Tuesday, May 19, 2015

Seeking Alpha: Exact Sciences' Significant Upside Looks Reasonably Priced

Things have gone well for Exact Sciences (NASDAQ:EXAS) since I last wrote about this up-and-coming diagnostics company in July of 2014. With a favorable CMS coverage decision in hand and a commercial launch underway, the shares have appreciated more than 40% and outdone the $20 base-case fair value I laid out at the time.

Since commercialization has begun, Exact Sciences has followed a path that should be familiar to the more grizzled veterans of med-tech stocks - namely, adoption hasn't ramped up quite as quickly as the Street hoped and it is costing more money to build and support the sales effort. As is, the shares look pretty much fairly valued to me today.

Seeing the Cologuard designated a Class A or Class B test by the USPSTF would be a significant help in securing commercial insurance coverage, but a cost effectiveness study due later this year could pose a threat to future pricing, as does competitive blood-based tests on the way. I'd certainly be happy to reconsider the shares on a pullback, but it would take some combination of a lower price, faster adoption, more assurance on pricing, better visibility into European sales, and/or more color on the pipeline to get me more bullish right now.

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Exact Sciences' Significant Upside Looks Reasonably Priced

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