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estimates too low; short interest to fuel +30% UPSIDE
We are hosting a call today at 1:00PM ET to review our Exact Sciences (EXAS) Long thesis. With short interest still elevated at 30.6% we see significant upside heading into 2017 as consensus sales estimates are too low at $163.2M which implies a massive deceleration in either provider adds, tests per provider or ASP. We have developed a reliable tool to gain visibility into EXAS's provider count and will be watching this tracker closely over the next few months.
With a series of clinician and former executive interviews, combined with data from the National Ambulatory Medical Care Survey (NAMCS) we gained new insights into the colon cancer screening market and Cologuard's role in it, which stand in contrast to the short seller narrative. We'll review our addressable market analysis that estimates Cologuard's potential annual test volume to be 2.7M, or 2.0M for the commercially insured population and 0.7M for Medicare. We will also review EXAS provider adoption model and provide our thoughts on the bigger questions around payor contracts and dormant physician accounts. We see +30% upside in the near term, but also believe we have visibility into an opportunity to pivot short when growth starts to slow.
- Addressable market analysis including state level detail on provider adoption and number of tests
- Screening vs. Non-Screening colonoscopy market analysis
- Medicare's past growth and why commercial insurance will drive EXAS future
- Dormant vs Active Providers
- Consensus numbers and why they're too low
- Review of short case and the current short interest level
Thoughts into the (Pre-Announced) print
On January 8th Exact Sciences reported preliminary revenues for 2016 of $99-$99.5M implying 4Q16 revenues of $34.9-$35.4M. EXAS is scheduled to report 4Q16 and full-year 2016 results on Tuesday, February 21st. For 4Q16 and full-year 2016 we are expecting EPS of ($0.38) and ($1.68) compared to consensus of ($0.39) and ($1.69). For the fourth quarter we are modeling COGS at $178 per test and expect to see Sales and Marketing expense of $32.8M due to higher television ad campaign spend.