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Is Cologuard Maker Exact Sciences Underestimating Revenue Guidance?

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Is Cologuard Maker Exact Sciences Underestimating Revenue Guidance?



exact science (EXAS) – Get Exact Sciences Corporation Report A major milestone was reached in 2021. Its flagship colon cancer screening tool, Cologuard, became the first diagnostic test to reach $1 billion in annual revenue.

This is more income than peers Invitae (NVTA) – Get Invitae Corporation ReportSema4 (SMFR) and 23andMe (ME) – Get the 23andMe Holdings Company Report Taken together – this is just one part of a leader’s overall business.

Management expects the growth engine to continue to operate this year. The midpoint of full-year 2022 revenue guidance is over $2 billion, with at least $1.3 billion for Cologuard alone. Excluding COVID-19 testing revenue, this would represent a 20% year-over-year increase.

It may also underestimate the company’s growth potential.

Will Exact Sciences Raise Revenue Guidance?

Exact Sciences divides its business into two broad categories.

Screening consists of tools used to quantify cancer risk in healthy individuals and detect tumors early. Cologuard and PreventionGenetics, a recently acquired subsidiary that provides hereditary cancer screening products, is expected to generate $1.35 billion in sales by 2022. This would mark a year-over-year increase of 27%. Precision Oncology includes a suite of tools designed to characterize hereditary cancer tumor profiles and optimize patient treatment. This segment of the business is expected to generate sales of $602.5 million in 2022. This would mark a 7% year-over-year increase.

The company also expects to generate about $45 million in revenue from coronavirus testing this year, but investors can rule out this dwindling revenue stream when evaluating the business. Doing so suggests that full-year 2022 revenue is expected to grow by about 20% over 2021.

However, Exact Sciences started the year with momentum. Screening revenue grew 28% year over year in the first quarter of 2022, while precision oncology revenue grew 18%. This puts the growth trajectory above trend.

In fact, management added annual guidance when it announced its first-quarter 2022 results.

Can the momentum continue? It looks more and more likely.

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Management noted that many people have delayed colon cancer screenings during the pandemic. This happened when screening recommendations were changed to include individuals 45 years of age or older or 5 years younger than previous guidelines.

This is a meaningful change. Exact Sciences expects to generate $100 million this year from screening individuals in the 45-49 age group.

If the worst of the pandemic is over, doctors and patients can get back on track, and if young people pay attention to the new guidelines, that should create a solid tailwind for Cologuard in the second half of the year.

The precision oncology portfolio is also likely to continue to exceed expectations. Revenue of $153 million in the first quarter puts the segment on track to generate revenue of $612 million for all of 2022. This will greatly exceed expectations for this year.

Of course, tumor diagnosis is not a mobile phone. Income is a little unpredictable. So while investors can’t expect revenue to grow every quarter, this is a trend for six straight quarters.

It’s important to note that a strong U.S. dollar could create strong headwinds for international sales, which have recently been a significant source of growth for the precision oncology portfolio. Still, likely conservative guidance leaves room for surprises to the upside.

Long-term investors are in good hands

I wouldn’t be surprised to see Exact Sciences increase its full-year 2022 revenue guidance when it reports its second-quarter 2022 results. Then again, incrementally raising expectations isn’t terribly important for investors with a long-term mindset.

Exact Sciences has a solid growth trajectory for the next few years. The business can rely on Cologuard’s continued dominance, which may only scratch the surface of its long-term potential.

Medicare’s proposed changes, for example, could lead to meaningful sales growth in 2023. The Madison, Wisconsin-based company also has many opportunities to expand PreventionGenetics by leveraging the industry’s strongest commercial infrastructure.

At the same time, a large number of new screening and precision oncology tests are expected to be launched over the next 24 months. This includes the company’s first liquid biopsy tool, the second-generation Cologuard test, and more.

The combination of these developments reinforces management’s belief that the business can achieve profitable adjusted EBITDA by the end of 2024. This would provide a considerable advantage in an industry full of unprofitable peers.

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