NEW YORK (GenomeWeb News) – Mizuho Securities USA has initiated coverage of Exact Sciences with a Buy rating and a $13 price target.
The Madison, Wis.-based firm is developing the Cologuard test, a stool-based DNA test for colorectal cancer screening. Mizuho analyst Peter Lawson said in a note that there is a "large untapped revenue opportunity available to Cologuard of over $1.2 billion in the US with limited competition."
Exact Sciences recently filed the first module of its premarket approval submission to the US Food and Drug Administration for Cologuard. The firm intends to file a second module, the analytical module, in February 2013. It also expects top-line results from its DeeP-C pivotal trial for the test in March, with a clinical module expected to then be submitted to FDA.
"Exact Sciences' colorectal cancer test has a large addressable market, limited competition, and enjoys an unprecedented 'joint' FDA approval and CMS reimbursement decision," Lawson wrote. "We believe demand for a non-invasive CRC test will be driven by the unmet medical need, higher compliance rates, [and] ability to reduce disease and lower healthcare costs."
He also noted that Cologuard has demonstrated high sensitivity for both cancer and pre-cancer detection, and it has "significant IP protection."
In addition, Lawson cited a proven management team and Exact Sciences' ability to develop additional molecular diagnostic tests based on the firm's underlying technology. The company's CEO is Kevin Conroy and its CFO is Maneesh Arora, both of whom served in those roles at Third Wave Technologies prior to that firm being acquired by Hologic in 2008 for $581 million.
Among the risks to the stock noted by Lawson is Exact Sciences focus on a single product right now — "a play upon a single disease indication, with an untried collection method and with considerable risk and expense associated with educating a new market for molecular testing which may never develop."
He also said that there could be a slower than expected ramp in revenues, and the firm faces multiple potential stumbling blocks, such as FDA clearance and reimbursement.
Exact Sciences also faces competition from firms either developing or already selling blood-based tests for colorectal cancer detection. Epigenomics is making its own test based on the Spetin9 DNA biomarker, which it also has licensed to Quest Diagnostics for its ColoVantage test. In addition, Canadian firm GeneNews makes the ColonSentry molecular test, which was launched in certain US markets earlier this year by the firm's partner, Enzo Clinical Labs.
Lawson's $13 price target for Exact Sciences' stock represents a roughly 19 percent increase over the firm's closing stock price of $10.95 on Thursday. In Friday morning trade on the Nasdaq shares of Exact Sciences were down 2 percent at $10.76.