Madison-based Exact Sciences Corp. plans to buy a California-based cancer diagnostics company for $2.8 billion, which will expand Exact Science’s reach in cancer screening.
Exact Sciences expects to close the deal with Genomic Health Inc. by the end of the year, with the acquisition subject to regulatory and shareholder approval.
Genomic Health stockholders would get $27.50 in cash and $44.50 in Exact Sciences stock for each share they own in Genomic Health for a total value of $72 a share.
Exact Sciences is best known for the colorectal cancer screening product Cologuard. Genomic is known for its cancer diagnostics tests that analyse the biology of breast and prostate cancers to help develop individualized treatment plans.
Exact Sciences is valued at $15.2 billion.
“Exact Sciences is continuing to grow sales and expand adoption of Cologuard at a rapid pace, and Genomic Health’s Oncotype DX (test) is the global standard of care to inform treatment decisions for women with breast cancer,” Exact Sciences chairman and CEO Kevin Conroy said in a statement. “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.”
Cologuard, which detects cancer using stool samples collected by patients at home, was approved by the U.S. Food and Drug Administration in 2014 and has since been used by more than 2 million patients.
Exact Sciences employs more than 2,500 people with about 1,800 of those jobs in the Madison area. The acquisition will add about 900 Genomic Health employees to Exact Sciences’s team.
Genomic was incorporated in 2000 and in 2004 launched its first product, the Oncotype DX breast cancer test that helped predict the likelihood of breast cancer recurrence and effectiveness of chemotherapy.
Genomic now also offers tests for detection or recurrence of cancer in colon cancer and prostate cancer patients as well as breast cancer.
By acquiring Genomic Health, Exact Sciences will expand its commercial base and use the company’s network of oncologists, OB/GYNs and urologists to further market Cologuard while continuing to market Oncotype DX. Currently, Exact Sciences primarily markets to primary care physicians.
The companies expect to have a commercial presence in more than 90 countries.
“We will have the collective talent, expertise and platform to bring our products to even more people around the world,” Genomic Health chairwoman, president and CEO Kim Popovitz said in a shareholders conference call.
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By combining the teams to streamline processes, Exact Sciences expects to see $25 million in savings within three years.
“We really believe we have a one-plus-one-equals-three here,” Popovitz said.
Shares of Genomic Health went up 6.4% to about $73 Monday. Exact Sciences shares dropped as much as 10% during the day, but bounced back to about the same price as it opened, with each Exact Sciences share trading at $117.
A skeptical note
Analyst Brian Weinstein, with investment firm William Blair & Co., said in a research note the fluctuation in stock price wasn’t a surprise as investors bought in for growth in Cologuard rather than the broader hold on cancer treatment that the acquisition leads toward.
“In addition to dilution from the stock component of the deal, this acquisition really does little, in our view, to help accelerate that core growth story we had become accustomed to hearing as the investment thesis. Rather, Exact Sciences will see its overall growth slow — to a still very strong 30%+ — and have to show it can handle running two very distinct franchises without a lot of obvious overlap or synergy to them,” Weinstein wrote.
Exact Sciences also partners with drug giant Pfizer for expanded marketing for Cologuard and with Mayo Clinic for research and development.
Exact Sciences is also developing a blood test to screen for liver cancer using DNA biomarkers, similar to how it tests for colorectal cancer. With several products under its belt, Genomic’s team will bring more experience in clinical testing and the regulatory approval process to the Exact Sciences team, Conroy said on the conference call.
Exact Sciences plans to continue the growth of Cologuard by seeking to expand the age range the test is approved for, following an American Cancer Society recommendation to begin colorectal cancer screenings at age 45, Conroy said. Screenings with Cologuard are currently approved to begin at age 50.
Exact Sciences also announced second-quarter results Monday, which exceeded previous targets — including testing 415,000 patient samples to bring in $199.9 million in revenue, compared to the target of 376,000 tests and $180.8 million in revenue.
“Simply put, this was a monster quarter and one where everything seemed to fall into place for Exact Sciences,” Weinstein wrote.
State Journal reporter Bill Novak contributed to this report.