A Diagnostics & Imaging Week

Colon cancer test developer Exact Sciences (Marlborough, Massachusetts) reported that the company has formed a strategic relationship with Genzyme (Cambridge, Massachusetts) in which it granted that company certain intellectual property assets related to the fields of prenatal and reproductive health as well as three million shares of Exact common stock for a total value of about $24.5 million.

News of the agreement came just a day after rival suitor Sequenom (San Diego) commenced a tender offer to acquire all the shares of Exact for $1.50 a share in cash, or about $41 million total. Earlier this month, Exact's board rejected the Sequenom offer, saying that it was actively pursuing an alternative that it believed provided greater value to Exact and its shareholders. Sequenom reported in a press release that it had dropped its bid in response to the Genzyme agreement.

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

Jeffrey Luber, Exact's president/CEO, said, "This strategic relationship with Genzyme is an important milestone in Exact's continued evolution and will serve as a solid platform for us to grow our oncology diagnostics business. 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."

"This transaction will bring Genzyme intellectual property in support of our development of non-invasive prenatal testing and other advanced diagnostic testing services," said Jon Hart, Senior Vice President and General Manager, Genzyme Genetics. "We have a responsibility to bring forward more advanced testing options for physicians and families and we are strongly committed to driving continued innovation in this field."

The transaction provides for Exact to receive $24.5 million in cash in total. At closing, Exact received $16.65 million, with an additional $1.85 million to be received 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 intellectual property assets, including those relating to reproductive and prenatal health. In addition, Genzyme purchased 3 million shares of EXACT common stock at $2 per share for an aggregate purchase price of $6 million. The per share purchase price represents a 127% premium to the 30-day average closing price of Exact shares as of market close on Jan. 26.

The companies have amended their March 1999 license to provide Exact with the additional rights necessary to distribute FDA approved kits for stool-based detection of disease and colorectal cancer screening based on the detection of APC and P53 mutations. The license amendment as well as the ongoing assumption by Genzyme of certain patent costs will reduce Exact's cash outlays going forward.

The companies also have agreed to form a joint advisory committee to assist both parties in the achievement of product development goals related to the purchased IP and to assist Exact with its regulatory goals.

In conjunction with the completion of this transaction Luber said he intends resign as Exact's CEO, and will work with the company's board to find a replacement.

As of Sept. 30, 2008, Exact had about $6.1 million in unrestricted cash and equivalents to fund its operations through the end of the second quarter of 2009 based on the company's current cost structure and operating assumptions.

Now, the company believes it will have cash resources to last into 2011. That same year, the company plans to submit an application to the FDA for its next-generation non-invasive colorectal screening test, Version 3.

Exact plans to focus on the development of a Version 3 colorectal cancer screening test based on an improved DNA detection technology developed by Johns Hopkins University.

Exact intends to resume sample collection for a clinical trial aimed at securing FDA clearance or approval for a new Version 3 technology for non-invasive colorectal cancer screening. The company currently plans to design the trial based on its extensive discussions held with the FDA in mid 2008 and will seek input from Genzyme through the joint advisory committee.

Merriman Curhan Ford & Co. delivered an opinion to the board of Exact as to the fairness of the transaction.

In other dealmaking news:

• Research Corporation Technologies (RCT; Tucson, Arizona) said it has granted Toshiba America Medical Systems (Tustin, California) a nonexclusive license to pioneering patents owned by RCT that broadly cover ultrasound tissue harmonic imaging (THI). Toshiba is a leader in diagnostic and medical imaging technology.

RCT manages the THI technology for its partner, the University of Rochester (Rochester, New York). RCT received U.S. patent No. 7,104,956 in September 2006; U.S. patent No. 7,004,905 in February 2006; and U.S. patent No. 6,206,833 in March 2001. Two other U.S. patents are pending.

In addition to Toshiba, Acuson, a Siemens company, Royal Philips Electronics, General Electric Biosound Esaote and Medison are licensees of the THI technology. RCT continues its efforts to license the technology broadly to the ultrasound industry. All licensing agreement terms are confidential.

• Mercury Computer Systems (Chelmsford, Massachusetts), a provider of embedded, high-performance computing systems and software for complex image, sensor, and signal-processing applications, reported that it signed a definitive agreement and closed on the sale of its wholly-owned subsidiaries, Visage Imaging, and its affiliate Visage Imaging GmbH, to Pro Medicus (Melbourne, Australia). The financial terms of the transaction were not disclosed.

Visage Imaging is a provider of scalable, enterprise-wide advanced visualization and image distribution solutions for hospitals and imaging centers.

• TheraGenetics (London/Cambridge, Massachusetts), a personalized medicine diagnostics company that is developing a portfolio of pharmacogenetic diagnostic tests to guide and improve the treatment of central nervous system (CNS) disorders, has been acquired by the Avacta Group (York, UK) for an undisclosed amount.

Avacta seeks to develop detection and analysis technology aimed primarily at the pharmaceutical and healthcare markets. TheraGenetics is focused on developing pharmacogenetic diagnostic tests for schizophrenia, depression, bipolar disorder, Alzheimer's disease and attention deficit hyperactivity disorder.

TheraGenetics will be acquired for a combination of cash and stock. Additionally, under the agreement, the U.S. operations will remain in Cambridge, Massachusetts.

• Impulse Monitoring (IM; Columbia, Maryland), a provider of intraoperative neuromonitoring (IONM) to hospitals, reported that it has purchased the IONM and autotransfusion (AT) assets of NVMS (Hendersonville, Tennessee) also known as Nursing Visioned Medical Services. The terms of the purchase were not disclosed.

IONM assesses neurological function involving the brain, spinal cord and related nerve structures during surgery. Use of IONM facilitates the surgical process and can reduce surgical risk by providing alerts to surgeons of potential harm to spinal cord or neural structure. AT is a process by which a patient's own blood is captured and cleaned and used for transfusion during a surgery instead of donated blood.

• Toshiba Medical Systems (Tokyo) reported that via its wholly-owned subsidiary, Toshiba Medical Visualization Systems Europe (TMVS), has completed its previously disclosed acquisition of the Advanced Visualization Imaging System Division (AVIS) of Barco (Kortrijk, Belgium).

This acquisition brings in-house the development of 3-D volume rendering and advanced visualization capabilities for all Toshiba modalities, the company said.

The AVIS team has been conducting research, development and sales of medical 3-D visualization software products since 1991 as Voxar Ltd. For the past 10 years, Toshiba has used Voxar 3-D visualization core software in its medical imaging products and PACS. AVIS, as part of Barco, provided advanced visualization solutions for the medical imaging and PACS markets.

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