European investor shells out $118M for DNA testing outfit to boost animal Dx offerings

GHO co-founder Mike Mortimer

DNA testing outfit DNA Diagnostics (DDC) is selling out to European healthcare investor GHO Capital for €104 million ($118 million), handing GHO a suite of tests including one for feline DNA testing and letting the investor cash in on the fast-growing animal health diagnostics market.

Neither side is revealing financial details, but GHO will inherit feline, equine, canine and avian DNA tests through the deal, including DDC's polycystic kidney disease (PKD) test for cats. PKD is an inherited genetic disorder identified by cyst formation on the kidneys, which can eventually lead to renal failure or death. DDC's test uses cheek swabs to screen for the disease in Persians, Himalayans, Exotics and cross-breeds of the three cats, allowing pet owners to collect DNA samples at home and mail them back for processing. Owners then get emailed results after 10 business days, the company said on its website.

The deal will also provide GHO with a wide range of testing services including those for the pharma industry, allowing the investor to expand its international reach while broadening DDC's global footprint, the company said in a statement. GHO was founded last June and raised $400 million in an initial fundraise, setting the stage for more progress and acquisitions in the year to come.

"The field of genetic diagnostics is an attractive, high growth segment within healthcare and, as a well-established business with significant global potential, DDC is an excellent fit for GHO Capital's investment strategy," GHO co-founder Mike Mortimer said in a statement.

Diagnostics is a hot field in animal health, with companies such as Mars Petcare, veterinary diagnostics maker IDEXX ($IDXX) and Zoetis ($ZTS) vying for market share. In May, Mars Veterinary, a division of Mars Petcare, said it would team up with Finnish company Genoscoper Laboratories to expand DNA testing in veterinary hospitals. Genoscoper's MyDogDNA genomic test screens for most inherited canine diseases, genetic diversity and physical details that define certain breeds, and the company is working on technologies that would allow vets to deliver more personalized test results.

In June, some analysts thought that Zoetis would make a bid for IDEXX after Valeant ($VRX) takeover rumors died down. Zoetis wants to expand its presence in diagnostics, Canaccord Genuity analyst Mark Massaro said in a report, and IDEXX represented an attractive option. IDEXX has been transitioning to an all-direct sales model--one that Zoetis approves of--and a Zoetis vet leads the company's sales team.

IDEXX CEO Jonathan Ayers

But IDEXX seems okay flying solo--at least for now. The company posted second-quarter revenues that grew 6% year over year to $413 million, and placements of its Catalyst One next-generation chemistry analyzer jumped 44% to an all-time record of 1,100 units.

"We expect continued momentum with instrument placements and have updated our outlook to well over 9,000 chemistry and hematology instrument placements for the full year 2015, which bodes well for long-term growth in the recurring instrument consumable revenues," IDEXX CEO Jonathan Ayers said at the time.

Meanwhile, IDEXX is working with Hill's Pet Nutrition and researchers at Oregon State University to develop a new biomarker for chronic kidney disease in cats. The scientists found that the biomarker, dubbed SDMA, could pinpoint kidney disease an average of 17 months earlier than traditionally used approaches. And in one case, SDMA could spot the disease a full four years earlier. The findings could generate a diagnostic test that can identify early warning signs for the disease.

- here's the statement
- read more about DNA Diagnostics' feline DNA test

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