- Exact Sciences will buy fellow cancer technologies firm Genomic Health in a $2.8 billion deal announced Monday. Between the companies' currently marketed tests — Exact Sciences' Cologuard for colorectal cancer diagnosis and Genomic Health's Oncotype DX tests for predicting response to cancer treatments — executives forecast the combined company would generate $1.6 billion in revenue next year.
- If cleared by regulators, the combined company will employ roughly 1,000 people and is slated to have an R&D budget of about $200 million. The deal is expected to close by the end of 2019.
- Also on Monday, Exact reported second quarter revenue of roughly $200 million, nearly double last years total. The company added 13,000 first-time-ordering physicians during the quarter, bringing the number of U.S. providers adopting Cologuard to about 174,000. Genomic Health revenues totaled $114 million in the second quarter.
Amid an increasingly crowded market for cancer detection technologies, Monday's deal diversifies Exact Sciences' focus to also include breast and prostate cancers. With Exact's existing colorectal cancer business, the new company will have diagnostic products targeting an estimated 40% of all solid tumors.
Since Exact Sciences launched its flagship stool test for colorectal cancer in late 2014, 2.6 million people have reportedly been screened using Cologuard.
Exact Sciences credited part of its sales growth during the quarter to a marketing partnership with Pfizer, now almost a year old. More than 80% of Exact Sciences' customers are primary care providers, but the company is looking to expand its marketing channels. CEO Kevin Conroy said on a call with investors Monday that 60 people were added to its gastrointestinal sales force this month.
The Genomic Health partnership could offer Exact Sciences new relationships with oncologists. "Today, as a cancer diagnostics company, we lack an oncology sales force," Conroy said.
Another benefit is Genomic Health's San Francisco Bay area location, Conroy said, "providing lab infrastructure in a state where the Medicare Administrative Contractor participates in the [molecular diagnostics] program, which may facilitate reimbursement of future liquid biopsy products," according to a company press release.
Conroy declined to specify timelines for an international expansion of Cologuard or other forthcoming products.
Separate from the transaction announced Monday, Exact Sciences raised its full year revenue guidance to between $800 million to $810 million for 2019, up from the $725 million to $740 million previously estimated.
Potential competitors to Exact include Roche, Guardant Health, Grail and Freenome; the latter announced a $160 million fundraising round last week, to be used in part for running a pivotal study to support an FDA submission for a blood-based colorectal cancer diagnostic.
"This could potentially be one of the bigger deals for specialty labs," Cowen analyst Doug Schenkel wrote in a note to investors Monday. He said there are not many of these deals, with Roche's acquisition of Foundation Medicine last summer being an exception.
"Perhaps it is possible that the sector is on the cusp of a long-awaited period of consolidation," Schenkel added.