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Bull of the Day: Exact Sciences (EXAS)

Published 07/19/2021, 05:20 AM
Updated 07/09/2023, 06:31 AM

Exact Sciences (NASDAQ:EXAS) EXAS is the $19 billion leader in proactive cancer diagnostics with the Cologuard screening kit, which the majority of healthcare providers are actively prescribing and seeking insurance reimbursement for.

This represents a potential $18 billion total addressable market for EXAS, especially after the the United States Preventive Services Task Force (USPSTF) released in May its final colorectal cancer screening recommendation that screening begin at age 45 (lowered from 50).

Colorectal cancer is the second leading cause of cancer death in the United States, in part because many cancers go undetected until later stages when treatment options are limited. Colorectal cancer can even be prevented through early screening.

However, approximately 44 million average-risk adults age 45-74 are currently eligible for screening, including about 19 million between the ages of 45 and 49. Exact is reaching less than 10% of that population right now.

First Quarter Highlights

EXAS will report Q2 earnings in late July, but here were the highlights of their Q1 report on May 4...

Over 900,000 people were given some type of test or screen by Exact Sciences technology in the first quarter.

Total revenue was $402.1 million, an increase of 16 percent from the year-ago quarter. Net loss was $31.2 million, or $0.18 per share, compared to a net loss of $134.6 million, or $0.91 per share.

This bounce-back in earnings was also a big shock to Wall Street analysts who had projected a loss of $1.04, for an 82.7% positive surprise. Exact had EPS beats in the prior two quarters as well of 52.6% in Q4 and 29.4% in Q3.

Exact 2021 Guidance

The company anticipates revenue of $1.69 to $1.735 billion during 2021, including Screening revenue of $1.12 to $1.15 billion, Precision Oncology revenue of $515-$525 million, and COVID-19 testing revenue of $50-$60 million.

Based on this guidance, analysts boosted their consensus to $1.72 billion in revenues for this year, representing 15.4% growth. And next year's $2.14 billion consensus represents a 24.3% advance. That big jump next year is all about the company's expansion into multiple diagnostic areas, like breast cancer and Precision Oncology with the recent acquisition of Genomic Health.

Here was one particularly bullish call in June as investors and analysts recognized the need for frequent screening at all stages of potential and survived disease...

Raymond James analyst Andrew Cooper initiated coverage of Exact Sciences with a Strong Buy rating and $160 price target. Cooper believes that Exact Sciences is positioned to be a major player in each of the most exciting areas of diagnostics for years to come. The analyst views the valuation as attractive, with the base business growing rapidly in a market investors are valuing highly for new entrants.

The Era of Smart, Personalized Health

The "new entrants" he's probably referring to are Guardant Health (NASDAQ:GH) GH, Natera (NASDAQ:NTRA) NTRA, and Invitae (NYSE:NVTA) NVTA. And I own most of them at any given time in my Healthcare Innovators portfolio.

All of these companies have approved diagnostic tests that they seek to deliver across the lifetimes of patients using advanced bioinformatics, with Invitae and Natera also specializing in non-invasive prenatal screening.

Not only is early detection crucial, but making it easy and convenient for more frequent screening -- where patients and their doctors are proactively engaged in uncovering potential health mysteries, or prescribing best-fit lifestyle changes before they become problems -- is a key prevention strategy built around advanced data analytics tools.

Another new player is Adaptive Biotechnologies (NASDAQ:ADPT) ADPT. This $5 billion emerging player in genetic diagnostics focuses on immune-driven clinical products to transform the treatment of disease. As their name implies, they seek to be the experts in the human adaptive immune system.

The ARK Invest genomics research team calls it "a platform for all auto-immune diseases" since they are using machine learning and computational biology to create better, faster, and cheaper sequencing procedures that can analyze, diagnose, and discover new treatments. Shares soared to $70 in Q1 during the "ARKG bubble" and also on FDA EUA for a specialized COVID test called T-Detect.

Here's what I told my Healthcare Innovators members when we recently added ADPT shares to our portfolio...

Now I see good risk reward in the company shares near $35 as sales estimates rise and project 53% growth this year to breach $150 million. And next year is forecast by 4 analysts for a 39% advance to $208 million. Earnings estimate revisions have also awarded the stock a Zacks #2 Rank currently.

Recall that the adaptive immune system, also referred as the acquired immune system, is composed of specialized, systemic cells (B and T) and processes that eliminate pathogens or prevent their growth. It works in tandem with innate immune system functions like skin, mucous membranes, and cell enzymes, etc.

Some of the most important scientific and medical research is being done in the adaptive arena (think CAR-T) because every body is different and has its own stories to tell of disease and immunity. With over 58 billion immune receptors to sequence, map, and research, Adaptive believes they have a lot of productive work to do.

I see them much like Twist, Invitae, and Pacific Biosciences (NASDAQ:PACB) as specialized labs/platforms able to do deep genomic R&D that larger BioPharma will pay for.

Here's how the founders tell their story...

In 2009, Harlan Robins made a breakthrough that created a window into the adaptive immune system the world hadn’t thought possible. Together, Harlan and his brother Chad, founded Adaptive to meet the worldwide demand for immunosequencing technology. Over the past decade, we have developed our proprietary immune medicine platform to read and translate the adaptive immune system at scale and with precision in order to use its capabilities in the clinic.

And now, Adaptive is ready to evolve and generate opportunities across life sciences research, clinical diagnostics, and drug discovery. Our future holds bold discoveries, building on a platform that can be deployed at speed and scale with the aim to launch universal diagnostics.

Disclosure: At the time of publication, I own shares of EXAS, NVTA, TWST, PACB and ADPT for the Zacks Healthcare Innovators portfolio.

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Exact Sciences Corporation (EXAS): Free Stock Analysis Report

Adaptive Biotechnologies Corporation (ADPT): Free Stock Analysis Report

Invitae Corporation (NVTA): Free Stock Analysis Report

Natera, Inc. (NTRA): Free Stock Analysis Report

Guardant Health, Inc. (GH): Free Stock Analysis Report

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