Q4 2019 Earnings Call
For instance, centrally up the name of the conference you were talking to join please.
Oh, I would like to James right exact sciences earnings call.
In may of this filling up your first a loss me please.
First name Navy D.A. I'd.
And last name Brown via our own level yet.
And now have your company named please.
And I are a era.
And they have your telephone number with the area code. Please.
You want to 960 3697.
Thank you your line will not be placed on music hold until the conference begins.
Thank you.
And your telephone.
Please be advised that today's conference is being recorded.
If you require any further.
The press Star Zero I would now like to hand, the conference over to your speaker today.
I can Jonas manager Investor Relations. Thank you. Please go ahead.
Thank you and thank all of you for joining us for that fences fourth quarter 2019 conference call on the call today or Kevin Conroy, the company's chairman and CEO and Jeff Elliott, Our Chief Financial Officer.
That sounds issued a news release earlier this afternoon detailing our fourth quarter financial results.
News release in today's presentation are available on our website at exact sciences dotcom.
During today's call will make forward looking statements based on current expectations.
Actual results may be materially different from such statements reconciliations to GAAP figures are available in our earnings press release and descriptions of the risks and uncertainties associated with exact sciences are included in our FCC filings.
It can be accessed through 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 to end the transformative year during the quarter. We closed the genomic health acquisition as a combined company, we intend to BB advanced cancer diagnostics leader for years to call. We help screen 477000 people would go.
Older and tested 41000 patients with Oncotype and delivered nearly 350 million in revenue on a combined pro forma basis. The strong foundation, we'd go for Cologuard and Oncotype capabilities of our combined team and our financial strength will allow us to capture a significant portion of.
Our combined 20 billion total addressable market and deliver more innovative tests to people in need.
Today, We will review our fourth quarter financial performance and 2020 guidance. We'll also discuss our key accomplishments in 2019 of the path forward work combined team stuck with our 2020 priorities.
Our CFO, Jeff Elliott will now review our financial results. Thanks, Kevin Good afternoon, everyone. My comments will reflect contribution from Joe make health starting with the acquisition close on November eightth, rather than for the entire quarter unless otherwise stated.
Total fourth quarter revenue was $296 million and $348 million on a combined pro forma basis.
And our screening business, which primarily includes cologuard revenue of $229 million increased 60% on strong cooler good volume growth.
Average called a good revenue per test was $481 slightly above the third quarter level.
We expect stable Cologuard revenue per test near term they continue to see a long term path to at least $500.
And precision oncology, which includes the former genomic health business.
Fourth quarter revenue was $66 million.
Standalone Journal makeup revenue for the full fourth quarter would have been $119 million an increase a 14%.
Total fourth quarter gross margin, including amortization of acquired intangibles was 72% non-GAAP gross margin, which excludes amortization of acquired intangibles was 76%.
Fourth quarter Cologuard cost of sales improved $6 to $123 per completed test inline with our guidance.
Fourth quarter, so additional fixed costs from bringing our new cologuard left by mine to meet growing demand.
We expect to leverage these costs over time with increased Cologuard volume and lab automation, we're confident enriching our long term cost per test goal of $100 or less.
Total sales and marketing expense was $120 million, including the Pfizer service fee, a $14 million GNS expense of $145 million included $53 million and transaction and integration costs related to the genomic health acquisition.
R&D expense was $43 million.
Relative to our guidance for Standalone exact sciences sales and marketing Gionee and R&D expense with each slightly favorable helped by timing.
Fourth quarter, adjusted EBITDA was $10 million, our definition of adjusted EBITDA as back stock based compensation acquisition and integration costs and any loss on settlement of convertible notes.
Total fourth quarter Capex was $34 million included genomic health, bringing the full year to $182 million.
For 2020, we expect Capex of approximately $125 million, which is slightly to the first half of the year and including Capex for the acquired genomic health business.
We ended the quarter with cash and securities of $324 million.
Turning to our 2020 guidance based on underlying strength received in the business, we're raising our revenue outlook to 1.61 billion to 1.64 or five 1.64 or $5 billion. This assumes screening revenue of 1.1 to 5 billion to $1.15 billion and precision oncology revenue.
A 485 million to $495 million.
We expect non-GAAP gross margin in the 75% to 76% range with screening gross margin relatively flat year over year as we work to leverage the new lab.
This assumes netted $2 million amortization of acquired intangibles.
In addition to the full year impact of genomic health. There are three main drivers of sales and marketing growth of 20 to 20.
We are investing about $45 million in a primary care sales force expansion, we expect about $35 million in additional services fees paid to Pfizer and we'll see the full year impact of investments made in 2019.
We expect gionee to increase of $100 million driven by the full year impact of genomic health the investments made in 2018 and additional headcount to support growth.
We expect R&D of approximately $200 million with about 75% of that related to our pipeline.
For the first quarter, we expect revenue of $349 million to $359 million. This assumes screening revenue of $230 million to $235 million and precision oncology revenue of $119 million to $124 million, we expect first quarter operating expense to increase about 50 million down.
Yes from the fourth quarter with a full quarter impact of genomic health, partially offset by reduction in acquisition and integration costs.
We expect total sales and marketing to be around $185 million, including the full quarter impact of genomic health, our primary care salesforce additions and an additional $10 million in Pfizer services fees compared to the fourth quarter.
We expect total DNA of around $110 million with the reduction in acquisition and integration costs of about $50 million compared to the fourth quarter, partially offset for the full quarter impact of genomic health and an increase in headcount to support growth.
We expect total R&D of what $52 million with growth from the fourth quarter, primarily due to the acquisition.
As we've indicated over the past year, we don't plan to provide cologuard or oncotype test volumes and related metrics going forward.
I'll now turn the call back to Kevin.
Thanks, Jeff.
Sciences team had three key priorities in 2019.
During our partnership with Pfizer enhancing cologuard in advancing our pipeline of blood based cancer tests.
During 2019, we continued laying the groundwork to allow cologuard to reach at least 40% of the us colorectal cancer screening market from just over 5% today.
Our expanded sales team innovative and evolving marketing campaign and growing payer in health system relationships provide the key pieces to support Cologuard growth.
Our fines or partnership is strong we're pleased with the effectiveness of our partnership last year, and we expect even greater productivity from our partnership this year.
Support to support these teams and future growth. We also increased our lab capacity and meet our it systems stronger and more flexible the sales team now has advanced selling tools and capabilities through the veeva customer relationship platform, which we made available and.
December we implemented Epyx World class electronic health record system as the backbone of our IP infrastructure and an improved nearly every other aspect of our IP infrastructure in 2019.
The team more than doubled our lab capacity to 7 million test annually by introducing automation and opening a new web site in medicine.
We've invested significantly to help establish cologuard as a new standard of care and colorectal cancer screening we've created a powerful brands supported by a large body of clinical evidence broad physician adoption and a 1000 person commercial organization. This will allow cologuard to to dramatically.
The improved colorectal cancer screening rates in the U.S.
Our second 2019 priority was to enhance cologuard, including the label expansion to age is 45 to 49 and and improved version of Cologuard. The FDA approved Cologuards label expansion to include these $19 million average risk Americans last year. This represents an important opportunity to screen.
People earlier and to impact the rising incidence of colorectal cancer in younger age groups.
Cologuard is a convenient effective option that fits well with theyre busy lifestyles.
To increase adoption in this age group, we're enhancing our marketing efforts and working to raise awareness of the need for earlier screening. We also plan to published results from our prospective study in the 45 to 49 year old age group this year to further support Cologuard use.
The team also made progress on an enhanced version of Cologuard with the potential to further differentiate jet is our frontline screening test, we presented promising data showing new markers with improved specificity, while maintaining a high level of sensitivity when compared to the current verse.
One of Cologuard.
Based on this study we kicked off a 10000 patient prospective clients to validate performance.
Our third priority was advancing our blood based cancer diagnostics program.
In November we presented our third dataset for our liver cancer tests design for patients with liver disease in need of more accurate and convenient testing options.
These data demonstrated the superior performance of our liver test compared to the guideline recommended blood test Alpha Fetoprotein with 80% sensitivity for all stages of liver cancer at 90% specificity.
We plan to make our test available in the second half of this year with the goal of generating real world evidence to support guideline inclusion broad reimbursement and adoption overtime.
We look forward to offering our test to the 3 million total eligible Americans.
And demonstrating the power of our pipeline and the strength of this combined team.
Exact sciences is the leading advanced cancer diagnostics company globally, our people and infrastructure combined with our financial strength will help us extends our leadership in cancer diagnostics in the next decade and beyond.
Our partnership with Mayo Clinic, 200 million dollar R&D budget, and our experienced R&D team of 250, scientists and engineers will allow us to accelerate the availability and growth of new innovative tests to patients in need.
We recently signed agreements to acquire paradigm and Biomimics another step forward in extending our leadership position in advanced cancer diagnostics.
Paradigm and Biomets have exciting DNA sequencing technologies and experience scientists.
Paradigm provides a therapy selection test for late stage cancer patients. The test recently received a local coverage determination through the mall the ex program.
And is differentiated by faster turnaround times and a design that requires less sample input.
Many patients today don't have access to therapy selection testing because it takes to longer there is not enough DNA in the sample to obtain a valid result.
This information is critical to support treatment decisions and the paradigm test will allow us to provide smarter faster answers to more patients today. The paradigm test is a tissue based test in the future we plan to make available a blood based version.
Overtime, our precision oncology sales team will offer advanced cancer test like these to patients and and oncologists, who need them expanding our total addressable market by about 4 billion globally.
Biomarks a team we collaborated with for years provides critical sequencing and biomarker discovery capabilities.
We've worked with by on mix in the past to identify unique markers. We plan to use in pipeline tests. This talented team will bring additional resources to our world class R&D organization, allowing us to serve more patients across the cancer continuum, This technology and clinical lab testing capability.
We will play a pivotal role as we work to bring blood based therapy selection and minimum residual disease tests to patients and physicians.
Building, the leading advanced cancer diagnostics company starts with clear defined and well communicated priorities in 2020, we are committed as a team to achieving these three core priorities.
Deliver more answers enhance the customer experience and power new growth.
Delivery more answers means growing our core business cologuard and oncotype to impact more patients we have a solid foundation and clear plan in place for bolt.
We want to enhance the customer experience by making every aspect of the testing process really easy for patients physicians health systems in managed care organizations.
Our experienced teams and infrastructure will make working with exact sciences across the cancer continuum simple and straightforward for all our customers will power new growth by continuing to lay the groundwork for future cancer tests. This is fueled by our tenure collaboration with Mayo clinic, our experienced R&D.
And our automated accurate and differentiated platform.
We expect our liver cancer test to be next of many innovations in cancer diagnostics on this team.
We look forward to providing updates on our progress toward these priorities throughout the year, we're now happy to take your questions.
As a reminder to ask a question you May press star one on your telephone to withdraw your question press the pound or hash key please standby, we compile the culinary roster.
Your first question comes from Derik de Bruin with Bank of America. Your line is open.
Hey, good afternoon. Thanks for taking my question. So I guess the first question.
Cologuard guide for the first quarter, I think with a little bit below where people were thinking can you sort of talk about salesforce productivity and sort of contributions from Pfizer was going in with Ed just sort of walk us through how you got to that first quarter number.
Hi, Derek this is Jeff first of all take a step back here. The Cologuard business is very strong right now when you look ahead to the year broadly there is a robust set of growth drivers you mentioned rep productivity, obviously, that's a big one when I look at every cohort of reps, we hired whether a year ago or.
Five years ago every cohort to continues to get more productive.
Well, we announced earlier last month as that we are expanding the sales team. We are adding over 150, new reps. So rep productivity will be a big driver. This year, we see other big drivers. This year when it comes to three year Rescreening Theres over 200000 more patients do for Rescreening. This year than last year, and we are seeing a higher capture rate on the re screens.
Yes.
Health systems, a big part of the business and growing electronic order in overseeing more more health systems compared to electronic ordering so the point here is there's a lot of growth drivers in the business is in very good shape. When you think a phasing through the year well. We're signaling is expect a typical facing through the year when they look over the last two years 18 in that.
Teen Q1 was about 20% of the volumes for the year. When you look at the 2020 guide what we're signaling is Q1 will be about 20% of the revenue for the year. So I would think of this is a pretty typical year for cologuard.
Great and.
On the genomic health business.
Any specific.
Coming milestones and things that we should be looking for in terms of clinical data releases for the next year.
Yes, so that business continues to perform very well, which is excited to keep in mind that the second half of 29 team was arguably the strongest period of the company's history right and that came at a time during the acquisition announcement and the acquisition closed the team at Semicon delivered two very strong.
Quarter. So we enter 2020 with very good momentum really a lot of this momentum stems from the continued benefit of the to the rest study, which is now almost two years old.
And as well as the team is really high quality team top to bottom really high quality team. So I would expect 2020 to be another good year of execution. When you look at the three main components of that business. The us breast franchise, we expect mid single digit growth there in that business. Now you are your two years post to the Rex.
So some moderation in the growth was due to expected on internationally again, a really strong team, which will provide a valuable foundation for years to come as we bring new test to market expect strong double digit growth internationally and prostate prompted ended the year last year with very good momentum is strong we expect strong double digit growth.
And that business.
And even what you're seeing is even stronger revenue growth and volume growth given an improvement reimbursement dynamics.
Great and just one final follow up going back to the the first point I guess just.
[music].
Third quarter into fourth quarter of last year.
People were little bit disappointing the numbers I guess, if the question being in first quarter being a little bit softer on the core of our guide I guess what.
What's your level in terms of confidence on the back half acceleration.
When it comes to Q1, you have to keep in mind the seasonal impact on this business, we've talked about holidays. The for holidays lead to above pretty dramatic impacted in primary care seeking behavior. So you think of the back half of December even weaker Thanksgiving fewer people go to see the primary care.
After that leases some softness in Q4, the bigger impact from the holidays is really felt in Q1 right. Because there is about a 30 day lag between an order at a completed test and you all look at completed test. So the seasonality really hurts Q1 more than Q4, so thats something to keep in mind. If so this is a floor it at some point that Q.
One cologuard business will end up being down below Q4, Theres no way around that now when I look internally at I'd look at kind of daily order trends when I look at that and think about all the drivers we have over the course of this year I'm very confident in the outlook. In fact, we're now pointed to a higher cologuard number at a higher overall red.
And a number that we had talked about previously select certainly sort of today, we're very confident in the state of the business today.
Great. Thanks.
Your next question comes from Brian Weinstein with William Blair. Your line is open.
Hey, guys. Thanks for taking my questions.
Starting on the acquisitions that you guys were talking about paradigm and by almost share.
Did you disclose what you paid there and then specifically with each one of those on paradigm.
How quickly do you think you can move that from a tissue to a blood based test and where is that in process now and then on biometrics.
He mentioned Mardi testing there in particular when would we see something on that how close are you to too.
Causing something there just more broadly on on some of the biomarker discovery that they're doing when would we see some some evidenced progress at that they're making.
We're.
We're really excited today.
Have both of these biz businesses as a part of the exact sciences family. They provide the DNA sequencing capabilities and there are really important test that's differentiated from other therapy selection test.
We're not giving time frames at this point for when that test will be in the hands of the outfit.
Of the precision oncology salesforce or when the liquid based version of vet test will be available suffice it to say, we have the technical capability to deliver those solutions to oncologists.
We need them and it's important to note. It's about a 2 billion dollar Tam in the us and about that same size ex us and we're a company with the.
Proven ability through the precision oncology international business unit to deliver new innovative and.
Life, saving and life changing tests to the patients who need them. So we're really excited Brian about what pair paradigm can do.
Where patients looking out into the future.
We're also weve already developed Biomarkers with Biomet, So we've had a long relationship with Biovance.
And they have delivered to us biomarkers that are embedded in various products that.
We will bring to physicians and patients into the future.
Im not sure that will ever really disclose exactly which biomarkers they develop.
Compared to the male clinic relationship in our own internal efforts suffice it to say.
They are approaching biomarker discovery from a different direction than either we or we in combination with the Mayo clinic, and we think that will make a big difference over time, we're really excited about these.
Two acquisitions, we have not disclose the purchase price.
Okay and then.
Kind of a higher level question here before you Kevin I mean, there so out of people I think struggling to understand the potential for a broad based screening tests and calling card colorectal cancer. I mean can you just review for everybody Youre take in terms of what you think is needed.
Not only just have a test approved but also getting guidelines get reimbursement ultimately used by clinicians and when we're looking at data.
From whoever's, putting it out there what are the things that are most important in your view for people to be considering in terms of things like trial designer statistical methodology et cetera. Thank you.
Thanks, Brian I think the most important thing to consider when you look at the opportunity in colon cancer screening is that there are 106 million Americans in the air average risk screening population between the ages of 45, and 85 106 million.
There are 50 million, who today are either not screen or out of compliance with screen $50 million.
As you know we have delivered about results to about three and a half million people.
And.
And so we've barely gotten started and that is.
A huge opportunity for Cologuard, and we think and I think it's important to understand that the current tests available with calling us to be and Cologuard clearly the two most sensitive test which is the goal of screening is to be able to detect cancers and pre.
Cancers at a high rate and Colin as to be in Cologuard are above the rest of the pack that fit and that will be tests.
When you think about a blood based test.
You have to consider what is the sensitivity and specificity and and to date.
The folks who have worked on this including exact sciences.
Have delivered.
Case control studies that are not particularly impressive relative to cost could be in and Cologuard and we think that it's a long effort to make a difference I think there is a role for blood based test, we think that will be.
Smaller roll compared to those tests with a longer interval testing cologuard three years Colonoscopy 10 years also keep in mind that.
The brand awareness of Cologuard is significant in the mine of consumers and physicians and over the next four five years that is only going to continue to build and we have the largest commercial presence and capability to bring a blood based test to physicians.
So that's.
Our view of this and that view it has been consistent overtime.
And we think that it's time that will prove out.
That.
With Cologuard, we can get to a significant percentage of those 50 million Unscreened Americans.
[music].
Thank you.
Your next question comes from Brandon Couillard with Jefferies. Your line is open.
Hey, Thanks, good afternoon.
Kevin If we look at health systems to sort of update us on where you stand in terms of incremental progress Thats been made since Pfizer came onboard how much of the volume for Cologuard today does do health system to account for and it should we think about.
That is more of a 21 story kind of post the epic ordering functionality rollout or will it be a material driver you think of the business this year.
Thanks, Brandon vis.
The health systems productivity and impact is increasing our each quarter, we had a very strong fourth quarter of each els seven implementations and thus a piece of software that goes between a health system by E HR system, and our lab system, making.
Easy for a position within one or both systems to order Cologuard electronically.
And we expect that to continue into the first quarter, we're not going to break out the number of health systems, who get HL seven interfaces that it's a pretty significant step up from the first half of 2019.
And we expect that to continue throughout this year, then there will be a large impact towards the end of this year when epic rolls out the ability to electronically order cologuard within their version of epic about 45% of primary care physicians use the epic EMR system, then as those systems update.
Good.
To the New instance of epic.
In 2021 will start to feel in even greater impact basically it takes.
For the new for health systems that implement NHL seven interphase after about a year, they're ordering 95% more cologuard test spend a system that doesn't have NHL seven or electronic ordering capability. So best.
Hopefully that gives you some.
Direction in terms of the impact here over time, it will be an important growth driver for us in 20 2021 and beyond.
Thanks, and a two part question for for Mark is there just curious if theres any metrics or anything you can share with us as far as the impact of Veeva rollout, which I think happened in early December and the part two.
Just curious if you could share with us how you expect the marketing message to kind of evolve as we move for the year.
The new content and.
Press, we might begin to see some messaging around the Cologuard 45. Thanks.
Let me start with this and then Jeff will answer since we now have for our business unit ads market is not on this call.
But certainly would be available if you want to chat with them offline. So Jeff if you want to take this one.
Brand in the first question on Veeva roll up your rate Veeva ruled out went live in December the team did a phenomenal job, bringing the salesforce in training them on the new system early feedback has been fantastic truly to surety metrics on that when considering we're very early in that rollout, but the feedback has been very good veeva enhances reps ability to do.
Very sophisticated call planning and call routing. So over time, we think this will be very big driver of incremental productivity. When you think of our ability to partner with Pfizer. It worked well together now both the Pfizer reps and our reps are in the same platform services. The fantastic tool really excited to have that on the.
Hi, good in messaging.
I think you mentioned on 45 rest and 45, what is happening as we are working to update all of our more marketing materials to make sure. We're driving awareness on the expanded label for Cologuard. So that has already started to happen if you've seen our ads you'll see that they now talk about Cologuard 45, others additional marketing content that will run through the.
Year, it's important to keep these at TV ads fresh TV ads dependent absolute home run for us. They are still the biggest driver of new ordering physicians as well as you'll Kevin talked about this brand that we've created when you think over the life of Cologuard.
They were with it with the budget for this year, we're approaching a billion dollars of marketing and sales investment in this brand. So this is creating a very strong brand that will have a long long runway out there. So we will continue to evolve the messaging overtime and stay tuned for some new ads this year.
Okay. Thank you.
Your next question comes from Doug Schenkel with Cowen Your line is open.
Hey, good afternoon guys.
Maybe starting on reorder rates, you sounded a bit more positive on this in your prepared remarks, then I think you have over the past few quarters not not on the opportunity that that's been consistent but really on converting our patients to get them to reorder is that right and if so what's changed and what are you.
[music] factoring into 20 to 20 guidance I'm on reorder rates at this point.
Hi, Doug. This is Jeff I think is your question on the three year repeat test and yes, yes, yes, okay. Okay up to Rescreening huge opportunity. This year there over 370000 patients coming up for three repeat testing, which I mentioned before that's over 200000.
In patients more than last year. So it's a huge opportunity in longer term as we continue to to drive a higher capture rates, we expect to re screens to become over half of our revenue. So it's important it's an important driver today. It is a material driver.
What we're seeing internally is increasing capture on that three year repeat customer when I look month on month, we're seeing a higher capture rate I think with this boils down to is we're doing a better job at both reaching out to the patient and making sure. The patient is aware that there do enter the physician. So we've given our sales team new.
Rules to make sure that they can communicate with the physician.
The patients are due for screening when I look out over the course of 2020, Theres, some really new exciting tools come in place and this is really all enabled by the investments we made last year in both epic in diesel. So let me give you. One example on on Ziva now that the reps have the d. the platform, which is a really high quality I T system when they.
Communicate with the physician newly prompted if that physician has patients do for three year reordering.
Now the planted this year to make it through a physician we can we can communicate a list of patients right to the physician Sachs email. However, the physician prefers that with the physician has it list right in front of him or her to respond to to make sure that patient is still eligible and very easily through ideally to the click of a button to.
Placed at three year reorder, so getting better tools in place and better programs around this has allowed us to start capturing a higher percent and I expect that momentum to continue throughout 2020.
Okay, and then given a lot of those tools, while exciting our new.
Presumably it's probably too early for you to get too aggressive and incorporating any real upside associated with the implementation of those tools over the course of the year.
So there is rescreening revenue in the base.
So obviously, we have a pretty good line of sight into the near term impact Doug.
So big than what we know potentially obviously theres a theres a long runway ahead for years to come. So this is going to be one of the key growth drivers for many years to comp.
Okay understood.
Im pivoting to M&A and strategic partnerships I.
I guess another guidance question Howard paradigm and Biopharmx treated in your revenue targets for the year comment there included at all and what's your bandwidth to do more agreements along these lines.
Over the course of 2020.
The vial mix of is primarily R&D further shift.
Again as Kevin mentioned this is a really high quality partner that we've worked with for many years.
Paradigm does have an on market test.
And now bringing out the contribution however, it is factored into guidance. It is not immaterial contributor. This year is primarily about laying the foundation for the future putting this into the hands of the really high quality precision oncology sales team and opening up a much broader part of the cancer continuum.
In terms of our bandwidth Doug.
We are so we're thrilled with the quality of leadership in.
Individuals that are part of the precision oncology team.
That really gives us an incredible opportunity to bring more impactful tests to physicians and patients who need them.
And that means that theres, an opportunity for us to in license technologies that we think our impactful.
To.
Acquire companies, who have gotten to a certain places, but really need access to a large commercial organization and payer team to be able to activate those tests and get them into guidelines and to help them.
Bringing those tests of the physicians and remember we have a thousand person commercial organization, which really differentiates us.
So we have the bandwidth and capability to do more things like this and an incredible R&D team now combined with the genomic health.
Scientists and engineers, who we think we're going to be in a great position to keep innovating and adding to our portfolio of products now and over a long period of time.
Okay. That's helpful and just a couple of quick ones.
To wrap up.
Act bolt.
This is up 7500 patient study.
That you quietly.
Did over the course of last year, collecting blood and stool as part of your efforts to advance next generation Cologuard.
That's study I believe it's supposed to read out maybe in March is it possible that you would share any read out data from that study over the course of 2020.
As fold.
The plan is to have that finished enrolling in the near term Doug that would then some time to then processes samples and generate any evidence I expect at some point there will be a readout on it as of now the really the primary intend to vet bold is to use those samples to to finalize the design of our Sears seeds.
We'll go to 2.0 in our CRC blood assays.
Okay and last one on guidance just just going back to Derricks question. The first question on the call on Q1 guidance.
I just want to make sure I'm doing the math right I mean, it it seems like one while you're not necessarily a assuming an increase in completed orders per provider based on seasonality you are likely assuming an increase in kits ordered per provider, which again I think would speak to the seasonality you described to Jeff and then secondly, just to be clear.
Here It seems like your expectation based on your pacing commentary is that after you move past Q1 seasonality at any potential flu impact that we should expect a more notable sequential increase in orders per practice, along the lines of what we saw Q on Q2 last year is that right.
Yes, the typical seasonal pattern for orders, which is what we really look at internally. The typical seasonal pattern as you start the year coming out of the holidays with a steep ramp and we can see that the steep ramp orders per doctor ramps very strongly all the way up until about memorial timeframe moral day timeframe.
The reason is around memorial day.
Families with children people start to go on vacation more commonly so you see the steep ramp continuing through but then as may over the summer you have some temporary disruption from from holidays in summer vacations, and then about mid August or sell the seasonal trends start to improve again, you see a very another steep ramp.
In the orders for Dr. always through Thanksgiving. So at the typical seasonal pattern again holidays Thanksgiving Christmas New years are the biggest areas of seasonal weakness thats not unique to us thats pretty difficult the primary care focused company.
The flu.
Who happens every year, we are seeing some impact on the food. This year that is baked into guidance I want to be clear about that we did assume that in the quarter Q1 guidance in the annual guidance. It's important to keep in mind. If you look back to 2018 20 team was the worst flu year at that time and about 10 years, we did have some impact on the business back in.
18, however, more importantly is that that impact was temporary in fact, when you look at the the remainder of the year the business not only have recovered it actually accelerated coming out of the flu. So to the extent that we have any any more meaningful impact this year with to look it's going to be temporary it has been historically and we'd expect a nice.
Ran through the year when you look at all the different growth drivers that we have lined up for 2020, it's going to be very exciting year.
Okay. Thanks, a lot I appreciate it.
Your next question comes from Dan Arias with Stifel. Your line is open.
Hey, Thanks, This is Daniel Mesa convert Dareus.
So what does the outlook assume in terms of 45 to 49 year old population contributed in the mix and with that as well what should we look for in terms of coverage for that population.
[music].
Yes. Thanks to this is Jeff so take a step back and looked at 45 to 49 means read. This this target. Each group. This is group has 19 million average risk Americans and we estimate the nearly all of them are on our unscreened.
Cool guard given that it's a very patient friendly noninvasive test fits into their lifestyles very well. So we're very optimistic longer term about the potential in this age group given the timing of the FTC approval last year lately year. It wasn't a material contributor as expected in Q4 that said I do expect it to be immaterial.
Driver of growth this year and for many years to come we're seeing some increasing adoption. The important early efforts are around making sure physicians are aware of the the need to serve screen in earlier with the evidenced show and really why the American cancer Society lowered its screening recommendation to is 45 is are there has been.
A rapidly of rapid rise in incense over 50% ryzen incidence and the younger population over the past 20 years, So we need to get more people screamed and again cologuard fits well into the lifestyle. So making sure physicians are aware of that the sales team as has been trained on an expanded label they're out there educating physicians.
I mentioned before the marketing campaign has been updated so now we're out there trying to reach patients through an updated marketing campaign unless the working with the payers and guideline committees is also important so we want to make sure theres broad commercial reimbursement. This is group what we've seen so far is that when patients in this each would get cologuard the vast majority.
Our covered fault today over 70% are covered in full we want to make sure that number goes up overtime keep in mind that overall cologuard has about 95% of our patients pays zero, we want to make sure that that doctors and patients are confident that cologuard will be covered in fall. So there's some work to be done on the on the coverage side still.
Great. Thanks, just just to clarify that too.
So on the payer side, the conversations you're having there pretty consistent with previous commentary that.
Yes, we continue to see progress with the payers. They see that the evidence is very solid for screening patients at a younger age and as I mentioned over 70% of of eligible patients. In this age group are covered in the fall by the payers.
Okay great.
In terms of the pipeline the deliver cancer assay is there anything we should be in looking for in terms of data maybe on the first half of the year.
The next big milestone for liver as we plan to make that test available in the second half of this year.
There are likely will be some additional data published this year haven't said, which conference yet, but there will be some additional data published the plan is to get some additional data out there and then use that as the basis to launch the test.
Gotcha, Okay, and then thanks, and then one last quick one just switching over to genomic health the Oncotype Dx in terms of reimbursement in Germany, and France or you could just provide the latest there. Thank you.
Yes, so theres some exciting news in Germany last year with the establishment of the reimbursement codes. So that if that is moving forward and we expect derivatives via but what are the more major growth drivers for that business.
This all stems from the Tailorx study, which as you know published back in 2018. So that study is led to improving reimbursement globally in Germany is one of the bigger drivers. This year, though it's a France as we've said before does like that a bit but given the strength of the evidence here. We expect reimbursements is continue to improve for years to comp.
Okay. Thank you.
Your next question comes from Amanda Murphy with BTIG. Your line is open.
Hi, good afternoon.
Two questions I guess one.
So again, beating the cadence for the year to death, but I'm going to happen you can sorry about that Jeff.
Hi. This is curious obviously, you've got a lot experience in some of these dynamics like Reordered trade from the primary care productivity, hi, there and.
Obviously brought on that before.
In terms of understand their productivity, but then you've got maybe for newer dynamics with with bringing online FX and.
Kind of incremental strategies and marketing and then it's our integration and with how plans I just wanted to get a sense as you think about the year and guidance and.
How your Caveating from these newer dynamics that may be and.
Yes, and that not that you don't have have less experienced flat, but that's kind of get a sense again.
Where are the upside downside might be what what you're thinking about in terms of at least the back half the year, where where there could be joining dozens of of how you buyback.
Incorporating all of it into that number is especially areas, where you may not have.
A year than I've kind of knowledge of how these underwear.
I am into this is Jeff when it when I think about guidance what I tried to do is bake in my best expectation for all these various growth drivers so whether its rep productivity three screens electronic ordering 45 to 49 try to begin.
Everything I know up until that point and many of these things Weve also we have contribution in the base already.
You talked about Pfizer, what we've been working with Pfizer for over a year as I mentioned, we've added reps afore. So we have good experience and very good line of sight into what the expected contribution will be.
That said there is always new things that come up we've got a really talented commercial team running cologuard. So they continue to find new ways to keep driving that this is Ford and we'll keep pressing them instead an expectation so.
Yes, I think that the guidance is appropriate and bakes in everything we know as of today.
Okay Fair enough and then.
Jeff and I guess is the question for both of year, you talked about with the new acquisitions.
Yes.
Greening across the cancer continue and that's very interesting and maybe you could talk about that a little bit more.
Obviously, there is lots of discussion around early cancer detection and different indication.
Some other folks out there doing therapy selection.
There's also a big opportunity in terms of cancer recurrence.
So we're having maybe you could take a step back and maybe like long term about how you see in it doesn't matter what you've already talked about what you're in liquid biopsy focus with met now.
Hi, dozens evolving pipeline perspective based on that that one comment that you made earlier on that continue cantor.
Thanks, Amanda its Kevin.
Historically, if you look at the introduction of new cancer test Theres been a very long cycle to get those tests adopted and there have only been a handful of companies that have been particularly successful and and there are we looking as there are three major.
Mhm impediments and things that you need to do too.
To make a new test successful one is a tremendous R&D clinical trial capabilities evidenced generating capabilities second is.
The ability to reach and gained traction with insurers and finally as a commercial presence.
We have what we consider to be.
Okay.
Top tier R&D incredible reach into payers between the Oncotype Dx and Cologuard brands, you have near Universal coverage are nearing universal coverage and our commercial organization that is pretty remarkable. So this means that we are.
Strategic plan is to press on the accelerator and to bring more tests through our R&D team are.
Team that deals with large insurers and art importantly, our commercial organization, because we know that cancer diagnostics at Europe as dawn of a new era in molecular medicine, and with the new cancer therapies that are coming to patients, we think that by detecting cancer earlier.
And detecting recurrence earlier, you can change outcomes with new therapies that.
Our showing to be more effective the smaller the tumor loaders and so we're excited about what the future holes and this is across the continuum screen right incredibly large.
Our opportunities diagnostics like our liver cancer test for people, who are already at very high risk of liver cancer do they are don't day.
Oncotype Dx tests the paradigm therapy selection touch you are now starting to span this continuum and you're doing it with an incredible team.
Our goal is to stay world class at everything that we do so that that physicians, who choose to order a test for their patients has a high degree of confidence that its reliable.
And one quick follow up there.
So you've talked a lot about caustic and that's obviously a big circuits for Cologuard.
I understand its way different and modality nextgen sequencing that it how do you think about that as you again.
Thinking long term.
Bringing some of these.
[music].
Areas some market share Aircard test the market, where there were.
Obviously, there's some cost there.
I guess, what's your view there and in getting.
During the cost base rate.
To be competitive and and so adding value and adding clinical utilities are curious there too.
Yes, I think that the key thing is to use the right tool for that particular.
Clinical challenge and if its therapy selection sequencing is clearly the right tool.
And as sequencing costs come down there is an opportunity to use sequencing and.
An additional array of potential test one of the reasons that Cologuard works is because the cost of goods of the say itself are low and that's important as you're trying to reach a 106 million Americans that in that particular population could be very challenging to make DNA sequencing.
Work in that setting.
But.
On things change and we're thrilled to have a deep capability of DNA sequencing.
Onboard and we will grow that and look for incredible scientists, who want to join our exciting company.
In a matter. This is just as head of a Kevin said.
Part of the cost of launching a product in fact, one of the biggest costs is the commercial team now we're in a very good position with the talented team from genomic health. It today as you know has about a 1000 of oncology reps with deep experience about a third of those reps of over 10 years experience out in the field.
Building relationships with oncologists, so that cost we already have right with 30 baked into our model for Oncotype now as you bring new products to market will get very good leverage in that model, there's a lot less incremental investments for us to make as we bring new products.
And that's on an additive Jeff.
Just just said the combination of B.
Precision oncology salesforce broadly, including the urology Salesforce and our primary care Salesforce also creates opportunities for us to think about tests that would help with prostate cancer and bladder cancer and and beyond so.
Vis vis commercial organization is a dynamic one that will partner with.
Our different different groups of our sales teams.
End up impacting patients in a positive way.
Okay, great. Thank you.
Your next question comes from Patrick Donnelly with Citi. Your line is open.
Great. Thanks, guys, maybe just one on the hiring side you guys called out the hiring adds a few times, obviously seen an uptick can you just talked through the strategy here you understand the primary care market is fragmented, but to add to probably track a little higher than we anticipated given the Pfizer agreement supplementing Michel side as well can you just talked to the given take there.
On your end.
Yes.
When you think about.
Primary care launch you typically not launch it really significant product without at least.
Allison reps and on a combined basis between Pfizer an exact sciences, we have more than a thousand reps focused on this and that's important win when you realize that there are 350000 perspective ordering healthcare providers in primary care offices.
And so it's important to be able to reach those ordering healthcare providers and.
Reach them on a frequent basis.
There's a reason that large primary care.
Drug companies have been very effective with large salesforce is because it's that reached combined with the frequency and so that 150. The new team members that have recently joined US and will become impactful are over the course of this year and next year is a start you could expect.
Over time that that will increase as we have a greater reliance on on our own.
And.
And we want to reach those 350000.
Physicians in every group of new primary care reps that have joined us have become more productive we haven't seen in any of those cohorts of their productivity flat now.
Hi, This is Jeff just to add what Kevin said, we approached the investment in sales reps. The same way we approach any investment we look at the return on investment and what we see as if the ROI on reps is very high and it continues to grow overtime as they get more productive and we give them more tools. So up to the extent their ROI is strong we will make the invest.
And I expect that to continue for many years given given how early we are and the penetration also keep in mind that over the past year. We added 50000, new order in providers. So we need to make sure that we are sales forces rightsized to to keep driving cologuard growth amongst that growing physician base.
Thats helpful. Maybe just to stay on the sales from Pfizer side, you talked about their engagement now that disruption around lyric a few months behind us.
The activity there and then.
There been any compensation structure changes there with them kind of have more heavily upsizing cologuard. Thank you.
I think what we have articulated is that we believe that in 2020, there will be a greater focus within the buys or field force on Cologuard.
The compensation depends upon the position in the Pfizer bag that Cologuard is carried I think on average that that compensation will be higher in 2020 than it was and 2019, indicating a relative higher up positioning.
In in.
Lease a portion of the of the overall team.
Hi, guys are spent a tremendous partner across not only sales, but also marketing I'll use give you. An example at 60 minutes on Sunday Night, There was a placement of our brought to you buy cologuard for one of the 60 minute segments and that is that it's a hallmark of that Pfizer Mark.
Any team that thinks creatively and has the reach and access to that type of advertising placement.
And they're just a ton of examples where we have gotten better because of our Pfizer partnership.
Thanks, guys.
Your next question comes from Katherine choppy with Baird. Your line is open.
Okay.
Hey, guys. Thanks for your question. Please first on we see any comments on how enrollment is progressing so far.
Hi, Kevin This is Jeff.
As you know blue Cgis initiated in the fourth quarter. So we've seen them, we've got dozens of sites up and running enrolling patients, we're not going to break out each quarter, where enrollment is trending but we're off to a good start there.
Okay and going back to the recent sales force expansion recognizing that has talked about RUPS, taking six to 12 productive, but they're getting typically more productive more quickly.
What are you assuming in guidance in terms of lingers rough start meaningfully contributing his thoughts do we start to see a benefit and in the second quarter or TV that market that.
So thanks for the question I think you'll start to see some benefit early but.
That historical timeframe is still still there right typically six to 12 months to say to get productive, but that team. It's a high quality team that the we've hired we've put in place a lot of tools like veeva sell make sure they get productive.
I think the real contribution will be in the back half, but we'll see some early contribution of started really in the second quarter.
Okay, and then last one from me I know, it's only a few quarters and at this point, but be happy with the progress so far with CCI sales force.
How are you measuring success comes to that.
So the Gs sales force to about 60 reps that we've put in place last August there's really three key reasons why we hire that team.
The first is on on making sure that guys have the proper background knowledge the proper clinical evidence on Cologuard. Because you guys are often considered the thought leaders in colon cancer screening that way when they're out there talking to other physicians there for their equipped with the rate data and our market research has shown when when the guys have.
The basic facts on Cologuard, they're much more up optimistic they are much more supportive of the test. So that's the first.
And the we will measure that is on the order rate on the surrounding primary care doctors in a territory.
The second is on the direct orders from a guy themselves, so guys live and breathe costs could be colon cancer screening.
However, there are certain patients that perhaps would decide they don't want to do another cost could be or perhaps cologuard is the better alternative so for those patients of the G. I can in many do order cologuard and facts well over half of all guys have ordered the test. So there is an opportunity for that GA team to drive incremental Youtube.
Position amongst you guys.
And third is that starting with liver cancer, we need AG sales team liver cancer that product, which should be available later this year and overtime as we bring new products to market like the stuff that geo cancer pancreatic cancer cancer. These tests will be carried by that GE sales team. So three main reasons.
Why we're pleased that we have that team, we expect the benefits to get to grow in 2020.
Okay, great. Thank you.
Your next question comes from Dan Brennan with your line is open.
Great. Thanks for thanks for taking the questions.
So Kevin and Jeff just wondering back to I think a few questions that have already been asked but just wanted to get your perspective, when we look at like from an annual basis, while I know you're not going to give any cologuard test volume data anymore, but nonetheless, when we think about like that utilization number is it kind of what is baked in the kind of implicitly in 2020 is does utilization.
Does it go up as much as it occurred in 2019 is at less than that.
Just trying to get a flavor for how we think about that because that's something I'm sure we're still going to try to track ourselves.
Dan This is Jeff.
When you look at the Cologuard market. Obviously, you know today, we have about 5% market share it within a given physicians practice, we've only captured somewhere between five and 10% of they're eligible patients. So we're still very early we do expect that said test per doctor never to continue like you mentioned before it has it has grown over time in.
After we grew 22% year on year. So we expect that number to continue going up overtime. You can you can get a good sense of where it's headed if you look at the revenue that we report in keep in mind, what I've said about revenue per test expect instability in the near term and slight improvement overtime that will give you a pretty good sell.
It's on where test per Doctor a trend, but we do expect it to go up this year and for many years to come.
Okay, and then Kevin I know you mentioned that prepared remarks and has been a few questions on Pfizer, but you discussed.
How you think productivity I think will accelerate in 2020 or you used the word that would signify it's going to get better in 2020.
Can you just characterize like how we think about that in terms of your guidance like how does that productivity increased factor into the guidance.
Yes, well all of our factors Dan.
Nick figure into our guidance for 2020.
And we won't break out any one component relative to another.
Suffice it to say.
Pfizer is incredibly experience they have deep relationships with their primary care physicians and they are getting better at and more knowledgeable with Cologuard just as all of our reps do it typically takes about a year before reps become really.
Effective and up now that Pfizer reps have had cologuard for five quarters. So we expect good things and it's embedded in our guidance.
Great. Thank you for that kind of and then maybe just on liquid biopsy. Obviously other companies are continuing to progress and running studies and just wondering if you can give us an update on when you think we can expect to see data from your own program.
Yes, we think that we are the leader in the.
Liquid biopsy or colon cancer screening from a blood based test we're in a position that we don't have to show our R&D.
All of the studies that were doing and we just continue to focus on doing great science and at the appropriate time.
We will release that data and you know again, what I want to emphasizes the cologuard brand and the deep resources and incredible investments that we've made.
Our pretty powerful and create a sustainable advantage for us both for Cologuard and a potential.
Blood based colon cancer screening test that we bring to physicians and patients.
We're excited to be the leader in this space.
Great and then maybe the last one I know there's been a few questions on paradigm I know you, but but I don't know if you disclose and on the call I was surfing on their website.
Did you disclose anything with regard to the revenues today number of cash what differentiated about the technology and if not like one would we expect to get more color on this acquisition. Thank you.
We haven't disclosed the purchase price the revenues aren't material and you will have an opportunity to learn more about paradigm and biovance overtime. The first job is to make sure we do a great job with integration and to do.
Take all of the right steps to make sure that the scale as there in the lab to meet the demand that we expect to generate.
And Dan for modeling purposes, the paradigm business will generate revenue it within the precision oncology reporting line.
Got it okay. Thank you.
Ladies and gentlemen, we have reached the end of the allotted time for the question and answer session I now turn the call back over to the presenters.
Thank you for joining us today to review our fourth quarter results progress made in 2019 in our plan for 2020 and beyond thanks to the entire exact sciences team for your hard work and continued commitment to our mission we've never been more excited about the future of exact sciences.
I'd have complete confidence this team will continue to change the way cancer is diagnosed and treated thank you.
[music].
This concludes today's conference call you may now disconnect.
[music].