Conroy’s comments in the CC about price and profit margin have some amazing implications. It is clear now that when he previously mentioned a $1.2B market opportunity or $150 per test, he meant profit, not gross (as I, and I think most of us, assumed). The difference is huge. When you have a product that meets a vital need without serious competition, conventional wisdom on profit margins goes out the window. (I seem to recall Pro giving an example or two of that, but can’t search his deleted past posts.) A health plan administrator would gladly pay $300 every 3 years to avoid (with 90% probability) a $2,000 colonoscopy every 7 to 10 years.

When Conroy said he conservatively expects EXAS to keep 65% of $300 per test, that’s a really big deal, given his no-hype record of under-promising and over-delivering.

I was surprised, and, frankly, disappointed to hear the timeline was longer than expected. But, I trust EXAS management to do what makes sense, and believe the extra time spent now will bring higher and more certain profits later. They allowed time to find and fix any unforeseen problems, and if nothing serious comes up, they’ll finish early, and they’ll have greased the skids for the FDA trial.

So, if Conroy is right (and he called execution straightforward from here), what does that imply about EXAS share price in a few years?

To be very conservative, let’s assume eventually PE is 10 and dilution to 50 million shares. Considering only the US market, 30% of 90 million people getting screened every 3 years, EXAS earning 65% of $300 per test, that suggests a possible share price of (90M/3) x .3 x .65 x 300 x 10 / 50M = $351. If you figure global sales are at least triple that (a very low assumption, Europe alone is about triple), it is hard to hard to come up with a long-term share price estimate under $1,000, if Conroy is anywhere close to being right. (Overseas approvals are very likely to rapidly follow US approval.) I thought Pro was a bit over the top when he mentioned $200 a while back, but now it kind of looks like he was being conservative.

Of course, unforeseen negative events are always possible, but so are positive events, like success with upstream cancer screening, or possible lowering of recommended screening age from 50 to 40 (which becomes cost-effective with SDNA replacing most colonoscopies), or exceeding some of the conservative assumptions.

I think one of the biggest risks is that a successful hostile takeover attempt at $20 or so could stop us from riding this much higher.

For those who think this seems like over the top pumping bordering on lunacy (and I can see how it might come across that way), please tell me which of my numbers is wrong (market size and penetration, profit per test, PE, number of shares outstanding). You could reduce this estimate by 100 fold and EXAS would still be better than a four bagger from here.

If I’m wrong, someone please straighten me out (facts, logic, and civility please, I’m kind of burned out on the name-calling stuff, and I use my ignore button).

BTW, since Conroy's 2.5 million options vest over the next 3 years and 5 months or so, he would be giving up an immense amount of money to run for govenor unless he renegotiates that, so I don't think he'll run this time. (Thank God we didn't have a compensation Czar in a position to stop us from paying Conroy well enough to bring him on board, he's been worth every penny.) I also firmly believe the Sept9 trial results will be disappointing to many stockholders who believe the hype without checking, and I think shorting Epigenomics would probably be profitable (although they do have other products that I haven't researched). I don't short, so I'm not, and haven't researched the issue beyond their competitiveness with SDNA.