PR Newswire | Nov 2, 2021 04:05PM EDT

11/02 15:05 CDT

Exact Sciences announces third quarter 2021 results MADISON, Wis., Nov. 2, 2021

MADISON, Wis., Nov. 2, 2021 /PRNewswire/ -- Exact Sciences Corp. (Nasdaq: EXAS) today announced that the company generated revenue of $456.4 million for the third quarter ended September 30, 2021, compared to $408.4 million for the same period of 2020.

"Exact Sciences is entering an exciting period for its pipeline, generating evidence to support innovative tests that will help defeat cancer through earlier detection," said Kevin Conroy, chairman and CEO. "Our powerful commercial engine will help us achieve our mission by getting more people tested with Cologuard(r), Oncotype DX(r), and our future tests."

Third quarter 2021 financial results

For the three-month period ended September 30, 2021, as compared to the same period of 2020 (where applicable):

* Total revenue was $456.4 million, an increase of 12 percent * Screening revenue was $280.4 million, an increase of 31 percent * Precision Oncology revenue was $145.4 million, an increase of 59 percent * COVID-19 testing revenue was $30.6 million, a decrease of 70 percent * Gross margin including amortization of acquired intangible assets was 70%, and non-GAAP gross margin excluding amortization of acquired intangible assets was 75% * Intangible asset impairment of $20.2 million was related to a supply agreement asset recorded as part of the combination with Genomic Health * Net loss was $166.9 million, or $0.97 per share, compared to a net loss of $202.5 million, or $1.35 per share * EBITDA was $(119.9) million, and adjusted EBITDA was $(16.3) million * Cash, cash equivalents, and marketable securities were $1.22 billion at the end of the quarter

Screening includes laboratory service revenue from Cologuard tests and revenue from Biomatrica products. Precision Oncology includes laboratory service revenue from global Oncotype products and laboratory service revenue from Ashion.

2021 outlook

* The company anticipates revenue of $1,722-$1,737 million during 2021, including Screening revenue of $1,050-$1,055 million, Precision Oncology revenue of $547-$552 million, and COVID-19 testing revenue of $125-$130 million. * Updated revenue guidance has been narrowed toward the high end of our previously expected range of $1,705-$1,745 million, which included Screening revenue of $1,100-$1,125 million, Precision Oncology revenue of $530-$540 million, and COVID-19 testing revenue of $75-$80 million. * Screening revenue expectations are lower due to the rapid rise in Delta variant cases starting in late July, causing in-person sales calls to significantly decrease in August and September.

Non-GAAP disclosureIn addition to the company's financial results determined in accordance with U.S. GAAP, the company provides non-GAAP measures that it determines to be useful in evaluating its operating performance. The company presents EBITDA, adjusted EBITDA, as well as non-GAAP gross margin and non-GAAP gross profit. EBITDA and adjusted EBITDA consist of net loss after adjustment for those items shown in the table below. The company defines non-GAAP gross profit and non-GAAP gross margin as GAAP gross profit and GAAP gross margin, respectively, excluding amortization of acquired intangible assets. The amortization of acquisition-related intangible assets used in the calculation of non-GAAP gross profit and non-GAAP gross margin pertain only to the amortization associated with developed technology acquired and recorded through purchase accounting transactions. The amortization of these intangible assets will recur in future periods until such intangible assets have been fully amortized. The company believes that these non-GAAP measures are useful in evaluating the company's operating performance. The company uses this non-GAAP financial information to evaluate ongoing operations and for internal planning and forecasting purposes. Non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance. However, non-GAAP financial information is presented for supplemental information purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with U.S. GAAP. For example, non-GAAP gross margin and non-GAAP gross profit exclude the amortization of acquired intangible assets although such measures include the revenue associated with the acquisitions. For a reconciliation of these non-GAAP measures to GAAP, see below "EBITDA and Adjusted EBITDA Reconciliations" and "Non-GAAP Gross Profit and Non-GAAP Gross Margin Reconciliations."

Third quarter conference call & webcastCompany management will host a conference call and webcast on Tuesday, November 2, 2021, at 5 p.m. ET to discuss third quarter 2021 results. The webcast will be available at www.exactsciences.com. Domestic callers should dial 833-952-1519 and international callers should dial +1-236-714-2125. The access code for both domestic and international callers is 2782364.

An archive of the webcast will be available at www.exactsciences.com. A replay of the conference call will be available by calling 800-585-8367 domestically or +1-416-621-4642 internationally. The access code for the replay of the call is 2782364. The webcast, conference call and replay are open to all interested parties.

About CologuardThe Cologuard test was approved by the FDA in August 2014, and results from Exact Sciences' prospective 90-site, point-in-time, 10,000-patient pivotal trial were published in the New England Journal of Medicine in March 2014. The Cologuard test is included in the American Cancer Society's (2018) colorectal cancer screening guidelines and the recommendations of the U.S. Preventive Services Task Force (2021) and National Comprehensive Cancer Network (2016). The Cologuard test is indicated to screen adults 45 years of age and older who are at average risk for colorectal cancer by detecting certain DNA markers and blood in the stool. Do not use the Cologuard test if you have had precancer, have inflammatory bowel disease and certain hereditary syndromes, or have a personal or family history of colorectal cancer. The Cologuard test is not a replacement for colonoscopy in high risk patients. The Cologuard test performance in adults ages 45-49 is estimated based on a large clinical study of patients 50 and older. Cologuard performance in repeat testing has not been evaluated. The Cologuard test result should be interpreted with caution. A positive test result does not confirm the presence of cancer. Patients with a positive test result should be referred for diagnostic colonoscopy. A negative test result does not confirm the absence of cancer. Patients with a negative test result should discuss with their doctor when they need to be tested again. Medicare and most major insurers cover the Cologuard test. For more information about the Cologuard test, visit www.cologuardtest.com.

About Oncotype DXThe Oncotype DX(r) portfolio of breast, colon and prostate cancer tests applies advanced genomic science to reveal the unique biology of a tumor in order to optimize cancer treatment decisions. In breast cancer, the Oncotype DX Breast Recurrence Score(r) test is the only test that has been shown to predict the likelihood of chemotherapy benefit as well as recurrence in invasive breast cancer. Additionally, the Oncotype DX Breast DCIS Score(r) test predicts the likelihood of recurrence in a pre-invasive form of breast cancer called DCIS. In prostate cancer, the Oncotype DX Genomic Prostate Score(r) test predicts disease aggressiveness and further clarifies the current and future risk of the cancer prior to treatment intervention, and the Oncotype DX AR-V7 Nucleus Detect(r) test helps determine which patients with metastatic castration-resistant prostate cancer (mCRPC) are resistant to androgen receptor (AR)-targeted therapies. The Oncotype DX AR-V7 Nucleus Detect test is performed by Epic Sciences at its centralized, CLIA-certified laboratory in San Diego and offered exclusively by Exact Sciences. The Oncotype MAP(r) Pan-Cancer Tissue test is a rapid, comprehensive tumor profiling panel that aids therapy selection for patients with advanced, metastatic, refractory, or recurrent cancer. With more than 1 million patients tested in more than 90 countries, the Oncotype tests have redefined personalized medicine by making genomics a critical part of cancer diagnosis and treatment. To learn more about Oncotype tests, visit www.OncotypeIQ.com, www.MyBreastCancerTreatment.org or www.MyProstateCancerTreatment.org.

About Exact Sciences Corp.A leading provider of cancer screening and diagnostic tests, Exact Sciences relentlessly pursues smarter solutions providing the clarity to take life-changing action, earlier. Building on the success of Cologuard and Oncotype tests, Exact Sciences is investing in its product pipeline to support patients throughout their cancer diagnosis and treatment. Exact Sciences unites visionary collaborators to help advance the fight against cancer. For more information, please visit the company's website at www.exactsciences.com, follow Exact Sciences on Twitter @ExactSciences, or find Exact Sciences on Facebook.

Forward-looking statementsThis news release contains forward-looking statements concerning our expectations, anticipations, intentions, beliefs or strategies regarding the future. These forward-looking statements are based on assumptions that we have made as of the date hereof and are subject to known and unknown risks and uncertainties that could cause actual results, conditions and events to differ materially from those anticipated. Therefore, you should not place undue reliance on forward-looking statements. Examples of forward-looking statements include, among others, statements we make regarding expected future operating results; our strategies, positioning, resources, capabilities and expectations for future events or performance; and the anticipated benefits of our acquisitions, including estimated synergies and other financial impacts.

Important factors that could cause actual results, conditions and events to differ materially from those indicated in the forward-looking statements include, among others, the following: uncertainties associated with the coronavirus (COVID-19) pandemic, including its possible effects on our operations, including our supply chain and clinical studies, and the demand for our cancer and COVID-19 testing products and services; our ability to efficiently and flexibly manage our business amid uncertainties related to COVID-19; our ability to successfully and profitably market our products and services; our ability to realize the benefits of our recently hired sales representatives and our promotion agreement with Pfizer; the acceptance of our products and services by patients and healthcare providers; our ability to meet demand for our products and services; the willingness of health insurance companies and other payers to cover our products and services and adequately reimburse us for such products and services; the amount and nature of competition for our products and services; the effects of any judicial, executive or legislative action affecting us or the healthcare system; recommendations, guidelines and quality metrics issued by various organizations regarding cancer screening or our products and services; our ability to successfully develop new products and services and assess potential market opportunities; our ability to effectively enter into and utilize strategic partnerships and acquisitions; our success establishing and maintaining collaborative, licensing and supplier arrangements; our ability to obtain and maintain regulatory approvals and comply with applicable regulations; our ability to manage an international business and our expectations regarding our international expansion and opportunities; the potential effects of foreign currency exchange rate fluctuations and our efforts to hedge such effects; the possibility that the anticipated benefits from our business acquisitions will not be realized in full or at all or may take longer to realize than expected; the possibility that costs or difficulties related to the integration of acquired businesses' operations will be greater than expected and the possibility that integration efforts will disrupt our business and strain management time and resources; the outcome of any litigation, government investigations, enforcement actions or other legal proceedings, including in connection with acquisitions; our ability to retain and hire key personnel including employees at businesses we acquire. The risks included above are not exhaustive. Other important risks and uncertainties are described in the Risk Factors sections of our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q, and in our other reports filed with the Securities and Exchange Commission. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

EXACT SCIENCES CORPORATION

Selected Unaudited Financial Information

Condensed Consolidated Statements of Operations

(Amounts in thousands, except per share data)

Three Months Ended September Nine Months Ended September 30, 30,

2021 2020 2021 2020

Revenue $ 456,379 $ 408,363 $ 1,293,275 $ 1,025,052

Operating expenses

Cost of sales (exclusive of amortization of acquired intangible assets) 115,738 95,061 339,699 254,559

Research and development 75,356 31,471 297,158 107,653

Sales and marketing 196,617 136,481 577,585 423,092

General and administrative 186,541 115,589 621,897 336,265

Amortization of acquired intangible assets 23,940 23,430 70,954 70,199

Intangible asset impairment charge 20,210 209,666 20,210 209,666

Total operating expenses 618,402 611,698 1,927,503 1,401,434

Other operating income - - - 23,665

Loss from operations (162,023) (203,335) (634,228) (352,717)

Other income (expense)

Investment income (expense), net (4,093) 2,523 30,524 5,532

Interest expense (4,680) (4,478) (13,948) (63,382)

Total other income (expense) (8,773) (1,955) 16,576 (57,850)

Net loss before tax (170,796) (205,290) (617,652) (410,567)

Income tax benefit 3,858 2,752 242,638 5,294

Net loss $ (166,938) $ (202,538) $ (375,014) $ (405,273)

Net loss per share-basic and diluted $ (0.97) $ (1.35) $ (2.19) $ (2.71)

Weighted average common shares outstanding-basic and diluted 171,978 150,155 170,978 149,346

EXACT SCIENCES CORPORATION

Selected Unaudited Financial Information

Condensed Consolidated Balance Sheets

(Amounts in thousands)

September 30, December 31, 2021 2020

Assets

Cash and cash equivalents $ 273,779 $ 1,491,288

Marketable securities 944,688 348,699

Accounts receivable, net 249,572 233,185

Inventory 95,167 92,265

Prepaid expenses and other current assets 52,385 33,157

Property, plant and equipment, net 524,200 451,986

Operating lease right-of-use assets 167,911 125,947

Goodwill 2,242,535 1,237,672

Intangible assets, net 2,044,958 847,123

Other long-term assets, net 59,241 63,770

Total assets $ 6,654,436 $ 4,925,092

Liabilities and stockholders' equity

Current liabilities $ 397,127 $ 320,380

Convertible notes, net, current portion 313,104 312,716

Convertible notes, net, less current portion 1,865,647 1,861,685

Long-term debt, less current portion 21,438 22,342

Other long-term liabilities 436,580 51,342

Operating lease liabilities, less current 162,950 121,075portion

Total stockholders' equity 3,457,590 2,235,552

Total liabilities and stockholders' equity $ 6,654,436 $ 4,925,092

EXACT SCIENCES CORPORATION

Selected Unaudited Financial Information

EBITDA and Adjusted EBITDA Reconciliations

(Amounts in thousands)

Three Months Ended Nine Months Ended September 30, September 30,

(In thousands) 2021 2020 2021 2020

Net loss $ (166,938) $ (202,538) $ (375,014) $ (405,273)

Interest expense 4,680 4,478 13,948 12,563

Depreciation and amortization 46,200 43,143 135,221 123,544

Income tax benefit (3,858) (2,752) (242,638) (5,294)

EBITDA $ (119,916) $ (157,669) $ (468,483) $ (274,460)

Stock-based compensation 59,132 37,317 176,095 102,839

Investment expense (income) 4,093 (2,523) (30,524) (5,532)

Acquisition and integration costs ^(1) 10,150 7,706 141,401 19,474

Asset acquisition ^(2) - - 85,337 -

Loss on settlement of convertible notes^ (3) - - - 50,819

CARES Act Funding ^(4) - - - (23,665)

Intangible asset impairment charge ^(5) 20,210 209,666 20,210 209,666

Legal settlement ^(6) 10,064 - 10,064 -

Reduction-in-force severance ^(7) - - - 2,198

Adjusted EBITDA $ (16,267) $ 94,497 $ (65,900) $ 81,339

____________________

(1) Represents acquisition and related integration costs incurred as a resultof the Company's business combinations and asset acquisitions, a majority ofwhich relates to the acquisition of Thrive Earlier Detection Corp. ("Thrive")for the three and nine months ended September 30, 2021. Stock-basedcompensation including the incremental fair value of assumed stock awards andaccelerated vesting from post-acquisition qualified termination events was $4.5million and $107.2 million for the three and nine months ended September 30,2021, respectively. For the nine months ended September 30, 2021, $5.2 millionof total stock-based compensation costs were related to stock awards that werecash-settled. Stock-based compensation including the incremental fair value ofassumed stock awards and accelerated vesting from post-acquisition qualifiedtermination events was $4.2 million and $8.2 million for the three and ninemonths ended September 30, 2020. Legal and other professional service fees were$3.9 million and $23.2 million for the three and nine months endedSeptember 30, 2021, respectively. Legal and other professional service feeswere $3.5 million and $11.3 million for the three and nine months endedSeptember 30, 2020, respectively. Expense of $1.8 million and $11.0 million wasincurred for the three and nine months ended September 30, 2021 resulting fromthe remeasurement of the contingent consideration liabilities in connectionwith business combinations.

(2) During the first quarter of 2021, the Company acquired a worldwideexclusive license to the proprietary Targeted Digital Sequencing ("TARDIS")technology from The Translational Genomics Research Institute ("TGen"). Theacquisition was treated as an asset acquisition under U.S. GAAP and resulted ina $52.3 million charge to research and development expense. During the secondquarter of 2021, the Company acquired PFS Genomics, Inc. The acquisition wastreated as an asset acquisition under U.S. GAAP and resulted in a $33.1 millioncharge to research and development expense.

(3) The loss on settlement of convertible notes represents the differencebetween (i) the fair value of the consideration transferred and (ii) the sum ofthe carrying value of the debt at the time of repurchase for $100 million ofconvertible notes with an original maturity of January 15, 2025.

(4) As part of the Coronavirus Aid, Relief, and Economic Security Act ("CARESAct"), the Company received $23.7 million from the United States Department ofHealth and Human Services Provider Relief Fund provided to eligible healthcareproviders. The CARES Act funds are meant to offset the implications of theCOVID-19 pandemic which include increases in the Company's costs and lostrevenues.

(5) During the third quarter of 2021, the Company determined that the supplyagreement intangible asset recorded as part of the combination with GenomicHealth was impaired due to the performance of the underlying product. As aresult, and in connection with the preparation of the financial statements, theCompany recorded a non-cash, pre-tax impairment of $20.2 million.

During the third quarter of 2020, the Company began discussions with Biocartisregarding the termination of its agreements related to the development of an invitro diagnostic version of the Oncotype DX Breast Recurrence Score test. As aresult, and in connection with the preparation of the financial statements, theCompany recorded a non-cash, pre-tax impairment loss of $200.0 million relatedto the in-process research and development intangible asset that was initiallyrecorded as part of the combination with Genomic Health.

During the third quarter of 2020, the Company abandoned certain research anddevelopment assets acquired through an asset purchase agreement with ArmuneBiosciences, Inc. in 2017. These assets were expected to complement theCompany's product pipeline and were expected to have alternative future uses atthe time of acquisition; however, due to changes in strategic priorities andefforts during the third quarter of 2020, these assets are no longer expectedto be utilized to advance the Company's product pipeline. As a result, and inconnection with the preparation of the financial statements, the Companyconcluded that the intangible asset would need to be written off as ofSeptember 30, 2020 which resulted in a non-cash, pre-tax impairment loss of$9.7 million.

(6) During the third quarter of 2021, the Company presented a settlement offerof approximately $10 million to the United States Department of Justice ("DOJ")concerning the DOJ's investigation of Genomic Health's compliance with theMedicare Date of Service billing regulations, which was accrued for as ofSeptember 30, 2021. This represents the Company's best estimate of the probableloss for this matter, but the recorded amount may be materially adverselyaffected by an ultimate unfavorable resolution of this matter.

(7) Represents severance costs as a result of proactive measures the Companyput in place to address the impact of the COVID-19 pandemic. The severance costresulting from this workforce reduction was $2.2 million for the nine monthsended September 30, 2020.

EXACT SCIENCES CORPORATION

Selected Unaudited Financial Information

Non-GAAP Gross Profit and Non-GAAP Gross Margin Reconciliations

(Amounts in thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Revenue $ 456,379 $ 408,363 $ 1,293,275 $ 1,025,052

Cost of sales (exclusive of amortization of acquired intangible assets) 115,738 95,061 339,699 254,559

Amortization of acquired intangible assets ^(1) 21,214 20,555 62,957 61,573

Gross profit $ 319,427 $ 292,747 $ 890,619 $ 708,920

Gross margin 70% 72% 69% 69%

Amortization of acquired intangible assets ^(1) 21,214 20,555 62,957 61,573

Non-GAAP gross profit $ 340,641 $ 313,302 $ 953,576 $ 770,493

Non-GAAP gross margin 75% 77% 74% 75%

____________________

(1) Includes only amortization of intangible assets identified as developedtechnology assets through purchase accounting transactions, which otherwisewould have been allocated to cost of sales.

Investor Contact:Megan JonesExact Sciences Corp.meganjones@exactsciences.com608-535-8815

Media Contact:Katie BoyceExact Sciences Corp.kboyce@exactsciences.com608-710-3903

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SOURCE Exact Sciences Corporation