Exact Sciences (EXAS) surged Thursday after beating expectations for its second-quarter results, signaling a return to growth for its biggest moneymaker, a colon cancer test called Cologuard.
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Cologuard uses home-collected stool to screen colorectal cancer patients. But Exact Sciences shares have been under pressure for months after a rare first-quarter sales slowdown and after rival Guardant’s Health (GH) has received Food and Drug Administration approval for its colon cancer blood test, Shield.
Analysts said the second quarter report was a complete turnaround for Exact Sciences. Exact beat the high end of its revenue guidance and reaffirmed its full-year outlook, suggesting Cologuard sales will accelerate again in the near term.
“We believe investors should take a deep breath following Exact’s second-quarter update,” Kyle Mikson, an analyst at Canaccord Genuity, said in a report. “The company delivered solid year-over-year growth in Cologuard revenue and maintained its view that multiple factors should drive even stronger year-over-year growth in the second half of 2024.”
In early trading on the stock market today, Exact Sciences shares rose 20.2% to 54.92. MarketSurge shows that the shares were up from their 50-day moving average at the open.
Exact Sciences stocks: outperforming their own guide
Total revenue rose 12% to $699.3 million in the second quarter, according to FactSet, above expectations of $690 million and Exact’s own forecast of $677 million to $697 million.
That included $532 million from screening revenue and $168 million from the precision oncology business, up 15% and 7%, respectively. Screening revenue includes Cologuard and PreventionGenetics, the latter providing tests that screen DNA for nearly all clinically relevant genes. Precision oncology includes sales of the Oncotype DX breast cancer recurrence test and therapy selection tests.
Exact Sciences expects revenue for the year to be $2.81 billion to $2.85 billion, up 13% at the midpoint. Screening revenue is expected to be in the range of $2.16 billion to $2.18 billion.
“If the company is simply able to meet guidance, it would imply a 21% revenue growth rate in the second half, compared to 11% in the first half,” William Blair analyst Andrew Brackmann said in a report. “This should help expand the multiple, which has historically been driven by revenue growth rate.”
Brackmann maintained his outperform rating for the Exact Sciences share.
Exact’s blood test is coming
Exact Sciences is developing its own blood test for colon cancer.
The test is powered by PCR (polymerase chain reaction), a technology that has been widely used during the Covid pandemic. This should significantly reduce the cost of goods compared to tests made using next-generation screening, or NGS, technology, Brackmann said.
This allows the company to offer its test at a lower (more appropriate) price, he said.
Vijay Kumar, an analyst at Evercore ISI, notes that the company expects its blood test to perform similarly to other comparable blood tests.
“Management also stressed that it expects to lower the price of the blood test, which means the bar for competition will be high,” he said.
Guardant’s Shield has an 83% sensitivity for detecting colorectal cancer and a 90% specificity for advanced neoplasia. Sensitivity is the ability of a test to correctly identify people with a disease. Specificity is the ability of the test to exclude people without disease. The Centers for Medicare and Medicaid Services reimburses a test with an overall sensitivity of 74% and a specificity of 90%.
Kumar has an outperform rating on Exact Sciences stock. He says the stock is “excited to bounce back if the blood test results match Guardant Health’s performance.”
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
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