Investors are avoiding Exact Sciences' (NASDAQ:EXAS) shares because spending in support of the launch of its Cologuard colon cancer screening test is taxing its balance sheet. However, increasing Cologuard sales, stable costs, and a $144.2 million follow-on offering significantly improved Exact Sciences balance sheet last quarter, and that may make owning this company's stock much more intriguing.

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Building its business

Exact Sciences Cologuard is a non-invasive colon cancer screening tool that can be used to help patients avoid a late-stage colon cancer diagnosis. Unfortunately, while colon cancer survival rates are high when it's discovered early, most colon cancer is found in the late stages when it's tough to treat.

Colonoscopies are the gold standard in colon cancer screening, but colonoscopies are expensive, and many patients skip screening because of the test's invasiveness. In patients who are failing to follow through with colon cancer screening, Cologuard is carving itself out an important niche, and as a result, Exact Sciences completed 68,000 Cologuard tests in the third quarter, generating $28.1 million in revenue. For comparison, the company completed 54,000 tests and 40,000 tests in Q2 and Q1, respectively, and Q2 and Q1 revenue was $21.2 million and $14.8 million, respectively.

Shrinking cash burn

Exact Sciences' third quarter sales more than doubled from the comparable quarter of 2015 and that growth significantly reduced the company's losses and its cash burn rate.

In Q3, operating expenses ticked slightly downward quarter over quarter, leading to a net loss of $37.8 million that was lower than Q2's loss of $44.8 million. Rising sales and stable costs resulted in cash utilization falling to $30.5 million in Q3 from $38.5 million in Q2.

Shrinking cash utilization stretches how long the company's cash stockpile will last, and thanks to a $144.2 million stock offering last quarter, the company's balance sheet appears to be in better financial shape than it was previously. Exact Sciences cash, cash equivalents, and marketable securities totaled $337.8 million exiting September, up significantly from $224.1 million in June, and roughly in line with the $343.5 million in cash on the balance sheet at this time last year.

Image source: Exact Sciences Corp.

Overall, the company's total debt to equity ratio improved to 1.83 in Q3 from 2.72 in Q2. Its current ratio, which measures the company's ability to make good on liabilities if creditors come knocking, improved to 11.94 from 8.71 quarter over quarter, and the company's book value increased to $3.34 per share from $2.54 per share quarter over quarter.

Looking forward

Exact Sciences' improving revenue, a slowing increase in operating expenses, and cash from its follow-on offering suggests managements got enough financing to avoid more dilutive offerings or debt -- at least for a while. Cologuard's sales growth should continue reducing cash utilization in the future, further improving the company's financial footing.

Management hasn't said when Exact Sciences will become profitable, but the company's improving balance sheet suggests management still has plenty of time to build its business.

Therefore, while Exact Sciences' losses make its stock unsuitable for many investors, growth investors with a penchant for risk might want to consider buying. After all, aging baby boomers means the number of Americans who should be tested for colon cancer is getting bigger. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.