Cancer diagnostic tests developer OncoCyte has signed a definitive agreement to acquire 25% of the outstanding shares of Razor Genomics, which offers treatment stratification test for lung cancer.

Under the terms of the deal, OncoCyte will also have the option to buy the remaining outstanding shares.

Razor’s treatment stratification test is designed to identify patients with early stage lung cancer who are at high or low risk of death within five years of surgical resection.

The test helps to detect individuals who have high recurrence risk, enabling treatment when lung cancer is responsive to adjuvant chemotherapy.

Results from a clinical utility study demonstrated 92% five-year disease-free survival rate in high-risk patients identified by the Razor test and treated with chemotherapy versus 49% in untreated patients who were at high risk.

Also, patients identified as low risk by the Razor test achieved a 94% five-year disease-free survival without chemotherapy.

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The test is said to have shown high accuracy in distinguishing high and low-risk individuals compared to the existing National Comprehensive Cancer Network (NCCN) criteria for risk assessment.

OncoCyte expects the Razor test to expand its capabilities into early-stage lung cancer management.

OncoCyte CEO Ron Andrews said: “The addition of the Razor treatment stratification test for patients diagnosed with early-stage lung cancer is a perfect downstream complement to our proprietary DetermaVu liquid biopsy test that we are developing to help manage CT-identified lung nodules and thereby facilitate the early diagnosis of lung cancer.

“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.”

The agreement includes a $10m cash payment by OncoCyte for an initial 25% equity interest in Razor. There will also be an additional payment $1m for achieving the milestone of positive coverage decision by Centers for Medicare and Medicaid Services (CMS).

Furthermore, the deal involves other milestone payments and funding to support future clinical trials.