Please ensure Javascript is enabled for purposes of website accessibility

Why Exact Sciences Shares Are Soaring 11.6% Today

By Todd Campbell - Oct 31, 2017 at 1:37PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Impressive growth in the third quarter is fueling investor optimism.

What happened

After the company reported better-than-expected top- and bottom-line third-quarter results today, shares of Exact Sciences (EXAS 3.03%) are jumping 11.6% at 12:30 p.m. EDT.

So what

As many as 20 million Americans between the ages of 50 and 74 are not getting colon cancer screening as often as recommended, and as a result, many patients are diagnosed with advanced colon cancer that could have been detected at an earlier stage, when chances of survival are higher.

The contents of a Cologuard kit on display.

IMAGE SOURCE: EXACT SCIENCES.

Perhaps that's changing. Exact Sciences reported earlier today record demand for its at-home colon cancer screening kit, Cologuard. 

In the third quarter, the company completed 161,000 Cologuard tests and reported sales of $72.6 million, up 158% year over year. Over 91,000 doctors have now ordered a Cologuard kit for a patient, up from 60,000 physicians at the end of Q4 2016. 

Exact Sciences also reported losses that suggest it continues to make headway toward profitability. An increase in commercially insured patients using Cologuard lifted average recognized revenue per test by 9% to $451, and that, plus volume growth, resulted in operating expenses falling as a percentage of revenue.

The company's gross margin improved 14.7% year over year to 71% in Q3, and its operating expenses dropped to 110.6% of revenue from 192.9% of revenue in Q3 2016.

 Metric Q3 2017   Q3 2016  
Laboratory service revenue $72,574   $28,115  
Operating expenses:    % of Revenue:    % of Revenue:
     Research and development $11,725 16.2% $7,625 27.1%
     General and administrative $30,763 42.4% $20,292 72.2%
     Sales and marketing $37,768 52% $26,308 93.6%
     Total operating expenses $80,256 110.6% $54,225 192.9%

Data source: Exact Sciences.

Now what

Colon cancer is the second most deadly cancer in America, so there's a massive need for new screening options. Cologuard isn't a substitute for a colonoscopy, but it's an important alternative that may lead to more baby boomers getting back on a regular screening schedule.

If demand for Cologuard continues to increase, it's not hard to imagine that Exact Sciences financials will continue to improve. Following its third-quarter performance, management is increasing its full-year outlook to between $254 million and $257 million on volume of 568,000 to 572,000 tests. In Q2, its guidance was for sales of $230 million to $240 million on 550,000 completed Cologuard tests; in Q1, it projected 470,000 tests and sales of between $195 million and $205 million for the full year.

There's no telling when this company will turn a profit, but trends are certainly encouraging. In the first nine months of 2017, its operating loss improved to $95 million from a loss of $131 million in the comparable period of 2016. 

Given that there are 80 million Americans who need testing and this market is potentially worth $4 billion, it appears Exact Sciences has plenty of runway ahead that could help get it into the black. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Exact Sciences Corporation Stock Quote
Exact Sciences Corporation
EXAS
$40.59 (3.03%) $1.20

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
311%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.