Constellation Alpha Capital to Acquire DermTech to Advance Non-Invasive Skin Cancer Diagnostics

VCBeat (WeChat Official Account: vcbeat) has learned that on March 15, 2019, Constellation Alpha Capital, a firm focused on investing in healthcare services companies, announced the acquisition of molecular genomics company DermTech and signed a non-binding letter of intent for the acquisition. The definitive agreement is expected to include a minimum cash closing condition of $15 million and will be completed in the second quarter of this year.

DermTech is dedicated to developing diagnostic methods for skin cancer and other dermatological conditions, including a test for pigmented lesions and a non-invasive biopsy kit for melanoma detection that was approved in Canada one year ago. Headquartered in La Jolla, California, DermTech operates a CLIA-certified laboratory that provides molecular pathology services to external clients; the laboratory is also certified by the New York State Department of Health.

To date, DermTech has completed eight funding rounds totaling $47.2 million. The most recent round occurred on November 1, 2017, when the company closed a $10 million Series C financing.

Constellation Alpha Capital, founded in 2015 and headquartered in Palm Beach, Florida, focuses on investing in or acquiring local healthcare companies in India to secure business collaboration opportunities. Under the proposed transaction terms, DermTech will become a wholly-owned subsidiary of Constellation Alpha Capital and receive a portion of Constellation Alpha Capital’s common stock. Upon completion of the merger, DermTech is expected to become the largest shareholder of Constellation Alpha Capital.

At that time, Cowen, a U.S.-based financial services firm, and Greenberg Traurig, a law firm, will serve as the financial and capital markets advisor and legal counsel, respectively, to Constellation Alpha Capital. Mintz will act as legal counsel to DermTech. Constellation Alpha Capital’s previous acquisition took place in August 2018, when it acquired Indian diagnostic chain Medall Healthcare for $212 million.

If a legally binding definitive agreement is reached, the shareholders of Constellation Alpha Capital will be provided with a complete description of the transaction terms in the proxy statement filed with the U.S. Securities and Exchange Commission (SEC). Constellation Alpha Capital will also urge investors, shareholders, and other relevant parties to read the proxy statement and other documents filed with the SEC in a timely manner, as these documents will contain important information. The final proxy statement will be mailed to the shareholders of Constellation Alpha Capital by the proposed deadline to enable them to vote on the proposed business combination.

Rajiv Sarman Shukla, Chairman and CEO of Constellation Alpha Capital, stated in a press release: “DermTech has developed a suite of dermatology-focused deep diagnostic tests. These tests offer advanced clinical sensitivity, enable non-invasive sample collection to enhance patient comfort during diagnosis and treatment, and reduce costs for payers. We are pleased to bring this profitable opportunity to our shareholders.”

Dr. John Dobak, CEO of DermTech, stated, “We look forward to closing this transaction. This merger will accelerate the commercialization of DermTech’s skin cancer products, facilitate the development of our new products, and deepen our collaborations with pharmaceutical partners. DermTech has developed a unique diagnostic platform grounded in science, clinical evidence, and value for physicians and patients, which presents significant commercial potential. Our partnership with Constellation Alpha Capital provides us with the opportunity to leverage and further build upon our platform.”

Constellation Alpha Capital is a blank check company. (A blank check company refers to a company without specific business plans or objectives; its operations often involve speculative investments, and the U.S. Securities and Exchange Commission also refers to such entities as “penny stocks” or “small-cap stocks.”)

DermTech, also known as DermTech International, was founded in 1996 and is headquartered in La Jolla, California, USA. DermTech has developed its proprietary qPCR-based assay—a biopsy method utilizing non-invasive skin sampling. The DermTech assay can simultaneously analyze multiple gene targets to assess their RNA expression levels. DermTech anticipates conducting these diagnostic tests through its CLIA-certified laboratory located in San Diego. In April 2011, the British Journal of Dermatology announced that DermTech had identified differentially expressed gene targets in melanoma samples. This assay evaluates RNA expression patterns consistent with melanoma, demonstrating high sensitivity (>95%) and specificity (>70%).

(Compiled by Wang Shuijing)