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.
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%|
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.