Exact Sciences and Genomic Health Merge to Form Leading Cancer Diagnostics Company
Wisconsin-based EXACT Sciences Corp. and California-based Genomic Health, Inc are merging to form a leading global cancer diagnostics company driven by two of the strongest and fastest-growing brands in cancer diagnostics, Cologuard and Oncotype DX.
Exact Sciences’ Cologuard is the first non-invasive stool DNA screening test for colorectal cancer that was approved by the U.S. Food and Drug Administration. Genomics Oncotype DX is a screening tool for breast cancer. The combined companies will have a commercial presence in more than 90 companies and plan to increase the number of early-detection tests being adopted across the globe. Additionally, the combined companies said they intend to bring new innovative cancer diagnostics to patients around the world.
Exact Sciences will combine with Genomic Health in a deal valued at $2.8 billion. The transaction is expected to close by the end of 2019. Shares of Exact Sciences are down nearly 5% in premarket trading, while Genomic’s shares are up about 2% to $70. The combined companies will have more than 1,000 employees and a strong infrastructure of lab sites.
Kevin Conroy, chairman and chief executive officer of Exact Sciences, called combining the two companies a “pivotal step” in building the “leading cancer diagnostics company in the world.” In the announcement this morning, the companies said the deal combines two of the strongest brands in cancer diagnostics into one entity and provides a platform for continued growth. Cologuard and Oncotype DX, the companies said this morning, will continue to help detect colorectal cancer and inform treatment decisions in colorectal, breast and prostate cancer, which collectively represent approximately 40% of all solid tumor incidence.
“Exact Sciences is continuing to grow sales and expand adoption of Cologuard at a rapid pace, and Genomic Health’s Oncotype DX is the global standard of care to inform treatment decisions for women with breast cancer. Together, with our collective resources and broader platform, we will be able to provide our existing tests to more people, while also accelerating the development and launch of future cancer diagnostic tests,” Conroy said in a statement.
Genomic Health’s Kim Popovits, chairman and CEO, said the merger with Exact Sciences provides immediate value to stockholders and will continue with those returns due to the combined commercial and R&D capabilities of the two companies. Popovits said those factors will “continue to drive significant growth into the future.”
There is certainly room to grow for Cologuard. Exact Sciences said it has captured less than 6% of the “large addressable market” of people over 50 years old. The company has a goal of reading a40% share of the market over the long-term. Likewise, Genomic Health estimates that its Oncotype DX suite of products in oncology and urology have a total available market of $2 billion.
Existing finances will allow the combined company to have the financial strength to support a high level of investment in R&D. Among the goals of the combined company is to identify proprietary biomarkers across the world’s 15 deadliest cancers, while continuing to advance the adoption of current products.
On a pro forma basis, the combined company expects to generate revenue of approximately $1.6 billion and gross profit of approximately $1.2 billion in 2020. Additionally, the combination is expected to generate annualized cost synergies of approximately $25 million within the third full year following close, primarily through reducing public company costs and purchasing optimization.