Exact Sciences could eventually nab half of the colon cancer screening market, an analyst said after the company's next-generation Cologuard beat the original product in a study of 20,000 people. But EXAS stock seesawed on the news.
Cologuard looks for indications of colorectal cancer in a patient's stool sample. Exact's screening sales topped the $1 billion mark in 2020 and are expected to come in above $2.4 billion this year. Now, the company is trying to beat its own success.
In a study called Blue-C, Exact Sciences' next-generation Cologuard showed 94% sensitivity and 91% specificity. Sensitivity refers to a test's ability to find positive cases. Specificity is the test's ability to rule out someone without the disease.
Canaccord Genuity analyst Kyle Mikson says the results could set up Exact Sciences to eventually win half the market — or more — in colon cancer screening. Colon cancer is becoming increasingly prevalent and the American Cancer Society now recommends regular screening for people age 45 and older. Exact says Cologuard can help ease a backlog in colonoscopies even as the number of patients grows.
"In our view, the next-generation Cologuard results should support the company's long-term path to 50% market share (or above)," he said in a report.
EXAS Stock: Topping Its Own Success
Notably, next-generation Cologuard beat out the original colon cancer test on various measures. The original Cologuard was approved in 2014 based on the 10,000-person Deep-C study which showed it had a sensitivity of 92% in detecting all colon cancer cases, and an overall specificity of 87%.
"At a high level, Cologuard 2.0 raised the bar across the board," Evercore ISI analyst Vijay Kumar said in a report. "A 2% pick-up in overall sensitivity while raising the bar on specificity by about 300 basis points was impressive."
But EXAS stock toppled 4.3% on Wednesday after the company announced the Blue-C results.
The tumble is likely related to the new product's minimal improvement in finding precancerous polyps. Those polyps can be removed before they become cancerous. Cologuard 2.0 had a 43% sensitivity for early cancer detection vs. 42% for the original Cologuard.
Evercore's Kumar notes investors were looking for a 50% sensitivity. In earlier studies, Cologuard 2.0 demonstrated a sensitivity of 57%. Still, he kept his outperform rating and 90 price target on EXAS stock.
Next-Gen Cologuard Could Be Coming
Exact Sciences is planning to file for approval of its next-generation Cologuard by the end of the year.
"Cologuard is a groundbreaking innovation in noninvasive cancer detection," Chief Executive Kevin Conroy said in a written statement. "Next-generation Cologuard will set a new performance standard."
The approval would come at a critical time. There are more than 60 million people in the U.S. who are eligible for colon cancer screening but haven't been screened, Conroy said. They can use Cologuard, other stool-based tests or colonoscopies. There are also blood-based tests for colon cancer, but the ACA doesn't recommend them at this point. Exact is also working on its own blood test.
"Based on these numbers, Cologuard 2.0 should dispel any lingering concerns on cannibalization from blood-based tests," Evercore's Kumar said.
He noted Guardant Health's blood test for colon cancer had an overall sensitivity of 83% and a specificity of about 90%. The results from Exact make "a strong statement about sustainability of Cologuard in the colon cancer screening landscape."
EXAS Stock Reverses Higher
On Thursday, Exact Sciences stock reversed course and bounded 5.9% higher.
That followed Exact's investor day. The company said it expects sales to increase at a 15% compound annual rate from 2022-27, excluding its Covid and prostate cancer screening sales. Exact Sciences also reiterated its guidance for $2.4 billion in sales this year, at the midpoint.
Importantly, Exact expects to become free cash flow positive this quarter.
After hitting a recent low point in October, EXAS stock has surged 216% as of Friday's close. Shares are also well above their 50-day and 200-day moving averages, and climbing.
Plus, EXAS stock is highly rated, according to IBD Digital.
Shares have a nearly perfect Relative Strength Rating of 98 out of 99. This means Exact stock ranks in the top 2% of all stocks when it comes to 12-month performance. Shares also have a strong Composite Rating of 94, which is based on fundamental and technical measures.
Exact Sciences stock broke out of a consolidation with a buy point at 72.19 on May 10. EXAS stock was about 32% extended from that entry as of Thursday's close, according to MarketSmith.com.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
