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Biotech Stock Mailbag: Dismantling The Exact Sciences Short Thesis

Let's turn now to how Cologuard performed against FIT, fecal immunochemical test, during the DeeP-C trial. Cologuard achieved superiority to FIT, not just for pre-cancer sensitivity but for cancer sensitivity as well. Our Cologuard trial was designed with the sequential approach to analyzing the performance of Cologuard compared to FIT. After determining that Cologuard achieved non-inferiority to FIT for cancer sensitivity, our statisticians were able to make a calculation regarding superiority. We are very pleased to report that Cologuard demonstrated superiority to FIT for cancer sensitivity with a statistically significant P value. Claims of superiority to FIT for both cancer and pre-cancer detection will be included in our FDA submission.

Exact Sciences has not yet disclosed the detailed data showing the numerical superiority of Cologuard over FIT because the results are included in a manuscript of the study submitted for publication in a medical journal.

Again, Conroy, this time from the company's July 23 conference call:

"...We have prepared our analysis of the trial's full data set in collaboration with Principal Investigator and submitted a manuscript in June to a premier peer reviewed medical journal. We hope to have the paper published before the end of the year."

This explains why Exact Sciences uses historical data on FIT in its investor slides.

What we know already from the DEEP-C study is Cologuard's sensitivity to cancer: 92%, pre-cancer sensitivity: 42%; and specificity: 87%. We also know these Cologuard numbers are superior to FIT, we just don't know by how much until the study is published.

Second, "Alpha Exposure" contends that even when Exact Sciences discloses the Cologuard vs. FIT comparison from the DEEP-C study, the result will be bogus because the company chose a FIT comparator that is obsolete and pre-destined to deliver subpar results.

If Exact Sciences was interested in an honest comparison between Cologuard and FIT, the company would have used the InSure FIT as the comparison screen in the DEEP-C study, "Alpha Exposure" says.

InSure FIT is an easier-to-use, more accurate version of the old FIT, with cancer sensitivity of 88%, pre-cancer sensitivity of 43% and specificity of 97%. Across all three measures, InSure FIT would beat Cologuard, "Alpha Exposure" claims.

As proof, the hedge fund points to a November 2006 study published in Cancer comparing InSure FIT to an older fecal occult blood test.

Here's where "Alpha Exposure" cherry picks data to unfairly bolster its Exact Sciences short thesis. If you read the abstracted results from the Cancer paper only, indeed, InSure Fit's sensitivity and specificity appear just as described by "Alpha Exposure" in its Seeking Alpha article.

But if you read the text of the Cancer study, you'll get to this important caveat in the discussion:
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