All things being equal and assuming issuance is ultimately 8 milliion shares, we will see approximately 9% dilution on share count and yet the stock is at 25.30. That equates 27.80 price before the event. The fact that Exact was able to raise $200 million off a 28 base price or $2.5 billion market value is one heck of an endorsement and testimonial as to what the institutional community currently thinks about prospects for the company. I guess the shorts simply believe that post USPTF and into the future, Exact will never be able to exceed 250K tests per year. Apparently $200 million disagrees. Watch the market cap-this is going to be fun.
Jeffries drove this deal on reverse inquiry. Probably see filings showing large holders adding and 1-2 new holders of 2-3 million shares. It's a tough call. Anyone or group trying to add 8 million shares given the existing short interest, would drive the stock into the mid 30's and fall well short of their accumulation goal. But the problem is they know that, wouldn't buy the mid 30's and the company would not have the cash. J&P China drove the last issuance by purchasing 75% of that offering to establish a new position. The question is who did it this time? Whoever drove this inquiry believes the company's prospects are excellent and they wanted to build or establish a very significant position. More importantly, they didn't just buy 25.5 to get weak in the knees and sell it out at 22 because they miss orders by 1000 units next quarter. I thought both USPTF and a secondary raise after that announcement were priced in. Hence, I expected any price move would have been modest post announcement as everyone waited for raise . But the equation has changed. No raise needed, money to fund MD Anderson + Mayo initiatives in place + ample money to fund uptake. Ironically, raising the money now and knowing that it went to long term holders. opens the door for a greater run through and post USPTF than before. We will look back on the mid 20's next year the same way some of us look back on the 9-11 range that took awhile to leave in the rear view mirror.
Just listened to the CMS presentation replay on YouTube. I didn't listen for what Ma-Weaver was going to say. It's obvious he had nothing to say going in but the expectation of the event itself was an attempt by shorts to cover. That said, Conroy pointed out that Exact is achieving 73% compliance within 2 months of prescription versus 20% for FIT within 12 months while the "Gold Standard" colonoscopy sees only 38% compliance in a year. At the same time, and it is very early days, Exact is increasing the screen population by 40% already. Remember the slide from the investor day showing the background of the Cologuard users-how many had never been screened ever? I know a little bit about statistics and modeling outcomes-enough to get by and perhaps fool a few people but it dosen't take much of a model (or much intelligence for that matter) to understand that 2-3.65X the compliance rate over a significantly larger screening population is going to save the system a huge sum of money. All of the statistics and models after that fact are simply narrowing the rounding errors. The test is going to save the system huge sums of money. End of story.
If you are short Exact you have a simple problem: The institutions which own 100%+ of the stock were given no reason to sell yesterday and, as I think we will see shortly, were given more reasons to buy. Individual investors who overthink the company at this point are going to miss the big picture here. Exact has evolved from a single product emerging growth company which justifies the current $2.67 billion market cap on that fact alone to a company with multiple venture capital opportunities with much better than venture prospects for success. The hammer IS the MD Anderson blood bank collected over the course of 20 years from 1 million ASYMPTOMATIC patients. Many are working on algorithms in the blood space for various diagnostic tests but the ability to look back at specific samples taken when asymptomatic once symptoms appear is the key to optimizing algo’s, prospective trial designs, approaching the FDA/CMS to agree upon formal design, parallel review and successful execution. Hey didn’t Mayo have a unique bank of stored stool samples? Sound familiar? That blood bank is the moat, MD Anderson is the castle and Exact just got invited in. If you want to understand what the next five years holds simply look back to 2010. Follow Exact’s progress and look at the market cap increases that occurred as they went past various milestones. The company now has three more shots on goal, three new sets of milestones, and Lung Cancer is a high margin $2 Billion+ annual gross sales opportunity. We have USPTF right in front of us then we will have the chance to see if Exact can deliver upside surprises versus the expected Cologuard test ramps-I think they will but think the near term downside, if any, is very limited if the progress is steady as expected. I have marveled at the short thesis here for years and I simply don’t get it. Being a great investor means you are right more than you are wrong over an extended period of time. That is true whether long, short o