OncoCyte said today it plans to acquire Razor Genomics for at least $11 million, in a deal designed to bolster the buyer’s early-stage lung cancer management capabilities with a Razor test that recently won a positive coverage recommendation by the Centers for Medicare & Medicaid Services (CMS).
Razor’s CLIA-certified treatment stratification test is designed to identify early-stage lung cancer patients who are at high-risk versus low-risk of death within five years following surgical resection. The Razor test is intended to enable identification of lung cancer patients at high risk for recurrence, allowing them to be treated during a stage when their cancer may still respond to adjuvant chemotherapy.
“The addition of the Razor treatment stratification test for patients diagnosed with early stage lung cancer is a perfect downstream complement to our proprietary DetermaVu liquid biopsy test,” OncoCyte CEO Ron Andrews said in a statement.
DetermaVu is a proprietary confirmatory, non-invasive liquid biopsy test OncoCyte is developing, with the aim of facilitating the early diagnosis of lung cancer by helping manage CT-identified lung nodules. According to OncoCyte, DetermaVu will be a significant advance over current standard of care for confirmatory diagnosis of suspicious nodules, which entails performing invasive and often risky biopsy procedure
“The Razor test enables us to address an adjacent critical decision point that physicians and patients face during the lung cancer treatment journey that today remains unmet,” Andrews added. “There are many such decision points along this care continuum, and this transaction is a significant step forward for OncoCyte as we work to build a comprehensive diagnostic content company serving the needs of lung cancer patients across disease stages, from early diagnosis all the way through recurrence monitoring and beyond.”
OncoCyte cited statistics showing that approximately 30% of patients with surgically removed early stage lung cancer recur, while over half of those that recur die within five years of surgery. Andrews also cited positive studies of Razor’s treatment stratification test in The Lancet and the Journal of the American Medical Association (JAMA), as well as CMS’s recent proposed positive coverage decision to provide reimbursement, which he predicted will drive broad adoption of the test.
The acquisition is expected to close by September 30, subject to customary and other closing conditions. OncoCyte will have a purchase option allowing it to acquire the balance of the outstanding shares of Razor common stock from Razor’s shareholders.
Upon closing of the deal, OncoCyte agreed to pay $10 million for an initial 25% equity interest in the form of Razor preferred stock, plus an additional $1 million milestone payment for achieving the positive CMS coverage decision.
The selling shareholders of Razor are eligible to receive an additional $10 million in cash and $5 million of OncoCyte common stock, or shares of common stock and cash in certain circumstances,for all remaining shares of Razor upon achieving clinical trial milestones. The Razor shareholders are also eligible for an additional up to $3 million of OncoCyte common stock, or shares of common stock and cash in certain circumstances, tied to achieving another clinical trial milestone—while OncoCyte also agreed to pay Razor’s parent company Encore Clinical $4 million in cash upon achieving an additional CMS coverage milestone.
Razor has agreed to set aside $4 million of the initial $10 million payment from the purchase of the preferred stock toward funding a supplemental clinical trial of the Razor test. OncoCyte said it agreed to pay future clinical trial costs in excess of that $4 million reserve, subject to ceilings under a clinical trial budget.
“There remain many significant unmet needs in the detection and treatment of lung cancer, and we are poised to occupy a leading position in providing molecular tests that can improve outcomes for lung cancer patients,” Andrews stated.