Q2 2020 Exact Sciences Corp Earnings Call
Ladies and gentlemen, thank you for sending bite and welcome to the exact sciences second quarter, Twentytwenty webcast and conference call.
At this time all participants are in listen only mode. After the speakers presentation. There will be a question answer session. Please note that due to time constraints participants will be funded to one question and possibly one follow up question.
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Thank you Christina and thank all of you for joining us for exact Sciences second quarter 2020 conference call.
On the call today, or Kevin Conroy, the company's chairman and CEO and Jeff Elliott, our Chief Financial Officer.
Hi, This is issued a news release earlier this afternoon detailing our second quarter financial result.
This news release in today's presentation are available on our website that exact sciences dot com.
During today's call we will make forward looking statements based on current expectation our actual results may be materially different from such statements.
Conciliations 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.
Well its can be accessed through our website.
Now my pleasure to introduce the company's chairman and CEO, Kevin Conroy.
Thanks, Mike in the Cold at 19 crisis has highlighted the need for more convenient and accurate cancer testing options.
Experts estimate that over the next decade, there will be an additional 10000 deaths from colorectal and breast cancer due to screenings that had been canceled or delayed just through the end of June.
This will mean crisis will continue to grow.
Hello Guard is an accurate at home colon cancer screening test, we believe the coded 19 crisis will accelerate adoption of Cologuard by one to two years towards our 40% marketshare goal.
Patients and physicians are also looking for smarter faster answers to guide their cancer treatment decisions.
Elevating the importance of our precision oncology tests.
No. It's been testing will play a larger more meaningful role in cancer care because of corporate night.
Exact sciences is positioned to create value at every step along the way from cancer screening to late stage therapy selection, our CFO, Jeff Elliott will now review our financials.
Thanks, Kevin Good afternoon, let's start with their second quarter results.
Revenue was $269 million.
That's done by screening precision oncology in Qubec testing.
Screening revenue was $131 million down 34%.
Well with 19 drove a decline in test orders in a temporary negative impact on patient compliance.
In April colder orders to the low point and then improved through June outpacing, calling us could be grilled during that time.
We estimate the second quarter pulling us could be volumes were less than one third of their prequalified levels.
About 5000, new health care providers ordered cologuard during the quarter in nearly 211000 have ordered since launch.
And precision oncology revenue was $103 million.
There was a normal like between a screening mammogram in an Oncotype Dx test.
After mammogram a cancer diagnosis is confirmed and staged.
Oncotype Dx, it's an ordered for patients with early stage breast cancer to help predict chemotherapy response in recurrence risk.
In April there was a significant decline in member grams.
As expected started in May Oncotype Dx test volumes softened.
For the third quarter, we expect total precision oncology revenue to decline sequentially based on demographics volume trends in recent months.
Despite this the long term outlook for Oncotype Dx is very strong.
That's due to the robust evidence and highly capable team supporting the test a solid U.S. market position in a significant international runway.
Covert testing revenue was $35 million in the second quarter.
Future Cobot testing revenue depends in the course of dependent make our lab capacity and supply availability among other factors.
Second quarter gross margin, including amortization of acquired intangibles was 63%.
Non-GAAP gross margin, which excludes amortization of acquired intangibles was 71%.
Non-GAAP gross margin declined six points sequentially as Colby temporarily reduced our test volumes and fixed cost leverage.
In April we implemented a cost reduction program lower in second quarter spend by over $100 million relative to our initial plan.
Since the business has recovered faster than we expected reinvesting some of those savings.
I'm proud of our team's ability to quickly reprioritize spending.
Sales and marketing expense was $119 million.
<unk> expense was $107 million.
R&D expense was $33 million.
We expect total operating expense to increase sequentially in the third quarter as the sales team returns to the field, we restarted several clinical trials and we invest to support our growth.
Other operating income included $24 million and the carriers Act as previously disclosed.
Net loss was $86 million adjusted EBITDA was negative $5 million in Capex was $21 million.
We ended the quarter with cash and securities of $1.2 billion.
The recent rising coping infections has slowed the pace of recovery in our business, we're not providing guidance today because of that uncertainty I will now turn the call back to Kevin.
Thanks, Jeff.
Currently 46 million Americans remain on screen for colorectal cancer. Our goal is to screen as many of them as possible with Cologuard and reach at least 40% market share of the total 106 million person colorectal cancer screening market.
The value of an at home convenience screening test was recognized quickly by patients and providers during the cold in 19 pandemic.
Helping pull forward cologuards adoption curve.
We have seen increased cologuard use among customers who were previously infrequent users.
Cologuard ordering is now near pre cobot levels and recovered more quickly than screening, calling us to fees, which are down 30% to 40% year over year.
This recovery occurred was significantly limited physician office access for our field sales force a key driver of growth historically.
We plan to solidify the strengthen awareness by continuing to highlight cologuards value to providers.
Cobot has caused a significant backlog of screening colon ask these with more than 1 million Miss during the second quarter alone.
Strong neurologists have limited capacity today, and we expect they will continue prioritizing diagnostic corn, asking peas, and more urgent procedures, even as the pandemic abates.
Our team is taking action to help address this building colorectal cancer screening backlog.
Key initiatives include virtual sales calls.
Easier ordering processes and promotion of Tele health, which allows people to request cologuard from home.
To stay engaged with patients we introduced new advertisements HSBC feature on the Cologuard website and campaigns to support screening compliance.
Cologuards convenience and accuracy, coupled with our additional promotional efforts should accelerate adoption and increased brand awareness and loyalty.
We expect us increased awareness will persist well beyond the pandemic.
Identifying the best treatment options for cancer patients quickly and accurately has grown even more important during the corporate crisis.
Risk of infection has increased and surgical procedures have been delayed exact sciences helps provide these critical answers with their expanding offerings and precision oncology.
Good type Dx and our recent recently acquired paradigm Pcbs test support patient facing difficult treatment decisions that are further complicated by cobot 19.
Oh paradigm PC Dx test.
As a broad panel to help guide late stage cancer patients to the appropriate therapy, we plan to expand the launch of the tissue based paradigm PC Dx test through our precision oncology team later this year followed by a full year.
Rollout next year.
We believe this oncology sales team is one of the best in diagnostics. We're also working to enhance the tissue based test and introduce a blood based version of the paradigm test.
We're providing more precise smarter answers across the cancer continuum with Cologuard, Oncotype Dx and paradigm Pcbs.
These tests and the breadth of our commercial lab and IP infrastructure uniquely position exact sciences to support early and late stage cancer patients.
We successfully adapted our automated and differentiated platform to support cobot testing.
We're extremely proud of how a team of more than 1000 people from R&D our lab.
Actually and operations collaborated under demanding conditions to develop secure ft emergency use authorization and launch a scalable testing solution.
This team rapidly raise capacity to tens of thousands of test per week.
We've tested more than half million people for corporate 19 from all 50 states.
We tackle quoted testing because it was the right thing to do for our employees and our communities.
This effort also helps build relationships to support other areas of the business demonstrates the capabilities of our team and technology and shows the potential for potential for future pipeline innovation.
Our team scientific capabilities and experience position us to be the leader and advanced cancer diagnostics.
Cologuards long term outlook gives us confidence to invest in our current products growth and our deep pipeline.
We plan to expand our test offerings to our thousand person commercial organization with sales teams and primary care Gastroenterology oncology urology and women's health in the us and internationally.
Our goal is to lead the rapid shift to tele health and convenient cancer diagnostic solutions with hundreds of millions invested in IP over several years, including installing epic internally to improve ease of ordering.
We can maintain a deep connection with patients throughout their entire cancer journey with our customer experience engine.
We have the key pieces in place supported by a longstanding R&D collaboration with Mayo clinic to introduce new test for colorectal liver pancreatic has softened deal and prostate cancer in the U.S. and abroad.
Our pipeline of future test is strong.
This was evidence.
And at the DDW and ESCO scientific conferences this year.
We presented data across six cancers in different sample types, including stool tissue and blood.
The data spanned indications from screening to recurrence monitoring.
The depth and breadth of our pipeline is unmatched by our commercial is matched by our commercial capabilities.
We are in a unique position to create value from our pipeline and plan to invest.
Accordingly.
Our pipeline team moved several initiatives forward during the second quarter, we made progress towards the launch of our liver cancer test for the 3 million Americans at high risk of developing the disease.
We presented another study at ASCO confirming to superior performance of our liver test when compared to the current guideline recommended protein blood test.
We are on track to launch our liver cancer test through our gastroenterology sales team next year.
We're also re initiating blue see our pivotal trial to support FDA approval of Cologuard 2.0, and our blood based colorectal cancer screening test.
Our primary goal with Cologuard 2.0 is to increase specificity, while maintaining cologuards high sensitivity.
Based on data presented last year, we believe Cologuard 2.0 will raise the bar even higher for aspiring market entrants.
These case controlled data showed an increase in specificity, while maintaining a similar level of cancer sensitivity and higher pre cancers sensitivity.
These data also proved to superior performance offered by store based test because DNA from pre cancerous polyps and early stage cancer is being shut directly into the stool, but not consistently into the blood supply.
We're confident in leading the colorectal cancer screening opportunity with our accurate cost effective approach.
And the significant primary care presence, we've already established for Cologuard, We're now happy to take your questions.
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As a reminder to ask a question you lead to press Star then the number one on your telephone to withdraw your question press. The pound key please standby will become Paul the Q and a roster.
And your first question comes your line is run this colored with Jefferies.
Hey, Thanks, good afternoon.
Jeff can certainly understand why we've elected to offer any guidance, but.
Your formerly for the third quarter, but could you kind of share any detail with as far as you know how close are order trends progressed through the period and maybe some some comments on where you exited.
How July Chicago.
Sure and happy to this is Jeff.
Obviously talked about April trends were Cologuard was down orders were down about 60% record. During April that was really the brunt of the impact from co bid win when states were shut it down and implemented stayed home measures. So that that months really felt the brunt of the impact both on orders and on patient compliance things starting to recover.
Her from from the low point in April and May was down 40% year over year in terms of Cologuard orders.
With the actions, we took and remember the convenient at home nature of Cologuard, we returned to year on year growth in the month of June.
So again this is at a time when calling us can be volumes for the quarter were down by about two thirds and even today, calling us could be volumes are down 30% to 40% Cologuard returned to growth slight growth in June no in July with the increased growth of co would that we're seeing that has started to slow down.
Alan some of that pace of recovery and the month of July Cologuard orders were about flat year on year.
Great Thanks for that.
Color, maybe one for you Kevin.
Between the two initiatives, where you're trying to focus on conference of the call. We'll ask the backlog Gulf Scott This new Tele health.
Online ordering platform up and running.
We're either of those material contributions in the second quarter as we think about contribution from those channels in the second half of the year and then over time do you think the tele health and online platform can actually.
See higher compliance rates than the balance of your business.
The core business.
Well.
Thanks, Brad we're really proud of all the actions the team has taken over the last several months with new it new initiatives that we think put cologuard in an even stronger position.
As we think about at some point exiting the pandemic.
And all of these actions are contributing one of them is.
Television advertising, which is.
We expect to spend about 70 million this year.
And that is certainly increasing awareness some of that is driving then to that Cologuard test dot com.
Website, where you are able to order cologuard by answering questions Mitch, making sure that you are appropriate for Cologuard and then a physician reviews that interacts.
With the potential patient, we're not breaking that out.
And it's it's modest to start growing and we expect over a several year period of time for that to to be impactful.
Certainly somebody who.
Seeks out screening is more likely to a complete screening so hopefully that answers.
That part of the question that yes, we are seeing that there is a greater degree of compliance by people, who who here the television or see the television commercial and then initiate testing through Cologuard test that comp.
And your next question comes from the line of Doug Schenkel with Cowen.
Good afternoon. Thank you for taking my questions.
So I appreciate the color I think we all do on Cologuard volume trends into the until this quarter and.
Also in July.
I guess building off of that what about the pace of new practice additions.
How are those then pacing what are you doing.
In the current environment.
To help drive new practice additions given its still a little bit different than than it was in the past and you're not able to get on to doctors offices quite as much as you didn't look hospital that sounds like that's improving.
And then I guess finally, how much does this metric matter I mean, I know, it's it's important but I guess, what I'm getting out as as you increase your virtual efforts and you get more patients ordering direct.
Arguably is this metric going to be a little less important moving forward.
Thanks, Doug, Yes, I think it will be less important we added 5000, new ordering physician. So first time users of cologuard in the quarter, which is pretty remarkable given that.
The the pandemic and given that our field force was largely not physically in the field.
During that time.
That has increased to now 211000, the total number of health health care providers that have ordered cologuard and obviously our ability to focus on those customers.
Is critical embedded in that question is kind of when does our field force get back to full capacity in.
The first thing that we're focused on there is the safety of both our field reps and.
Our customers and although many of our reps are back in the field access today is much more limited than it was at the beginning of the year.
And.
Our field representatives will be able to get more into the field more frequently as the pandemic abates theres patients there on our part we're engaging with physicians through a multiple different.
Number of avenues, whether it is easy detailing.
Through the Veeva platform through.
The telephone and through email and other ways to engage with our customers.
So although.
Salesforce productivity is not what it is we are in Cologuard volumes are back to near pre coated low levels and that gives us.
Great confidence that as a pandemic abates, we will be able to.
Drive continued use of Cologuard and go get those 45 million Unscreened American screened.
Okay. Thank you for that Kevin and then just I guess a quick follow up.
Regarding Cove at 19 testing.
Is there a I don't know, there's probably a better way to put this but if there are toggle between covance testing and Cologuard revenue volume or will there be at some point I guess, what I'm thinking is with cologuard volumes recovering.
Is there are effectively a cap on what you can do and co, but just from a capacity standpoint.
And on I guess related clean up what what's the impact of covert testing on gross margin in the quarter.
Doug.
My 11 years, an exact sciences really one of the most energizing things I've ever seen has held the team came together to develop a coal that test submit to the.
FDA in a rapid period find the physical space the instruments.
Developed a test to all of the things that we're required to bring up a coal that test at scale.
Initially to support our own employees to make sure that people are safe and could.
Delivered test results for our customers.
And then to help support our communities. So our goal really is to help as much as we can and then to exit.
This business and there there is a limit to the capacity that we have we do have the ability to deliver more test results.
And we'll continue to support our communities and we won't have to toggle between the two Jeff would you like to provide more color Doug on your second question you asked about gross margin.
The driver of gross margin change relative to the first quarter was really the the decline in volumes as well as some changes in mix. It really had to do with Cologuard and precision oncology volumes coming down lower relative to the first quarter.
Was the big driver when I look out to the second quarter. So to the third quarter I do expect gross margins on a non-GAAP basis to be flat to up slightly as improved volume leverage in the Cologuard business is is largely offset or mostly offset by the.
By a decline in the precision oncology business.
As far as capacity, we're fortunate to have always taken a long term approach when it comes to expanded our capacity recall for Cologuard in Madison, Wisconsin, We now have to labs. The original lab, we had built two to sustain an annualized capacity of 3 million test then.
New lab that we opened up last year could add 4 million more.
Obviously right now cologuard volumes are not yet to that 7 million annualized we hope to get them there as soon as possible over that square footage in the lab does offer as Kevin mentioned room to expand our covert testing from the specific 2000 or so per week that we could do in the second quarter.
Your next question comes from the line of Brian Weinstein with William Blair.
Hey, guys.
Thanks for taking the question.
Just to dig in on the July comment a little bit in things flattening out is that really just in areas with rising cases in Texas, Florida, California, when that or how are you seeing a flattening is well in the northeast Midwest, where where there's maybe less of an impact.
Yes. Thanks for the question, Brian look I don't want to get too granular here, but the exciting thing for US is that when you look at the rise in coated volumes now nationally volumes are at or above where they were back in April yes. Thanks to the actions the team has taken.
Cologuard volumes are still at that pre coping level, which is a very different scenario than we were at in April.
So that business is shown to be very resilient when you dig into the numbers here. There are some exciting trends here. So nationally theres still there's still a fair number of primary care offices that are closed down.
By some Matthew see its 20% to 30% easily that are still close down onto yet again cologuard volumes are back to the pre coded level.
When you dig in further what we are seeing is it some of the providers that previously had ordered occasionally it just really sporadic orders of Cologuard are ordering at a much higher level now and I think that speaks to the nature of Cologuard as an accurate at home test. So there are some really exciting data points, we dig in here that give us confidence that overtime.
As the as his pandemic a believes that our adoption will accelerate by year or two.
Okay fair enough.
Greg Im sorry, please in terms of the July trends certainly as we have seen a resurgence and co bid infections in states, like California, and Texas and Florida.
Obviously large populations that as.
An impact and.
The cologuard ordering rate as as fewer people go into the office to see their physician.
Again, the important thing, though are these underlying trends, which are quite positive for cologuard short term and long term.
Oh I appreciate that thanks for the answer and then on.
The comment.
Looking back at their pre provision level.
You are faring better than corn off even without significant to access to a lot of these physician offices, how does that change your way to think about the investments that make going forward in your salesforce sales and marketing and how you go at it is it.
How should we think about the efficiency that you might be book gain as a result of this type of stuff.
Thanks, Brian another thing that I'm really proud of the team here is that the team reacted very very quickly to.
The crisis and as we saw volumes initially decrease the team acted very quickly to.
To reduce expenses, so that we could be in the strongest position possible coming out as volumes started to increase than the team also acted rapidly to make intelligent investments to support future growth.
Jeff can provide more color there.
Yes, the recovery we've seen in Cologuard speaks to the return on this investment Im confident that our reps and that the actions our marketing team took or what's driving this improvement relative to a calling us could be in relative to the broader landscape. So it speaks to the positive return and no longer term given the size of this market.
There is 106 million Americans, who are in this target market I'm confident this investment over time, we'll continue to pay off as it has since we launched the test.
And your next question comes from the line of Derik de Bruin with Bank of America.
Hi, good afternoon.
Hi, Dare Hey.
Hey, you know we saw some news recently that.
Humana with launching this test kits for all in sending out F.I.T. test and I'm. Just wondering how do you think that could have any impact on the business I mean, there could be some confusion between flight testing Cologuard and I'm just wondering if.
Yes, if your counter detailing against that.
Yep.
I remember Derek.
When I am going back about 10 years ago sitting down with.
A.
Head of.
Large primary care practice, who said one of the most frustrating things is how frequently they handed out that tests and how infrequently they came back.
Being handed out by a health insurance company, you can send a million out and.
Maybe get.
100000 back.
And and then one year later.
That person is effectively still in the on screen population.
Because it's a test to be effective needs to be done every year. So one year later, there they still need either cologuard test are calling us capacity. That's a that's a long way of saying that these fit our programmatic fit programs are just simply arent very effective and thats one of the reasons.
As we develop cologuard a more accurate test that is makes the patient go down there colon cancer screening for three years and then it also highlights the value of the infrastructure that we felt this incredible customer experience engine that not only delivers a co.
In regard test kit, but also props patients to return that test kit and helps them understand what they need to do as the next step.
So no we don't expect that one program like these these are common programs that occur all of that time, they're not really that.
Thats not unique.
What we're delivering here is value over the life of patients experience because we can continue to engage with them and get them re screen door overtime.
Great.
Thank you just.
One follow up on the precision oncology business can you talk if I missed it I apologize on us versus are you with trends in that business and also just a little bit more color on the paradigm test and how much that contributed and sort of your expectations for revenues on that thank you.
Sure Derek this is Jeff I'm happy to answer that.
International coded trends were really a couple of months ahead of the U.S. trends and Youre seeing that play out in a similar met or in our business, whereas the us precision oncology business stayed strong really through the end of April and started to decline in may the precision oncology business was was hurt a little bit earlier in the year.
That business did perform relatively better the international business performed better during the second quarter.
I think in large part because the way Cobot has played out also the international market is relatively underpenetrated and there's a large growth opportunity overtime. There we have some positive trends there and reimbursement increased adoption. So the international business is a nice driver overtime for that.
Paradigm not material really started to have that business in house to really solid growth platform for years to come as Kevin talked about in his remarks, we plan to run initial pilot through the precision oncology Salesforce later this year with a full launch to that sales team next year, given how how large an experience that sales team is.
As we expect very good growth next year over at this point, it's not a material contributor to revenue.
And your next question comes from the line of Patrick Donnelly with Citi.
Thanks, guys.
Maybe just on the Colin off to be shift.
We're able to disarm kind of new patients were shifting over from delaying cooling off taking cologuard any metrics like increasing cologuard to come visit your online orders that that can be tied back to add I'm. Just wondering how you guys are trying to track how effective you are doing and capturing that obviously very large potential opportunity.
Thanks, Patrick the opportunity here, you can really see affected by the.
Doctors, who previously infrequently ordered Cologuard and you can see that their use of Cologuard is up significantly. Although you can't make that direct connection is pretty clear. These are patients who they otherwise would have probably sent to calling us skippy and now are.
Sending to Cologuard is the testing option.
There that is.
But driven again without the impact of our field force.
And over time, what we expect this will do.
It gives the physician a deeper experience with cologuard.
They're able to see that their patient satisfaction with the noninvasive option and one data point that we.
Recently, just got a we just got a survey back of 150 healthcare providers.
And.
70% of them say that Cologuard will play a more important role in colorectal cancer screening in the future and 75% of them expect cologuard volumes to increase over the next year.
So this is that this has to be in part because of a shift from Cornell skippy to cologuard.
No that's definitely encouraging thanks, Kevin and then maybe just one on the Pfizer relationship just something we get asked about a decent amount how does that evolves from here, obviously was tied to revenue numbers, but did not anticipate covidien. So maybe just update us where that stands in your general thoughts. Thank you.
Sure we entered into our partnership with Pfizer not quite two years ago, and it's been an incredible partnership that has achieved.
Most of our goals.
We've added new providers and health systems, we've increased awareness through our joint marketing campaign, we've reached more providers more frequently and presently we're in discussions to adjust the partnership for this coal bid environment and optimize the incentives so that.
It is a partnership that continues.
At least through the the end of the current partnership which is the.
End of next year.
And we'll hit we have time here to to decide whether to continue that build our own capacity or some version of bolt on that as a decision that will be made down the road.
Your next question comes from the line of Katherine Schultz with Baird.
Hey, guys. Thanks for the question is first Steve talked a couple of time today about Cove and accelerating the adoption of Cologuard by one to two years towards your long term market share goals, so with that in mind.
So what point do you think it does start to be a net positive to the cologuard trajectory.
Yes, Thanks, Catherine this is Jeff.
I think part of what Kevin talked about before is what really gives us confidence is that we are seeing providers, who typically hedges doubled ordered sporadically starting to order more frequently and that really speaks to the the nature of Cologuard again at home convenient test as well as the size of this market with 106 million American.
And who are in the target market 46 million of those still needed to be screens. So given that combined with the actions. This team has taken.
As far as bringing up the tele health side quickly as far as adapting to tele sales and bringing new TV advertisements that are adjusted for the coveted environment. We're pleased with the speed at which is team moved and we're pleased in pleasantly surprised by the pace of there is this recovery im not going to speculate or guide to.
The future because of the uncertainties with Calvin but given the increased adoption of these these pockets of these trends that we're seeing we're confident that we will pull ahead that adoption by at least a year or two.
Yes.
Okay, Great I know you've been putting a big focus on capturing the re screen opportunity any comments on how that trended in the quarter and what kind of progress you've been able to make there.
It responds or a really important growth opportunity for us. Both this year in long term, it's already material part of the business. This year Theres over 370000, new patients who become eligible for their three year rescreening opportunity and I'm excited to say that the because of the actions the team has taken.
We are seeing an increased capture rate of those patients within this the do I T tools, we've put in place allow us to quickly identify who is eligible target them.
Both directly to the patient as was identified to the ordering provider when a patient is due in a new feature we just rolled out this week can allow a healthcare provider to see all the patients. This she has who are eligible and quickly and verify their information in place that three year Rescreening order through the click of a but.
So the team is getting better identified and capturing this opportunity. It is something that will be a material growth driver from going forward.
And your next question comes from the line of Dan Bergman with CBS.
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Q, thanks for taking the questions.
I was hoping to dig in on the telehealth angle.
Possible to discuss.
This quarter.
What was the mix in order to roughly two tele health and in person.
And how you think that mix will shift kind of going forward.
The next year, or so and Kevin I know, Jeff you, both because that's a lot of actions being taken to optimize the ability to use tele health Im just wondering how optimize our you today for telehealth other any important steps that need to be taken.
Next couple of quarters or year that could further.
Possibly accelerate that adoption.
Thanks, Dan we are still very early in the adoption cycle of.
People choosing to get Scream self initiated through Cologuard test outcome. So clearly the weighting is very heavily towards the normal process of a physician ordering a test.
And let me remind you that the number of office visits is down appreciably, probably more than 30% and so for cologuard testing to be back at pretty cold.
Levels that gives us a excitement for the future in terms of Tele health. This is one component of a broader strategy. So for patients to self initiate is one part of it another part of it is that wherever at a doctor and however, a physician is engaging in a tele health and Connor with a patient is.
Where we want them to be able to order cologuard electronically. So as you know all within the uptick environment there can be a.
Virtual patient visit or a tele health business and.
Towards the end of this year cologuard or electronic ordering will be embedded.
In FX as the next rollout and upgrade.
Back occurs across the country. So this is a multifaceted effort and we think a very powerful one that sets us up and differentiates US and then also improved provides a unique opportunity for us to plug in our pipeline tests through that same capability. It is something that.
We have invested as Jeff said in his earlier comments over $300 million.
In IP that pay off or for patients and physicians is going to occur over the next one year five years in 10 years, and we look forward to that.
Great. Thanks, Kevin and then maybe just one on the comment about orders being back to normal.
I'm trying to put that in contact so I think.
Our math you had about nearly 460000 test completed tests in one Q that was pretty cold is that went back to normal implies like we're going to go off that as the jumping point as we look forward just trying to think about that commented how we might utilize that as we think about forecasting going forward.
Sure Dan This is Jeff two comments today gave you a one was on the year over year change in orders I mentioned in June Cologuard orders were up slightly it in July there were about flat you keep in mind that against a base of orders that grew through the year.
We've also given lose commentary that cologuard orders are about back to their pre coated level.
Now.
Year over year, we typically would expect growth. So I wouldn't say things are totally normalize there's still a very big impact from co bid due to the decline in physician office visits.
Things are headed in a good direction and this is before Salesforce is largely back out in the field with normal access and this before some of the initiatives we put in place like Tele health have had their full impact.
Your next question comes line of Dan Arias with Stifel.
Afternoon, guys. Thank you Kevin you mentioned that you're back on track with Lucy can you just speak to which of the other studies in where in the R&D plan, you're turning things back on just given their recovery that you mentioned.
Versus what might still be on the shelf with the part of the cost savings plan and for Jeff What is the savings amount that you're targeting now you're reinvesting back in business.
So a reminder, that blue see is for Cologuard 2.0, and a blood based test.
We had chose to pause that trial because of significant decline in screening calling us guppies.
And now that screening, calling us speeds are starting to occur again those sites are showing an interest in.
In Reengaging and so blue see is kicking off.
In the near term and we think we'll be back to normal enrollment by the end of this year.
We're confident in the timeline that we laid out for the Blue see study.
And.
That which again is for both a store based test and a plug taste based test this.
Our study infrastructure, coupled with our lab I T commercial infrastructure.
Together allow us to launch additional studies like our studies in liver and a slew of other pipeline tests.
We can go into those at some late later date suffice it to say that our clinical affairs team as happily.
Reengage then.
And that is accelerating.
On the spending reduction program I recall, why we put that in place back in April given that period of heightened uncertainty, we want to preserve capital and make sure that we could stay nimble during this pandemic well as the business recovered fashion to be expected. We think the appropriate thing to do is to reinvest back in.
The business because our priority here is to make the right investments for the long term and that means driving growth and build a solid infrastructure, we think thats the bright way to drive value for the long term.
In the third quarter, the big changes from the second quarter would be bringing our salesforce back putting the salesforce back in the field added seems to do so.
Restarting the studies that Kevin talked about we do expect to step up in R&D and also hiring to support the continue to grow when you think about the volumes were putting through our labs. Now. This is very significant these are higher volumes, we've ever done before when you consider the combination of covert testing and cologuard. So we have to hire to continues.
To support that growth.
Okay, so, but if we were basing our model math around the 400 million that you had talked about what would be the number that we should now base our model math on.
All right, yes, we're not going to update that number it will be considerably less because the business has recovered far faster than we expected not going to provide guidance on how much do expect the sequential uptick in FX. However.
Okay.
Okay, and then just a just a follow up question on the Rescreening opportunity in the expectations. There do you still think that you can get half of that population I mean, I think the math you guys had talked about was reaching 70% of them and then getting 70% compliance how does that sound as an assumption at this point just given the way to think of evolved.
It did that longer term that is the goal look our goal is to get as many of these patients screened as possible. If we are you a unique position to to do that given that we know who these patients are we know where they live we did whats provider. They see at least who this on three years ago when to win there through due for.
Screening and to date, we've tested over 4 million patients over time. This becomes a kind of a revenue engine recurring revenue engine that eventually becomes over half our revenue. So we will get this right I think a goal is to capture at least 50% and hopefully more than that.
Your next question comes from the line of Kevin Degeeter with Oppenheimer.
Hey, Thanks for taking my question with regard to precision oncology.
Yes, I guess these women frankly type Dx 10 come in duties are positive screening mammography base further diagnosis or.
Self examination. So I guess my question is is the reduction the magnitude of the reduction were saying and screen Maga phase.
Consistent with the magnitude of reduction we're seeing an actual diagnosis for these women, which I think.
Really is what is going to drive down the pipe volumes.
Well thanks, Kevin.
We are we're so excited about our precision oncology.
Business and team and opportunities so just to frame this oncotype dx.
Helps guide in answer the question in early stage.
Yes cancer, whether a patient will benefit from chemotherapy and based on the Tailorx slightly about 85% of women can avoid chemotherapy.
At our.
Early stage and node negative.
And yes, so for patients.
Our.
That self exam, and then go visit a physician and Thats how that.
Cancer is first diagnosed.
That is.
Keeping the that business.
Strong coupled with now the.
Recent uptick in screening mammography is there has been a push in that and a greater awareness that.
In the April timeframe, you saw a significant April may and June timeframe, a significant decrease in the number of screening.
Mammograms in this country and that has certainly.
Had a temporary impact I think the thing to.
To note here is that this is a large us market about half a billion dollar market with 73% adoption and right. After this.
Pandemic, Ted what we saw was it a short term and dramatic increase in the number of Oncotype Dx breast test.
And prostate tests also saw an increase because ultimately what those tests do.
Is to decrease the impact in the aggressiveness of surgical treatment.
And we saw more oncologists.
In the case of the prostate test urologist recommend a molecular tests that helps a patient potentially.
Avoid a more aggressive treatment. So long term we are awfully excited about Oncotype Dx and then that Pcbs tests, which is a.
Test for people with metastatic cancer.
And it helps guide the right targeted chemotherapy and that is a very small business today, but with our nearly 100 person precision oncology oncology Salesforce 50 person urology Salesforce. This test is going to be an important part of the future and what it does is.
Delivers a result faster than.
The other test today in about three to four days and that turnaround time.
We believe will drive adoption.
Great. Thanks for taking my question.
And your next question comes the line of Max Mitsubishi with Canaccord Genuity.
Hi, Thanks for taking the questions. So we're just starting to see a wire scale covert 19 testing for asymptomatic individuals. In addition to healthcare providers and first responders. It's it's evident that the U.S. supply of carbon testing is below demand, especially out of the traditional flu season. So.
How are you thinking about the duration of your Covance 19 testing opportunity and.
Add Clover 19 test processing cap capacity of 60000 tons per week I think math would suggest to you is just under 60% of that capacity in Q2. So are there any barriers that whether its people and technology. That's preventing you from utilizing a higher percentage of that capacity going forward.
We will be able to increase capacity over time, the and it really speaks to the.
Incredible platform technology that we have we had to.
Our first.
Telephone call with the.
An outside group that needed testing was on March 14th and we delivered our first Kobin test by March on March Thirtyth.
Capacity has scaled up.
Ever since then and we expected to exceed 50000 tests per week.
The truth is though this is not a business that we hope to be in long term.
We want to do our part to to help our community and our our state in our country and all the areas that we do business.
And what it really shows is the underlying.
Value of of the team and the platform and the science that we're able to deliver as we think about a pipeline that includes liver cancer testing in pancreatic cancer is softer geo cancer.
You should know that we have the ability to deliver on that from an infrastructure.
Scientific R&D regulatory.
Capacity, that's the take home here.
Great and then lots of moving parts this quarter, but what sort of traction are you seeing and then the age 45 to 49 age group for Cologuard ordering clinicians willingness to order. So this age group and just where you stand with any conversations you you may continue to engage in which which commercial payers.
Sure. Matt. This is Jeff from 45 to 49 is an exciting opportunity Theres almost 20 million Americans, who are in that target market. So is a significant increase to the addressable opportunity. We have seen that tick up as a percentage of total cologuard orders and for me that no surprise considering that cologuard.
It's very well into the busy 45 to 49 year old lifestyle and the clinical evidence there is very strong over the past 20 years, we've seen about a 50% increase in the the incidence and mortality rate in that age group. So we think clinically there's a strong reason to to adopt cologuard in that each group.
Reimbursed it continues to improve for that age group within the next big leg of growth. We expect is is through greater reimbursement that likely hinges on on guideline inclusion over the team continues to work on on driving the reimbursement higher given the strong value proposition for Cologuard in that age group.
Your next question comes the line of Luke Sirgo with Evercore ISI.
Hey, guys. Thanks for taking my question I was just quick one here.
On the koby testing on the logistics behind it so I realize it's a different way of the test getting to you guys than than your typical cologuard or oncotype.
Any chance on that these new channels and getting that KOVA testing to present an opportunity to.
Access new patients for Cologuard or Oncotype that previously wouldn't have been able to access with legacy channels more so on the cologuard, obviously than that and Oncotype.
Yes, that's been one of the great.
Benefits of coded testing is that we have a deepened and strengthened our relationships with health systems that will help both cologuard and Oncotype Dx overtime.
Weve.
Strengthened our relationship with FX and the.
We've had to set up.
Well over a dozen interfaces between healthcare providers and our exact lab that allow for electronic ordering and that will have benefits for cologuard overtime again, the probably the largest benefit has been and showing ourselves.
And our scientists and our Laboratorians and all the teams that came together to launch a new test.
In a matter of weeks.
And so I think people are chomping at the bit to be able to launch the next test and over time I think that the next five years, you'll see an incredible amount of productivity in terms of new tests that are launched through this infrastructure.
And that's the most important takeaway of cobot testing is our ability to.
To help in the health system ecosystem in the healthcare ecosystem going forward.
Okay, great. Thanks, and then I guess last one here on I guess seen any change on in a lag between the order rate and the actual test succession.
And any changes in compliance rates I don't know if I caught that earlier.
Let's see Cologuard compliance rate in the quarter was about 66% remember this is on a linked basis looking back 12 to 18 month, but the typical way we reported.
As far as the turnaround time I'd say good question was on from order to completed test.
That was negatively impacted during the March April timeframe really in the early days of of coded since and things of largely recovered over time. Our goal is to get that compliance rates back above 70% and I'm confident we'll be able to that.
And your last question comes from line of Bruce Jackson with benchmark.
Hi, Thank you for taking my question I wanted to circle back to the electronic quarter and can you remind us some what percentage of doctors order Cologuard electronically right now and are you I'm thinking about becoming integrated with any of the other electronic health care systems.
Sure first this is Jeff today about 35% of Cologuard orders are submitted electronically when a provider orders electronically issue orders that over a 50% higher rate than order in via facts, it's because it's an easier ordering process, it's an easier process for us.
US to return that result back and it should cost us less money if somebody do it because the due to come in clean.
So we're looking forward to the epic conversion that Kevin mentioned later.
We are integrated today with some other the cloud based electronic health systems like Athenahealth cloud base, we've been integrated with that one early on and overtime, we will integrate with all the systems Cologuard is too big into important but product, we will make sure to integrate with all of them. So it will take time on the precision.
On colleges side, the electronic ordering rate is significantly higher so that shows there is a path forward.
In one of the benefits of Copel testing that Kevin mentioned is deepening our relationships with health systems and providers for cobot testing the electronic ordered rate from the start has been very high today, it's well north of 70% electronic ordering so.
There are other benefits of cobot testing and that is one that we think will help cologuard ordering electronic or run rate go higher overtime.
Alright, thats great. Thank you very much.
You're welcome.
I will now I'll turn it back over to our presenters for any closing remarks.
Thank you for joining us to review, our second quarter results and thanks to especially to all of our employees for their unwavering commitment to our mission. The way. This team reacted in the face of incredible challenges due to the cobot crisis.
Across the cancer continuum. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.
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