EXAS : NASDAQ : US$21.04 BUY
Exact Sciences Corporation is a molecular diagnostics
company focused on the early detection and prevention
of colorectal cancer. It is developing a patient-friendly,
stool-based (sDNA) test known as Cologuard, for the early
detection of colorectal pre-cancer and cancer. The
company is based in Madison, WI.
All amounts in US$ unless otherwise noted.
Life Sciences — Biomedical Devices and Services
AFTER MAYO CLINIC, LOOK FOR OTHER SYSTEMS TO FOLLOW; RAISE PT TO $23
We reiterate our BUY rating on EXAS following yesterday’s conference
call hosted by EXAS and the Mayo Clinic, which announced it is the first
healthcare system to adopt Cologuard. While the deal is a positive, we
think the bigger opportunity is the likelihood for additional systems to
come onboard as the publicity raises awareness among primary care
doctors. We raise our price target to $23 from $21.
Mayo Clinic endorsement a positive. EXAS will begin shipping
Cologuard tests to Mayo Clinic next week, gradually as doctors order
on behalf of patients (not one large order from the Mayo Clinic). We
expect additional systems will come on line, most likely after the
company obtains its preliminary Medicare reimbursement amount
by end of August/early September (no change to timing).
National coverage decision. Following the prelim. reimbursement
amount, look for a comment period, followed by a final national
coverage decision by end of October/November. At that time, all
individuals in the US age 65+ would be covered under Medicare.
USPSTF “A” or “B” decision mitigates private payor risks. We
expect USPSTF will grant Cologuard an A or B rating by the end of
2015; thus, under the ACA, Aetna’s “no coverage decision” of
Cologuard will not be meaningful by end of 2015, in our view.
Divide and conquer. Management is wasting no time, dividing and
conquering initial phases of commercializing Cologuard: meeting
with payors, raising awareness with KOLs, and developing its
marketing strategy, among other critical launch activities