US Labs Inc., an Irvine medical testing company, has received $15 million in late-stage venture capital funding.
US Labs received the money in a transaction led by the San Francisco office of ABS Capital Partners, which is headquartered in Baltimore and makes investments in mid- to late-stage companies. ABS Capital Partners ponied up $10 million, while returning investors Highland Capital Partners of Boston and Accel Partners of Palo Alto together provided the remaining $5 million.
Highland led a previous round of $4.5 million in venture financing for US Labs that was announced two months ago. Accel was involved in that round, along with Sage Venture Partners of Los Angeles. At that time, US Labs also completed a $5 million senior credit agreement with Heller Healthcare Finance Inc., a unit of Chicago-based Heller Financial Inc.
US Labs plans to use the new money to build an East Coast facility and to support its growth plans, including expanding its cancer genetics business, said Michael Danzi, the company’s chief executive. The newest funding round exceeded its original target, he said.
“We’re pleased to have completed this financing in the current market. It was well-received,” Danzi said, noting that the funding was based on a significant increase in valuation from the previous round, which he declined to disclose.
Danzi said ABS Capital Partners took a thorough look at the company before investing.
“For ABS, this was a brand-new deal,” he said. “They sent people here and camped out for weeks.”
Highland Capital has joined in US Labs’ funding for several reasons, according to Matt Downs, a Highland associate who is on US Labs’ board of directors. Those are, Downs said, its management team, sales force, billing group and “tier-one quality cancer-focused diagnostics.”
“We’ve been involved with Mike Danzi for three-plus years,” Downs said. “This is a company we know very well.”
Danzi was careful when asked whether US Labs is planning an initial public offering, saying, “We believe it will not be necessary to raise additional private capital.”
US Labs specializes in genomics, or the medical application of genetic research. The company provides screening, diagnostic and prognostic cancer testing services to hospitals, physicians’ offices, surgery centers, biopharmaceutical companies and research institutions. Competitors, according to Danzi, include Impath Inc. of New York and Dianon Systems Inc. of Stratford, Conn.
Industry sources estimate US Labs’ annual revenue at more than $20 million. Danzi, in an August interview, didn’t give specifics but indicated that “we made all our projections and hit all numbers. We have good revenue and we’re making money operationally.
“If you’re profitable, you can attract attention and raise money. What we are seeing is interest in our sector. The interest in dot-com types is gone,” Danzi said in August.
This year has been a busy one for US Labs. It’s in the midst of moving to a 53,000-square-foot building near John Wayne Airport that was designed to allow the company to hire 80 new workers within a year and a half.
About half of US Labs is in the new facility, and “the lab will move completely by year-end,” Danzi said.
Danzi said that US Labs’ total employment is now around 250, up from around 225 in late August. He said the hires were “across the board” and included skilled technicians and medical billers.
Earlier this year, Danzi said US Labs had grown by 38% from February to March. Last week, he noted that the company saw another 30%-plus growth rate in August.
“Our projections are to grow 10% a month. We tend to grow faster than that, but that’s what we’re hiring for,” Danzi said in August. n
