Exact Sciences (EXAS) Prelim. Q1 Revenue Tops Consensus

Exact Sciences (NASDAQ: EXAS) disclosed:

Exact Sciences Corporation (the “Company”) expects to report the following financial results for the three-month period ended March 31, 2020, as compared to the same period of 2019 (where applicable):

· Total revenue of approximately $348M, compared to $162M

· Screening revenue of approximately $219M, an increase of 35%

· Precision Oncology revenue of approximately $128M, an increase of 18% from pro forma 2019

· Cash, cash equivalents and marketable securities of $1.2B at the end of the quarter

(*Consensus was for revenue Q1 of $343 million)

The financial data presented herein for the first quarter of 2020 are preliminary, have not been subject to final review or other procedures by the Company’s independent auditor, and are thus inherently uncertain and subject to change. There can be no assurance that the Company’s final results for this period will not differ from these estimates. During the course of the preparation and review of the Company’s consolidated financial statements and related notes as of and for the quarter ended March 31, 2020, the Company or its independent auditor may identify items that could cause the Company’s final reported results to be materially different from the preliminary financial estimates presented herein.

COVID-19 Business Update

The COVID-19 environment is rapidly evolving, and there are continued uncertainties surrounding its impact. Despite these uncertainties, the Company’s testing labs have been operating throughout the COVID-19 pandemic and remain operational at this time. Business continuity plans are in place at all sites to help sustain operations and ensure continuity of service for patients. The Company’s labs are also providing COVID-19 testing on a limited basis. In April 2020, the Company received $24 million of funding under the CARES Act, subject to the Company’s agreement to comply with the Department of Health & Human Services’ standard terms and conditions.

Due to social distancing, stay-at-home orders, and other actions taken in response to COVID-19, there has been a significant and widespread decline in standard wellness visits and preventive services. That decline has negatively impacted Cologuard test orders in our Screening business, notwithstanding the availability of alternative ordering channels such as telehealth. Through the end of February, Cologuard revenue was tracking consistent with our original first quarter guidance range of $230 million to $235 million, provided on February 11, 2020. Cologuard test order volume and patient compliance have been negatively impacted by COVID-19. From March 15 through March 31 and during the first 20 days of April, Cologuard test orders decreased 36% and 63% year-over-year, respectively. During April, we have seen what appears to be a stabilization in the year-over-year decline of Cologuard test orders.

After delivering strong results in the first quarter, the Precision Oncology business is also starting to see weakening underlying conditions because of COVID-19, more notably in the U.S. prostate business and in certain international geographies. We expect the widespread decrease in preventive services, such as mammograms and prostate cancer screenings, to negatively impact Precision Oncology test volumes in the coming months due to the typical lag between cancer screening and genomic test ordering.

The Company has initiated proactive measures to address the order weakness experienced thus far and anticipated for the balance of 2020, due to the COVID-19 pandemic. The Company expects to achieve cost savings through, among other things:

(i) reduction of the CEO’s base salary to effectively zero (excluding amounts to cover benefits and taxes),

(ii) elimination of the Board of Directors annual cash retainer,

(iii) reduction of base salaries for our executive team and employees at or above the director level,

(iv) reduction in the annual corporate bonus and quarterly sales commissions,

(v) implementation of a voluntary furlough program,

(vi) implementation of a workforce reduction, involuntary furloughs, and work schedule reductions,

(vii) reduction of investments in marketing and other promotional activities,

(viii) reduction in costs of goods sold consistent with the expected decrease in revenue,

(ix) pause in certain clinical trial activities,

(x) reduction of travel and professional services fees, and

(xi) delay or termination of certain capital projects.

The Company estimates that these items will contribute over $400 million of cost savings in 2020. The Company believes that its cost savings, coupled with its strong cash position, will enable the Company to continue serving patients who rely on its screening and diagnostic products and services through the remainder of the COVID-19 pandemic and thereafter. These estimates of potential cost savings, and the timing thereof, are subject to a number of assumptions and actual results may differ.

As announced on March 19, 2020, the Company has withdrawn its annual guidance for 2020. The Company intends to provide an updated outlook when it reports full and final first quarter financial results on May 6, 2020, to the extent practicable, based on information available at the time.

The information furnished in this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such filing.

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