Exact Sciences stock crashed Wednesday after the company inked a deal for the exclusive rights to Freenome's blood-based colon cancer test.
The news comes alongside a second-quarter beat-and-raise. But Exact shares tumbled 15.8% to 39.50 in after-hours trades. The test Exact is licensing beat out its own internally developed blood-based colon cancer screening tool.
Under the terms of the deal, Exact Sciences will pay $75 million in cash and make up to $700 million in additional payments to secure the rights to Freenome's current and future blood-based screening tools for colorectal cancer. Exact will also pay sales royalties up to 10% and $20 million annually for the next three years in joint research and development costs.
The deal builds on Exact's own platform, which includes a stool-based screening test called Cologuard and an experimental blood test. These tools target the roughly 50 million people in the U.S. who are eligible for colon cancer screening.
"Any updates on their blood-based testing strategy are likely to be the most important data points," RBC Capital Markets analyst Conor McNamara said in a report. "If it unclear if EXAS plans to continue their blood-based test development, stating, 'Internal testing and evaluation of the assay are ongoing.' "
Exact Sciences Builds On Cologuard
Colon cancer is diagnosed with a colonoscopy. But other tools like Cologuard, fecal immunochemical tests and blood-based tests can help screen for signs of cancer.
In clinical studies, Freenome's first test showed 81% sensitivity for colon cancer. This means it correctly identified patients with the disease. It also correctly identified 14% of patients with advanced lesions that indicate cancer. Those lesions can be surgically removed before they become a systemic problem.
Freenome's test also had a specificity of 90%, meaning it correctly ruled out nine in 10 patients who didn't have the disease.
The results outperformed Exact Sciences' internally developed blood-based test, which had a sensitivity of 73% for colon cancer, with a sensitivity of 14% for advanced lesions at a 90% specificity. An Exact Sciences spokesperson notes the Freenome test uses next-generation sequencing technology, while its internally developed test relies on a PCR platform.
Guidance Hiked For 2025
Exact Sciences also easily topped second-quarter sales expectations. Sales grew 16% to $811 million, beating forecasts for $774 million, according to FactSet.
The company also reported a loss of 1 cent per share, improving from a 9-cent loss in the year-ago period and topping expectations for a 13-cent loss.
Screening tools brought in $628 million in sales, easily above forecasts for $602 million, while Exact Sciences' precision oncology business generated $183 million in sales. Analysts called for a lower $173 million for the precision oncology unit.
Exact Sciences raised its full-year sales guidance by $55 million to a range of $3.13 billion to $3.17 billion. Analysts projected a lower $3.1 billion in sales for the year.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
