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Exact Sciences Boosting Position in Cancer Dx Market Through M&A


NEW YORK – When Exact Sciences acquired Genomic Health for $2.8 billion in July 2019, CEO Kevin Conroy said the merger would "create an organization with a breadth of capabilities that doesn't exist today," and that the combined company would be well-positioned to bring together complementary capabilities to create leading cancer diagnostics.

Exact now appears to be continuing in its goal to add unique capabilities and boost its position in the cancer diagnostics market, announcing on Tuesday during its fourth quarter earnings conference call that it had agreed to acquire two more companies in the cancer testing space for an undisclosed sum: Paradigm Diagnostics, which currently sells an NGS-based cancer diagnostic test that aids in therapy selection, and Viomics, a molecular diagnostics company that specializes in biomarker selection for cancer diagnostics.

On the call with analysts, Conroy said advancing its pipeline of blood-based cancer tests is one of the company's three main goals in 2020, with the other two being to enhance its Cologuard colorectal cancer test and to support its sales partnership with Pfizer.

As part of advancing the blood-based cancer diagnostics program, Exact presented data last November on its liver cancer test, which demonstrated that the test was more sensitive and specific than the guideline-recommended blood test, alpha-fetoprotein (AFP).

Researchers from Exact and their collaborators at the Mayo Clinic collected blood samples from 137 radiographically diagnosed hepatocellular carcinoma (HCC) and 313 age-matched controls with benign liver disease without structurally apparent HCC. They assessed 10 methylated markers that had previously been reported as having some association with HCC, as well as several protein markers including AFP. With a specificity of 90 percent, the researchers found that their panel of six markers detected early-stage HCC with a sensitivity of 71 percent compared to 25 percent for AFP. The panel also detected Stage A HCC with a sensitivity of 74 percent compared to 30 percent for AFP. Overall, the panel's sensitivity was 82.6 percent compared to 47.1 percent for AFP. At 90 percent specificity, AFP's sensitivity was 45 percent.

"We plan to make our test available in the second half of this year, with the goal of generating real-world evidence to support guideline inclusion, broad reimbursement, and adoption over time," Conroy said on the Q4 call. "We look forward to offering our test to the three million total eligible Americans."

In addition to advancing development on the liver cancer test, Conroy cited the acquisitions of Paradigm and Viomics as "another step forward in extending our leadership position in advanced cancer diagnostics."

Paradigm markets a therapy selection test for late-stage cancer patients. The Paradigm Cancer Diagnostic (PCDx) assay received a local coverage determination through the MolDX program from Medicare Administrative Contractor Palmetto GBA in January, Conroy said, and has faster turnaround times than any similar test on the market with less sample input requirements.

The test gets results back to physicians in three to five business days. It detects substitutions, indels, and copy number alterations in 234 genes and select gene rearrangements, Paradigm said. PCDx also detects genomic signatures, including microsatellite instability and tumor mutational burden using DNA isolated from FFPE tumor tissue specimens in addition to select immunohistochemistry tests.

"Many patients today don't have access to therapy selection testing because it takes too long or there's not enough DNA in the sample to obtain a valid result," Conroy said. "This information is critical to support treatment decisions, and the Paradigm test will allow us to provide smarter, faster answers to more patients."

He added that PCDx is currently a tissue-based test, but that Exact is planning to make a blood-based version available in the future.

Viomics, meanwhile, is a company that Exact has collaborated with for many years. The company provides sequencing and biomarker discovery capabilities. Exact has used Viomics' services to identify unique markers that it plans to use in tests that are currently in the pipeline, Conroy said.

"We've had a long relationship with Viomics, and they have delivered to us biomarkers that are embedded in various products that we will bring to physicians and patients into the future," he added. "I'm not sure that we'll ever really disclose exactly which biomarkers they develop compared to the Mayo Clinic relationship and our own internal efforts. Suffice it to say, they are approaching biomarker discovery from a different direction than we are, or we in combination with the Mayo Clinic, and we think that will make a big difference over time."

Conroy also noted that the addition of Viomics' technology and clinical lab testing capabilities will enable Exact to bring blood-based therapy selection and minimum residual disease (MRD) tests to patients and physicians.

In their notes to investors on Wednesday, analysts seemed pleased by Exact's results and optimistic about the company's long-term prospects.

William Blair analyst Brian Weinstein wrote that the company's "notion of becoming a leading advanced cancer diagnostics company was on full display," highlighting the continuing integration of Genomic Health, and the acquisitions of Paradigm and Viomics.

"The two smaller acquisitions announced on the call continue to broaden the capabilities of the team and take advantage of the complete infrastructure built out over the course of a decade," Weinstein said. "This should not go unnoticed or be underappreciated by investors as they consider how areas like therapy selection and monitoring have the potential to quickly expand into massive markets that can complement the screening market the team is known for today."

The company's overarching strategy in the cancer space is more important than concerns about the pace of Cologuard test volume from quarter to quarter, he added, and while investors should keep an eye on the company's plans for the year, "we are focusing much more on how this team is absolutely fearless and completely determined to play across the continuum in advanced cancer diagnostics. We are unaware of any other company with such lofty ambitions that also has the capabilities from an R&D, payer, and commercial infrastructure perspective. Things have certainly changed from just a year ago when it was 'all Cologuard all the time.'"

SVB Leerink analyst Puneet Souda concurred, writing in his own note on Wednesday that Exact appears to have ambitions to build out assay offerings for the whole spectrum of cancer diagnostics, from metastatic disease testing to recurrence monitoring and screening, based on its acquisitions of Paradigm and Viomics.

However, Souda also noted that Exact already has some competition in the therapy selection market in metastatic patients: the Foundation One CDx FDA-approved assay is the current market leader, and there are also products from Caris, Tempus, Guardant Health, and other companies that are being offered to these patients and clinicians, he said.