When Kevin Conroy was recruited for the top job at Exact Sciences Corp. (NASDAQ:EXAS), he knew it would require a leap of faith to take on the role. After all, the Madison, Wisconsin-based cancer diagnostics company had an unenviable track record and an uncertain future.
Exact had been unsuccessful twice in developing colorectal cancer screening tests, was quickly depleting its cash and had a pipeline that didn't inspire a great deal of confidence. These issues were reflected in the company's share price of about $2.65. That was even lower than its initial public offering price in 2001.
My, how things have changed. In the past year, the company's shares have more than doubled to $115. Just last week, Exact made a move that expands its key role in cancer diagnostics with a nearly $3 billion purchase of Genomic Health (NASDAQ:GHDX).
The Genomic addition will expand Exact's presence to 90 countries and create a leader in the cancer diagnostics space with projected 2020 revenues of $1.6 billion, according to an article in MedCity News.
"Long term, bringing together Exact Sciences and Genomic Health will create an organization with a breadth of capabilities that doesn't exist today," Conroy said on a call with investors, during which he announced the deal and reported second-quarter results. He estimated the combined company will have a $200 million research and development budget.
Conroy is often asked how he brought a company with such dim prospects to where it is today. He credits guiding principles in a Linkedin posting he published in April:
- Defy convention.
- Take risks if you want change.
- Focus on three priorities.
One big risk that paid off occurred in 2011, when the company knew it needed to validate the science for its colorectal screening test on a wide scale. So Exact started a 10,000-patient study to satisfy the evidence requirements for the Food and Drug Administration and the Centers for Medicare & Medicaid Services and, ultimately, give patients and providers the confidence in a potential new screening method.
The success of the study would make or break the company. Little need to guess what happened: Exact's Colorguard was launched in 2014 after it partnered with the Mayo Clinic. Colorguard is an at-home stool-based DNA test for colorectal cancer that has been used on more than 2.6 million people and has helped uncover 12,000 cases of early-stage cancer and 84,000 pre-cancerous polyps.
With the addition of Redwood City, California-based Genomic Health, Exact gains the Oncotype DX Breast flagship genomic test for early-stage breast cancer. Genomic also has a diagnostics product targeting prostate and colon cancer.
Expanding its pipeline to include more early detection tests for prevalent cancers was one of the key drivers in Exact's agreement to acquire Genomic.
The combined company will now have the funds required to support an aggressive research and development program. The Milwaukee Business Journal reported Conroy said the deal will also give Exact the infrastructure--something it was lacking-- to deliver a new blood-based test it has been working on to accurately detect liver cancer.
Cancer diagnostics is a huge opportunity for Exact as well as number of other companies. , According to a report from Grand View Research, the international market is expected to be worth more than $250 billion by 2026, growing by more than 7% in the coming years.
Among others with diagnostic cancer testing programs are Agilent Technologies (NYSE:A), Becton, Dickinson (NYSE:BDX), Thermo Fisher (NYSE:TMO), Illumina (NASDAQ:ILMN) and Abbott Laboratories (NYSE:ABT).
Disclosure: The author has a position in Illumina.
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