Exact Sciences stock bounded higher Thursday after beating second-quarter expectations, signaling a return to growth for its biggest moneymaker, a colon cancer test called Cologuard.
Cologuard uses stool collected at home to screen patients with colorectal cancer. But Exact Sciences shares have been under pressure for months following a rare sales slowdown in the first quarter and after rival Guardant Health gained Food and Drug Administration approval for its blood-based colon cancer screener, Shield.
The second-quarter report was a complete turnaround for Exact Sciences, analysts said. Exact beat the high-end of its revenue outlook and reaffirmed its full-year outlook. This suggests Cologuard sales will reaccelerate in the near-term.
"In our view, investors should take a deep breath following Exact's second-quarter update," Canaccord Genuity analyst Kyle Mikson said in a report. "The company posted solid year-over-year growth in Cologuard revenue and maintained its view that multiple factors should drive even stronger year-over-year growth in the second half of 2024."
On today's stock market, Exact Sciences stock surged 26.8% to 57.91. Shares bounced off their 50-day moving average at the open, MarketSurge shows.
Exact Sciences Stock: Beats Its Own Guide
Total second-quarter revenue climbed 12% to $699.3 million, above expectations for $690 million and Exact's own guidance for $677 million to $697 million, according to FactSet.
That included $532 million from in screening revenue and $168 million from the precision oncology business, up a respective 15% and 7%. Screening revenue includes Cologuard and PreventionGenetics. The latter provides tests that screen DNA for nearly all clinically relevant genes. Precision oncology includes sales of breast cancer recurrence test Oncotype DX and therapy selection tests.
For the year, Exact Sciences expects sales to come in at $2.81 billion to $2.85 billion, an increase of 13% at the midpoint. Screening sales are expected to be in a range of $2.16 billion to $2.18 billion.
"If the company is simply able to meet guidance, this would imply a second-half screening revenue growth rate of 21% vs. the first half at 11%," William Blair analyst Andrew Brackmann said in a report. "This should help expand the multiple, which has historically been driven by the revenue growth rate."
Brackmann kept his outperform rating on Exact Sciences stock.
Exact's Blood-Based Test Is Coming
Exact Sciences is developing its own blood-based test for colon cancer.
The test is powered by PCR — polymerase chain reaction — a technology that gained widespread use during the Covid pandemic. This should allow it to have a much lower cost of goods vs. tests created using next-generation screening, or NGS, technology, Brackmann said.
This allows "the company to position its test at a lower (more appropriate) price," he said.
Evercore ISI analyst Vijay Kumar notes the company expects its blood-based test to perform similarly to other comparable blood-based tests.
"Management also stressed that it expects to price its blood-based test at a lower price point, implying the bar for competition will be very high," he said.
Guardant's Shield boasts a sensitivity of 83% for detecting colorectal cancer and a specificity of 90% for advanced neoplasia. Sensitivity is a test's ability to correctly identify people with a disease. Specificity is the test's ability to rule out people without a disease. The Centers for Medicare and Medicaid Services will reimburse a test with 74% overall sensitivity and 90% specificity.
Kumar has an outperform rating on Exact Sciences stock. He says shares are "coiled to snap back if its blood test results match Guardant Health's performance."
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