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Exact Sciences' Asset Sale to Genzyme to Bring in $24.5M

NEW YORK (GenomeWeb News) – Exact Sciences said after the close of the market on Tuesday that it has sold to Genzyme certain intellectual property assets related to the fields of prenatal and reproductive health in a deal that is expected to provide the firm with a cash infusion of $24.5 million.

In addition, the Marlborough, Mass.-based firm has sold to Genzyme 3 million shares of its common stock.

Under the agreement, Exact retains exclusive worldwide rights to its colorectal cancer screening and stool-based DNA testing intellectual property. It also will receive a share of Genzyme's sublicensing income derived from the purchased intellectual property outside the fields of prenatal and reproductive health.

The agreement with Genzyme ends Sequenom's bid to acquire Exact Sciences for around $41 million. Earlier on Tuesday, Sequenom commenced its hostile takeover bid for Exact, offering Exact shareholders $1.50 in Sequenom stock for each share of Exact held.

Sequenom announced its plans to acquire Exact on Jan. 12, but Exact's board had refused to accept the offer.

Sequenom said that it would terminate the offer if Exact "enters into any out-licensing agreement, collaboration, or financial restructuring," and this morning, as expected, it did just that without accepting any of Exact's shares. Sequenom added that it remains "committed to building its oncology diagnostic franchise."

The deal with Genzyme calls for Exact to receive $16.65 million at the closing of the transaction, with an additional $1.85 million coming over the next 18 months, contingent upon the "non-occurrence of certain events" in exchange for the sale and license of certain of Exact's assets. The firms did not specify the "certain events" cited in the statement.

Genzyme also agreed to purchase 3 million of Exact shares for $2 per share, a 127 percent premium over Exact's 30-day average closing price as of market close on Jan. 26. Exact officials noted during a conference call this morning that Genzyme is now the largest shareholder of its stock.

"This transaction has allowed us to substantially monetize previously underappreciated assets in the field of prenatal and reproductive health without diminishing the value of our colorectal cancer business," Exact Chairman Patrick Zenner said during the call. "It also provides a substantial amount of non-dilutive financing for Exact that will allow us to exectue on key aspects of our business plan."

Exact and Genzyme also amended their licensing deal from March 1999, giving Exact additional rights necessary to distribute Food and Drug Administration-cleared kits for stool-based detection of disease and colorectal cancer screening based on the detection of APC and P53 mutations. The amended license and assumption by Genzyme of certain patent costs will reduce Exact's cash outlays going forward, the firm said.

Shares of cash-strapped Exact were moved from the Nasdaq Global Market to the Nasdaq Capital Market in late November 2008, because its shares failed to meet certain listing requirements. That move followed a letter sent to the firm from Nasdaq on July 10, informing Exact that the value of its listed securities was below the minimum $50 million required for continued listing on the market.

The firm now believes that it has enough cash to fund operations into 2011. "We are now in the strongest financial position we have been in since mid-2006," Zenner said.

"In addition to the substantial infusion of capital into Exact, we believe that our ability to access Genzyme's extensive development and regulatory expertise will facilitate our efforts toward the introduction of our next-generation platform for colorectal cancer screening," Exact President and CEO Jeffrey Luber said in a statement.

In connection with the Genzyme alliance, Luber has agreed to work with the firm's board of directors to find a new CEO who has product and commercial development expertise that is aligned with Exact's next phase of growth. Luber will remain in his current post until the new CEO is hired.

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