What do Exact Sciences’ New Risk Factors Tell Investors?

Exact Sciences (EXAS) is an American cancer screening and diagnostics company. Its products include colorectal cancer test Cologuard and Oncotype DX, which helps with breast, prostate, and colon cancer tests. (See Top Smart Score Stocks on TipRanks)

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With this in mind, we used TipRanks to take a look at the newly added risk factors for Exact Sciences.

Q3 Financial Results

Exact Sciences reported revenue of $456.4 million for Q3 2021, against $408.4 million in the same quarter last year and surpassing the consensus estimate of $430.55 million. It posted a loss per share of $0.97, which narrowed from a loss per share of $1.35 in the same quarter last year, but missed the consensus estimate of a loss per share of $0.85. The company ended Q3 with $1.22 billion in cash.

For 2021 full-year, the company anticipates revenue in the range of $1.72 billion to $1.74 billion. The consensus estimate calls for revenue of $1.73 billion. (See Exact Sciences stock charts on TipRanks)

Risk Factors

Exact Sciences carries 64 risk factors, according to the new TipRanks Risk Factors tool. The company recently updated its risk profile with three new risk factors.

In its first new risk factor, under the Litigation and Legal Liabilities subheading, Exact Sciences has told investors that it is involved in a number of legal proceedings whose outcomes remain uncertain. It cautions that litigation can be expensive and disruptive to normal business operations. It goes on to say that an adverse outcome in the ongoing proceedings could have an unfavorable effect on its financial position and damage its reputation.

In the second new risk factor, under the Employment and Personnel subheading, the company has informed investors that it has an agreement with Pfizer (PFE) to promote its Cologuard test. It also hired hundreds of former Pfizer sales representatives. It cautions that it may not achieve the anticipated benefits of the arrangement with Pfizer. Regarding the newly hired former Pfizer sales representatives, Exact Sciences said that integrating them into its workforce may run into difficulties and cause delays.

The third new risk factor also falls under the Employment and Personnel subheading. In it, the company has cautioned investors that its business and results of operations may be adversely affected by labor issues. It says that the labor market is becoming more competitive and may result in labor shortages. In addition to the difficulty in recruiting enough workers, Exact Sciences warned that its labor costs may also increase because of high turnover and tight competition with other companies for skilled personnel.

Most of Exact Sciences’ risk factors fall under the Legal and Regulatory category, with 27% of the total risks. That is slightly above the sector average of 26%. Exact Sciences’ stock has declined about 29% year-to-date.

Analysts’ Take

Following Exact Sciences’ Q3 earnings report, BTIG analyst Mark Massaro reiterated a Buy rating on Exact Sciences stock but reduced the price target to $120 from $145. Massaro’s lowered price target still suggests 27.23% upside potential.

The analyst noted that Exact Sciences’ Q3 results were mixed, as the Cologuard test performance fell short of expectations. However, Massaro noted that Cologuard still has strong growth potential, as it has only reached 6% of the market and the management aims to achieve 40% market penetration in the long-term.

Overall, consensus among analysts is a Strong Buy based on 9 Buys and 1 Hold. The average Exact Sciences price target of $134.70 implies 42.81% upside potential to current levels.