Exact Sciences: Navigating Challenges While Advancing Cologuard Deployment

Exact Sciences Corporation (EXAS) is dedicated to solidifying Cologuard as the go-to solution in colorectal cancer screening. With a focus on high-impact pipeline opportunities, the company is making strides to enhance its digital infrastructure and diagnostic capabilities, providing essential insights across the cancer care continuum. However, rising costs tied to macroeconomic conditions and a heavy reliance on the Cologuard test pose significant challenges.

Over the past year, this Zacks Rank #3 (Hold) stock has seen a decline of 17.9%, slightly worse than the industry’s 15.6% drop but contrary to the S&P 500 Composite’s notable increase of 26.9%.

Exact Sciences holds a market capitalization of $10.70 billion and boasts a long-term earnings growth rate of 30.6%, outpacing the industry’s average of 20.2%. In the last four quarters, the company’s earnings beat estimates in two instances, matched in one, but missed in another, culminating in an average surprise of 29.9%.

Key Drivers Behind EXAS Stock Performance

Growing Adoption of Cologuard: As of August 2024, Exact Sciences reported that the Cologuard test has been utilized for colorectal cancer screening over 16 million times in the last decade, with growth momentum continuing. During the third quarter of 2024, screening revenues surged by 15%, fueled by an increase in Cologuard volumes, as health systems and providers increasingly integrate this test into routine care.

To further increase Cologuard’s reach, Exact Sciences is concentrating on three strategic areas: optimizing its commercial organization with leadership and effective sales training, simplifying the ordering process for healthcare providers and patients, and encouraging earlier screenings starting at age 45 to detect cancer sooner.

Innovations in Testing Solutions: Recent developments have included FDA approval of the Cologuard Plus test for adults aged 45 and above considered average risk for colorectal cancer in October 2024. The company’s OncoDetect MRD test aims to identify residual disease earlier than conventional imaging. Additionally, Exact Sciences plans to introduce OncoLiquid, a blood-based test from its Resolution Bioscience acquisition, which will complement the tissue-based OncoExTra service.

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At the ESMO (European Society for Medical Oncology) 2024, Exact Sciences highlighted significant progress in its blood-based colon cancer screening test, aiming to assist 60 million Americans who have yet to be screened. The company also presented positive data on its multi-cancer early detection blood test, showcasing the diagnostic potential of utilizing multiple biomarkers for various types of cancer.

Improving Patient Experience: Exact Sciences is committed to building an advanced digital infrastructure that transforms cancer care by enhancing the experience for both patients and healthcare providers. This initiative is designed to empower patients to engage actively in their care and simplify the test ordering and result interpretation processes for physicians.

The proprietary platform, Exact Nexus, has established electronic connections with nearly 250,000 providers who ordered Cologuard this year, in addition to reaching 24 million patients and collaborating with over 370 U.S. health systems and 800 payers. This combination of technological capability and commercial strength is facilitating more frequent Cologuard screenings, helping to address the existing screening gap.

Challenges Facing EXAS Stock

Rising Operational Costs: Geopolitical tensions, including ongoing conflicts in Europe and the Middle East, have led to increasing raw material, labor, and shipping costs. A high-interest-rate environment, coupled with restricted access to credit markets, has added strain on the company’s suppliers and partners, thereby impacting Exact Sciences’ profitability.

Dependence on Cologuard: The company has stated that its revenue generation heavily relies on the success of Cologuard and Oncotype DX breast cancer tests, at least for the next year. There is uncertainty regarding Exact Sciences’ ability to develop other products that will generate substantial revenue moving forward. If sales growth for Cologuard and Oncotype DX stagnates or experiences delays, the financial and operational health of Exact Sciences could be adversely affected.

EXAS Stock Estimate Analysis

Over the past month, Zacks Consensus Estimate for Exact Sciences’ per-share loss for 2024 has persisted at $1.20. Meanwhile, the estimate for revenue in 2024 indicates a year-over-year growth of 9.7%, reaching $2.74 billion.

Top Picks in the MedTech Sector

Several stocks in the broader medical landscape are attracting attention, such as Veracyte (VCYT), Haemonetics (HAE), and Phibro Animal Health (PAHC).

Veracyte is estimated to achieve a 37.2% earnings growth rate in 2024, significantly above the industry average of 15.3%. In recent quarters, Veracyte’s earnings consistently surpassed the Zacks Consensus Estimate, with an average surprise of 520.6%. Over the past year, its shares have appreciated by 44.5%, while the industry saw meager growth of 3.6%.

Currently, VCYT holds a Zacks Rank #1 (Strong Buy). You can view the complete list of today’s Zacks #1 Rank stocks here.

Haemonetics, ranked #2 (Buy) by Zacks, is projected to achieve a fiscal 2025 earnings growth rate of 15.9%, in contrast to the industry’s 12.3%. However, the company’s shares have experienced a decline of 8.3% in the recent past.