No matter how you look at it, Exact Sciences (EXAS 0.18%) has been a big winner. Shares of the company best known for its Cologuard colorectal cancer screening test have skyrocketed nearly 6,000% over the last 10 years. Exact Sciences stock is up more than 40% in the first seven weeks of 2019.
There's no question that Exact Sciences has made some investors quite wealthy. But could it potentially even be a millionaire-maker stock?
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Picking up momentum
Exact Sciences' current success is due entirely to Cologuard. Many individuals who should be screened for colorectal cancer aren't screened. One key reason why is that some don't want to take off from work to have a colonoscopy or undergo the unpleasant preparation process for the invasive procedure. Cologuard provides a convenient alternative for these individuals.
Sales for the DNA screening test for colorectal cancer have taken off since the FDA first approved Cologuard in August 2014. Revenue has increased by a staggering compound annual growth rate (CAGR) of 126%.
You might think that growth would taper off after the fantastic performance in the first few years after Cologuard's launch. Nope. Actually, Cologuard could pick up even more momentum for four key reasons.
First, more providers than ever are now prescribing Cologuard. Exact Sciences recently reported that around 147,000 providers have adopted the DNA cancer test, which reflects a CAGR of 76% since 2014.
Second, more payers than ever are covering Cologuard, including the biggest insurers such as Anthem and UnitedHealth Group. Exact Sciences estimates that around 94% of Cologuard patients have no out-of-pocket cost for using the test.
Third, Exact Sciences now has a big partner at its side. In August 2018, the company signed a deal with Pfizer to co-promote Cologuard. Pfizer has a large sales force that calls on healthcare professionals who are prime candidates for prescribing Exact Sciences' DNA cancer test.
And fourth, Cologuard currently is approved only for screening patients between the ages of 50 and 85 with an average risk. But Exact Sciences plans to pursue FDA approval for an expanded label for Cologuard to be used by patients beginning at age 45. The American Cancer Society changed its recommended age for colorectal cancer screening from 50 to 45 last year. Exact Sciences thinks this could add another $4 billion annual market opportunity for Cologuard.
A massive new opportunity
As impressive as the prospects for Cologuard are, Exact Sciences is conducting research in another area that is even more exciting: liquid biopsy. What is liquid biopsy? The kind that Exact Sciences is working with Mayo Clinic to develop is a blood test that allows multiple types of cancer to be detected at very early stages by analyzing DNA biomarkers that point to the presence of cancer.
Exact Sciences and Mayo Clinic have targeted liquid biopsy for the top 15 types of cancer. They've had especially impressive early results for a liquid biopsy for liver cancer detection.
Check out the latest Exact Sciences earnings call transcript.
Consulting firm Frost & Sullivan predicts that the market potential for liquid biopsy across all cancer types in the U.S. alone could eventually be $100 billion or more. Exact Sciences is more cautious in its optimism, projecting that the liquid biopsy market could top $13 billion by 2030. That's still a massive new opportunity for the company if its efforts to develop liquid biopsy tests are successful.
What it would take to be a millionaire-maker
Exact Sciences certainly has plenty of room to grow, but could the stock really be a millionaire-maker? It depends on several variables, especially the amount invested initially and the amount of time for the investment to grow.
If we assumed an initial investment of $10,000 and a 20-year period, Exact Sciences' share price would have to increase by a CAGR of nearly 26%. Another way to look at it is that Exact Sciences' market cap would need to soar to $1.1 trillion from around $11 billion today. That's a tall order.
The odds are definitely against Exact Sciences turning an investor who buys the stock now into a millionaire. But the chances of Exact Sciences continuing to generate solid returns as it has in recent years still appear to be pretty good.
