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Exact Sciences’ Stock Stumbles on Early Cologuard Launch Data

Xconomy Wisconsin — 

Exact Sciences’ stock dipped on Tuesday after Wall Street got spooked by the company’s early sales results from the launch of Cologuard, its stool-based DNA test for colorectal cancer.

Madison, WI-based Exact (NASDAQ: EXAS) saw its stock drop as much as 18 percent from its opening bell price yesterday of $24.86 per share, before closing at $22.90—its lowest end-of-day mark since late November. The stock recovered some today, trading around $24 per share.

The flurry of trading activity was spurred by the release of Exact’s fourth-quarter financial results, in which it reported a $32.4 million loss, or 38 cents per share, on $1.5 million in sales, compared with a $12.2 million loss, or 17 cents per share, on $1 million in revenue in the same period the previous year.

Investors apparently weren’t satisfied, at least at first glance, by Exact’s early results from the launch of its colon cancer diagnostic, which it began selling last fall.

In the fourth quarter last year, more than 4,000 tests were completed. Exact has picked up momentum this year, as 5,200 tests have been completed in the first quarter. That number could surpass 10,000 by the end of the quarter, Exact CEO Kevin Conroy said in a Tuesday conference call with analysts, according to a Seeking Alpha transcript.

Of the 16,000 doctors contacted by Exact sales reps about signing up to prescribe Cologuard, 12,000 have enrolled, and 6,300 have gone ahead and ordered the test at least once.

Those are still small numbers, considering Exact is targeting about 280,000 primary care doctors in the U.S. But the early traction was accomplished with a sales staff of about 80 people, which is being increased to 140 in the next week and 200 by the end of the year, the company said.

Meanwhile, about 75 percent of patients who were prescribed Cologuard last year followed through and completed the at-home test, which involves shipping a stool sample to Exact’s lab for analysis. Most of them needed a little coaxing from Exact, however, in the form of follow-up phone calls. Patient compliance is an important stat to watch because, as Exact points out, colorectal cancer is “considered the most preventable, yet least-prevented cancer, due to the lack of patient compliance with screening.”

Financial analysts with Robert W. Baird & Co. viewed this week’s stock fluctuation as “a case of consensus expectations being too high, rather than launch missteps,” according to a note to investors. They remain “bullish” on Exact’s prospects because they expect physician enrollment to continue growing, especially as Exact adds more sales staff; orders of the test have been on the rise; the patient compliance rate is “healthy”; and more than half of Cologuard’s target patient group has insurance that covers the test. Baird analysts maintained their “outperform” rating on Exact’s stock; most analysts rate the stock a “buy.”

The biggest challenge to Cologuard’s future success, Conroy admitted, is getting more private insurers to reimburse the test. Exact has secured coverage by Medicare, more than five other insurers, and eight states that mandate reimbursement because Cologuard is included as a recommended colon cancer screening option by the American Cancer Society. So far, Exact has had more luck with regional private insurers than with large national ones. “The large payers, we think, are going to take more time,” Conroy said in the transcript. “We are in conversations with them.”

One thing that could greatly help—or potentially hurt—Cologuard’s insurance coverage is a pending assessment of the test by the U.S. Preventive Services Task Force. If the task force issues a positive recommendation of Cologuard in its guidelines, it would mean that all U.S. insurers would eventually have to cover the test, due to Affordable Care Act rules, Conroy said. The task force’s decision is expected by the end of this year or early 2016, he said.

Baird analysts think almost all insurers will cover Cologuard eventually—regardless of the task force’s decision—given the test’s accuracy, as well as its lower one-time cost and increased convenience when compared with a colonoscopy.