On Tuesday, Piper Sandler reaffirmed its Overweight rating and $75.00 stock price target for Exact Sciences (NASDAQ:EXAS) Corporation (NASDAQ:EXAS), a molecular diagnostics company.
The firm's positive outlook is based on the recent price increase for Cologuard Plus by the Centers for Medicare & Medicaid Services (CMS). This development is seen as a reinforcement of the company's potential for margin growth and supports the expectation that Exact Sciences will surpass a 20% EBITDA margin by 2027.
The analyst at Piper Sandler expressed confidence in the company's trajectory despite a guidance reduction for the fourth quarter. The firm acknowledges that while Exact Sciences needs to improve its direct-to-physician sales strategy, other factors are anticipated to compensate for any setbacks.
These factors include the aforementioned CMS price increase for Cologuard Plus, new opportunities in compliance through Cares Gap, and an expanding rescreening population which could drive revenue growth.
Piper Sandler's projections for Exact Sciences' EBITDA in 2026 are approximately $650 million. The firm suggests that even with conservative estimates of revenue growth, the company's operational leverage is strong enough to boost EBITDA. This financial leverage is a key element in the firm's continued endorsement of an Overweight rating for the company's stock.
Exact Sciences specializes in cancer screening and diagnostic tests, including its flagship product, Cologuard, which is a non-invasive colorectal cancer screening test. The price increase for Cologuard Plus by CMS is a significant endorsement of the test's value and efficacy in cancer screening.
The company's focus on expanding its product offerings and enhancing sales strategies is part of its broader goal to improve cancer detection and patient outcomes. With the recent CMS price increase and other strategic drivers, Exact Sciences is positioned to potentially exceed its financial targets and strengthen its market presence.
In other recent news, Exact Sciences Corporation has secured a 16% increase in the Medicare rate for its next-generation assay, Cologuard Plus, from the Centers for Medicare & Medicaid Services (CMS). The new rate is set at $592, up from the current $509 rate for the existing Cologuard test. This development has led to reaffirmed positive ratings from Leerink Partners, Bernstein SocGen Group, Stifel, and Wolfe Research.
Exact Sciences plans to apply the new rate to its Medicare Cologuard population, which represents 15-20% of its immediate business, before expanding to Medicare Advantage and commercial plans. This pricing also sets a benchmark for negotiations with commercial payors.
The company's Q3 2024 earnings reported a 13% year-over-year revenue increase, reaching $709 million, and a significant 75% increase in adjusted EBITDA to $99 million. Exact Sciences is also making strides in multi-cancer early detection (MCED) testing, with research indicating that a new multi-biomarker approach can significantly improve early cancer detection.
These are among the recent developments from Exact Sciences Corporation, underlining its dedication to financial growth and advancements in cancer detection.
InvestingPro Insights
Recent InvestingPro data provides additional context to Piper Sandler's optimistic outlook on Exact Sciences (NASDAQ:EXAS). Despite the company's strong revenue growth of 11.91% over the last twelve months, reaching $2.69 billion, Exact Sciences is not currently profitable. This aligns with an InvestingPro Tip indicating that analysts do not anticipate the company will be profitable this year.
The company's gross profit margin stands at an impressive 72.96%, reflecting efficient cost management in its core operations. However, the operating income margin of -8.44% suggests challenges in translating this gross profit into bottom-line results, which is consistent with Piper Sandler's emphasis on the need for improved sales strategies.
Another InvestingPro Tip notes that liquid assets exceed short-term obligations, indicating a solid short-term financial position. This liquidity could provide Exact Sciences with the flexibility to invest in growth initiatives and weather potential setbacks as it works towards profitability.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips for Exact Sciences, providing deeper insights into the company's financial health and market position.
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