Exact Sciences Target Price $ 18

EXAS : NASDAQ : US$13.65

BUY 
Target: US$18.00

Life Sciences — Biomedical Devices and Services
CONFIDENCE BUILDS IN TIME OF UNCERTAINTY, SCENARIO ANALYSIS TAKES OUR PT TO $18, REITERATE BUY
Investment recommendation
We believe EXAS’ Cologuard test for colorectal cancer and pre-cancer
will soon obtain FDA approval and good preliminary Medicare
reimbursement. We are buyers of EXAS ahead of a series of catalysts,
the first of which is FDA approval, likely by July-end. Reiterate BUY.
Investment highlights
 Raising numbers based on our scenario analysis. We think EXAS
has ~20% upside in the next month based on the base case of our
scenario analysis (Figure 1), assuming FDA approval and a $400
CMS reimbursement. Given our higher conviction that Cologuard
can convert 8%, 14% and 21% of the 10.2M/year FIT/FOBT testing
market (see Figure 3) for 2015, 2016 and 2017, we raised our
revenue estimates to $111M, $202M and $321M, above consensus’
$87M, $191M and $320M for 2015, 2016 and 2017, respectively.
 Three scenarios for the stock. We think EXAS trades up to $16
under our base case (+5% on FDA approval; +12% on CMS
reimbursement of $400); $20 under our bull case (FDA approval;
$500 Medicare decision); and trades down to $8 in our bear case
(no FDA approval), the latter of which we assign a 5% probability.
 Higher patient compliance should increase the size of the market.
While patient compliance for colonoscopy is low at 38%, total
compliance rates rise to 69% when a physician offers the patient a
choice of either colonoscopy or FIT/FOBT. We believe the addition
of a superior non-invasive test can expand the non-invasive test
market and help EXAS achieve its goal of ~80% patient compliance.

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