Thursday, October 9, 2014

Exact Sciences - A Game Changer in Gastrointestinal Cancer Screening

See this prior post for some background information and my rebuttal to Whitney Tilson's recommendation to short EXAS. We now know that he and other shorts publishing high visibility reports at places like Seeking Alpha were completely wrong, on every count.

Exact Sciences received $502 reimbursement for Cologuard from medicare!  This is huge.  Median analyst pricing estimates built into their forward stock price guidance was around $315; this represents a 59% underestimation of the reimbursement that Exact Sciences would receive.

Couple this with what we know about early adoption of the test, with Mayo Clinic and Group Health Cooperative both already pledging to cover the test.  Mayo Clinic is the top innovator in medicine in the country and one of its scientists David Ahlquist was instrumental in developing Cologuard.  Group Health Cooperative was rated the top insurer in Wisconsin, and amongst the top ten insurers in the country.

Ten Million inferior FIT tests are performed annually. A test that requires significant fecal interaction as opposed to Cologuard which requires none. A test that must be taken annually, as opposed to every three years like Cologuard.  A test that has poor cancer detection, very poor pre-cancer regular adenoma detection, and zero detection of sessile serrated adenomas, flat lesions which are difficult to detect via colonoscopy.  FIT tests are going to be rapidly replaced by Cologuard.  And that is just the beginning.

Back to the shorts.  Latest short report which came out today, October 9th 2014 for trade date September 25th - shows 25.7 million shares held short.  An astonishing 30.9% of the 83 million shares outstanding. And 100% wrong in their thesis.  I've witnessed over the last year, the depths that these shorts have gone in their attempts to malign this company, to malign Cologuard, and the outright spread of false information in their attempts to hurt the company and its share price.  I wont link to them, but they are worth going and reading, in light of the facts that are known.  They deserve to get crushed. They have been standing in the way of advancement in health care, which will save lives while simultaneously reducing system costs.

Somewhere between $14-$20 billion dollars a year is spent annually treating colorectal cancer and over 40,000 people die in the USA every year from the disease.  A disease that is easy to treat when in the pre-cancer and early cancer stage.  Proper population adherence to a screening regiment is key to reducing those costs and mortalities, and Exact Sciences is the key.

Beyond CRC, there exists the very real science and potential for Cologuard to become a screening test for the entire GI Tract from the inlet to the outlet, so to speak.  Early clinical exploration by the company show remarkable sensitivity to Barrett's Esophagus with 100% sensitivity, and Pancreatic Cancer detection via pancreatic juice, with 88% sensitivity.  The current more invasive method of Pancreatic cancer diagnosis is via biopsy, which has a lower rate of detection.  Comments in the IBD article and Ahlquist abstract indicate encouraging early data in bile duct carcinomas.  The world is in desperate need of non-invasive non-radiological GI tract cancer screening.  Now it is on the horizon.

Update: Someone asked for a link to the press release.  There is no press release.  Here is the link to the preliminary pricing determinations for CLFS CY15. If you want to verify that I am accurate, start your digging folks.

Update 2: Here is a little write up I did about the companies' history a while ago when I started my blog