Option Deal Structure Works For Myriad As It Moves To Buy Crescendo

When Myriad Genetics Inc. crafted a strategic investment agreement with an option-to-purchase with Crescendo Bioscience Inc. in September 2011, the company emphasized its desire to diversify both in terms of therapy area (beyond oncology) and technology (into protein-based testing) while maintaining the younger company’s independence and giving it time to prove itself. (See Also see "Myriad Genetics' M&A Buys Into Protein-Based Testing" - Scrip, 1 October, 2011..) Having watched Crescendo gain a foothold in the market for inflammatory and autoimmune diagnostics – it had launched its first test, Vectra DA, for measuring disease activity in rheumatoid arthritis (RA) patients, in November 2010 – Myriad is now moving forward with the acquisition. [See Deal] Myriad first came to know Crescendo when a mutual acquaintance brought together Crescendo president and CEO William Hagstrom and Myriad Genetic Laboratories Inc. president Mark Capone at the JP Morgan Healthcare Conference in January 2011. Their interests clicked. “Those that have longer-term interests in building positions in markets [can benefit] from creative deal structures,” Hagstrom says. “There hadn’t been one structured in quite this way before.”

The agreement included a $25 million loan – nondilutive financing that was to be repaid in years four to six – and a three-year option to acquire Crescendo at a multiple of revenues once those revenues hit an initial threshold and according to a formula gauging their rate of growth after that. [See Deal] In November 2013, Myriad said Crescendo had met the terms for exercising the option. The purchase price – $270 million in cash, less $25 million payback on the loan – was calibrated according to the pre-established revenue target: Crescendo’s sales for the most recent quarter were $10 million