Alders, it’s no time to jump off Exact Sciences’ ledge

The Exact Sciences option for Judge Doyle Square was placed in doubt Tuesday by a federal task force, but it’s still too early for local leaders to join investors in jumping off the ledge.

While much of the focus was understandably on the 46% drop in the company’s stock price, it would be wise for opponents to keep their powder dry until we see the impact on more telling company metrics like sales, the level of Medicare reimbursement, and inclusion in health care quality measures.

Shares of Exact Sciences’ stock sunk like a boulder Tuesday after the U.S. Preventive Services Task Force (USPSTF) did not classify Cologuard, the company’s non-invasive test for colorectal cancer, as one of the main recommended screening tests. Instead, the task force named Cologuard as an alternative test that’s useful in select clinical circumstances as it issued a draft report updating its guidelines for colorectal cancer screening.

The USPSTF’s draft report, basically a preliminary finding that must still be finalized, came one week after the Madison Common Council approved a development agreement on the Judge Doyle Square project that includes $46.7 million in public investment.

It wasn’t exactly what Exact Sciences CEO Kevin Conroy expected to hear, and opponents of the company’s $200 million development proposal for Judge Doyle Square were quick to say, “I told you so,” in reference to Exact Sciences’ long-term business prospects.

Not so fast.

There is still a chance the task force’s preliminary recommendation could be reversed before the final recommendation is made. Even if it isn’t, Cologuard still received some validation from the task force following an exhaustive review, and it still has Food and Drug Administration approval, the validation of the American Cancer Society, which has included Cologuard in its own colorectal cancer screening guidelines, and until further notice, the market approval of health care insurers, physicians, and patients.

FDA approval, announced in October 2014, came after the results of a 90-site, 10,000-patient trial were published in the New England Journal of Medicine in March of that year.

None of that was wiped out by the task force’s draft report, which is the first update of colorectal cancer screening guidelines since 2008. In the report, alternative tests are a newly created category that includes Cologuard and CT colonography, which is also known as a “virtual colonoscopy” that uses low-dose radiation CT (computed tomography) scanning to produce an internal view of the colon, which otherwise is only seen in a more invasive procedure that I won’t describe here. So even as an alternative test, Cologuard is in pretty good company.

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In a conference call with investors and market analysts, Conroy vowed to work with the task force through its public comment period and convince it to modify its draft guidance and include Cologuard as one of the recommended screening strategies. That’s worth the effort, especially since more than 20 commercial health insurers already cover Cologuard. Those 20 insurers represent 57% of the covered population.

However, it’s not the only factor local decision makers should consider.

Once the heat of the moment subsides, the stock price could recover from the beating it took on Tuesday, when the company’s share price dropped precipitously from its Monday closing of $18.53.

Moreover, the company, noting that early adoption of Cologuard remains strong, hasn’t backed off his commitment to adding 400 new jobs by 2019. Thus far, physicians have ordered more than 100,000 tests, which represents a strong product launch.

One thing to watch for is a final determination by the Centers for Medicare and Medicaid Services (CMS) on maintaining the current reimbursement rate for Cologuard. Last week, CMS issued a preliminary determination to maintain the current rate, and it also announced a new CPT billing code for Cologuard. Medicare and commercial payers use CPT codes to facilitate the processing of claims.

CMS is expected to issue its final decision in November for rates that will be effective on Jan. 1, 2016.

If the timing works out — remember, Exact Sciences would like to begin development in Judge Doyle Square by year’s end — it would also be a good idea to see if Cologuard is included in quality measures like HEDIS (Healthcare Effectiveness Data and Information Set). As Conroy notes, inclusion in those quality measures drives physician utilization and behavior, and payers want to be able to advertise to their large-employer customers that they have high-quality metrics.

So while all the focus is on panicky investors, how about taking a breath to see what CMS, insurers, doctors, and patients think?

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