Why EXACT Sciences Corporation (NASDAQ:EXAS) Has Chosen Equity Financing Despite Strong Cash Position

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Despite closing 2Q2016 with $49 million in cash and equivalents, EXACT Sciences Corporation (NASDAQ:EXAS) has embarked on a fundraiser process that involves the sale of new shares. The fundraiser path will dilute the stock, but will also save the company from accumulating more debt.

EXACT Sciences announced that it will offer 7 million shares of its common stock to the public through underwriters. But it has granted the underwriters, which include W. Baird, Canaccord Genuity and Jefferies, the option to purchase additional 1.05 million shares in case they face oversubscription.

EXACT Sciences has not announced the pricing of the shares on offer, which makes it difficult at this juncture to know exactly how much the company would generate from the transaction. But shares are trading in the vicinity of $16, so assuming an offering price of $16, the company could end up with $117 million in gross proceeds from the equity offering.

The amount of gross proceeds could be higher if demand for the shares on offer turns out to be strong than the underwriters expect.

Putting the money to use

EXACT Sciences Corporation has identified at least three areas where it hopes to spend the money. The top priority is to funnel the proceeds from the equity offering to fund marketing of its product called Cologuard. The company also said that a portion of the proceeds would go into developing new products. In case there is still some more money left, the company said it would spend it on working capital.

2Q2016 earnings

EXACT Sciences fared well in the June quarter, posting results that handily beat the consensus estimates. Revenue of $21.2 million not only rose 161% and topped the estimate of $18.54 million. The EPS loss of $0.46 was better than the EPS loss of $0.55 seen by Wall Street.

EXACT Sciences completed about 56,000 Cologuard tests in 2Q2016, indicating an increase of 160% over the same quarter last year. The management guided for 240,000 tests this year, which should generate sales of at least $90 million. EXACT estimates the addressable market for its Cologuard to be $4 billion.

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