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Exagen Buys Cypress’ Diagnostics Business

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Exagen Diagnostics Inc. acquired the medical diagnostics division of Cypress Bioscience Inc. in San Diego, Calif.

Albuquerque-based Exagen agreed to pay up to $8 million for the division’s assets, including all testing services, intellectual property rights and equipment. Exagen will make a $4 million upfront cash payment in two installments over the next 24 months and another $4 million, or up to that amount, in milestone payments. In addition, Cypress is eligible to receive a 10 percent royalty on defined product sales.

Exagen will assume the lease for Cypress’s laboratory operations in San Diego, and all of the Cypress lab employees will be offered positions with the new owner.

The acquisition marks a big turnaround for Exagen, which formed in 2002. The company received about $20 million in venture investments, including $4 million from the New Mexico State Investment Council, but it was teetering on the edge of bankruptcy in early 2008 because the U.S. Food and Drug Administration was taking longer than expected to approve the company’s first cancer-testing kit.

Investors stepped in last year to revamp the company’s administration and its business strategy.

They hired Scott Glenn – a nationally renowned serial entrepreneur in the life sciences – as the company’s new CEO. They also pumped $3 million more into the firm.

Glenn has reoriented Exagen’s marketing strategy away from the earlier goal of getting FDA approval to sell diagnostics kits to laboratories. Now, the company conducts its own tests in Albuquerque for doctors.

It has achieved Clinical Laboratory Improvement Act certification to do testing for medical professionals in most U.S. states. That allows Exagen to immediately sell its testing services to doctors before seeking FDA approval for product sales.

The acquisition of Cypress’s diagnostic business will allow Exagen to expand its testing services in new areas, Glenn said in a news release.

“The Cypress products and technology complement our genomic testing platform and diagnostic panels in the market place today,” Glenn said. “Cypress has done a nice job of advancing [its] diagnostic business to this point and we look forward to expanding and diversifying our diagnostic business with this portfolio of products.”

In particular, Exagen will work with Cypress to advance Lupus diagnostics and management, said Cypress Chairman and CEO Jay Kranzler.

“Exagen is committed to marketing our current testing services and moving our platform for the improved diagnosis and management of Lupus into the commercial development phase,” Kranzler said. “We believe that this transaction is in the best interest of Cypress stockholders, and that it maximizes the value of these assets.”

Cypress (NASDAQ: CYPB) is a pharmaceutical company that develops innovative drugs to treat central nervous system disorders.

Exagen is a venture capital-backed startup that uses proprietary computational software to rapidly screen huge volumes of genetic information, allowing it to identify key sets of genes as biomarkers to diagnose diseases. It has developed genetics-based tests for inflammatory bowel disease and irritable bowel syndrome, as well as diagnostics for breast cancer, hepatitis C and other diseases.

Source: New Mexico Business Weekly