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Exact Sciences has long been synonymous with its non-invasive colon cancer screening test Cologuard, but it could soon be known for a broader array of cancer diagnostic technology that’s in the pipeline at the Madison-based company.
The biotech company has made a series of acquisitions in the past two years, staking a claim in more corners of the cancer diagnostics market and widening its scope to include screening for more types of cancer, identifying the right course of therapy for cancer patients and monitoring cancer’s recurrence.
Exact Sciences first introduced Cologuard – an at-home screening test that uses protein and DNA biomarkers to detect the presence of colon cancer in stool samples – after receiving U.S. Food and Drug Administration approval in 2014. The company has seen massive growth since then, thanks to growing demand for the test and expanding insurance coverage for it.
In November 2019, Exact made a $2.8 billion acquisition of California-based Genomic Health, which expanded its diagnostics into breast cancer with Genomic’s Oncotype DX test.
Brian Weinstein, an analyst with investment firm William Blair & Co, points to the Genomic acquisition as a “lightbulb moment” that signaled Exact leadership’s larger, long-term vision of “not just being the Cologuard company but being the leader in all cancer diagnostics.”
Exact has doubled down since then on a series of acquisitions to build out its testing technology capabilities. In spring 2020, it acquired two Phoenix-based diagnostic companies, Paradigm Diagnostics, Inc. and Viomics, Inc. Those were followed by another acquisition later that year of England-based epigenetics company Base Genomics for $410 million.
“The takeaway on those other deals is that this is a company that is willing to bring in any technology that they think they need to in order to solve the problem at hand,” Weinstein said.
Late last year, Exact took what chief executive officer Kevin Conroy described as a “giant leap” toward its goal of commercializing a blood-based multi-cancer screening test when it announced its acquisition of Massachusetts-based Thrive Earlier Detection Corp. in an eye-popping $2.15 billion cash-and-stock deal. Thrive developed a liquid biopsy test, called CancerSEEK, which – in a 10,000-patient prospective study – showed promising results in detecting 10 types of early-stage cancer before symptoms occur.
Exact Sciences has been working for years with the Mayo Clinic to identify and validate biomarkers across various types of cancers with the goal of bringing more blood-based cancer screening tests to market.
Conroy has said he expects blood-based, multi-cancer screening to be as routine as a common blood test for other health conditions a decade from now.
“One of the greatest opportunities to eradicate cancer is through a multi-cancer screening test,” he said.
Exact has closed on two more acquisitions since the beginning of the year: Ashion Analytics, LLC, a sequencing lab in Phoenix Arizona, and PFS Genomics, a company that has developed a mechanism for identifying which women with early-stage invasive breast cancer need radiation therapy.
Driving Exact’s acquisition strategy, Conroy said, is the question of whether the new test or technology will significantly impact patient care.
“That’s where everything starts,” Conroy said during a May earnings call. “The PFS deal is an example of that. We believe it’s going to dramatically change how certain patients with breast cancer are treated.”
The vision, Conroy said, is to create a “flywheel effect” by building a suite of tests that can help patients detect cancer earlier and better inform their treatments.
“We have a responsibility now to bring more and better tests and services and data and data insights and artificial intelligence to the physicians that treat patients and the patients who desperately need new ways to be treated,” he said.
That vision will take some time, however, as the success of new testing products are dependent on factors like FDA approval, Medicare reimbursement and broad commercial insurance coverage, and inclusion in U.S. Prevention Services Task Force guidelines.
For example, while preliminary data has been promising for its liquid biopsy multi-cancer screening test, the company expects clinical trials – which could involve as many as 100,000 patients – to take a few years before it would seek FDA approval for the product, Conroy told investors.
Meanwhile, Exact continues to see growth in its flagship product. Despite the national decline in in-person doctor visits, revenues from Cologuard and Exact’s Biomatrica products were up 10% in the first quarter compared to a year ago.
There’s also more growth potential for the Cologuard product on the horizon. New guidelines released last month by the USPSTF lowered the recommended age for beginning colon cancer screenings, from 50 to 45. That decision widens Exact’s potential customer base by roughly 19 million people. In 2019, the FDA approved Cologuard for average-risk individuals beginning at age 45, and the task force included Cologuard among the recommended screening test options when it issued its new guidance.
Since first being included in the USPSTF recommendation in 2016, Cologuard has been used to screen more than 5 million patients in the U.S.
Exact’s revenue has grown year over year, from $266 million in 2017 to just under $1.5 billion in 2020. The screening segment of the business, which includes Cologuard, brought in roughly $815 million last year. The company is projecting total revenues of roughly $1.7 billion at year’s end.
However, Exact Sciences is still not profitable, though its net losses did narrow from $134.6 million, or 91 cents per share, in the first quarter of 2020 to $31.2 million, or 18 cents per share, in the first quarter of this year.
That kind of financial picture is typical for precision oncology companies, Weinstein said, pointing to competitors Guardant Health, Invitae Corp. and Natera, Inc. He noted the company isn’t expected to be profitable in the near-term as it continues to invest in its infrastructure, R&D and clinical trials.
“There is a massive amount of investment that is going on to not just support product development, which of course is critical and is the foundation, but to also support infrastructure buildout in the sense of having laboratory operations, health care IT systems that are linked in, a salesforce that’s built out,” he said. “There’s a lot of things that go into the development of these products that extend beyond ‘do they work or not?’”
That’s not to mention the cost of bringing in leaders who can steer a company with big aspirations like Exact.
“World-class individuals aren’t cheap,” Weinstein said.
Profitability will likely depend on the outcomes of future clinical trials and potential insurance coverage for its new products.
When it comes to competitors, Weinstein said Exact is in a favorable position of being able to build off its existing, successful Cologuard infrastructure for the growth of other testing products.
“A lot of these other guys don’t really have that kind of core product in the space to sort of use as a jumping off point,” he said.
Exact isn’t likely to rest on its laurels, however, as the “arms race” in the precision oncology market ramps up, Weinstein said.
“Knowing Kevin (Conroy), he’s not going to stop,” he said. “He’s going to keep putting the pedal down and is going to keep spending and investing.” ϖ