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Veracyte Exclusively Licenses NanoString Diagnostic Platform for up to $60M

NEW YORK – Veracyte has taken an exclusive global license to NanoString Technologies' nCounter platform for diagnostic use and has obtained the rights to NanoString's 510(k)-cleared Prosigna breast cancer prognostic test and research-use LymphMark lymphoma subtyping assay, the companies said after the close of the market Tuesday.

Under the agreement, Veracyte will pay NanoString $40 million in cash and $10 million in Veracyte common stock, as well as up to $10 million in cash contingent upon the commercial launch of Veracyte diagnostic tests on the nCounter platform.

Veracyte will market and sell the Prosigna assay, both as a kit and through its US CLIA lab. It will also sell future diagnostic tests developed for the nCounter platform and distribute the nCounter Flex system for diagnostic purposes.

NanoString retains the exclusive rights to commercialize nCounter products for research and investigational uses and to develop its other platforms for diagnostic use, including the GeoMx Digital Spatial Profiler and Hyb & Seq technology.

NanoString will also manufacture the kits for Prosigna, LymphMark, and new tests developed by Veracyte or its partners for the nCounter platform. NanoString will sell diagnostic assay kits and nCounter systems to Veracyte at preset prices under supply agreements between the firms.

Veracyte believes that the transaction will allow it to access a global market for its tests and to expand its test menu. Under the agreement, the firm has exclusive global rights to develop and commercialize diagnostic tests on the nCounter Flex system, which is cleared by the US Food and Drug Administration and allows for the simultaneous analysis of RNA, DNA, or protein targets from up to 800 genes.

In 2021, Veracyte aims to offer its Envisia classifier for idiopathic pulmonary fibrosis diagnosis to international customers as a kit-based test on the nCounter system. The firm also expects to launch its lung cancer nasal swab classifier, which is currently in development, on the nCounter system in 2022, after it launches the assay at its US CLIA lab in early 2021.

"We are especially excited about the opportunity to bring our noninvasive nasal swab classifier to a global market, where it can help save more lives in the fight against lung cancer," Veracyte CEO Bonnie Anderson said in a statement. "This transaction will further our ability to inform clinical care decisions throughout the patient journey in cancer and other clinical indications, while allowing us to deliver profitable, long-term growth for our shareholders."

In a conference call with investors Tuesday afternoon, Anderson noted that Veracyte has also hired members of NanoString's global diagnostic sales, marketing, medical affairs, and distribution team which represents the firm in over 20 countries, "giving us a strong foundation for our international expansion."

Veracyte expects the deal to contribute $6 million to $8 million to its revenues in 2020.

Meanwhile, NanoString believes the deal will allow it to focus on its rapidly growing research business, in particular its digital spatial profiling technology. The company anticipates that reduced operating costs and the supply agreement will reduce its operating loss by about $12 million in 2019 and noted that the transaction will increase its cash, cash equivalents, and investments to about $180 million.

"This partnership allows NanoString to focus our energy and resources on the significant growth opportunities in our life sciences business, especially the commercialization of our GeoMx Digital Spatial Profiler," NanoString CEO Brad Gray said in a statement.

In Wednesday morning trading on the Nasdaq, Veracyte's shares were up about 2 percent at $26.71, while NanoString's shares were up nearly 7 percent at $27.97.