Exact Sciences Corporation – March 09, 2023

Cancer is one of the leading causes of death worldwide, and early detection is crucial for successful treatment. However, traditional screening methods are often invasive, uncomfortable, and expensive.

Exact Sciences Corporation is a leading, global, advanced cancer diagnostics company, developing some of the most impactful products in cancer screening as it works to bring new, innovative cancer tests to patients throughout the world. The company specializes in the development of non-invasive tests and are aiming to make earlier cancer detection a routine part of medical care. From screening to treatment guidance, their services help provide critical information needed to make more informed cancer care decisions.

Their flagship product, Cologuard, is a non-invasive stool DNA test for colorectal cancer that can detect the presence of cancerous or precancerous cells with a high degree of accuracy, making it a more accessible and effective option for patients. It also provides a range of precision oncology tests for breast and colon cancers, along with tumor profiling for patients, and covid-19 testing services.

With an expanding global network of ordering healthcare providers, Exact has provided cancer tests to more than 12 million people. Building on a solid history of consistent top-line revenue growth, the company is currently focused on accelerating its path to profitability through key prioritization efforts. In particular, it is concentrating on further expanding its market reach by partnering with healthcare providers and insurance companies to increase awareness and access to its products.

Additionally, the company is exploring new geographic markets, as it also continues to undertake critical research and development initiatives within colorectal cancer screening, multi-cancer early detection, and molecular residual disease.

Founded by Stanley Lapidus and Anthony Shuber in Massachusetts in 1995, Exact Sciences struggled in its early years including following an initial offering on the NASDAQ in 2001. However, a significant turnaround in the company’s fortunes began with the announcement of a mutual collaboration and licensing agreement with the Mayo Clinic in 2009. In the same year, the company appointed its current CEO and chairman, Kevin Conroy.

By 2014, Exact received premarket approval from the FDA for the use and marketing of Cologuard, a breakthrough that heralded the beginning of a period of rapid growth and the start of its foray into the acquisitions market. In the years following, Exact acquired several companies including Sampleminded, Armune Bioscience, Biomatrica, Paradigm Diagnostics, and Viomics, adding a range of technical capabilities.

However, it was its $2.8 billion purchase of Genomic Health, a genetic cancer detection company based in California, which expanded Exact’s product portfolio markets outside the U.S. The deal led to the opening of Exact Sciences offices in the United Kingdom, France, Germany, Italy, and Japan, and the foundation of Exact Sciences International.

In 2020, Exact responded to the covid pandemic by refocusing a portion of its diagnostic capacity to testing for the disease, becoming one of the first companies in the U.S. to receive FDA approval to provide home testing kits.

While most recently in early 2021, Exact announced its acquisition of Ashion Analytics and plans to collaborate in research with TGen, the City Of Hope’s Genomics Institute, building on its purchase of an exclusive-use license of TGen’s proprietary liquid biopsy-based test technology, Tardis.

Kevin Conroy became chief executive officer of Exact in 2009 and chairman in 2014, transforming the organization into one of the world’s premier cancer diagnostics companies with more than 6,500 employees. Conroy has led Exact through the entire journey of development, clinical trial, regulatory approval, and commercialization of Cologuard. This culminated with the test becoming the first medical device or diagnostic to receive simultaneous FDA approval and national Medicare coverage. Before joining the company, Conroy served as CEO and president of Third Wave Technologies, held leadership positions at GE Healthcare, and practiced intellectual property law in private practice. He also currently serves as a director of Adaptive Biotechnology Corporation and is on the board of the American Clinical Laboratory Association and Personalized Medicine Coalition.

Conroy is joined by chief science officer and former president of Minimal Residual Disease and Therapy Selection, Jorge Garces, who brings decades of experience in diagnostics including a focus on the development, clinical trials, and commercialization of liquid biopsy tests in the field of oncology. Prior to joining Exact, Garces served in several president, CEO, and CSO roles with Epigenomics AG, AltheaDx Inc, and Enigma Diagnostics, along with many other leadership positions at Hologic Inc., Third Wave Technologies, Genzyme Genetics, and Athena Diagnostics.

Exact’s flagship screening product, the Cologuard test, is a patient-friendly, non-invasive, stool-based DNA (sDNA) screening test that utilizes a multi-target approach to detect eleven DNA and hemoglobin biomarkers that are associated with colorectal cancer and pre-cancer.

Exact also provide more than 5,000 predefined genetic tests for nearly all clinically relevant genes, additional custom panels, and comprehensive germline, whole exome, and whole genome sequencing tests. In particular, the company’s hereditary cancer test, Riskguard, helps people understand their inherited risk of cancer, providing them with critical information to make better treatment decisions.

Precision oncology tests marketed under the Oncotype DX labeling deliver actionable insights to inform prognosis and cancer treatment after a diagnosis. Oncotype DX tests serve a range of purposes including identifying breast cancer patients who are most or least likely to benefit from chemotherapy, helping guide treatment decision-making for women with ductal carcinoma in situ, and enabling an individualized approach to treatment planning for patients with stage II and stage III colon cancer. While the OncoExTra test applies comprehensive tumor profiling and sequencing, to aid in therapy selection for patients with advanced, metastatic, refractory, relapsed, or recurrent cancer.

These tests ultimately enable patients to take a more active role in their cancer care and make it easy for providers to order tests, interpret results, and personalize medicine by applying real-world evidence and guideline recommendations.

In late March 2020, Exact also began providing COVID-19 testing. Partnering with various customers to administer testing, specimens are sent to Exact’s laboratory in Wisconsin, where they run the assay and provide test results to ordering providers. However, as the public health impacts of COVID-19 evolve, Exact has said it intends to periodically reassess offering covid testing as the pandemic abates, demand declines over time, and government funding for testing services is reduced.

It is widely accepted that colorectal cancer is among the most preventable, yet least prevented cancers. It can take up to 10 to 15 years to progress from a pre-cancerous lesion to metastatic cancer and death. While patients who are diagnosed early in the progression of the disease are more likely to have a complete recovery and to be treated less expensively. Furthermore, as the second leading cause of cancer deaths in the U.S. and the leading cause among non-smokers, each year there are approximately 153,000 new cases of colorectal cancer and approximately 53,000 deaths across the country.

In 2014, the Cologuard test became the first and only FDA-approved sDNA test, while in 2019, the FDA expanded its indication to include average-risk individuals ages 45-49, making it indicated for adults 45 years of age and older. Furthermore, the American Cancer Society has specifically included the Cologuard test as a recommended colorectal cancer screening test for this population. To date, more than 55% of Americans within this group are not up-to-date with screening. As a result, with nearly 110 million Americans at a three-year screening interval and an average revenue per test of approximately $500, this represents a potential $18 billion market for Cologuard tests.

Exact’s core products, Cologuard and Oncotype DX are already generating significant revenue, however, the company has several incremental improvements to these products in its pipeline. Such as Cologuard 2.0, which boasts increased specificity and advanced adenoma sensitivity, aiming to reduce false positive rates. To that end, Exact has completed enrollment of a multi-center study, which is expected to support FDA approval of the enhanced test. While the recent launch of the OncoExTra therapy selection test brings with it next-generation sequencing and comprehensive tumor profiling to provide doctors and their patients with a complete molecular picture of a patient’s cancer to aid in therapy selection.

Exact is also investing in the development of minimal residual disease (MRD) testing, with studies underway for both colon and breast cancers. The company plans to offer both tumor-informed and tumor-naive MRD tests, which can help detect small amounts of tumor DNA that may remain in patients’ blood following initial cancer treatment. By monitoring MRD levels over time, doctors can identify when a patient’s cancer cells are starting to grow again and intervene with additional treatments before the cancer has a chance to progress.

Finally, looking further ahead, the company is developing a multi-cancer early detection test aimed at helping to detect many different types of cancer from a single blood draw. For which initial data was presented data at the European Society for Medical Oncology Congress in September 2022.

With the exception of a modest tempering throughout the covid pandemic, Exact has been on an impressive trajectory of revenue expansion for the last decade, largely achieving high double-digit and even triple-digit year-over-year growth each year. The company ended 2022 strongly with a record quarter that also resulted in a record full-year revenue that exceeded $2 billion for the first time. Total revenue of $2.1 million, made up of Screening revenue of $1.43 billion and Precision Oncology revenue of $601 million, represented a year-on-year increase of 18%.

Of particular note in its latest results, Exact said it has shifted its focus towards achieving positive adjusted EBITDA as a way to signal a path to eliminate cash burn in 2023. The company’s adjusted EBITDA profit in the fourth quarter at $5 million, was an improvement of $120 million. Furthermore, industry-leading gross margins are powering future positive results and a clear path to free cash flow.

Looking ahead, the company anticipates revenue of $2.27 to $2.32 billion during 2023. This assumes Screening revenue of $1.66 to $1.69 billion and Precision Oncology revenue of $600 to $620 million, along with COVID-19 testing revenue of $5 million. The target represents year-over-year growth of around 10%, also matching consensus expectations. Analysts are also expecting full-year earnings per share to record a loss of $2.22 for 2023, improving over 33% from a $3.35 loss in 2022.

With the U.S. market for colorectal cancer screening exceeding more than 110 million eligible individuals, it has attracted numerous competitors.

Exact’s Cologuard test faces competition from procedure-based detection technologies such as colonoscopy, flexible sigmoidoscopy, and “virtual” colonoscopy, as well as other common screening tests, such as the fecal occult blood test and the fecal immunochemical test. Newer screening technologies also include liquid biopsy tests.

Exact is also aware of at least three companies, Mainz Biomed, Prescient Metabiomics, and Geneoscopy, that are seeking to develop or have developed stool-based colorectal cancer tests in the U.S.

However, given all other colorectal cancer detection methods currently in use are constrained by some combination of poor sensitivity, poor adherence, or high cost, the Cologuard test, being the first and only sDNA-based non-invasive test on the market today, compares favorably to the alternatives.

After achieving solid traction with its initial core products, Exact appears to be at an inflection point for not only improving profitability, but backing it up with a growing pipeline of life-changing diagnostics.