EXAS » Topics » Overview

This excerpt taken from the EXAS 10-Q filed May 15, 2009.

Overview

 

EXACT Sciences Corporation is a molecular diagnostics company focused on colorectal cancer.  Our non-invasive stool-based DNA (sDNA) screening technology includes proprietary and patented methods that isolate and analyze human DNA present in stool to screen for the presence of colorectal pre-cancer and cancer.  We believe that our proprietary methods and technologies have several advantages over other screening options that may ultimately lead to decreased mortality associated with colorectal cancer, which is the third leading cause of cancer death overall, the second leading cause of death from cancers that affect both men and women, and the leading cause of cancer death among non-smokers in the United States.

 

Currently, we license certain of our colorectal cancer screening technologies on an exclusive basis in the U.S. and Canada through December 2010 to Laboratory Corporation of America® Holdings, or LabCorp®.  LabCorp has developed and commercially offers a non-invasive stool-based DNA (sDNA) colorectal cancer screening service for the average-risk population, which is based on certain of our technologies.

 

Our primary goal is to become the market leader for a patient-friendly diagnostic screening product for the early detection of colorectal pre-cancer and cancer.  Our strategic roadmap to achieve this goal includes the following key components:

 

·      develop and refine our non-invasive sDNA colorectal pre-cancer and cancer screening test;

 

·      advance our product through U.S. Food and Drug Administration, or FDA, clinical trials;

 

·      secure insurance coverage and reimbursement for our product; and

 

·      commercialize an FDA-cleared product that detects colorectal pre-cancer and cancer.

 

We believe obtaining FDA approval is critical to building broad demand and successful commercialization for our sDNA colorectal cancer screening technologies.  In 2009, we intend to focus on further refining our product design to demonstrate the clinical superiority of the test to detect pre-cancer and adenomas while balancing its product attributes to enable ease of commercialization and widespread laboratory adoption.  Additionally, we intend to finalize plans for clinical trials in 2009—with the goal of confirming our trial protocols with the FDA.

 

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Table of Contents

 

We have generated limited operating revenues since inception and, as of March 31, 2009, we had an accumulated deficit of approximately $176.3 million.  Losses have historically resulted from costs incurred in conjunction with research, development and clinical study initiatives; salaries and benefits associated with the hiring of personnel; the initiation of marketing programs; and prior to August 31, 2007, the build-out of our sales infrastructure to support the commercialization of SDNA screening.  We expect to continue to incur losses for the next several years, and it is possible we may never achieve profitability.

 

This excerpt taken from the EXAS DEF 14A filed Apr 29, 2009.

Overview

        Our compensation philosophy is based on a desire to balance retention of executive talent with pay for performance-based incentive compensation. In this regard, we have designed our compensation programs to reward our named executive officers for continued service and our sustained financial and operating performance. We also believe that the compensation of our named executive officers should align our executives' interests with those of our stockholders and focus executive behavior on the achievement of both near-term corporate targets as well as long-term business objectives and strategies. It is the responsibility of the Compensation Committee of our Board of Directors to administer our compensation practices to ensure that they are competitive and include incentives that are designed to appropriately drive our performance. Our Compensation Committee reviews and approves all of our executive compensation policies, including executive officer salaries, bonuses and equity awards.

These excerpts taken from the EXAS 10-K filed Mar 31, 2009.

Overview

        EXACT Sciences Corporation develops proprietary DNA-based technologies for use in the detection of certain cancers. We have selected colorectal cancer as the first application of our technologies. We license certain of our colorectal cancer screening technologies, including improvements to such technologies, on an exclusive basis in the United States and Canada through December 2010 to Laboratory Corporation of America® Holdings, or LabCorp®. LabCorp has developed and commercially offers a non-invasive stool-based DNA colorectal cancer screening service for the average-risk population, which is based on certain of our technologies. Our current focus is on commercially developing, and obtaining U.S. Food and Drug Administration, or FDA, approval for, a colorectal cancer screening product based on our stool-based DNA technologies.

        Colorectal cancer is the third leading cause of cancer death overall, the second leading cause of death from cancers that affect both men and women in the United States, and the leading cause of cancer death among non-smokers. Patients who are diagnosed early in the progression of the disease, however, are more likely to have a complete recovery and to utilize lower levels of expensive medical resources. Accordingly, the American Cancer Society, or ACS, recommends that all persons age 50 and above undergo regular colorectal cancer screening. Of the more than 89 million people in the United States for whom routine colorectal cancer screening is recommended, it is estimated that about one-half have never been screened, and it is believed that a significant portion of the balance have been inadequately screened. We believe that this large population of unscreened patients represents an opportunity to reduce the mortality and healthcare costs associated with colorectal cancer.

        Professional colorectal cancer screening guidelines in the United States, including those of the ACS, the American College of Gastroenterology, and the American Gastroenterological Association, recommend regular screening by a variety of methods. Historically, such recommendations consisted of colonoscopy, flexible sigmoidoscopy and fecal occult blood testing, or FOBT, as well as combinations of some of these methods. On March 5, 2008, the ACS and the U.S. Multi-Society Task Force on Colorectal Cancer, or MSTF-CRC, a consortium of several organizations including representatives of the American College of Gastroenterology, American Gastroenterological Association, American Society for Gastrointestinal Endoscopy and the American College of Physicians/Society of Internal

1


Table of Contents


Medicine, announced that non-invasive, stool-based DNA screening technology has been included in the updated national colorectal cancer screening guidelines as a screening option for the detection of colorectal cancer in average risk, asymptomatic individuals age 50 and above. Accordingly, LabCorp's commercially offered, non-invasive stool-based DNA colorectal cancer screening service is the first DNA-based, non-invasive colorectal cancer screening test to be available for use following the issuance of these new colorectal cancer screening guidelines of the ACS and MSTF-CRC in the United States for the average risk population.

        LabCorp developed and commercially offered PreGen-Plus, its first generation non-invasive stool-based DNA colorectal cancer screening service for the average-risk population based on our Version 1 technology, from August 2003 through June 2008. In June 2008, LabCorp stopped offering PreGen-Plus and, in July 2008, LabCorp began to commercially offer ColoSure™, its next generation non-invasive, stool-based DNA testing service for the detection of colorectal cancer in the average-risk population, which is also based on certain intellectual property relating to colorectal cancer screening that we license to LabCorp. LabCorp, the second largest commercial laboratory in the United States with more than 37 primary laboratories and over 1,600 patient service centers, is the exclusive licensee, in the United States and Canada, of certain of our intellectual property relating to colorectal cancer screening through December 2010, followed by a non-exclusive license for the life of the licensed patents. LabCorp currently does not offer ColoSure in Canada. LabCorp performs the ColoSure testing service in a single specialized centralized laboratory and, by the terms of the license, pays us a fifteen percent royalty based on its net revenues from sales of ColoSure. Pursuant to the terms of our license agreement with LabCorp, LabCorp has paid us $30 million in upfront license fees and milestones. In addition, we may be eligible for up to an additional $42.5 million in milestones and performance incentives under the agreement, primarily based on the achievement of significant sales thresholds. Pursuant to our amended license agreement with LabCorp, we are permitted to license the intellectual property to any third party in connection with an FDA approved product and to select third-party organizations and commercial service laboratories, for a colorectal cancer testing service, subject to certain pricing protections afforded to LabCorp. LabCorp maintains sole responsibility, at its expense, for all commercial activities including marketing, sales, and reimbursement of ColoSure under the agreement.

        In addition to our Version 1 technology underlying the PreGen-Plus testing service formerly offered by LabCorp, we have also developed or licensed technologies related to a Version 2 colorectal cancer screening technology that we believe has greater sensitivity and is more cost effective than Version 1. Our Version 2 technology includes two DNA markers, which in published studies have been shown to be associated with colorectal cancer. These markers include the aberrant methylation of the Vimentin gene promoter region, which we refer to as Vimentin, and DIA®, or long DNA. We have exclusive rights to the Vimentin technology through our license agreement with Case Western Reserve University, or Case Western, under which we are obligated to pay a royalty and certain other fees to Case Western in return for the right to use and sublicense the Vimentin technology. In a research study evaluating stool-based DNA in 82 patients with confirmed colorectal cancer and 363 colonoscopically normal individuals, our Version 2 stool-based DNA technology demonstrated sensitivity of 83 percent and specificity of 82 percent for the detection of colorectal cancer. LabCorp's ColoSure testing service currently relies solely on the Vimentin gene and does not use the DIA marker that is also included in our Version 2 technology. In July 2008, as part of our cost reduction efforts, we suspended our efforts to seek FDA approval or clearance for our Version 2 technology.

        In January 2009, we completed a strategic transaction with Genzyme Corporation, or Genzyme, pursuant to which Genzyme acquired from us, for an aggregate of $18.5 million, our intellectual property assets related to the fields of prenatal and reproductive health as well as certain intellectual property outside the fields of colorectal cancer screening and stool-based DNA testing. Genzyme also purchased three million shares of our common stock, or approximately ten percent of our outstanding

2


Table of Contents


common stock, for an aggregate of $6.0 million. Under our agreement with Genzyme, we retained worldwide rights to our colorectal cancer screening and stool-based DNA testing intellectual property, and will receive a portion of any Genzyme sublicensing income derived from the purchased intellectual property outside the fields of prenatal and reproductive health. We and Genzyme also agreed to form a joint advisory committee to assist Genzyme in the achievement of product development goals related to the purchased intellectual property and to assist us with our product development and regulatory goals.

        Following the closing of our strategic transaction with Genzyme in January 2009, we have begun resuming our efforts to develop an FDA-approved in vitro diagnostic test for stool-based DNA colorectal cancer screening. As part of our development efforts, FDA study plans, and ongoing evaluation of stool-based DNA capabilities and market needs, we are exploring the marker combinations and platform requirements necessary for optimal performance of our technology. Objectives around performance, throughput and cost are among the elements that will need to be met in the design and development of an FDA-approved or cleared commercial product based on our technology. We may determine to develop an FDA-approved product containing a Version 3 technology based on BEAMing or digital polymerase chain reaction, or digital PCR, we may use genetic markers that are different from those used currently or in the past, we may focus on increasing the performance of our existing Version 2 technology and/or we may determine that our existing Version 2 technology provides sufficient performance to enable reasonable market penetration for stool-based DNA for colorectal cancer detection. During 2008, a proof of concept study using the BEAMing technology, an advanced form of digital PCR developed by The Johns Hopkins University, in which stool and blood plasma were assessed in a head-to-head comparison for the detection of colorectal cancer, demonstrated 92 percent sensitivity for detecting colorectal cancer 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." Although we believe that this technology may have the potential to be more sensitive and specific than the current stool-based DNA colorectal cancer screening test commercially offered, Version 3 is still in the prototype stage of development.

Overview

        EXACT Sciences Corporation develops proprietary DNA-based technologies for use in the detection of certain cancers. We have selected colorectal cancer as the first application of our technologies. We license certain of our colorectal cancer screening technologies, including improvements to such technologies, on an exclusive basis in the United States and Canada through December 2010 to Laboratory Corporation of America® Holdings, or LabCorp®. LabCorp has developed and commercially offers a non-invasive stool-based DNA colorectal cancer screening service for the average-risk population, which is based on certain of our technologies. Our current focus is on commercially developing, and obtaining U.S. Food and Drug Administration, or FDA, approval for, a colorectal cancer screening product based on our stool-based DNA technologies.

        Colorectal cancer is the third leading cause of cancer death overall, the second leading cause of death from cancers that affect both men and women in the United States, and the leading cause of cancer death among non-smokers. Patients who are diagnosed early in the progression of the disease, however, are more likely to have a complete recovery and to utilize lower levels of expensive medical resources. Accordingly, the American Cancer Society, or ACS, recommends that all persons age 50 and above undergo regular colorectal cancer screening. Of the more than 89 million people in the United States for whom routine colorectal cancer screening is recommended, it is estimated that about one-half have never been screened, and it is believed that a significant portion of the balance have been inadequately screened. We believe that this large population of unscreened patients represents an opportunity to reduce the mortality and healthcare costs associated with colorectal cancer.

        Professional colorectal cancer screening guidelines in the United States, including those of the ACS, the American College of Gastroenterology, and the American Gastroenterological Association, recommend regular screening by a variety of methods. Historically, such recommendations consisted of colonoscopy, flexible sigmoidoscopy and fecal occult blood testing, or FOBT, as well as combinations of some of these methods. On March 5, 2008, the ACS and the U.S. Multi-Society Task Force on Colorectal Cancer, or MSTF-CRC, a consortium of several organizations including representatives of the American College of Gastroenterology, American Gastroenterological Association, American Society for Gastrointestinal Endoscopy and the American College of Physicians/Society of Internal

1


Table of Contents


Medicine, announced that non-invasive, stool-based DNA screening technology has been included in the updated national colorectal cancer screening guidelines as a screening option for the detection of colorectal cancer in average risk, asymptomatic individuals age 50 and above. Accordingly, LabCorp's commercially offered, non-invasive stool-based DNA colorectal cancer screening service is the first DNA-based, non-invasive colorectal cancer screening test to be available for use following the issuance of these new colorectal cancer screening guidelines of the ACS and MSTF-CRC in the United States for the average risk population.

        LabCorp developed and commercially offered PreGen-Plus, its first generation non-invasive stool-based DNA colorectal cancer screening service for the average-risk population based on our Version 1 technology, from August 2003 through June 2008. In June 2008, LabCorp stopped offering PreGen-Plus and, in July 2008, LabCorp began to commercially offer ColoSure™, its next generation non-invasive, stool-based DNA testing service for the detection of colorectal cancer in the average-risk population, which is also based on certain intellectual property relating to colorectal cancer screening that we license to LabCorp. LabCorp, the second largest commercial laboratory in the United States with more than 37 primary laboratories and over 1,600 patient service centers, is the exclusive licensee, in the United States and Canada, of certain of our intellectual property relating to colorectal cancer screening through December 2010, followed by a non-exclusive license for the life of the licensed patents. LabCorp currently does not offer ColoSure in Canada. LabCorp performs the ColoSure testing service in a single specialized centralized laboratory and, by the terms of the license, pays us a fifteen percent royalty based on its net revenues from sales of ColoSure. Pursuant to the terms of our license agreement with LabCorp, LabCorp has paid us $30 million in upfront license fees and milestones. In addition, we may be eligible for up to an additional $42.5 million in milestones and performance incentives under the agreement, primarily based on the achievement of significant sales thresholds. Pursuant to our amended license agreement with LabCorp, we are permitted to license the intellectual property to any third party in connection with an FDA approved product and to select third-party organizations and commercial service laboratories, for a colorectal cancer testing service, subject to certain pricing protections afforded to LabCorp. LabCorp maintains sole responsibility, at its expense, for all commercial activities including marketing, sales, and reimbursement of ColoSure under the agreement.

        In addition to our Version 1 technology underlying the PreGen-Plus testing service formerly offered by LabCorp, we have also developed or licensed technologies related to a Version 2 colorectal cancer screening technology that we believe has greater sensitivity and is more cost effective than Version 1. Our Version 2 technology includes two DNA markers, which in published studies have been shown to be associated with colorectal cancer. These markers include the aberrant methylation of the Vimentin gene promoter region, which we refer to as Vimentin, and DIA®, or long DNA. We have exclusive rights to the Vimentin technology through our license agreement with Case Western Reserve University, or Case Western, under which we are obligated to pay a royalty and certain other fees to Case Western in return for the right to use and sublicense the Vimentin technology. In a research study evaluating stool-based DNA in 82 patients with confirmed colorectal cancer and 363 colonoscopically normal individuals, our Version 2 stool-based DNA technology demonstrated sensitivity of 83 percent and specificity of 82 percent for the detection of colorectal cancer. LabCorp's ColoSure testing service currently relies solely on the Vimentin gene and does not use the DIA marker that is also included in our Version 2 technology. In July 2008, as part of our cost reduction efforts, we suspended our efforts to seek FDA approval or clearance for our Version 2 technology.

        In January 2009, we completed a strategic transaction with Genzyme Corporation, or Genzyme, pursuant to which Genzyme acquired from us, for an aggregate of $18.5 million, our intellectual property assets related to the fields of prenatal and reproductive health as well as certain intellectual property outside the fields of colorectal cancer screening and stool-based DNA testing. Genzyme also purchased three million shares of our common stock, or approximately ten percent of our outstanding

2


Table of Contents


common stock, for an aggregate of $6.0 million. Under our agreement with Genzyme, we retained worldwide rights to our colorectal cancer screening and stool-based DNA testing intellectual property, and will receive a portion of any Genzyme sublicensing income derived from the purchased intellectual property outside the fields of prenatal and reproductive health. We and Genzyme also agreed to form a joint advisory committee to assist Genzyme in the achievement of product development goals related to the purchased intellectual property and to assist us with our product development and regulatory goals.

        Following the closing of our strategic transaction with Genzyme in January 2009, we have begun resuming our efforts to develop an FDA-approved in vitro diagnostic test for stool-based DNA colorectal cancer screening. As part of our development efforts, FDA study plans, and ongoing evaluation of stool-based DNA capabilities and market needs, we are exploring the marker combinations and platform requirements necessary for optimal performance of our technology. Objectives around performance, throughput and cost are among the elements that will need to be met in the design and development of an FDA-approved or cleared commercial product based on our technology. We may determine to develop an FDA-approved product containing a Version 3 technology based on BEAMing or digital polymerase chain reaction, or digital PCR, we may use genetic markers that are different from those used currently or in the past, we may focus on increasing the performance of our existing Version 2 technology and/or we may determine that our existing Version 2 technology provides sufficient performance to enable reasonable market penetration for stool-based DNA for colorectal cancer detection. During 2008, a proof of concept study using the BEAMing technology, an advanced form of digital PCR developed by The Johns Hopkins University, in which stool and blood plasma were assessed in a head-to-head comparison for the detection of colorectal cancer, demonstrated 92 percent sensitivity for detecting colorectal cancer 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." Although we believe that this technology may have the potential to be more sensitive and specific than the current stool-based DNA colorectal cancer screening test commercially offered, Version 3 is still in the prototype stage of development.

Overview



        EXACT Sciences Corporation develops proprietary DNA-based technologies for use in the detection of certain cancers. We have
selected colorectal cancer as the first application of our technologies. We license certain of our colorectal cancer screening technologies, including improvements to such technologies, on an
exclusive basis in the United States and Canada through December 2010 to Laboratory Corporation of America® Holdings, or LabCorp®. LabCorp has developed and commercially offers
a non-invasive stool-based DNA colorectal cancer screening service for the average-risk population, which is based on certain of our technologies. Our current focus is on
commercially developing, and obtaining U.S. Food and Drug Administration, or FDA, approval for, a colorectal cancer screening product based on our stool-based DNA technologies.




        Colorectal
cancer is the third leading cause of cancer death overall, the second leading cause of death from cancers that affect both men and women in the United States, and the leading
cause of cancer death among non-smokers. Patients who are diagnosed early in the progression of the disease, however, are more likely to have a complete recovery and to utilize lower
levels of expensive medical resources. Accordingly, the American Cancer Society, or ACS, recommends that all persons age 50 and above undergo regular colorectal cancer screening. Of the more than
89 million people in the United States for whom routine colorectal cancer screening is recommended, it is estimated that about one-half have never been screened, and it is believed
that a significant portion of the balance have been inadequately screened. We believe that this large population of unscreened patients represents an opportunity to reduce the mortality and healthcare
costs associated with colorectal cancer.



        Professional
colorectal cancer screening guidelines in the United States, including those of the ACS, the American College of Gastroenterology, and the American Gastroenterological
Association, recommend regular screening by a variety of methods. Historically, such recommendations consisted of colonoscopy, flexible sigmoidoscopy and fecal occult blood testing, or FOBT, as well
as combinations of some of these methods. On March 5, 2008, the ACS and the U.S. Multi-Society Task Force on Colorectal Cancer, or MSTF-CRC, a consortium of several organizations
including representatives of the American College of Gastroenterology, American Gastroenterological Association, American Society for Gastrointestinal Endoscopy and the American College of
Physicians/Society of Internal



1









HREF="#bg46501a_main_toc">Table of Contents






Medicine,
announced that non-invasive, stool-based DNA screening technology has been included in the updated national colorectal cancer screening guidelines as a screening option for the
detection of colorectal cancer in average risk, asymptomatic individuals age 50 and above. Accordingly, LabCorp's commercially offered, non-invasive stool-based DNA colorectal cancer
screening service is the first DNA-based, non-invasive colorectal cancer screening test to be available for use following the issuance of these new colorectal cancer screening
guidelines of the ACS and MSTF-CRC in the United States for the average risk population.



        LabCorp
developed and commercially offered PreGen-Plus, its first generation non-invasive stool-based DNA colorectal cancer screening service for the
average-risk population based on our Version 1 technology, from August 2003 through June 2008. In June 2008, LabCorp stopped offering PreGen-Plus and, in July 2008, LabCorp
began to commercially offer ColoSure™, its next generation non-invasive, stool-based DNA testing service for the detection of colorectal cancer in the average-risk
population, which is also based on certain intellectual property relating to colorectal cancer screening that we license to LabCorp. LabCorp, the second largest commercial laboratory in the United
States with more than 37 primary laboratories and over 1,600 patient service centers, is the exclusive licensee, in the United States and Canada, of certain of our intellectual property relating to
colorectal cancer screening through December 2010, followed by a non-exclusive license for the life of the licensed patents. LabCorp currently does not offer ColoSure in Canada. LabCorp
performs the ColoSure testing service in a single specialized centralized laboratory and, by the terms of the license, pays us a fifteen percent royalty based on its net revenues from sales of
ColoSure. Pursuant to the terms of our license agreement with LabCorp, LabCorp has paid us $30 million in upfront license fees and milestones. In addition, we may be eligible for up to an
additional $42.5 million in milestones and performance incentives under the agreement, primarily based on the achievement of significant sales thresholds. Pursuant to our amended license
agreement with LabCorp, we are permitted to license the intellectual property to any third party in connection with an FDA approved product and to select third-party organizations and commercial
service laboratories, for a colorectal cancer testing service, subject to certain pricing protections afforded to LabCorp. LabCorp maintains sole responsibility, at its expense, for all commercial
activities including marketing, sales, and reimbursement of ColoSure under the agreement.



        In
addition to our Version 1 technology underlying the PreGen-Plus testing service formerly offered by LabCorp, we have also developed or licensed technologies related to a
Version 2 colorectal cancer screening technology that we believe has greater sensitivity and is more cost effective
than Version 1. Our Version 2 technology includes two DNA markers, which in published studies have been shown to be associated with colorectal cancer. These markers include the aberrant methylation of
the Vimentin gene promoter region, which we refer to as Vimentin, and DIA®, or long DNA. We have exclusive rights to the Vimentin technology through our license agreement with Case Western
Reserve University, or Case Western, under which we are obligated to pay a royalty and certain other fees to Case Western in return for the right to use and sublicense the Vimentin technology. In a
research study evaluating stool-based DNA in 82 patients with confirmed colorectal cancer and 363 colonoscopically normal individuals, our Version 2 stool-based DNA technology demonstrated sensitivity
of 83 percent and specificity of 82 percent for the detection of colorectal cancer. LabCorp's ColoSure testing service currently relies solely on the Vimentin gene and does not use the
DIA marker that is also included in our Version 2 technology. In July 2008, as part of our cost reduction efforts, we suspended our efforts to seek FDA approval or clearance for our Version 2
technology.



        In
January 2009, we completed a strategic transaction with Genzyme Corporation, or Genzyme, pursuant to which Genzyme acquired from us, for an aggregate of $18.5 million, our
intellectual property assets related to the fields of prenatal and reproductive health as well as certain intellectual property outside the fields of colorectal cancer screening and stool-based DNA
testing. Genzyme also purchased three million shares of our common stock, or approximately ten percent of our outstanding



2









HREF="#bg46501a_main_toc">Table of Contents






common
stock, for an aggregate of $6.0 million. Under our agreement with Genzyme, we retained worldwide rights to our colorectal cancer screening and stool-based DNA testing intellectual
property, and will receive a portion of any Genzyme sublicensing income derived from the purchased intellectual property outside the fields of prenatal and reproductive health. We and Genzyme also
agreed to form a joint advisory committee to assist Genzyme in the achievement of product development goals related to the purchased intellectual property and to assist us with our product
development and regulatory goals.



        Following
the closing of our strategic transaction with Genzyme in January 2009, we have begun resuming our efforts to develop an FDA-approved in vitro diagnostic test for
stool-based DNA colorectal cancer screening. As part of our development efforts, FDA study plans, and ongoing evaluation of stool-based DNA capabilities and market needs, we are exploring the marker
combinations and platform requirements necessary for optimal performance of our technology. Objectives around performance, throughput and cost are among the elements that will need to be met in the
design and development of an FDA-approved or cleared commercial product based on our technology. We may determine to develop an FDA-approved product containing a Version 3
technology based on BEAMing or digital polymerase chain reaction, or digital PCR, we may use genetic markers that are different from those used currently or in the past, we may focus on increasing the
performance of our existing Version 2 technology and/or we may determine that our existing Version 2 technology provides sufficient performance to enable reasonable market penetration for stool-based
DNA for colorectal cancer detection. During 2008, a proof of concept study using the BEAMing technology, an advanced form of digital PCR developed by The Johns Hopkins University, in which stool and
blood plasma were assessed in a head-to-head comparison for the detection of colorectal cancer, demonstrated 92 percent sensitivity for detecting colorectal cancer 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
." Although we believe that this technology may have the potential to be more sensitive and specific than the
current stool-based DNA colorectal cancer screening test commercially offered, Version 3 is still in the prototype stage of development.




Overview



        EXACT Sciences Corporation develops proprietary DNA-based technologies for use in the detection of certain cancers. We have
selected colorectal cancer as the first application of our technologies. We license certain of our colorectal cancer screening technologies, including improvements to such technologies, on an
exclusive basis in the United States and Canada through December 2010 to Laboratory Corporation of America® Holdings, or LabCorp®. LabCorp has developed and commercially offers
a non-invasive stool-based DNA colorectal cancer screening service for the average-risk population, which is based on certain of our technologies. Our current focus is on
commercially developing, and obtaining U.S. Food and Drug Administration, or FDA, approval for, a colorectal cancer screening product based on our stool-based DNA technologies.




        Colorectal
cancer is the third leading cause of cancer death overall, the second leading cause of death from cancers that affect both men and women in the United States, and the leading
cause of cancer death among non-smokers. Patients who are diagnosed early in the progression of the disease, however, are more likely to have a complete recovery and to utilize lower
levels of expensive medical resources. Accordingly, the American Cancer Society, or ACS, recommends that all persons age 50 and above undergo regular colorectal cancer screening. Of the more than
89 million people in the United States for whom routine colorectal cancer screening is recommended, it is estimated that about one-half have never been screened, and it is believed
that a significant portion of the balance have been inadequately screened. We believe that this large population of unscreened patients represents an opportunity to reduce the mortality and healthcare
costs associated with colorectal cancer.



        Professional
colorectal cancer screening guidelines in the United States, including those of the ACS, the American College of Gastroenterology, and the American Gastroenterological
Association, recommend regular screening by a variety of methods. Historically, such recommendations consisted of colonoscopy, flexible sigmoidoscopy and fecal occult blood testing, or FOBT, as well
as combinations of some of these methods. On March 5, 2008, the ACS and the U.S. Multi-Society Task Force on Colorectal Cancer, or MSTF-CRC, a consortium of several organizations
including representatives of the American College of Gastroenterology, American Gastroenterological Association, American Society for Gastrointestinal Endoscopy and the American College of
Physicians/Society of Internal



1









HREF="#bg46501a_main_toc">Table of Contents






Medicine,
announced that non-invasive, stool-based DNA screening technology has been included in the updated national colorectal cancer screening guidelines as a screening option for the
detection of colorectal cancer in average risk, asymptomatic individuals age 50 and above. Accordingly, LabCorp's commercially offered, non-invasive stool-based DNA colorectal cancer
screening service is the first DNA-based, non-invasive colorectal cancer screening test to be available for use following the issuance of these new colorectal cancer screening
guidelines of the ACS and MSTF-CRC in the United States for the average risk population.



        LabCorp
developed and commercially offered PreGen-Plus, its first generation non-invasive stool-based DNA colorectal cancer screening service for the
average-risk population based on our Version 1 technology, from August 2003 through June 2008. In June 2008, LabCorp stopped offering PreGen-Plus and, in July 2008, LabCorp
began to commercially offer ColoSure™, its next generation non-invasive, stool-based DNA testing service for the detection of colorectal cancer in the average-risk
population, which is also based on certain intellectual property relating to colorectal cancer screening that we license to LabCorp. LabCorp, the second largest commercial laboratory in the United
States with more than 37 primary laboratories and over 1,600 patient service centers, is the exclusive licensee, in the United States and Canada, of certain of our intellectual property relating to
colorectal cancer screening through December 2010, followed by a non-exclusive license for the life of the licensed patents. LabCorp currently does not offer ColoSure in Canada. LabCorp
performs the ColoSure testing service in a single specialized centralized laboratory and, by the terms of the license, pays us a fifteen percent royalty based on its net revenues from sales of
ColoSure. Pursuant to the terms of our license agreement with LabCorp, LabCorp has paid us $30 million in upfront license fees and milestones. In addition, we may be eligible for up to an
additional $42.5 million in milestones and performance incentives under the agreement, primarily based on the achievement of significant sales thresholds. Pursuant to our amended license
agreement with LabCorp, we are permitted to license the intellectual property to any third party in connection with an FDA approved product and to select third-party organizations and commercial
service laboratories, for a colorectal cancer testing service, subject to certain pricing protections afforded to LabCorp. LabCorp maintains sole responsibility, at its expense, for all commercial
activities including marketing, sales, and reimbursement of ColoSure under the agreement.



        In
addition to our Version 1 technology underlying the PreGen-Plus testing service formerly offered by LabCorp, we have also developed or licensed technologies related to a
Version 2 colorectal cancer screening technology that we believe has greater sensitivity and is more cost effective
than Version 1. Our Version 2 technology includes two DNA markers, which in published studies have been shown to be associated with colorectal cancer. These markers include the aberrant methylation of
the Vimentin gene promoter region, which we refer to as Vimentin, and DIA®, or long DNA. We have exclusive rights to the Vimentin technology through our license agreement with Case Western
Reserve University, or Case Western, under which we are obligated to pay a royalty and certain other fees to Case Western in return for the right to use and sublicense the Vimentin technology. In a
research study evaluating stool-based DNA in 82 patients with confirmed colorectal cancer and 363 colonoscopically normal individuals, our Version 2 stool-based DNA technology demonstrated sensitivity
of 83 percent and specificity of 82 percent for the detection of colorectal cancer. LabCorp's ColoSure testing service currently relies solely on the Vimentin gene and does not use the
DIA marker that is also included in our Version 2 technology. In July 2008, as part of our cost reduction efforts, we suspended our efforts to seek FDA approval or clearance for our Version 2
technology.



        In
January 2009, we completed a strategic transaction with Genzyme Corporation, or Genzyme, pursuant to which Genzyme acquired from us, for an aggregate of $18.5 million, our
intellectual property assets related to the fields of prenatal and reproductive health as well as certain intellectual property outside the fields of colorectal cancer screening and stool-based DNA
testing. Genzyme also purchased three million shares of our common stock, or approximately ten percent of our outstanding



2









HREF="#bg46501a_main_toc">Table of Contents






common
stock, for an aggregate of $6.0 million. Under our agreement with Genzyme, we retained worldwide rights to our colorectal cancer screening and stool-based DNA testing intellectual
property, and will receive a portion of any Genzyme sublicensing income derived from the purchased intellectual property outside the fields of prenatal and reproductive health. We and Genzyme also
agreed to form a joint advisory committee to assist Genzyme in the achievement of product development goals related to the purchased intellectual property and to assist us with our product
development and regulatory goals.



        Following
the closing of our strategic transaction with Genzyme in January 2009, we have begun resuming our efforts to develop an FDA-approved in vitro diagnostic test for
stool-based DNA colorectal cancer screening. As part of our development efforts, FDA study plans, and ongoing evaluation of stool-based DNA capabilities and market needs, we are exploring the marker
combinations and platform requirements necessary for optimal performance of our technology. Objectives around performance, throughput and cost are among the elements that will need to be met in the
design and development of an FDA-approved or cleared commercial product based on our technology. We may determine to develop an FDA-approved product containing a Version 3
technology based on BEAMing or digital polymerase chain reaction, or digital PCR, we may use genetic markers that are different from those used currently or in the past, we may focus on increasing the
performance of our existing Version 2 technology and/or we may determine that our existing Version 2 technology provides sufficient performance to enable reasonable market penetration for stool-based
DNA for colorectal cancer detection. During 2008, a proof of concept study using the BEAMing technology, an advanced form of digital PCR developed by The Johns Hopkins University, in which stool and
blood plasma were assessed in a head-to-head comparison for the detection of colorectal cancer, demonstrated 92 percent sensitivity for detecting colorectal cancer 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
." Although we believe that this technology may have the potential to be more sensitive and specific than the
current stool-based DNA colorectal cancer screening test commercially offered, Version 3 is still in the prototype stage of development.




Overview

        EXACT Sciences Corporation develops proprietary DNA-based technologies for use in the detection of certain cancers. We have selected colorectal cancer as the first application of our technologies. We license certain of our colorectal cancer screening technologies, including improvements to such technologies, on an exclusive basis in the United States and Canada through December 2010 to Laboratory Corporation of America® Holdings, or LabCorp®. LabCorp has developed and commercially offers a non-invasive stool-based DNA colorectal cancer screening service for the average-risk population, which is based on certain of our technologies. Our current focus is on commercially developing, and obtaining U.S. Food and Drug Administration, or FDA, approval for, a colorectal cancer screening product based on our stool-based DNA technologies.

        In January 2009, we completed a strategic transaction with Genzyme Corporation, pursuant to which Genzyme acquired from us, for an aggregate of $18.5 million, our intellectual property assets related to the fields of prenatal and reproductive health as well as certain intellectual property outside the fields of colorectal cancer screening and stool-based DNA testing. Genzyme also purchased three million shares of our common stock, or approximately ten percent of our outstanding common stock, for an aggregate of $6.0 million. Under our agreement with Genzyme, we retained worldwide rights to our colorectal cancer screening and stool-based DNA testing intellectual property, and will receive a double-digit royalty on any Genzyme sublicensing income that may derived from the purchased intellectual property outside the fields of prenatal and reproductive health. We and Genzyme also agreed to form a joint advisory committee to assist Genzyme in the achievement of product development goals related to the purchased intellectual property and to assist us with our regulatory goals.

        Since our inception in February 1995, our principal activities have included:

    researching and developing our technologies for colorectal cancer screening;

    conducting clinical studies to validate our colorectal cancer screening technologies;

    negotiating licenses for intellectual property of others;

    developing relationships with opinion leaders in the scientific and medical communities;

    pursuing reimbursement for stool-based DNA screening with third-party payors, including the Centers for Medicare and Medicaid Services, or CMS;

    conducting market studies and analyzing various markets for our technologies;

    raising capital;

    licensing our certain of our intellectual property to LabCorp, Genzyme and others;

    working to further the adoption of stool-based DNA testing for colorectal cancer, including obtaining inclusion of our technology in the guidelines of the major guidelines organizations;

    pursuing U.S. Food and Drug Administration, or FDA, clearance or approval, or exemptions therefrom, for our stool-based DNA screening technology for colorectal cancer;

    working on activities in support of the awareness around stool-based DNA screening; and

    pursuing strategic alternatives for our business, resulting in the Genzyme Transaction.

40


Table of Contents

        We have generated limited operating revenues since our inception and, as of December 31, 2008, we had an accumulated deficit of approximately $172.5 million. Our losses have historically resulted from costs incurred in conjunction with our research, development and clinical study initiatives, salaries and benefits associated with the hiring of personnel, the initiation of marketing programs and, prior to August 31, 2007, the build-out of our sales infrastructure to support the commercialization of stool-based DNA screening. We expect that our losses will continue for the next several years and we may never achieve profitability.

        From the date of commercial launch through June 2008, when LabCorp stopped commercially offering PreGen-Plus, LabCorp had accessioned approximately 14,900 PreGen-Plus samples, including approximately 1,800, 3,700 and 4,000 samples during the years ended December 31, 2007, 2006 and 2005, respectively. In July 2008, LabCorp began to commercially offer ColoSure™, its next generation non-invasive, stool-based DNA testing service for the detection of colorectal cancer in the average-risk population, which is based on certain of our intellectual property. From such date through February 28, 2009, LabCorp has accessioned approximately 995 ColoSure samples, including approximately 512 ColoSure samples during the quarter ended December 31, 2008, and approximately 391 ColoSure samples during January and February 2009.

        We have developed or licensed technologies related to a Version 2 colorectal cancer screening technology that we believe has greater sensitivity and is more cost effective than our Version 1 technology underlying the PreGen-Plus testing service formerly offered by LabCorp. Our Version 2 technology includes two DNA markers that, in published studies, have been shown to be associated with colorectal cancer. These markers include the aberrant methylation of the Vimentin gene promoter region, which we refer to as Vimentin, and DIA®, or long DNA. We have exclusive rights to the Vimentin technology through our license agreement with Case Western Reserve University, or Case Western, under which we are obligated to pay a royalty and certain other fees to Case Western in return for the right to use and sublicense the Vimentin technology. We own the rights to DIA and do not pay any royalties on the use of DIA. In a research study evaluating stool-based DNA in 82 patients with confirmed colorectal cancer and 363 colonoscopically normal individuals, our Version 2 stool-based DNA technology demonstrated sensitivity of 83 percent and specificity of 82 percent for the detection of colorectal cancer. LabCorp's ColoSure testing service relies solely on the Vimentin gene and does not use the DIA marker that is also included in our Version 2 technology.

        Following the closing of our strategic transaction with Genzyme in January 2009, we have begun resuming our efforts to develop an FDA-approved in vitro diagnostic test for stool-based DNA colorectal cancer screening testing service. As part of our development efforts and ongoing evaluation of stool-based DNA capabilities and market needs, we are exploring the marker combinations and platform requirements necessary for optimal performance of our technology based on market need. Objectives around performance, throughput and cost are among the elements that will need to be met in the design and development of a commercial product based on our technology. We believe obtaining FDA approval for our stool-based DNA colorectal cancer screening technologies is critical to building broad demand for stool-based DNA colorectal cancer screening technologies and for the successful commercialization of stool-based DNA colorectal cancer screening nationally. We do not currently have sufficient funds to fully achieve this goal. We may determine to develop an FDA-approved product containing a Version 3 technology based on BEAMing or digital polymerase chain reaction, or digital PCR, we may use genetic markers that are different from those used currently or in the past, we may focus on increasing the performance of our existing Version 2 technology and/or we may determine that our existing Version 2 technology provides sufficient performance to enable reasonable market penetration for stool-based DNA for colorectal cancer detection. During 2008, a proof of concept study using the BEAMing technology, an advanced form of digital PCR developed by The Johns Hopkins University, in which stool and blood plasma were assessed in a head-to-head comparison for the detection of colorectal cancer, demonstrated 92 percent sensitivity for detecting colorectal cancer in

41


Table of Contents


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." Although we believe that this technology may have the potential to be more sensitive and specific than the current stool-based DNA colorectal cancer screening test commercially offered, Version 3 is still in the prototype stage of development.

Overview

        EXACT Sciences Corporation develops proprietary DNA-based technologies for use in the detection of certain cancers. We have selected colorectal cancer as the first application of our technologies. We license certain of our colorectal cancer screening technologies, including improvements to such technologies, on an exclusive basis in the United States and Canada through December 2010 to Laboratory Corporation of America® Holdings, or LabCorp®. LabCorp has developed and commercially offers a non-invasive stool-based DNA colorectal cancer screening service for the average-risk population, which is based on certain of our technologies. Our current focus is on commercially developing, and obtaining U.S. Food and Drug Administration, or FDA, approval for, a colorectal cancer screening product based on our stool-based DNA technologies.

        In January 2009, we completed a strategic transaction with Genzyme Corporation, pursuant to which Genzyme acquired from us, for an aggregate of $18.5 million, our intellectual property assets related to the fields of prenatal and reproductive health as well as certain intellectual property outside the fields of colorectal cancer screening and stool-based DNA testing. Genzyme also purchased three million shares of our common stock, or approximately ten percent of our outstanding common stock, for an aggregate of $6.0 million. Under our agreement with Genzyme, we retained worldwide rights to our colorectal cancer screening and stool-based DNA testing intellectual property, and will receive a double-digit royalty on any Genzyme sublicensing income that may derived from the purchased intellectual property outside the fields of prenatal and reproductive health. We and Genzyme also agreed to form a joint advisory committee to assist Genzyme in the achievement of product development goals related to the purchased intellectual property and to assist us with our regulatory goals.

        Since our inception in February 1995, our principal activities have included:

    researching and developing our technologies for colorectal cancer screening;

    conducting clinical studies to validate our colorectal cancer screening technologies;

    negotiating licenses for intellectual property of others;

    developing relationships with opinion leaders in the scientific and medical communities;

    pursuing reimbursement for stool-based DNA screening with third-party payors, including the Centers for Medicare and Medicaid Services, or CMS;

    conducting market studies and analyzing various markets for our technologies;

    raising capital;

    licensing our certain of our intellectual property to LabCorp, Genzyme and others;

    working to further the adoption of stool-based DNA testing for colorectal cancer, including obtaining inclusion of our technology in the guidelines of the major guidelines organizations;

    pursuing U.S. Food and Drug Administration, or FDA, clearance or approval, or exemptions therefrom, for our stool-based DNA screening technology for colorectal cancer;

    working on activities in support of the awareness around stool-based DNA screening; and

    pursuing strategic alternatives for our business, resulting in the Genzyme Transaction.

40


Table of Contents

        We have generated limited operating revenues since our inception and, as of December 31, 2008, we had an accumulated deficit of approximately $172.5 million. Our losses have historically resulted from costs incurred in conjunction with our research, development and clinical study initiatives, salaries and benefits associated with the hiring of personnel, the initiation of marketing programs and, prior to August 31, 2007, the build-out of our sales infrastructure to support the commercialization of stool-based DNA screening. We expect that our losses will continue for the next several years and we may never achieve profitability.

        From the date of commercial launch through June 2008, when LabCorp stopped commercially offering PreGen-Plus, LabCorp had accessioned approximately 14,900 PreGen-Plus samples, including approximately 1,800, 3,700 and 4,000 samples during the years ended December 31, 2007, 2006 and 2005, respectively. In July 2008, LabCorp began to commercially offer ColoSure™, its next generation non-invasive, stool-based DNA testing service for the detection of colorectal cancer in the average-risk population, which is based on certain of our intellectual property. From such date through February 28, 2009, LabCorp has accessioned approximately 995 ColoSure samples, including approximately 512 ColoSure samples during the quarter ended December 31, 2008, and approximately 391 ColoSure samples during January and February 2009.

        We have developed or licensed technologies related to a Version 2 colorectal cancer screening technology that we believe has greater sensitivity and is more cost effective than our Version 1 technology underlying the PreGen-Plus testing service formerly offered by LabCorp. Our Version 2 technology includes two DNA markers that, in published studies, have been shown to be associated with colorectal cancer. These markers include the aberrant methylation of the Vimentin gene promoter region, which we refer to as Vimentin, and DIA®, or long DNA. We have exclusive rights to the Vimentin technology through our license agreement with Case Western Reserve University, or Case Western, under which we are obligated to pay a royalty and certain other fees to Case Western in return for the right to use and sublicense the Vimentin technology. We own the rights to DIA and do not pay any royalties on the use of DIA. In a research study evaluating stool-based DNA in 82 patients with confirmed colorectal cancer and 363 colonoscopically normal individuals, our Version 2 stool-based DNA technology demonstrated sensitivity of 83 percent and specificity of 82 percent for the detection of colorectal cancer. LabCorp's ColoSure testing service relies solely on the Vimentin gene and does not use the DIA marker that is also included in our Version 2 technology.

        Following the closing of our strategic transaction with Genzyme in January 2009, we have begun resuming our efforts to develop an FDA-approved in vitro diagnostic test for stool-based DNA colorectal cancer screening testing service. As part of our development efforts and ongoing evaluation of stool-based DNA capabilities and market needs, we are exploring the marker combinations and platform requirements necessary for optimal performance of our technology based on market need. Objectives around performance, throughput and cost are among the elements that will need to be met in the design and development of a commercial product based on our technology. We believe obtaining FDA approval for our stool-based DNA colorectal cancer screening technologies is critical to building broad demand for stool-based DNA colorectal cancer screening technologies and for the successful commercialization of stool-based DNA colorectal cancer screening nationally. We do not currently have sufficient funds to fully achieve this goal. We may determine to develop an FDA-approved product containing a Version 3 technology based on BEAMing or digital polymerase chain reaction, or digital PCR, we may use genetic markers that are different from those used currently or in the past, we may focus on increasing the performance of our existing Version 2 technology and/or we may determine that our existing Version 2 technology provides sufficient performance to enable reasonable market penetration for stool-based DNA for colorectal cancer detection. During 2008, a proof of concept study using the BEAMing technology, an advanced form of digital PCR developed by The Johns Hopkins University, in which stool and blood plasma were assessed in a head-to-head comparison for the detection of colorectal cancer, demonstrated 92 percent sensitivity for detecting colorectal cancer in

41


Table of Contents


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." Although we believe that this technology may have the potential to be more sensitive and specific than the current stool-based DNA colorectal cancer screening test commercially offered, Version 3 is still in the prototype stage of development.

Overview



        EXACT Sciences Corporation develops proprietary DNA-based technologies for use in the detection of certain cancers. We have
selected colorectal cancer as the first application of our technologies. We license certain of our colorectal cancer screening technologies, including improvements to such technologies, on an
exclusive basis in the United States and Canada through December 2010 to Laboratory Corporation of America® Holdings, or LabCorp®. LabCorp has developed and commercially offers
a non-invasive stool-based DNA colorectal cancer screening service for the average-risk population, which is based on certain of our technologies. Our current focus is on
commercially developing, and obtaining U.S. Food and Drug Administration, or FDA, approval for, a colorectal cancer screening product based on our stool-based DNA technologies.



        In
January 2009, we completed a strategic transaction with Genzyme Corporation, pursuant to which Genzyme acquired from us, for an aggregate of $18.5 million, our intellectual
property assets related to the fields of prenatal and reproductive health as well as certain intellectual property outside the fields of colorectal cancer screening and stool-based DNA testing.
Genzyme also purchased three million shares of our common stock, or approximately ten percent of our outstanding common stock, for an aggregate of $6.0 million. Under our agreement with
Genzyme, we retained worldwide rights to our colorectal cancer screening and stool-based DNA testing intellectual property, and will receive a double-digit royalty on any Genzyme sublicensing income
that may derived from the purchased intellectual property outside the fields of prenatal and reproductive health. We and Genzyme also agreed to form a joint advisory committee to assist Genzyme
in the achievement of product development goals related to the purchased intellectual property and to assist us with our regulatory goals.



        Since
our inception in February 1995, our principal activities have included:





    researching and developing our technologies for colorectal cancer screening;


    conducting clinical studies to validate our colorectal cancer screening technologies;


    negotiating licenses for intellectual property of others;


    developing relationships with opinion leaders in the scientific and medical communities;


    pursuing reimbursement for stool-based DNA screening with third-party payors, including the Centers for Medicare and
    Medicaid Services, or CMS;



    conducting market studies and analyzing various markets for our technologies;


    raising capital;


    licensing our certain of our intellectual property to LabCorp, Genzyme and others;


    working to further the adoption of stool-based DNA testing for colorectal cancer, including obtaining inclusion of our
    technology in the guidelines of the major guidelines organizations;



    pursuing U.S. Food and Drug Administration, or FDA, clearance or approval, or exemptions therefrom, for our stool-based
    DNA screening technology for colorectal cancer;



    working on activities in support of the awareness around stool-based DNA screening; and


    pursuing strategic alternatives for our business, resulting in the Genzyme Transaction.


40









HREF="#bg46501a_main_toc">Table of Contents








        We
have generated limited operating revenues since our inception and, as of December 31, 2008, we had an accumulated deficit of approximately $172.5 million. Our losses
have historically resulted from costs incurred in conjunction with our research, development and clinical study initiatives, salaries and benefits associated with the hiring of personnel, the
initiation of marketing programs and, prior to August 31, 2007, the build-out of our sales infrastructure to support the commercialization of stool-based DNA screening. We expect
that our losses will continue for the next several years and we may never achieve profitability.



        From
the date of commercial launch through June 2008, when LabCorp stopped commercially offering PreGen-Plus, LabCorp had accessioned approximately 14,900
PreGen-Plus samples, including approximately 1,800, 3,700 and 4,000 samples during the years ended December 31, 2007, 2006 and 2005, respectively. In July 2008, LabCorp began to
commercially offer ColoSure™, its next generation non-invasive, stool-based DNA testing service for the detection of colorectal cancer in the average-risk
population, which is based on certain of our intellectual property. From such date through February 28, 2009, LabCorp has accessioned approximately 995 ColoSure samples, including approximately
512 ColoSure samples during the quarter ended December 31, 2008, and approximately 391 ColoSure samples during January and February 2009.



        We
have developed or licensed technologies related to a Version 2 colorectal cancer screening technology that we believe has greater sensitivity and is more cost effective than our
Version 1 technology underlying the PreGen-Plus testing service formerly offered by LabCorp. Our Version 2 technology includes two DNA markers that, in published studies, have been shown
to be associated with colorectal cancer. These markers include the aberrant methylation of the Vimentin gene promoter region, which we refer to as Vimentin, and DIA®, or long DNA. We have
exclusive rights to the Vimentin technology through our license agreement with Case Western Reserve University, or Case Western, under which we are obligated to pay a royalty and certain other fees to
Case Western in return for the right to use and sublicense the Vimentin technology. We own the rights to DIA and do not pay any royalties on the use of DIA. In a research study evaluating stool-based
DNA in 82 patients with confirmed colorectal cancer and 363 colonoscopically normal individuals, our Version 2 stool-based DNA technology demonstrated sensitivity of 83 percent and specificity
of 82 percent for the detection of colorectal cancer. LabCorp's ColoSure testing service relies solely on the Vimentin gene and does not use the DIA marker that is also included in our Version
2 technology.



        Following
the closing of our strategic transaction with Genzyme in January 2009, we have begun resuming our efforts to develop an FDA-approved in vitro diagnostic test for
stool-based DNA colorectal cancer screening testing service. As part of our development efforts and ongoing evaluation of stool-based DNA capabilities and market needs, we are exploring the marker
combinations and platform requirements necessary for optimal performance of our technology based on market need. Objectives around performance, throughput and cost are among the elements that will
need to be met in the design and development of a commercial product based on our technology. We believe obtaining FDA approval for our stool-based DNA colorectal cancer screening technologies is
critical to building broad demand for stool-based DNA colorectal cancer screening technologies and for the successful commercialization of stool-based DNA colorectal cancer screening nationally. We do
not currently have sufficient funds to fully achieve this goal. We may determine to develop an FDA-approved product containing a Version 3 technology based on BEAMing or digital polymerase
chain reaction, or digital PCR, we may use genetic markers that are different from those used currently or in the past, we may focus on increasing the performance of our existing Version 2 technology
and/or we may determine that our existing Version 2 technology provides sufficient performance to enable reasonable market penetration for stool-based DNA for colorectal cancer detection. During 2008,
a proof of concept study using the BEAMing technology, an advanced form of digital PCR developed by The Johns Hopkins University, in which stool and blood plasma were assessed in a
head-to-head comparison for the detection of colorectal cancer, demonstrated 92 percent sensitivity for detecting colorectal cancer in



41









HREF="#bg46501a_main_toc">Table of Contents






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
." Although we believe that this technology may have the potential to be more sensitive and specific than the
current stool-based DNA colorectal cancer screening test commercially offered, Version 3 is still in the prototype stage of development.



Overview



        EXACT Sciences Corporation develops proprietary DNA-based technologies for use in the detection of certain cancers. We have
selected colorectal cancer as the first application of our technologies. We license certain of our colorectal cancer screening technologies, including improvements to such technologies, on an
exclusive basis in the United States and Canada through December 2010 to Laboratory Corporation of America® Holdings, or LabCorp®. LabCorp has developed and commercially offers
a non-invasive stool-based DNA colorectal cancer screening service for the average-risk population, which is based on certain of our technologies. Our current focus is on
commercially developing, and obtaining U.S. Food and Drug Administration, or FDA, approval for, a colorectal cancer screening product based on our stool-based DNA technologies.



        In
January 2009, we completed a strategic transaction with Genzyme Corporation, pursuant to which Genzyme acquired from us, for an aggregate of $18.5 million, our intellectual
property assets related to the fields of prenatal and reproductive health as well as certain intellectual property outside the fields of colorectal cancer screening and stool-based DNA testing.
Genzyme also purchased three million shares of our common stock, or approximately ten percent of our outstanding common stock, for an aggregate of $6.0 million. Under our agreement with
Genzyme, we retained worldwide rights to our colorectal cancer screening and stool-based DNA testing intellectual property, and will receive a double-digit royalty on any Genzyme sublicensing income
that may derived from the purchased intellectual property outside the fields of prenatal and reproductive health. We and Genzyme also agreed to form a joint advisory committee to assist Genzyme
in the achievement of product development goals related to the purchased intellectual property and to assist us with our regulatory goals.



        Since
our inception in February 1995, our principal activities have included:





    researching and developing our technologies for colorectal cancer screening;


    conducting clinical studies to validate our colorectal cancer screening technologies;


    negotiating licenses for intellectual property of others;


    developing relationships with opinion leaders in the scientific and medical communities;


    pursuing reimbursement for stool-based DNA screening with third-party payors, including the Centers for Medicare and
    Medicaid Services, or CMS;



    conducting market studies and analyzing various markets for our technologies;


    raising capital;


    licensing our certain of our intellectual property to LabCorp, Genzyme and others;


    working to further the adoption of stool-based DNA testing for colorectal cancer, including obtaining inclusion of our
    technology in the guidelines of the major guidelines organizations;



    pursuing U.S. Food and Drug Administration, or FDA, clearance or approval, or exemptions therefrom, for our stool-based
    DNA screening technology for colorectal cancer;



    working on activities in support of the awareness around stool-based DNA screening; and


    pursuing strategic alternatives for our business, resulting in the Genzyme Transaction.


40









HREF="#bg46501a_main_toc">Table of Contents








        We
have generated limited operating revenues since our inception and, as of December 31, 2008, we had an accumulated deficit of approximately $172.5 million. Our losses
have historically resulted from costs incurred in conjunction with our research, development and clinical study initiatives, salaries and benefits associated with the hiring of personnel, the
initiation of marketing programs and, prior to August 31, 2007, the build-out of our sales infrastructure to support the commercialization of stool-based DNA screening. We expect
that our losses will continue for the next several years and we may never achieve profitability.



        From
the date of commercial launch through June 2008, when LabCorp stopped commercially offering PreGen-Plus, LabCorp had accessioned approximately 14,900
PreGen-Plus samples, including approximately 1,800, 3,700 and 4,000 samples during the years ended December 31, 2007, 2006 and 2005, respectively. In July 2008, LabCorp began to
commercially offer ColoSure™, its next generation non-invasive, stool-based DNA testing service for the detection of colorectal cancer in the average-risk
population, which is based on certain of our intellectual property. From such date through February 28, 2009, LabCorp has accessioned approximately 995 ColoSure samples, including approximately
512 ColoSure samples during the quarter ended December 31, 2008, and approximately 391 ColoSure samples during January and February 2009.



        We
have developed or licensed technologies related to a Version 2 colorectal cancer screening technology that we believe has greater sensitivity and is more cost effective than our
Version 1 technology underlying the PreGen-Plus testing service formerly offered by LabCorp. Our Version 2 technology includes two DNA markers that, in published studies, have been shown
to be associated with colorectal cancer. These markers include the aberrant methylation of the Vimentin gene promoter region, which we refer to as Vimentin, and DIA®, or long DNA. We have
exclusive rights to the Vimentin technology through our license agreement with Case Western Reserve University, or Case Western, under which we are obligated to pay a royalty and certain other fees to
Case Western in return for the right to use and sublicense the Vimentin technology. We own the rights to DIA and do not pay any royalties on the use of DIA. In a research study evaluating stool-based
DNA in 82 patients with confirmed colorectal cancer and 363 colonoscopically normal individuals, our Version 2 stool-based DNA technology demonstrated sensitivity of 83 percent and specificity
of 82 percent for the detection of colorectal cancer. LabCorp's ColoSure testing service relies solely on the Vimentin gene and does not use the DIA marker that is also included in our Version
2 technology.



        Following
the closing of our strategic transaction with Genzyme in January 2009, we have begun resuming our efforts to develop an FDA-approved in vitro diagnostic test for
stool-based DNA colorectal cancer screening testing service. As part of our development efforts and ongoing evaluation of stool-based DNA capabilities and market needs, we are exploring the marker
combinations and platform requirements necessary for optimal performance of our technology based on market need. Objectives around performance, throughput and cost are among the elements that will
need to be met in the design and development of a commercial product based on our technology. We believe obtaining FDA approval for our stool-based DNA colorectal cancer screening technologies is
critical to building broad demand for stool-based DNA colorectal cancer screening technologies and for the successful commercialization of stool-based DNA colorectal cancer screening nationally. We do
not currently have sufficient funds to fully achieve this goal. We may determine to develop an FDA-approved product containing a Version 3 technology based on BEAMing or digital polymerase
chain reaction, or digital PCR, we may use genetic markers that are different from those used currently or in the past, we may focus on increasing the performance of our existing Version 2 technology
and/or we may determine that our existing Version 2 technology provides sufficient performance to enable reasonable market penetration for stool-based DNA for colorectal cancer detection. During 2008,
a proof of concept study using the BEAMing technology, an advanced form of digital PCR developed by The Johns Hopkins University, in which stool and blood plasma were assessed in a
head-to-head comparison for the detection of colorectal cancer, demonstrated 92 percent sensitivity for detecting colorectal cancer in



41









HREF="#bg46501a_main_toc">Table of Contents






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
." Although we believe that this technology may have the potential to be more sensitive and specific than the
current stool-based DNA colorectal cancer screening test commercially offered, Version 3 is still in the prototype stage of development.



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