Why Exact Sciences Shares Are Already Up 65% in 2017

By Motley Fool Staff Markets Fool.com

Exact Sciences (NASDAQ: EXAS) thinks that its cheaper and less intrusive approach to colon cancer screening can allow it to tap into a massive market. About 80 million Americans fall within the guidelines for regular colon cancer screening, but only about half of them get tested because current options are pricey and invasive.

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Sales are already growing quickly for Exact Sciences' Cologuard, and in this clip of The Motley Fool's Industry Focus: Healthcare podcast, Kristine Harjes and Todd Campbell discuss how that's translating into market-beating returns for investors.

A transcript follows the video.

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This podcast was recorded on March 6, 2017.

Kristine Harjes: Our next stock is also another cancer-related oncology company. This one isExact Sciences,ticker EXAS. They are up 65% year to date.

Todd Campbell: This is a really interesting company because they're doing something thata lot of people were very skeptical they'dbe able to commercialize and do, and do itsuccessfully. They have developed a screening tool that can be used to find colon cancer much earlier. If you start thinking about colon cancer,it's the second deadliest cancer. If it's caught early, it'svery easy to care. Nine out of 10 people will be cured. If it's caught late,however, it has a very high mortality rate. So, it's reshaping how patients getevaluated for their colon cancer risk.

I thinkwe have probably talked about this on the show before, butas a refresher to everybody,the gold standard is the colonoscopy. Colonoscopies are expensive, and they're invasive. As a result, very few of the tens of millions of people whoshould be getting screened every year follow through and do it. This test is just used as a stool sample that you send off to a lab. That makes it,obviously, less expensive than having to do all the prep and going to hospital for aprocedure,and it also makes it easier for people to follow through on and get done. It's less invasive. It's easier for them to be willing to do.

Harjes:This was a great story. Itsounds like a fantastic idea. But, at first,there was a lot of doubt. Butit seems like the company is starting to turn the corner. They had 244,000 completed Cologuard tests in 2016, which was up 135% year over year. They had sales of these from $99 million, which was up152% year over year. This is,however, a company that is still losing money. They posted a pretty hefty net loss in 2016. Buta lot of that is because they're still spending so much money on their marketing and boosting awareness. Theirtest completion rates are also problematic. They definitely still have some work to do,but they seem to be heading in the right direction.

Campbell:Thecompliance rate with the test is better than it is with other screening methods. And as more insurance companies startrecognizing that it makes more sense to catch this disease earlyand they start reimbursing for it,I think you're going to see that this company's sales will continue to climb,and eventually, this company becomes profitable. Like you said, right now it's not, because it'sinvesting so much in marketing. But it's a very interesting the story, and it'sdefinitely one that investors are going to want to keep an eye on.

Kristine Harjes has no position in any stocks mentioned. Todd Campbell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.