EXACT Sciences Forms Pact with Genzyme
After the market close, EXACT Sciences announced that it formed a strategic pact with Genzyme (GENZ), which represents the grounds for the
Board's refusal two weeks ago in response to Sequenom's (SQNM) hostile exchange offer at $1.50 per share in stock. The announcement followed news in the pre-market today that SQNM planned to commence its exchange offer through 3/24/09, valuing EXAS at $41M.
However, the GENZ deal included the purchase of 3M shares of EXAS a $2 each ($6M), an upfront cash payment of $16.65M, and an additional $1.85M to be received over the next 18 months for $24.5M cash in total associated with the deal. Beyond the much needed cash infusion, EXAS announced that President and CEO Jeffrey Luber would be stepping down and assist the Board in finding a replacement with the necessary experience for product development and commercialization.
Terms of the deal call for GENZ to acquire select intellectual property (IP) of EXAS related to prenatal diagnostics and reproductive health. EXAS retains the exclusive global rights related to the IP covering its colorectal cancer (CRC) screening and stool DNA (sDNA) testing. EXAS will also receive a double digit percentage of any sublicensing income that GENZ receives related to IP it purchased outside of prenatal/reproductive.
Aside from the obvious benefits of an immediate cash infusion, EXAS will have access to the product development and regulatory expertise of GENZ, in addition to its global distribution network. The deal comes at an opportune time as the coverage of sDNA testing is expanding in the form of state mandates and large insurers such as Cigna (CI) since its American Cancer Society (ACS) guidelines recommendation last year as a CRC screening test option.
In addition, a
NY Times report summarizes the results of a study published in the medical journal,
Annals of Internal Medicine , which concluded that colonoscopies may actually prevent 60%-70% of CRC, rather than previously quoted rate of 90% for the test. While colonoscopies are still effective at preventing CRC and will continue to be widely recommended and used; the study highlights limitations of the procedure – especially in the detection of flat and right-sided lesions, with the latter accounting for about 40% of all CRC cases.
Sensitivity results of 82% were already published last summer for EXACT's
V2 sDNA technology , while the next-generation sDNA test (V3) boasts 92% sensitivity and has shown the potential to detect 86% of precancerous adenomas. Currently, only 24% of the 90M eligible patients in the U.S. are compliant with CRC screening recommendations and there is clearly an unmet medical need for an effective, non-invasive CRC screening test for the average-risk population which people will actually use.
The potential for an effective, non-invasive CRC screening test for the average risk population is also a global opportunity as
a report concluded that the E.U. needs to double the current rate for cancer screenings in order to reduce preventable deaths. The report calls on the 27 member countries to improve large-scale screening programs for target groups regardless of their symptoms, and only 12 member countries currently have programs for CRC screening.
Developing a V3 sDNA CRC screening test will be the focus of EXAS now that it has the cash needed to see it through 2011, when it expects to submit for FDA approval of the V3 CRC screening test and can be opportunistic with regarding to financing transactions to fund the remaining development and launch of the test. EXAS plans to resume sample collection during this quarter and will design the clinical trial based on extensive input from the FDA from last year, along with input from GENZ in the form of the joint advisory committee. EXAS may pursue a CLIA or homebrew launch of a V3 test by early 2011 and will also evaluate other opportunities such as aero-digestive cancer screening tests.
EXAS has delivered on its promise to shareholders of a more lucrative deal, as the Company still retains the rights to the technology platform for the stool-based detection of any disease + stool or blood-based screening assays for CRC. While some investors may have been hoping for a buyout to occur at a higher price than the $1.50 per share offered by SQNM; the GENZ deal provides the capital, expertise, and synergies needed for EXAS to realize the true potential for a highly effective, non-invasive screening test in the detection of CRC for the average risk population in the form of its V3 technology, in addition to other opportunities which will arise from the GENZ collaboration.
$1.69 (01/28/09)
