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Exact Sciences Eyes Cologuard Market Expansion After “Landmark Year”

Xconomy Wisconsin — 

[Updated 2/22/19, 2:42 pm CT. See below.] Exact Sciences screened 934,000 patients for colorectal cancer in 2018 using its stool-based diagnostic test, Cologuard, resulting in a 71 percent surge in annual revenue to $454.5 million, the company announced Thursday.

Exact (NASDAQ: EXAS), which relocated from the Boston area to Madison, WI, in 2009, is one of the area’s fastest-growing healthcare companies and an increasingly prominent player in cancer diagnostics. It’s now valued at $10.5 billion. It employs more than 1,600 people, including 1,200 in the Madison area, the company said last August, when it broke ground on a new corporate headquarters.

Exact still isn’t profitable, and in fact its net loss grew last year to $175.1 million, due to increased spending on sales and marketing, and other costs. Nevertheless, the company’s ballooning revenues and several important developments in 2018—including a partnership with pharma giant Pfizer (NYSE: PFE) to co-promote Cologuard—have Exact CEO Kevin Conroy feeling good.

“2018 was a landmark year for Exact Sciences, and we’re incredibly excited about the company’s long-term potential,” Conroy said during a Thursday conference call with financial analysts, after Exact released its annual results.

After the call, Canaccord Genuity analysts reiterated their “buy” rating on Exact’s stock. They raised their prediction for Exact’s 2019 revenue to $725 million, up from their earlier projection of $700 million. Exact, for its part, anticipates $710 million to $730 million in revenue this year. Canaccord Genuity analysts also project Exact will hit $1 billion in annual revenue in 2020, and will become profitable in 2021, according to a research report from the firm.

“Exact continues to execute at a high level and isn’t afraid to make big investments to
hit its ambitious goal of achieving $6 billion of revenue for Cologuard over time (with
over 40% market share),” Canaccord Genuity analysts wrote. [Added analysts’ comments.—Eds.]

Here are four interesting tidbits from the conference call:

1. Expanding Cologuard’s target market. In the first half of this year, Exact plans to formally ask the FDA to allow the company to market Cologuard for patients age 45 and older, rather than the current 50 and up, Conroy said. He hopes to receive FDA approval for that change in the first six months of 2020.

Last May, the American Cancer Society updated its guidelines and now recommends people at average risk of developing colorectal cancer start screenings at age 45. The change was made in part based on data showing colorectal cancer rates are increasing in younger people.

“There are 19 million average-risk Americans between the ages of 45 and 49 who should be screened for colon cancer, according to the American Cancer Society’s [updated] guidelines,” Conroy said during the conference call. “That represents an additional $4 billion in total market potential for Cologuard.”

Exact is currently recruiting patients for a clinical trial that will evaluate the effectiveness of Cologuard in screening patients ages 45 to 49 for colorectal cancer. But Conroy told analysts Thursday that FDA officials—who met with Exact leaders during the federal government shutdown in January—have indicated that prospective data from the study will not be needed to support an application for expanding Cologuard’s approved target group. Exact is “committed to that study, nevertheless,” he added.

“We don’t have a final agreement with the FDA on the plan forward,” Conroy said. “We will be laying out what evidence we will submit to the FDA once we have a final understanding” of what the agency will require.

2. Lower out-of-pocket costs. Exact now estimates that 94 percent of patients who complete a Cologuard test will have zero out-of-pocket costs, Conroy said during the conference call. That’s up from 92 percent at the end of the third quarter last year; both levels are “remarkable” achievements, Canaccord Genuity analysts wrote in their report. [Added analysts’ comments.—Eds.]

Last year, Exact expanded by 80 million the number of patients who are eligible for insurance coverage for the diagnostic test, Conroy said.

“We have signed in-network agreements with most major insurers,” he said. “We expect the benefit of widespread coverage to increase over time as our sales and marketing teams deliver that message broadly to physicians and patients.”

3. Increased capacity, reduced costs. In addition to building a new headquarters, Exact has been expanding its current lab’s size. That has given the Madison lab, where all Cologuard tests are processed, the capacity to process 3 million Cologuard tests annually, up from 1.5 million, Conroy said. At the same time, Cologuard lowered its cost of goods used per test by more than 9 percent last year, mostly by “introducing automation throughout the lab,” he said.

4. Marketing to women. Exact hasn’t historically marketed Cologuard to obstetrician-gynecologists (OB/GYNs), but last month, Pfizer’s women’s health team began selling the product, Conroy said. Around 25 percent of OB/GYN patients are age 50 or older, and they often discuss cancer screening with their OB/GYN, he said.

“There are more than 30,000 [OB/GYNs] in the U.S., and to date, only 4,000 OB/GYNs have ordered Cologuard,” Conroy said. “Cologuard complements Pfizer’s existing women’s health products, and this area represents another opportunity for growth.”