OncoCyte said recently that it has entered into a definitive agreement to acquire Razor Genomics, which developed and markets a prognostic test to assess risk in early-stage lung cancer patients after surgery.  

In an initial closing, expected in September, OncoCyte will pay $10 million in cash to acquire shares of Razor preferred stock representing 25 percent of its outstanding equity. The company will then pay an additional $1 million milestone associated with the positive Centers for Medicare and Medicaid Services coverage decision Razor recently received for its test.

Razor will use $4 million from that initial $10 million payment to support a supplemental clinical trial of its existing test. Under the terms of the deal, shareholders of Razor will be further eligible to receive an additional $10 million in cash and $5 million worth of OncoCyte common stock, or in certain circumstances a combination of the two, for all remaining shares of Razor upon the achievement of certain clinical trial milestones, completing the acquisition.

Explaining the rationale for the acquisition, OncoCyte said that the companies' tests complement each other in terms of their function in the lung cancer care continuum. Additionally, the fact that the Razor test already has a draft local coverage decision in place from its local CMS contractor means it can help provide a predicate as OncoCyte later seeks coverage for its own DetermaVu assay.

Razor's test is an algorithmic genomic assay. In a clinical utility study published last year, patients tested by Razor and treated based on the results had a five-year disease-free survival rate of 92 percent compared to 49 percent in untreated high-risk patients. In addition, patients identified as low risk by the Razor test had a five-year disease-free survival of 94 percent without the use of chemo.

"The addition of the Razor treatment stratification test … is a perfect downstream complement to our proprietary DetermaVu," OncoCyte CEO Ron Andrews said in a statement. Whereas the Razor test is designed to aid decision-making for patients after surgery, DetermaVu is a non-invasive detection assay that helps determine which lung nodules identified by imaging are most likely to be cancerous and require further biopsy and potential surgical removal.

"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 … and this transaction is a significant step forward … 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," he added.