Exact Sciences: Assuming Coverage With $78 Fair Value Estimate, as Robust Pipeline Not Yet Derisked

We are transferring coverage of Exact Sciences EXAS, keeping our moat rating at none and raising our fair value estimate to $78 per share from $68 previously. This is driven by a more optimistic view of Cologuard’s revenue and the addition of molecular residual disease, or MRD, testing and single cancer screening revenue, and partially tempered by a more conservative view of its multicancer early detection, or MCED, test.

Exact is a leader in cancer screening with its stool-based Cologuard test for colorectal carcinoma, or CRC, which contributed 68% of 2022 revenue. Most of the remaining revenue comes from Oncotype Dx, its tissue-based genomic profiling platform with over 50% market share in breast cancer. Exact has a strong pipeline in blood-based tests and is developing products in several key liquid biopsy categories, including MRD, single cancer screening, and MCED. These markets have multi-billion-dollar potential but are still in early stages that are not derisked. We need more clarity about payer coverage and the competitiveness of Exact’s clinical data before we have a clearer picture of their potential.

We expect continued growth from Cologuard, which is more convenient than colonoscopy and performs better than Guardant’s blood-based Shield test. Near-term revenue will be driven by patients aged 45-49 joining the screening pool after recent guideline changes in 2021, expansion into more healthcare networks, and patients due for rescreening every three years. Additionally, the next generation of Cologuard could launch in 2025 with improved specificity (fewer false positives). However, in the long term, its market share could be threatened by blood-based screening, especially if later generations significantly improve sensitivity to advanced adenomas and Stage I tumors.