kirkydu (96.02)

The Exact Table I Pound

April 05, 2011 – Comments (4) | RELATED TICKERS: EXAS

For several years now I have been telling people about a company called Exact Sciences.  I will disclose that I am very long and very committed to the position long term.  In fact, the position has grown to be my largest.  A colleague today commented he would love to see the company pull back so he could buy more.  My comment, "it's going to at least $30, it's $7, just buy it." 

So, I guess I have two things today I'll talk about.  First, I'll talk briefly about Exact Sciences, EXAS.  Exact Sciences, according to research so far, has a DNA based screening test for colorectal cancer that can pick up cancer in it's earliest stages and in fact in a pre-cancerous form.  This is an extremely important test as colorectal cancer is very deadly when found late.  Under current tesing realities, it is usually found late because people simply do not want a colonscopy and FOBT/FIT doesn't work well even when peole are in compliance with testing guidelines- which they usually aren't.

A validation report on Exact's science is due soon, and an FDA study will very likely follow if the validation report is about what many, including at the company expect.  If Exact gets this test to market, likely sometime in late 2012 or 2013, the market potential is well over a billion dollars in global revenue (the company has made in roads in Europe already).  The potential market cap is into the several billions of dollars just on this test.  The kicker is that the technology that Exact has is very adaptable to other screening tests.  This company could be the next Genzyme or Genentech if it is not bought out in the next few years.  A poison pill prevents a cheap take out, so we might be witnessig the slow motion birth (Exact has been around over a decade) of a new giant.

Now, onto investment philosophy.  The guy next door down who I turned onto EXAS wants a pullback.  I do not, not really, I already own a lot of EXAS via calls and stock.  Regardless, forget the pullback potential, it's a microcap bio-tech, there is always pullback potential.  The problem I see over and over is that too many people wait for pullbacks of things they know are good ideas.  In essence sabotaging themselves.  If you know something is a good idea, at least buy a quarter position (to me that is 1.5% of a portfolio).  If you don't know something is a good idea, don't buy any.  If something you have is not actually a good idea, don't wait, just sell it unless you have a chart that tells you that in a few days you'll get a great exit opportunity, but since you don't, so just sell it.

For those who care, I have a double position in EXAS, that is, about 12% of holdings.

Do your own research, and by all means, act on it when you are sure.