After less than a year, Exact Sciences has terminated a partnership with the University of Texas MD Anderson Cancer Center aimed at developing blood-based diagnostic tests for lung cancer.
The decision to nix the agreement was mutual, MD Anderson’s Sam Hanash said in an e-mail to Xconomy. Hanash is a physician and researcher at the cancer center, which is in Houston.
The main reason for ending the collaboration, which was announced in June, was its potentially high cost, Exact CEO and chairman Kevin Conroy said during an earnings call with financial analysts on Wednesday. Madison, WI-based Exact (NASDAQ: [[ticker:EXAS]]) decided it could not justify spending millions of dollars on a study of the lung cancer screening test when there would still be uncertainty around receiving approval from regulators afterward. Conroy specifically cited the U.S. Preventive Services Task Force, which has been a stumbling block for Exact’s flagship product, Cologuard, a stool-based DNA screening test for colorectal cancer.
Exact and MD Anderson realized that, “the amount of evidence that the Task Force requires for a new screen modality is so incredibly high that even one large study may not have been enough,” Conroy said, according to a transcript of the call posted on the stock market website Seeking Alpha.” And that one large study could’ve cost $50 million to…$100 million, depending on what the FDA [would] require.”
Exact and MD Anderson had said that a clinical trial for one of the tests they were planning could involve more than 15,000 patients.
That would’ve been larger than the 10,000-patient study Exact completed to advance Cologuard to market in 2014. The positive results and thoroughness of that clinical trial drew praise from an FDA advisory panel that unanimously endorsed Cologuard. The test later received FDA approval and Medicare coverage.
But the U.S. Preventive Services Task Force dealt Cologuard an unexpected setback last October. The group issued draft guidelines that recommended four other colorectal cancer screening methods, but put Cologuard into a new “alternative” screening category.
The proposed recommendations created uncertainty around how insurers would cover the test, and Exact’s stock price was cut nearly in half in a single day.
The Task Force’s final guidelines have yet to be issued. In the mean time, Exact has continued striking agreements with private insurers to cover Cologuard.
One of the tests planned with MD Anderson would have screened current and former smokers to determine the need for low-dose computed tomography (CT) scans, which can be used to detect lung cancer.
Exact is continuing to work on the other lung test alongside the Mayo Clinic, a Rochester, MN-based health system that Exact spokesman JP Fielder said was already part of the project before MD Anderson dropped off. That test is aimed at assessing potentially cancerous nodules, or clumps of cells, found in the lungs as a result of CT scans or other imaging work. Exact has said that the vast majority of all nodules found by CT scans are benign, which it said leads to “unnecessary and often harmful invasive procedures, radiation exposure, and high costs.”
Conroy said that Exact has not yet determined whether the nodules-related test will be a laboratory-developed diagnostic test or one submitted for FDA approval. Going the lab-developed route would likely be the cheaper option. That’s because lab-developed tests use a controversial FDA regulatory exception that allows companies to market tests that they design and carry out in-house. Such tests bypass the usual FDA approval process, although the agency has proposed strengthening its oversight.
Meanwhile, Mayo and Exact are working on a program to distinguish between pancreatic cancer and benign tumors, Conroy said. The two groups are also collaborating on a diagnostic targeting patients who have been diagnosed with Barrett’s esophagus, which puts them at increased risk of developing esophageal cancer. Cologuard was developed with help from researchers at Mayo.
Exact’s financial results for the three-month period ending Dec. 31, the main reason for the conference call, were mixed. The company reported a loss of $40 million, or 41 cents per share. That’s compared with a $32.4 million loss during the same period the previous year. Overall, Exact posted a $157.8 million annual loss in 2015, wider than its $100 million loss in 2014.
The company’s stock price decreased 8.4 percent Wednesday, closing at $5.87 a share.
There were some positive data points, however. Quarterly revenues were $14.4 million, up from $1.5 million in the final quarter of 2014. And the number of physicians ordering Cologuard increased to nearly 27,000, a 27 percent hike from the previous quarter’s total.
