NEW YORK – Concurrent with the release of its third quarter earnings on Tuesday, Exact Sciences announced that it has entered into a definitive agreement to acquire liquid biopsy test developer Thrive Earlier Detection for cash and stock consideration of up to $2.15 billion, and that it has acquired DNA methylation analysis company Base Genomics for $410 million.
The deals are meant to help Exact accelerate its development of a blood-based, pan-cancer test that would eventually be used routinely in every part of a cancer patient's care — from diagnosis to residual disease testing to therapeutic decision-making.
The acquisition of Thrive is "a giant leap forward toward ensuring blood-based multi-cancer screening becomes a reality, and eventually standard of care," Exact Chairman and CEO Kevin Conroy said on a conference call with analysts to discuss the earnings and the merger deal.
Cambridge, Massachusetts-based Thrive has raised at least $357 million in financing since its founding, including a $257 million series B financing in July and a $110 million Series A financing in May 2019. Conroy noted that Exact participated in both rounds as an investor. He said that the merger of the two companies would create an R&D team specializing in methylation, next-generation sequencing, bioinformatics, and liquid biopsy, with robust clinical evidence generation capabilities. He further added that Exact is uniquely placed to accelerate the approval, availability, and widespread adoption of multi-cancer screening, and that he expects the combination of the two firms to transform the future of premier cancer diagnostics and have a "powerful impact on [cancer] outcomes."
Specifically, Conroy said that 114 million people between the ages of 50 and 85 in the US could be screened with a pan-cancer test. While the total addressable markets are currently about $18 billion and $3.5 billion for Exact's colorectal cancer test Cologuard and Oncotype DX genomic tests, respectively, the company estimated that the market for multi-cancer testing could be worth $25 billion or more.
On the call, Thrive CEO David Daly noted that the company envisions a future where earlier cancer detection is integrated into routine cancer care. Thrive's CancerSeek blood test, which was developed by researchers at Johns Hopkins University, has been validated in a 10,000-patient prospective interventional study. In the study, JHU researchers used Thrive's combined DNA mutation and protein analysis to detect early-stage cancers in 10 different organs, seven of which did not have standard-of-care screening, Daly said.
According to Conroy, Exact now plans to combine its own expertise on DNA methylation with Thrive's work on cancer mutations, protein markers, and liquid biopsy. The firms will improve CancerSeek by adding methylation markers to it to increase its sensitivity while holding its specificity at the current 99 percent rate.
Though he declined to provide exactly what levels of sensitivity the new version of CancerSeek may reach, Conroy pointed to data that Exact shared in September at the Cowen Liquid Biopsy Summit on a pan-cancer liquid biopsy test that it was developing in partnership with the Mayo Clinic. That data showed overall sensitivity of 86 percent at a specificity of 95 percent in initial results for a six-cancer test, and that was a limited panel of methylation markers, Conroy said. Exact and Thrive are confident that adding mutational and protein analysis to methylation marker detection will help increase the sensitivity greatly.
"The amazing innovation of Cologuard being able to get to a high level of cancer detection was done because of a combination of methylation, mutation, and proteins, and it's this multi-analyte approach that we think will serve patients," he added.
Once the assay optimization work is complete, the company plans to conduct an 80,000-patient clinical trial to demonstrate the clinical value of CancerSeek, and obtain regulatory approval from the US Food and Drug Administration.
Exact is also positioned to make CancerSeek succeed in the same way it made Cologuard a success, with proven clinical and regulatory teams, payor relationships, lab space, sales teams, and marketing and customer support experience, Conroy added.
He declined to comment on a timeline for the launch of the test, as well as possible pricing, however, he did add that the number of methylation markers to be incorporated into CancerSeek is limited, so the teams are set to work quickly.
"With Thrive, Exact Sciences will gain additional scientific capabilities necessary to bring tests to patients at every step of their cancer journey" including screening, minimum residual disease testing, and therapeutic selection, he said.
As for Base Genomics, Conroy said, the company's epigenetics expertise and DNA methylation analysis technology will enhance Exact's efforts in cancer diagnostics across its product portfolio. He noted that the low-cost technology is highly complementary to Exact's existing platform, and will enable accurate detection of cancer markers in small amounts of blood samples.
The company raised $11.5 million in June to commercialize a new approach for DNA methylation sequencing. The technology is called TET-assisted pyridine borane sequencing (TAPS), and it enables users to detect both 5-methyl cytosine and 5-hydroxymethyl cytosine at single-base resolution, overcoming limitations with the conventional bisulfite sequencing approach for methylation analysis, which requires a large amount of input DNA and damages the DNA during the chemical reaction.
Importantly, Conroy also said that multi-cancer screening will not replace single-cancer tests like Cologuard for colorectal cancer or mammography for breast cancer. The sensitivity of multi-cancer won't achieve the sensitivity levels of mammography or Cologuard, he said. But for the first time, these tests will allow doctors to screen for cancers that can't be screened for right now, and blood-based pan-cancer screening will allow cancer testing to become part of a regular health checkup.
Base Genomics' and Thrive's technologies will enhance Exact's technology for cancer screening from a blood draw, but ultimately, the most sensitive way to detect colorectal cancer is from stool, Conroy added. So, the new tests the company plans to develop will enhance its existing products, rather than replacing them.
In a note to investors, SVB Leerink analyst Puneet Souda said Exact's acquisition of Thrive, which comes just over one month after Illumina's $8 billion acquisition of Grail, provides further validation for the liquid biopsy market as a whole. Importantly, it serves to "further entrench [Exact] in the liquid biopsy cancer screening market," he wrote.
In his own note to investors, BTIG analyst Mark Massaro reiterated his choice of Exact's stock as a Top Pick, saying that the acquisition of Thrive is "a great match, not only because the technologies and products are complementary, but both management and boards are aligned and highly mission-driven."
The deal will likely prove to be a headwind for Exact in the short term, but the acquisitions of both Thrive and Base Genomics take some of the risk out of Exact's screening business over the mid- to long-term and the company will remain "a leader in cancer screening for the next decade," he added.
Exact's shares rose nearly 25 percent to $133.01 in afternoon trading on the Nasdaq.