Is Exact Sciences still a buy at these prices? Print
By Staff and Wire Reports   
Wednesday, 20 August 2014 09:17


As biotech investors may know, the FDA approved a new genetic test from EXACT Sciences Corporation (NASDAQ:EXAS) that can help diagnose colon cancer.

The test, named Cologuard, scans for any genetic mutations in a patient's stool that could serve as an indicator of irregular growths within the colon. It will be available by prescription only, and during testing Cologuard discovered 6.55 percent more colon cancers than a comparable blood test that is currently on the market. Is the FDA approval price pop on this stock done or are investors still buying-- even at these prices?

After a recent presentation by EXAS CEO Kevin Conroy and COO Maneesh Aurora at the Canaccord Genuity Growth Conference last week, analyst Mark Massaro says he has come away with greater conviction in the stock heading into the firm's next risk event. "We are buyers of EXAS," says Mr. Massaro while adding: “On the next risk event (preliminary Medicare decision amount expected in late August/early September), we estimate there is a 60% chance the stock trades higher, 23% chance the stock trades lower, 17% chance the stock hovers roughly flat, and we peg a “risk-adjusted”, probability-weighted upside o 6.3%."

Exact Sciences Corporation is a molecular diagnostics company focused on the early detection and prevention of colorectal cancer. It is developing a patient-friendly, stool-based (sDNA) test known as Cologuard, for the early detection of colorectal pre-cancer and cancer.

As you can see below, EXAS stock prices have been trending higher since May and Massaro thinks the company will trade higher based on early traction with commercial payers. He wrote "Last week, COO Maneesh Aurora stated that EXAS has lined up a number of meetings with large commercial payors, a positive endorsement. Although the timing/amount remains uncertain, we opine that EXAS will take a disciplined stance in negotiating a premium price with commercial payors above CMS’ rate. We expect EXAS will “aim high”, consistent with its decision to price the test at a list of $599."

Massaro believes that there is a 90%+ chance Medicare reimburses EXAS with a cross-walk framework, which is basically a sum-of-the-parts framework that maps to existing reimbursed CPT codes. To date, all of EXAS’ discussions with CMS have been cross-walk-related. Under the cross-walk framework, EXAS hopes to get $502 total from Medicare.

The firm has a $21 per share 12 month price target on the stock and while EXAS’ pancreatic development indicates 88% cancer detection. The analyst also believes that Cologuard has a good chance of being used in high or higher-risk populations where individuals have family risks  of colorectal cancer or irritable bowel disease (IBD, Crohn’s/colitis).  In addition, over the next five years he wouldn’t be surprised to see guidelines move the time down to age 40 or age 45 to begin screening for colorectal cancer.

As always, we urge you to do your own homework on these stocks.


Disclosure: None


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