IBD 50 stock GeneDx will spend up to $51 million to acquire privately held Fabric Genomics, a small name working in AI-powered genomic interpretation.
Gaithersburg, Maryland-based GeneDx screens patients' DNA for abnormalities consistent with genetic diseases. Acquiring Fabric Genomics expands GeneDx's vision of offering decentralized genetic testing with its cloud-based platform. The deal involves an up-front cash payment of $33 million and up to $18 million in milestone payments.
Chief Executive Katherine Stueland says genomic testing is becoming essential to health care.
"To achieve this, we must evolve and provide adaptable solutions so this information can be used more proactively and without geographic constraints," she said in a written statement. "Adding Fabric Genomics and their talented team moves us closer to that future, enabling our partners to deliver groundbreaking genomics insights to patients across the globe."
GeneDx stock fell 3.8%, closing at 98.29 on Wednesday. Shares are consolidating with a buy point at 115.60. In a normal market, that would be a good time to consider adding GeneDx shares. But in a risky market like this, Investor's Business Daily suggests a market exposure of 0% to 20%.
Expanding Genetic Testing
Genetic testing isn't standard in the neonatal intensive care unit, or NICU. GeneDx estimates fewer than 5% of the 400,000 infants admitted to NICUs in the U.S. each year undergo genetic testing. And genetic testing isn't usually a go-to option for pediatricians.
But understanding a patient's DNA can shed light on oftentimes mystifying symptoms. And, with an earlier diagnosis, the patient's prognosis improves while health care costs decline.
With the close of the Fabric Genomics deal, health care systems can use GeneDx's platform in two ways. They can take samples and send them to GeneDx's centralized lab. There, the samples will be run through genetic sequencing and an AI platform to search for markers of disease. Or, the system can run its own genetic sequencing and then send it to the AI interpretation platform, which is supported by human geneticists.
"This marks an exciting new chapter for Fabric Genomics," CEO Martin Reese said in a statement. "By joining forces with GeneDx, we're combining two of the most powerful engines in genomic medicines, our AI-driven interpretation platform and GeneDx's unparalleled disease data set."
He expects the combination to make genome interpretation "faster, more scalable and more impactful."
The deal is expected to close in the second quarter.
Highly Rated GeneDx Stock
GeneDx ranks No. 22 on the IBD list of elite growth stocks.
Shares have run up more than 50% from the beginning of the year through Feb. 19, helped by a strong fourth-quarter earnings report. That helped reverse a three-day slide in early February after short seller Grizzly Research alleged the company is committing fraud by stacking codes to inflate billings and revenue.
The company referred to several analysts' reports in response to a request for comment from Investor's Business Daily. Wells Fargo analyst Brandon Couillard called the sell-off "overdone" and the concerns "misplaced." Similarly, Craig-Hallum analyst Bill Bonello viewed the short report as "misguided."
GeneDx shares have a best-possible Relative Strength Rating of 99, according to IBD Digital. This means shares outrank 99% of all stocks when it comes to 12-month performance. Shares also have a nearly perfect Composite Rating of 98. The CR is a 1-99 score of a stock's fundamental and technical metrics.
This story has been corrected to reflect the total deal and milestone amounts.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
