Unanimous Panel Vote Speaks Not Only to Approval but Also Possible Strong Uptake

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At the conclusion of last Thursday’s FDA meeting of the Molecular and Clinical Genetics Advisory Panel, the panel members voted unanimously positive, 10-0, on all questions related to the Exact Sciences (NASDAQ:EXAS) Cologuard product. Based on the data that had been released to date, which showed compelling safety and efficacy for colorectal cancer and advanced adenomas as well as statistical superiority to FIT, a positive vote was already expected though we believe the unanimous nature is important to note.

Of course, the panel vote does not constitute granting of a PMA by FDA, but given the overwhelmingly positive dialogue during Thursday’s meeting (and unsolicited positive commentary from FDA Director of In Vitro Diagnostics Alberto Gutierrez at the conclusion of the meeting), we believe Cologuard is a lock to receive formal FDA approval by the end of the first half of 2014.

In addition to that, analysts believe the panel commentary spoke to a high likelihood of strong uptake once approved. In fact, after hearing physician members of the panel (including both GIs and primary care physicians) describe the benefit of Cologuard over FIT in glowing terms, we believe the uptake scenarios we have projected by 2018 (roughly 1 million tests) could well prove to be conservative.

While it has always been our belief that Cologuard is clearly a better screening assay that can do a tremendous amount of good in reducing the 140,000 new cases of CRC annually, the overwhelming endorsement it was given Thursday (and in The New England Journal of Medicine last week) boost our confidence meaningfully. So even with volatility likely to remain in the stock throughout 2014 as the company navigates through reimbursement and initial uptake, we remain bullish on the stock as we continue to have a strong belief in the product, the market it addresses, and management’s positioning of the company for commercial success. We reiterate our Outperform rating and see significant upside developing over the next several years.

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