Precision Thera drops IPO, goes public via reverse merger

(UPDATE: The merger is dead.)

Pittsburgh’s Precision Therapeutics, a biotech working on diagnostics designed to identify the best chemotherapy for cancer patients, appears to have dropped its planned IPO and instead went public via a reverse merger with Oracle Healthcare Acquisition — a “blank check” acquisition firm that appears to be no relation of the database-software giant.

I was pretty hard on Precision when it filed its IPO, since its cancer diagnostic test not only struck me as fairly crude and simplistic, it also lacks compelling data suggesting that it should do much good. IPO investors apparently weren’t overly enthusiastic either, although for some reason the Oracle acquisition folks seem to have jumped at the opportunity.

Financial terms of the deal aren’t entirely clear, but the release notes that the combined company — which will retain the Precision name — will have $120 million in cash. That amounts to a substantial cash infusion, given that Precision reported only about $19 million on hand in cash and working capital as of June 30. So either the Oracle guys are idiots, which seems unlikely, or they’re seeing something here that didn’t jump out the last time I went through the S-1. Or perhaps they’re just willing to bet the farm on the possibility — slim though it may seem — that Precision’s diagnostic tests will somehow emerge as blockbusters. It certainly wouldn’t be the first time in this industry.