By Kirell Lakhman

ExonHit Therapeutics has killed its plan to acquire RedPath Integrated Pathology after a Medicare contractor said it would only reimburse one of the lab's tests — a fact that has been known for at least one month.

"Following [Healthmark Medicare Services'] recent decision to limit coverage of RedPath PathFinderTG family of tests to the pancreatic cancer test only, the two companies were unable to agree on revised financial terms and conditions," ExonHit said in a terse statement.

While RedPath is a Medicare provider for Part B services in its home state of Pennsylvania, Highmark is the Medicare contractor for New Jersey, Maryland, Delaware and Washington, DC, for Medicare Parts A and B.

RedPath is covered for the entire country for all Part B services and bills Highmark for them.

In its own statement, Highmark said it "noted insufficient studies measuring whether the use of [the] PathfinderTG technology would improve patient relevant clinical outcomes," adding that "questions raised included whether PathfinderTG results affected diagnostic evaluation or treatment decisions."

However, it also said it "received extensive comments from physicians and providers from across the country" who support the "use and results of the PathfinderTG technology very specifically for patients with pancreatic cysts where 'traditional' fluid chemistry and/or cytology evaluations were inconclusive."

As a result, the PathfinderTG assay "will be covered as a 'reasonable and necessary' service specifically and only for the indications of pancreatic cyst/mass where diagnostic evaluations are inconclusive.”

Medicare will begin reimbursing for the test Nov. 5.

RedPath Flatlined

Beside its assay for pancreatic cancer, the PathfinderTG technology could be used to distinguish between benign and malignant lesions; metastatic, synchronous, and recurrent tumors; reactive and neoplastic lesions; and to grade dysplasia.

PathfinderTG, which works with a wide variety of standard pathology specimens, can also be used to differentiate metastatic, synchronous, and recurrent tumors in organs such as breasts, lungs, liver, endometrium, and ovaries.

In today's statement, ExonHit stressed that it is not out of the M&A game, saying it "is committed to pursuing its strategy of development via external growth and maintains its objective to acquire a revenue-generating molecular diagnostic company."

ExonHit in April said it planned to acquire RedPath for as much as $32.5 million in cash and stock in a bid to offer its RNA-based molecular diagnostic services in the US, and to open the European pathology market to RedPath's molecular assays.

The acquisition, which was supposed to close in July, hit a snag in June when HMS decided Medicare should not cover PathFinderTG pending a re-assessment.

RedPath had until July 9 to tell HMS why the test should continue to be covered. HMS, which planned to kill coverage Sept. 29, would then decide whether to change its mind.

When RedPath delivered this news to ExonHit, the French biotech put the deal on hold.

But in late September, RedPath received what it thought was a reprieve when it announced that Medicare would cover the pancreatic cancer assay.

This apparently wasn't enough for ExonHit as a single test didn't justify $32.5 million, and the firms couldn't agree on better terms.

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