Guarding health (GH) unveiled pivotal results for its colon cancer-detecting blood test that lagged rival Exact Sciences (EXAS) – Leading GH stocks crash Friday. Meanwhile, EXAS stock skyrocketed.
In the final phase of the study, Guardant Health said its blood test had an 83% sensitivity in detecting colon cancer. A highly sensitive test is less likely to miss positive cases. By comparison, Exact Sciences says its already approved test, Cologuard, has a sensitivity of 92%. Cologuard looks for colon cancer cells in a stool sample.
Investors were looking for Guardant’s test to have a sensitivity of at least 85%, Canaccord Genuity analyst Kyle Mikson said in a note to clients. Still, he doesn’t view the results as a failure. This was a first study of its kind. Further, Guardant’s colon cancer test, called Shield, appears to be a “lock” to Medicare reimbursement. That should boost sales.
“We think the reaction (from the stock) was a bit aggressive, recognizing that Guardant missed the mark and that these results should lift a meaningful overhang for Exact,” he said. “We have lowered our Shield revenue estimates to reflect modestly slower adoption.”
In stock market premarket trading today, GH shares plummeted 31.8% near 28.20. EXAS shares, on the other hand, rose 22.2% close to 54.50.
GH Stock: Slower uptake expected
Guardant screened 13,000 people to evaluate his Shield blood test for colon cancer. In addition to an overall sensitivity of 83%, Shield had a specificity of 90%. Tests with higher specificity are less likely to report false positives. The overall specificity of Cologuard is lower at 87%.
“We view the results as mixed with a modest skew to the downside,” Mikson said.
He lowered his price target on GH shares from 99 to 65, but kept his buy rating. Overall sensitivity is within its range of 82%-87% and above the 74% required by the Food and Drug Administration for approval.
“In our view, 83% is good enough to warrant solid adoption over time,” he said.
Guardant also expects the FDA to approve the test and Medicare to reimburse the costs.
But the results for detecting advanced adenomas aren’t sugarcoated. These are lesions that start out harmless and become cancerous over time. Guardant’s Shield had only a 13% sensitivity to those tumors. That was below expectations for 15%-25% and previous test results for 20%.
“However, it is important to note that the malignant transformation of most precancerous lesions can take 10-20 years,” Mikson said. “Regular screening should therefore detect cancer at a relatively early stage.”
Remove an overhang for EXAS inventory
Mikson maintained its buy advice on Exact shares. The company has 5%-10% of the colon cancer screening market.
“We continue to believe that Exact will approach its long-term target of 40% market share for Cologuard by 2035,” he said. The rest of the market includes blood tests, tests that look for hidden blood in the stool, and colonoscopies.
Similarly, Evercore ISI analyst Vijay Kumar reiterated his outperform rating on EXAS stock. He also has a target price of 60.
Statistically, the tests are not strikingly different, Kumar said in a note. But this will have real world implications.
“There is now a delta of 900 basis points in susceptibility to colorectal cancers,” he said. “Or, for every 1 million people screened, Exact will detect about 315 or 10% more cancers than Guardant.”
Market still wide open
Despite the approval of Cologuard in 2014, there remains a large market for colon cancer screening.
Patients do not always follow the doctor’s instructions to submit a stool sample for cancer screening. Citing two studies, Guardant estimates that only 43%-66% of people whose doctors ordered a stool test to look for colon cancer actually completed it.
Meanwhile, there are about 49 million people eligible for colon cancer screening in the US.
“We believe that a highly sensitive blood test can play a vital role in improving adherence by providing an accurate and convenient blood test to those who are reluctant to get screened,” said Guardant Co-Chief Executive AmirAli Talasaz in a statement. written explanation.
Still, the news sent GH stock into a tailspin. Stocks have a low Relative Strength Rating of 19, placing them among the lowest one-fifth of stocks in 12-month performance, according to IBD Digital. EXAS stock has a slightly higher RS Rating of 46.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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