Eyeing the biotech IPO boom earlier this year, Ariosa Diagnostics planned to go public as it battled larger competitors in the prenatal testing field. But the San Jose, CA-based company backed off in late April, and that was its last chance. Multinational healthcare firm Roche has bought Ariosa for an undisclosed amount, the companies announced today.
That puts Roche, whose sprawling molecular diagnostics business had no prenatal testing product until now, in competition with San Carlos, CA-based startup Natera, San Diego’s Sequenom (NASDAQ: SQNM), and Illumina (NASDAQ: ILMN) (through its buyout of Verinata Health in January 2013).
Illumina paid $350 million up front for Verinata, with potentially $100 million more. We don’t know how much Roche is paying for Ariosa, but in the week before it pulled its IPO attempt, Ariosa was aiming to sell 3.5 million shares in the $16 to $18 range. A $17-per-share debut would have given the company a market value of $323 million, according to IPO analysts Renaissance Capital.
Ariosa, the maker of a test for Down Syndrome and other chromosome abnormalities, has become a key player in an emerging industry battle to market prenatal genetic tests that use the mother’s blood, not an invasive needle, to sample the fetus’s DNA. Its Harmony test reeled in $53 million in sales last year, and $19.5 million through the first quarter of 2014, according to the most recent figures available.
Ariosa said in March that tapping the public markets would help beef up its sales and marketing of Harmony, which has been available since May 2012. The firm sells its test to both general or “high risk” pregnancies—deemed as such because of the mother’s age, or other factors. Of 4 million live births in the U.S. each year about 500,000 are high-risk pregnancies, according to Ariosa’s regulatory filings.
Until now, Ariosa’s partnership with LabCorp has helped the company get third-party payer coverage for high risk pregnancies only. In 2014, the partnership was amended, with Ariosa claiming the right to market Harmony in the U.S. and Canada on its own, or through other distributors. Ariosa said in its IPO documents earlier this year that expansion of coverage into general pregnancies would be “a necessary element of achieving material commercial success.”
Competition was also fierce. As the innovation in DNA sequencing has increased, and its cost has plummeted, other companies have sought to capitalize.
According to Ariosa’s regulatory filings earlier this year, Venrock (39.1 percent) and Domain Associates (24.0 percent) are its largest stockholders, followed by Meritech Capital Partners (9.4 percent) and FMR LLC (6.5 percent). The company raised just over $70 million in equity financing since its inception in 2008.
Ben Fidler contributed to this report.