The market for colon cancer screening is massive — and underserved — says Exact Sciences Chief Medical Officer Paul Limburg. And that might be why EXAS stock is on an eight-month hot streak.
Exact Sciences makes Cologuard, a stool-based detection test for colorectal cancer. Colon cancer is beginning to show up in younger patients, and Cologuard provides an alternative to traditional screening with an invasive colonoscopy. It works to detect cancerous polyps before they turn into cancer.
Limburg called colon cancer the "most preventable, yet least prevented" form of cancer.
Still, about 44 million people in the U.S. aren't up to date with current screening recommendations. With a backlog like that, it's going to take more than colonoscopies in the already strained health care system to make a dent, he told Investor's Business Daily.
"It's going to take a perspective that we have to find the best option to meet patients' needs," he said. "That way, I think we can continue to provide the screening support people need because, quite frankly, if we wait too long the risk of developing a cancer or dying of cancer goes up."
EXAS stock has nearly tripled since hitting a recent low in October. Exact stock is also the eighth-biggest holding in Cathie Wood's ARK Innovation exchange-traded fund, weighted at nearly 5%.
EXAS Stock: 'One Size Doesn't Fit All'
There are myriad colon cancer screening options today. Another test called FIT, or fecal immunochemical test, uses antibodies to detect blood in the stool. Guardant Health also makes a blood-based test known as Shield. Further, Exact Sciences is making its own blood-based test.
"One size doesn't fit all," Limburg said. "Patients and their providers should pick the screening option that works best for them."
Two years ago, the American Cancer Society lowered its guidelines for colorectal cancer screening to age 45. That's down from age 50 previously.
It's unclear why colon cancer is showing up in young people, says Limburg. But what is clear — and could help lift EXAS stock further — is that there's still work to do in getting the word out that people are eligible for screening.
"There's a lack of awareness that colorectal cancer is a condition that affects men and women, that even if you don't have symptoms you can still be at risk for colorectal cancer and that there are multiple, effective options currently available for people to get screened," he said.
Bullish Sales Growth, Lighter Losses
Sales are growing bullishly, however.
In the first quarter, Exact Sciences' total revenue climbed 24% to $602.5 million. Screening sales, which includes Cologuard, surged 45% to $443.2 million. The screening business also includes revenue from its PreventionGenetics business. PreventionGenetics provides genetic testing.
UBS analyst Elizabeth Garcia said Exact Sciences came "barreling out of the gates" in the March quarter. Not only did sales beat expectations but Exact reported a smaller-than-expected loss per share of 42 cents. That shrank from a year-earlier loss of $1.04 a share.
Exact Sciences also issued a bullish outlook. The company expects $2.38 billion to $2.42 billion in sales this year, and topped Wall Street's expectations.
"Cologuard is continuing its steady rate of share capture in the colorectal cancer screening market aided by an enhanced sales execution strategy and solid digital ordering trends," Garcia said in a recent note to clients. "Re-screening is driving momentum and now comprises about 20% of revenue."
In the aftermath of the earnings report on May 9, EXAS stock rocketed almost 11%. Shares broke out of a consolidation with a buy point at 72.29, according to MarketSmith.com.
Exact stock is now well above its 5% buy zone and recently moved into a profit-taking zone. Savvy investors are encouraged to take profits when a stock is 20%-25% north of its entry.
Profitability Is Still Two Years Out
Today, Exact Sciences is still reporting losses. But that's expected to change in 2025. At that point, analysts polled by FactSet expect the company to report an adjusted gain of 56 cents per share.
Sales in 2023-25 are expected to grow 13%-15%.
EXAS stock also has a nearly perfect Relative Strength Rating of 98. This puts shares in the top 2% of all stocks in terms of 12-month performance, according to IBD Digital. Shares also have a strong Composite Rating of 95, meaning EXAS stock outranks 95% of all stocks when it comes to fundamental and technical measures.
Evercore ISI analyst Vijay Kumar says Exact Sciences is a key contributor to reducing the backlog in colon cancer screening after people age 45-49 were added to screening guidelines. He has an outperform rating on shares and recently boosted his price target on EXAS stock to 90 from 76.
The first quarter, he said in a recent note, "checked all the boxes."
Exact Sciences "is in a terrific position to maintain momentum," he said.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
