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Exact Sciences Q3 Revenues Up 85 Percent

NEW YORK – Exact Sciences reported after the close of the market on Tuesday that its third quarter revenues rose 85 percent year over year, thanks to an 89 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 $218.8 million, up from $118.3 million a year earlier, and beating the average Wall Street analyst estimate of $216.1 million.

The number of people screened with Cologuard during the quarter rose to 456,000. The company said nearly 12,000 healthcare providers ordered their first Cologuard test during Q3, and more than 185,000 clinicians have ordered the test since it was launched. Including the expansion of Cologuard's label to include average-risk Americans ages 45 to 49, the test's estimated market share has risen to 5.2 percent, Exact said.

The average Cologuard recognized revenue per test decreased by $13 to $479 in Q3, and the average cost per test to the company fell by $10 to $114. On a conference call with analysts following the release of the earnings, Exact CFO Jeff Elliott said that the company expects revenue per test to be about $480  for Q4, and that it continues to see "a clear path" to $100 or better cost per test over time.

He also said that the compliance rate for the test was 67 percent during Q3, and that Exact expects a slightly lower compliance rate of 66 percent in Q4 due to the impact of the holidays.

"The Exact Sciences team delivered another strong quarter and most importantly, has screened more than 3 million people with Cologuard over the last five years," Exact Chairman and CEO Kevin Conroy said in a statement. "The team made significant progress enhancing our internal infrastructure with the opening of our new lab and implementation of Epic's best-in-class electronic health record system. The foundation we've built for Cologuard and our planned combination with Genomic Health position Exact Sciences to be the cancer diagnostics leader for years to come."

Exact's Q3 net loss narrowed to $40.5 million, or $.31 per share, from a net loss of $45.4 million, or $.37 per share, in the year-ago period. Analysts had expected a loss of $.41 per share.

The company's R&D costs for the quarter rose 98 percent to $34.9 million from $17.6 million in Q3 2018, and its SG&A expenses rose 50 percent to $166.8 million from $111.5 million. On the conference call, Elliott said that the higher R&D costs included expenses for studies and sample collection for Cologuard's label expansion, Cologuard 2.0, and for the liver cancer test the company is currently researching. Exact expects R&D expenses to be relatively flat year over year in Q4.

Exact ended the quarter with $1.03 billion in cash and cash equivalents, and $126.2 million in marketable securities.

For full-year 2019, Exact expects revenues of $802 million to $810 million. This doesn't include the impact of the company's pending merger with Genomic Health. Elliott said that Exact anticipates Cologuard test volume of 1.67 million to 1.68 million tests for 2019. For Q4, the company expects revenues of $221 million to $229 million.

On average, analysts expect revenues of $810.9 million for the year and revenues of $232.8 million for Q4.

In a separate announcement, Exact said new research from its collaboration with the Mayo Clinic revealed new methylation and protein biomarkers that enable the detection of colorectal cancer and advanced adenomas with high accuracy. The study is part of an effort to increase the specificity of Cologuard while maintaining its sensitivity.

The new markers were tested alongside the current Cologuard markers on 725 stool samples, including 117 colorectal cancers, 120 advanced adenomas, 161 non-advanced adenomas, and 327 controls. The results showed that the new markers were able to identify colorectal cancers with 92 percent sensitivity compared to 88 percent for the current markers, and were able to identify advanced adenomas with 65 percent sensitivity, compared to the current 53 percent sensitivity. The new markers also maintained Cologuard's 92 percent specificity, the company said.

The company has also initiated a 10,000-patient prospective study to validate the performance of the enhanced test.

On the conference call, Conroy said that the label expansion for Cologuard, as well as the upgrade to Cologuard 2.0 present an important opportunity for growth and for the earlier detection of colorectal cancer. The label expansion to people ages 45 to 49 has increased the total addressable market for Cologuard by $3 billion, he added.

Conroy also noted that several payors, including Aetna, have lowered the eligible age for coverage of Cologuard to people who are 45 years old. The company is now negotiating with other payors to expand Cologuard coverage to people in this age group, he said.

The company is also collaborating with the Mayo Clinic to advance its liquid biopsy-based cancer diagnostics. The most recent data for the liver cancer test, which the company plans to unveil next week, shows that the test performs better than the current standard of care for liver cancer testing. Conroy said that Exact is planning to enroll more patients into a study to finalize the test's development, and that the company expects to make this diagnostic available in the second half of 2020.

Exact's shares fell nearly 9 percent to $82.48 in after-market trading on the Nasdaq.