Exact Sciences (EXAS) Q4 2021 Earnings Preview
From: Financial Inversion
Background
Exact Sciences has been on my radar and in my portfolio since 2013. Back then they were completing development of their non-invasive colon cancer test (Cologuard). They have since gotten FDA approval, they received a good CMS reimbursement, they got included on the US Preventative Screening Task Force (USPSTF) recommendations see here under sDNA-FIT. This USPSTF rating was critical an A or B rating from the USPSTF because it meant that under the Affordable Care Act (ACA) insurance companies would have to cover the test. Since those early days Exact Sciences has broadened their scope significantly through further research and through many acquisitions.
This broadening in scope has actually caused me to lose some of the more intimate touch I felt with the company and its business. Simply put the company is now too complex for me to follow as well as I would like. Big picture highlights is that Exact is progressing toward becoming a broad cancer diagnostic testing company (e.g. their addition of Oncotype Dx, see their current slide deck here). Exact also has a long term goal to be a player in the holy grail of caner detection a multi-cancer blood screening test. Many companies are working on this and they all are years away from a successful product. In the mean-time Exact is currently generating revenue from Cologaurd, Oncotype Dx, and a nice short term pivot to Covid-19 testing. Exact revealed that they are one of the frontrunners for this technology with their release back in fall 2020 at the Cowen Liquid Biopsy Summit (Exact slides here and see image from slide 17 below).
Exact Sciences past Quarter results Q3 and Q4 Guide
Key headlines from their Q3 release:
- Total revenue was $456.4 million, an increase of 12 percent
- Screening revenue was $280.4 million, an increase of 31 percent
- Precision Oncology revenue was $145.4 million, an increase of 59 percent
- COVID-19 testing revenue was $30.6 million, a decrease of 70 percent
- Net loss was $166.9 million, or $0.97 per share, compared to a net loss of $202.5 million, or $1.35 per share
- EBITDA was $(119.9) million, and adjusted EBITDA was $(16.3) million
- Cash, cash equivalents, and marketable securities were $1.22 billion at the end of the quarter
Full Year 2021 Original guide as of Q3
- The company anticipates revenue of $1,722-$1,737 million during 2021, including Screening revenue of $1,050-$1,055 million, Precision Oncology revenue of $547-$552 million, and COVID-19 testing revenue of $125-$130 million.
- Updated revenue guidance has been narrowed toward the high end of our previously expected range of $1,705-$1,745 million, which included Screening revenue of $1,100-$1,125 million, Precision Oncology revenue of $530-$540 million, and COVID-19 testing revenue of $75-$80 million.
Preliminary Q4 results as of 1/9/2022
- Total revenue between $472 million and $475 million, an increase of 2 percent
- Total revenue, excluding COVID-19 testing, increased 16 percent
- Screening revenue between $277 million and $278 million, an increase of 11 percent
- Precision Oncology revenue between $148.5 million and $149.5 million, an increase of 27 percent
- COVID-19 testing revenue between $46.5 million and $47.5 million, a decrease of 53 percent
Preliminary 2021 Financial Results as of 1/9/2022
- Total revenue between $1,765.3 million and $1,768.3 million, an increase of 18 percent
- Total revenue, excluding COVID-19 testing, increased 29 percent
- Screening revenue between $1,061.6 million and $1,062.6 million, an increase of 30 percent
- Precision Oncology revenue between $561.1 million and $562.1 million, an increase of 27 percent
- COVID-19 testing revenue between $142.5 million and $143.5 million, a decrease of 39 percent
Analysis and Expectations for Earnings on 2/22/2022
I expect Exact to report approximately what they preliminarily released on 1/09/2022. The topline revenue of $1768 mil beats their guide of $1737 mil at their Q3 release (+1.7% beat). Overall that is acceptable for me, their screening revenue has been hampered by limited doctors visits due to Covid. Conversely, during rough Covid stretches their Covid-19 testing revenue appears to go up. Perhaps this is the reason behind the early Q4 release.
I am optimistic that we will finally start to see that reacceleration of screening revenue in 2022 picking up where we left off in Q1 2020. The tide of Covid related limitations appears to have turned and I expect 2022 to see that shift impact doctors visits and thus Cologuard sales. See this graph of quarterly revenue where we were seeing some nice acceleration prior to Q2 2020.
I expect screening revenue to be the biggest driver of revenue for 2022 and I am keenly interested in the screening revenue guide for 2022. Here is the revenue splits for the past few years.
Projections
I think a decent year in 2022 would see Screening revenues and Onco revenues grow ~8% each quarter and ~36% for the year. That would give a full revenue estimate of $2080 mil with $1353 mil from Screening and $728 from Onco. I think these numbers could upltimately be exceeded with good conditions: evaporation of Covid limitations, doctors visits close to the norm, unraveling of colon screening backlog, expansion of covered age groups for Cologaurd. However, I do not expect Exact management to guide to the rosiest picture. I expect a reasonable reacceleration with the potential to raise guidance throughout the year if conditions develop.
