Q1 2020 Earnings Call

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Greetings, ladies and gentlemen, today's conference is scheduled to begin momentarily against today's conference is scheduled to begin momentarily. Your lines again will be placed on music whole. Thank you for your patience.

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Ladies and gentlemen, thank you for standing by and welcome to the exact Sciences first quarter 2020 webcast and conference call. At this time, all participants are any listen only mode. After the speakers presentation. There will be a question and answer session. Taski question. During today's session you would need to press star one on your telephone.

But if you were quite father assistance. Please press star Zero I would now like to hand, the conference over to your host for today Megan Jones.

Thank you operator, and thank all of you for joining us for exact Sciences fourth quarter 2020 conference call on the call today or Kevin Conroy, The company's Germany, you and Jeff Elliott, our Chief Financial Officer.

That sounds of issued a news release earlier this afternoon detailing our first quarter financial results. This is a replay of todays presentation are available on our website at exact sciences dotcom.

During today's call will make forward looking statements based on current expectation.

Actual results may be materially different from such statements.

Reconciliations to GAAP figures are available or in our earnings press release and descriptions of the risks and uncertainties associated with exact sizes are included in our 60 filing.

Well it can be accessed through our website.

It is now my pleasure to interest the company's chairman and CEO Kevin.

Thanks again.

Even in most of that at times cancer doesn't stop the Corona virus epidemic highlights and increases the need for novel ways to screen for cancer detected early and guide treatment.

Our coal regard Oncotype Dx paradigm test meet that need.

World that is trying to avoid unnecessary physician office visits invasive procedures and treatments Oh workout and deep pipeline are more valuable now than ever we plan to play an even greater role in cancer screening and garden therapy decisions after grown up virus pandemic update.

Today will provide details on three key topics.

Near term challenges presented by the corner virus and steps our team is taking to respond.

Our positioning to provide smarter solutions to patients and providers across the cancer continue.

Answers were taking to deliver bail you over the long term.

Our CFO, Jeff Elliott well now highlights our financial.

[laughter].

[laughter].

Thanks, Kevin Good afternoon, everyone.

First quarter revenue was $348 million consistent with or pre announcement last month.

And our screening business, which primarily includes cologuard.

Revenue of $219 billion increased 35% driven by touched volume growth.

Approximately 9000, new healthcare providers ordered cologuard during the first quarter and nearly 206000 have ordered since launch.

Hello, Good revenue has been negatively impacted into Q ways by coping 19 and related actions such as stayed home measures and decreased wellness visits.

As you recall that gets us are being ordered second patients are completed and test at a lower rate.

After a 63% year over year to cloudy Cologuard test orders during the first 20 days of April we've recently seen a slight recovery.

Orders declined 47% year over year. The left 10 days of April with continued positive trends in may.

Our world class customer care team is contacting people with a cold good collection kit to remind them of the importance of colon cancer screening and support them and completed the test.

And precision oncology, which primarily includes the former genomic health business.

First quarter revenue was a record $128 million with growth across all major products and geographies.

First quarter benefited from the timing of Oncotype Dx breast test volumes in the U.S.

Some patients are delaying surgery because of koeppen 19 fears and completed Oncotype testing earlier help inform them. What did you use chemotherapy on a new edgemond basis.

Growth in the U.S. breast business continues in April.

We expect a widespread decrease in screening mammograms due to coordinate teams to negatively impact test volumes in the coming months.

The typical like between a member Graham and an Oncotype Dx tests.

And the international business coping with a gene could weaker under like conditions in certain geographies, resulting in a test volume decline from March to April.

Well first quarter you whats prostate grew up with strong during April coping 19 contributed to a 26% year over year volume decrease as physician office visits declines.

Total first quarter gross margin, including amortization of acquired intangibles was 71%.

Non-GAAP gross margin would excludes amortization of acquired intangibles was 77% health play higher mix of precision oncology revenue.

Total sales and marketing expense was $168 million included the Pfizer service fee of $20 million spending was below our original expectations due to coordinate gene related savings.

Certain initiatives in the lower Pfizer service fee.

<unk> expense was $114 million slightly above our expectations due to additional did you make health integration costs.

R&D expense was $44 billion lower than we expected due to coordinate gene related savings and the delay of certain clinical trials.

First quarter net loss was $106 million and adjusted EBITDA was negative $8 million.

Total first quarter Capex was $26 million.

We ended the quarter with cash and securities of $1.2 billion, including the proceeds from by February convertible debt offering.

We have a strong balance sheet the provides us flexibility to invest in the business and withstand uncertainty.

We are taking steps to minimize disruption for <unk> and called 19.

Reduce spending then there is not immediately critical to patient care.

The company identified more than $400 million of savings relative to our original 2020 budget with the majority coming from reduced operating expense.

If we see a faster than expected recovery from Kobin 18 savings will be lower as we would invest to support that grow.

Since the Coca 19 environment is rapidly evolving and their continued uncertainty surrounding its impact we're not providing financial guidance. At this time I will now turn the call back to cabin [laughter] [noise].

Thanks, Jeff the exact sciences team, we wrote our 2020 priorities in response to the krona buyers pandemic.

Our new priorities are getting people tested taking care of our customers and preserving our financial strength.

We know that cancer is relentless and exact sciences labs in Madison Redwood City, and Phoenix continued to deliver critical answers to patients even in the face of Corbett 19.

To protect the health of our employees, we minimize team members onsite to those who perform patient critical work.

We're taking steps to limit exposure and transmission of the disease.

Our field sales team suspended face to face interactions with health care providers and is working to serve them via telephone and online technologies until it's safe to return to the field.

We're using our marketing an inside sales tools to reach health care providers virtually.

The corner viruses highlighted the importance of accessible easy to use at home screening tools and tele health improved access to colorectal cancer screening for the 46 million on screened Americans.

We celebrated the launch of her tele health site with patient education resources, highlighting their ability to request cologuard online through a tele health provider.

People can now requested tele health consult specific to Cologuard from home.

To raise awareness of the importance abstain up to date with screening and the opportunity to order Cologuard on line, we've introduced new social digital and TV advertisements.

Covert 19 will change the way people interact with their health care providers and with these investments cologuard fits seamlessly into we believe eight permanently changed healthcare environment.

A significant backlog is building or those who need to be screen.

This backlog will continue to grow as focus remains on more urgent diagnostic calling Oscar piece.

Gee I societies have recommended prioritizing essential services, while delaying elective procedures.

Which significantly reduces the number of screening calling us can piece being performed.

Putting off screening can lead to diagnosis and later stages, where outcomes are poor hold card is the solution here.

We can help health care providers.

It ties procedures and send patients at the highest risk, including those with the positive cologuard to Colin Oscar be first.

[noise] Cologuard can play an important role in alleviating this backlog in getting more people screen.

Exact sciences can also provide critical answers to patients diagnosed with breast and prostate cancer.

In response to cope at night in breast cancers societies have recommended physicians consider delaine surgery, because invasive procedures such as <unk> mastectomies.

Can expose patients to the krona barberis, well Oncotype Dx is typically run on tissue removed during surgery. It also can be perform using tissue taken from a needle biopsy.

Physicians and patients are increasingly using the oncotype Dx breast recurrence score from the needle biopsy to evaluate the use of chemotherapy on the neoadjuvant basis before surgery.

If new York, Ed you've been therapy shrinks, the tumor a lumpectomy can potentially be performed in set instead of a minute back to me.

The Oncotype Dx genomic prostate score also provides valuable information to men with low and intermediate risk prostate cancer.

It helps the patient decide whether he can safely undergo active surveillance versus aggressive treatment.

And it changes treatment recommendations for one out of four patients.

Given a patient my confidence to avoid radical prostate surgery is highly valuable now more than ever.

Exact sciences has built the foundation needed to provide more precise smarter answers to patients across the cancer continue.

We recently closed the acquisition apparel accompanying specialized in advanced cancer therapy selection.

We added a high quality team and an important test to our precision on Koji portfolio. The paradigm test helps late stage cancer patients determining the best path forward for treatment.

This test has exceptionally fast turnaround times and is designed to require less sample input than other therapy selection test.

This allows us to test Oh this allows for a high test completion rate.

And helps patients who may not have access to therapy selection testing because it takes too long or there's not enough DNA into sample to obtain a valid result.

We plan to expand the launch of the tissue based paradigm by adding it to the precision oncology teams product portfolio later this year.

Followed by a full salesforce rollout next year.

In the future. We also plan to make an enhanced tissue based in a blood based version of the paradigm test available to oncologists through our broader precision oncology team.

Exact sciences is well equipped to bring these and other advanced cancer test, especially a minimum residual disease recurrence testing to patients and oncologists who need them.

Exact sciences decided to develop and rapid we rollout testing for the Sars koby to virus.

We now have the capacity to test more than 60000 people per week.

Our goal is to keep our team healthy through ready access to our own testing. It also allows us to do our part in helping to increase our country's overall testing capacity.

I couldn't be more proud of the entire team that developed secured FDA emergency use authorization and scaled up our Madison lab sites to handle significant volumes.

This highlights our research and development laboratory and manufacturing abilities as well as our nimble yes.

These qualities will help us achieve our long term goals in cancer diagnostics.

We are the leading cancer diagnostics company globally, our people experience in infrastructure combined with our financial strength provide a great foundation for growth.

Answer doesn't stop or anything and cobot 19 highlights the value of Cologuard and Oncotype Dx, which can limit the number of people exposed to unnecessary invasive procedures and treatments.

And it changed healthcare environment exact sciences is positioned to lead the increasingly important advanced cancer diagnostic spiel.

We have unmatched breadth in diagnostics covering primary care oncology, gastroenterology, urology and women's health.

This allows us to provide smarter answers across the cancer continue.

We're confident in the long term growth opportunities for Cologuard in Oncotype, Dx and unsuccessfully bringing additional tests like paradigms to patients in need.

We're now happy to take your questions.

And at this time in order to ask your questions. Please press star and followed by the number one on your telephone keypad again the star one on your telephone keypad to ask your question at this time. Please limit your questions. So one question and one follow up question what possible just a moment so compiled the Q and a roster.

All right in your first question comes from the line of Brian Weinstein with William Blair.

Hey, guys. Thanks for taking the questions maybe.

Maybe starting off on the comments about the positive trends that you're seeing a bit more can you be a little bit more specific there are you seeing goes across the country or are those and just small pockets and I'm curious if you're seeing them in areas, where the shutdown is starting to abate or are you have believing that maybe some of this is from some of the.

What's that you guys have had been tele health and some of the other things you're doing thanks.

Yeah. Thanks, Brian So the comments are run Cologuard really broad base, we are seeing improving trends broadly across the country.

Areas that have upped larger outbreaks of the cool that date cheap endemic obviously there are still impacted but we're seeing across the board EBIT in the northeast New York City, we are seat recovery. So the recovery is broad based.

I think in part it is due to the actions we've taken such as Tele health.

Tele health is really a foundational investment for us that opens up the broader part of this market.

Really helps us leverage the investments we've made for years in consumer marketing they'll patients have another way to access cooler coverage from the 60, if they're in home I really speaks to the value of our test. So I think the investments we are making the actions we've taken our helping.

That said there is also very large backlog of colon cancer screening that couldn't happen during during the early days dependent make when people were.

Quarantining and really the lifecycle and pause. So this backlog is events will take a long time to clear and Cologuard is it is a big part of the slippage there.

Yes, I want to push a little bit on that comment about the Colin Oscar piece, and what's not happening I think curves what roughly 300 to 350000 screening Cowen Oscar piece, a month that are not happening right. Now. So can you talk more specifically about some of the interactions that your team is having with GE eyes.

Any kind of success, you're seeing I know you had a G.I. specific salesforce is there more focus on that sales force now how can you really don't try and dig into that growing backlog. How do you guys actually begin to see some of that materialized for you.

Hi, Brian it's Kevin the the challenge that exists out there and the gastroenterology practices is that S.G.E. actually recommended against office visits and elective procedures and in particular.

And so you have seen many practices that have just simply shut down.

And now they're starting to come back in their first starting to come back with a diagnostic going ask fees. Our team has not yet in the field. So what we feel good about here is the value that we're seeing is with cologuard. It did not fall anywhere near as fast as screening Cowen Oscar.

Yes.

And no the return to screening is first happening obviously with the.

Noninvasive at home test and the real bail you have Cologuard I think is is being highlighted during these incredibly challenging times and one of the first things that we did was to reach out to Oh, Gee, I societies, and and start to engage in a conversation about how we can pay.

Hartner.

With GE rise to get these people who are screamed screen because if we don't we're going to have a shift we believe from earlier stage detection to later stage detection and we simply can't afford that so much more to come down the road, but know that we are working.

With gastroenterologist around the country and their societies to be their partner in addressing this large problem in opportunity.

Great wonderful could change sneak one quick what it biometric a other capabilities there that that product has recovered 19, I think there were showing some master mixer components at one point I don't know if that's continuing but did the opportunity for survival based option is there anything you're doing with biometric are there. Thanks.

No.

The cobot 19 tests that we have brought up is was developed here and medicine with or without using any of the biometric up components.

Thank you guys.

Thanks, Brian.

And your next question comes from the line of Brendan.

Yeah.

Hi, guys. This is Matt on for Brandon's afternoon. Thanks for taking my questions one to touch a little bit more on the tele health and online ordering functionality rolled out understanding. It's early days curious if you're wondering if you're willing to provide any additional color on the mix or trends, you're seeing so far whether it be new ordering docs higher volume dog.

Directing patients there people from the Rescreening population any color you can provide on on early trends there and then if we look out over the next 12 to 18 months how much of this.

New opportunity do you think could be.

Total mix them.

People ordering Cologuard test.

Matt This is Jeff first what a thinks it seemed that exact sciences that want to telehealth capability.

Very quick on a very quick timeframe, what's really excited about tele health is what it can beat for the future Tele health opens up parts of the market that historically, we did not served a one example here is through our website historically, we've driven to a significant amount of traffic to a website before patients could not request.

Cologuard test to the website today they can.

Other channels that we see opportunities in our the employer channel and appeared shell. So we've had an active conversation with other partners that are not only do you think about the tele health capability. So we're pleased with the early launch we're pleased with the growth we've seen so far we're very excited about the long term opportunity, but tell house, especially.

At a cold with World co bid what does last impacts that we see is the Easter shift towards telehealth bid cologuard fits into that market is very well again. This really highlights the at home can feed it nature the underlying value of Cologuard. So we're excited about what would it doesn't mean, we're not going to provide guidance or or specific numbers.

On the opportunity yet it is early but it does open up a big part of the market to us.

Thanks, and then just another quick one any slowdown or changes to the previous anticipated rollout of the electronic ordering functionality across epics platform in the fourth quarter either from your end or on there.

No. The the GE plans or are still on track there Matt the exciting thing about electronic ordered as we've discussed before is that when physicians order electronically not only is easier for them and easier for us the old at a much higher rate.

So we are seeing steady shift from stacked ordering which is still the majority of our cologuard test orders to electronic ordering.

And later this year through our epic partnership a.

A significant percent primary care providers today between 40, and 50% of all primary care providers in this country or on the epic platform will later this year I think we'll release new functionality dual enabled them to order electronically no. It will take some time to roll out that doesn't happen overnight, but we'll have a signal.

He can shift towards electronic ordering capability.

The first half of next year. So we're excited about that can mean those plans are still on track.

Super Thank you.

Your next question comes on the line of adoption.

Hey, good afternoon, and thank you for taking my questions.

It makes sense that orders are gonna be pressured given a decline.

Across the board in any procedure or anything you are going to order that could be viewed us remotely elective.

How affected can you'd be in the current environment and adding new practices to does that frees did that frees up initially as the pandemic spread and then as as.

People started to at least kind of.

Get a little more use to what's going on if that's probably one way of putting it as that happens and as you guys pivot to eat detailing deep does it kind of get back to the point, where you could add new practices in a way that resembles what you would normally doing a quarter.

Thanks, Doug This is Jeff I go back to the size of this market. Obviously this over 300000 primary care providers out there and so there's still a significant pool provider Swift never ordered.

So there's still a long runway ahead and recall this historically most of the new providers the try cologuard.

Did so is the result of our marketing campaign that highly effective marketing campaign as is needed patients to come into the provider a request their provider Cologuard test and so those that are still continue we are seeing continued adoption from new providers. In Q1, we added 9000, new providers, we did see a slightly softer.

March things have slowed down there, but theres still a massive a pool of their new providers that can come in and then this market and a coupon world what you're seeing is TV viewership rates are are a lot higher now than they were pretty cold.

So, whereas there is still up there we recently rolled out at new TV AD campaign.

I think will help us.

Into this large pool of doctors, who have it used to test and again I go back to the backlog. This backlog is massive and Colin or can help providers through that backlog. During this call that endemic.

Yes, so a couple of follow up on that and thanks, Thanks for that Chuck.

In terms of being able to detail docs I know I've built that into the for the last question, Bob but as you've talked about many times over the years detailing is what actually really helps doctors order more is that something you're able to do a lot in the pcps or home and their volumes are actually down.

As well is there actually had opportunity to do more with the detailing to get them in a position where they would order more.

And then to that other point, which you just referenced again the ability for cologuard to play a role in helping the system catch up with colorectal cancer screening Brahma mathematics standpoint, do you have a sense for how many colon Oscar piece actually could be done per month, I'm just trying to get.

The there because there is gonna be a catch up necessary and.

It may be frankly, just necessary for folks even if they weren't inclined to to push colon off could be patients to exact.

Oh, it's Kevin Doug.

Thanks for the question he detailing.

The occurring it's happening over the phone.

It's happening with other electronic tools that we have except me with our partner Pfizer.

It's clearly not as effective as being in the office talking to physicians, but our salesforce is waking up and engaging with physicians are everyday.

Initially the off many of the offices were shot.

They are yeah, clearly opening again and are actively engaged with patients and we're seeing the effective and I'll go back and say too.

To add to what Jeff said, there were actually Oh, I'm pleased and maybe even.

Oh really pleasantly surprised at the level of ordering activity that is occurring right now even though there are certain many people going to see their primary care physician. So we.

This is an experiment that we've been able to not when do we never like to do again, where we have seen what the bottom is when offices, our shops and people are going to.

To see their doctor that Cologuard is still a choice and then that leads into your next question about cornell's can be capacity.

But corn has to be capacity is coming back, but it's coming back at about.

It's offices are just starting to Openoffice, maybe 25% for 50% capacity.

And there are addressing the patients who really need a calling us to be for diagnostic purpose.

Equally that's because of a positive cologuard test.

They are not prioritizing screening, calling us so if you're getting behind we have seen numbers as high as 500000.

Colin ask fees per month lagging there if you want to get people screened in this environment Cologuard becomes increasingly important option. So we're cautiously optimistic about the future. We have we're pleased with the repo and the team our team to Pfizer teams are hungry to move.

Forward.

Sure.

Okay. That's really helpful. Thanks, Kevin Thanks Chuck.

Thanks.

Your next question comes from the line of Derik de Bruin Bank of America.

Hi, good afternoon area.

So I'm going to follow up on Doug's question and that instead of catch up screening I'm, just wondering would people potentially delay.

I'm just doing that's I mean, the average age for collapsed we the still around 53, if that's a good people just may be delayed a little bit more and that falls under the question of obviously, we have really significant spike in the unemployment rate. How are you sort of seen the impact of the job market.

Yeah potential recession sort of impacting business.

In terms of the impact on <unk>, Louis recession high unemployment impacting Oh colon cancer screening, obviously, it's going to have some impact and and we just don't know yet.

We have been so focused on the first three priorities trying to assess the economic future and the impact on health care.

It's hard to assess keep in mind, though there are 45 million Americans who are on screen. Today. So there is always going to be this need and.

Lease that at the present, we are not.

We're optimistic about what the future holds.

It's just as to what Kevin said, Derek keep in mind that Cologuard today has been extremely broad coverage or cost commercial insurance, which obviously with a higher unemployment rates could be impacted.

We also have high coverage and Medicare and increasing coverage in Medicaid.

That wasn't the KC three to five years ago, so that broad coverage will help.

Lessen the impact of rising unemployment, obviously, there would be some impact but in a broad coverage and the attested offers we think very good value for the price.

Helps offset some of them.

It.

And as a follow up question, you're doing thats moving on to cost savings and as kids can you talk about what this impacts the pipeline.

Deliver test and just the rigs like you know.

Turning some of your initial projects going to be little bit delayed either because of reprioritization or nothing will be clinical trials. Thanks.

Yes, thanks, Derek so some of the the major trials that we had underway are temporarily paused given the for example, Lucy is temporary pause given that the decline in number of people go into a screening calling us could be that said the major R&D programs that we have we've talked a little for Duke.

Did you there's a lot of work happening outside of the trials. The can continue so big big efforts cooling or 2.0 continues or cool and blood products continues.

Liver that program does continue to Tommy to that the initial launch of that is likely next year as opposed to later this year given the impact from cold it but major initiatives to continue we're really excited about this this broader platform we have capabilities across.

R&D capabilities loud I see this whole sales and marketing infrastructure, we now and the pipeline relief will help us leverage that broader infrastructure. So we the adjustments we've made tourist spending.

Will allow the major products to continue a lot of the spending reductions in R&D relate to the studies that have been put on hold temporarily we've largely left the major initiatives untouched.

Great. Thank you.

All right in your next question comes from the line of Patrick Donnelly with Citi.

Great. Thanks, guys, maybe just due to timing a little deeper onto the the telehealth angle.

Certainly very timely to get that out during during a pandemic here when we think about the go forward I guess any way you frame. It in terms of what percentage of volume you think could shift over there again I assume you get a much higher compliance rate, maybe even profitability improves given it seems a little less heavy on the salesforce, but maybe just help us think about again what.

What percent of volume you think can shift over there overtime.

[noise]. Thanks, Patrick I think the larger opportunity is with Tele health generally so think of up a person who is 60 years old they have an ethical and ask can be they need to get screened or a person who's 45 years old nollen, they're engaging with their physician over.

Face time like application, we see that occurring more often as long as that position could order cologuard easily.

Becomes a more of a check the box occurrence rather than trying to control somebody to go get a calling us skippy and everybody appreciates the ease of that and and seen Cologuard box show up at that person's home, where they can perform to test and send it back and this we think that's the.

Major under a long lead trend Cologuard test dot com ordering is for a lot of people, who just don't have a primary care physician and we have heard that over and over and over again over the years that I'd love to get a cologuard test, but I don't even have primary care physician.

I haven't seen a doctor in a couple of years, but I really do want to get screened so we think that this may be.

A small part of the overall opportunity here with Tele health. The Big one is the ease of ordering a cologuard test electronically and that gets back to what Jeff was highlighted is that this time next year, we expect that should be really rolled out through the addition of Cologuard and all.

Instances of epic, which is about 50% of primary care physicians. So we don't know what the future holds with Cologuard test dotcom broadly.

We're really excited about the opportunities.

Okay. Thanks, Kevin maybe one for justice on the expense side again nice to see you guys go to pull the levers to pull out a bunch of costs here, how should we be thinking about.

Those expenses coming I guess what percent are what number is permanent versus how much as expenses just being pushed out and we should see a big uptick 2021 or do you feel like you're now maybe a little bit of a leaner platform.

Again, some of these expenses fully disappeared and maybe the pathway.

Greater profitability is a little clear thank you.

Yes, Thanks Patrick.

The 400 million, we took up again that is across our cost of sales operating expense capex kind of across all spending areas.

As and when the the business picks back up to like we are starting to see with Cologuard. Then we'll start to reinvest in the business to supplement that growth.

One of the the benefits of this is that we as we come out of coal, but we expect to be a more profitable company than we would have been otherwise so.

We do expect most of these investments will come back online, but there will be some that we've taken out and allow us to drop through revenue at a higher rate of profitability.

Okay. Thank you.

All right. Your next question comes on line of Green areas with Stifel.

Okay.

That's new guys. Thanks, Kevin I guess, it's been about three weeks or so since the Preannounce says the volume decline rate move materially from the 63% level that you noted in the press release, how would you have us think about the way that you're trending there into mid may on volumes.

Dan This is Jeff as as I said the remarks, we did see improving trends through the less 10 days of April it into the first week or so of May.

See I think I said before that that's in part due to the actions that we've taken such as Tele health.

To continue driving the business also in party I think that people have started to adjust to the some of the stay at home measures and and in some areas of the country started to get back to work. So we are started to see in some cases offices opening sack up and people getting back to business. So I think all those factors related to two improving trends were very pleased to see that.

And.

This is Kevin as we talk to some of our primary care customers one of the things that they have done is rapidly over the last few weeks converted to tele health and they're engaging all day long with their patients.

And in some cases are even busier than they were before.

As a result of that.

It is appearing that colon cancer screening is coming back on to the list of important things and.

This is something that we're excited about.

Got it Okay, and then Jeff just on the cost savings how much of the 400 million in total savings do you think will come from the lower Cogs on the lower volumes and then if I just think about what you've done in the workforce can you just talk a little bit to where furloughs had been put in place rather than full reductions and then Conversely.

Where are you actually had to make some headcount decisions permanent headcount decision.

Yes.

Yes.

I think about the the magnitude of that's you know line items that existed to start the year. The biggest serious spend within operating expenses in that line item. So that's going to get the biggest chunk of the $400 million of a savings.

The change to capital expenditures this was pretty modest considered that our long term outlook has not changed in fact.

As we said before could really underscores amplifies the the benefits of the test that we offer so that the capital investments are largely unchanged. We had said before we had guided previously to about a $125 million.

Capital expenditures for the year, so that the changes to better relatively modest.

Cost of sales there will be some really.

Commensurate with the expected decline in revenue it make it a break out specifics there because we're going to provide guidance for the rest of the you're right now, but directionally operating expense or are the biggest one.

As far as on the personnel side look at the personnel changes.

We made.

Most of these are just too to adjust the business for the volumes were seeing and as the business picks back up.

We're going to start getting reps back out in the field and and unwinding. Some this changes were excited to.

The team has responded this is Ben.

It's been really exciting to see other team as all kind of read their hands on ways to help contribute whether its tele health Ur cobot testing. The team is really responded rapidly. So we're excited for the business to pick back up and get people back to work.

All right in your next question comes from a line of Kathryn.

From Baird.

For the questions I guess first just how should we think about your plans to redeploy our Salesforce Oh are you opening it up in certainly in the local stay at home orders are lifted our your plans to wait it out at that longer until you see my patient flow.

Thanks, Catherine the number one priority as safety safety of or the.

The patients we serve in the offices and of course, our Salesforce. So we have the ability to do testing we are working on.

The ability to make sure that all of our people are tested on a regular basis. So.

There is safe as possible and we are putting a plan in place right now to to.

In response to that the changes in the various state stay at home orders, we will probably err on the conservative side.

There rather than getting out too early and.

Putting anybody in harm's way. So safety is the number one priority there and we're really.

Just on that.

Sure.

Okay and on the cost reduction measures and new England, breaking it out specifically between the line items in Opex, just any any color on how much of those could could fall in the second quarter.

Kevin I'm not going to get that granular now, but considering we we put some of these measures and partway through into the second quarter. I think you can take that into consideration for modeling purposes.

Okay and selling it on your website update that to show that about 80% of call. Our patients 45 to 49, but no out of pocket Castilla nice improvement there any comments on the trends in 45 to 40 on the first quarter and and where we stand today in terms of Medicare volume next.

Due to that just assassin the younger age group.

Yes, 45, 49 is again, a really exciting opportunity considering there, but 19 million people that age group and the vast majority arent screen to enter the cologuard fits very well into the lifestyles people that each of your parts of the few working the often if kids and busy schedules. So cologuard doesn't at home Tuscan.

Did very well into that isn't that age group. We are seeing continued positive trends there. It is outgrowing the.

The each grew 50, an above so we're pleased with that.

No. The the Salesforce is very excited but the opportunity to reach these patients in this market Medicare mix from a volume standpoint first quarter was about 44%.

Okay, great. Thank you.

Alright. Thank you and your next question comes from the line of Dan Brenan would you be is.

Great. Thanks, Thanks for taking the questions.

Maybe the first one is just on you guys touched upon us a few times just wanted to understand it.

When you think about maybe some of the early feedback that you're seeing from patients who want to avoid invasive procedures post coded and obviously that benefits.

[noise] called it out over Kalinowski is this something you can give us any early indication of in terms of feedback from docs or maybe some of your own diligence on this front.

And kind of how impactful this could be as we look out some of the calls we've done suggests you could see as much as.

15% bumping your volumes as as as doctors are kind of switching over to Cologuard from kalinowski in these cases.

Yes, Dan This is Jeff one piece of feedback I get this is looking at the numbers, we've seen data showing that screening calling us could be so down to run 90% because of called the date team. We shared some of the numbers that we've seen for Cologuard down just over 60% to start the month and and done.

Over 40% exited the April and positive trends continuing so.

With that really speaks to is the cologuard not as impacted by cobot as as cost could be and the acceleration. We're seeing now speaks to your people wanting to get back to business, one and just talk to cleared this backlog and Kevin talked before about some of the feedback we've gotten from the G.I. societies on encore.

Look on how the completed bigger role and and the backlog for diagnostics won't ask piece is even bigger than it is for screening corners could be so hula guard. We think is going to play needs in bigger role as we move forward. I think this is one of the changes that is here to stay from Cobot, We think that home test will play an even bigger role.

In this market.

Great.

The number you mentioned the down 40, what was that Jeff sorry, I joined a few minutes place are down 40 is what you exited the people that you said.

It's done about Super 45% in the the lesson days of April.

Got it Okay, and then on telehealth.

How are you trying to avoid channel conflict. There, obviously, it's a great opportunity for patients.

It's kind of seamless but at the same time, all the PC piece in GBS ever seen these patients to the extent now there are no longer in their office getting the screening color getting the Cologuard test there how are you trying to weave in distribution GPC into this process or are you.

Well one of the things that we're doing Dan is working with.

Guys in the local communities, where a patient or local community, where a patient as be tested so that if they test positive then we can work.

To get them to a gastroenterologist that can do the follow up diagnostic going off skippy.

And that's an opportunity to partner.

Through our sales force through our relationships with large with the societies.

And we'll we'll continue to press on debt and then of course the results for patient request that their results go to their primary care physician.

And that is also an opportunity again for us to engage with the physician and remind them of the of the value of Cologuard. So we don't see to us as being a channel conflict if anything it really enhances our relationship both with Pcps Angie.

Great. Thank you Kevin maybe one final one more what kind of think about like if we had a great crystal ball beyond this year and for next year, which is I guess the question for a lot of different.

Companies are now what the impact is as we look in 2021, but if we think about the factors that would prevent you from reaching what you're maybe your internal our our own forecast for 21 before this happened.

Patient visits I would assume probably.

Assuming that we don't have a really big rebound potentially there is some catch up and 20 once a patient that's probably could be greater than they were before.

You're gonna have share gains from calling us could be at some benefit from tell how so as we think about the factors that could help you or not or kind of hurt you in terms of reaching that pre kovac forecast I am I thinking about right or the other factors, obviously talk utilization at the last one were down one I think you could be hard to kind of catch up for the Florida eight weeks at your Salesforce isn't there.

Kind of motivating these doctors use cologuard. So maybe if you can just comment on.

Pre and post cold and kind of.

21.

Yeah, well the question is women's postcode. So it's a it's too early to tell right no what the where we will be by 2021.

I think just to tick off the trends is the backlog of calling us could be the value of our at home screening.

The broad reimbursement coverage for Cologuard and the increasing awareness of that as you mentioned the data indicating that.

Both primary care physicians and GE eyes are more likely to view, our cologuard as as a.

As the solution for our patients moving forward all we think moved things in the positive direction. The reason there's always reason for caution in this environment is nobody knows what the next month or much less than next six to nine months hold so.

No at a high level, Dan the thing that I'm really excited about is the team is energized look we've asked.

People throughout this company to a.

Sharon and the financial pain that is occurring and if anything that seems to have brought this team together people are very very committed to the overall call cause and I think we come out of this as a stronger company with a stronger brands both in Cologuard and don't forget Oncotype Dx both the.

Breast and prostate test their underlying values and the value that team has created along with no. They can't wait to get the PC Dx test in their hands.

That's the paradigm tissue selection tests, both the urology team and college you team and you don't so there are a lot of positives that.

Can come out of even a storm like this.

Great. Thank you Ken.

Alright. Thank you so much in your last question comes from the mine Luke.

Hi.

Hey, guys squeezing me in thanks.

Just real quick I guess on the covert testing kit have you given up the number of test that you've been running per week over the last month.

Thanks, Luke this is Jeff we have not given that number of what we've said is that our lab capacity today is at least 60000, there's room to ramp that's further.

It's a if the demand is there and what we're seeing is a lot of demand clearly there is that a lack of testing a capacity in this country. So we're pleased to be part of the solution here.

The team as Kevin said before has really rallied to bring this test up and scale. It very very quickly I'm going to provide guidance on the passports here how much will contribute sit to see it will be we expected to be a nice contributor going toward that said, we hope we can get older. This business as soon as possible in co, but it's something we never.

You're talking about again.

And that would be nice.

And then.

A follow on from that so, let's say that Cologuard and things come back on line into the back half a little better than usual than you expected given the tele health and everything that everybody has been digging in on today.

Is there a chance that there could be supply chain issues as the overall diagnostic industrial complex shift their volumes to all types of covert testing.

Well one of the this is Kevin one of the values that we Didnt think about when we brought up coded testing is that.

There is going to be prefer preference given to labs that do cobot testing and since we adapted the cologuard instruments, the liquid handling instruments and our PCR instruments to coded testing some of those critical supply chain items.

We will be.

Uh huh.

Be able to more readily access those are key components than others. We feel good about our supply chain. It is something that we pay a lot of attention to on a daily basis and we're in good shape and.

I just want to reiterate what what Jeff said, we're really proud of the nimbleness of this team to bring got cobot testing at scale like that on our own instrument. It was a upbeat of people working nights and weekends around the clock to reconfigure rewrite the code on these.

Our instruments through all of the validation testing.

And then create a workflow and capability to deliver this.

Two large states.

In this country. So we expect overtime to utilize all all of that capacity and likely to grow it based on the calls that are coming to us.

And we're being cautious about.

Taking on too much here to make sure that there are no supply chain issues, because we want to deliver on our promise.

That's great. Thanks.

All right I would now like to turn the call over back to your host.

Thanks, all for joining us to review, our first quarter results and mostly thanks to our employees for their unwavering commitment to our mission in just the past couple of months. This team has made cologuard more accessible to tele health developed a cobot tests to help fight against the corner.

Yes, and and the team has met increasing volume demand in our precision oncology lab.

Because in important acquisition, extending our leadership in advanced cancer diagnostics.

So we are positioned to provide answers to patients and providers looking for more accessible and precise ways to detect and treat cancer and we plan to play an even greater role in screening for cancer and guiding therapy decisions in the post corporate world. Thank you.

Ladies and gentlemen, this estimate does today's conference call you may now disconnect presenters. Please standby.

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