Taking the long view on the Exact Sciences stock plunge

Let’s face it: If we knew precisely why stock markets surge up, down, and sideways at the drop of a hat, we would all be a lot richer.

Such is the inexact science of trying to make sense of why the stock of Exact Sciences, a Madison-based cancer diagnostics company, took a nosedive last Tuesday over a draft report from an independent healthcare review panel.

Stockholders and others who follow the company may want to take a deep breath before concluding the stock plunge is anything more than a speed bump in what has been an otherwise fast and smooth road for Exact Sciences.

The company’s stock fell about 50% on Oct. 6 with the release of a report from the U.S. Preventative Services Task Force, which is a panel of national experts who make recommendations about clinical preventive services such as screenings and preventive medicines.

This panel is not the U.S. Food and Drug Administration, which approved Exact’s flagship colorectal cancer test — Cologuard — almost precisely a year ago. Nor is it the Centers for Medicare and Medicaid Services, which issued its final “national coverage determination” for the non-invasive stool test at the same time. In fact, Cologuard was the first medical device to receive FDA and CMMS clearance in one fell swoop.

Rather, the task force is a volunteer group that grades various products, devices, and services in order to provide guidance to practitioners and patients alike. An influential group, yes; the final word on what those practitioners and patients choose to do, no.

In its draft statement, which is open for public comment through Nov. 2, the task force rated Cologuard as an “alternative test,” meaning it is useful in select clinical circumstances rather than being a main screening test at this time. That was up from a previous grade of “I,” the equivalent to an incomplete on a school report card, which the task force issued before Cologuard passed muster with the FDA, CMMS, and a host of peer-reviewed clinical trials.

To move from an “I” to an alternative test is progress by most standards, but some industry analysts didn’t see it that way. Many stockholders — mostly institutional — exercised their right to bail out. That’s capitalism and a better system has yet to be invented.

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There is a difference, however, between what one analyst predicted will now be a “much shallower revenue ramp” for Exact and the long-term success of the company — not only from a commercial standpoint, but from the perspective of its core mission of saving lives.

For starters, Cologuard is selling. About 100,000 tests have been ordered in the past year by a total of 20,000 physicians. Thirty healthcare systems have adopted the test, which detects colon cancer and pre-cancer by analyzing both stool-based DNA and blood biomarkers. Also, more than 20 insurers cover Cologuard through reimbursement systems — as does Medicare itself.

The market for a better way to detect colon cancer is huge: 80 million Americans alone. Cologuard gets seven out of 10 people to complete the test, while only three out of 10 people who should have a highly invasive colonoscopy actually do so. Why? It’s unpleasant, from the vile intestinal cleansing solution patients must drink to the procedure itself. Colon cancer is slow-acting, which is fortunate, but it’s also the nation’s No. 2 cancer killer because too many people avoid getting tested.

The Exact Sciences test works. A study of 10,000 people, published last year in the New England Journal of Medicine, showed Cologuard found colorectal cancer in 92% of the cases and identified 69% of pre-cancerous. That same study concluded Cologuard has a 10% rate of false positives, which became a factor in the Oct. 6 task force report.

Here’s why: Although the American Cancer Society recommends using Cologuard every three years and Medicare reimbursement is tied to that same schedule, the task force report assumed an annual test — which drove up the false positive rate, and caused the task force to conclude that colonoscopies would need to be conducted to eliminate the false positives.

Exact Sciences went from two employees who took a chance on moving a nearly moribund research firm from Boston to Madison in 2009 to a thriving enterprise of 400-plus workers today. Stock markets aside, this company is poised to be around for the long haul.

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