For Immediate Release
Chicago, IL – July 19, 2021 – Zacks Equity Research Shares of Exact Sciences Corporation (
EXAS Quick Quote EXAS - Free Report) as the Bull of the Day, Vericel Corporation ( VCEL Quick Quote VCEL - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Home Depot, Inc. ( HD Quick Quote HD - Free Report) , ExxonMobil Corp. ( XOM Quick Quote XOM - Free Report) and Discover Financial Services ( DFS Quick Quote DFS - Free Report) . Here is a synopsis of all five stocks: Exact Sciences is the $19 billion leader in proactive cancer diagnostics with the Cologuard screening kit, which the majority of healthcare providers are actively prescribing and seeking insurance reimbursement for.
This represents a potential $18 billion total addressable market for EXAS, especially after the United States Preventive Services Task Force (USPSTF) released in May its final colorectal cancer screening recommendation that screening begin at age 45 (lowered from 50).
Colorectal cancer is the second leading cause of cancer death in the United States, in part because many cancers go undetected until later stages when treatment options are limited. Colorectal cancer can even be prevented through early screening.
However, approximately 44 million average-risk adults age 45-74 are currently eligible for screening, including about 19 million between the ages of 45 and 49. Exact is reaching less than 10% of that population right now.
EXAS will report Q2 earnings in late July, but here were the highlights of their Q1 report on May 4...
Over 900,000 people were given some type of test or screen by Exact Sciences technology in the first quarter.
Total revenue was $402.1 million, an increase of 16 percent from the year-ago quarter. Net loss was $31.2 million, or $0.18 per share, compared to a net loss of $134.6 million, or $0.91 per share.
This bounce-back in earnings was also a big shock to Wall Street analysts who had projected a loss of $1.04, for an 82.7% positive surprise. Exact had EPS beats in the prior two quarters as well of 52.6% in Q4 and 29.4% in Q3.
Exact 2021 Guidance
The company anticipates revenue of $1.69 to $1.735 billion during 2021, including Screening revenue of $1.12 to $1.15 billion, Precision Oncology revenue of $515-$525 million, and COVID-19 testing revenue of $50-$60 million.
Based on this guidance, analysts boosted their consensus to $1.72 billion in revenues or this year, representing 15.4% growth. And next year's $2.14 billion consensus represents a 24.3% advance. That big jump next year is all about the company's expansion into multiple diagnostic areas, like breast cancer and Precision Oncology with the recent acquisition of Genomic Health.
Here was one particularly bullish call in June as investors and analysts recognized the need for frequent screening at all stages of potential and survived disease...
Raymond James analyst Andrew Cooper initiated coverage of Exact Sciences with a Strong Buy rating and $160 price target. Cooper believes that Exact Sciences is positioned to be a major player in each of the most exciting areas of diagnostics for years to come. The analyst views the valuation as attractive, with the base business growing rapidly in a market investor are valuing highly for new entrants.
The Era of Smart, Personalized Health
The "new entrants" he's probably referring to are Guardant Health, Natera and Invitae. And I own most of them at any given time in my Healthcare Innovators portfolio.
All of these companies have approved diagnostic tests they seek to deliver across the lifetimes of patients using advanced bioinformatics.
Not only is early detection crucial, but making it easy and convenient for more frequent screening -- where patients and their doctors are proactively involved in uncovering potential health mysteries, or prescribing best-fit lifestyle changes before they become problems -- is a key prevention strategy built around advanced data analytics tools.
Another new player is Adaptive Biotechnologies. This $5 billion emerging player in genetic diagnostics focuses on immune-driven clinical products to transform the treatment of disease. As their name implies, they seek to be the experts in the human adaptive immune system.
The ARK Invest genomics research team calls it "a platform for all auto-immune diseases" since they are using machine learning and computational biology to create better, faster, and cheaper sequencing procedures that can analyze, diagnose, and discover new treatments. Shares soared to $70 in Q1 during the "ARKG bubble" and also on FDA EUA for a specialized COVID test called T-Detect.
Here's what I told my Healthcare Innovators members when we recently added ADPT shares to our portfolio...
Now I see good risk reward in the company shares near $35 as sales estimates rise and project 53% growth this year to breach $150 million. And next year is forecast by 4 analysts for a 39% advance to $208 million. Earnings estimate revisions have also awarded the stock a Zacks #2 Rank currently.
Recall that the
adaptive immune system, also referred as the acquired immune system, is composed of specialized, systemic cells (B and T) and processes that eliminate pathogens or prevent their growth. It works in tandem with innate immune system functions like skin, mucous membranes, and cell enzymes, etc.
Some of the most important scientific and medical research is being done in the adaptive arena (think CAR-T) because every
body is different and has its own stories to tell of disease and immunity. With over 58 billion immune receptors to sequence, map, and research, Adaptive believes they have a lot of productive work to do.
I see them much like Twist, Invitae, and Pacific Biosciences as specialized labs/platforms able to do deep genomic R&D that larger BioPharma will pay for.
Here's how the founders tell their story... In 2009, Harlan Robins made a breakthrough that created a window into the adaptive immune system the world hadn’t thought possible. Together, Harlan and his brother Chad, founded Adaptive to meet the worldwide demand for immunosequencing technology. Over the past decade, we have developed our proprietary immune medicine platform to read and translate the adaptive immune system at scale and with precision in order to use its capabilities in the clinic. And now, Adaptive is ready to evolve and generate opportunities across life sciences research, clinical diagnostics, and drug discovery. Our future holds bold discoveries, building on a platform that can be deployed at speed and scale with the aim to launch universal diagnostics.
I last wrote about
Vericel in late January as the Bull of the Day and recommended that investors buy shares on dips under $40. You got one more chance in March and then it was off to the races for this innovative maker of cell therapies for knee cartilage and severe burns.
VCEL shares rallied sharply to new highs above $60 in April and then again in June, as investor anticipation grew about a pending FDA approval for their NexoBrid product in severe burn treatment.
But on June 29, Vericel announced that its development partner, MediWound, received a complete response letter from the U.S. Food and Drug Administration regarding the Biologics License Application for NexoBrid, a potential treatment for eschar removal in adults with deep partial-thickness and/or full-thickness burns. The FDA communicated to MediWound that it had completed its review of the BLA, as amended, and has determined that it cannot approve the BLA in its present form.
Following this news, VCEL shares gapped down from a new closing high near $68 to $57. As the bearish trend persists, shares have slid to $50 because EPS estimates have been revised downward as well, pushing the stock into the lower tiers of the Zacks Rank.
More Than NexoBrid
What investors should keep evaluating is how much the current sales growth of 30% and the valuation of only 10X sales means in light of other product categories that are working just fine. For instance, as a VCEL shareholder, I was delighted to see this news I reported on in early January...
Vericel announces expansion of MACI coverage by UnitedHealthcare
Vericel Corporation announced that UnitedHealthcare has expanded its medical policy for MACI to include coverage for patients with symptomatic full-thickness cartilage defects in the patella and multiple cartilage defects in the knee. UnitedHealthcare is the largest commercial payer in the United States, covering more than 26 million lives, and more patients treated with MACI are covered by UnitedHealthcare than any other plan in the United States. The revised policy is effective February 1, 2021.
Getting to Know VCEL And Deciding Where You Buy
Here's how I've described the company in several reports since we first bought shares at $14 in July of 2020...
The goal of Vericel therapies is to repair or restore a patient’s damaged tissues or organs using their own cells. The company markets two autologous cell therapy products in the United States: Carticel for the treatment of cartilage defects in the knee, and Epicel for the treatment of severe burns.
It is also developing MACI (TM) for the treatment of cartilage defects in the knee, and ixmyelocel-T for the treatment of advanced heart failure due to ischemic dilated cardiomyopathy.
Sales for this small-cap are projected to launch 40% to over $170 million next year and profits are expected to vault more than 400% after a rough 2020 due to the massive hold on elective medical procedures during the COVID-19 shutdown.
And in September, Vericel announced the FDA accepted the company's filing for the recently submitted Biologics License Application (BLA) for NexoBrid® (concentrate of proteolytic enzymes enriched in bromelain) for eschar removal (debridement) in adults with deep partial-thickness and/or full-thickness thermal burns.
NexoBrid is a bromelain-based biological product containing a sterile mixture of proteolytic enzyme that selectively removes burn eschar within four hours without harming surrounding viable tissue.
What is Cell Therapy?
Cell therapy is the infusion, injection or transplantation of whole cells back into a patient for treatment of a condition. In autologous therapy the patient is the source (donor) of their own tissue cells. With the patient acting as their own donor, the risk of rejection and the use of immunosuppressive therapy is minimized.
How does autologous cell therapy work?
The goal of cell therapy is to repair or restore damaged tissues using cells. For Vericel therapies, tissue from the patient is collected by a qualified and trained surgeon, and then processed and expanded by Vericel into a specific cell type or multicellular therapy. The patient’s own cells are then returned to the surgeon for implantation.
The Vericel Process
Vericel uses a proprietary cell-processing technology to expand naturally occurring populations of cells derived from the patient’s own tissue. Specific to the type of therapy needed, a small sample of tissue is taken from the patient. The sample is then sent to their laboratory in Cambridge Massachusetts for cellular expansion. Rigorous testing ensures the quality and viability of cells before they are delivered back to health care professionals. These cells, in conjunction with rehabilitation regimes, have demonstrated the ability to restore function to patients with serious medical conditions.
To learn more about the Vericel experience, check out their website with a great testimonial from 5-time Olympic swimmer and mom Dara Torres who has benefited greatly from the company's approach to knee cartilage restoration.
The Vericel science is exciting because it addresses two areas of common injury and severe pain that don't have ready solutions.
Keep VCEL on your watchlist because after this earnings and FDA hiccup, this stock will be a buy again in the $40s.
Disclosure: I do not currently own shares of VCEL but may begin a position at any time.
Additional content: 3 Growth Stocks with Attractive Dividends to Ride Out Inflation
Even though the news of economic recovery amid easing of restrictions, increasing pent-up demand and improving employment levels is enough to cheer investors, the same is stoking inflation.
Per the recent inflation data, Labor Department’s consumer price index (CPI) jumped 5.4% year over year. This was the fastest 12-month rise in more than a decade. The core CPI that excludes volatile categories including food and energy also remains elevated.
This general increase in price level is driven by a massive surge in prices of used cars and trucks, an uptick in airfares as well as the rise in prices of hotels and restaurants.
The Fed is considering this spike in inflation a blip, which will level off gradually. Thus, the government is setting aside all inflationary fears for the moment and are continuing with their monetary policy to support economic growth.
High inflationary environment is generally not conducive for growth stocks as interest rates tend to shoot up, hurting corporate profits. But this time, there is full assurance from the administration that interest rates will not be raised in the near future.
This reassurance raised optimism among investors and made growth stocks look alluring with healthy dividend yields that promise to protect their inflation-adjusted returns.
We thus shortlisted some stocks with a solid Growth Score. The Zacks Growth Style Score (part of the
Zacks Style Scores system), looks beyond the traditional growth attributes to analyze a company's real growth prospects, makes it pretty easy to find cutting-edge growth stocks.
These stocks also have a consistent history of dividend hikes, which should continue in the foreseeable future.
Our Choices Home Depot, the world’s largest home-improvement specialty retailer, is in a sweet spot owing to continued strong demand for home-improvement projects as well as the ongoing investments in the space.
The company is also reaping significant benefits from the execution of the “One Home Depot” investment plan. It focuses on expanding supply-chain facilities, augmenting technology investments and enhancing the digital experience.
Its efficient delivery network goes well with its customers. Its recently-launched interconnected facilities like the mixed-cart selling from store capability and in-the-tool rental facilities are likely to enrich the experience of both Pro (professional) and DIY (Do-It-Yourself) customer categories.
A favorable housing market, aided by accelerated home-buying activities, has been driving demand for home-improvement goods for a while now. Home Depot is a key beneficiary of this trend as the leading retailer in the home-improvement space.
The stock carries a Growth Score of A and a Zacks Rank #2 (Buy) at present. You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
It has a dividend yield of 2.07% and has upped the same for the past decade with payout ratio between 40% and 50%. With an annual free cash flow return on investment of 49.04%, ahead of the industry’s nearly 45.33%; the dividend payment is likely to be sustainable.
ExxonMobil boasts a bellwether status in the energy space and an optimal integrated capital structure that has historically produced industry-leading returns. Management's track record of capex discipline across the commodity price cycle makes it a relatively lower-risk energy sector player.
The company made multiple world-class oil discoveries at the Stabroek Block, located off the coast of Guyana. It hit another oil prospect at the Longtail-3 well, offshore Guyana. These new finds will lead to soaring production volumes. Daily production is expected to reach 1 million barrels by 2027.
Annually, through 2025, the company is willing to invest in the $20-$25 billion range. The investments will likely get allocated to profitable growth projects that will generate significant cash flow. The company expects to generate more than 30% returns from such investments.
Its strong growth profile along with low debt compared to other integrated majors makes it all the more attractive. These factors should enable Exxon to grow its cash flow, allowing it to continue increasing its dividend. Last year, the company did not raise its dividend as its business took a hit from a decline in demand for energy. This can be taken as a one-time event since the company has been hiking dividend for 18 straight years. Now management deepens focus to add shareholder value.
The stock currently carries a Zacks Rank #3 (Hold) and a Growth Score A.
Discover Financial Services is a payment processor and also loans money through its own bank. The company generates revenues from the interest on its credit card balances, which is the interest income part. Its non-interest income is generated from its card-processing business.
In 2020, the company suffered lower interest rates and depressed net interest margin due to weak lower card balances as defaults and credit losses were rampant. Revenues were down 7.4% in 2020. Its peer American Express Co. also suffered last year but is recovering solidly this year.
As the economy reopens, consumer spending and prudent expansion of credit should drive profitable loan growth going forward. Several factors, such as bolstered sales volume, improving trends in categories of retail and restaurants plus a rise in credit standards should support loan growth, which in turn, will boost net interest margin.
What more, Discover Financial Services has increased its annual dividend since 2011. It comfortably generates the required cash flow to continue paying and growing its dividend.
The Zacks Consensus Estimate for 2021 revenues is pegged at a skyrocketing growth rate of 272.2%.
The stock presently carries a Zacks Rank of 3 and a Growth Score A.
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