Why EXACT Sciences Corporation Is Today's Best Healthcare Stock

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of EXACT Sciences , a molecular diagnostics company best known for early detection, non-invasive colon cancer diagnostic test Cologaurd, vaulted higher by as much as 48% after the Centers for Medicare and Medicaid Services released its national coverage determination, or NCD, on Cologuard.

Amplification Lab per 2014 shareholder meeting presentation slide. Source: EXACT Sciences.

So what: According to the CMS' NCD, EXACT's Cologuard will be covered by Medicare effective immediately, although final pricing on the test is still under review by the CMS. The announcement that Cologuard would be covered was unique, as EXACT's press release notes, because it was done on a parallel basis, with the Food and Drug Administration and CMS reviewing the diagnostic test concurrently. Keep in mind the FDA only approved Cologuard two months ago. As EXACT Sciences' CEO, Kevin Conroy noted, "We are pleased with CMS' final coverage determination for Cologuard and would like to thank both CMS and FDA for giving Exact Sciences the opportunity to participate in the parallel review pilot program."

Now what: You might have thought Cologuard's FDA approval was the big news, but in reality it's the reimbursement potential that had investors waiting on pins and needles. Medicare approval is crucial to EXACT because one of colon cancer's greatest risk factors is age. Therefore, having Medicare reimbursement approval should encourage the elderly to get this diagnostic test -- which exams the cellular breakdown of colon wall cells that are shed on a patient's stool sample to determine if any abnormal cells exist (i.e., cancer or precancerous cells) -- done on an annual basis. With its Medicare approval locked up, I'd suggest EXACT Sciences remains on track to turn profitable on an annual basis within the next two to three years, dependent on the success of the product launch, of course.