On Tuesday, Exact Sciences (NASDAQ:EXAS) Corporation (NASDAQ:EXAS) shares received a favorable update as Medicare released its final 2025 clinical laboratory fee schedule, resulting in a significant increase in the contracted rate for its Cologuard Plus test. The new rate represents a roughly 16% increase from the previous rate for the company's colorectal cancer screening test.
The updated fee schedule crosswalks Cologuard Plus to three times the contracted rate for Epi proColon, plus one time the rate for FIT, totaling a new contracted rate of $591.92. This adjustment is a marked increase over the prior contracted rate of $509. Bernstein SocGen Group maintained an Outperform rating and a $70.00 price target on Exact Sciences in light of this development.
The new rate is set to go into effect on January 1, which could accelerate the impact of the price increase compared to the anticipated April 1 date if the test had been granted Advanced Diagnostic Laboratory Test (ADLT) status. The timely increase may also provide Exact Sciences with more certainty regarding long-term contracted rates with Medicare Fee-For-Service (FFS).
The analyst from Bernstein SocGen Group noted that this pricing outcome was not fully anticipated by the market, as most other models did not reflect an increase. The analyst's own model suggests an 8% increase in the average selling price (ASP) for Cologuard by the end of 2026, even with conservative estimates.
This projected growth rate is over 300 basis points higher than the consensus, indicating that consensus estimates may have overlooked potential ASP gains or underestimated volume growth in the coming years.
Exact Sciences is expected to see a tailwind on pricing starting with the launch of Cologuard Plus in the second quarter, and potentially even in the first quarter of 2025. The analyst's estimates suggest that if a 16% price increase is applied to approximately 20% of Cologuard revenue from Medicare FFS, it could result in a more than 3% increase in pricing from the product's launch.
In other recent news, Exact Sciences Corporation has seen noteworthy developments. The company's Q3 2024 earnings reported a 13% year-over-year revenue increase, reaching $709 million, and a significant 75% increase in adjusted EBITDA to $99 million.
Stifel and Wolfe Research reaffirmed their positive ratings for Exact Sciences, citing the potential impact of the launch of Cologuard Plus, a next-generation colorectal cancer screening test that has received FDA approval.
The Centers for Medicare & Medicaid Services (CMS) has increased the Medicare reimbursement rate for Cologuard Plus, which is expected to significantly impact revenues, especially in the second half of 2025. The company anticipates a swift transition to the new rate for both Medicare fee-for-service and Medicare Advantage, which account for a substantial portion of Cologuard volumes.
Exact Sciences has also reported progress in early cancer detection research, with a new multi-biomarker approach showing potential to improve early cancer detection. The company is developing the Cancerguard test, aiming to detect multiple cancers from a single blood draw. These are among the recent developments from Exact Sciences Corporation, underlining its dedication to financial growth and advancements in cancer detection.
InvestingPro Insights
The recent Medicare fee schedule update for Exact Sciences' Cologuard Plus test aligns with some key financial metrics and insights from InvestingPro. Despite the positive news, investors should consider the broader financial picture of the company.
According to InvestingPro data, Exact Sciences has a market capitalization of $10.21 billion USD, reflecting its significant presence in the medical diagnostics market. The company's revenue growth of 11.91% over the last twelve months and 12.78% in the most recent quarter demonstrates continued expansion, which could be further boosted by the increased Medicare reimbursement rate.
However, InvestingPro Tips highlight some challenges. The company is not currently profitable, with a negative P/E ratio of -50.11 over the last twelve months. This aligns with an InvestingPro Tip indicating that analysts do not anticipate the company will be profitable this year. Additionally, the stock has underperformed recently, with a -20.21% return over the past month.
On a positive note, Exact Sciences' liquid assets exceed its short-term obligations, suggesting a stable financial position to support ongoing operations and potential growth from the new pricing structure.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide valuable insights into Exact Sciences' financial health and market position.
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