Exact Sciences (NASDAQ:EXAS) is a molecular diagnostics company focused on colorectal cancer. The company has exclusive intellectual property protecting its non-invasive, molecular screening technology for the detection of colorectal cancer. On March 27, 2014, the Molecular and Clinical Genetics Panel of the Medical Devices Advisory Committee of the U.S. Food and Drug Administration will review the premarket approval application (PMA) for the company's Cologuard stool-DNA-based, non-invasive colorectal cancer screening test. After carefully reviewing the published scientific evidence, we believe that Cologuard will receive favorable review on its PMA.
Over 600,000 people die from colorectal cancer (CRC) annually worldwide . It is the second leading cause of cancer deaths in the US . According to the Journal of the National Cancer Institute, CRC is often considered the most preventable, yet least prevented cancer. Nearly 50 percent of those age 50 and older have not been screened as recommended. Over 75% of CRC occurs in people with no genetic risks. Most common risk factors include increasing age and unhealthy lifestyle choices . People with inflammatory bowel disease or family history of genetic syndromes such as familial adenomatous polyposis are at higher risk of CRC . Most deaths due to CRC are associated with metastatic disease. CRC confined in the colon is curable by physical removal of the cancer. Standard screening methods are invasive colonoscopy and sigmoidoscopy, which involve a lighted flexible tube passed through the anus, providing a visual diagnosis and opportunity for biopsy. Fecal occult blood test (FOBT) is a non-invasive test, which checks for hidden blood in fecal material by detecting hemoglobin protein stool samples .
Cologuard assays exfoliated DNA markers (methylated BMP3 and NDRG4, mutant KRAS, beta-actin) and fecal hemoglobin to detect CRC and its precursors, advanced adenoma (AA) and sessile serrated adenoma (SSA) . In the company's early trial, using 385 cases (133 AA + 252 CRC) and 293 controls collected from 5 sites, their stool DNA ((sDNA)) assay showed 85% detection sensitivity for CRC and 63% detection sensitivity for AA>1cm at 90% specificity cut-off, compared to the reference colonoscopy method . Importantly, sDNA detection rate was not affected by neoplasm site, indicating that sDNA assay can detect both left-sided and right-sided colorectal neoplasms, in contrast to all conventional screening methods, which are biased toward detecting left-sided colorectal neoplasms. Later, the company conducted another study on independent set of 207 cases (30 SSA + 80 AA + 93 CRC) and 796 controls to test their automated sDNA assay. In the study, they achieved 98% (n=98) detection rate for CRC at 90% specificity cut-off . For AA/SSA, the detection sensitivity increases with increasing lesion size, from 60% (n=84) for AA/SSA>1cm to 83% (n=24) for AA/SSA>3cm. In the preliminary results from the company's largest trial, so-called 'DeeP-C' study where >12,000 patients were enrolled from 90 sites, the company claims to achieve 92% sensitivity for CRC and 66% for AA>2cm and 42% for all pre-cancerous polyps .
FOBT, a comparable non-invasive screening method currently available, appears much less sensitive than sDNA assay in detecting CRC and its precursors. Other researchers have reported FOBT detection rate as 13% for CRC, 11% for AA, and 5% for minor polyps . EXAS also conducted a study to compare the performance between Cologuard and FOBT in detecting SSA using 29 SSA≥1cm and 232 controls with no polyps and concluded that a single marker in Cologuard (mBMP3) achieved 66% detection sensitivity at 91% specificity cut-off while FOBT achieved 10% . They also found that Hemoglobin marker alone showed no discrimination between cases and controls, corroborating the low detection rate by FOBT. The company also claims that they exceeded all end-points including comparison with FOBT in their large-scale DeeP-C trial, although the data are not public yet .
Compared to existing methods, Cologuard offers a reliable CRC screening choice in a completely non-invasive form. If the company successfully obtains coverage from the Centers for Medicare and Medicaid Services for Cologuard, it could at least completely replace FOBT and/or increase the CRC screening market size by involving people who would otherwise not be screened for CRC due to the invasive colonoscopy procedure. In short, we believe Cologuard will be approved by the FDA sometimes this year and EXAS stock is a strong buy.
Disclosure: I am long EXAS.
Business relationship disclosure: We current hold a long call option on EXAS. We wrote this article expressing our own opinions. We are not receiving compensation for it. We have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Beacon VP Investments is a team of analysts. This article was written by Hyun Ji Noh on behalf of Beacon VP Investments.