Exact Sciences falls as analyst says current valuation supports Neutral rating

Shares of molecular diagnostics company Exact Sciences Corporation (EXAS) are plunging after the company, earlier in the day, reported financial results for the third quarter and gave revenue guidance for the full year 2016. WHAT'S NEW: Exact Sciences reported better than expected Q3 results on the top and bottom lines with a Q3 loss of 36c per share on revenue of $28.1M. Analysts were expecting a larger loss per share of 42c on revenue of $25.28M. The company completed approximately 68,000 Cologuard tests during the quarter, an increase of approximately 100% from the same quarter of 2015. According to the company, since the launch of Cologuard and through the end of the third quarter of 2016, nearly 50,000 providers have ordered the test. "Our sales and marketing campaigns continue to complement each other, driving growth in ordering providers, completed tests and revenues, which grew significantly from the same period of last year," said Kevin Conroy, chairman and CEO of Exact Sciences. "This continuing strength is yielding not only good sequential and annual revenue growth, but expanding penetration in the large market for colon cancer screening. Cologuard and our compliance service, which helps to ensure patients are screened with our test, position Exact Sciences well for long-term growth." WHAT'S NEW: Following the inclusion of Cologuard in the U.S. Preventive Services Task Force colorectal cancer screening guidelines, commercial insurance coverage accelerated in the third quarter, said the company. According to recent coverage data, more than 144M people are currently in health plans that cover Cologuard, including Medicare and commercial insurers. Cologuard's compliance rate was 67% as of Sept. 30. The compliance rate is derived from the number of completed tests reported divided by the number of collection kits shipped to patients during the 12-month period ending 60 days prior to Sept. 30. The compliance rate was down 1% during the third quarter because of a higher mix of commercially-insured patients, who comply with their physician's test order at a lower rate than Medicare patients. OUTLOOK: Exact Sciences continues to anticipate completing approximately 240,000 Cologuard tests during 2016. The company expects that this test volume will deliver full-year 2016 revenues in the range of $93-95, narrowed from earlier guidance of $90M-$100M. Analysts were expecting FY16 revenue of $90.86M. ANALYST VIEW: Following Exact Sciences' Q3 report, Ladenburg Thalmann analyst Kevin DeGeeter, in a research note to investors, said that quarterly Cologuard results are "solid" but the company's current valuation "supports Neutral rating." The analyst, who noted that fourth quarter test volume guidance was below the firm's outlook, sees modest upside to 2016 test volume guidance of 240,000. Ladenburg Thalmann has a Neutral rating on Exact Sciences' shares. PRICE ACTION: In afternoon trading, shares of Exact Sciences are down $2.89, or 14.75%, to $16.70 per share.