As I've written in reference to med-tech in the past, sometimes FDA
approval is the relatively easy part of the process. Almost every
company can talk up the prospects for an experimental drug, device, or
diagnostic test (with sell-side analysts dutifully parroting them), but
products don't sell themselves and navigating the correct path through
patient/doctor education, pricing, reimbursement, and so on is trickier
than many investors realize or expect.
When last I wrote about Exact Sciences (NASDAQ:EXAS)
I mentioned the risk that the company could get an adverse ruling from
the United States Preventive Services Task Force (USPSTF), and that
happened. While the initial ruling wasn't a clear-cut "don't use" for
the company's Cologuard test, it wasn't the unambiguous positive
decision that investors were hoping for and that would have spurred
widespread commercial reimbursement in 2016.
Absent a final ruling from the USPSTF, Exact Sciences is in a tough
spot. A negative USPSTF determination doesn't prevent private insurers
from covering Cologuard, but it gives them an excuse not to and/or to
push hard for pricing concessions. While I've remodeled for a slower
uptake of the test, a lower ASP, and higher spending, I still arrive at a
fair value that suggests meaningful undervaluation. If the company can
deliver the expected volumes this year investors may reconsider the
name, but if the uncertainty about reimbursement starts impacting that
ramp, all bets will be off.
Read the full article here:
Exact Sciences Traveling A Familiar, Tough Road
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