1.) Key financial metrics include about 35 million shares outstanding, $28.8 million cash/equivalents, and no debt
2.) Adequate liquidity through at least late 2010 with modest dilution up to 40 million shares expected through 2012
3.) Planned FDA submission in 2011 of V3 sDNA CRC screening test for marketing clearance
4.) Collaborations with Mayo Clinic and Genzyme (NASDAQ:GENZ)
5.) EXAS has a proven executive leadership team from Third Wave with experience in molecular diagnostics. Third Wave was sold to Hologic (NASDAQ:HOLX) in 2008 for $582 million, and the management team led the successful clinical development and FDA clearance of screening tests for cervical cancer while at Third Wave.
6.) Pending clinical trial with 8,000-10,000 subjects enrolled at 30-40 clinical sites with a goal of obtaining broad claims for a non-invasive sDNA-based CRC screening test, including the detection of pre-cancers and adenomas
7.) Expected market launch of a FDA-cleared, V3 test during 2011 with first full year of sales in 2012
8.) The V3 sDNA screening technology outperforms blood-based tests, especially for earlier stage disease detection, which is critical for improved treatment and survival outcomes. In August 2008, research was published in which a total of 25 sDNA samples from CRC patients were analyzed and a next generation sDNA technology (V3) correctly identified 23 (92%) of the cancers. In the 16 of 25 cases where there were paired stool and plasma DNA samples, the sDNA technology detected mutated DNA in stool in 14 cases (88%) while only 8 (50%) corresponding plasma DNA samples had detectable levels of mutated DNA.
9.) A five-year interval for sDNA CRC screening equates to about 16 million people in U.S. eligible for annual screening; while a three-year interval ups the number to 27 million. Significant upside is possible based on wider adoption of preventative medicine as part of U.S. healthcare reform, especially in the area of screening tests for the early detection of cancer as it much cheaper and more beneficial to patients to prevent or begin treatment of CRC in early stages.
10.) Key earnings model assumptions include a recommended three-year screening interval for the FDA-cleared V3 technology as a mass-screening test for the average-risk population with the ability to detect pre-cancers and adenomas. Three key regions reflected in earnings model include North America, Europe, and Asia-Pacific with estimated populations in each of about 100 million people over the age of 50 eligible for the V3 sDNA screening test for CRC.
11.) The models include estimated market penetration rates of 10% in 2012 and 15% in 2013 on a global basis. The U.S. marketing plan is likely to involve direct licensing of FDA V3 test kit to major labs throughout the country. The ex-U.S. marketing plan is expected to involve a combination of licensing deals with regional diagnostic companies/labs and/or a multi-national firm such as Abbott Labs (NYSE:ABT) or Roche (RHHBY.PK) with a significant diagnostics business
12.) The market opportunity in the U.S. alone equates to potential earnings power exceeding $4/share for EXAS in 2012, assuming a 10% market penetration rate for 100 million people over age 50 with $150 reimbursement rate and a recommended three-year testing interval. Market opportunities in Europe and Asia-Pacific regions equate to over $4/share in additional earnings power in 2012 with lower reimbursement and royalty rates assumed for these regions, but EXAS would not bear any of the expenses for marketing or sales as ex-U.S. opportunity represents a pure-play on licensing royalties.
13.) The major risk factor underlying the models presented in the report are pending results in the clinical trial for FDA clearance. The Company's goal is to obtain a broad, FDA-cleared test with 80-90% sensitivity for the detection of CRC and 65-70% for pre-cancers in the average risk population for a three-year testing interval recommendation.
Disclosure: Long EXAS
$2.78 (08/01/09)
