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Exact Sciences Q3 Revenues Up 63 Percent

NEW YORK (GenomeWeb) – Exact Sciences reported after the close of the market on Tuesday that its third quarter revenues rose 63 percent year over year thanks to a 49 percent increase in testing volumes for its Cologuard colorectal cancer screening test.

For the three months ended Sept. 30, the Madison, Wisconsin-based molecular diagnostics company reported revenues of $118.3 million, up from revenues of $72.6 million a year earlier and beating the analysts' average estimate of $109.3 million.

Exact said it screened approximately 241,000 people with Cologuard during the quarter and that the patient compliance rate for the test was 66 percent during the quarter. Further, more than 11,000 healthcare providers ordered their first Cologuard test during Q3 and nearly 132,000 have ordered it since the test was launched. Average recognized revenue per test was $492, and the average cost per test was $125 during Q3. The company also said it now has in-network contracts with all five top commercial health plans for Cologuard.

"The Exact Sciences team delivered another strong quarter, highlighted by significantly increased patient access to Cologuard with no out-of-pocket cost and continued progress toward our 2018 priorities," Exact Chairman and CEO Kevin Conroy said in a statement. "We are enthusiastic about our partnership with Pfizer and launched Cologuard to their internal medicine team in early October. We look forward to working with such a tremendous partner in the fight against colon cancer."

Exact and Pfizer announced in August that they had signed a deal to copromote Cologuard. Under the terms of the deal, which begins in the fourth quarter and runs through 2021, Pfizer will join Exact's sales representatives in reaching out to physicians and health systems and will actively participate in the Cologuard marketing campaign in an attempt to increase the adoption rate of the test. Exact will maintain responsibility for all aspects of manufacturing and laboratory operations of Cologuard. Pfizer will pay marketing support of $20 million to $24 million each year through 2021 and get a 50 percent share of gross profits above an agreed upon baseline of $441 million in 2018, $622 million in 2019, $861 million in 2020, and $1.19 billion in 2021.

On a conference call with analysts following the release of the earnings, Conroy said that Exact's first priority for 2018 is to "command the core Cologuard business," and that he expects the Pfizer partnership will accelerate Cologuard's growth trajectory.

"The Exact Sciences and Pfizer teams [are working] diligently to develop a comprehensive training program to educate the Pfizer team about Cologuard and our patient compliance services," he added. "The Exact Sciences and Pfizer marketing teams are closely aligned to ensure operational excellence and to deploy promotional spending efficiently."

He also noted that thanks to the company's efforts to sign payor contracts for Cologuard, Exact now estimates that approximately 92 percent of patients who complete Cologuard tests will have no out-of-pocket costs.

The company is also focused on meeting future demand for the test and is progressing with its building renovation and expansion projects, Conroy said. The expansions of its current lab are complete and annual capacity is now 2.5 million Cologuard tests. He also said that the company is adding equipment to increase capacity to 3 million tests by the end of 2018 and plans to open its new lab with an annual capacity of 2 million Cologuard tests by the end of 2019, for a total lab capacity of 5 million tests.

Conroy also discussed efforts Exact is making to advance its pipeline. The company is currently engaged in preparations to expand Cologuard's label to the 45-to-49-year-old age group, which would represent a 40 percent increase in the unscreened population and a significant increase in the immediately addressable opportunity for Cologuard, Conroy added.

"The American Cancer Society updated its guidelines to recommend that screening start at age 45, as colon cancer incidence increased 51 percent among adults younger than age 55 between 1994 and 2014," he said. "Respondents to a survey we conducted of 500 individuals, ages 45 to 49, indicated that they are three times more comfortable taking in at-home stool test than they are in having a colonoscopy. We have a team dedicated to compiling evidence, preparing for discussions with the [US Food and Drug Administration], obtaining insurance coverage, and preparing marketing materials to ensure the 21 million Americans in this age group have access to Cologuard."

Conroy also noted that Exact is currently enrolling patients in a study to further develop its liver cancer test after presenting data earlier this year that showed the test has approximately 90 percent sensitivity and specificity. "While test development continues, we're advancing our plans for a successful commercial launch," he said. "Our early research suggests primary care physicians help manage patients with liver disease. Many physicians we were already calling on for Cologuard could be regular orders of the liver cancer test."

Exact's Q3 net loss widened to $45.4 million, or $.37 per share, from $26.9 million, or $.23 per share, in Q3 2017, beating the Wall Street estimate of a loss per share of $.42.

The company's R&D costs for the quarter rose 50 percent to $17.6 million from $11.7 million a year earlier, and its SG&A expenses increased 63 percent to $111.5 million from $68.6 million in the year-ago period. On the call, CFO Jeff Elliott said that selling and marketing expenses increased during the quarter primarily due to expansions in the sales force and a test of network TV ads, in addition to the company's ongoing cable TV ads. G&A investments included additions to the personnel and IT teams, and R&D costs increased primarily for clinical studies to support Exact's pipeline and medical affairs.

He also noted that the company expects operating expenses to increase about $20 million in Q4, primarily because of increased selling and marketing to support the Pfizer partnership.

Exact ended the quarter with $161.7 million in cash and cash equivalents and $1.02 billion in marketable securities.

For full-year 2018, the company raised its revenue guidance, and now anticipates revenues of $435 million to $440 million, up from prior guidance of $420 million to $430 million. This assumes 910,000 completed Cologuard tests for the year, Elliott said. Analysts are expecting revenues of $428.8 million for the year. Elliot also noted that the company is expecting cost per test in Q4 of about $130 as investments in lab capacity temporarily offset continued gains in productivity.

Exact's shares rose nearly 14 percent to $73.31 in Wednesday morning trading on the Nasdaq.