On Tuesday, Exact Sciences (NASDAQ:EXAS) received a favorable final decision from the Centers for Medicare & Medicaid Services (CMS) regarding the Medicare pricing for its next-generation assay, Cologuard Plus (CG+), which is set to launch late in the first quarter or early in the second quarter. The new Medicare rate will be $592, marking a 16% increase from the current $509 rate for its existing Cologuard test.
Leerink Partners has reaffirmed its Outperform rating and $70.00 price target for Exact Sciences, anticipating the stock to rise following the recent 23% decline since the third-quarter earnings report. The finalized clinical lab fee schedules (CLFS) determinations are seen as a significant positive for the company, which had been considering an Advanced Diagnostic Laboratory Test (ADLT) designation if CMS pricing had not been favorable.
The finalized CLFS pricing of $592 is based on a crosswalk to three markers and a Fecal Immunochemical Test (FIT), which is higher than what was initially expected after a preliminary decision to maintain CG+ pricing at the same level as the original Cologuard. Management at Exact Sciences has indicated that they do not plan to pursue ADLT, which would have been the alternative path for pricing leverage.
Exact Sciences is expected to first apply the new Medicare rate to its Medicare Cologuard population, which represents 15-20% of its immediate business, before expanding to Medicare Advantage and commercial plans. This pricing also sets a benchmark for negotiations with commercial payors, potentially increasing the average selling price (ASP) above Leerink Partners' model of $482.
The higher Medicare pricing for CG+ is a welcome development for Exact Sciences, particularly following the challenges faced in the previous quarter, including a downward revision of expectations due to sales force productivity issues and increased competition from blood-based tests. The company also stands to benefit from targeting care gaps, expanding to the 45-49 age demographic, and the potential for rescreening 1.6 million patients in 2024.
The new pricing is expected to aid in maintaining a growth rate of over 15% for the Cologuard product line and improving profit margins due to a 5% lower cost of goods sold (COGS) for CG+, as reported by company management.
In other recent news, Exact Sciences Corporation has been making significant strides in its financial performance and early cancer detection research. The company's Q3 2024 earnings reported a 13% year-over-year revenue increase, reaching $709 million, and a significant 75% increase in adjusted EBITDA to $99 million.
Exact Sciences received a favorable update as Medicare released its final 2025 clinical laboratory fee schedule, resulting in a significant increase in the contracted rate for its Cologuard Plus test. This new rate represents a roughly 16% increase from the previous rate for the company's colorectal cancer screening test.
Analysts from Bernstein SocGen Group, Stifel, and Wolfe Research have maintained positive ratings for Exact Sciences, citing the potential impact of the launch of Cologuard Plus and the Medicare reimbursement increase. The company is also developing the Cancerguard test, aiming to detect multiple cancers from a single blood draw, and has reported progress in early cancer detection research, with a new multi-biomarker approach showing potential to improve early cancer detection.
These are among the recent developments from Exact Sciences Corporation, underlining its dedication to financial growth and advancements in cancer detection. The company anticipates a swift transition to the new rate for both Medicare fee-for-service and Medicare Advantage, which account for a substantial portion of Cologuard volumes. The company 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.
InvestingPro Insights
The recent positive news regarding Medicare pricing for Exact Sciences' Cologuard Plus aligns with some key financial metrics and insights from InvestingPro. Despite the company's current unprofitability, as indicated by its negative P/E ratio of -50.11 for the last twelve months, Exact Sciences shows promising revenue growth. The company's revenue increased by 11.91% over the last twelve months, reaching $2.69 billion, with a notable 12.78% growth in the most recent quarter.
An InvestingPro Tip highlights that Exact Sciences' liquid assets exceed its short-term obligations, suggesting a solid financial position to support the launch and expansion of Cologuard Plus. This financial stability could be crucial as the company navigates the transition to the new, higher-priced assay.
However, investors should note that the stock has underperformed recently, with a -20.21% return over the past month. This aligns with another InvestingPro Tip indicating that 9 analysts have revised their earnings downwards for the upcoming period, which may reflect cautious short-term expectations despite the positive Medicare pricing news.
For a more comprehensive analysis, InvestingPro offers 13 additional tips for Exact Sciences, providing investors with a deeper understanding of the company's financial health and market position.
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