What: Shares of Exact Sciences (EXAS +0.00%), a molecular diagnostics company, plunged by over 45% today on exceptional volume as a result of the U.S. Preventive Services Task Force's, or USPSTF, draft list of recommendations suggesting that Cologuard be used as an "alternative screening test" for colon cancer, rather than a "recommended" test. Put simply, the market is deeply concerned that this initial recommendation will lead to push back from private payers, hurting the company's bottom and top-lines.
Source: Exact Sciences
So what: Cologuard's commercial launch has gotten off to a fairly decent start, raking in $8.1 million in revenues in the second quarter. And based on these initial numbers, analysts polled by S&P Capital IQ had Cologuard's sales growing by a noteworthy 223% in 2016, relative to 2015's figures. Today's news will probably lead the Street to revise these numbers downward, perhaps significantly so.
Now what: This dramatic depreciation in Exact Sciences' share price may or may not be warranted. The truth is that it is too early too tell how this draft list of recommendations will ultimately impact Cologuard's commercial uptake -- or even if it will stand moving forward. After all, management has already stated that they plan on working closely with the USPSTF in hopes of changing its recommendation.
Another important issue to consider is that the USPSTF's recommendations aren't always widely adopted by the medical community, evinced by its controversial recommendation against PSA testing for prostate cancer and recommendation that mammography screening be optional.
Therefore, investors with a strong stomach for the potent combo of volatility and risk may want to consider grabbing some shares of this molecular diagnostics company in the wake of this massive pullback.
