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The Problem:

Colorectal Cancer is the most preventable, yet least prevented form of cancer in which 50,000 people died from, and approximately 140,000 people were diagnosed with in the United States last year alone. Early detection is essential for a successful outcome with this cancer and unfortunately it is detected in late stages 60% of the time, making treatment difficult and expensive.

With only 53% of Americans estimated to be current for their recommended screening, the problem of why this number is so low must be addressed. One of the major underlying reasons is that the diagnostic test of choice for this cancer detection is a colonoscopy, which is the use of a small camera on a flexible tube passed through the anus. Knowing this, many patients have a natural aversion to having this invasive procedure performed.

It is also worth noting, that at approximately $1000 per procedure, colonoscopy is not cheap, and also carries several other risks:

  • 5 in 1000 colonoscopy patients face serious complications

  • Perforation of the colon occurs at a rate of about 1 in 1000 procedures

  • death at a rate of 1 in 3300 to 1 in 333000

The Solution:

One company, Exact Sciences (NASDAQ:EXAS), is a highly speculative play with a potential game changer that uses non-invasive molecular screening technology, and DNA analysis of stool, to detect colorectal cancer with a high rate of success.

The benefits of its screening method include:

  • It's non-invasive, and studies have shown that when given an option patients are twice as likely to comply.

  • No bowel preparation, or diet/medication restrictions such as the ones needed for colonoscopy are necessary.

  • Much more affordable (Although there is no definite price point established yet)

  • Unlimited access to this test, including that it can be mailed from anywhere and receive fast results.

October 2012 Trial:

The company presented results of a 1,003-patient case-control study that used the same technology as the DeeP-C trial. This data was presented in October, 2012 to a meeting of the American Association for Cancer Research and included patients at 36 study centers.

  • Among the study population, there were 93 cases of colorectal cancer, 114 cases of advanced pre-cancers and 796 controls.

  • At a nominal specificity of 90 percent, the Exact Sciences test detected 98 percent of colorectal cancers and 83 percent of pre-cancers with high-grade dysplasia, the majority of which progress to cancer.

  • The test demonstrated 57 percent sensitivity in the detection of advanced pre-cancers equal to or larger than 1 centimeter.

  • The test's sensitivity increased with the size of the pre-cancers, rising to 83 percent for pre-cancers larger than 3 centimeters.

Actionable Catalyst: Data from largest trial expected this month prior to FDA submission

In November of 2012, Exact Sciences completed the enrollment of more than 12,700 patients at sites in the United States and Canada with the intent of forming the basis for submitting the non-invasive test for Pre-Market Approval with the U.S. Food and Drug Administration, this data was announced in March 2013 to be expected released in March or April of this year, and quickly followed with a Q2 2013 FDA submission date.

Conclusion:

The answer to this problem is simple: The higher we can get the compliance rate, the lower the number of people negatively affected by colorectal cancer will be. With common sense dictating that the amount of people getting screened will improve drastically with a non-invasive option, the potential for Exact Sciences new product is huge.

As this is not a drug submission, the company is not required to go through the usual 3 phases of testing, so the future success depends on this latest trials results. If all goes well, and this test shows good results according to FDA standards, the potential for upside is anywhere from 30%+ short term, and even higher following it's run up to approval. On the opposite side, it appears the potential downside could be anywhere from 20% or more. With a current price of $9.76 a share, I see a high-risk/high reward scenario, and a great potential for a speculative play that could pay out big for the speculative investor.

Source: Exact Sciences: A Cancer Diagnostic Play With An Upcoming Catalyst This Month