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Why EXACT Sciences Shares Nosedived

By Sean Williams - Apr 18, 2013 at 1:24PM

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High expectations crush EXACT Sciences top-line clinical trial results for its colon cancer diagnostic test.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of EXACT Sciences (EXAS 7.96%), a molecular diagnostics company focused on cancer and pre-cancer colorectal screening tests, nosedived as much as 30% following the release of top-line data from the company's Deep-C clinical trial for Cologuard.

So what: Cologuard is EXACT's proprietary molecular analyzer that looks to differentiate the difference between the DNA of normal cells shed daily from the colon, and cells from cancerous and pre-cancerous polyps that express mutated DNA signatures. This is done by a patient sending in a stool sample to EXACT's lab, and EXACT using Cologuard to make that determination. In trials, Cologuard was successful at detecting cancer 92% of the time and identified pre-cancerous polyps 42% of the time, including a 66% success rate if they were in excess of two centimeters. However, many Wall Street analysts had been looking for the pre-cancerous polyp detection number to be much higher than it actually was.

Now what: I labeled EXACT Sciences as a risky bet in my Tackling Cancer series for this exact reason. However, I feel today's drop may be a tad bit overdone. Although the pre-cancerous efficacy was lower than many had expected, Cologuard met its primary endpoint and delivered strong enough results from its non-invasive test that I feel the Food and Drug Administration would eventually approve it. It's not perfect, but it's a considerably more pleasant alternative to a colonoscopy and a starting point for diagnosing colon cancer for high-risk patients.

Craving more input? Start by adding EXACT Sciences to your free and personalized watchlist so you can keep up on the latest news with the company. 

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