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Leerink Initiates Coverage of Exact Sciences With Outperform Rating

This article has been updated with a correction to the current market penetration for Cologuard. The correct figure is 1 percent, not 42 percent as originally reported.

NEW YORK (GenomeWeb) – Leerink on Monday initiated coverage of molecular diagnostics firm Exact Sciences with an Outperform rating and a 12-month $30 price target on the company's stock price.

In a research note, analyst Puneet Souda said that Exact Sciences has a "massive and highly underpenetrated opportunity" for its Cologuard colorectal cancer test, which received US Food and Drug Administration approval in 2014. He estimated that Cologuard has about 1 percent penetration in the colorectal cancer screening market, but is modeling penetration for Cologuard to ramp to around 4 percent by 2020, translating into $518 million in revenue. He added that Cologuard test volumes should quadruple in 2020 from current levels, while compliance rates should recover to 70 percent longer term with the test. 

Currently about 195 million lives are covered for the test by Medicare and private insurers, with more payor contracts likely within the next nine to 12 months, "creating what we believe is an even stronger competitive position in the market," Souda said.

The average sales price for Cologuard was $430 in 2016 but could rise to $495 in 2020 as payor coverage ramps up, he said.

He further noted that the test is already included in key clinical guidelines, such as the US Preventive Services Task Force's, and with several major milestones achieved, "we believe the story is more about execution now, and we remain confident in management's ability to deliver on the long-term opportunity."

In late-morning trading on the Nasdaq, Exact Science's shares were up about 3 percent at $23.99.