This U.S. biotech stock is up 90% this year and will continue to soar, fund manager says
Shares of U.S. biotech firm Exact Sciences have surged by almost 90% this year. But the run may not be over just yet, according to fund manager Dani Saurymper. The Nasdaq-listed company makes tests to detect colon cancer. Earlier this week it said its next-generation screening test, Cologuard 2.0, showed a 30% lower false positive rate for detecting the disease in a study compared to its already approved test. The positive results from the study, called BLUE-C, come at a significant moment for the company. Millions of screenings did not take place during the Covid-19 pandemic, which has created substantial demand for Exact Sciences’ testing technology now, according to Saurymper, who manages Pacific Asset Management’s Longevity and Social Change fund. “It’s a huge opportunity. And someone like Exact obviously plays right into that,” Saurymper told CNBC’s Pro Talks Wednesday. EXAS 1Y line Saurymper’s fund focuses on identifying investment opportunities among companies with high exposure to an aging demographic, which Saurymper calls “longevity industries.” Their screening method involves examining companies’ revenue streams and ranking them based on how much of their income is generated from these industries. Companies with more than half of their revenues from these sectors are considered high exposure. One theme that Saurymper highlighted to investors is prevention and screening for diseases. He believes that focusing on firms that encourage healthy living and the prevention of illnesses is more beneficial than on firms offering treatments. This is where Exact Sciences fits in. The company, once loss-making, has seen a significant increase in screening volumes and is projected to be profitable this year. Last year, the firm’s screening business brought in $1.4 billion in revenue, mostly from their FDA-approved colon cancer test sales. Analysts have also welcomed the results of the new study. “Overall, we believe Exact’s BLUE-C top-line results for next- generation Cologuard are notable (and relatively solid),” said Kyle Mikson, an analyst with Canaccord Genuity, who has a buy rating on the stock, in a note to clients on June 20. In addition, Exact Sciences is also developing a “liquid biopsy,” which is designed to use a blood test to catch early signs of liver cancer that could be extended to detect other forms in the future. While investors have welcomed the run-up in shares this year, Exact’s stock suffered losses over the past two years alongside other technology sector stocks. Saurymper believes that the stock has corrected and has a significant runway ahead. “Its fundamentals have caught up with the share price,” he told CNBC’s Arabile Gumede. “We certainly think it’s got significant growth in front of it, and we wouldn’t be backing away just yet.”
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