A Diagnostics & Imaging Week

GE Healthcare (Waukesha, Wisconsin) reported that it has completed its $860 million cash acquisition of Vital Signs (Totowa, New Jersey) that was first disclosed in July. Vital Signs is a provider of medical products applicable to a wide range of care areas such as anesthesia, respiratory, sleep therapy and emergency medicine.

Vital Signs will become part of GE Healthcare's Clinical Systems business, a provider of advanced technologies for patient monitoring, anesthesia delivery and acute respiratory care.

"We believe that combining the skills and knowledge of the two companies will create significant added value for our customers, bringing new technologies to healthcare professionals worldwide," said Omar Ishrak, president/CEO of GE's Clinical Systems business. "Clinical Systems is a key area of growth for GE Healthcare and expanding our skill base and product offering in this area supports our vision of helping clinicians and nurses deliver the best possible care to their patients."

In other dealmaking news:

• Clinical Data (Newton, Massachusetts) said it will buy struggling Avalon Pharmaceuticals (Germantown, Maryland) in an all-stock transaction valued at $10 million.

Avalon said it will keep its operations in Germantown and current staff of 35. The deal is expected to close in two to four months.

According to Critcal Data, the combined company will have expanded development capabilities in targeted therapeutics and molecular diagnostics for oncology.

"Avalon's comprehensive biomarker discovery platform, validated by partnerships with leading pharmaceutical companies, extensive library of biomarkers and compounds, and oncology expertise, add to our growing estate of proprietary oncology biomarkers and in-depth knowledge of biomarker and pharmacogenetic test development," said Drew Fromkin, Clinical Data's president/CEO, in a statement.

Avalon's shares have steadily decreased from above $1 at the beginning of the summer to closing at 8 cents a share on Monday – its lowest level since going public in 2005.

On Sept. 24 the company got word that its common stock would be delisted from the Nasdaq Global Market if it didn't hit minimum bid price requirements by March 23, 2009.

In response to its stock losing 80% of its value in the past year and a funding shortage, Avalon said in August it was cutting a third of its work force.

Avalon, which ended the second quarter with $16.7 million in the bank, said without additional investment it wouldn't be able to fund operations past the end of 2008. It ended the quarter with a net loss of $5.6 million, or 33 cents per share.

It booked $137,000 in revenue, compared to $78,000 a year earlier.

The agreement to merge was one of four separate definitive agreements signed by the companies, which included a private placement, a secured term loan agreement, and an exclusive license to Avalon's drug and biomarker discovery platform.

Avalon's board approved the merger agreement and recommended approval of the transaction to Avalon's stockholders. The merge is subject to various closing conditions, including approval by Avalon stockholders. They will vote on the proposed transaction at an upcoming meeting.

Clinical Data completed a private placement of 3,390,547 shares of Avalon's common stock, equivalent to 19.9% of Avalon's issued and outstanding shares.

In addition, Clinical Data was issued warrants to purchase up to an additional 1,695,273 shares of Avalon's common stock.

Clinical Data provided a $3 million term loan to Avalon, secured by a first priority lien on all of Avalon's intellectual property. The loan, with 7% interest, will be due to Clinical Data on March 31, 2009.

Clinical Data provided $1 million in cash to Avalon for an exclusive license to Avalon's proprietary drug and biomarker discovery platform.

The merger was an opportunity for Avalon to keep using its biomarker-based drug discovery platform to build a pipeline and cancer therapeutics, according to Kenneth Carter, CEO of Avalon.

"With Clinical Data's oncology biomarker development programs and abilities, we can pursue drugs and diagnostics that offer the greatest potential value for patients, providers, payers and our stockholders," said Carter in a statement.

• Xenomics (New York), a developer of non-invasive next-generation molecular diagnostics, reported that it has licensed exclusive rights to its patents for the development of prenatal research and diagnostic products to Sequenom (San Diego), a genetics and molecular diagnostics company.

The licensed technology is based on Xenomics' proprietary Transrenal DNA/RNA (Tr-DNA/RNA) technology. The agreement provides for an upfront payment, equity participation and royalties on sales of licensed products, subject to certain minimum amounts. The license does not cover the company's current test for fetal gender determination based solely on detection of Y chromosome.

"This license offers Sequenom the potential for a broader approach to prenatal diagnostics by using fetal nucleic acids found in easily-obtained maternal urine samples," said Dr. Samuil Umansky, CSO and co-founder of Xenomics.

This agreement represents Xenomics' first license for applications of its proprietary platform technology. In addition to prenatal diagnostics, the company has patent rights covering the fields of infectious diseases, tumor detection and transplantation. Due to simplicity of sample collection and Tr-DNA stability, the technology is optimally suitable for screening tests.

• Cepheid (Sunnyvale, California) reported that it has entered into a definitive agreement to acquire Stretton Scientific (Stretton, UK), a privately held distributor of scientific diagnostic, measuring and monitoring equipment.

Cepheid will pay about 1.2 million ($1.9 million) in cash to acquire Stretton. The transaction is expected to close early this month, subject to customary closing conditions, and it is not expected to have a material impact on Cepheid's 4Q08 results.

Stretton currently distributes Cepheid's SmartCycler System, among other diagnostic and life science products, to a broad group of medical customers including the National Health Service, medical universities and commercial customers.

"Consistent with Cepheid's strategy to invest in sales and marketing capabilities to support national market development, the acquisition of Stretton Scientific is expected to augment our newly established UK-based direct sales team," said Cepheid CEO John Bishop. "With our industry-leading GeneXpert System, Cepheid is committed to supporting the UK's efforts to minimize negative patient outcomes and reduce financial costs associated with HAIs, and we are very pleased to be building out our infrastructure to support this rapidly expanding opportunity."

Cepheid is an on-demand molecular diagnostics company that develops systems for genetic analysis in the clinical, industrial and biothreat markets.