When I last wrote about Exact Sciences ( EXAS - Get Report), makers of a stool-based genetic test for colon cancer, I had this to say: "I view Exact with the same lens as a company like Discovery Labs i.e., train wrecks that might, perhaps, possibly, eventually, one day turn themselves around. But there's no guarantee, and the track record certainly shouldn't give anyone confidence that the carnage can be cleaned up. It seems better to sit on the sidelines and wait for something good to happen." Well, something good did happen last week. The American Cancer Society (ACS) issued new colon cancer screening guidelines that included, for the first time, Exact's PreGen-Plus stool DNA test. Exact shares are up almost 70% to $3.29 since the ACS made its announcement Wednesday night. Inclusion on the ACS list of recommended colon cancer tests was a long time coming, and should help Exact and its testing partner LabCorp ( LH - Get Report) finally start to gain some commercial traction with PreGen Plus. To date, the test has been a commercial failure, mainly because private insurance carriers and Medicare don't offer reimbursement. But don't go all in on Exact just yet. This news needs to be followed by more progress before Exact is really on solid footing. For starters, the FDA is still requiring an FDA approval for PreGen Plus. To get that done, there are two roads Exact could travel -- one relatively easy, the other hard and long. On a Thursday night conference call, Exact CEO Jeff Luber said meetings with the FDA so far indicate that the agency is willing to allow the company to take the easier route to approval. If and when FDA approval is granted, Exact and LabCorp still need to convince Medicare and the private payors to reimburse for PreGen Plus. Only then, will revenue really start to roll in. Exact has $12.5 million in the bank, enough to last through the end of 2008, says Luber. That's less than a year's worth, so don't be surprised to see the company try to raise some more, especially with the wind at its back on this positive endorsement from the ACS.
Excuse me while I step away from investable nuggets to air my two cents about last week's controversy between the American Academy of Neurology and several sell-side analysts. The AAN accused the analysts of breaking an embargo for the group's upcoming annual meeting by writing research reports discussing clinical data contained in embargoed research abstracts.
Biotech firms were supposed to be safe havens from the current credit crisis gripping Wall Street. Drug development is hard enough without having to worry whether companies have their cash tied up in risky, illiquid financial instruments. Well, get ready to worry. In the past few weeks, a handful of biotech and drug companies have announced that some of their cash is tied up in high-risk (and now illiquid) auction rate securities. The list includes Amag Pharmaceuticals ( AMAG), ImClone Systems ( IMCL), Bristol-Myers Squibb ( BMY - Get Report), Endo Pharmaceuticals ( ENDP - Get Report) and Tapestry Pharmaceuticals (which filed for bankruptcy, in part because of getting caught holding auction rate securities it couldn't sell.) At this point, alarms bells aren't necessarily ringing across Biotechland, but this latest development, especially if more widespread, won't help bring investors back to the sector.