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Exact Sciences Q3 Revenues Rise 12 Percent

NEW YORK – Exact Sciences reported after the close of the market on Tuesday that its third quarter revenues rose 12 percent year over year, thanks to increased revenues from its screening and precision oncology businesses.

For the three months ended Sept. 30, the Madison, Wisconsin-based molecular diagnostics company reported revenues of $456.4 million, up from $408.4 million a year earlier, and beating the average Wall Street estimate of $430.0 million.

Screening revenues, which include laboratory services for the Cologuard colorectal cancer screening test and Biomatrica products, rose 31 percent to $280.4 million. Precision oncology revenues, which include laboratory services from Oncotype DX products, rose 59 percent to $145.4 million. And COVID-19 testing revenues fell 70 percent to $30.6 million.

"Exact Sciences is entering an exciting period for its pipeline, generating evidence to support innovative tests that will help defeat cancer through earlier detection," Kevin Conroy, Exact's chairman and CEO, said in a statement. "Our powerful commercial engine will help us achieve our mission by getting more people tested with Cologuard, Oncotype DX, and our future tests."

On a conference call with analysts following the release of the earnings, Conroy said the company tested 950,000 patients during the quarter, hired 400 primary care field representatives from its comarketing partner Pfizer, increased covered lives for the 45- to 49-year-old group for Cologuard to 70 percent, and secured regulatory approval for its Oncotype DX Breast diagnostic test in Japan.

Exact CFO Jeff Elliott further added that 9,000 new healthcare providers ordered Cologuard during the quarter, and 253,000 have ordered the test since its launch.

Sales of Cologuard grew slightly less than the company had expected, Elliott said. This was due to a rapid rise in cases of COVID-19 caused by the Delta variant, as cases tripled from late July to mid-September, which reduced access to physician offices for the firm's sales force, he added.

Growth was also affected by actions taken by Pfizer during the quarter. Due to COVID concerns, the pharma company pulled its sales reps out of the field starting in late July through September, and then reduced the size of its internal medicine team in mid-September.

"Combined, the Delta variant and our partner Pfizer's decision caused our in-person sales calls to decrease 70 percent during this time period," Elliott said. "This led to a flattening of Cologuard orders in August and September. It takes about 30 days between the Cologuard order and a completed test when we recognize revenue. This means that Cologuard orders in August and September had a modest impact on third quarter revenue."

In fact, he added, this will have a bigger effect on fourth quarter revenues, which will also be affected by the holidays, when seasonality leads to fewer orders around Thanksgiving and Christmas and a temporary delay in patients returning Cologuard kits. All of this has factored into the company's decision to lower its expectations for screenings revenues for the full year.

Conroy tried to sound a positive note, however. "Even with the backdrop of fewer cancer screens throughout COVID and more recently due to the Delta variant, Cologuard is playing an important role in getting more people screened," he said. "Because Cologuard is accurate and convenient, we have screened nearly 3 million people since the pandemic began."

Further, he added, just in October, which was the first full month after the Pfizer sales reps were hired full-time by Exact, orders for Cologuard rose 10 percent, accelerating in the back half of the month.

Exact's Q3 net loss narrowed to $166.9 million, or $.97 per share, from $202.5 million, or $1.35 per share, in the year-ago period. Analysts had expected a net loss of $.85 per share for the quarter.

The company's R&D costs for the quarter rose 139 percent to $75.4 million from $31.5 million in Q3 2020, and its SG&A expenses rose 52 percent to $383.1 million from $252.1 million. On the call, Elliott said the increase in R&D costs was driven by the company's multicancer and colorectal cancer programs.

Exact ended the quarter with $273.8 million in cash and cash equivalents and $944.7 million in marketable securities.

The company raised its guidance for 2021 and now expects revenues of approximately $1.72 billion to $1.74 billion, including screening revenues of $1.05 billion to $1.06 billion, precision oncology revenues of $547 million to $552 million, and COVID-19 testing revenues of $125 million to $130 million. Analysts are expecting total revenues of $1.73 billion for the year.

Screening revenue expectations, though, are lower than the previous guidance of $1.10 billion to $1.12 billion due to the rapid rise in cases of the COVID-19 Delta variant starting in late July, which caused in-person sales calls to significantly decrease in August and September.

Exact's shares fell more than 9 percent to $86.75 in Wednesday morning trading on the Nasdaq.