Dive Brief:

• Pfizer will team up with Exact Sciences to co-promote Cologuard, a screening test for colorectal cancer, the companies said in a Wednesday statement.
• The big pharma has agreed to help promote the test to physicians and health systems along with Exact sales reps, and to roll out an extended marketing campaign. With the deal, Exact CEO Kevin Conroy said on a Wednesday morning conference call he expects about $700 million in sales for 2019.
• Exact will pay Pfizer for its help with a promotional fee based on gross profits above a baseline figure, as well as royalties for three years after the deal ends on Dec. 31, 2021, according to a Securities and Exchange Commission filing.

Dive Insight:

Shares of Exact opened 20% higher Wednesday morning as investors appeared to favorably judge the deal.

Cologuard is the only Food and Drug Administration-approved, non-invasive stool DNA screening test. The FDA approved the test in August 2014.

Since then, Exact has seen steady quarterly demand growth, with the test being used by more than 1.3 million people in total and detecting roughly 6,200 early-stage cancers, according to a third quarter company presentation.

"Any type of partnership where there is an extended reach and leverage to increase screening ... we support 150 percent," Sara Geist, a spokesperson for the Colorectal Cancer Alliance, told BioPharma Dive in an interview.

Geist noted colorectal cancer is the third-most diagnosed cancer in the world and the second-most leading cause of death among cancers, following skin cancer. "This year alone, about 130,000 will be diagnosed and over 50,000 will die in 2018," she said.

In 2017, 571,000 people were screened with Cologuard, leading to $266 million in revenue with a gross margin of 73%.

For 2018, Exact expects $420 million to $430 million in Cologuard revenue from 900,000-920,000 tests. In the first six months of the year, the company reported about 401,000 tests performed with revenue of $193 million.

The Pfizer deal could also help Exact accelerate growth, as the company now expects $700 million in sales in 2019. Exact sees an addressable U.S. market worth more than $14 billion, which it currently has a 3% market share in, according to the company's latest quarterly presentation.

Through the deal, Pfizer agreed to match Exact's marketing and promotional expenses up to about $20 million each year.

In fact, anticipated growth is built into the deal's payment formula for Pfizer. The promotional fee that Exact will pay Pfizer will be 50% of how much actual revenue beats set baseline values multiplied by the gross margin percentage.

Baseline revenues were set at $441 million in 2018, $622 million in 2019, $861 million in 2020 and $1.19 billion in 2021.

Then, after the deals runs its course and expires at the end of 2021, Pfizer will receive royalty payments ranging from 0-3% based on revenue for three more years.