Cancer screening specialist Exact Sciences (EXAS -0.46%) is on fire. The company's shares have soared 69% since 2023 started. Gains of this magnitude can sometimes scare off investors who see limited upside left for the company in question. But in the case of Exact Sciences, there are excellent reasons to be optimistic, particularly for those with a long time horizon of 10 years or more.
Let's consider several reasons why Exact Sciences still looks like an attractive pick.
The core business is performing well
Exact Sciences is best known for Cologuard, a non-invasive colorectal cancer diagnostic test aimed at people 45 and older and at average risk of contracting the disease. Colorectal cancer is the second-leading cause of cancer death in the U.S. That's why Cologuard has been successful, as it has provided patients with an at-home, non-invasive option to undergo screening for the illness.
The goal is for physicians to detect changes in patients' stools that may indicate pre-cancerous conditions or full-blown cancer. And while demand for this product dropped during the early days of the pandemic, things seem to be getting back to normal. In the first quarter, Exact Sciences' revenue increased 24% year over year to $602 million. The company's screening revenue (including laboratory services for Cologuard) saw an even more significant growth of 45% year over year.
While Exact Sciences remains unprofitable, there was major progress on the bottom line. The company's net loss per share of $0.42 was much better than the loss of $1.04 reported in the first quarter of 2022. Exact Sciences' strong first-quarter results are a crucial reason its shares have been performing so well in recent months, but there is more room to grow in the years ahead.
Exact Sciences estimates that there are 60 million Americans between the ages of 45 and 85 eligible for Cologuard who have yet to get tested. That's why the company has been aggressively marketing this product, an initiative that could attract many of these would-be customers and help significantly increase the adoption of Cologuard.
Some significant opportunities in the pipeline
Exact Sciences is currently working on Cologuard 2.0. No cancer screening test is perfect, and they are typically judged in terms of their sensitivity (true positives) and specificity (true negatives). In an early study, Cologuard 2.0 scored an overall sensitivity and specificity of 95% and 92% compared to the 92% and 87% that the first version of Cologuard currently has.
Positive Cologuard tests must be confirmed by a colonoscopy, the gold standard for detecting colorectal cancer. But patients and physicians would benefit from a more accurate version of Cologuard. Exact Sciences plans on releasing more data from another ongoing trial for its next-generation Cologuard during the summer.
The company is working on other exciting programs, notably an early multi-cancer detection platform. Exact Sciences plans on releasing data from ongoing studies in this area sometime this year. The company sees a potential market of 135 million patients in the U.S. The addition of multi-cancer testing, not to mention its next-gen Cologuard and several other products it owns, should substantially increase the company's total addressable market.
In the next decade, the cancer screening specialist should be able to grow its revenue consistently thanks to these opportunities while it eventually turns a profit. That's why although its shares have soared recently, Exact Sciences is still an excellent healthcare stock to buy and hold through the next decade.
