Q2 2022 Exact Sciences Corp Earnings Call
Good day and welcome to the exact Sciences second quarter 2022 earnings call. Today's call is being recorded I would now like to turn the call over to Megan Jones Senior director of Investor Relations. Please go ahead.
Thanks for joining us for exact sciences second quarter 2022 conference call on the call today are Kevin Conroy, the company's chairman and CEO and Jeff Elliott, Our Chief Financial Officer, and Chief operating Officer.
Every Cunningham, our chief commercial officer will also be available for questions.
Exact sciences issued a news release earlier this afternoon detailing our second quarter financial result, this news release and today's presentation are available on our website at exact sciences dotcom.
During today's call we will make forward looking statements based on current expectations. Our actual results may have material differences from such statements.
Reconciliations to GAAP figures are available in our earnings press release and descriptions of the risks and uncertainties associated with exact sciences are included in our SEC filings.
It can be accessed through our website I will now turn the call over to Kevin.
Thanks Megan.
During the second quarter the team made several advancements toward our vision to eradicate cancer through earlier detection and smarter answers for patients and their healthcare providers.
<unk> from the quarter include being a great place to work certified for <unk>.
Third consecutive year screening.
Screening more than 700000 people for colon cancer with Cologuard, securing an improved position in the <unk> guidelines for Oncotype Dx breast is the preferred path for early stage breast cancer patients.
<unk> and our path to profitability and cash liquidity position.
Cutting.
<unk> EBITDA loss.
Quarter over quarter.
Showcasing the breadth of our screening and precision oncology pipeline with 13 abstracts at Ash coal.
Making progress towards completing Blue C. Our pivotal study to support our next generation Cologuard and colon cancer blood test.
Publishing evidence for our tumor minimum residual disease testing colon cancer.
Generating additional evidence for our multi cancer early detection test, which we plan to share at the European Society for medical oncology or ESMO conference in September .
And finally, enhancing our sequencing capabilities by partnering with ultimate genomics.
We're focused on executing with our core business of Cologuard and Oncotype Dx prioritizing the highest impact projects to reach profitability and generating high quality evidenced for our pipeline of advanced cancer tests.
Jeff will now review our financial results. Thanks, Kevin and good afternoon second quarter revenue was $542 million, an increase of 20% or 20.
Covid testing.
Screening revenue was $354 million, an increase of 34%, including four points from prevention genetics cool.
Cologuard growth was driven by improved sales team productivity, a marketing partnership with TD correct three year re screened and used in the 45% to 49 age group.
9000, new health care providers ordered cologuard during the quarter and nearly 282000 have ordered since launch <unk>.
Precision oncology revenue was $154 million, an increase of 12% driven by Oncotype Dx breast and therapy selection.
Foreign exchange was a $2 million headwind.
Covid testing revenue decreased 58% to $14 million.
Second quarter GAAP gross margin was 68% non-GAAP gross margin, which excludes amortization of acquired intangibles was 72%.
Margins were lower than expected due to inflation, especially shipping and wages, we expect inflation and unfavorable foreign exchange to be about a two point headwind in the second half of the year compared to our prior guidance of about 73%.
We expect margins to expand as we absorbed the additional lab capacity brought online for Cologuard and introduced new automation.
Sales and marketing expense was $216 million G&A expense was $182 million, including a $24 million net gain mainly related to thrive in a $5 million expense from cost reduction activities.
R&D expense was $106 million.
Net loss was $166 million and adjusted EBITDA was a loss of $46 million. This.
This improved $76 million from two quarters ago, and 44 million from last quarter.
We ended the quarter with.
$728 million we.
Boost an AR securitization facility during the quarter with up to $150 million in borrowing capacity for.
Per the agreement, we borrowed $50 million under the facility.
We also have about $150 million available under our revolving credit facilities.
This provides total liquidity of almost $1 billion.
We're also exploring ways to unlock capital from our real estate facilities, we expect our cash use to be lower in the second half of the year compared to the first half.
We're confident in achieving adjusted EBITDA profitability in 2024, while we continue investing in future growth and efficiencies. For example, we're investing $300 million 90, this year to improve our digital tools and support initiatives that cologuard re screens enhance our customer experience and billing systems and eliminate redundant costs from our legacy.
Turning to our guidance, we expect total revenue between $490 million and $505 million during the third quarter and between $1 98, and 2.0 to 2 billion for the year.
We expect screening revenue between 350, and 355 million for the third quarter and between $1 35, and $1 $372 million for the year.
This includes convention Gen X revenue of approximately $10 million during the third quarter and between 40% and $42 million for the year.
We expect precision oncology revenue between 135 and $140 million for the third quarter and between 580 <unk> hundred 99 for the year.
Our expectations for global Oncotype Dx breast are unchanged, we're up generic guidance reflect portfolio the product portfolio changes and a $4 million incremental FX headwind for the year.
We divested our Oncotype Dx genomic prostate score test to ensure our team is focused on the highest impact projects and improving our profitability.
Certain members of our dedicated neurology team will transition to Mdx health, a commercial stage precision diagnostics company focused solely on prostate cancer and other urological diseases. We have agreed to provide certain transition services to mdx health, including lab services to ensure a smooth transition for patients.
Per the agreement exact sciences received $30 million upfront, including 25 million in cash and $5 million in Mdx health equity.
Additional $70 million is payable to exact sciences upon achievement of certain revenue milestones.
We expect Covid testing revenue between five and $10 million for the third quarter and between 50 and $60 million for the year.
Moving to Opex for the full year, we are lowering our sales and marketing expense by $30 million and now expect between 870 and $890 million.
And the second quarter, we saw improvement in our key sales and marketing metrics such as revenue per sales representative we expect this to improve further as we grow cologuard to make more products available.
We're also lowering our research and development expense by $5 million and now expect between 425 and $445 million.
Our expectations for G&A, Capex and intangible amortization remained the same.
I will turn the call back to Kevin.
Thanks, Jeff a recent study showed that about half of Americans between ages 50, and 75 are not up to date with colon cancer screening that means as many as 60 million Americans need to be screened cologuard is helping to solve this problem almost half.
A first time cologuard users are new to screening.
The centers for Medicare and Medicaid services, or CMS recently proposed removing the barrier to getting more people screened by eliminating Medicare cost sharing for a follow up colonoscopy.
After a positive stool based screening test.
This follows a federal regulation, requiring private payers to eliminate cost sharing starting in 2023.
Addressing that top concern patients and providers have about using cologuard.
Our sales and marketing teams are helping screen more people with cologuard by using a multichannel marketing approach to elevate colon cancer screening and Cologuard.
Investing to support our health system partners needs and implementing tools help people.
To help keep people up to date with screen.
Our powerful data and digital infrastructure is one key to unlocking the full potential of Cologuard, Oncotype Dx and our future tests.
We have spent nearly a decade thoughtfully designing and enhancing our it systems, including a custom built laboratory information system and installing epic is the backbone of all processes from ordering to billing.
This will power one interface to meet our health system and physician partners testing needs.
Hereditary cancer colon cancer multi cancer.
Cancer prognosis minimum residual.
And late stage therapy selection.
Our goal is to make it easy for health care providers to order all advanced cancer tests through one partner.
Making prevention and diagnosis simple and personalized instead of complicated and fragmented.
Exact sciences has the foundation in precision oncology to provide answers to key questions a cancer patient oncologists biopharma or academic partner may at.
The Oncotype Dx breast.
Please standby this is Neil.
Operator, we will reconnect the speaker line.
Once again this is the operator, please stay on the line, we will reconnect the speaker line.
Once again, everyone. This is the operator, we are attempting to reconnect the speaker line. Please stay on the line.
At what point.
Okay.
Operator, do we have you where on the backup line yes.
Yes. Your line is live please go ahead.
Can you, let us know where the line Zhao please.
Yeah It dropped.
Dropped approximately three minutes ago.
Okay.
Sure.
Okay.
To those listening we apologize for the technical glitch, we we don't know exactly where we stopped.
I think it's.
For most of my comments I am going to go back to the start for safety and relief.
Thank you Jeff.
A recent study showed that about half of Americans between ages 50, and 75 are not up to date with colon cancer screening that means as many as 60 million Americans need to be screened.
Cologuard is helping to solve this problem.
Most have a first time cologuard users are new to screening.
The centers for Medicare and Medicaid services recently proposed to removing the barrier to getting more people screened by eliminating Medicare cost sharing.
For a follow up colonoscopy after a positive stool based screened.
This follows a federal regulation, requiring private payers to eliminate cost sharing starting in 2023. This addresses the top concern patients and providers have had about using cologuard.
Our sales and marketing teams are helping screen more people with cologuard scarred by one using a multichannel marketing approach to elevate colon cancer screening and cologuard to investing to support our health system partners needs.
And three implementing tools to help keep people up to date with screening.
Our powerful data and digital infrastructure is one key to unlocking the full potential of Cologuard, Oncotype Dx and our future tests we.
We have spent nearly a decade thoughtfully designing and enhancing our it systems, including our custom built laboratory information system.
And installing epic is the backbone of all processes from ordering to billing.
This powers one interface to meet our health system.
Physician partners testing needs in hereditary cancer colon cancer.
All tie cancer prognosis minimum residual disease and late stage therapy selection all of these tests. Our goal is to make it easier for health care providers to order all advanced cancer tests through one partner, making prevention and diagnosis simple and personalized instead of complicated and.
Correct.
Exact sciences has the foundation in precision oncology to provide answers to key questions are cancer patients oncologists, biopharma or academic partner mania.
The Oncotype Dx breast test is now the most strongly recommended to natural gas.
With the highest evidence quality of all multi gene test.
To expand our precision oncology test offerings, we are developing a minimum residual disease test and.
<unk> enhancing our therapy selection test and partnering with Biopharma companies to help identify and develop better therapies for patients.
And therapy selection, we're taking aspects from our current tests.
<unk> and <unk> extra to bring one market, leading comprehensive tests to patients.
Prevention Genetics recently received approval for the first FDA authorized class two molecular companion diagnostic device developed in collaboration with rhythm Pharmaceuticals, with 40, Biopharma partnerships that prevention genetics team provides invaluable relationships to build upon for future.
Gnostics. The team is also planning approaches pilot launch of hereditary cancer testing later this year to help breast cancer patients make better treatment decisions based on Jeanette. The genetic makeup of their team.
Okay.
In the next 12 months, we plan to deliver evidence supporting three of the most important cancer diagnostic advancements for patients colon cancer screening multi cancer early detection and minimum risk.
Minimum residual disease testing.
We displayed the breadth and depth of our pipeline at <unk> with 13 abstracts.
And our prospective Blue C trial, which is supporting our colon cancer screening programs, we're happy to announce that we've enrolled the number of cancers necessary to power an FDA submission for our next generation Cologuard test.
We will continue enrollment to ensure we have enough cancer cases to support our colon cancer blood test.
And multi cancer early detection, we plan to share data at ESMO in September that demonstrates the power of our multi marker approach.
And minimum residual disease, we published evidence supporting our tumor naive panel and colon cancer at Astro. We also initiated study with the West German study group to validate our tumor informed approach in breast cancer and expect to have additional data in colon cancer later this year.
We want to provide patients better information before diagnosis and across all stages of cancer treatment.
We have a team with expertise across many technologies in biomarker classes.
This provides flexibility to deliver the best test on the right platform for each question, we're answering before them throughout a cancer diagnosis, our development work with ultimate genomics and singular genomics may provide future access to a differentiated and affordable sequencing technology and another tool to <unk>.
Deliver the best outcome for patients, we're now happy to take your questions.
Thank you if you would like to ask a question on the phone lines. Today, you can press star one on your telephone question.
Ill phone keypad, please limit yourself to one question to allow everyone an opportunity to ask.
If you have additional questions. Please reenter the queue.
We'll take our first question from Derik de Bruin with Bank of America.
Hi, good afternoon.
Afternoon, and thank you for taking my question.
Okay.
I guess to start off I mean, there was a $12 million beat on Cologuard relative to consensus and our estimates on the quarter, yet you're still maintaining the full year guide I guess why the conservatism for the second half of the year. Given you should have a number of tailwind is better sort of there given the self.
Forcing less less COVID-19.
I guess any initial thoughts on how we should think about cologuard for 'twenty three.
Well, let me start and then hand that over to Jeff as well at the start by saying we are guiding to 22% growth in the back half of the year.
Taking a step back cologuard has it tremendously.
A long runway ahead of it.
There are between 45, and 60 million unscreened people, who need to be screened.
The people, 45% to 49 are starting to be screened added increasing clip.
And.
The environment for access to physicians.
It has not changed it has been essentially flat over the first half of the year, we expected that to increase.
Eventually it will again, what we're seeing is that we moved from a period, where access was limited because of Covid.
No access being more limited because of.
Office staff shortages.
All of those things are temporary in nature and the need for colon cancer screening is.
Is persistent.
And we're seeing a fundamental shift that is that cologuard.
Is becoming more commonly accepted within large health systems among primary care physicians importantly, among patients.
It's a great way to get screened it's just becoming more common in that data back that up Jeff can touch on some of those.
Okay aspects of <unk>.
Or green behaviors, but the positive note is the upside is tremendous and we continue to expect to.
Meet or beat our 40% long term market share goal with Coke.
This adjusted as Kevin talked about we're guiding to 22% growth in the <unk>.
Back half of this year for Cologuard, that's 100 until they might have incremental revenue that may keep in mind Cologuard as you know the $1 billion plus product. It is profitable today, where we're emphasizing profitable growth going forward I want to make sure. What we feel is sustainable in generating the consistent growth and cash flow will guide to next year as we typically do a likelihood.
Fourth quarter call there was a ton to be excited about as Kevin talked about that.
He mentioned the efficiency of things, we're doing with health systems, which is 54% now electronic ordering.
We will continue to climb higher with the backlog of systems that are they are signing up upon just really waiting two to convert to electronic ordering and when you do that you see a nice lift in orders. So I feel good about the progress you've made on growth today. We are about three five months left in the year from a cologuard order perspective recall things really slow down for us.
Our ability to turn orders into revenue.
It really goes down after Thanksgiving.
Here today, but three to eight months left in the year, we will try to do everything we can but you should think of our the midpoint of guidance for the year as the most likely outcome.
Sure.
We'll take our next question from Brandon <unk> with Jefferies.
Hey, thanks.
Two part question for Jeff.
First it.
Dollars reduction in sales and marketing for the year can create on the drivers of that and then on G&A I think there was a $25 million gain in the second quarter, but the full year spending outlook unchanged is that right.
Yes, a two part question Brad This is Jeff. The first then I'll start with sales marketing that maybe average Canadian can chime into piece has something to add.
As Bill's marketed I think what Youre seeing here is an emphasis on on prioritization and invested the highest return areas of growth. So evident team have done a very nice job, making sure. We're targeting the right doctors targeted rate territories and always looking at marketing has been closely.
What I'm really pleased to see the improvement that we saw when you look at the sequential sequential overall growth of 7% a sequential decline in sales and marketing of 7%. So this is some really nice efficiencies we're getting.
I mentioned in my remarks, we are seeing improved efficiency of our sales team.
As part of the plan that we kicked off early this year to two and improve the productivity there before I have a chance in a <unk>.
G&A.
We had this dynamic the last two quarters of $25 million gain.
It really just relates to the earn out for the <unk> acquisition.
Only thing that really happened here is that as interest rates go up.
The math around the the accretion on that earn out says that we've got it again, so that's really the dynamic here that could happen again in the future of that content, but it could happen again as interest rates fluctuate.
That's the change there as far as the G&A in the back half.
We'll continue to invest in things like <unk>.
So that's likely the step up in the back half.
It is crucial driver for for the efficiencies that we expect to get over time. So I think those investments they can test sets ever do anything to add on the sales and marketing line.
Yeah, Jeff just around the optimal deployment.
We've taken a look at putting our resources toward.
Those largest opportunities that we have I like and I am excited about where we've invested in our commercial organization. We've invested in our health systems organization, we know that health systems.
Have been important and will be more important as we the year goes on and as we go into 2023 24.
That investment in health systems has allowed us to really develop a deep partnerships.
And making sure that Cologuard is a major choice for those large systems.
We will take our next question from Brian Weinstein with William Blair.
Hey, guys. Thanks for taking the question not really thrilled that you brought up three five months of Thanksgiving 85 in Sarnia in Chicago with Andy do you want to.
Think about that yet so not cool at all.
So you guys divested an asset this quarter.
We are looking at what makes sense.
Maybe Kevin or Eric if you guys can talk about the portfolio more broadly any thoughts about the right time to potentially add to the bag to maximize kind of sales force more broadly and even potentially help cologuard and beyond that like even in precision oncology you guys had been an acquirer shall we expect.
That to continue and the reason I'm asking is obviously just strategic intent, but also just wondering how M&A or or other types of opportunities to add to the bag to help cologuard potentially.
How that factors into kind of comments you've made in the past about not raising equity of course, and then also achieving profitability. So kind of a bunch of stuff bundled up that hopefully that may checks.
Yeah, Thanks, Brian its Kevin.
If you go look back to 2016, I think we generated $99 million of revenue and this year, we're guiding to 2 billion. So the company has been transformed and an important part of that transformation was.
Joining forces with genomic health and building what we believe is the best.
Reach from all the way from primary care Gi obgyn other specialties, all the way to oncology.
So if you then take a look at what is our portfolio of strategy you have two of them.
We think the best brands in cancer testing, Cologuard, and Oncotype Dx breast, which are anchors to our long term growth and now looking at our pipeline. We have multi cancer early detection testing really an amazing opportunity to excess of 135 million Americans.
Irregular basis, and transform cancer care by making detection earlier too.
Our colon cancer next generation Cologuard test and colon cancer blood programs.
And three minimum residual disease those three.
Adam.
Groups of products.
Access a total combined Tam of about $60 billion.
And we are the company that can deliver that one of the reasons. We can deliver it is because we have this amazing IP platform.
That is soup to nuts from from the time, a Doc learns about a task they order it they get a result, all the way to billing.
The investment to get there is huge.
We believe the best commercial organization not only in cancer diagnostics, but in diagnostics. This is an incredible team of professionals that engages deep capabilities in the lab.
Clinical and regulatory this allows us to take new products and dropped them in.
To this portfolio.
So our M&A philosophy is driven by <unk>.
Will the product or the technology contribute to this long term strategy that.
Just articulated is it the right culture fit and does it create shareholder value when it comes to our Oncotype Dx prostate test is a great test.
No people personally who benefited greatly from.
The information that that test.
Deliveries and Mdx health is.
We know the leadership of the company well, it's a very strong company totally focused on urology, we will be.
One of the important shareholders of the company, we want to support.
And help them be successful.
We believe that this is the right home for Oncotype Dx.
State. So we'll continue ever it I don't know if you have anything to add there.
Yes, Kevin I will just add one thing I've been out in the field over the last month and a half talking to large health systems about this.
Portfolio approach to our cancer continuum and the response that they that the health systems have given us the Ceos Cmos, they're saying if you can simplify the number of lab partners that we had to deal with and you have the backend support of all your <unk> solutions to help our <unk>.
Hello.
Theyre going to partner with US we were going to move from selling individual products to being their cancer continuum partner. That's what health systems are looking for that's what we've seen over the last that's what I've seen over the last month and a half that I've been in the field. So it's it's a it's inspiring.
Thanks Deborah.
We will take our next question from Catherine Schulte with Baird.
Hey, guys. Thanks for the question.
First in the past you've talked about the group of docs that had represented the top 40% of orders pre COVID-19.
Down while the bottom group is ordering much more than they did pre pandemic did that can continue in the second quarter and how long do you think it takes for that top cab orders to come back.
Hey, Catherine this is Jeff. This is a really exciting part of the business something I know, Kevin and I never looked at closely and we're really excited with the future here so that trend it actually accelerated in the in the quarter relative to prior quarters. So we saw as those doctors that order historically had ordered most recently.
They improved their orders now are down just under 10% relative to the start of the tenant again, that's in an environment of more limited access that was that compares to about down 15% in the first quarter. So good improvement sequentially. These are doctors that are the true believers. The order is still at a higher rate.
That patient flow is ticking back up and as access improves they will come back even more and expand from the current levels.
The doctors, who historically only double ordered infrequently oftentimes, we didnt even call them up.
This part of the business tremendously excited those doctors have essentially doubled their order rate relative to the start of the pandemic continues to improve last quarter. I think it was up 60 now closer to a 100%.
Improvement since the start of the pandemic. So this provides a huge growth opportunity for us for years to come we can selectively con.
Promising doctors in this group were seeing this broadening of the order base that really bodes well now for Cologuard also other products like hereditary cancer and multi cancer as we launch them, we'll have a broader base of physicians to launch it drew.
We will take our next question from Dan Brennan with Cowen.
Great. Thanks, guys. Thanks for the question.
Kevin I thought I'd, just ask you about with eclipse coming obviously, you've spoken pretty prominently on expectations.
But can we get to the next call.
It could be out.
Just wondering if you can update us anything incremental or kind of how youre thinking about.
The different scenarios and kind of how exact will react depending upon the scenario and kind of how cologuard IP position versus scenarios.
Well, let me remind you.
B.
There are many challenges in bringing a.
Blood colon cancer blood test.
Jim market as a leading way to screen people for cancer.
There are five main reasons number one is that any of the blood tests. The data that we've seen are less accurate than cologuard and colonoscopy and other established screening approaches.
Equivalent FDA approval and claim language is.
Is is unlikely.
And that's a challenge when it comes to introducing a new test into the <unk>.
Awfully challenging and complicated screening paradigm.
Our bar for guideline inclusion, which drives commercial coverage is very high.
Pricing is likely to be sub $200.
And.
Vendors the question of where does a blood test fit given that you had tremendous performance.
In terms of efficacy with colonoscopy and Cologuard.
So I think the market is challenged our view Hasnt changed here, we have a blood test that we expect to.
Be priced appropriately we havent.
Our commercial team our lab infrastructure in it system, where we will be able to drop our blood test into that ecosystem, making it really easy for docs to order and patients to use it test it for any reason dates opt not to get a cologuard test.
And so that's.
Our view of this in terms of data data.
As step one there is FDA approval, there is getting claim language Medicare coverage et cetera that will take.
Most likely will take multiple years USPS PFS next.
Output is probably three to four years away.
Okay.
Our next question comes from Vijay Kumar with Evercore ISI.
Hey, guys congrats.
Congrats on the print and thanks for taking my question I had one on.
On this path to profitability.
Jeff It looks like your gross margin assumptions changed I heard some commentary inflation, what's your updated free cash flow burn rate for the year and now when you think about the 'twenty 'twenty four adjusted EBITDA.
About a pack of profitability.
Assuming revenues to grow teens gross margins were consistent in your Opex has to grow low singles over the next two years are those assumptions.
Reasonable did.
Did that make sense to you given our looking at DAP and exact being at the high end of your.
Your peer group.
Gross said.
Thanks, Vijay this is Jeff.
What it did again I know we've said this before but we are firmly committed to adjusted EBITDA profitability for the full year of 24, and we made great progress towards this team pulled together came up with.
Awesome, and new ideas and how do we get more and more efficient as we grow.
And going forward.
It will start with revenue growth and effort of the team are doing a nice job growing the top line.
I do expect some gross margin improvement over that period inflation here in the near term is what it equated to shipping and wage inflation.
Incremental headwinds relative to our last update we have significant lab automation projects in flight now will help us drive improvement on top of the leveraging the fixed cost of our lab. So I do expect some gross margin improvement and then you see in the Opex discipline, it starting with the sales and marketing lines, you'll get even more of that.
G&A in the coming years, so I feel very good about the path from here to 24.
Okay.
We'll take our next question is from Dan Arias with Stifel.
Good afternoon, guys. Thanks, Kevin maybe a couple on the pipeline.
Starting with Cologuard to point out is it 2023 commercial launch for that assay in the picture at all just given the current submission timeline expectations and then maybe on <unk> and the dual approach that you have there I mean, obviously there is a need for data generation.
Sounds like there's some data on the way.
How are you thinking about the timelines that those tests are on should they more or less arrived together or is that development path, just not something thats going to allow that to happen.
Cologuard two point al.
Or what we call next generation Cologuard will.
2023 is a possibility we have.
I have not yet made a determination internally as to when that test will be launched it will obviously depend upon the test.
Performance and then there are a whole bunch of things you need to do to make that.
Flow, so we may or may not needed a new CPT code.
That will affect the launch timing and then Medicare coverage and insurance coverage you want to make sure all of that is block. So that when you flip the switch you have a very smooth billing process.
And patient experience process in terms of MLR D.
We are have a couple we have access to a couple of important.
Sample sets that will allow us to see.
<unk>.
And L D T status and then work towards getting.
Inclusion as one of the reimbursed tests, we see this spaces is developing very nicely said, it's setting us up for a product launch.
In <unk> Dee.
This year on a reimbursed basis.
Most likely next year.
We'll take our next question from Mac Sykes with Goldman Sachs.
Hey, guys. This is Dave on for Matt Congrats on the strong print.
Could you tell us.
To ask about that.
Physician office access for the millionth time in the past two years, but.
Any comments on the percent of pre pandemic.
The office access your sales reps are getting in in person.
And any directionality there.
This is Jeff I'll take that one typically has talked about access being relatively unchanged since our last call. One of the newer dynamics. This isn't just us I'm sure you've heard other companies talk about this.
A critical staffing shortage that youre seeing in health care provider setting so that has affected because of limited access further so yes.
I would say, whereas it relative to pre pandemic, probably somewhere 50% to 60% of pre pandemic levels Thats, what we talked about on our last call.
Edward and team are really creative at finding ways around that and making sure that we are a good partner to health systems and other providers and that's what's helped us deliver upon that growth, including 22% growth in the second half of the year.
Okay.
We will take our next question from Patrick Donnelly with Citi.
Hey, Jeff Thanks, maybe following up on that one there in terms of kind of improvement in the second half we get Cologuard guidance is basically implying kind of flat to down sequentially from what you did in <unk> typically <unk> seasonality is a little bit better obviously, a few factors working your way as you've talked about.
In terms of building momentum.
Is that just conservatism baked into that <unk> number you discussed just trying to figure out the moving pieces why that number <unk> would be better than <unk> sequentially on cologuard specifically thanks.
Yes, Hi, Jay this is Jeff.
I would say the guidance is the likelihood you.
Where we will end the year based on everything we see access as part of that.
Theres other other trends out there too, but it's a stick to the guidance that particularly land.
Historically, you look back at the last couple of calls I talked about the seasonal trends of Cologuard as the base of this business continues to grow youre going to see the seasonal pattern shifts a little bit and I think that's what a lot of the street has missed.
I think it's between that and just.
Axa historically.
In prior quarters, we had assumed access would improve gratulate over the course of this year now, we're saying it's likely to be flat over the balance of this year. We're just guiding to what we see right now maybe it improves maybe it doesn't but we're just we're baking in.
<unk> for the rest of the year.
We will take our next question from Jack Meehan with Nephron research.
Thank you good afternoon.
So Kevin one of your or maybe forever as well one of your competitors launched the colorectal cancer liquid biopsy test as an L. D. T back in May So obviously very super early days, but was wondering if you saw any impact in certain accounts and what you may or may not be seeing about the interim.
Play between Cologuard and liquid biopsy in the field.
We saw zero impact from.
Any other aspiring entrants into colon cancer screening.
During the quarter were unlikely to see any impact.
<unk>.
Tests that aren't reimbursed that earning guidelines that don't count towards a quality measure credit.
Just Don.
It's challenging challenging to conceive of a way that there would be significant uptake.
There that could impact that we screened over 700000 people in the quarter, we expect that to continue to grow throughout.
The next.
Several years and beyond so.
No.
Really.
Blood tests have a role in colon cancer screening.
They achieve.
At least the same level of cancer sensitivity as a fit test.
And.
Better advanced adenoma pre cancer detection than we have seen from case control studies.
And if so and there is widespread reimbursement and validation of these tests, we think that they will have a role just not in the near term.
Okay.
We will take our next question from Mark Massaro with BTG.
Hey, guys. Thanks for taking the question maybe a two parter.
Jeff The first one is for you on Oncotype prostate.
You lowered the guidance by $15 million to $20 million for the year I just wanted to confirm that the rough.
GPS revenue run rate was around $30 million to $40 million.
And then secondly.
I wanted to follow up on the profitability topic clear.
Clearly you have significant investment to come and multi cancer early detection cigna.
Significant investment in <unk>.
And I understand that you divested oncotype prostate the small part of your business, but I guess I could use some help as to how you expect to achieve adjusted EBITDA profitability in 2024.
When you have the investments.
That I that I laid out.
So I guess, what I wanted to maybe clarify as you know are you do you expect to continue investing in DTC, because obviously, that's a pretty significant line item and then I'd also be.
Since you are divesting the prostate sales force any comments on your Gi sales force.
Okay.
Sure. Mike This is Jeff on the first one I think you're in the right ballpark. There, we said that they don't break that out but youre in the right range.
The second one looking at it we are again, we are very committed to being profitable in 2024.
Our mantra internally is to keep savings, we can invest in the highest impact priorities and keep growing this business and serving more patients and.
I'm confident we can invest in those three key thing Kevin touched on that obviously, our colon cancer business, it's MLD and multi cancer.
Benefit from having a strong foundation from which to grow and we've got this foundation of lab sale.
Sales for assistant we don't invest incrementally as we bring these new products to market.
The incremental profitability gets even better so I'm confident I'm happy to spend some time offline on the math, but.
I look forward to driving continued leverage of our sales and marketing team and the G&A going forward I think G&A will be a big area of improvement in the coming years.
And then on DTC, Yes, we will continue to invest in that will continue to make these investments because the return is very good.
The Gi sales team is a crucial part of the business is growing for today for Cologuard in the future for a whole series of other products.
Okay.
Thank you our next question from Puneet <unk> with SBB Securities.
Yeah, Hi, Kevin Jeff Thanks for taking the question two simple ones for me.
First one on CMS coverage, a diagnostic colonoscopy I'm wondering if there is any change in the marketing approach among the sales force as a result of this first of all coverage of.
Follow up follow on colonoscopy.
And can you remind us how wide is the coverage of follow up follow on colonoscopy by commercial pairs and then just one for Jeff and prevention genetics.
Yeah.
We have seen a disruption from one of the competitors in the marketplace hedge trade diagnostic peer is reducing their workforce by a third so just wondering in terms of share taking perspective, and an opportunity to again talent. Thank you.
So for.
The CMS coverage.
For.
NASDAQ colonoscopy, that's pretty uniform today and the proposed CMS rule is a change that says <unk>.
When a patient has a positive stool tests, so either that test or a cologuard test have follow on colonoscopy.
Should be deemed a screening colonoscopy because it completes that patients screening journey.
And as such there should be no cost sharing today, there is about a 20% cost share for that.
This rule is finalized we won't go into effect until.
Next year, so no today, we're not out marketing this but in the future we will.
Yes.
To add some color to that one U S. On the commercial side of that you said the CMS. The seamless uptake goes followers. The department of Labor regulation that applies to commercial plan. So this is essentially universal started in January that that diagnostic follow up colonoscopy will be without any cost sharing to the patient.
Our big win something we've advocated for quite a long time on your second question on prevention. Thanks, We're really pleased with the growth in the quarter and the amount of opportunities that lie ahead, we highlighted the bathroom partnership there couldn't be happier with this new acquisition and all the capabilities there.
Serve as the foundation for future entrants enter edited.
Testing.
The longer term goal is to really grow the pie, especially in the primary care channel. Obviously, we've got a strong foundation, there with cologuard today and future products so overtime.
We do plan a kind of an early access launch later this year in oncology I think this is a perfect opportunity for us to do.
Build upon the relationships we've established over the past 15, plus years with the Oncotype Dx breast so really pleased with the future opportunity here I think it's primarily about growing the pie and getting more women men and women access to this.
<unk> technology.
Yes.
We will take our next question from Kyle Mixon with Canaccord.
Hey, guys. Thanks for the questions I, just want to talk about Blue Sea. So you enrolled enough cologuard to put out patients to power. The FDA submission I think it was <unk>.
Acted.
But youre going to continue to enroll for the blood arm I guess, how long will that take and then just maybe remind us of the path forward, there and any timelines for the CRC bought assai.
Yes.
Yes.
This is Kevin.
A separate blood arm.
Unfortunately about.
10% to 20% of people, who are willing to get a stool test don't complete blood draw, that's probably because that requires a <unk>.
Special a trip to a blood collection.
Enter or because they don't like needles.
And so that's why we continue the entire study as we have more.
Patients in the study it just increases the powering of the study which is great. That's.
Probably for few more months, we havent determined.
When we will finally locked that study we're just thrilled that we are in a position that if we wanted to.
Shutdown to study for Cologuard.
Next generation Cologuard, we could do that today.
Ultimately excited about the opportunities that that both tests are forward to patients.
We will take our next question from Alex Nowak with Craig Hallum Capital Group.
Great. Good afternoon, one going back to the portfolio strategy one of the things that exact science. It doesn't have is what I'd call bread and butter old school cancer testing like fish flow pathology cytogenetics do you need to own a broader testing menu and succeed with that portfolio strategy or do you eventually see those relatively commodity like task getting it.
Ultimately phased out here replace with newer modalities that exactly half.
We don't think that those tests will be replaced by molecular tests, rather molecular tests are answering new and different questions that those.
Tissue tests.
Don't always answer.
And do we need.
Our flow business or fish business to be successful to answer is.
No we don't need that business to be successful over time, we've kind of laid out what our.
Strategic plan is we're excited about that strategic plan and we're going to execute that plan like our lives depend upon it because it's the right thing to do for patients.
Thank you and this does conclude today's presentation. Thank you for your participation you may now disconnect.
Please wait the conference will begin shortly.
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