Exact Sciences Corp. and Genomic Health Inc. have entered into a definitive agreement under which Exact Sciences will combine with Genomic Health for $72.00 per share in a cash and stock transaction valued at $2.8 billion. The transaction, which has been unanimously approved by the Boards of Directors of both companies, is expected to be completed by the end of 2019.
 
Together, Exact Sciences and Genomic Health will create a leading global cancer diagnostics company. The combined company will offer two of the strongest and fastest growing brands in cancer diagnostics, Cologuard and Oncotype DX, providing a robust platform for continued growth. With this enhanced platform, including a commercial presence in more than 90 countries, the combined company expects to continue to increase adoption of current tests, and to bring new innovative cancer diagnostics to patients throughout the world.
 
On a pro forma basis, the combined company expects to generate revenue of approximately $1.6 billion and gross profit of approximately $1.2 billion in 2020. Additionally, the combination is expected to generate annualized cost synergies of approximately $25 million within the third full year following close, primarily through reducing public company costs and purchasing optimization.
 
"Uniting the best minds and molecular diagnostics capabilities will advance the fight against cancer. Combining industry pioneers Exact Sciences and Genomic Health is a pivotal step toward building the leading cancer diagnostics company in the world," said Kevin Conroy, chairman and CEO of Exact Sciences. "Exact Sciences is continuing to grow sales and expand adoption of Cologuard at a rapid pace, and Genomic Health's Oncotype DX is the global standard of care to inform treatment decisions for women with breast cancer. Together, with our collective resources and broader platform, we will be able to provide our existing tests to more people, while also accelerating the development and launch of future cancer diagnostic tests. We are excited to join together two teams who are united in their dedication to making a positive impact on patients' lives."
 
"We are very pleased to join forces with Exact Sciences, a company and team with which we have a shared vision to revolutionize the way cancer is diagnosed and treated," said Kim Popovits, chairman of the board, chief executive officer and president of Genomic Health. "Genomic Health has achieved incredible success over nearly two decades in pioneering cancer diagnostics, and the recent landmark TAILORx trial results set a new standard of care for the use of the Oncotype DX test for women with early-stage invasive breast cancer. This transaction provides immediate value to Genomic Health stockholders through an upfront cash payment, as well as ownership in a combined company with enhanced financial strength and the commercial and R&D capabilities to continue to drive significant growth into the future."
 
Cologuard and Oncotype DX, the companies' leading brands, will respectively continue to help detect colorectal cancer and inform treatment decisions in colorectal, breast and prostate cancer, which collectively represent approximately 40 percent of all solid tumor incidence.
 
Exact Sciences' Cologuard has a total available U.S. screening market of $15 billion, with an additional potential $3 billion opportunity among people ages 45-491. To date, Cologuard has captured less than 6 percent of the large addressable market of people over 50 years old, and is rapidly building on its 174,000-healthcare provider customer base, with a goal of reaching 40 percent share of the market over the long-term. In the second quarter of 2019, Cologuard revenue grew 94 percent year-over-year.   
 
Genomic Health's Oncotype IQ portfolio has guided personalized treatment decisions for more than one million cancer patients worldwide, and delivered more than 19 percent year-over-year overall revenue growth in the second quarter of 2019. Genomic Health estimates that its Oncotype DX suite of products in oncology and urology have a total available market of $2 billion.

The transaction will create a combined R&D team with extensive clinical capabilities and a robust evidence generation engine, complemented by proven regulatory expertise, and key relationships with oncologists. The combined commercial organization will have more than 1,000 team members inclusive of sales, marketing and reimbursement teams. The combined company will have the financial strength to support a high level of investment in R&D. This will support the development of innovative products across the diagnostic paradigm, including the ongoing work to identify proprietary biomarkers across the world's 15 deadliest cancers, while continuing to advance the adoption of current products.  

The combined company will have a commercial presence in more than 90 countries and expanded reach across primary care, oncology, OB/GYN, gastroenterology, and urology to support growth of existing and future cancer tests. The combined company will build upon Genomic Health's presence in the San Francisco Bay Area, providing lab infrastructure in a state where the Medicare Administrative Contractor participates in the MolDx program, which may facilitate reimbursement of future liquid biopsy products.
 
Under the terms of the agreement, for each share of Genomic Health common stock they own, Genomic Health stockholders will receive $27.50 in cash and $44.50 in shares of Exact Sciences stock, subject to a 10 percent collar centered on Exact Sciences' volume-weighted average price for the 45 trading days ended July 26, 2019.
 
Based on the parties' closing stock prices as of July 26, 2019, the last trading day prior to today's announcement, the total per-share consideration represents a premium of approximately 19 percent to Genomic Health's volume-weighted average price ("VWAP") for the last 30 trading days. Upon closing, Exact Sciences shareholders are expected to own approximately 91 percent of the combined company, and Genomic Health stockholders are expected to own approximately 9 percent.
 
The transaction is subject to customary closing conditions and regulatory approvals, including the approval of stockholders of Genomic Health. Felix and Julian Baker and certain funds advised by entities with whom they are affiliated, which collectively own approximately 25.3 percent of the outstanding shares of Genomic Health common stock, have entered into agreements to vote in favor of the transaction.
 
Centerview Partners and XMS Capital Partners are serving as financial advisors to Exact Sciences and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal advisor. Goldman Sachs & Co. LLC is serving as financial advisor to Genomic Health and Sullivan & Cromwell LLP and Pillsbury Winthrop Shaw Pittman LLP are serving as legal advisors.