Shares of early cancer detection company Exact Sciences Corp. soared Tuesday morning on news it is acquiring two liquid biopsy screening companies, Thrive Earlier Detection Corp. and Base Genomics Ltd., for $2.56 billion and selling $869 million of common stock to institutional investors.
The dual acquisitions come just one month after Illumina Inc. bought blood-screening startup Grail Inc. for $8 billion, further validating the growth potential of the liquid biopsy market.
The stock (NASDAQ:EXAS) closed up 23.04% at $131.12.
$1.7B upfront for Thrive
Exact Sciences will acquire Thrive for $2.5 billion. The Madison, Wis.-based company, which is best known for its Cologuard cancer screening test, will pay Thrive $1.7 billion upfront, comprised of 65% common stock and 35% cash. An additional $450 million will be payable to Thrive upon completion of certain milestones related to the development and commercialization of a blood-based, multicancer screening test, the companies said.
Founded in May 2019 with offices in Cambridge, Mass., and Baltimore, Thrive is developing a liquid biopsy test as a screening tool for picking up cancers in an asymptomatic individuals. In an interim one-year readout of data from the prospective five-year DETECT-A study in 10,000 women, reported in April, an early version of Thrives Cancerseek test detected 26 cancers ahead of standard-of-care screening, but missed other cancers the latter picked up.
The startup, which licensed its technology from Johns Hopkins University, secured $257 million in a series B financing this summer to finalize the design of Cancerseek, conduct a trial to support U.S. FDA approval and prepare for commercialization.
Kevin Conroy, Exact Sciences’ chairman and CEO, called the acquisition a “giant leap” toward making blood-based, multicancer screening the standard of care.
“We have long respected the Thrive team for their rigorous scientific approach, having participated in both funding rounds as an investor,” he said. “We are proud to take our partnership to the next level by leveraging Exact Sciences’ established R&D team and highly accurate testing platform to augment development of Cancerseek and accelerate its commercialization.”
During Tuesday’s third-quarter earnings call, Conroy said Thrive has had extensive discussions with the FDA about an 80-patient pivotal study to support FDA approval of the Cancerseek test. “Suffice it to say, we’re very impressed with the design that they have put forward, and we’re excited to get to the point where we can initiate that study.”
Citing the real-world interventional screening study of 10,000 patients, Svbleerink analyst Puneet Souda gave the deal a thumbs up.
“EXAS plans to combine its methylation technology and markers with Thrive’s assay to enhance the sensitivity of the combined assay (at 99%+ specificity lock in multicancer) prior to pursuing an FDA registrational trial,” he wrote. “We believe this acquisition further catalyzes the entire liquid biopsy market, and view expected commercial synergies upon launch of Cancerseek given EXAS’ large, established sales team and relationships with primary care physicians and offices throughout the country.”
Both companies’ boards have approved the deal. It is expected to close in the first quarter of 2021, pending regulatory approvals.
Bolstering position in DNA methylation
Exact Sciences also announced Tuesday it is acquiring Base Genomics for $410 million in cash. The Oxford, U.K., epigenetics startup – which launched in June with an $11 million seek round – uses DNA methylation analysis to detect cancer in its early stages.
On the call, Conroy said Base Genomics’ low-cost technology complements its methylation expertise and multimarker approach, and brings offers two key benefits. It preserves virtually all of the DNA in the sample, which is “critical … when you’re looking for a needle in a haystack, and you start with a very small amount of DNA.” And it preserves the content of that information so that both mutations and methylation can be read in the analysis. “There’s been a vexing problem in methylation, and this team came at it from a different approach and that solved a real problem,” he said.
He said the addition of both Base Genomics and Thrive should boost Exact Sciences’ position in detecting minimal residual disease.
COVID-19 tests give Q3 a boost
News of the twin deals dovetailed with Exact Sciences’ third-quarter earnings report, which touted total revenue of $408 million – up from $218.8 million in the same period last year and above Street estimates of $337 million. The quarter got a significant boost from COVID-19 testing, which accounted for $102.2 million of the haul. Screening revenue (Cologuard) decreased 2% to $214.6 million, while precision oncology revenue was $91.6 million.
Earlier this month, the company launched its Oncotype MAP Pan-Cancer Tissue test for patients with advanced, metastatic, refractory or recurrent cancer. The Oncotype MAP (molecular assessment panel) test uses next-generation sequencing and immunohistochemistry to provide results from samples as small as 3 mm of tissue or two to three slides. The turnaround time for results is three to five business days.
The company is developing a line of screening and diagnostic tests that build on its Cologuard colorectal cancer (CRC) test and Oncotype Dx tests. In May, it reported additional data from a prospective clinical survey demonstrating the clinical value of the Oncotype Dx Breast Recurrence Score test, with a 36% net decrease in chemotherapy recommendations among patients with node-negative disease. Exact Sciences obtained the Oncotype Dx tests for breast and prostate cancer in 2019 via its acquisition of Genomic Health Inc., of Redwood City, Calif.
Today, the U.S. Preventive Services Task Force released a draft guideline on CRC screening, adding 45- to 49-year-olds to the existing 50- to 75-year-old screening recommendation.
Svbleerink’s Souda called the change a “positive” for Exact Sciences’ Cologuard business and a move that could spur broader coverage of the 45-49 demographic, which comprises about 19 million lives.
Asked by Derik De Bruin, of Bofa Merrill Lynch, if Thrive’s Cancerseek test might displace Cologuard, Conroy said no.
“The important aspect of a multicancer screening test is that you’re, for the first time ever, able to screen for cancers that today aren’t screened for. And … you’re screening a whole person rather than an individual organ,” he said.
While the Thrive and Base Genomics technologies may enhance the company’s approach to CRC screening from a blood drop, ultimately “we still believe the most sensitive and accurate way to screen is from a stool test because you just end up with more DNA in that sample with cells shedding directly from a precancer or an early cancer, providing a much higher quantity and quality of DNA to analyze.”
That said, he noted multicancer screening tests could save money by screening for a whole range of cancers in a single blood draw.