US-based oncology diagnostic products company Cancer Genetics has entered into a definitive agreement to merge with Israeli functional genomics firm NovellusDx.

The merger will be carried out through the Cancer Genetics’ subsidiary in Israel.

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Under the terms of the agreement, NovellusDx will gain stock equivalent to about 49% of Cancer Genetics equity on a fully diluted basis.

“The transaction, subject to customary closing conditions and approvals, is expected to be completed in the first quarter of next year. After the closing, Cancer Genetics will be the surviving entity.”

The deal will combine the Cancer Genetics’ scale, test portfolio and tumour biology dataset with NovellusDx’s technology and machine learning capabilities, to focus on precision medicine.

The merged entity will focus on accelerating and enhancing therapeutic development by matching patients to targeted treatments and in order to improve treatment success rates.

Cancer Genetics CEO John Roberts said: “We believe that the combination of Cancer Genetics and NovellusDx will result in an organisation that is uniquely positioned within the oncology ecosystem.

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“We are confident that this transaction significantly strengthens our value proposition for both existing and potential biopharma partners.”

Boards of directors of Cancer Genetics, as well as NovellusDx, have approved the proposed merger.

The transaction, subject to customary closing conditions and approvals, is expected to be completed in the first quarter of next year. After the closing, Cancer Genetics will be the surviving entity.

NovellusDx co-founder and CEO Haim Gil-Ad said: “This merger will result in a company offering advanced science and cutting-edge technology to empower oncologists and the biopharma industry to make optimal treatment decisions and develop new therapies to benefit patients in need.”

NovellusDx’s existing shareholders may invest $10m in additional equity under a concurrent PIPE financing that is expected to close immediately after and in connection with the merger completion.

In addition, NovellusDx plans to provide up to $2.3m bridge loan to Cancer Genetics in conjunction with the signing of the merger agreements.