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Wall Street Increases Loss Estimates for Exact Sciences Following Details of Clinical Trial Plans

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – One day after Exact Sciences announced its second-quarter earnings and provided details about the clinical trial for its colorectal cancer screening test, Wall Street reacted in mixed fashion, as several analysts increased their loss-per-share estimates for 2011 and 2012, and one downgraded Exact Sciences' stock.

On Tuesday, the Madison, Wis.-based cancer molecular diagnostics firm announced that revenues for the second quarter slid 23 percent year over year. During a conference call that followed, Exact Sciences CEO Kevin Conroy also detailed clinical trial plans for the company's Cologuard colorectal cancer test ahead of a premarket approval submission to the US Food and Drug Administration.

The trial is expected to include 10,000 patients at average risk for colorectal cancer and will be conducted at 60 planned sites. Submission to the FDA is anticipated in the fourth quarter of 2012.

Rodman & Renshaw responded to the news by downgrading Exact Sciences' rating to Perform from Outperform. It had had an 18-month price target on the company's shares of $7, but did not provide a new price target.

In a research report, Elemer Piros noted several risk factors, including two earlier versions of a stool-based, DNA colorectal test by Exact Sciences that "were not commercially successful. …Even if the third-generation test currently in development addresses the sample size and DNA stability problems of the prior versions, it may face challenges in reimbursement and commercial adoption."

Exact Sciences and Laboratory Corporation of America had a licensing deal for Exact Sciences' second-generation colorectal cancer test, called ColoSure. The deal expired in December, but LabCorp can continue marketing that test without paying royalties to Exact Sciences, according to Piros.

"If the market dynamics change where consumers accept home-based stool testing, ColoSure may become a more significant competitor," he said.

Piros added that the Cologuard test may face competition from other technologies in development, such as a methylation-based test from OncoMethylome and Epigenomics, and a miRNA test from Rosetta Genomics.

He estimated the firm's loss per share for 2011 at $.51.

Investment bank Jefferies increased the estimated loss per share for Exact Sciences for 2011 to $.53 from an earlier forecast of $.46, and changed 2012 loss-per-share estimates to $.55 from $.50. In a research note, analyst Jon Wood said the changes reflect an expected increase in the clinical trial's costs. Exact Sciences said that it now anticipates spending $25 million, up from an earlier estimate of $20 million.

Wood maintained a Buy rating and a $9 price target.

Quintin Lai at RW Baird kept an Outperform rating and a $13 price target, but increased the estimated loss per share to $.55 from an earlier estimate of $.53 for 2011. For 2012, he revised the loss-per-share estimates to $.77 from $.74.

For 2011, Lai raised revenue estimates slightly to $4.2 million from $4.1 million but also increased R&D estimates to $21.7 million from $20.3 million.

Exact Sciences "faces a number of hurdles before achieving commercialization of its colorectal cancer screening assay," Lai said in a report, but added that the company has achieved "solid execution … thus far in initiating the clinical trial following assay refinement."

WedBush also noted higher than previously anticipated clinical trial-related R&D expenses in raising its estimated loss per share. The investment firm now expects a 2011 loss per share at $.56, compared to an earlier forecast of $.55, and 2012 loss per share to be $.67, compared to an earlier estimate of $.65.

Analyst Zarak Khurshid reaffirmed an Outperform rating and a $10 price target.

In late Wednesday afternoon trading on the Nasdaq, Exact Sciences' shares were down 4 percent at $7.42.

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