Analyst Leaves Exact Sciences CEO Meeting With 'Fortified Confidence' Despite Recent Controversy

Following a series of investor meetings with EXACT Sciences Corporation's EXAS CEO and chief financial officer, Cowen said it has come back with fortified confidence in the outlook for upside relative to current Street financial expectations.

Not All Are Optimistic

This is in contrast to the assessment by Citron's Andrew Left, whose Monday commentary sent shares of the company down over 8 percent in intra-day trading before they recouped some of the losses and yet ended down about 4 percent. The negative reaction was due to short-seller Left's comment that the stock has a 40-percent downside near term and the potential to drop to near-zero, single digits in the long term.

New Provider Additions Sustainable

Analysts Doug Schenkel, Adam Wieschhaus, Ryan Blicker and Chris Lin noted that management believes the current pace of new provider additions is sustainable, for at least the next two to three years. The belief is supported by the fact that only 55,000 of the 200,000 primary care providers in the U.S., eligible to order Cologuard have placed an order as of the first quarter.

The analysts think the current full year guidance is achievable, with no change from the about 800 new provider additions per week rate seen in the first quarter.

Cowen now forecasts the company to add 770, 800 and 675 providers per week in 2017, 2018 and 2019, respectively.

"We believe 2017 guidance likely embeds a slightly higher physician addition assumption than we are embedding in our forecast, and clearly management seems to be expecting a higher weekly provider addition rate than what we are incorporating into our 2018/2019 forecast," the firm clarified.

"We view management confidence as a sign of potential upside to Street expectations over the next few years."

If the provider additions increase to 900–1,000 per week through 2019, Cowen feels revenues could reach $600 million in 2019, about $100 million higher than its current estimate. The firm said it believes the momentum is building and that the bias is to the upside.

Among other things the firm said:

TV advertising campaign is working, boosting sales efficiency.
Order rate is another area of material upside.
Cologuard CMS payment rate is expected to remain stable for at least the next three years.
Annual revenue opportunity would likely exceed $4 billion.
The company is likely to pursue FDA approval for liquid biopsy lung cancer diagnostic.

Cowen has an Outperform rating and $45 price target on the shares of the company.

Exact Sciences shares traded recently at $31.91.

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