giant.
I was pretty hard on Precision when it filed its IPO, since its cancer diagnostic test not only struck me as fairly crude and simplistic, it also lacks compelling data suggesting that it should do much good. IPO investors apparently weren’t overly enthusiastic either, although for some reason the Oracle acquisition folks seem to have jumped at the opportunity.
Financial terms of the deal aren’t entirely clear, but the release notes that the combined company — which will retain the Precision name — will have $120 million in cash. That amounts to a substantial cash infusion, given that Precision reported only about $19 million on hand in cash and working capital as of June 30. So either the Oracle guys are idiots, which seems unlikely, or they’re seeing something here that didn’t jump out the last time I went through the S-1. Or perhaps they’re just willing to bet the farm on the possibility — slim though it may seem — that Precision’s diagnostic tests will somehow emerge as blockbusters. It certainly wouldn’t be the first time in this industry.
2 Comments
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Tom Salemi said:
Hi David,
I enjoy the blog. One thing to consider is Oracle was running out of time. Looks like they could be forced to buy something by March or else they have to give their money back. -
David P. Hamilton said:
Thanks, Tom. That’s an interesting observation. I looked through Oracle’s filings yesterday, but obviously didn’t give them quite the scrutiny you did.
Tom is too polite to say so, but he’s got his own analysis of the deal, complete with the data to support his argument that Oracle may simply have needed to beat the clock, over at the In Vivo blog, where there’s lots of other good stuff as well.
For my money, the fact that Oracle faced a hard-and-fast deadline of next March 8 to make an acquisition dramatically increases the odds that this deal was rushed to the altar. The lack of clinical validation for ChemoFx alone should have been enough to give a reasonable investor pause (see my earlier piece, linked above, for details). But maybe Oracle’s Larry Feinberg figured he had to bet big to win under these circumstances, which in this case means taking on greater risk that the whole investment will be for naught.
4 Trackbacks
7:05 am
VentureBeat » IPO roundup: Is the window slamming on life sciences? said:
[...] — yanked its IPO in December. (Precision Therapeutics also dropped its IPO that month, but went public via a reverse merger.) In January three more — Bioheart (our coverage), Elixir Pharmaceuticals (our coverage) and [...]
12:36 pm
Life sciences briefing: Friday, Feb. 22, 2008 » VentureBeat said:
[...] December, the “blank check” acquisition company Oracle Healthcare Acquisition agreed to buy the Pittsburgh diagnostic biotech Precision Therapeutics in a transaction that was virtually impossible to value at the time. Only later did the companies [...]
7:05 am
Life sciences briefing: Wednesday, March 5, 2008 » VentureBeat said:
[...] the special-purpose acquisition company Oracle Healthcare Acquisition said it has terminated its planned merger with Precision. The release blamed “currently prevailing market conditions” for the [...]
8:37 am
Precision Thera merger with “blank check” Oracle Healthcare collapses » VentureBeat said:
[...] the special-purpose acquisition company Oracle Healthcare Acquisition said it has terminated its planned merger with Precision. The release blamed “currently prevailing market conditions” for the [...]