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EXACT SCIENCES CORP (EXAS)·Q3 2019 Earnings Summary

Executive Summary

  • Q3 2019 delivered strong topline and operational progress: revenue $218.8M (+85% YoY), Cologuard volumes 456K (+89% YoY), gross margin 76% (+130 bps), and average revenue per test of $479 while cost per test improved to $114 .
  • Guidance: FY19 revenue raised/maintained to $802–$810M and Q4 revenue guided to $221–$229M; FY19 Cologuard volume 1.67–1.68M tests; CapEx trimmed to ~$185M (from ~$200M in Q2) .
  • Strategic milestones: FDA approved label expansion to ages 45–49, implemented Epic EHR, began new Madison lab processing, initiated BLUE‑C pivotal for Cologuard 2.0; early payer coverage includes Aetna, CareFirst, Blue Shield of California .
  • Potential stock catalysts: execution on Q4 guide amid holiday seasonality, adoption ramp from 45–49 label and electronic ordering via Epic/Veeva, and clarity on Cologuard 2.0 and blood test development timelines .

What Went Well and What Went Wrong

What Went Well

  • Record operational metrics: revenue $218.8M (+85% YoY), 456K tests (+89% YoY), gross margin 76% (+130 bps), cost per test down to $114 .
  • Strategic infrastructure: Epic EHR implemented; new lab increasing capacity to 7M tests/year, supporting scalability and future electronic ordering lift .
  • Innovation momentum: FDA 45–49 label expansion; promising Cologuard 2.0 markers (92% specificity, 92% cancer sensitivity, 65% precancer sensitivity) and BLUE‑C pivotal initiation .

What Went Wrong

  • Market share ticked lower vs Q2 (5.2% in Q3 vs 5.7% in Q2), highlighting competitive dynamics and mix effects despite volume growth .
  • Operating expenses rose to ~$202M (+56% YoY) including transaction/integration costs for Genomic Health and higher Pfizer-related fees, keeping the company at a net loss ($40.5M, EPS -$0.31) .
  • Q4 outlook acknowledges seasonal downtick in completed tests per physician due to holidays, tempering near-term utilization growth despite broader adoption drivers .

Financial Results

Quarterly Financials and Operating Metrics

MetricQ1 2019Q2 2019Q3 2019
Revenue ($USD Millions)$162.0 $199.9 $218.8
Net Loss ($USD Millions)—$38.4 $40.5
EPS ($USD)—$(0.30) $(0.31)
Gross Margin (%)73% 74% 76%
Cologuard Test Volume (Units)334,000 415,000 456,000
Avg Revenue per Test ($USD)$483 $479 $479
Avg Cost per Test ($USD)$128 $123 $114
Operating Expenses ($USD Millions)$187.0 $182.1 $201.7

Notes: Dashes indicate data not disclosed in the referenced primary documents for that period.

Year-over-Year Comparison (Q3)

MetricQ3 2018Q3 2019
Revenue ($USD Millions)$118.3 $218.8
EPS ($USD)$(0.37) $(0.31)
Gross Margin ($USD Millions)$88.3 $166.0

KPI Highlights

KPIQ1 2019Q2 2019Q3 2019
New Providers Ordering (Units)~14,000 >13,000 ~12,000
Cumulative Providers Ordering (Units)~174,000 ~174,000 >185,000
Estimated Market Share (%)—5.7% 5.2%
Patient Compliance Rate (%)65% 67% (guidance) 67% actual; Q4 ≥66% expected

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2019$800–$810 $802–$810 Raised low end
Cologuard Volume (Units)FY 20191.66–1.68M 1.67–1.68M Narrowed/maintained
Revenue ($USD Millions)Q4 2019—$221–$229 New
Avg Revenue per Test ($USD)Q4 2019—~$480 New
Avg Cost per Test ($USD)Q4 2019High $120s expected in Q3 Low–mid $120s Maintained trajectory
Operating Expense ($USD)Q4 2019—+~$10M seq increase New
G&A / R&DQ4 2019—Relatively flat ex-Genomic Health costs New
CapEx ($USD Millions)FY 2019~$200 ~$185 Lowered

Earnings Call Themes & Trends

TopicQ1 2019 (Previous Mentions)Q2 2019 (Previous Mentions)Q3 2019 (Current Period)Trend
Epic EHR / Electronic OrderingPlanned Epic implementation in 2019 to enhance scalability Live internally; future click-to-order for Epic providers; electronic orders double rate vs fax Epic implemented; enables future electronic ordering lift and analytics Positive execution momentum
Veeva CRMMigration planned late 2019 to enable closed-loop marketing —Rollout first week of December; productivity benefits expected in 2020 Near-term deployment
45–49 Label ExpansionFDA submission filed; ACS guideline tailwind; early payer interest (Anthem FEP, Aetna, CareFirst) Guided approval timing (1H 2020) FDA approval achieved; early coverage with Aetna, CareFirst, Blue Shield CA Accelerating adoption groundwork
Cologuard 2.0Internal data promising; aim to raise specificity while maintaining sensitivity —Data presented (92% specificity; 92% cancer sensitivity; 65% precancer sensitivity); BLUE‑C pivotal initiation Advancing to pivotal
GI Sales ForceHire and launch in Q3; >60 reps New GI team launched Transition of top reps to GI; expected influence amplification Building channel influence
Pfizer PartnershipEarly ramp; OB/GYN reach doubled; 6–12 month rep productivity curve Continued contributions; service fees above assumptions Strong collaboration; productivity gains expected to continue Sustained lever
Seasonal Utilization—Q4 2018 unique tailwinds noted Q4 seasonal downtick in tests per physician expected Seasonal headwind near term
Blood-based CRC / MRDPipeline in liver/pancreas; case-control work underway Combination with Genomic Health strengthens evidence generation; MRD focus Case-control shows strong performance; pricing/USPSTF timing imply niche annual test Long-term optionality

Management Commentary

  • “We screened 456,000 people with Cologuard in the third quarter… delivered $219 million in revenue… implemented Epic’s EHR… and prepared for the Genomic Health combination.” — Kevin Conroy, CEO .
  • “Third quarter gross margin was 76%… cost of sales improved to $114 per test… we expect Q4 cost per test in the low to mid $120 range.” — Jeff Elliott, CFO .
  • “FDA approved our label expansion… providing access to Cologuard for the 19 million average risk unscreened Americans ages 45 to 49… increasing its total addressable market by $3 billion to $18 billion.” — Kevin Conroy .
  • “At 92% specificity, the new markers were 92% sensitive for cancers and 65% sensitive for precancerous polyps… we’re initiating BLUE‑C.” — Kevin Conroy .

Q&A Highlights

  • Seasonality and Q4 guide: Management expects a slight sequential downtick in completed tests per physician in Q4 due to holidays; 2018 was an exception given unique tailwinds, but long-term utilization per physician should rise materially .
  • Pfizer productivity: Exact and Pfizer reps are at the point where productivity typically ramps; collaboration on shared targets yields higher penetration; productivity should improve annually .
  • Electronic ordering impact: Electronic orders drive ~20%+ higher ordering (health system bidirectional) and >60% more vs fax in broader provider comparisons; Epic should unlock wider adoption and lower costs .
  • Compliance: Q3 compliance 67%; expecting at least 66% in Q4 due to seasonal effects; long-term aiming >70% .
  • Blood-based CRC positioning: Likely annual test with pricing pressure; not expected to displace Cologuard/colonoscopy; USPSTF inclusion timeline likely 2026–2027 .

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 2019 revenue and EPS was unavailable due to S&P Global request limits at the time of retrieval; as a result, we cannot quantify beat/miss versus consensus for this quarter. Values were intended to be sourced from S&P Global but were not retrievable due to API limits.
  • Given raised/maintained FY revenue guidance ($802–$810M) and new Q4 guide ($221–$229M), Street models may need to reflect improved cost per test and CapEx moderation, while incorporating holiday seasonality in Q4 utilization .

Key Takeaways for Investors

  • Execution remains strong: revenue growth, margin expansion, and cost-per-test reductions, supported by infrastructure scaling (Epic, new lab) .
  • Near-term: Expect holiday-driven utilization softness, but Q4 revenue guide and per-test economics should anchor expectations; watch for Veeva rollout productivity in 1H20 .
  • Medium-term: 45–49 label expansion and payer coverage adoption are catalysts to broaden TAM and accelerate provider adoption, especially as electronic ordering scales .
  • Innovation: BLUE‑C pivotal and Cologuard 2.0 specificity gains can further enhance the health-economics case and adoption; liver test data at AASLD may add optionality .
  • Pfizer partnership: Continued lift expected from coordinated targeting across shared accounts and health systems; monitor service fee dynamics and ROI .
  • Capital intensity easing: CapEx trimmed to ~$185M for FY19; operating expense cadence guided modestly higher in Q4 but flat G&A/R&D excluding Genomic Health costs .
  • Watch market share/mix: Q3 share at 5.2% vs 5.7% in Q2; sustained volume growth should remain the primary driver, but share/mix trends warrant monitoring .

Appendix References

  • Q3 2019 Press Release (8‑K 2.02): Revenue, test volume, per-test economics, margins, operating expenses, net loss/EPS, FY19 guidance .
  • Q3 2019 Earnings Call: Guidance detail (Q4, OpEx, CapEx), Epic/Veeva, 45–49 label expansion and payer coverage, BLUE‑C/Cologuard 2.0 data, Pfizer partnership commentary, compliance .
  • Q2 2019 Press Release (8‑K 2.02): Revenue, test volume, per-test economics, margins, FY19 guidance .
  • Q1 2019 Earnings Call: Revenue, test volume, per-test economics, margins, Epic/CRM plans, compliance .