THE HEDGEYE EDGE
Exact Sciences' (EXAS) stock has experienced significant volatility over the last year and a half while the market grappled with United States Preventative Services Task Force's (USPSTF) recommendations for their Colorectal Cancer screening product, Cologuard.
Since its launch in October of 2014, Cologuard has seen rapid adoption among providers and we are currently expecting 10K sequential provider adds in 1Q17 for a total of 69,500. We have developed a proprietary method of tracking the number of physicians using Cologuard and will provide updates as they become available.
The recent spike in short interest surprised us given EXAS’ positive 2017 guidance, but we continue to see upside to numbers. Our 1Q17 revenue estimate of $40.26M implies YoY growth of 171% versus consensus at $37.2M implying growth of 151% YoY. Estimates haven't moved high enough, in our opinion, and we continue to see upside into the mid $20s from here.
INTERMEDIATE TERM (TREND)
The opportunity to add more providers exists in Cologuard’s core markets of Gastroenterologists, Internal Medicine Physicians and Family Physicians, all of which have low penetration rates. Cologuard is most penetrated into the gastroenterologist market, at 31.9%, followed by family practice and internal medicine physicians at 16.1% and 11.5%. We believe these low penetration rates in their core markets represents an opportunity for EXAS to continue to add providers at a similar rate to its current rate throughout 2017.
Another factor driving Cologaurd test volume is providers reorder rate. This is the most sensitive part of our model which we believe is skewed due to a significant amount of the reported physicians representing dormant accounts. Despite this, we think this rate will increase over time as commercial coverage and provider awareness gain more traction.
LONG TERM (TAIL)
Contracted private payor rates are a significant leg of the short thesis. Since USPSTF guidelines were issued, Cologuard has been included in a number of commercial insurance guidelines, although contracted price has yet to be reached in many cases. We believe Cologuard adoption will continue its positive trend as commercial coverage increases and patients continue to see the Cologuard commercial.
Key drivers of our long-term thesis include commercial coverage, Cologuard’s average selling price, reorder rate by providers and provider adds.
ONE-YEAR TRAILING CHART
