On Tuesday, Stifel reaffirmed its Buy rating and $67.00 price target for Exact Sciences (NASDAQ:EXAS), following the announcement of a Medicare reimbursement increase for the company's Cologuard Plus test. The Centers for Medicare & Medicaid Services (CMS) has set the Clinical Laboratory Fee Schedule (CLFS) final determination at $592 for Cologuard Plus, marking a 16% increase from the current Cologuard version, which is reimbursed at $508.
Exact Sciences anticipates a swift transition for Medicare fee-for-service, which accounts for 15-20% of Cologuard volumes, to the new rate, beginning one month after the initial orders expected early in the second quarter of 2025. In addition, the transition for Medicare Advantage, representing another 15-20% of volumes, is also expected to be quick, occurring within the same year.
The company estimates that 35-40% of its Cologuard volumes will switch to Cologuard Plus in 2025, significantly impacting revenues in the second half of the year. However, transitions in commercial reimbursement rates are anticipated to be slower, with a substantial increase from major commercial payers not projected until 2026. Some commercial payers have already included provisions for Cologuard Plus in existing contracts, although the first-generation Cologuard test took 36 months to establish commercial reimbursement.
In a detailed assessment, Stifel outlined a scenario where Cologuard Plus could launch on April 1, 2025, with Medicare Part B immediately reimbursing the CDLT rate and Medicare Part C following suit by August 1. This would lead to a blended average selling price (ASP) increase of 3-3.5% for the fiscal year 2025.
Including commercial and other testing volumes transitioning later in the year could push the ASP increase to approximately 4-4.5%. Further projections suggest that by fiscal year 2026, with the majority of Medicare and 60% of commercial and other volumes moving to Cologuard Plus, an additional 8% year-over-year increase in ASP could occur, followed by another 4% increase in fiscal year 2027 as all volumes are reimbursed at the higher rate.
In other recent news, Exact Sciences Corporation has been making significant strides in its financial performance and early cancer detection research. The company reported a 13% year-over-year revenue increase in the third quarter of 2024, reaching $709 million, and a 75% increase in adjusted EBITDA to $99 million. Wolfe Research reiterated an Outperform rating for Exact Sciences, anticipating a significant impact on revenue from the launch of Cologuard Plus in late Q1 2025 or early Q2 2025.
Exact Sciences' research has indicated that a new multi-biomarker approach can significantly improve early cancer detection. The company is also developing the Cancerguard test, aiming to detect multiple cancers from a single blood draw. Furthermore, the FDA has approved the company's next-generation colorectal cancer screening test, Cologuard Plus.
Despite operational challenges, Exact Sciences has revised its full-year revenue guidance to between $2.73 billion and $2.75 billion, with adjusted EBITDA expected to be between $310 million and $320 million. The company is optimistic about accelerated growth for 2025 and a strong product pipeline including Oncodetect and the ExactNexus platform.
InvestingPro Insights
To complement Stifel's optimistic outlook on Exact Sciences (NASDAQ:EXAS), recent data from InvestingPro offers additional context for investors. Despite the positive news regarding Medicare reimbursement increases, it's important to note that Exact Sciences faces some financial challenges. The company's revenue growth of 11.91% over the last twelve months, while solid, is accompanied by an operating income margin of -8.44%, indicating ongoing profitability concerns.
InvestingPro Tips highlight that analysts do not anticipate the company to be profitable this year, which aligns with the current P/E ratio of -46.75. This suggests that investors are pricing in future growth potential rather than current earnings. On a more positive note, Exact Sciences' liquid assets exceed its short-term obligations, providing some financial flexibility as it transitions to Cologuard Plus.
The stock's recent performance has been mixed, with a 10.63% price return over the past six months, but a -20.21% return in the last month. This volatility may reflect market reactions to developments like the Medicare reimbursement news and broader sector trends.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips for Exact Sciences, which could provide valuable insights into the company's financial health and market position as it navigates the launch of Cologuard Plus.
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