Exact Sciences riding high after rebounding from rough patch
Exact Sciences Corp. ’s fortunes are on the upswing.
Sales of its Cologuard test for colorectal cancer are on the rise, its stock is hitting record highs, and the company has padded its coffers with the sale of even more stock.
Its new research and development center is fully occupied, and Exact is looking for more space to grow.
“Exact Sciences remains confident in the growth of Cologuard and our ability to continue having a positive impact on the community,” said Kevin Conroy, president, CEO and chairman.
It wasn’t that long ago, though — in the fall of 2015 — that Exact Sciences was in a pickle.
It had planned to move its offices Downtown as part of the $200 million Judge Doyle Square project. Exact had more than 700 employees then — including 425 in the Madison area — and promised to add at least 400 well-paying jobs at the site just south of Capitol Square. Its Cologuard DNA stool test had been on the market for one year, and about 100,000 patients were expected to use the home kits in 2015.
But the massive development project — which also included a hotel, commercial space and parking — grew increasingly contentious, as opponents questioned Exact Sciences’ long-term viability and railed at the request for $46.7 million in public money, including $12 million to help Exact relocate from the West Side.
A draft report from the prestigious U.S. Preventive Services Task Force added fuel to the fire, rating Cologuard an “alternative” option, not a primary choice, sending Exact Sciences stock plunging nearly 50 percent, below $10 a share.
Exact scuttled its role in the Downtown project in November 2015, opting instead to add to its facilities at University Research Park.
Today, a year and a half later, Exact Sciences occupies three buildings at the research park, has a warehouse and recycling center on Holtzman Road, and is mounting a big expansion of its Cologuard processing facilities.
The company is working with Mayo Clinic on at least seven more cancer-screening products and has 1,000 employees nationwide, with nearly 750 in metro Madison, and plans to hire 250 more, including 200 locally.
A final report from the U.S. Preventive Services Task Force last June was a big help. It listed Cologuard on the same level as other colorectal screening tests, prompting more insurance companies to cover the cost.
This year, Exact expects to process 470,000 completed Cologuard tests. The company’s stock recently hit an all-time high of nearly $39 a share. Exact held a secondary stock sale in June of 7 million shares at $35 a share, netting the company $238 million, with the possibility of selling 1 million more shares by mid-July.
Conroy, who has headed Exact since its 2009 move to Madison from Marlborough, Massachusetts, is upbeat.
In growth mode
“Being on this mission to help win the war against cancer is incredibly exciting,” Conroy said. “In particular, working in the research and development facility brings you really close to the advancement that we’re making to be able to detect cancer really early from a simple blood draw.”
Exact Sciences headquarters offices occupy two floors at 5801 Research Park Blvd., while its new research center and adjacent manufacturing building — both updated in a $5 million renovation last year — are a couple of blocks away.
The research and development center is at 501 Charmany Drive. Exact bought it in June 2015 for just under $4.9 million, according to the city assessor’s office records. Its value is assessed at $7.4 million. The purchase came even as the company was negotiating to move its headquarters Downtown.
“We needed an immediate location for the R&D team,” Exact spokesman J.P. Fielder said.
Next door, at 441 Charmany Drive, Cologuard reagents — or chemical compounds and solutions — are manufactured. Exact has leased space there for years, said Aaron Olver, director of University Research Park, the building’s owner.
“They are great owners and operators ... and great tenants,” Olver said. “We love having them here.”
Two weeks ago, construction began to expand Exact’s lab at 145 E. Badger Road, where completed Cologuard tests are analyzed. The lab, completed in mid-2014, can process 1.25 million tests a year; Exact wants to push capacity to 2 million tests a year, Conroy said.
A second site is in the works for additional Cologuard processing and for customer service.
“It’s important that we get another site up because we’re bursting at the seams in our current site and we want to make sure that we are prepared for success over the long term,” Conroy said.
The new location has not been chosen yet. Conroy said it will be in the Madison area but not Downtown. He said he expects to decide before the end of 2017, “hopefully, in the next three or four months.”
At the research center, two-thirds of the activity is focused on trying to improve Cologuard, Conroy said.
“Whether it’s making the test more robust or more efficient in the laboratory — that’s a pretty significant investment of people and research and development,” he said.
Cologuard is a “very complex product,” said Conroy, with about 300 reagent components, seven instrument systems involving sample processing and advanced robotics, and complicated software.
“In our industry, a product is never done,” added Graham Lidgard, chief science officer and senior vice president of research and development.
Meanwhile, more physicians and insurance companies are accepting Cologuard to screen for colorectal cancer.
Nationwide, about 800 new physicians a week hand out Cologuard prescriptions — three-fourths of them are primary care physicians, the company’s main target, Conroy said.
So far, of the 200,000 primary care physicians who are actively seeing patients, 56,000 have prescribed the test. “We’re only a quarter of the way to our goal of getting all of them,” Conroy said.
With the recent addition of some major insurers such as United HealthCare and Aetna, about 86 percent of Americans between the ages of 50 and 84 participate in health plans that cover Cologuard, Conroy said.
He said the use of the test as a screening tool is having an impact. A study by USMD Health System in the Dallas area, published in January, showed of 347 patients who had not been tested for colon cancer and used Cologuard, 51 tested positive for DNA markers. Forty-nine of them went on to have diagnostic colonoscopies: Four were found with early-stage cancer and 21 had pre-cancerous polyps.
In the works, in collaboration with Mayo Clinic, are screening tests known as liquid biopsies for more types of cancer. In early research, blood tests for lung and liver cancer and cyst fluid tests for pancreatic cancer all have been more than 90 percent accurate in finding cancers, the company said.
Conroy said each of those is still years from coming to market.
Financially, though, even with increasing Cologuard use, Exact is not profitable. In the first three months of 2017, the company reported a net loss of $35 million; the 2016 net loss was $167 million.
Exact Sciences has not publicly said when it expects to make money. But at least one financial analyst is projecting profitability in the second half of 2019. In a June 14 research note, Mark Massaro, of Canaccord Genuity, said it’s possible the company could make a profit in the second quarter of 2019 if it cuts expenses about $30 million a year, mainly by trimming TV advertising.
In 2015, Ald. David Ahrens, District 15, led the charge against Exact’s bid for inclusion in Judge Doyle Square and today, he says he has no regrets.
“I don’t believe that the city should invest in high-risk enterprises,” Ahrens said. If the project had gone through before Exact’s stock price plunged, “we would have had a two-block wide, three-story deep hole in the ground and debts for tens of millions of dollars. ... It would have been a financial catastrophe for the city and possibly for Exact,” he said.
Ahrens said, though, he’ll “gladly” request a Cologuard prescription on his 70th birthday, and hopes the company will proceed with more cancer screening tests.
“This enterprise is not only good for Madison but for humankind,” said Ahrens. “However, having said that, it is a project that we should leave to venture capitalists and not tax-dependent municipalities.”