EXACT Sciences in strategic relationship with Genzyme for DNA diagnostics technology

9 February 2009

EXACT Sciences Corporation (NASDAQ: EXAS) has formed a strategic relationship with Genzyme Corp. (NASDAQ: GENZ) in which Genzyme has acquired intellectual property assets related to prenatal and reproductive health as well as three million shares of EXACT common stock for $24.5 million.

Under the transaction, EXACT retained exclusive worldwide rights to its colorectal cancer screening and stool-based DNA testing intellectual property, and will receive a share of Genzyme’s sublicensing income derived from the purchased intellectual property outside the fields of prenatal and reproductive health.

Jeffrey R. Luber, EXACT's President and Chief Executive Officer, said, “This strategic relationship with Genzyme is an important milestone in EXACT’s continued evolution and will serve as a solid platform for us to grow our oncology diagnostics business. Genzyme is one of the world’s leading biotechnology companies and this transaction offers an ideal relationship for EXACT. In addition to the substantial infusion of capital into EXACT, we believe that our ability to access Genzyme’s extensive development and regulatory expertise will facilitate our efforts toward the introduction of our next-generation platform for colorectal cancer screening.”

“This transaction will bring Genzyme intellectual property in support of our development of non-invasive prenatal testing and other advanced diagnostic testing services,” said Jon L. Hart, Senior Vice President and General Manager, Genzyme Genetics. “We have a responsibility to bring forward more advanced testing options for physicians and families and we are strongly committed to driving continued innovation in this field. We are pleased to be shareholders in EXACT and believe that our relationship may facilitate their important mission to bring novel stool-based cancer diagnostics to the public.”

Terms of the transaction

The transaction provides for EXACT to receive $24.5 million in cash in total. At closing, EXACT received $16.65 million, with an additional $1.85 million to be received over the next 18 months, contingent upon the non-occurrence of certain events, in exchange for the sale and license of certain of EXACT’s intellectual property assets, including those relating to reproductive and prenatal health. In addition, Genzyme purchased 3.0 million shares of EXACT common stock at $2.00 per share for an aggregate purchase price of $6.0 million. The per share purchase price represents a 127% premium to the 30-day average closing price of EXACT shares as of Market close on Monday, January 26th.

EXACT will retain rights to the technology for stool-based detection of any disease and stool or blood-based screening assays for colorectal cancer in patient samples. Further, EXACT will receive exclusive rights in these fields to improvements to the purchased intellectual property that may be developed by Genzyme. EXACT will also receive rights in these fields to improvements resulting from any joint developments between EXACT and Genzyme.

In addition, EXACT and Genzyme have amended their March 1999 license to provide EXACT with the additional rights necessary to distribute FDA approved kits for stool-based detection of disease and colorectal cancer screening based on the detection of APC and P53 mutations. The license amendment as well as the ongoing assumption by Genzyme of certain patent costs will reduce EXACT’s cash outlays going forward.

The companies have also agreed to form a joint advisory committee to assist both parties in the achievement of product development goals related to the purchased IP and to assist EXACT with its regulatory goals. Genzyme and EXACT’s joint advisory committee will consist of internal experts and outside advisors who are recognized leaders in the technological, clinical, and regulatory aspects of diagnostic testing who will advise both organizations on their product development objectives. Finally, Genzyme has agreed to pay EXACT a double digit percentage of any sublicensing income that it receives outside the field of reproductive and prenatal health which utilize the intellectual property.

EXACT’s strategic plan

Going forward, EXACT plans to focus on the development of a Version 3 colorectal cancer screening test based on an improved DNA detection technology developed by Johns Hopkins University in the US.

Previously, EXACT announced the published results from a proof of concept study using the BEAMing technology, an advanced form of digital PCR, in which stool and blood plasma were assessed in a head-to-head comparison for the detection of colorectal cancer (CRC).

Study results demonstrated 92% sensitivity for detecting CRC in stool samples. These data were published in the August 2008 issue of Gastroenterology in a paper entitled Analysis of Mutations in DNA Isolated from Plasma and Stool of Colorectal Cancer Patients. The newly expanded APC/P53 gene license with Genzyme to the key genetic markers used in the August BEAMing publication will facilitate the Company’s efforts to offer FDA-approved kits based on such a Version 3 technology.

EXACT intends to resume sample collection for a clinical trial aimed at securing US FDA clearance or approval for a new Version 3 technology for non-invasive colorectal cancer screening. The Company currently plans to design the trial based on its extensive discussions held with the FDA in mid 2008 and will seek input from Genzyme through the joint advisory committee.

EXACT intends to re-start the sample accrual process during the current fiscal quarter. This should allow EXACT to submit an application for FDA approval in 2011, assuming its platform development and sample collection goals have been met prior to this date. Achieving development goals more quickly may allow EXACT to pursue CLIA launch of a Version 3 test by early 2011, an opportunity the company plans to evaluate as part of its strategic plan.

The Company also intends to continue its evaluation of related technologies, resources, and relationships that can accelerate its overall progress and allow it to access adjacent opportunities such as aero-digestive cancer screening.

EXACT remains encouraged by the recent momentum in state-based mandates for coverage of sDNA testing following its inclusion in the March 2008 American Cancer Society guidelines recommendation. The Company intends to continue its work with US health insurers and other third party payors around the country to expand coverage.
Based on current expectations, EXACT believes that its cash resources should last into 2011, which would allow the Company to be opportunistic in seeking the further financing that will be needed to develop and launch a Version 3 test. The Company is continuing to develop a detailed implementation plan for its Version 3 technology.

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