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Image source: Exact Sciences.

What: Following the release of strong second-quarter financials that were supported by a record number of completed colon cancer tests, shares in Exact Sciences (NASDAQ:EXAS) are rallying 32% today.

So what: The company says it completed 54,000 Cologuard tests in the quarter, which translated into sales of $21.2 million, or $391 per test. For comparison, Exact Sciences completed 40,000 tests in the first quarter at an average price of $370 per test.

The results come on the heels of a big run in the company's share price following inclusion in guidelines updated by the United States Preventive Services Task Force in June. Previously, tentative guidelines had included suggesting Cologuard as an alternative to other colon cancer screening options, but final guidelines issued last month included Cologuard on the same level as other choices.

The USPSTF concludes with high certainty that screening for colorectal cancer in average-risk, asymptomatic adults aged 50 to 75 years is of substantial net benefit. Multiple screening strategies are available to choose from, with different levels of evidence to support their effectiveness, as well as unique advantages and limitations, although there are no empirical data to demonstrate that any of the reviewed strategies provide a greater net benefit. Screening for colorectal cancer is a substantially underused preventive health strategy in the United States.

In explaining the change in guidance, the task force -- an independent panel of experts that operates under the aegis of the Department of Health and Human Services -- said:

This is an update of the 2008 USPSTF recommendation. In 2008, the USPSTF recommended screening with colonoscopy every 10 years, annual FIT, annual high-sensitivity FOBT, or flexible sigmoidoscopy every 5 years combined with high-sensitivity FOBT every 3 years. In the current recommendation, instead of emphasizing specific screening approaches, the USPSTF has instead chosen to highlight that there is convincing evidence that colorectal cancer screening substantially reduces deaths from the disease among adults aged 50 to 75 years and that not enough adults in the United States are using this effective preventive intervention. The reasons for this gap between evidence and practice are multifaceted and will require sustained effort among clinicians, policy makers, advocates, and patients to overcome.

Both the inclusion of Cologuard in these guidelines and the pace of growth in completed Cologuard tests are encouraging to investors who believe that Cologuard could become the favorite choice among patients seeking a cheaper and less intrusive screening method than colonoscopy.

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Image source: Exact Sciences.

Now what: Exact Sciences is spending a considerable amount of money on marketing Cologuard, which means that there's no telling when sales growth could begin translating into profit. Exact Sciences spent $56.2 million last quarter, up from $42.4 million in the same period in 2015. As a result, the company reported a net loss of $44.8 million, or $0.46 per share, for the second quarter, which was worse than the net loss of $39.1 million, or $0.44 per share, in the same quarter last year.

Although we can't predict when losses are likely to end, shares could continue higher as short sellers cover their positions. Despite the new USPSTF guidelines, short sellers went into today's earnings report short 33% of the company's shares available for trading.

Because Exact Sciences is losing money, investing in it is risky. However, colon cancer is the second-leading cause of cancer death in the U.S., and 134 000 people are diagnosed with it every year. When caught early, it's far easier to treat, a fact that highlights the need for people to get screened for the disease, and the huge potential for Cologuard.

Management pegs Cologuard's addressable opportunity at $4 billion, and thinks the company will complete 240,000 screenings and deliver at least $90 million in sales this year. Those numbers suggest aggressive investors might want to consider buying Exact Sciences shares, especially if they retreat in the coming weeks. 

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Like this article? Follow him on Twitter where he goes by the handle @ebcapital to see more articles like this. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.