Why Shares in Exact Sciences Corporation Are Jumping

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Source: Exact Sciences via Facebook

What: Shares in Exact Sciences Corporation are soaring higher by more than 10% after the company released first quarter financial results that outpaced Wall Street analyst forecasts.

So What: Exact Sciences Corporation reported that sales of its Cologuard colon cancer test improved to $4.3 million during the first quarter. For comparison, sales of the noninvasive colon cancer testing kit were just $1.5 million in the fourth quarter, and industry watchers were looking for sales of $4.1 million in Q1.

In the first quarter, Exact Sciences reports that more than 11,000 Cologuard tests were completed, up from 4,000 in the fourth quarter. The company also announced that the number of physicians prescribing Cologuard has doubled versus the fourth quarter.

The sales increase is due to Exact Sciences boosting its sales force from 80 people to 140 people in the quarter and because more health insurance plans are agreeing to reimburse for the test.

Last quarter, Exact Sciences secured payment coverage from insurers such as Anthem and Tufts Health Plan that provide insurance to more than 40 million members.

Now What: Colon cancer is far more easily treated if it's caught early, and that makes testing incredibly important. However, as many as 23 million Americans age 50 or older aren't being tested for the cancer.

In a bid to reduce costs associated with treating advanced cases of the cancer, healthcare payers could spark demand for Cologuardthat would increase Exact Sciences' sales significantly. However, investors might want to avoid the temptation to chase shares in Exact Sciences higher. Exact Sciences still loses a lot of money, including $35.8 million last quarter alone, and the company already has a market cap of $2.1 billion, which may indicate that a lot of Cologuard's potential is already baked into the company's valuation.

The article Why Shares in Exact Sciences Corporation Are Jumping originally appeared on Fool.com.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B.Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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