Q3 2019 Earnings Call
Ladies and gentlemen, thank you for Fenby by and welcome to the exact sciences.
Third quarter earnings call at this paying all participants on in listen only mode. At the speakers presentation. There will be a question and answer fashion to ask a question. During the session you would need to press star one on your telephone.
Please be advised that today's conference is being recorded I would like to hand, the conference over to your speaker today Megan Joan. Thank you. Please go ahead Madam.
Thank you been Nita and thank all of you for joining us for exact Sciences third quarter 2019 conference call on the call today or Kevin Conroy, the company's chairman and CEO , Jeff Elliott, Our Chief Financial Officer, and Mark Stenhouse President of Cologuard.
Exactly because issued a news release earlier this afternoon detailing our third quarter financial results. This news release in today's presentation are available on our website that exact sciences dotcom.
During today's call will make forward looking statements based on current expectation or our actual results may be materially different from such statements.
Descriptions other risks and uncertainties associated with exact sciences are included in our SEC filings, which can be accessed through our website.
It's now my pleasure to introduce the company's chairman and CEO , Kevin Conroy.
Thank you for joining us this afternoon. The exact sciences team delivered another strong quarter and made significant progress enhancing our internal infrastructure positioning us for long term sustainable growth.
We screened 456000 people with Cologuard in third quarter and more than 3 million people over the last five years during the quarter. The team delivered 219 million in revenue. We also implemented ethics best in class electronic health record system as the foundation of our IP and.
Restructure began processing cologuard samples that are live and prepared for the genomic health combination.
We made meaningful progress on our pipeline with an expanded label for Cologuard to include people.
Page 40, 549 in new data for Cologuard, 2.0, and our liver cancer test.
Exact sciences is positioned to be the can be cancer diagnostics leader for years to call.
The strong foundation, we've built for Cologuard and the capabilities being added by the genomic health team will help us capture a significant portion of our combined 20 billion total addressable market.
And deliver more innovative diagnostic test to people in need.
Today, We will review, our third quarter financial performance and full year guidance and discuss progress on our 2019 priorities our CFO , Jeff Elliott will now review our financial results.
Thanks, Kevin and good afternoon, everyone.
Third quarter revenue increased 85% to $219 million on strong cologuard volume growth.
Average cooler good revenue per test was $479 inline with the second quarter.
We expect revenue per test in the $480 range during the fourth quarter.
Third quarter Cologuard cost of sales improved $10 to $114 per completed test.
Lapping operational efficiencies helped offset additional costs from the opening of our new lab.
We expect fourth quarter cost per test to being the low to mid 120 dollar range as we'll have a full quarter impact of the new lab.
Overtime will work to offset the new lap costs through volume leverage and operational efficiencies and we continue to see a clear path to call. The good cost per test.
$100 or better.
Third quarter gross margin was 76% an increase of 130 basis points.
Third quarter operating expense totaled $202 million up, 56%, which was 29 points slower than revenue growth.
Total selling and marketing expense of $86 million was better than expected due to the timing of certain marketing programs.
Selling and marketing included the Pfizer service fee of $16 million, which was about $2 million more than we had assumed in guidance.
<unk> expense of $81 million included $7 million and transaction related costs for the plan genomic health combination as well as $2 million integration related costs, neither of which were factored into guidance.
We also invested in writing infrastructure with the launch of epic and an upgrade to our Sep ERP system.
R&D expense was $35 million.
We invested in sample collection activities and studies to support our pipeline, including expanding color goods label to age 45, Cologuard 2.0, and our liver cancer test.
In the fourth quarter, we expect operating expense to increase about $10 million sequentially due primarily to additional additional selling and marketing efforts.
We expect DNA to be relatively flat, excluding any fourth quarter genomic health costs.
We expect R&D to be relatively flat for the third quarter.
Total third quarter Capex was $41 million for the full year, we expect capex of approximately $185 million.
Third quarter, cashews totaled $79 million, including $43 million paid to Pfizer for service fees incurred from beginning of the partnership through the end of June .
We ended the quarter with cash and securities of $1.2 billion.
Turning to our guidance, we expect revenue of $802 million to $810 million and Cologuard volume of 1.67 to 1.68 million tests.
With just two months left in the year and the major holiday still in front of US you should focus on the guidance range as the most likely view of how we see results playing out.
For the fourth quarter, we expect revenue of $221 million to $229 million I will now turn the call back to Kevin.
Thanks, Jeff the exact sciences team is focused on three priorities in 2019.
One powering our partnership with Pfizer to enhancing Cologuard and three advancing our pipeline of blood based cancer diagnostic tests.
Starting with our first priority.
We're confident that we can capture at least 40% of the U.S. colorectal cancer screening market from about 5% today.
Our talented sales teams partnership with Pfizer innovative marketing campaign, and deep payer relationships provide a powerful commercial organization to support Cologuards growth.
Pfizer partnership has been valley valuable in driving Cologuards adoption and the teams are working well together.
Partnering with Gastroenterologist will help cologuard reach more people in July we launched a new G.I. sales team to call on these important influencers in colon cancer screening.
During the third quarter, we accomplished two major milestones in building a robust infrastructure to support Cologuards growth.
We began processing tests at our new 11, Madison, increasing our total lab capacity to 7 million tests per year.
We also successfully implemented epics powerful help IP platform.
Epyx DHR system will provide an enhanced experience for cologuard users positions and our employees.
In the future epic will enable you to electronic ordering for a greater share of our customers. It will also allow powerful analysis and enhance our understanding of the entire cologuard experience, improving our patient compliance and rescreening efforts.
Our second priority is enhancing cologuard. There are two main components of this goal for 2019.
Banding Cold Guards label to include age is 45 to 49 and laying the foundation for an improved version of Cologuard.
Expanding cologuards label is an important opportunity for growth and for detecting colorectal cancer earlier.
Last month, the FDA approved our label expansion, providing access to cologuard for the $19 million average risk Unscreened Americans ages, 45 to 49 and increasing its total addressable market by $3 billion to 18 billion.
Over the last 25 years colorectal cancer incidence has increased more than 50% and people under the age of 50.
It's incredibly important to screen younger people earlier I.
I mean, cologuard is a convenient effective option that fits well into this younger age groups busy lifestyle.
Insurance coverage is essential to broad adoption in healthcare several national and regional payers have lowered their covered screening age for Cologuard to 45, following the American cancer Society guideline update last year, including Aetna, Carefirst and Blue Shield of California. This is incurred.
Good progress in our team is engaging with other payors educating our salesforce and developing new marketing plans to help increase awareness for the importance of screening in this age group.
Cologuard to point, all has the potential to lift cologuards clinical and economic value proposition, even higher and further differentiate it as a frontline screening test.
Our primary goal is to increase cologuard specificity, while maintaining a high level of sensitivity.
Higher specify the city further enhances the overall health economic performance of Cologuard in the screening setting.
Today, we presented data at the American College of Gastroenterology scientific meeting demonstrating that we have identified markers with the potential to achieve our performance goals.
At 92% specificity, the new markers were 92% sensitive for cancers, and 65% sensitive for pre cancerous polyps.
We are pleased with these strong results as we saw a five point increase in specificity, while maintaining a similar level of sensitivity.
It's important to note the pre cancerous polyps tests in this study we're typically larger in size than we saw in our large prospective trial for cologuard, and therefore likely easier to detect.
We may see some pre cancers sensitivity improvement with Cologuard 2.0 from the current markers. However, the size of the precancerous polyp stage of cancer timing of sample collection relative to calling out skippy and many other factors can enhance performance in case control studies.
Based on these strong results were initiating blue see a prospective pip pivotal trial to validate the performance of this new enhanced version of Cologuard and prepare for an FDA submission.
We plan to enroll our first patient and Blue see next month. This is an exciting step toward setting an even higher bar in the early accurate detection of colorectal cancer.
Real World evidence is critical to supporting continued cologuard adoption overtime.
Working with Mayo clinic, we recently initiated voyage, a 150000 patient Prospectives observational study of individuals using cologuard for routine screening.
The seven year study will follow and this seven year study will follow individuals to evaluate the real world impact of Cologuard on screening incidents and mortality rates.
Our third priority is advancing our blood based cancer diagnostics program, we are uniquely positioned to be the leading cancer diagnostics company for years to come.
Our collaboration with Mayo clinic, and the success of Cologuard provide a platform for future advancement.
The combination with genomic health will build on our success, creating an even stronger growth platform for Cologuard, Oncotype Dx and our pipeline.
We're bringing together some of the greatest mines in cancer diagnostics to form a best in class Research development clinical and commercial organization together, we'll have a global infrastructure and a stronger financial profile to accelerate the availability of and growth of new innovative tests to patients in need.
Liver cancer is the number two cancer chiller globally and patients with advanced liver disease need more accurate and convenient testing options. We're presenting data at the American Association of Association for the study of liver diseases meeting next month, demonstrating superior performance.
Of our liver tests compared to the Alpha Fetoprotein test.
We'll provide more details about these data after their presented at a SLD and no longer under embargo. We're we're also enrolling additional patients to finalize test development and plan to make the test available in the second half next year.
Our goal is to generate real world evidence to support guideline inclusion broad reimbursement and adoption overtime.
We believe test that can accurately detect pre cancer and early stage colorectal cancer like Cologuard and colonoscopy will lead the us screening market, while a blood based test could provide another option for some people.
To support validation of our blood based colorectal cancer screening test and create significant cost and time efficiencies, we plan to collect blood and stool in our Blue see study beginning in the coming weeks.
Our years of work with Mayo clinic, combined with our low cost accurate testing platform and extensive clinical trial regulatory and commercial capabilities position us as the leader in this space.
We're now happy to take your questions.
Okay.
We really are happy to take your question.
Thank you as a reminder to ask a question you will need to press star one of your telephone to withdraw your question press the pound key please standby, while we compared to Q1 day roster.
Your first question comes from the line of Brian Weinstein with William Blair.
Hey, guys. Thanks for taking my questions.
I wanted to start out just on a broad question on the Cologuard franchise right now sounds like things are are going okay relative to your expectations, but I mean, you do have a lot of things going on with epic in the G.I. Salesforce and.
Some other things I think you guys mentioned so Kevin can you just talk a little bit about.
Any kind of what impact that.
Those things might have right now relative to just to the Cologuard franchise in total and then is part of that also just.
How you're seeing the sales force working with Pfizer, how are we seeing the kind of fully efficiency.
Between the Salesforce is at this time or or is there still more to Gulf is just those two groups get together.
Thanks, Brian .
We see is continued strong progress towards our goal of.
Reaching 40% penetration or market share of what today's stands as about 106 million person market opportunity.
And.
All of the signals that we see and the work that we're doing is preparing for that long term they're always some.
Minor disruptions it.
At any time, we did implement epic during the quarter really proud of the work that the team did there.
To make a major ITD transformation during the middle of a quarter and still.
Achieved record results.
We also saw some of our very best reps move into new roles with in the G.I. Salesforce and as it relates to Pfizer that partnership there is stronger than ever the teams are really geleen the marketing the sales the health system sales.
Our.
Our we're seeing significant progress and we have high expectations for next year.
And Brian This is Jeff just add to what Kevin said, when I look across the key leading indicators in the business I see very strong momentum. So for example, when I looked at our Salesforce I can look at the productivity of each cohort of reps that we've hired over time recall, we've typically hired a new court every year.
Every cohort of reps continues to get most productive so even the reps in five years ago continue to get most more productive each year on top of that when I look at the physicians that have ordered Cologuard rights over 180000 total providers that have ordered every cohort of providers based on when they first ordered when I look at different.
It is a first order they continue to get more productive. So we're seeing very good incremental productivity across our reps and across our across the physician base. So I see it very strong momentum across the business.
Okay. Thank you for that.
Let some others I think follow up on some of that but just on the blood stuff.
Can you give us just an update where you guys are as far as collection of data internally. We've doubled the number of blood samples I think you were getting out of one clinical trial or Sturgis day in enrollment of trying to get samples now you're collecting in 2.0 sum blood samples. So can you give us an idea just where you see.
Thank you are in development here, when we could get an update on something more formal as far as.
Time frames to see some data from you guys. Thank you.
Brian We've recently completed a case controlled data our case control study demonstrating.
Strong performance with the blood based colorectal cancer test, let me take a step back here the way that we see the opportunity is that.
Colon us skippy penetration has leveled off at four above the 10 10 year period prior to.
Cologuard being FDA approved and with Cowen ask maybe you have a highly accurate but low.
Low patient friendly test.
And with.
Cologuard, you have high accuracy and high patient friendliness, and what you've seen is significant adoption among people would never been screen before with Cologuard to fit test you see.
The opposite you see lower performance, yet hi, ease of use on the.
Patients part and.
We're seeing now overall as cologuard.
Taking share from Cowen on Skippy, and the screening setting and the fit test and importantly, expanding the overall population a blood test.
Has.
But any of the data that we have seen has lower performance than even the the fit test in terms of pre cancer detection, which is really important as models as the data than feeds these models and similar performance for cancer.
Detection at a similar specificity.
So we believe as a result of that that a blood test has to be priced appropriately and that it has more of an a niche because.
Of its performance characteristics is likely to model out as an annual test it's unlikely to model as in every three year test, putting pretty significant pressure on pricing.
The other thing to know about the blood based program as we don't anticipate.
Having this study done completed until after it's too late to be in the next few ESP guidelines Thats true we think of any other entrants in this space. So the first time, a blood based test would potentially be into us PST of guidelines would be in the 2020.
Six to 2027 timeframe during that time.
We intend to continued to grow.
The market penetration of Cologuard and to continue to enhance like we reference with the voyage study and Cologuard 2.0 to continue to raise the standard.
Bar and the standard enhance our standard of care position in the guidelines so.
That's how we see the overall opportunity with a blood based test we're pleased with our performance and we have not yet decided when we will make that performance available publicly.
Okay, great. Thanks, guys.
Your next question comes from the line of branding Calite with Jefferies.
Thanks, Good afternoon.
Kevin just to.
Come back to the third quarter to what extent you think genomic health was a distraction at all in the period I know you also pulled the reps out for some period of time to go through training for Cologuard 45, you think either of those two dynamics had an impact on the third quarter and then Jeff as we look at the fourth quarter guide seems to imply about a sequential increase of about 15000 test which was up.
Adjusted utilization per Doc might actually declined sequentially can you help us think through some of the some of the moving parts and factors that kind of informed your guidance on the fourth quarter.
Great and this is Jeff first question on the third quarter genomic health and the G.I. transitioned the team has done a very good job of working through all the things that limits of before we have very broad momentum throughout the cologuard business.
Go back to the size of this market 106 million people long term more headed to at least 40% share. We have 5% today nothing has changed about this business. It is very strong.
You had a comment that about the fourth quarter guide.
I would say for the fourth quarter keep in mind when you look over the five years now of history and in all those years, but one we did see a small downtick in the fourth quarter in terms of test per Doctor. The simple reason is seasonality when you head into the fourth quarter you have seasonal headwinds from the holidays patients don't go out to see there.
Doctors as much around the holidays and that impacts our business temporarily over long term. We expect continued momentum when we look at the next year Theres a significant number of drivers in working at to this but we have a lot of new drivers coming on next year in the following year. So we're very optimistic about the state of Cologuard, yes. Thanks, Jeff This is mark.
There are so many positive drivers the first a Jeff highlighted I think is the size of the market over 100 million Americans in our our share position, which gives you a sense of the possibility going forward a big part of that is called guard 45 than 19 million Americans are that need to be screen. It's our moral obligation is screen that population the incidence rate of it.
Increases over 50%.
And we've seen obviously the label change and very good training that training was done quickly and an expedited format. We're now communicating to doctors about that.
The other piece about the business I'm really excited about is the fact that 96% of our patient population is able to receive cologuard without any cost share a $0 copay for almost the entire available market you take that you add on the re screen business. The three year interval and all the patients that start come back to US next year, you add the fact that.
Health systems were starting to see an increase in electronic watering out of our health systems, which is as a byproduct the strong collaboration with Pfizer I really think it gives you a sense that what's in front of US is a really really strong business model.
Thats helpful. Then Mark maybe sticking with you one follow up do you still planned for the Veeva CRM rollout in the fourth quarter and what impact do you think that has on productivity and how quickly that can begin to sort of boost the productivity of the salesforce, that's something that happened fairly soon or does it more measured over a period of time as they get more familiar with the platform.
Yes, we are launching Veeva. The first week in December yes, I think it makes us more productive over time I don't think you see immediate productivity impart because of the timing of year, we're launching the tool. It enables the representatives to better manage their business their doctor engagements, we will also be putting our marketing.
Content on the V. the platform through their iPad, which will enable them enable them to have a better conversation with their physicians I think you really see the productivity in next year.
Hey, good thanks.
Your next question comes from the line of Derik de Bruin with Bank of America.
Hi, good afternoon.
Hi, Derek.
I Dare Hey.
Hi, Mike So I'm just curious.
The pro forma steel model that you put out there basically implies.
Standalone growth to the Standalone.
That linear basis about 40%.
Are you comfortable with that number that's out there right now you've got to meet with that.
Derek This is Jeff.
We plan to issue 2020 guidance on our fourth quarter call, which is when we typically give it im not sure, which which model you're referring to but always said about next year is what we said in the last call of 1.6 billion of revenue at 1.2 have been a blend of gross profit we havent commented beyond that.
I visit they should be doing that on the pro forma number for the company in the Standalone genomic health under the dock.
Finally, we just sort of backing into 40% growth rate on exact that way.
Getting there.
Hey, how.
Just can you talk about.
Progress in getting Rescreening.
Given that Theres number of people are retesting.
Yes, Eric this is mark the recurring business is obviously, a growing opportunity for us and is sizable next year, we've continued to outreach to patients and see not only a better compliance when a patient actually has the re screen tests ordered they return it at a higher compliance rate than ours.
Our rest of patients the new new screen patients are we continue to look for productivity gains I would say, we've not completely solve this yet but we have made measured performance. We continue to try ways to better engage patients both digitally and through written communication to get them to activate the come back to us I will say that once we get more.
Embedded electronically both with epic and ended in electronic medical record will continue to see a leverage in this and this opportunity.
Great and what was the combined for the quarter.
67% and then when they look ahead to next quarter I expect it to be at least 66% theres always a bit of a seasonal impact again similar to what we said about the holidays from a completed test standpoint around the holidays patients complied is slightly slower rate.
We expect it to be down a little bit in the fourth quarter.
Great. Thanks.
Your next question is from the line, a Doug Doug Schenkel with Cowen.
Hey, everybody.
So both both Brian and Brendan asked about Q3 performance in what's implied in guidance for Q4.
Yes, I apologize, but I don't think we got out of you what we're looking for some I'm going to take another shot.
I think almost all of us on this call know about the market opportunity, it's huge and we're excited about.
Your positioning to get more people screen for what's a very treatable cancer that said, while we appreciate that I know you. Appreciate part of our job is also understand to understand how well you're executing to planned in underlying trends in the business. So again, maybe to take another angle on this in the third quarter, while orders per Doc improve.
<unk> 0.07 in Q3 relative to Q2 this was actually a moderation relative to the average we've seen in terms of sequential growth on that metric over the past six quarters.
Were they are transitory dynamics in the quarter several of them at the unless that already where they are transitory dynamics in the quarter that impacted productivity as measured by that metric that you don't expect to continue in the long term. That's the first question.
The second question again going to guidance is you talked about a seasonal moderation Jeff.
But I don't think that that was true last year and if we think about things like the fact that the Pfizer reps as well as the reps that you hired in the back half of last year or just hitting their stride spending on advertising is not only increasing but increasingly going from Pfizer, which is supposed to actually increase.
The efficiency of spend why wouldn't those things, especially given as you said how early the stage of market penetration is why wouldn't those things overpower any seasonality in the business.
Hey, Doug I'll I'll first take this and pass it to Jeff.
We appreciate the fact that youd have a job to do and I think what we're trying to say is.
Overtime you have seen.
Fluctuations in the performance what you're looking at here is a record quarter of.
Of 90% order growth.
And you have to put all of this in the context that there are always puts and takes at any given time. When you are moving reps around were when you're putting in a new IP platform.
When you.
Have a large partner with dynamics on their own.
And what we're trying to say is put all of that noise aside and look at the.
Crack record of continued growth in that growth is driven by this underlying growth in the.
Overall number of people who are willing to get screened and we have seen this not change much since we launched cologuard that 50% of people get a cologuard test have never been screen before.
With.
90 million Americans in the 45 to 49 age group and about 35 million Americans in the older age group that have never been screened this market is going to grow and it's going to continue to grow at a steep pace.
So we're not going to get into all of the dynamics of of a quarter that was a really strong quarter will what we will says we're very confident as we look at next year, Jeff If you want to provide any additional color.
This is Jeff just to comment on Q4, so when I look back over every year since launch Q4. The completed test per physician have been down sequentially relative to Q3, the only year with that was not the case was 2018 in 2018 keep in mind that we had just added some reps during the middle <unk> third quarter.
In September we had some new coverage wins with Cigna and anthem and then in the started the fourth quarter. Our Pfizer partnership began so there was a lot of unique tailwind to the fourth quarter, the more normal trend, though and one that you should expect going forward is to have a a slight downtick and the completed test per physician in the fourth quarter. That's.
Not to say that the longer term trends are unclear, which Kevin talked about longer term.
The number of completed tests per physicians, who go up significantly today, we've only capture just about 5% of the available patients per physician Theres about 300 patients on average out there today.
Per physician the could today use cologuard. So it's a huge market and we're just getting started.
Okay. Thank you guys for that I. Appreciate you indulging on those topics again, just a couple on up Lucy.
It looks like you reduced ph cut off to 48 could you just walk us through why you did that and what the broader implications are.
And then just from a performance standpoint, if I remember correctly, there was a drop off insensitivity. When you move from the case control study deep sea or their reasons you wouldn't expect the same type of drop off this time. Thank you.
Sure.
Thanks, Doug well the reason that we included age 40, plus is to make sure that we have data should there ever be a further lowering of the.
Age in the colon cancer screening guidelines, most likely we see that the guideline staying at age 45 for some time.
It's an opportunity, though for us to evaluate performance in that even lower age group.
The other key differences here between Blue seeing deep sea is we're including patients with the second with more than two first degree relatives with CRC or one first degree relative with CRC before the age of 60, so people with the family history or patients with the family.
The history of a genetically.
Pretax.
Predisposition to colorectal cancer like ebay.
Or Lynch syndrome, we also have 120 sites versus 90 sites in the deep Sea study and.
We're also doing optional blood collection, we expect to get blood.
Collect blood from most patients in this study obviously people are lot more familiar with Cologuard now than they were when we initiated the deep Sea study. So we're confident that we can meet our enrollment goals in the timeframe we're looking at.
Okay and in terms of the performance do we expect a performance drop off as we look from a case control study to a prospective study.
That has is almost always the case that you see that performance.
Drop off the key thing here, though is specificity the specificity of 92%.
We.
Those us.
We're fairly confident that we will be north of 90% specificity given that that's where we will set the cut off in the large number of patients that we have studied many in that prospective environment, but yes, you always see whether it's a blood based test are still based test you would expect to see some performed.
Patients.
Okay. Thank you very much.
And one thing to note there Doug is we put out the data comparing cologuard.
The current version to Cologuard 2.0 to show the relative performance difference because that's that can give you some indication of our competence level that cologuard 2.0 is actually a better test.
Your next question comes from the line Katherine So would Barrett.
Hey, guys. Thanks for the question first for please see how long do you expect that trial to take and what do you think the all in cost of this study will be.
We have not provided clarity on the former I'll, let Jeff decide whether he wants to provide clarity.
Well, here's what I'll hand, the former.
Cologuard Deep Sea study took I think between 18, and 21 months, there or thereabouts and.
We shouldn't be longer than that's that's.
So Kevin this is Jeff deep Sea took about 18 months to enroll and we've said before it cost around $50 million. All in this one over overtime exact has gotten even more efficient at running this big studies, we've got a lot of experience going to these studies. So it is a core competency so as Kevin mentioned, our goal would be to get this done as quickly and efficiently as Paul.
CIBIL.
And then just I'm clear on that blood test piece of that if the tests performed as well as your intention to use three see is the ASCII a pivotal trial for the blood test as well and then off of that I know you are talking about performance of that blood test, but can you just say how many patients is included in that case control study you meant.
And Kevin.
In terms of the blood.
Case controlled study.
Yes.
We havent disclosed that but it was sufficiently powered to give us confidence in terms of the number of cancers.
And then yes, Kevin this is Jeff we do intend to use these blood specimens collected as part of Lucy as towards the FDA submission.
Okay, Great and then last one from me on 45 to 49 on your website. It says that 74% of of Cologuard patients in that age group has had no out of pocket cost for screening, which seems pretty high for this early on is for that 1.6 billion revenue number you've talked about for 2000.
20, how much of the impact do you think that age group could have on results next year.
Kevin as Mark said house, so that 74% numbers a reflection of some of the positive moves we've seen from Aetna.
Our first and Blue Shield, the California that Kevin mentioned, we're in active conversations with all the other national payers.
We have confidence that those those conversations are progressing I do I would signal that a lot of them are anchored to us PST EPS evidenced review of this age cohort, which will we likely believe will happen in 2021.
So I think we'll have to wait and see on the payer coverage, but portion of the 45 to 49 I think we'll be gated by the access that's available for that patient population as it grows I think that business will grow with it.
Kevin This is Jeff just add to what Mark said part of why we're so excited about 45 to 49 is that this 19 million Hearst. In addition to our target market includes patients that are almost all unscreened.
So when you look at the number of incremental people, who are available it's about a 50% growth and people who can today use cologuard on top of the in the 45 to 49 year old patient population Cologuard fits very well into these patients lifestyles. So we're very optimistic that we can have a very strong start as far as what's baked into the prevalent.
Guidance for next year, we'll give more color on that on the fourth quarter call.
Okay, great. Thank you.
Your next question comes from the line of.
Dan brand in would you be asked.
Great great. Thanks for taking the questions I wanted to just first question just on Pfizer maybe.
Kevin Maczka, Jeff in terms of the relationship maybe post LICA going off patent has that kind of impacted maybe the salesforce.
Kind of where they're carrying where they're pushing cologuard and then maybe mark could you speak to kind of where we are in their productivity curve I know typically there's a number of visits where doctors will begin north sales people get more productive with Pfizer coming on board last October kind of how we hit that point, yet or only part of the way in there just kind of walk through that.
Productivity onramps. Thanks.
Then I have a couple of follow ups.
Dan It's Kevin.
Why is it really has been an incredible partner and.
There have been some moving pieces there.
They are fully committed to cologuard their commercial efforts have been.
Remarkable and we've learned a lot from than we're obviously getting a lot of attention.
Because of and that was really a driving force behind partnering with Pfizer and Pfizer wanting to partner with us.
We're getting a lot of their attention their health systems team has really.
Kicking in we're seeing that.
The results of that and we expect that to continue into next year Mark at Dan What I'd say is as you know we're about a year removed from the start of the collaboration with Pfizer and this is about the time six to 12 months post removed from.
Promoting cologuard that you start to see the prototype our productivity curve ramp up.
Lets also remember that pfizer's delivering most of their calls in the second or third position, so where we see the greatest strength and the co promotion between Pfizer an exact sciences when we share focused on a single dr. when that happens is where we see the most lift I would echo what Kevin said this is a very productive partnership the teams.
We are working collaboratively very well together the qualitative feedback continues to be positive and we continue to believe with the large market that we're operating in our share position that we've got a great great future ahead of us.
So maybe one quick follow up related to that so so is it fair to say that possibly that productivity impact that you expect to see kind of that's largely ahead of us here.
And then I think Thats a fair statement, we're right at the point, where you would see the productivity picking up and this is the time that with where the organization between Pfizer an exact of we're focusing our call effort. We've had a year of behavior to observe where Pfizer is made calls where exact has made calls where we've made them together that allow.
Houses to optimize where we go next it has also the time that reps naturally start to be become more productive.
Hi, This is Jeff Thats, what Mark said I would expect the Pfizer reps and the exact reps to continue to get more productive every year for the foreseeable future I mentioned earlier that the reps that we had from the time of launch so but five years ago continued to get more productive. So it's not that you get say 612 months said and you peak out no you keep getting better and better.
At your job.
And then and then maybe just on some of these other big opportunities that are ahead of you and you kind of alluded to maybe 2020 and beyond obviously, given your 5% penetrated but between the IDN.
And the reordering the electronic quarter those are three big kind of opportunities could could you maybe just briefly touch upon kind of where we are with kind of traction on those three thanks.
IDN reorder and.
And electronic warfare.
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Today, and its Mark I think you framed it correctly.
Where we see an electronic ordering we know that anytime we have a system more physicians using electronic means to order. They order on average at least 20% more than those are on traditional facts order.
So we know that when that happens we see growth.
What we see and health systems in General is movement. So as we focus with Pfizer on accounts one of the measures of productivity of that partnered effort against the account increased electronic ordering in a bi directional interface, we see growth in that number number of systems using a bi directional interface.
Growing every quarter, we see that starting to pick up traction I answered. The recently question earlier, but it is an opportunity that grows over time, we're seeing performance both in the compliance rate in terms a number of kits that come back to us in the second order of the eligible patient population. We saw a tactics were deploying to drive incremental growth.
Both of the re screen population a number of patients that come back to us there's still room for improvement there and then the last one was on.
Thank you hit it IDN reordering electronic corner, yes.
Fair enough.
Good Kevin I mean I know.
Yes. Your third question, but did you talked a lot about liquid biopsy kind of during your prepared remarks I.
I think you mentioned in his prepared remarks at your expectations are for your test and for other tests that are.
Working through the different levels of development that you think the best case, there be similar to fit. So basically can you just remind us so fit as I recall, 95% set specificity, 74% sensitivity is that kind of what you think the best case is kind of your tests and or any of the other tests that are working their way through development, thanks, and and 24 per.
Sense specificity for Im sorry sensitivity for advanced Adenomas and.
We.
We have built.
A model a very sophisticated enhanced version of the models that exist in colorectal cancer screening. So we have the advantage to be able to scenario play with those models in terms of if you increase the advanced add enormous sensitivity.
Bring down the stage, one cancers sensitivity and play with the specificity then does that meet the U.S.P.S.T. of criteria for inclusion.
The challenge that you see with most of the data for those who are aspiring entrance into colorectal cancer screening with the blood based test is low early stage cancer sensitivity poor specificity relatively poor specificity relative to.
To that that test.
And no data on advanced at enrollments and to get advanced that no. One data you need to run a prospective study because they had enormous are typically cut out.
Before.
But they are typically cut out by by that.
By the time, you have an opportunity to get a blood drop so if you click the blood draw book for the call announced could be that works and you can collect those samples what you saw in the data that we just presented was 65% advanced at anomaly detection, we do not expect the ultimate Cologuard 2.0 tested to deliver 65%.
Those advanced at an almost where larger because they were left in and Thats. How we were able to get a blood draw before calling us skippy. So when you take a look at what is required you and you need to have some measure of advanced at enormous sensitivity and that's the hardest thing to do because there is one layer of the of cells that are starting to progress to.
Words cancer and there are being shut in to the colon not into the blood supply, which is why it's really hard to find signal.
That's the context here.
As a result of all of that there's one big takeaway.
A blood based test as Lou is likely to model as an annual test.
There was another takeaway from that.
Is that the price is probably in the area of about third of what Cologuard is priced today.
That doesn't leave a lot of room for all the costs associated with DNA sequencing, which is why we are focused on a.
Lower cost approach so that we can bring a test to market for people, who refuse both cologuard and.
Calling us Kobi, which we think will be us of small fraction of the overall opportunities. So.
We've spent 10 years really digging in here we've looked at every way that we could get to a 100% screening. This is one of those ways. We don't think it's going to.
Take share in a major wave from either calling us can be or cologuard, especially as you project were calling us been cologuard and up.
A decade from now where we think we you have 85% penetration between those two two approaches and probably roughly split.
Thanks, Kevin.
When did that maybe a long winded explanation, but thats the context with which we are.
We plan to launch a blood based test.
Great. Thank you.
Your next question.
From the line of meat start out with if need be leerink.
Yes, Hi, Kevin Mark Thank you.
Mark if I, if I could ask on on the reps as they.
Darren you get feedback.
From the new physicians, and a new docs and as well as the multiyear Cologuard prescribers.
The feedback changed from either of those two groups in the in the near term here just trying to get a sense of what the exact reps themselves into Pfizer reps are hearing is that changed at all and as it is any different than exact versus the Pfizer reps.
Elaborate there.
Really helpful.
So theres no qualitative feedback difference between the cohort of doctors are the reps.
And how they colon doctors, certainly where we associate collaborative effort on a single Doctor. So a doctor that has a large opportunities screen patients we see the greatest lift so in that dr. they've been convinced to use cologuard is a more frontline option than those that have lower value or current lower writing so.
The only qualitative difference there is that they are stronger believers in corporate part of the frontline screening death by way of the frequency of the effort and their acceptance of the message, but it's the underlying story is still true which is doctors are responsive to promotion and we don't see a degrade and that when we make more calls and their willingness.
Yeah and use of this product.
Okay, Thanks, and if I could ask on on on deep Sea and number of questions have been asked here. So.
I appreciate that you're starting deep sea blood.
Sub study here I'm, just wondering confirmed your confidence appears to be coming from this case control study or internal study that you can conducted here.
Given the.
The investment into this and your confidence behind Us I mean when can we.
See this this data and the second part of that question is.
You have started enrolling here I just I was just curious if you.
Have you know among the 120 sites that you have do you have any enrollment concerns.
Finally number of.
Colonoscopies are conducted everyday.
But we have a few other trials that are ramping now and the next year three that I can see 10000 patient trial. So just wanted to get a sense of is there any.
Is there is there any competitive concerns and these trials.
We have no plans in the near term to publish our internal data. There are 120 sites that are enrolling.
We have.
Tremendous confidence that we will be first to complete studies, we have the scale we have the relationship with.
Physicians in the commercial organization and the brand awareness and focus so we're confident that will be first.
Yes funny. This is Jeff just to add to what Kevin said, we have multiple prospective studies underway now many of these samples are being used for product development.
Many of the sites in these studies, we expect to convert over to the Blue see studies. So I think we've we're in a very good position to enroll the 10000 patients that we need and moved very quickly with Lucy.
Okay and last one if I could appreciate if I could squeeze in the 45 to 49 contribution in the quarter, Jeff and what was the expectation for the contribution in the fourth quarter.
For the 49 nine year old thank you.
Revenue impact of 45 to 40 that given when the FTC approval happened.
Was not material to the quarter, we will not promoted product off label and that approval came so late in the quarter that it wasn't material and what was the second question funny.
Just in the fourth quarter, if you could.
This is September 23rd I believe when it came through so I just wanted to get a sense of what would be potentially here in the fourth quarter because it was marketed I believe on the first day.
It could have been market on the first day. Thank you.
We're very excited about the opportunity here again 19 million people see huge opportunity long term. However, keep in mind that we're just now at their training the reps laying the foundation from a marketing perspective, so I wouldn't expect to materially impact in the fourth quarter either.
Okay. Thank you.
This question is from the Mark on the line of Mark Massaro with Canaccord Genuity.
Hey, guys. Thanks. So my first question I guess, a two parter on marketing.
First is do you expect to initiate the consumer initiated pilot in Q4 or have you started that and then the second one is when should we expect to see.
The age 45 change to some of these.
Direct to consumer commercials on TV.
So this is mark I'll take the second question first so one of the things. We noted be true is that as we talked about this is a big opportunity. We know the 19 million the 50% increase merian cancers societies recommendation really triggered our FDA labeling effort and you've.
Heard that we've got 74% coverage and that coverage needs to grow overtime to really get leverage and this screening population that vastly remains on screen. So we believe the most important thing to do as communicated doctors first so thats why our training has started and we were out communicating to doctors and frankly to payers.
We expect to convert our TV commercial to say eligible for 45, starting early next year.
So that and I think that triggers appropriate because then we will have talked to our physician population Onest. I've also mentioned previously that we were looking at a consumer initiate a pilot this year and we're still on track to do a small pilot on capabilities. This year.
Got it and then.
Did want to ask a question about the blood test initiative.
Can you just clarify that this is expected to rollout in Europe or outside the us I just wanted to clarify that I don't believe you have plans to launch a blood based test in the U.S. and if you do can you please comment on that.
We this will this study that we're doing now bluesy woods support in FDIC submission in the US yes in our comments so far on this call have been aimed at the U.S. market not the European market the European market as an opportunity we'll look at we'll do that in.
Combination with the genomic health International team, which is about 100 people strong and they'll help us evaluate the opportunity outside the U.S.
Excellent and then one last quick one on the epic health record system that was implemented in the third quarter.
I could be wrong, but I think there may be another piece to this sometime next year and I think it's related to capabilities surrounding tech text messages or E. Mailing to drive reordering is that something that we can expect later next year or was that also implemented implemented in Q3.
Mark I think what your recalling is that in towards the end of next year, we expect epic to enable electronic ordering for.
Virtually all physicians, who use the any instance of epic and that is an important long term driver of adoption because it enables.
Tremendously easy ordering for physicians and as you know epic has about 70% market share so.
That I think is the question or is the thing that youre remembering.
Mark This is Jeff to add to what Kevin said today, when we look at all the providers that order electronically comparative providers that order via facts the ones that order electronically over order over 60% more the ones that order via facts and as Mark said when you see that conversion to electronic order you see a pretty quick.
Bump.
Up in their order rates. So we're very excited about the opportunity over time that up they can help us with.
Great. Thank you.
And we have restart allotted time for Q1 day I'll now turn the call back over to Kevin Conroy for final remarks.
Well. Thank you for joining us today to review, our third quarter results and the progress we made toward our 2019 priorities. The exact sciences team delivered another strong quarter made significant progress enhancing our internal infrastructure and advancing our pipeline positioning us for long term sustainable growth.
Thank you to the entire team that exact senses for your hard work and continued commitment to our mission.
This concludes today's conference call. Thank you for your participation you may now disconnect.