Exact Sciences’ forecast cut shocks analysts
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By the numbers
Q3 Revenue: $709 million
13% increase year over year
Q3 Net loss: $38 million
Compared to $0.8 million net income in Q3 2023
Exact Sciences reported third-quarter results that fell short of analyst expectations and cut its guidance for the fourth quarter. The cut, which William Blair analysts called a “shocking guidance update,” contributed to a 23% drop in the diagnostic company’s stock Wednesday.
TD Cowen analysts said in a note to investors that the third quarter was the third time in five years that Exact Sciences, which sells the Cologuard colorectal cancer screening test, has missed revenue expectations.
Screening and precision oncology sales were each 1% below Wall Street’s consensus expectations, William Blair analysts wrote in a note to investors Tuesday. Exact Sciences is forecasting a bigger shortfall for the fourth quarter, with the company lowering its total revenue guidance by 11%, or around $85 million, from the prior implied range, according to William Blair.
Analysts said weaker than normal primary care order patterns, caused by commercial execution issues, were partly to blame.
TD analysts said Exact Sciences has undergone a lot of change in the past six to 12 months, with its commercial leader leaving and the sales force being cut and later expanded. The analysts wrote the details around why sales/commercial issues slowed orders were not totally transparent during the earnings call, adding that it was likely several factors. They added, “We don’t believe we are near a penetration peak for Cologuard.”
Leerink Partners analysts said that “Cologuard sales are very sensitive to sales force performance, and any misaligned incentive targets, changes to sales territories or other tweaks can cause issues.”
Other drivers of the miss were slower productivity from new sales hires and the impact of hurricanes. Leerink analysts said Exact Sciences hired 100 sales reps in April and May.
Exact Sciences CEO Kevin Conroy discussed the new recruits on the third-quarter earnings call.
“That group of reps has shown the ability to have an impact on the physicians, healthcare providers that they call on. Maybe not quite at the rate that we expected, but we see that positive impact,” Conroy said. “It continues to grow month-over-month, and that clearly is going to have been a good investment to make.”