Exact Sciences (EXAS - Get Report) shares were trading higher on Monday after the molecular-diagnostics company received Food and Drug Administration clearance to market its DNA-based colorectal-cancer-screening test for use by a wider patient population.
Analyst Bruce Jackson at Benchmark upgraded the stock to buy from hold, citing the widened FDA clearance for people aged 45 and older instead of 50 and older.
Jackson placed a new $130 target price on the stock, indicating upside of 25% from Friday's closing price of $103.97. The stock is trading up 5.3% on Monday at $109.48.
The Madison, Wis., company, focused on detecting and preventing colorectal cancer, said in a statement Monday that the Cologuard test uses a biomarker panel that analyzes a person's stool sample for 10 DNA markers, as well as blood in the stool.
The product, used at people's homes, is designed for those who are at average risk for colorectal cancer. Some 19 million people in the U.S. aged 45 to 49 are in this population, the company said.
At Benchmark, analyst Bruce Jackson wrote that Exact Sciences "came out of the second quarter with strong momentum from its sales-and-marketing agreement with Pfizer (PFE - Get Report) , and in the third quarter the company launched a new 60-person sales force focused on gastroenterologists.
"Given historic ordering patterns, the third quarter should also be strong."
Jackson sees risks to his view, including:
-- the question of how strongly the public will accept Cologuard; the product will require a substantial program to market the product to doctors, Jackson said. "Given the better sensitivity and ease of use, ... doctors will be more likely to prescribe Cologuard [and] patients will be more likely to comply with the test request," he wrote;
-- the prospect of changes in the regulatory environment in the U.S. and overseas;
-- "uncertainty involving which elements of genetic testing processes may be proprietary under patent law";
-- and customer concentration, which refers to Medicare representing about two-thirds of revenue in 2017, down from 78% a year earlier.
Because healthcare providers had been seeing more people 45 to 49 with colon cancer, the American Cancer Society in May 2018 urged people in that age range to get screened for the disease. The move also widened the group's recommendation from those aged 50 and older.
Colorectal cancer is the most preventable, yet least prevented, form of cancer, Exact Sciences said. It is more treatable in its early stages; conversely, survival rates are "low" in Stages III and IV of the disease, the company said.