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Exact Sciences Stock Tumbles After Firm Lowers Full-Year Revenue Guidance, Misses Q3 Estimates

NEW YORK – Shares of Exact Sciences were down around 25 percent Wednesday morning after the company said Tuesday evening after the close of the market that it is lowering full-year revenue guidance after reporting lackluster third quarter financial results.

For the three months ended Sept. 30, the Madison, Wisconsin-based cancer screening and diagnostics company reported revenues of $708.7 million, up 13 percent from $628.3 million in the same period last year but well below analysts' average estimate of $717.7 million.

The Q3 total included cancer screening revenue of $544.9 million, up 15 percent from $472.0 million, and precision oncology revenue of $163.1 million, up 5 percent from $156.3 million a year ago.

During a call with investors, Exact CEO and Chairman Kevin Conroy said that the company believes that the availability in 2025 of its improved Cologuard test, a stool-based genomic assay designed to detect the presence of colon cancer, will help attract new customers in the primary care space. The US Food and Drug Administration approved the new version last month.

"It sets a new performance standard with 95 percent cancer sensitivity and 94 percent specificity, [which] will help convince more primary care providers to consider Cologuard Plus as at least a coequal standard of care as colonoscopy and even as a first choice due to strong patient preference," Conroy said.

Relative to the first-generation Cologuard, these performance boosts represent an approximately 40 percent improvement in both the false-negative and false-positive rates of the test.

He also highlighted the fact that Exact's opportunity to rescreen patients using Cologuard will continue to increase. In 2023, approximately 1.6 million individuals should become due for their next colon cancer screening. "In 2025, that number grows to 2 million; and in 2026, 2.6 million," Conroy said.

The company expects to screen approximately 1 million people in total by the end of this year between first-time and follow-up tests. It anticipates that number growing to 1.3 million in 2025, Conroy estimated.

Beyond Cologuard Plus, Exact is also gearing up to launch its first minimal residual disease test, OncoDetect, for colon cancer in the first half of next year, opening a new market for itself in precision oncology. The company recently shared validation data for the test at the European Society for Medical Oncology congress, and has a paper scheduled to be published in January in a peer-reviewed journal, Conroy said.

Exact's Q3 R&D costs were $100.1 million, down 10 percent from $111.4 million in Q3 2023. Its SG&A spending rose about 5 percent to $411.9 million from $390.6 million.

The company recorded a Q3 net loss of $38.2 million, or $.21 per share, compared to net income of $794,000, or $.00 per share, in Q3 2023. Exact's loss per share was in line with analysts' average estimate.

The firm said it is lowering its full-year 2024 revenue guidance to a range of $2.73 billion to $2.75 billion from its prior projection of $2.81 billion to $2.85 billion. This includes projected screening revenues of $2.08 billion to $2.09 billion and expected precision oncology revenues of $650 million to $655 million.

Exact CFO Aaron Bloomer said that the reason for the revision was multifaceted. For one, the company typically sees the highest volume of Cologuard order growth in early August through late October. Although there were increases over that time this year, they weren't at the same levels as the company has seen historically.

"The second key reason would be that [although] we've seen a positive signal on recent sales and marketing investments that we've made, that signal is a bit more gradual than the prior guidance assumed," he added.

Finally, the company is being cautious about the impact of recent hurricanes, considering the fact that the areas affected represent roughly 18 percent of Cologuard test volumes. "Obviously, given the 30-day time lag between when we see an order and a result, this has a bigger impact on the fourth quarter," Bloomer said.

Conroy reiterated that the company's Q3 execution and updated FY2024 guidance don't reflect its full potential.

"I take accountability. Our management team takes accountability for the loss in performance and guidance for Q3 and Q4, respectively. We can do better. And we have our arms around these execution issues, and we have clear plans in place to address them," he promised.

Exact ended the quarter with $588.8 million in cash and cash equivalents, and $432.3 million in marketable securities.