Citron Research “Exposes” Exact Sciences – Short Term Target $20

Citron Research exposes Exact Sciences and PROVES beyond ANY doubt why this stock will soon be cut in half  – so says a new reprot from Citron Research – Citron founder Andrew Left  battled the CEO of Exact on CNBC on that topic for CNBC pro sub subscribers you can find that video here

UPDATE: 10:15AM EST May 16th 2017 – Exas CEO issued the following statement in response to Citron.

“Exact Sciences remains extremely confident in the near and long-term growth of Cologuard.   We look forward to speaking with our valued investors both at the Bank of America Merrill Lynch conference tomorrow and during our second quarter earnings call.

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“It should be noted that for years ‘research institutions’ have doubted Cologuard’s growth trajectory and ability to impact colon cancer screening by detecting early, curable-stage cancer.  The Exact Sciences team continues to prove them wrong, as patient demand increases, provider ordering rises, and insurance coverage accelerates.”

Citron report below.

Every Man and Woman Over The Age of 50 MUST read this report from Citron Research

Short term target:  $20.

3 to 5 Years:  Likely Single Digit, Potential 0.

Exact Sciences (NASDAQ:EXAS) pushes a cancer test (Cologuard) to the public, inferior by its own admission, and loses money doing it.  That is why this $4 billion company is mainly owned by passive investing ETFs or other healthcare baskets.

More importantly, as Citron will expose, the key metrics not disclosed by Exact Sciences are getting worse, while Medicare pricing inefficiencies end next January and investors will be left with a decaying asset with no terminal value.

This stock is a poster child for what goes wrong when Wall Street gets a hold of a health care concept with no discrimination for whether its good or bad medicine.


Citron has had great success over the past 10 years exposing companies whose business model has been to take advantage of a “broken healthcare system” but this case is unique. Most times we see this pattern:

  • A company strategy of exploiting Medicare
  • Making Money, Money, and More Money
  • Marketing a unique product (FDA license or orphan drug, etc.)
  • Dedicated shareholder base
  • No catalyst for change absent a congressional hearing.

For Exact Sciences (NASDAQ:EXAS), the situation is the complete opposite

Exact Sciences pushes a cancer test (Cologuard) to the public, inferior by its own admission, and loses money doing it. That is why this $4 billion company is mainly owned by passive investing ETFs or other healthcare baskets.

More importantly, as Citron will expose, the key metrics not disclosed by Exact Sciences are getting worse, while Medicare pricing inefficiencies end next January and investors will be left with a decaying asset with no terminal value.

How Did We Get Here?? Meet Cologuard: A Seriously Inferior Product and a Disastrous Business Model

Cologuard is a branded laboratory-based scan for DNA traces in stool samples indicating colorectal cancer. In a move that surprised many, and despite its lack of effectiveness, Cologuard was approved by the FDA and for Medicare reimbursement in 2014. This was ostensibly to encourage some sort of screening by the significant portion of the general public who are reluctant to have routine colonoscopy, which is the recommended standard of care. Then, due to a little-known loophole in Obamacare, it became obligatory for insurance reimbursement for certain classes of “approved list” diagnostics – even if they aren’t standard of care. And with that, Exact Sciences was off to the races.

Cologuard is Not the Standard of Care for Colon Cancer Screening. And There’s a Good Reason for that.

Exact Sciences markets (aggressively, to end user consumers) a “poop in a box” test for colorectal cancer, the rationale being that is less fear-inducing for many people than colonoscopy. So, as crazy as this might sound, a $4 billion company exists because some men think they are “too cool” (or too scared) to get a colonoscopy, despite the real dangers of colon cancer.

If anyone remembers Valeant’s Jublia, the overpriced toe fungus treatment that was marketed directly to consumers, then Cologuard should truly offend you. Colorectal cancer is a lot more dangerous than toenail fungus. The strategy of direct-to-public advertising places Exact Sciences in the role of endangering potential colonoscopy patients, by encouraging them to not accept their own doctors’ guidance.

Unlike anything we have ever seen before, Exact Science admits its product is inferior to both less expensive tests and the standard of care.

As published in Gastro Journal in 2016, these are the results of the test on Cologuard from a study conducted at Stanford University Medical Center. (MT-sDNA is the clinical term for Cologuard):

“In a Markov model, we found FIT and colonoscopy to be more effective and less costly than the MT-sDNA test when participation rates were equal for all strategies.

http://www.gastrojournal.org/article/S0016-5085(16)34617-0/abstract

What’s particularly shocking about this study is that Exact Sciences funded it! They rolled the dice to hopefully get a positive study and they lost, and now they try to pretend investors and insurance companies won’t notice the truth.

It Gets Worse For The “Science” that is not Exact.

United Healthcare, the largest managed healthcare company in the United States who is a thought leader in diagnostics declared last month:

Fecal DNA testing for colorectal cancer screening and/or monitoring is unproven and not medically necessary. There is insufficient published evidence in the clinical literature supporting the diagnostic accuracy of fecal DNA tests to screen for colorectal cancer in asymptomatic, average-risk patients. The gold standard for colorectal cancer screening is optical colonoscopy. There is insufficient published evidence comparing fecal DNA testing to optical colonoscopy. In fact, there is insufficient published clinical evidence that fecal DNA testing reduces the likelihood of mortality from colorectal cancer.

https://www.unitedhealthcareonline.com/ccmcontent/ProviderII/UHC/en-US/Assets/ProviderStaticFiles/ProviderStaticFilesPdf/Tools%20and%20Resources/Policies%20and%20Protocols/Medical%20Policies/Medical%20Policies/Fecal_DNA_Testing.pdf

It should be noted in healthcare that United’s Optum business is the gold standard of assessing costs benefit of a procedure in a “big data” population health framework. It should come as no surprise their conclusion aligned with the company’s own study.

When the nation’s largest managed care provider refuses to reimburse for what it considers to be an inferior and not cost effective diagnostic method for colorectal cancer, how in the world can Exact ever grow into profitability?

The costs of selling inferior technology– and Proof the Model is imploding NOW.

The company put up a lot of noise this quarter because it announced 100,000 tests for the first time. But look at the unsustainable acquisition costs for its growth:

Exact Sciences

Exact Sciences

Where is the leverage? With Medicare reimbursement now fully pipelined, sales and marketing cost per test should be plummeting, demonstrating the company’s ability to accrue leverage from its huge marketing push.

But it’s not. The numbers show sales and marketing per test has bottomed, and may in fact be climbing again.

Article by Citron Research

See the full PDF below.