Exact Sciences Stock Cut by Citi to Neutral on Valuation

Exact Sciences shares were cut by Citi analyst Patrick Donnelly to neutral from buy, based on the medical-diagnostics company's valuation.
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Exact Sciences  (EXAS) - Get Report shares were cut by Citi analyst Patrick Donnelly to neutral from buy, based on the medical-diagnostics company's valuation.

To be sure, he lifted his share-price target to $140 from $120 to reflect recent activity in the stock. 

Shares of Exact Sciences, which developed the colorectal-cancer-screening test Cologuard, have wavered on Wednesday. They recently traded at $131.92, up 0.6%. The shares have climbed 36% year to date.

On Tuesday Exact Sciences shares leaped 23% after the company unveiled an agreement to buy cancer-detection provider Thrive Earlier Detection for $2.5 billion. 

The deal will enable Exact Sciences, Madison, Wis., to fold Thrive's early-stage cancer-screening test, CancerSEEK, into its blood-based screening platform, Exact Sciences Chief Executive Kevin Conroy said in a statement.

Donnelly says that “overall, we are constructive on the deal and acknowledge the strategic rationale combining EXAS's expertise around DNA methylation and experience in navigating the regulatory landscape with Thrive's CancerSEEK test."

CancerSEEK, he said, has "demonstrated impressive specificity data in a real-world [10,000-patient] study.

“While we are positive on the combination, we see risk/reward as more balanced after the stock has gained more than $8 billion in value following the initial release of its liquid biopsy data on Sept. 24. 

"As the U.S. continues to undergo a resurgence in covid-19 cases, ... the headwinds to Cologuard volumes will prove more durable than what is factored into consensus estimates, offering downside risk to 2021 estimated numbers.”

Hence the downgrade. A multiple of 12 times estimated 2021 revenue "fairly values the liquid biopsy opportunity along with the base business facing near-term challenges,” Donnelly said.