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Citron Is Very Wrong On Exact Sciences


  • Exact Sciences is under another short attack regarding its non-invasive colon cancer screening test Cologuard.
  • The loud narrative made by short seller Andrew Left of Citron Research is similar to past loud incongruous arguments made by short sellers.
  • Beware anybody in finance who uses the words "guaranteed" or "proves beyond any doubt."
  • Cologuard is FDA approved in all screening guidelines and included in the most important quality rating measures.
  • Cologuard has an accelerating growth curve in a $14 billion market, is taking market share from its main competitors, and is leading to more patients being compliant with screening.

Exact Sciences (NASDAQ:EXAS) is under attack again by shorts. The arguments this time are similar to the arguments made in the past and just as likely to be wrong. That doesn’t mean, however, that investors and Exact Sciences itself can’t learn something from the rehashed criticisms.

The last big short attack on Exact was by Whitney Tilson who recently covered his losing position. This year’s attack is led by short seller Andrew Left of Citron Research whose track record is spotty at best. In Left’s case against Exact Sciences, he excretes a number of arguments that are rather easily disposed of. I will wipe those arguments away below.

Left's arguments, which can be read here on Seeking Alpha, center around four key points:

  • That Cologuard, Exact Sciences' colon cancer screening and currently only product, is an inferior screening methodology that surprised many when the FDA approved it and Medicare included it in payment guidelines.

  • That Exact Sciences is not profitable now and might never be due to being a non-scalable "poop-in-a-box" business.

  • That a periodic change in Medicare pricing for Cologuard due January 1st, 2018, will be dramatically lower, further damaging Exact's drive towards profitability.

  • That a currently non-existent blood test for colon cancer will someday displace Cologuard and potentially drive Exact Sciences shares to zero.

For those unfamiliar with me, I have been invested in Exact Sciences since late 2007, expanded my holdings during the financial crisis, again when CEO Kevin Conroy was hired, have regularly sold cash-secured puts for years accumulating both income and more shares and, on several occasions, bought calls or LEAPs. I have written about Exact Sciences on MarketWatch of the Wall Street Journal network multiple times, including here and here. I have also been quoted and interviewed about the company.

What is Cologuard?

This article was written by

Kirk Spano profile picture
Award Winning Kirk Spano's All-In-One Investing Service

25+ years of beating markets with less risk. Margin of Safety Investing. "The three most important words in investing are margin of safety." - Warren Buffett 

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I own and operate Bluemound Asset Management, LLC - a boutique registered investment advisory that manages and consults on 9 figures of wealth. I was lucky to have several mentors who managed billions of dollars, including, one who literally helped write the book on option selling. I have now managed money since the 1990s through several major market cycles. 

In the past decade I have worked on private equity led real estate projects, as well as, consulted to several private equity firms, hedge funds and family offices. I currently actively help accredited investors find sustainable real estate investments through private equity. 

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Analyst’s Disclosure: I am/we are long EXAS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I have recommended that subscribers to Fundamental Trends Investment & Retirement Letter buy shares of Exact Sciences. Certain clients of Bluemound Asset Management, LLC own shares of Exact Sciences.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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