Analysts say Exact deal not vital to Sequenom

Cancer test maker Exact Sciences Corp. on Monday rebuffed a buyout bid from genetic analysis product maker Sequenom Inc., and analysts said the purchase isn't necessary for Sequenom _ meaning the company may choose to walk away.

Late Monday, the board of Exact Sciences rejected Sequenom's offer of $41 million, or $1.50 per share, because it was pursuing an alternative that is more valuable. Earlier in the day, however, analysts appeared to doubt that idea.

Oppenheimer analyst Kevin DeGeeter said the company is reporting minimal sales _ it reported negative $700,000 in revenue during the third quarter _ and has less than six months of cash left. That made other offers unlikely in his view.

DeGeeter said Sequenom's offer presented a "great deal" for Exact Sciences, but he said Sequenom does not need to complete the deal and will probably not chase Exact Sciences.

In announcing its offer Friday afternoon, Sequenom said cancer screening is an important field for the company. It believes Exact Sciences' cancer tests fit well with Sequenom's own MassArray genetic research systems and other DNA tests.

San Diego-based Sequenom's most advanced product candidate is the SEQureDx test, a prenatal test for Downs syndrome. The company hopes to begin marketing the test later in 2009.

In Monday trading, shares of Marlborough, Mass.-based Exact Sciences climbed 51 cents, or 52 percent, to close at $1.50.

In a client note, Lazard Capital Markets analyst Sean Lavin said the deal would help Sequenom fulfill its goal of developing noninvasive cancer diagnostic tests. He wrote that Exact Sciences is one of the leading colon cancer diagnostic companies, and holds valuable patents. It also has relationships with key doctors, which could help sell its products, he said.

Lavin, who rates Sequenom at "Buy," believes that Sequenom would gain additional patent protection on its own products if it buys Exact Sciences' intellectual property. But he said the patents on SEQureDx should hold up even if no deal is made.

"Contrary to some market chatter, Exact Sciences does not seem to have any IP that would prevent Sequenom from launching its Down test even if this acquisition does not go through," he wrote.

Sequenom shares fell to $22.29 during the day, and lost another 23 cents to $22.06 in aftermarket trading.