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Editor's note: Exact Sciences (EXAS) is up 224% since we originally added it to our Best Ideas long list on 7/28/16. We see additional upside ahead. Our analysts are hosting a call at 10am today to discuss. Email sales@hedgeye.com for access.

BEST IDEA | Long EXAS: More Fuel In the Tank - exas hedgeye

Hedgeye Proprietary Data

The Hedgeye Health Care Team led by Tom Tobin has secured exclusive access to a database of over 3.75 billion medical claims that updates daily. In our Black Book call today at 10am ET, we will be showing our new Cologuard Test Volume Tracker which is derived from actual transaction data submitted to insurers. 

MORE FUEL IN THE TANK; BASE CASE +25% UPSIDE

At the beginning of 2017, we presented our long thesis on Exact Sciences (EXAS) that commercial coverage would drive physician adoption and translate into higher than expected Cologuard test volume. While the commercial coverage tailwind remains, we believe new tailwinds have emerged that will drive 2018 revenue closer to our estimate of $458M versus consensus at $417M.

  • Significant Growth in Test Per Provider; we expect the expanded sales force and the start of repeat testing in 2018 to drive significant growth in tests per provider, while steady provider adds and an increasing average revenue per test (ARPT) will drive additional growth.
  • Path-to-Profitability Exists; the debate around EXAS' path-to-profitability has long been dominated by EXAS’ direct-to-consumer campaign and questions over its ability drive sustained behavior change. We believe the investment to educate consumers and providers will produce recurring revenue that is scalable long-term. We are forecasting profitability in 2H19.
  • Addressable Market Significant; we revisited our addressable market analysis using the National Ambulatory Medical Care Survey (NAMCS), National Plan and Provider Enumeration System (NPPES) and prescribing physician anecdotes. The opportunity for Cologuard is bigger than we initially thought. We now believe EXAS will capture 70% of the 250k addressable physicians and 30% of all Colorectal Cancer screening methods which translates into ~8M annual Cologuard tests at peak.