When a good opportunity presents itself, it's easy to look at all the positives and overlook the negatives. However, even if the positives greatly outnumber the negatives, it is still important we take all factors into consideration, so we do not get burned.
Exact Sciences (NASDAQ:EXAS) is looking more and more promising after October 9th when the Centers for Medicare and Medicaid Services (CMS) issued a national coverage decision on Exact Sciences' cologuard test, a stool sample test used for screening for colorectal cancer. Upon this release the stock jumped from $18.12 per share, to right around $25. This was a huge win for investors that have held Exact Sciences in anticipation of this announcement. While there is still plenty of upside left for this stock, investors need to be aware, there may be a competitor lurking.
The one downfall to Cologuard, is that even though it doesn't involve an invasive procedure, the patient still must provide a stool sample. While this beats the alternative option of getting a colonoscopy, it does not beat what EDP Biotech Corporation is unveiling. EDP Biotech Corporation created a blood test that detects a protein called CD24 in the blood, which is elevated in the presence of colon cancer and pre-cancerous polyps. The test is called ColoMarker and can be collected from a routine blood draw and has a 92% accuracy rate, with a 8% false positive rate.
A colonoscopy can cost around $2,500. Cologuard is projected to cost significantly less, around $500. ColoMarker on the other hand, is projected to cost only around $50. Since Cologuard will never replace the standard practice of a colonoscopy, because if the test comes back positive, a colonoscopy is necessary to explore the colon and remove cancerous polyps, ColoMarker could dominate Cologuard as the initial test for screening for colon cancer.
Luckily for Exact Sciences, ColoMarker is not FDA approved in the United States and appears to be at least 2 years away. On October 1st though, ColoMarker was awarded CE Mark approval in Europe and is expected to be introduced in 30 member states belonging to the European Economic Area.
I believe Exact Sciences is undervalued and provides a great opportunity as a speculative biotech stock. Although ColoMarker does not provide a short-term threat to Cologuard's success, investors should be aware that competition lurks on the horizon. One of the most important aspects of treating colon cancer is detection, and the easiest, less invasive, and cheapest test in this category will ultimately win when it comes to screening for colon cancer. When speculating on a company that lacks fundamentals, knowing competitors is crucial. Invest in Exact Sciences for now, but be conscious of what EDP Biotech Corporation and ColoMarker are doing.
Disclosure: The author is long EXAS.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.