James Gill
Grab a morning coffee with Exact Sciences CEO Kevin Conroy and you quickly understand why Democratic Party insiders think he has the stuff to take out Scott Walker.
A patent attorney with a track record leading successful biotech companies in Wisconsin, Conroy combines a private-sector resume with a public-sector pedigree. His father, Sen. Joe Conroy, served 22 years in the Michigan state Legislature, and politics was a regular topic around the family dinner table in Flint.
Today, Conroy can convincingly make the case that offering some $4 billion to lure Taiwanese manufacturer Foxconn to Wisconsin is a poor use of taxpayer dollars. He decries the cuts to public education under Gov. Walker and says the damage inflicted on the UW System is unravelling 100 years of progress building a top research university.
“Part of the problem emanates from a leader with no private-sector experience, who has been a politician his whole career, and that unfortunately creates the perspective that the most important thing is getting elected rather than doing what is best for the state overall,” says Conroy, during a lengthy interview at his tidy office, and tour of the Exact Sciences headquarters at University Research Park. Conroy looked seriously at running in 2010 and again in the 2012 recall. Former Gov. Jim Doyle, among others, continues to promote him.
“Kevin is a highly successful person with the highest ethical standards,” says Doyle. “He gets things done and would make a tremendous governor.”
But even with what some see as a less than inspiring Democratic field heading into the August primary, Conroy isn’t biting.
“So why not jump into politics? Well, at Exact Sciences you can come into work each day and potentially save lives or you can jump into a pot of boiling oil,” explains the 52-year-old Conroy, who lives with his wife, Sheila, and their three daughters in a Maple Bluff lakefront home just a few doors down from the governor’s mansion.
Politics was a regular topic at home when Conroy was growing up. His dad, Joe, served 22 years in the Michigan state Legislature.
As it stands, Conroy has loftier goals. He believes his company, Exact Sciences, could effectively eliminate colon cancer, the second-leading cancer killer. If detected early, colon cancer can be successfully treated, but too often it’s not caught.
Conroy watched a childhood playmate die of colon cancer at age 46 and has lost two other friends to the disease: none had been screened.
In fact, barely half of people over age 50 are routinely screened for colorectal cancer. Those who are generally submit to a colonoscopy, a procedure that involves fasting overnight, choking down a strong laxative to clear the bowels, and then taking a trip to the hospital or a clinic, where a doctor looks inside the colon with a tiny camera inserted through the rectum.
Exact Sciences’ flagship product, Cologuard, is a much simpler home test. Patients send a small stool sample to the company’s lab where technicians look for changes in DNA that could indicate early stage cancer. The company announced in June it has also developed a blood test in conjunction with the Mayo Clinic that, in a study of 244 people, correctly identified 95 percent of a common form of liver cancer, potentially saving more lives.
Shares of Exact Sciences, which trade on the Nasdaq exchange under the symbol, EXAS, were among the biggest gainers on Wall Street last year and the top performing stock in Wisconsin, soaring nearly 300 percent in 2017. After a drop earlier this year, shares hit a record high of $71.60 in mid-June. Exact’s market capitalization — the stock market value of all its shared combined — has climbed to over $8 billion.
Conroy believes Exact Sciences could also be a game changer for Madison. The company is among the nation’s fastest growing biotech companies and a Wall Street darling. “Exact,” as it’s widely known, now counts more than 1,500 employees locally and is spending $300 million to redevelop the former Rayovac/Spectrum Brand HQ in an economically challenged neighborhood off the west Beltline. The company is also seeking to build new corporate headquarters at University Research Park, where it would be connected to the company’s existing research and development building. “We’re awaiting final approvals,” says Aaron Olver, managing director of University Research Park. “Assuming those go well, we hope to conclude all documents and start digging this summer.”
Olver says the move is significant for the company and research park: “We’ve been working to evolve the research park and we view this as the first catalytic project in that effort.”
Some hope that Exact Sciences expanding within the Madison city limits will take the sting out of losing Epic Systems to Verona in 2002 and Spectrum Brands to Middleton in 2012 — as well as the closing of Oscar Mayer last year.
“Exact has the potential to put greater Madison at the center of advanced health diagnostics,” says Zach Brandon, president of the Greater Madison Chamber of Commerce. “The implications both in fighting cancer and having a major impact on our economy appear limitless.”
A decade ago, Exact Sciences was headquartered in Boston and teetering on the brink of insolvency. It had burned through some $170 million of investment capital without a viable market-ready product. The share price had fallen as low as 40 cents and the company had just a handful of employees.
Conroy was looking for his next challenge after leaving Third Wave Technologies, a company rooted in UW research that was taken public in 2001 — then sold in 2008 to Boston-based Hologic Inc. That move enriched shareholders, including Conroy himself, but cost Madison more than 100 biotech jobs.
Conroy thought Exact Sciences had potential in the same genetic-based medical diagnostics area. He joined as CEO in 2009 and immediately brought on partner Maneesh Arora as chief operating officer.
Conroy and Arora had worked on getting a human papillomavirus (HPV) test to market with Third Wave Technologies and were wondering if they could use the same enzyme developed by Jim Dahlberg and others at UW-Madison to create a colon cancer test.
After raising additional capital, the stock price rose above $1 and out of danger of being delisted by Nasdaq. Then, after securing a $1 million loan from the Wisconsin Department of Commerce, they moved the Exact Sciences headquarters to Madison, where both Conroy and Arora were already settled.
The value of Exact Sciences stock has more than quadrupled since December 2016.
Exact Sciences also entered into a collaboration with David Ahlquist, a Mayo Clinic gastroenterologist, to develop Cologuard in his lab in Rochester, Minnesota. Through its partnership with the Mayo Clinic, Exact Sciences is also now developing assays for detecting pancreatic, esophageal and lung cancers, as well as the liver cancer test it recently announced.
For Cologuard, the company conducted a massive clinical trial of 10,000 patients, which it felt was crucial to prove Cologuard’s effectiveness to patients, doctors and providers. The results — published in 2014 — found Cologuard was 92 percent reliable in detecting stage 1 colon cancer, a sensitivity rate on par with the 95 percent success rate for a colonoscopy.
The Food and Drug Administration approved Cologuard for use in 2014 and it was approved for Medicare reimbursement. The company then launched a major marketing campaign that climbed past $260 million last year in sales and management costs.
Exact Sciences is betting the farm that patients will opt for the ease of the Cologuard home test versus the more invasive colonoscopy or the inexpensive fecal immunochemical test (FIT), which looks for blood in the stool, which can be an indicator of cancer.
“Kevin and Arora have done a great job in building out the company basically from nothing,” says Lloyd Smith, a chemistry professor at UW-Madison and a co-founder of Third Wave. “I’m glad to see they are expanding here in Madison.”
There’s something of a celebrity buzz to Exact Sciences — at least by Madison standards. Its stock performance has prompted “what if” discussions among early-rising retirees in local coffee shops and at elite business gatherings. “I bought a few shares early on but unfortunately I sold them,” says Chip Camillo, who owns a Madison-based outdoor sporting goods business. “Looking back on it, I wish I would have hung onto it.”
Conroy has been a frequent guest on Mad Money, the TV show hosted by investment guru Jim Cramer. Exact’s front man is local PGA golfer Jerry Kelly, who wears a Cologuard cap during nationally televised tournaments where the 50-plus crowd fits the colon cancer screening demographic to a tee. Exact Sciences also sponsors the Cologuard Classic PGA Champions Tour event in Tucson, Arizona.
Conroy on CNN’s Mad Money in January 2018, talking about his company’s prospects. The CEO is a frequent guest of host Jim Cramer.
There’s even a Packers angle. Exact has teamed with the Vince Lombardi Cancer Foundation to increase awareness of colon cancer, which killed the legendary coach at age 57. And the Exact Sciences communications director is Scott Larrivee, son of Green Bay Packers announcer Wayne.
There are skeptics, however. The company has yet to turn a profit — it lost $114 million on operations in 2017 — and faces stiff competition.
“I don’t want to be Debbie Downer or the guy who rains on everyone’s parade but there is always a danger in the psychology of crowds,” says Jay Handy, a Madison stockbroker. “When everyone is talking about a certain deal, or a business, within an ecosystem or community, it can be dangerous. As human beings, we have a fear of missing out or ‘FOMO).’ Mix in a little crowd validation and what could possibly go wrong?”
Exact Sciences shares have been widely shorted – meaning that some investors are betting their price will go down rather than up.
The company also faces the challenge of offering an alternative to colonoscopy, which currently provides a steady stream of business for many hospitals and clinics at an average cost of $3,000. A Cologuard test costs about $500. And while a colonoscopy requires a trip to a health facility it also allows doctors to immediately identify and remove precancerous polyps, something Cologuard can’t do — a positive Cologuard test often necessitates a colonoscopy.
Then there’s the risk that Cologuard could be overtaken by an even more advanced form of genetic-based testing developed by a competitor.
“Anyone who follows the landscape of diagnostic cancer testing knows that everything is moving toward blood-based DNA testing,” says a 2017 report from Andrew Edward Left, editor of the online investment newsletter Citron Research, which seeks out overvalued companies. “Any doctor in the field will tell you it is just a matter of time. Poop in a box will probably be a medical dinosaur in four years and the value of Exact’s only asset will be 0.”
That report prompted an immediate response from Conroy, who debated the future of Cologuard with Left on CNBC’s Halftime Report. “Mr. Left is dead wrong,” said Conroy during the live exchange. “You want to detect stage 1 cancer and you just can’t do that reliably from blood.”
Other analysts wonder how Exact Sciences will ever be profitable, given how much it has spent on marketing and how much it can charge for each Cologuard test. While Medicare has set a reimbursement rate of $508 for each test over the next three-year period, it’s unclear if private insurers will pay that much.
Exact Sciences has already offered some tests at a deep discount in order to get more providers on board. It filed a lawsuit at one point claiming it was never paid after billing Humana more than $800,000 for at least 4,664 tests, which works out to $172 each.
Exact Sciences is betting the farm that patients will opt for the ease of the Cologuard home test versus the more invasive colonoscopy.
“If Exact Sciences’ experience with Humana wasn’t an isolated one and recognized revenue from each test continues falling, this company’s bottom line could still be deep in negative territory five years from now,” warns analyst Cory Renauer in The Motley Fool.
But the company’s prospects got a recent boost when the American Cancer Society called for screening for colon cancer at age 45, instead of 50. That should keep the company on an upward trajectory, says analyst Catherine Ramsey Schulte of Baird.
“While it’ll likely take time to materialize, we think this update presents an exciting opportunity for Cologuard and note other opportunities for market expansion, like expanding Cologuard’s label to include high-risk patients,” she writes in a recent report.
Public health officials say more than 80 million people in the U.S. should be regularly screened for colorectal cancer but fewer than half actually follow through. Of those who do get screened, only two percent are currently using Cologuard, meaning there is plenty of room for growth.
If Exact Sciences can secure 30 percent of those people it could tap into a $2 billion market in the U.S., according to company forecasts. And the company has narrowed its losses, with revenue in the first quarter of 2018 up 87 percent to $90.3 million. It lost 33 cents per share for the period, 4 cents less than analysts had expected.
Kevin Conroy took a somewhat roundabout way to Madison. He graduated from Michigan State in 1988 with a degree in electrical engineering and then earned a law degree at the University of Michigan.
While in Ann Arbor, Michigan, he met his future wife, Sheila, who was rooming with Conroy’s younger sister, Kelly. All three were attending law school.
Sheila Conroy is an all-star in her own right, finishing first in her class as an undergrad at Marquette University. She now works as an attorney at Clark & Gotzler in Madison after working four years in the Doyle administration.
Doyle gushes about the Conroys and says he has talked “many times” to Kevin about running for governor, an office Doyle held from 2002 to 2010.
“They are both highly successful, very committed people who have managed to keep the family first,” says Doyle, who joined the board at Exact Sciences three years ago.
But Doyle, who has not endorsed any of this year’s Democratic candidates, says he understands Conroy’s greater mission. “They’re not making some sort of flashy trinkets at Exact Sciences: they are working to save lives,” he says.
Conroy’s first job out of college was working as an intellectual property litigator at two law firms in Chicago before moving to northern California to work as chief operations officer for a pair of venture capital-based technology companies.
But Conroy soon returned to the upper Midwest, taking a position at GE Healthcare in Milwaukee before being hired as corporate counsel and later CEO at Third Wave Technologies.
Family friend Dave Weinbach remembers being introduced to Conroy in the mid-2000s while playing golf at Nakoma Country Club and was immediately blown away.
“I’ve got to say he is one of the most impressive guys I’ve ever met,” says Weinbach, who runs a money management firm in Madison but knows Conroy best from platform tennis, an outdoor game played during winter with wooden rackets and a spongy ball.
Weinbach, a six-time national champion in pickleball, says Conroy is incredibly competitive, whether in business or on the court. But he notes that Conroy always finds time in his jam-packed schedule to make his daughter’s events.
“Kevin is driven to succeed, whether in business, or sports or as a dad,” says Weinbach. “He is a master motivator of people who simply refuses to lose.”
United Way’s Renee Moe (left) praises Conroy for developing others, “especially young professionals.”
Conroy served as chair of the 2016 United Way of Dane County campaign, drawing kudos for the effort he put into the volunteer position and sparking a record $18.6 million in community giving.
Also that year he promised to skydive if 90 percent of his employees donated to the United Way — they delivered and Conroy took the plunge.
“Kevin develops others, especially young professionals and has embraced Exact’s role as a thriving business, employer and community change maker,” says Renee Moe, president of the United Way of Dane County. “They take their corporate social responsibility very seriously.”
Conroy also speaks passionately about growing up in a strong Irish Catholic family in Flint and watching helplessly as the General Motors company town slid into an urban tangle of unemployment, crime and desperation. At its peak, there were 220,000 residents in Flint and 80,000 worked for GM. The Buick factory there was the second-largest manufacturing facility in the world.
But the recessions of the early 1980s, coupled with Japanese automakers grabbing major U.S. market share, put Flint on the skids. GM cut its workforce by a third and many people started leaving the city. The city’s downfall reached a nadir in 2014 with the contamination of the public water supply due to government malfeasance.
“Everybody forgets, but Flint once had the highest percentage of home ownership in the country with great public schools and just a ton going on,” says Conroy, the second-oldest of five children. “If you were a kid there growing up you had access to an incredible number of sports. I could play across the street at Haskell Park. There were no adults around and everybody got to play. You didn’t have to get chauffeured all over the place.”
Conroy draws on Flint’s experience when he talks about Exact Sciences’ commitment to Madison. It’s partly why the company has partnered with the Urban League of Greater Madison in developing new headquarters along the Beltline. That plan came about after the company’s stock plunged in 2015, just a week after the Common Council had approved funding for a Judge Doyle Square proposal with Exact Science's new headquarters at the center. The company withdrew from the project a few weeks later.
But Urban League CEO Ruben Anthony says its partnership with the company could transform lives. “We’re confident our partnership can improve the participation of underrepresented populations in our community’s bioscience sector.”
To that end, Exact Sciences offers a variety of entry-level positions with starting pay at $15 an hour for employees working in the call center. Benefits, stock incentives and a generous 401(k) match are all part of a package worth more than $40,000. Exact also gives 12 weeks of paid parental leave to all employees after a year of service.
“We want to be the local employer of choice and want people to make it a long-term career,” says Conroy.
Conroy’s own career has been lucrative: in 2017 he received $13.3 million in salary and stock options. But for a man who grew up in a political family and enjoys the spotlight, the chance to test his leadership skills on another level might prove too tempting.
“Right now I feel the most important thing I can do is continue to lead Exact Sciences’ fight against cancer,” he says. “But I also really care about creating and sustaining a strong economy in Wisconsin and believe in the importance of public service. So some day that may be a cause I pursue.”
Those who know Conroy best fully expect him to pursue politics either sooner or later. “It might not happen for two years or it might be longer but there is no doubt in my mind Kevin is going to become a mayor or a governor or serve in Congress,” says platform tennis buddy Weinbach. “He’s always looking for the next challenge.”
Editor's Note: This article has been updated to clarify the timeline of Exact Science's withdrawal from the Judge Doyle Square project.
