Raymond James Upgrades Exact Sciences (EXAS) to Market Perform

Raymond James analyst M upgraded Exact Sciences (NASDAQ: EXAS) from to Market Perform.

The analyst comments "This morning Exact Sciences announced that it has received a positive Medicare coverage decision for its Oncodetect MRD assay for stage II to IV colorectal cancer (CRC) patients in both the adjuvant and recurrence monitoring settings for up to five years. The product launched in 2Q, with this coverage timing ever so slightly delayed vs. management anticipating by the end of June. Coverage is likely backdated to the 1Q submission date. We’d view this as essentially on track given the product will be ramping over time as opposed to a dramatic near-term step up. Keep in mind, launch was in April and the repeat testing nature, especially for recurrence monitoring, means volumes should build over time. The contribution assumed in 2025 revenue guidance from both Oncodetect and Cancerguard was deemed “modest”, and we see no reason to change that outlook. MolDX established Oncodetect rates matching those it set for the leading Signatera assay from Natera (NTRA, Outperform), but the latter receives nearly $4K per single plasma test under ADLT pricing while Oncodetect is set at just $1,158 in this setting. This delta was not unexpected but remains notable as non-Medicare mix is likely to be substantial, likely limiting the near-term gross profit potential for Oncodetect. That said, with the existing infrastructure in the Precision Oncology segment, we expect some scalability. Despite that, management has called out investments to support this launch, as well as the forthcoming Cancerguard launch in 2H. Overall, the MRD market remains in its early stages but is every bit of a $15B TAM the company has called out, if not larger. Other players have noted ranges as high as at least $28B. We believe at least $15-20B is substantially achievable over time, far more so than TAM metrics often are in reality. In the near- and intermediate-terms, we see the tide rising fast enough to raise all boats. Oncodetect appears competitive from a performance perspective. That said even with the Beta-CORRECT and Alpha-CORRECT studies already presented we think it lags the leader in terms of clinical evidence. Closing this gap and expanding data and coverage to other cancer types is imperative. Breast is perhaps of greatest interest given the positioning the company has with Oncotype and potential workflow advantages that can bring. Net-net, this is an important step forward for unlocking a large opportunity in cancer diagnostics where Exact has a right to compete. We expect contribution to build gradually and see no reason to change our existing outlook on this news. Ultimately the focus for the equity remains on CRC screening. A “mid-summer” readout for the company’s blood-based assay is front and center in investor minds, in our view, with stock reactions diverging around an 80% overall sensitivity threshold. Trajectory for Cologuard near term of course is a focus as well, aided by Cologuard Plus pricing and performance improvements as that product rolls out further as well. To us, these dynamics are already appreciated, and we remain comfortable in a neutral stance at these levels."

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Shares of Exact Sciences closed at $53.54 yesterday.

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