As cancer detection companies thrive, Exact Sciences looks to consolidate by spending $2.8B to acquire peer Genomic Health
As predicted by Bloomberg, cancer diagnostics company Exact Sciences is buying peer Genomic Health in a $2.8 billion cash-and-stock deal.
Exact Sciences’ flagship colorectal cancer test Cologuard will complement Genomic Health’s Oncotype DX, a test designed to help doctors determine the best course of treatment for women with breast cancer. Together the tests help inform treatment decisions in colorectal, breast and prostate cancer, representing roughly 40% of all solid tumor incidence, the companies said.
Last year, Exact Sciences enlisted Pfizer as a US marketing partner to expand Cologuard adoption. The tie-up has ramped up the use of the test — in the second quarter of 2019, Cologuard revenue grew 94% year-over-year.
“We remain Outperform on EXAS with our view that Cologuard is still highly under-penetrated in a patient population management pegs at 101M where EXAS could deliver 40%+ penetration or $6B+ in revenue longer-term, from just ~5% penetration today,” Leerink analysts wrote in a note in May.
Genomic Health reported a 19% year-over-year jump in second-quarter revenue and estimates its Oncotype DX suite of products in oncology and urology have a total available market of $2 billion.
Combined under one roof, the companies are looking to take advantage of economies of scale, as rivals loom large. South San Francisco biotech Freenome raised $160 million last week to conduct a pivotal trial for its blood test for colorectal cancer. Meanwhile, Illumina spinoff Grail has raised $1.5 billion to work on a multi-cancer detection test and Third Rock-backed Thrive has scored $110 to build its liquid biopsy platform for early cancer detection.
“Together, with our collective resources and broader platform, we will be able to provide our existing tests to more people, while also accelerating the development and launch of future cancer diagnostic tests,” Exact Sciences chief Kevin Conroy said in a statement on Monday.
“Though we believe the pipeline benefits, potential for kitted products, expansion into international markets…and experience with FDA are winning aspects of the deal; EXAS is likely to get more investor questions on the near-mid term strategic rationale and $25M in 3rd year synergies,” Leerink analysts wrote in a note.
On Saturday, Bloomberg reported the deal was incoming, citing people familiar with the matter.
Under the deal, which is expected to close at the end of the year, Genomic Health stockholders will receive $27.50 in cash and $44.50 in shares of Exact Sciences stock. If consummated, Exact Sciences shareholders are set to own about 91% of the combined company, while Genomic Health stockholders will be left with the rest. Next year, the combined entity expects to generate revenue of approximately $1.6 billion and a gross profit of approximately $1.2 billion.
Social image: Exact Sciences