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Exact Sciences' Q4 Revenues Up 64 Percent

NEW YORK (GenomeWeb) – Exact Sciences reported after the close of the market on Thursday that its fourth quarter revenues rose 64 percent year over year, thanks to a 66 percent increase in the number of completed Cologuard colorectal cancer tests during the quarter.

For the three months ended Dec. 31, 2018, the Madison, Wisconsin-based molecular diagnostics company reported revenues of $143.0 million for Q4, up from $87.4 million in Q4 2017, and beating the average Wall Street estimate of $134.8 million.

Fourth quarter Cologuard test volume increased to 292,000 completed tests, expanding the firm's estimated share of the total colorectal cancer screening market to 4.1 percent. Nearly 15,000 healthcare providers ordered their first Cologuard test during Q4, and approximately 147,000 doctors have ordered the test since it was launched. The firm also said that the average recognized revenue per test was $486 in Q4, a decrease of 2 percent from the prior-year quarter.

"The Exact Sciences team made tremendous progress in 2018, and we look forward to helping more people get screened for colorectal cancer in 2019 through our partnership with Pfizer," Exact Chairman and CEO Kevin Conroy said in a statement. "Our team continues working hard to advance our pipeline of liquid biopsy tests to deliver additional life-changing innovations in early cancer detection."

On a conference call with analysts following the release of the earnings, Conroy said that Exact is still aiming to reach about 40 percent of its total addressable market from the 4 percent it has now, and that the firm's results in 2018 show that this goal is possible in the long term.

He also noted that about 94 percent of people who now complete a Cologuard test will have no out-of-pocket costs. "We have signed in-network agreements with most major insurers and added nearly 80 million total contracted lives in 2018," Conroy said. "We expect the benefit of widespread coverage to increase over time as our sales and marketing teams deliver that message broadly to physicians and patients."

The company also increased its annual Cologuard lab capacity from 1.5 million tests to 3 million tests, and lowered the costs of goods per test by more than 9 percent during 2018, he added.

Importantly, Conroy discussed the company's efforts to expand its pipeline. As he noted at the JP Morgan Healthcare Conference in January, Exact is aiming to expand the label for Cologuard testing to include people aged 45 to 49 who are at average risk for colorectal cancer. This would add another $4 billion in total market potential for the test, he added.

"Following the American Cancer Society's colorectal cancer guideline update to include people ages 45 to 49, we initiated a prospective trial for Cologuard's use in this population," Conroy told analysts on the call. " We met with the FDA in January to discuss the path forward for a Cologuard label expansion to age 45. We expect to submit our application in the first half of this year and hope to have a label expansion in the first half of 2020."

He also said that the company worked with Mayo Clinic to find biomarkers to improve Cologuard's performance, especially its specificity. The company is calling this program Cologuard 2.0.

"Cologuard 2.0 could also increase throughput at our lab, and therefore, reduce cost of goods, making the return on investment very attractive. We will provide additional updates as we work to further validate these markers," Conroy added.

Exact's net loss for the quarter widened to $54.0 million, or $.44 per share, from a net loss of $21.8 million, or $.18 per share, a year earlier. Analysts had expected a loss of $.50 per share in Q4.

The firm's Q4 R&D costs rose 65 percent to $20.9 million from $12.7 million in Q4 2017, and its SG&A expenses rose 80 percent to $133.2 million from $74.2 million.

For full-year 2018, Exact said revenues rose 71 percent to $454.5 million from $266.0 million in 2017, beating analysts' average estimate of $445.7 million.

Test volume for 2018 rose 64 percent to approximately 934,000 Cologuard tests.

Exact's net loss for the year widened to $175.1 million, or $1.43 per share, from a net loss of $114.4 million, or $.99 per share, in 2017. Analysts had expected a loss of $1.49 per share in 2018.

The firm's 2018 R&D costs rose 62 percent to $68.2 million from $42.1 million in 2017, and its SG&A expenses rose 63 percent to $427.7 million from $262.9 million.

Exact ended the year with $160.4 million in cash and cash equivalents, and $963.8 million in marketable securities.

For 2019, the company anticipates revenues of $710 million to $730 million. Analysts are expecting revenues of $704.4 million.

On the call, Exact CFO Jeff Elliott said the company expects Cologuard volume of 1.49 to 1.51 million completed tests for the year and 310,000 to 320,000 completed tests for Q1 2019. He also noted that Exact's internal goals are focused on revenue and that the company doesn't plan on disclosing Cologuard volumes starting in 2020.

Elliott further said Exact anticipates that Q1 R&D expenses will increase primarily to support improvements to Cologuard and the firm's pipeline development efforts. For the full year, Exact expects about 25 percent of its R&D to be Cologuard-related and the remaining 75 percent to be put toward major pipeline initiatives such as the firm's liver cancer test.

Conroy detailed the efforts Exact is making for its pipeline, noting that its collaboration with the Mayo Clinic is continuing, and is specifically focused on developing tests  for the early detection, accurate diagnosis, and recurrence detection of the top 15 cancers.

"The Mayo Clinic team has 50 experts working on nearly 70 protocols, helping form the foundation of our pipeline," he said. "With Mayo Clinic contributing to early research and discovery, we have identified biomarkers for 13 of the top 15 cancers. Our teams then perform multiple studies to validate these markers using our highly sensitive and specific technology platform."

He noted that the company is developing and plans to launch multiple liquid biopsy-based tests over the next several years, starting with the liver cancer test.

"The current standard of care for liver cancer testing is inconvenient and not accurate enough, and more than two-thirds of high-risk patients avoid recommended testing," Conroy said. "Our goal is to provide a more accurate test than the current standard of care, which is ultrasound, with or without alpha-fetoprotein. Early-stage sensitivity for ultrasound alone is 45 percent with a high false-positive rate; combined with AFP that sensitivity increases to 63 percent."

Exact has published data for a panel of markers that shows improvement from these levels and is continuing to enroll patients in clinical trials to finalize the development of the test, he added.

Exact's shares rose more than 3 percent to $86.00 in Friday morning trading on the Nasdaq.

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