NEW YORK (AP) — Cancer diagnostic test maker Response Genetics will file for Chapter 11 bankruptcy protection and plans to sell itself to competitor Cancer Genetics Inc. for $14 million.
Response Genetics will continue its day-to-day operations and will get up to $3 million in debt financing. The Los Angeles company is allowed to seek other offers. If it is sold to a different bidder, Cancer Genetics will get a breakup payment. Any sale is subject to approval by a bankruptcy court in Delaware.
The sale to Cancer Genetics is expected to close in early October. Cancer Genetics, which is based in Rutherford, New Jersey, said it expects to book $10 million to $12 million in annual revenue from the acquisition.
Shares of Cancer Genetics rose 5 cents to $8.68 in midday trading.
Response Genetics makes tests genetic tests that are designed to predict which cancer drugs may help individual patients, allowing doctors to treat those patients with the drugs that are most likely to help them. The company's ResponseDX tests are used in the treatment of cancers of the lung, colon, thyroid and brain as well as melanoma, the most dangerous type of skin cancer. Cancer Genetics makes tests that are used in treatment of cancers of the blood, genitals and urinary system and cancers associated with the human papillomavirus.
The tests are also used by researchers, drug companies and others.
Both companies have lost money, and both are counting on greater demand for their tests to help them become profitable. Cancer Genetics, which went public in 2013, has taken a loss every year since at least 2011. Its revenue climbed more than 50 percent to $10.2 million in 2014. Response Genetics has reported losses every year since at least 2007, and last year it lost $13.7 million, its largest annual loss over that time. Its annual revenue fell to $16.7 million from $19.8 million in 2013 because it did less business with pharmaceutical clients.