EXAS Stock Soars And GH Stock Crashes: Battle Of The Colon Cancer Tests Heats Up

Guardant Health (GH) unveiled pivotal results for its colon cancer-detecting blood test that lagged rival Exact Sciences (EXAS) — leading GH stock to crash Friday. Meanwhile, EXAS stock skyrocketed.

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In the final-phase 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. In 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-of-its-kind study. Further, Guardant’s colon cancer test, dubbed Shield, appears to be a “lock” for Medicare reimbursement. That should help stoke sales.

“We think (the stock) reactions were a touch aggressive, recognizing that Guardant missed the mark and these results should lift a meaningful overhang for Exact,” he said. “We have lowered our Shield revenue estimates to reflect modestly slower adoption.”

In premarket trading on the stock market today, GH stock plummeted 31.8% near 28.20. EXAS stock, on the other hand, soared 22.2% near 54.50.

GH Stock: Slower Uptake Expected

Guardant screened 13,000 people to evaluate its Shield blood test for colon cancer. In addition to having an 83% sensitivity overall, Shield had a specificity of 90%. Tests with higher specificity are less likely to report false positives. Cologuard’s overall specificity is lower at 87%.

“We view the results as mixed with a modest skew to the downside,” Mikson said.

He cut his price target on GH stock to 65 from 99, but kept his buy rating. The overall sensitivity is within his views for 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 sign off on its test and for Medicare to reimburse its costs.

But there’s no sugar-coating the results for detecting advanced adenomas. These are lesions that start off harmless and become cancerous over time. Guardant’s Shield only had a 13% sensitivity for those tumors. That was below expectations for 15%-25% and prior test results for 20%.

“However, it is important to note that the malignant transformation of most precancerous lesions can be 10-20 years,” Mikson said. “Thus, regular screening should detect cancer at a relatively early stage.”

Removing An Overhang For EXAS Stock

Mikson kept his buy rating on shares of Exact. The company has 5%-10% of the colon cancer screening market.

“We continue to believe Exact will approach its long-term target of 40% market share for Cologuard by the 2035 timeframe,” he said. The remainder of the market will include 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 speaking, the tests aren’t markedly different, Kumar said in a note. But this…