About a year ago on this board I outlined 3 catalysts that Exact Sciences (EXAS) had as potential growth drivers. The first was the Pfizer sales partnership, that catalyst began, as expected, about 9 months ago and has re-accelerated their revenue growth per below:
Qtr Rev QoQ YoY 3Q18 $118 14.6% 62.5% 4Q18 $143 21.2% **63.6%** (First partial quarter of Pfizer partnership) 1Q19 $162 13.3% **80.0%** 2Q19 $200 23.5% **94.2%**
Keep in mind that’s near 100% growth (and accelerating) at a TTM rev of $623M! I’m expecting next quarter to show triple digit growth and TTM rev to be close to $750M.
The second catalyst was the potential of the FDA increasing the EXAS TAM by lowering the target screening age from 50 to 45, as the American Cancer Society had recommended in May of 2018. Well today they announced the FDA has done that, lowering the label indication for eligible average-risk individuals, to 45 and up, instead of 50, for the EXAS screening test (Cologuard). It’s estimated this increases their TAM in the US from 80M to 100M people. This won’t affect this current quarter much as it is almost over, but should start showing up in their Q4 results. I believe this will allow their growth to stay at or above triple digits for another year as the sales force starts to sell to this age demographic.
Here is the link to the press release with some highlights (bolding mine):
Exact Sciences Corp. (NASDAQ: EXAS) announced today that the U.S. Food and Drug Administration (FDA) approved its noninvasive colorectal cancer screening test, Cologuard, for eligible average-risk individuals ages 45 and older, expanding on its previous indication for ages 50 and older. The decision comes at a critical time when the incidence of colorectal cancer is on the rise among American adults under the age of 50.
The American Cancer Society (ACS) responded to the growing trend of colorectal cancer in younger patients in May 2018 when it updated its colorectal cancer screening guidelines to include people between the ages of 45 to 49. The prior ACS recommendation called for screening to begin at age 50.
Colorectal cancer is considered the most preventable, yet least prevented form of cancer and is the second deadliest cancer in the U.S. Regular screening is crucial because colorectal cancer is more treatable when detected in its earlier stages.
The label expansion, or broadening of the population for whom Cologuard is FDA-approved, provides a new, sensitive, at-home stool-based screening choice for the approximately 19 million average-risk people in the U.S. ages 45 to 49.
“The alarming rise in incidences of colorectal cancer for those under 50 is creating a sense of urgency,” said Anjee Davis, President of Fight Colorectal Cancer.
The above 2 catalysts were pretty sure bets in my mind, and the benefits of them will continue to be realized in upcoming results. The remaining catalyst, is not such a sure thing, and not a reason in and of itself to invest. The third outlined catalyst was the liquid biopsy tests they’re working on (like many other companies), especially the liver cancer screening they’re working on with the Mayo clinic.
And a potential 4th reason for owning the stock (but not a growth catalyst) would be the possibility of EXAS being acquired, again, not a reason to invest, but still a potential in my mind.
As I’ve always said with this one, do your own DD, as I’m no expert, but it has been a great stock to own for years now, and I think that will continue. I’m a little more hesitant to make it as large a position as our SaaS stocks, but am adding to my position at this time to move it from about a 4% to 6% position in my portfolio as these catalysts continue to play out.
Seems like a good time to me as it had also been hit with the sector rotation out of high growth names as EXAS stock dropped from the mid $120 range to $105, but today is up about 5% to $110 on this news.