A decision by the American Cancer Society in May to drop the minimum age to recommend colon cancer screening to 45 years from 50 has helped propel Exact Sciences (NASDAQ:EXAS) shares 13.8% higher in 2018, according to S&P Global Market Intelligence.
Worry that demand for its stool-based colon cancer screening solution would fail to materialize has apparently been misplaced. Growing demand for Cologuard led to sales skyrocketing 168% to $266 million in 2017, and revenue increased 87% to $90.3 million in Q1 2018.
The rapid growth may only be the beginning for Exact Sciences, though. It estimates its market opportunity could be $14 billion and that it's only scratching the surface when it comes to screening. Management has a point. The addressable market for colon cancer screening totaled about 85 million Americans entering 2018, and following the new recommendations from the ACS, it now eclipses 100 million people.
The sheer size of the addressable population isn't the only reason why sales are growing, however. Colonoscopy has long been considered the gold standard in colon cancer screening, but millions of people avoid getting a colonoscopy because it requires significant preparation and it can cost thousands of dollars, depending on insurance coverage.
Cologuard is a simpler and cheaper alternative. Patients collect a stool sample at home that's then shipped to a lab for evaluation. In Q1, the average recognized revenue per Cologuard test was below $500.
An estimated 20 million Americans are behind schedule on being screened for colon cancer and that represents a big market opportunity for Cologuard. For perspective, the company only screened 571,000 patients in 2017.
Cologuard could be a multibillion dollar product, but Exact Sciences is also working with researchers at the Mayo Clinic on liquid biopsy tests that might be able to detect cancer using a blood sample. In June, the company presented data at a conference showing that its panel was "95% sensitive for detecting [hepatocellular carcinoma] HCC across all stages." Furthermore, its specificity was 93%, good enough for researchers to claim that it demonstrates an "ability to discriminate between normal and diseased patients."
HCC is the most common liver cancer, so this is great news, particularly if it leads to advances that allow the company to identify other cancers, too.
In 2018, Exact Sciences believes its sales will grow to at least $420 million. Sales could go materially higher than that in the coming years, especially if the liquid biopsy products pan out. The company estimates that the market for liquid biopsy screening could exceed $13 billion by 2030.
Given the opportunity to grow sales, and potentially turn a profit for investors, it's understandable that investors have been buying shares.