NEW YORK – After being forced to keep its sales teams working from home and seeing a decline in sales of its cancer tests because of the COVID-19 pandemic, Exact Sciences is now sinking more resources into telehealth solutions, like encouraging patients to order its Cologuard colorectal cancer test online. The company is betting that the pandemic will permanently change how patients interact with their healthcare providers and believes it can step in as the diagnostic provider of the future.
Like many other companies have been forced to do during the COVID-19 pandemic, Exact had to institute certain work-from-home measures for many of its employees, to limit their exposure to the SARS-CoV-2 virus. The company's field sales team suspended face-to-face interactions with healthcare providers, switching instead to serving doctors by telephone and through the internet.
But widespread stay-at-home orders have also kept most patients away from their doctors' offices, leading to a decline in standard wellness visits and preventive services. In its preliminary first quarter revenue report in April, Exact said that revenues for Cologuard decreased 36 percent from March 15 through March 31, and fell 63 percent year-over-year during the first 20 days of April.
On the conference call with analysts following the release of its Q1 earnings on Wednesday, Exact CFO Jeffrey Elliott confirmed that fewer Cologuard tests were being ordered and that patients were completing tests at a lower rate due to the impact of the pandemic.
"After a 63 percent year-over-year decline in Cologuard test orders during the first 20 days of April, we have recently seen a slight recovery," he said. "Orders declined 47 percent year-over-year in the last 10 days of April with continued positive trends in May."
Cologuard wasn't the only product that saw declining sales this quarter. Exact's precision oncology business was also starting to see weakening underlying conditions because of the pandemic, most notably in the US prostate cancer business and in certain international geographies. The company said it expected the widespread decrease in preventive services, such as mammograms and prostate cancer screenings, to negatively affect precision oncology test volumes in the coming months.
It's because of all this that the company is reworking its priorities, Exact Chairman and CEO Kevin Conroy said on the analyst conference call. "Our new priorities are getting people tested, taking care of our customers and preserving our financial strength," he said. "We're using our marketing and inside sales tools to reach healthcare providers virtually. The coronavirus has highlighted the importance of accessible, easy-to-use at-home screening tools and telehealth improved access to colorectal cancer screening for the 46 million unscreened Americans. We accelerated the launch of our telehealth site with patient education resources, highlighting their ability to request Cologuard online through a telehealth provider."
People can now request a telehealth consultation for Cologuard from home, and Exact is raising awareness of the opportunity to order Cologuard online by tailoring its social, digital, and TV advertisements to reflect that.
"COVID-19 will change the way people interact with their health care providers. And with these investments, Cologuard fits seamlessly into, we believe, a permanently changed health care environment," Conroy added.
Elliott added that the recovery the company is seeing in Cologuard sales is broad-based across the US and is due in part to the telehealth initiatives. "Telehealth is really a foundational investment for us that opens up a broader part of this market. It really helps us leverage the investments we've made for years in consumer marketing," he said. "Now patients have another way to access Cologuard from the safety of their own home. It really speaks to the value of our tests."
Importantly, Elliott noted, the focus on telehealth allows Exact to serve parts of the market that it had not served before. "Before, patients could not request the Cologuard test through the website. Today, they can," he said. "Other channels that we see opportunities in are the employer channel and the payor channel. We've had active conversations with other partners that are now enabled by the telehealth capability. So, we're pleased with the early launch. We're pleased with the growth we've seen so far, and we're very excited about the long-term opportunity with telehealth, especially in a COVID world."
Conroy also noted that a significant backlog of people who need to be screened for colorectal cancer is building up, as the list people who can't get to their doctors for routine colonoscopies continues to grow. Further, gastroenterologists are focusing on more urgent diagnostic colonoscopies, and GI societies have recommended prioritizing essential services while delaying elective procedures, significantly reducing the number of screening colonoscopies being performed.
"Putting off screening can lead to diagnoses in later stages where outcomes are poor," Conroy said. "Cologuard is a solution here. We can help healthcare providers prioritize procedures and send patients at the highest risk, including those with a positive Cologuard, to colonoscopy first. Cologuard can play an important role in alleviating this backlog and getting more people screened."
He further said that Exact can do something similar for breast and prostate cancer patients. Breast cancer societies have recommended that physicians consider delaying surgery as invasive procedures such as mastectomies can expose patients to SARS-CoV-2. Oncotype DX can be performed on tissue taken from a needle biopsy, so physicians can use the Oncotype DX breast recurrence score to evaluate the use of chemotherapy on a neoadjuvant basis before surgery, and then evaluate whether a mastectomy is needed, Conroy said.
As for the company's pipeline initiatives, Conroy said that some of the major trials Exact had undertaken — such as the BLUE-C study that was testing biomarkers for the new and improved version of Cologuard — have been temporarily paused. But the major R&D programs are continuing. Work on Cologuard 2.0 outside the BLUE-C trial is ongoing, as is work on the firm's colon blood product and its liver cancer test. The initial launch of the liver cancer test, which was set for later this year, will likely be moved to 2021, however.
In a note to investors on Thursday, Canaccord Genuity analyst Max Masucci said Exact is taking the necessary actions "to ensure that its business exits the COVID-19 pandemic in a position of strength."
There are two things Masucci said he has learned from the pandemic. The first is that telehealth is here to stay "and will become a cornerstone of patient management during and after the outbreak," he wrote. The second is that certain aspects of medical care don't require a physical visit to a physician's office. Given Exact's plans to focus on telehealth, he added that his long-term view on the company remains unchanged. He reiterated his Buy rating on Exact's shares, lowered the price target to $110 from $120, and said, "we'd be buyers on any major weakness."
Evercore ISI analyst Luke Sergott concurred, noting that the company's outlook has improved. "We point to a couple [of] indications that the recovery could be pretty sharp for [Exact]," he wrote in a note. The first was the improving trend for Cologuard sales, going from being down 63 percent year over year for the first 20 days of April, to only down about 47 percent for the last 10 days of the month. "The key is that we appear to have bottomed and Cologuard volumes should start coming back online towards the backend of the quarter," he said.
The other indicator Sergott pointed to was the company's investment in telehealth. "Telehealth investments have fundamentally changed the game for" Exact, he said. "Patients no longer need an in-person PCP visit. Everything can be done online and synced with the EHR (eventually), which should eventually lead to increased order rates per doctor."