It's been more than five years since the Food and Drug Administration stopped allowing 23andMe to tell customers about the cancer risks they inherited. Last year, the agency began allowing the company to offer risk assessments for breast cancer and, more recently, colorectal cancer. 

Anyone with an internet connection and an address can become a 23andMe customer, but consumers need their doctor to order Cologuard, the increasingly popular kit from Exact Sciences (EXAS 1.80%). Do Exact Sciences investors need to worry about competition, or will a popular consumer test push more patients to see their doctors and request an actual cancer screen? 

An FDA approved stamp.

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Here are four things Exact Sciences investors should understand about 23andMe's latest FDA-approved test.

1. It's back after a five-year hiatus

In case you're not already familiar, 23andMe is one of Alphabet's more successful bets from over a decade ago. More than 5 million customers have sent a vial of their saliva to 23andMe, and in return they get to find out if they carry genes for conditions like cystic fibrosis, or if their ancestors were Neanderthals.

At its outset, 23andMe began offering a wide range of health risk assessments, but the FDA shut that service down just a few months before the same agency approved Cologuard. 

The agency wanted to be sure that 23andMe's health-related assessments met the same quality standards as medical devices that perform similar functions. The agency also had heaps of legitimate health concerns, including patients potentially avoiding actual cancer tests like Cologuard because their 23andMe profile says they aren't genetically predisposed to colorectal cancer. 

A hand holding tweezers manipulating a strand of DNA.

Image source: Getty Images.

2. It shouldn't be a competitive threat

Most Americans over 55 probably understand why they should get a stool-based DNA test no matter what their hereditary risk score says about colorectal cancer. Unfortunately, that doesn't mean they won't convince themselves otherwise when it's time to collect their own sample. 

Luckily for Exact Sciences, the vast majority of colorectal cancer cases aren't hereditary. Just 5% have a well-understood genetic basis and most of these will still slip through 23andMe's fingers.

3. It won't be much help for most people

While the reinstated risk assessment will help some people know they're at increased risk of developing colorectal cancer, just 5% of colorectal cancer cases are hereditary. Also, 23andMe's report doesn't examine genetic variations associated with Lynch syndrome, which is the most common inherited form of the disease.

The FDA approved 23andMe's risk assessment to report on the two most common mutations that influence MUTYH-associated polyposis. Unfortunately, there are more than a hundred known genetic variants linked to the disease. 

Smiling scientist with a clipboard.

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4. It probably costs more

A Cologuard screen costs over $500, but thanks to the Affordable Care Act, insurers can't make people pay for recommended preventive services. For around 85 million Americans over 55 years old, a Cologuard test every three years won't cost a penny.

The FDA can make 23andMe play by the same rules as other companies that offer medical diagnostic services, but that doesn't mean insurers have to pay for hereditary risk assessments. The test tells people a lot about themselves for just $199, but that's still a lot more than anyone 55 or older should have to pay for Cologuard.

5. It could help Exact Sciences

Exact Sciences completed 934,000 Cologuard tests last year, and thanks in part to a marketing partnership with Pfizer (PFE 0.23%), the company keeps on raising expectations. Although Cologuard sales have been impressive, there are literally millions of Americans who can access it for free but still haven't bothered. 

If the return of 23andMe's colon cancer risk assessment has any effect on Cologuard sales in the years ahead, it will probably be a positive one. You might find it irritating when people discuss their 23andMe results with everyone they meet, but more public discussion about cancer risk is a good thing.

Colorectal cancer is America's second deadliest malignancy, even though it develops very slowly. It's relatively easy to treat when caught early. Unfortunately, people rarely complain about the symptoms until it's too late to do anything about it. 

Smiling lab employee.

Image source: Getty Images.

Big expectations

Exact Sciences will probably post its first annual profit in 2019, and investors are expecting the company's bottom line to balloon in the years ahead. Exact Sciences investors don't have to worry about 23andMe, but they should know that a sales slowdown for any reason could lead to a swift drop from recent prices. The stock has been trading at a nosebleed valuation of 25.5 times trailing revenue.

Pfizer didn't become America's largest pharmaceutical company without learning a thing or two about marketing healthcare products to large populations. With help from a terrific marketing partner, Exact Sciences has a pretty good chance of meeting investors' lofty expectations.

Check out the latest Exact Sciences earnings call transcript.