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Exact Sciences Stock Falls on Publication of New CRC Screening Cost-Effectiveness Study

NEW YORK – Exact Sciences' stock took a 10 percent tumble on Monday, closing at $108.74 as investors reacted negatively to a study published in PLOS One that called the company's colorectal cancer screening test Cologuard "an inefficient screening option" for the disease.

Exact Sciences and a handful of Wall Street analysts, however, noted flaws in the methodology used by the researchers conducting the study, particularly the lack of real-world data that would have provided a more accurate cost for other procedures. The analysts also suggested it is unlikely that reimbursement for Cologuard would be affected by the study's findings.

The study — which was conducted by researchers at Memorial Sloan Kettering Cancer Center, the Erasmus University Medical Center in the Netherlands, Kaiser Permanente Washington Health Research Institute, and elsewhere — looked at whether multitarget stool DNA (mtSDNA) testing is a cost-effective alternative to other CRC screening strategies reimbursed by the US Centers for Medicare and Medicaid Services (CMS).

The researchers used three microsimulation models to simulate a cohort of previously unscreened 65-year-olds who were then screened with triennial mtSDNA testing — Cologuard — or one of six other reimbursed screening strategies, and measured discounted life-years gained and lifetime costs, threshold reimbursement rates, and threshold adherence rates.

They found that compared to no screening at all, triennial mtSDNA screening resulted in 82 life-years gained per 1,000 simulated individuals, higher than for sigmoidoscopy conducted every five years but lower than for every other simulated strategy. At its 2017 reimbursement rate of $512, mtSDNA was the costliest strategy, the researchers concluded, noting that "it would not be a cost-effective alternative" even if adherence were 30 percent higher than with other screening strategies. However, they also added that two models found that triennial mtSDNA testing was an efficient and potentially cost-effective screening option if the reimbursement rate were to be substantially reduced to a rate of $6 to $18.

"Compared to no screening, triennial mtSDNA screening reduces CRC incidence and mortality at acceptable costs," the authors wrote. "However, compared to nearly all other CRC screening strategies reimbursed by CMS it is less effective and considerably more costly, making it an inefficient screening option."

Despite the study's negative conclusions and investor anxiety, however, analysts on Monday seemed to be unmoved in their bullish opinions of Exact's value.

Discussions on cost effectiveness have cropped up before and have caused some short-term volatility in the company's share price, William Blair analyst Brian Weinstein wrote in a note. "We obviously understand the sensitivity that there would be if new concerns on reimbursement began to manifest themselves for Cologuard, but given this is more of an academic exercise than anything that could affect actual reimbursement or guideline inclusion, we believe the stock move Monday is overdone as it relates to this issue," he added.

Cowen analyst Doug Schenkel noted that the PLOS One paper was written by the same group of researchers using the same modeling methodology as a paper that was written to assess Cologuard's economic value at the time of the last US Preventive Services Task Force (USPSTF) review in 2016, which led to inclusion of Cologuard as an acceptable or recommended CRC test.

Further, Schenkel said, the new study seems to have failed to take adjacent costs into account — such as anesthesia for colonoscopy — when calculating costs for other methodologies, and that the researchers didn't appear to have made an effort to look at the uncertainties around specificity and sensitivity with colonoscopy.

He also noted that the study seemed to assume there would be 100 percent adherence to testing for all other CRC screening modalities, which he called "not a fair reflection of the real world." And although the researchers had said there would need to be adherence of 31 percent to 53 percent for Cologuard for the test to be efficient at the reimbursement rate of $512, Schenkel pointed to Exact's data showing that Cologuard's adherence is seemingly much higher than this.

Indeed, on a conference call following the release of the company's second quarter earnings in July, Exact Chairman and CEO Kevin Conroy said that the compliance rate for the test in Q2 was 67 percent, and that the company expects a similar rate in the third quarter.

Schenkel concluded that although investor nervousness about the study could come from the fact that it was commissioned by CMS, and that there is some uncertainty as to how it could affect the current USPSTF review process, there isn't really a way for CMS to meaningfully change the reimbursement rate for Cologuard under current PAMA guidelines.

"Uncertainty is rarely good; what makes us feel okay about this development is that we don't think any of this modeling/analysis is really all that new relative to prior modeling/analysis, and we know how CMS and others have evolved when it comes to reimbursement," he wrote.

Canaccord Genuity analyst Mark Massaro concurred, writing in his own note that the unusual weakness in Exact's share price is a buying opportunity for investors. He also called the study "a flawed academic analysis with no ability to impact Medicare's pricing," pointing to the assumed 100 percent adherence rate for other screening tests, the study's misstatement on Cologuard's adherence rate, and the lack of adjacent costs for colonoscopy as mistakes in the analysis.

"The study cited $735 as the cost of a screening colonoscopy, which is about two to three times lower than actual total costs," Massaro wrote. "The study also ignores any costs associated with complications that can arise from colonoscopy, which can include death (albeit rarely), bleeding, colon perforation, infections, and adverse reactions to anesthesia, which can add thousands to an invasive procedure that already costs over a thousand dollars."

For its part, Exact released a statement on Tuesday noting that nearly 3 million people have been screened for CRC with Cologuard since the test was approved by the US Food and Drug Administration in 2014, with half of those tested having previously been unscreened. 

"Not only is Cologuard increasing the number of screened Americans, peer reviewed data shows that Cologuard is a cost-effective alternative for people at average risk for CRC," the company said, adding that the new PLOS One study "understates Cologuard's value proposition, by employing unrealistic assumptions, such as adherence rates (i.e., 100 percent adherence, or relative adherence over a fairly narrow range) for screening, follow-up and surveillance procedures."

The academic approach used in the study isn't reflective of the real world, Exact said, suggesting that the researchers should have incorporated more accurate real-world data regarding adherence rates into their analysis models.

Exact's shares fell more than 2 percent to $106.43 in early morning trading on Tuesday.