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Exact Sciences Stock Spikes After Primary Care Sales Team Nearly Doubles

NEW YORK – Exact Sciences' stock climbed steadily on Wednesday after the company said that it had significantly expanded its primary care sales team to increase adoption of its at-home colon cancer screening test, Cologuard.

By midafternoon, the company's shares saw an increase of nearly 9 percent to $105.31 on the Nasdaq with more than 1.4 million shares traded, above the average daily volume for the stock of slightly less than 1.3 million shares.

In a filing with the US Securities and Exchange Commission on Wednesday, Exact said that it hired approximately 400 new sales representatives, nearly doubling the size of its primary care field sales team to more than 850 reps. The company also disclosed that the new employees are former Pfizer sales reps who were displaced from their former jobs in late August and who had been promoting Cologuard under an agreement between Exact and Pfizer. Exact said it offered the displaced Pfizer sales reps the opportunity to join its team in full-time sales roles promoting Cologuard, and that the vast majority of those offers were accepted.

Exact and Pfizer originally entered into an agreement to copromote Cologuard in August 2018. Under the terms of the deal, Pfizer joined Exact's sales reps in reaching out to physicians and health systems and actively participated in the Cologuard marketing campaign in an attempt to increase the test's adoption rate. Pfizer was to pay a share of the marketing expenses and got a 50 percent share of the gross profits above an agreed upon baseline.

In its SEC filing, Exact said it expects the newly hired reps to be more productive as the company's own employees, rather than as Pfizer's, as they'll be better able to coordinate their interactions with healthcare providers with current Exact sales reps.

Exact also noted that Pfizer is still currently promoting Cologuard, but that it's doing so with a smaller sales team than it was before — because of the firm's internal policies related to COVID-19, Pfizer's sales reps are not making in-person sales calls in 41 states. Exact added that it is in discussions with Pfizer that could result in material changes to their promotion agreement.

In notes to investors, analysts viewed the sales team expansion as a net positive for Exact and said it would likely drive higher sales of Cologuard.

Canaccord Genuity analyst Kyle Mikson said that while Exact's spending on its sales force will increase, this should be partially offset by a reduction in the promotion fee it pays to Pfizer. Further, he added, although Pfizer had been "an excellent partner to Exact," the partnership's benefits weren't as clear in recent quarters, given the substantially reduced in-person promotion by Pfizer's reps.

"The new headcount could add incremental expenses in 2022 (we estimate less than $50 million)" for Exact, he wrote. "That said, we think the sales force expansion will be a net positive over time. For example, the new reps could contribute to Exact's other screening areas outside Cologuard. The company will also now have more control/influence over the reps."

William Blair analyst Brian Weinstein concurred, calling Exact's announcement a "no-brainer move that should drive faster uptake of Cologuard."

The incremental cost of that the company will incur in 2022 to add these sales reps is insignificant when compared to the benefit they'll be in helping to drive faster adoption of Cologuard, Weinstein added. He further noted that this will also allow the company flexibility when it looks to eventually market other similar products.

And SVB Leerink analyst Puneet Souda noted that sales reps typically require six months to nine months of training in order to reach full efficiency, so hiring these particular reps will also save Exact the time and trouble it would normally have to train new sales team members to market its particular products.

"It is important to note that the expanded team will benefit from having experience selling Cologuard for three years, and a familiarity of [Exact's] existing sales channels," he wrote. "This is undoubtedly a positive for Cologuard sales and [Exact] as rep count is the most meaningful driver of Cologuard sales historically."

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