EXAS - Two new catalysts

Investment Analysis Clubs Saul’s Investing Discussions
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So I’ve been posting updates on Exact Sciences (EXAS) here for about the last 8 or 9 months or so (since I’ve been building a position) when news warrants it. Not many seem interested, but I know some others hold shares as I’ve seen it in their portfolios, so I’ll continue to post when I think something material comes up.

And they’ve had 2 catalysts come out the past month that have practically doubled the stock price since the last time I posted (in March).

I won’t go into the detail I did after the last call other than to post the following link to the last review I did after their Q4 announcement. You can read it rather than me copying most of it here.

http://discussion.fool.com/exas-8-qtrs-of-triple-digit-growth-33…

Here are their updated revenue numbers after their Q1 release:

Revs (Millions)						

	Q1	Q2	Q3	Q4		Total Revs	Growth

2015	$4	$8	$13	$14		$39	        2088.9%
2016	$15	$21	$28	$35		$99	         152.0%
2017	$48	$58	$73	$87		$266	         167.9%
2018	$90

And a different view of their last 2 years revs and growth rates:

   Revs ($M)   Seq Rev Growth   YOY Rev Growth   TTM Rev (Millions)   TTM YOY Rev Growth

1Q16	$15	    2.8%	     244.2%	       $50	           760.3%
2Q16	$21	   43.2%	     161.7%	       $63	           353.2%
3Q16	$28	   32.5%	     123.0%	       $79	           196.2%
4Q16	$35	   25.3%	     144.4%	       $99	           152.0%
1Q17	$48	   37.5%	     227.0%	      $133	           166.3%
2Q17	$58	   19.0%	     171.7%	      $169	           168.7%
3Q17	$73	   26.0%	     158.4%	      $214	           172.4%
4Q17	$87	   20.4%	     148.3%	      $266	           167.9%
1Q18	$90	    3.0%	      87.0%	      $308	           131.5%

As you can see the rev growth came down significantly this quarter to 87% - down from anywhere from 150% to 250% over the past 8 quarters - so down a bunch, but still 87% growth!

So after their earnings announcement on 4/26/18, the stock popped up from the mid $40’s to the low $50’s. It was a good announcement with continued progress made on multiple fronts.

But the real news came over the last 3 weeks…

Catalyst #1

A little less than 3 weeks ago the American Cancer Society recommended that people at average risk of colorectal cancer start regular screening at the age of 45 rather than at 50. This in essence increased their TAM by 20M potential new clients, taking it from 80M to 100M.

https://www.bizjournals.com/milwaukee/news/2018/06/01/exact-…

When this news came out, the stock jumped from the low $50’s to the low $60’s and continued to drift up.

Catalyst #2

Then, about a week after that, EXAS and researchers at the Mayo Clinic announced they have developed a blood test that could detect curable liver cancer in 91% of patients studied. It proved 95% sensitive for detecting cancer across all stages. Overall, the test showed 93% specificity, demonstrating its ability to discriminate between normal and diseased patients. Physicians diagnose about 42,000 Americans with liver cancer each year. Exact Sciences estimates more than 3 million Americans are eligible for liver cancer surveillance. At a hypothetical $350 per test, this could add $1 billion to Exact Sciences’ potential market.

The above numbers were taken from the below article:

https://www.investors.com/news/technology/exact-sciences-liv…

After this news broke, the stock climbed from the low $60’s up to it’s current $70 price.

It’s another biotech, so of course it has risks, but it also has an FDA approved product that it has been selling for a few years now and who’s growth is still phenomenal, even after coming down from it’s triple digit growth over the previous 3 years.

Thoughts on these new developments?

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foodles, I really appreciate your posts on EXAS. I’ve looked at the company a number of times but never quite pulled the trigger to my chagrin. I need to take a look at them again to see margins, cash, debt all that stuff. Please keep posting, I always throw a rec your way even if I don’t respond as I don’t want to clutter the board.

all the best,
Ethan

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ditto that from me, pretty much word for word. I haven’t bought EXAS, because I don’t feel like I know enough, but always find these posts interesting.

cheers
Greg

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8.5 b cap
350 m rev
Not exastly cheap

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I held and sold EXAS, I have been toying with buying it back. As a Med company it doesn’t seem to be a story stock.

Somehow it fell off my watch list. :frowning:

Thanks for the update.

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I’ve followed EXAS for about a year now, seen it hit the high and low numbers. Thanks for posting the related catalyst’s. My primary reason that I did not purchase this past winter was based upon a visit to my primary physician. I am over 50 and prime candidate for a colon screening once a year, like all 50+ folks.

When my physician scheduled my colonoskopy, I asked him why I just shouldn’t take the colonguard test. He said that they were a waste of time. That the result would come back and recommend the colonoscopy anyway, so why pay and take the test anyway. He wasn’t thrilled with the test and was a firm believer that everyone should have a colonoscopy once they hit a certain age.

I think the new data for screening when you hit 45 will definitely assist. I think the question I am waiting for to be an investor is, can the test eventually replace the need for a colonoscopy? That would be a game changer.

Sox

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Apparently most doctors think that colonoscopies are 100% reliable for detecting cancers. My doctor says otherwise, and I have seen reference to a recent study done by the University of Utah that concluded that colonoscopies are actually only about 94% accurate, which is only slightly better than the EXAS test. However, your doctor’s advice about following up with a colonoscopy in any case may not be quite accurate. The American Cancer Society advises that “If you choose to be screened with a test other than colonoscopy, any abnormal test result should be followed up with colonoscopy.” The implication seems to be that if the alternative test results are normal, you might not need a colonoscopy. I wonder how many doctors are willing to take that chance and risk liability?

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The implication seems to be that if the alternative test results are normal, you might not need a colonoscopy.

The flip side of which is, if you have ever had a non-normal result, then you are no longer a candidate for the EXAS test.

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…my physician…said that they were a waste of time…He wasn’t thrilled with the test and was a firm believer that everyone should have a colonoscopy once they hit a certain age.

To a hammer, every problem looks like a nail.

I’m also over 50 for a few years now and had put off the colonoscopy, but finally got it done a couple months ago. One benign polyp found and removed during the procedure, I feel great that I got it done and removed a potential future cancer from my body.

The test is not perfect, it’s not for everyone, EXAS admits that, but it is great as an option for folks who will not get a colonoscopy for whatever reason. They do sell a lot of test kits, and that number is growing exponentially. They only have about 3% (as I remember) of the TAM currently, the question is how high can this number go? I don’t know that answer, but the rate they’ve been growing, and the available runway makes me a believer that it will be much higher than it currently is.

Also, the liver cancer blood test is very exciting.

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The fact is that until it is nearly universally accepted that this alternative can replace colonoscopy, doctors are still going to recommend a colonoscopy. If you have the means to pay, go ahead and do both.

Note those that make the recommendations (gastroenterologists) are the ones that do the colonoscopies. You can guess the odds of them coming out with a recommendation that colonoscopy is no longer needed with a negative stool screening. The probability goes way up if the cost of doing the procedure becomes more than what is reimbursed.

As long as colonoscopy is considered the gold standard, home screening will only increase the number of procedures, whether by actually finding cancers or by false positives. So as long as this alternative is not used as a reason to not do an otherwise indicated colonoscopy, most doctors won’t mind.

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Do you know if this procedure is approved for payment by Medicare?

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Do you know if this procedure is approved for payment by Medicare?

From the Cologuard website:

“Good news! Cologuard is covered by Medicare and most major insurers.”