Q4 2022 Exact Sciences Corp Earnings Call
Good morning, My name is Rob and I'll be your conference operator today.
At this time I'd like to welcome everyone to the exact Sciences fourth quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question again press the star one.
Thank you Megan Jones Senior Director Investor Relations you May begin your conference.
Thanks Robyn thank.
Thank you for joining us for exact Sciences fourth quarter conference call on the call today are Kevin Conroy, Chairman and CEO , and Jeff Elliott, Our Chief Financial Officer, and Chief operating Officer.
Cunningham, our chief commercial officer will also be available for questions.
Exactly and issued a news release earlier this afternoon detailing our fourth quarter financial results.
This news release and today's presentation are available on our website at exact sciences.
During today's call we will make forward looking statements based on current expectation our.
Our actual results may have material business as John discussed.
Discussions of non-GAAP figures and 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'll now turn the call over to Kevin.
The strength of our foundation supporting the best brands in cancer diagnostics puts us in a leading position to continue delivering innovative cancer tests.
Revenue growth and profitability.
We are using this platform to help prevent cancer detected earlier and guide treatment for more patients.
H achievements in 2022 that help strengthen our leadership team.
Surpassing $12 million.
Cumulative people tested for cancer, including $10 million with Cologuard.
Expanding our global network of ordering health care professionals.
More than 350.
Growing core revenue reached 180 billion year over year.
<unk> adjusted EBITDA profitable in the fourth quarter.
Completing enrollment of Blue C. Our pivotal study to support our next generation Cologuard and colon cancer blood test.
And generating evidence for our multi cancer early detection and molecular residual disease test.
Over the past decade, we've built a high quality platform to deliver advanced cancer tests at scale.
We've invested heavily in our people lab infrastructure technology systems clinical Oh, yes.
In customer experience.
This platform is fueling efficient growth for our current tests over time, it will fuel fuel the next wave of novel cancer.
Our health system customers employee most U S health care professionals and seek to improve quality of care, while reducing costs.
They are incentivized to focus on preventive care, including cancer screenings today, many phases staff shortage, leading to a trend of more in home services such as Cologuard.
Advanced cancer testing.
In advanced cancer testing and health systems continue to ask for fjord partners to meet their needs.
Yes.
Complete range of high quality impactful test broad insurance coverage EMR integration and data sharing capabilities.
<unk> is uniquely positioned to deliver on <unk>.
We have the broadest offering of innovative cancer tests patient focused services EMR integration capabilities and payer relationships.
This year will increase adoption of Cologuard and Oncotype Dx create an even better customer experience and advance our key pipeline programs in colorectal cancer.
Multi cancer early detection.
Molecular residual disease.
Jeff will now discuss our financial results and outlook for 2020, Thanks, Kevin Good afternoon.
Third quarter revenue of $553 million grew 17% or 28% excluding COVID-19 testing.
Screening revenue of $404 million increased 45%, including three points of growth.
For.
For the year its fee revenue increased 30% organically.
During the quarter as the new healthcare professionals have ordered cologuard, bringing the total to more than 302000 since launch.
<unk> revenue decreased 4% to $143 million.
Excluding the sale of our prostate business and a $2 million FX headwind of 1%.
Covid testing revenue decreased 7% to $6 million.
Fourth quarter GAAP gross margin was 70% non-GAAP gross margin, excluding amortization of acquired intangibles was 73%.
Net loss was $128 million.
Adjusted EBITDA was $5 million improvement of $120 million demonstrating the power of the exact sciences.
We ended the year with cash and securities of about $630 million.
Our total liquidity is about 840 million included available credit facilities.
The guidance, we expect total revenue between 536 and $551 million during the first quarter and.
2265, and $2 315 billion for the year.
Screening revenue between $3 90, and $400 million for the first quarter and $1 66 to $1 69 billion for the year.
Precision oncology revenue between $1 43, and $148 million in the first quarter and $600 million to $620 million for the year.
Total revenue of 3 million for the first quarter and $5 million for the year.
For the year this implies 18% growth for screening, 5% drove purposes analogy exclude the sale of our prostate business and 14% overall growth, excluding COVID-19 testing and the prostate sale.
We exited last year with broad momentum, which is driving our strong first quarter. This is especially true in our screening business, where we're seeing the benefits of past investments and great execution from our team.
We expect to generate up to $25 million adjusted EBITDA for the year.
This assumes a non-GAAP gross margin of about 73% for the year already.
Our industry, leading gross margins are powering positive adjusted EBITDA and a clear path to free cash flow as we continue investing in growth and efficiencies.
We expect total GAAP opex to increase mid single digits for the year.
This includes an absolute decrease in sales and marketing offset by increased G&A and R&D last year G&A was reduced by $57 million.
Primarily from a noncash gain related to the thrive acquisition earn out.
In addition to cycling against that came this year, we expect $19 million of non cash expense as we accrue for the earn out payments.
R&D is increasing this quarter multi cancer.
And we expect Capex this year to be about $120 million.
I'll now turn the call back to Kevin.
Thanks, Jeff.
<unk> is becoming the preferred colorectal cancer screening choice.
During the fourth quarter, nearly 160000 health care professionals ordered cologuard in new reps and the rate of people re screening is an all time high.
We're starting 2023 with <unk>.
Adding stronger health care professional conviction and Cologuard is a frontline screening test increased consumer awareness improved electronic ordering and an enhanced digital patient experience.
Also reach half a million people screened with Cologuard between 45 and 49.
As of the fourth quarter, we estimate Cologuard cologuard grew to 9% penetration.
More than 90 million people ages 50 to 85 in the colon cancer screening market.
For the nearly $20 million 45 to 49 year olds penetration grew to more than 8%.
Just 18 months after it was included.
Of that age group was included in USPS TF guidelines.
Screening people I'm admittedly audience will provide recurring revenue for decades as we've worked to keep them screaming every three years until Theyre 85.
Cologuard growth is supported by the most powerful sales and marketing team in cancer diagnostics.
We engage with health care professionals more than 1 billion times, each year and have more than doubled the revenue generally generated per interaction in the past year.
We build brand recognition and loyalty by generating more than 15 billion impressions.
Our commercial team supported by rigorous analytics will get even more efficient over time and help decrease sales and marketing costs as a percentage of revenue while supporting growth.
Our precision oncology team is guiding treatment decisions for more than $1 75 million cancer patients around the world, including a record 220000 people last year.
I have to take the extra revolutionized breast cancer.
Is internationally recognized as standard of care for patients early stage HR positive <unk> negative breast cancer, which represents about half of breast cancer.
We have an opportunity to impact even more lives.
Making archetype dx easily accessible to more women globally.
Offering uncle extra our enhanced therapy selection tests with DNA and RNA analysis, and working with our Biopharma partners to develop new targeted cancer therapeutics.
Thanks to our team posted Oncotype Dx brands and deep oncology relationships, we can power better treatment decisions that are specific to each patient's disease.
Our advanced R&D expertise and platform spanning screening and precision oncology.
But our pipeline tests to more patients.
We made meaningful progress in each of our key pipeline programs last year by completing enrollment of our Blue C. Pivotal trial, which included more than 26000 people.
Presenting two studies, including 4200 examples showing the power of our multi cancer early detection test.
Initiating and enrolling studies that will answer key questions clinicians and payers have when evaluating our molecular residual disease test.
We are completing the final steps of our Blue C trial and expect to have top line next generation Cologuard data mid 2023 before submitting to the FDA.
We expect to have two additional sets of multi cancer early detection data. This year further validating our multi marker class approach.
We moved to a larger prospective trial.
We also plan to validate and make our tour informed molecular residual disease test available colon cancer patients later this year.
Our mission is to make earlier detection, a routine part of medical care to help eradicate.
Our platform deeply embedded standard of care test and pipeline of life changing diagnostics with our years of growth and continued profitability.
Helping us to achieve our mission.
Thank you.
We're happy to open the line for questions.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
I ask that you limit yourself to one question only with no follow up questions.
First question comes from the line of Derik de Bruin from Bank of America. Your line is open.
Derik de Bruin your line is open.
Hi, its Eric sorry about that I had the mute on so.
So can.
Can you just so a couple of points. So a couple of questions. I think the first one is I guess what were the key market changes.
That drove some of the increased momentum we achieved in Q4 and.
The guide was better than expected, particularly for Cologuard and for 2023, and that's one and then just I've gotten a bunch of questions for investors lately about the competitive landscape outside of liquid biopsy Theres. A couple of companies that are advancing some their stool based colon cancer screening test and also just sort of a landscape for oncotype.
<unk> as it sort of it goes O U S. There's a little bit more competitive.
Opportunities out there can you just sort of talk through those couple of questions. Thanks, and I'll shut up.
Alright.
Let's first address the.
The momentum that we saw throughout the fourth quarter and the start of the year.
A lot of this is just the result of the investments that we have made over time.
The strong need for noninvasive.
Screening cancer.
Cancer screenings, so you have some structural tailwind, including the ease of electronic ordering that is taking.
A significant amount of effort time engagements with large health systems too.
Deliver a electronic ordering through our ethics and.
EMR capabilities.
Increased brand awareness around Cologuard two.
Systems are highly incentive to drive their colon cancer screening scores and they are frequently now reaching out to us to ask for a partner who can help them.
Improve their quality measures care gaps et cetera.
We're seeing it.
Gis have a staff shortage and there is a greater focus.
The endoscopy suite.
Okay.
Diagnostic colonoscopy and Gis are ordering cologuard.
Higher rate is.
Primary care physicians are.
Certainly.
Our sales and marketing team I just can't tell you how proud we are of the work that day.
<unk> continued to do.
Their efficiency their engagement is turning the tide and really making cologuard.
Personalized screening choice.
Also of course, the 45 to 49 year age group of 18 months ago, the guidelines change too.
<unk> age 50 to 45, and we believe Cologuard.
As leading in terms of market share today and the penetration is.
As impressive if you take the fourth quarter.
The number of tests and extrapolate that we believe were the penetration is.
8% as I mentioned, Jeff I don't know if you want to add any color.
And what Kevin said electronic oriented huge huge.
Your last year recall, we started the pandemic back nearly 20, 30% of Cologuard orders for electronics and.
In Q4 that was up to 63%. So yes that has implications not only for cologuard to make it easier to get borders as implications down the road.
We launched new products launched read into that foundation, so overall Cedric connections to health systems.
Q4 is I think as we've talked before Derek.
Picked up a little bit of extra upside from enhancements, we've made to our our patient compliance engine and our billing systems.
Added to the upside there with the sole cause of it and the reason I bring those up is because although we added these enhancements, which will benefit on a run rate basis, and it will get better compliance and better and better asp's going forward, but at the end of those and headsets.
Pulled forward a bit of revenue from Q2, and Q3s, so consider that catch up revenue.
A little bit more in Q4, so you really can't take Q4 and extrapolate that.
Now I've got half a few Q1 in the books now I think a little bit of that catch up revenue again on the $1 billion headsets patient compliance enhancements.
Related to Q1, that's part of the strength in Q1 and that is everything kind of said should continue.
Another question.
Competition in terms of the competitive dynamics when you look at Cologuard Cologuard.
Standard of care.
And a very high bar in colon cancer screening.
Cologuard two point or what we call. The next generation Cologuard will raise that bar.
And we.
We just haven't seen.
Data, indicating any other testing modality.
That approach is that high level of performance for detecting cancer for detecting precancerous polyps.
And having a high specificity right and you have to be careful when you take a look at data is that apples to apples what are the underlying drivers. How large is the study powered et cetera et cetera.
So we feel great about our competitive positioning.
Much more to Cologuard then of the test.
Test is.
Enormous investment altogether 5 billion invested in the 19 infrastructure commercial team.
Our lab.
Our team and capability that is.
Multibillion dollar investment too.
To be able to reach.
Hundreds of thousands of ordering health care providers.
Tens of millions of patients.
Yes.
<unk> is in a class of its own as the only test with that.
This level of evidence that you've seen with Taylor acts and respond.
As a result, as we position.
In U S and.
And so these are the two best brands and diagnostics, we will keep investing in them.
And they have become.
Standard of care without peer in terms of that Cologuard and its sample type.
Oncotype Dx it'd be very difficult to replicate that level of investment. So we're proud of these programs and continue to expect big things in the future.
Your next question comes from the line of Andrew Brachman from William Blair. Your line is open.
Hi, guys. Good afternoon, thanks for taking the question.
Kevin maybe one for you and sort of building off some of that store based commentary there.
Just sort of recognizing two point out data is going to come I think you said around mid year can you just sort of give us an update on where you expect those data to come in.
Anything in particular you'd point to as we put together the scorecards for that data and sort of the longer term benefit to the model. Thanks.
We expect Cologuard to point out to have improved.
So a more false.
And we.
Would be on a secondary basis would hope to see.
Some improvement in the advanced adenoma detection rates the main goal.
As to lower the false positive.
We have designed cologuard with.
More specific.
Markers, we also expect to see improved cost efficiencies.
In other aspects of Cologuard test.
That is where we are.
That's what we expect of course, we won't know until we complete all of that.
The validation testing.
We expect that to occur mid year.
Your next question comes from the line of Dan Brennan from Cowen Your line is open.
Great. Thanks, Ron Thanks for the question guys.
Maybe.
First one just on the re screened in the 45 to 49 and then just one question on the EBITDA guidance for 'twenty three.
Jeff can you just clarify so 8% penetration run rate in <unk>.
It seems like a really big and we're coming out with 130000 cash benefit Zip code.
20 million people in total.
And you divide that by three to get the addressable for Cologuard sits at $6 6 million.
And then you got $8 and then you've got 80% penetration in <unk>. So we just took a quarter of that in 80% of that so maybe maybe a little clarity on the math, there and how we and kind of how we think about I know you guys don't want to disclose too much on these.
But can say our material it'd be great to understand how youre thinking about the impact of re screened and 45 to 49 in 2023 and then the second one would just beyond the $25 million plus of adjusted EBITDA.
I guess dollar.
Stock comp in 2023, so if you exited <unk> with $5 million just wondering if that's a conservative number.
I would expect you guys will have some nice momentum.
Despite all the investments that you're doing so I would I would've thought maybe a high number 23, maybe you can just speak to some of the drivers there. Thank you.
Sure.
Obviously, you kind of talked about 45 in <unk> significant growth drivers and that will continue for a long time.
Last year, we had put up guidance for 45 of at least 100 million of revenue we beat that nicely in February sweeps, we said $240 million and maybe that nice. So both are really good momentum. This year, we expect risk seems to be about 20% of revenue in total and that should grow from there that should this becomes half of our revenue and 45.
Similar trajectories restricts the huge drivers there in Q4.
<unk> talked about.
The overall penetration rate for 45, and just to be clear on the definition here. We're looking at the pool of patients which is near the 2019.
And then Q4 run rate call. It roughly 125000 people tested if you adjust that for the interval.
The annualized it.
We were at 8% penetration into that younger age group the reason behind that.
<unk> got there about 18 months after USPS SCS guideline inclusion for the younger age group.
You contrast that to the 50 and above age group, which is thats been the biggest segment declined in history.
We're at 90% there today.
So the point there is really 45 has great very very quickly.
Question on adjusted EBITDA.
What we're guiding to is up flat to $25 million adjusted EBITDA for the year.
And this really speaks to the power of the platform.
Recall that we had accelerated the path to profitability. It was going to be 24, then mid 'twenty three inhibition, we got there.
The 22 for the year now or what we're guiding to is over $150 million of adjusted EBITDA growth.
The incremental adjusted EBITDA margin basis, we're talking to over 75% next month. So the guidance is the most likely outcome I am proud of what the team has delivered here.
I'm very proud of these numbers is a significant improvement year on year and it puts us in a position to really continue investing in growth and efficiencies.
Delivering profitability to investors.
Your next question comes from the line of Vijay Kumar from Evercore ISI. Your line is open.
Hey, guys. Thanks for taking my question.
Jeff.
<unk>.
I guess I had a two part question to porno.
Cologuard coupon results I know you mentioned increased testing.
And you expect an increase in advanced adenoma sensitivity is there any risk as you take up that specificity that the sensitivity for 10.
Cancer, perhaps.
Ops.
Can I know given sensitivity going up perhaps that's not the case, but maybe just talk to US is there any risk here from a sensitivity perspective heading into the Swiss Austin and on adjusted EBITDA, Jeff How should we think about those.
Leverage levels going forward.
Incremental.
Leverage Matt that you just laid out we should that hold true when we think about 'twenty four and 'twenty five thank you.
Why don't I take the first part chip and you take the second part.
So we would expect the cancer sensitivity.
At or above.
90%.
We would expect somewhere in the neighborhood of a 100 cancer samples.
In this study so.
As you recall in the deep C study, we had 60 by Sam.
So what have we done too.
Proved our likelihood of success, we number one.
The increase the powering of this study number two we've done a significant amount of work to compare.
The current version of Cologuard with the next generation version of Cologuard.
Samples, including samples from the deep C study, so we have a head to head comparison.
Which gives us confidence that cologuard two <unk> has performed better than Cologuard. One <unk> you can never control all of the risks because the fundamental population is changed or for example, you see a lot more smaller answers harder to detect cancers.
You don't know that you can't control for it.
So what we have done is.
Developed the very first test with the best markers.
Bob.
Efficient and powerful DNA capture technologies and deploying that into this study and we look forward to opening.
The results of the study and sharing them with you.
That's our thinking on that Jeff maybe you take the second.
Yes. This is Jeff on the leverage question, but this model was built to scale efficiently ultimately deliver positive free cash flow, which we expect to reach in 2004.
We sustained 75% plus incrementals I hope, so, but thats, a pretty tall order D J.
When I think about leverage going forward the best way to do is to drive really strong topline effort and team are going to do that we've got the net levers to pull when they walk through the P&L.
Gross margin.
Over 80% gross margin.
Two key products year, Cologuard and Oncotype oftentimes is there how many cologuard will get there over time, so I expect some good gross margin improvement.
The G&A.
This year I talked about thrive on all payment is driving higher G&A growth on a GAAP basis, but if you adjust for that as mid single digit growth over time, the G&A leverage will improve sales and marketing.
There is really to make sure we're always investing in the smart growth in debit so nice job there.
We're seeing that are really good leverage within sales and marketing R&D. The way, we'll get leverage there is to focus on the highest impact opportunities and Kevin has talked about those today.
Over time as we get the benefit Cologuard two <unk> programs multi cancer as we get the benefits of those programs.
That will help drive additional leverage through the P&L.
Your next question comes from the line of Catherine Schulte from Baird. Your line is open.
Hey, guys. Thanks for the question.
Thanks for showing that you might on rep productivity, it's great to see Cologuard revenue per field.
So getting to trend upwards, but im curious whats that number would have looked like pre COVID-19 and if you can talk about where you think that number should go over time.
Yeah, Kevin This is Jeff.
Pre COVID-19 I think theres a lot of moving pieces. There when you think of the Pfizer relationship. It's a great partnership it does change the dynamic as well, which is why we focused on the quarters that will be displayed on the slide deck going forward, where can it go if I can start with <unk>.
There's a long ways to grow when you think of that market penetration number, 9% and that 50 plus age group.
Near term I am confident we can get to at least 40% and I think we've already got a strong team in place.
To go way up over time, but no thanks, Jeff and thanks, Katherine for the question.
I'm really proud of what the commercial team has done over the past.
Year since we've launched Cologuard and we continue to evolve our commercial team is many things that are contributing to.
Productivity I'll just highlight a couple of things number one is.
The way in which we've evolved our territories.
Cleaned up the overlap in territory, which has driven deeper customer relations.
And I think that's driving a lot of the acceptance of why now cologuard as a preferred choice for screening.
Number two we use data and analytics now in terms of who to call on when to call on how often we call on those customers.
We're just much better now looking at knowing exactly who to call them for the growth and we review those analytics and who we're calling on a weekly and monthly.
<unk> process in our commercial organization.
Just don't do it centrally but we're now doing it at the market an area level, where that execution is happening.
And then.
Jeff mentioned, Kevin mentioned in terms of we're going to always invest for growth.
Really focused on health systems.
That's where a lot of our customers and patients are.
<unk> increased our amount of account executive at the health systems level and the conversations that we're having around the screening is our health systems are now coming to us on how can we partner for both hard to screen patients where they need to close the care gaps and we saw a lot of that at the tail end of 2020.
Two and Thats going to continue in 2023.
And our productivity will continue to improve.
Your next question comes from the line of Brandon <unk> from Jefferies. Your line is open.
Hi, Thanks, good afternoon.
Just two part question in terms of the guide for the year, Jeff what's embedded for the stock comp expense and then Kevin conceptually speaking if the top line is let's say running ahead of plan as we move through the year would it be your preference to reinvest some of those dollars, but still deliver on the profitability target or would you let that drop down.
Okay. Thanks.
Craig This is Jeff first of all on stock comp.
I think we've given you the pieces between when you look at it.
Yes.
<unk> growth in Opex adjusted EBITDA.
Stock comp is probably the biggest piece between there if you look at last year, which you haven't you will have in the case already it's going to grow from there.
As you look back at the headcount growth over time.
I think that that's enough to give you on that.
<unk>.
Further adjusted EBITDA on the second.
A question on reinvestment.
So.
In terms of investment, we're still making enormous investments in new product programs, we touched upon the three big ones colon cancer multi cancer early detection.
The <unk> program. So we also have some minor programs that we're working on in liver esophageal cancer endometrial cancer.
We're making those investments today, we're making significant investments in our it.
Our infrastructure so we selectively.
Reinvest some of those profits yes are we.
Biased towards and lead towards letting that flow through.
Or is just the whole company is.
On board with that they are driving towards.
We're all rowing together as one team.
Sure the profitability engine.
We have and Thats very important to us.
Your next question comes from the line of Matt <unk> from Goldman Sachs. Your line is open.
Hi, good afternoon. Thanks for taking my questions maybe the first one just on compliance Jeff you mentioned some of the enhancements you are making to compliance and if we add in the re screen opportunity over time could you maybe help us frame, where you think compliance can go two for cologuard over the next year or two.
And then just secondly, I'll ask them both upfront, but secondly, just on oncotype outside of the U S. I think you mentioned that sort of the main growth area for you could you maybe talk about what you see as sort of the growth rate for ex U S. Within Oncotype for this year. Thanks.
Yes. This is Jeff I think I'll handle both of those cologuard patient compliance the way, we typically report the salad.
Looking at test.
<unk> months prior.
That rate is in the mid 60% so about two to three patients comply with Cologuard over time expect that to go above 70.
75, the reason why I'm confident we'll get there is that on an re.
We screen patients the robot patient compliance rate is 15 to 20 points higher than first time patients. So over time, that's going to be a big driver of overall lift in the patient compliance rate.
And we're making significant investments to enhance the customer experience better ways for outreach better ways to make it even simpler to do cologuard and overtime that will naturally agreement that patient compliance rate.
The second question on MTX International growth.
There's a significant runway ahead, thanks to the strength of the team there the strength of the evidence that Kevin alluded to.
Undeterred globally as <unk>.
And new markets through reimbursement and access.
What we baked into this year is.
In the U S.
Growth there is approaching prevalence of points yourself, so they could kind of low to mid single digits.
And we'll go faster.
Be easily into the double digits, depending on new markets that launched within a given year.
This year, we expect Japan, which could eventually be the biggest market outside the U S. We expect Japan to command potentially mid year.
And that can be a big driver starting mid year and into next year.
Your next question comes from the line of Jack Meehan from Nephron Research. Your line is open.
Yes.
My questions for Kevin or on the blood screening programs first can you give an update on the blood portion of Blue C. When you expect that to read out and then second on <unk> talked about validating.
Additional markers can you just talk about.
How that might.
The similar or different to what you presented at ESMO and.
What that might mean for timeline for the <unk> study.
Sure.
On the first program, we havent given specific guidance as to.
When the colon cancer blood program will read out.
Team that is focused on our colon cancer programs are focused both on <unk>.
Stool.
Cologuard two <unk> and.
In blood.
There's a huge amount of effort that is required to.
Prior to testing samples so there is.
A rigorous analytical fifth set of analytical validation studies that are required.
Verification studies software development and.
Validation.
And so.
So there is an enormous amount of rigor that goes into that and preparing the automation.
The entire program and submission that goes to the FDA you don't make changes easily.
So you need to make sure that that.
The manufacturing capabilities of the studies are locked down so the cologuard two <unk> next generation Cologuard is first and then that team will shift his focus to the valley.
Validation and verification studies for CRC blood afterwards.
In the coming quarters, we will provide more clarity as to when that pivot.
Pivotal study from the portion of the CRC program will be.
In terms of the unsaid marker validation study.
Interim and full.
<unk>.
The tests designed kind of Lockdown study prior to moving into the large prospective study that study we expect to readout.
This year, so with two different studies will read out during the year and that is a much larger version of the data that you saw at ESMO last year.
That is that will lock down our final marker classes.
And then we expect sort of to start.
Next year.
We would expect that to start in the first half of next year.
And.
All of the team right now is working on perfecting the test, making sure that that test automation surrounding it.
A lockdown before we start that study again once you start a prospective study or a cancer screening test you don't make changes to that product. So historically.
Your next question comes from the line of Mark Massaro from <unk>. Your line is open.
Hey, guys. Thanks for the questions and congrats on the progress.
My first one is on <unk> and so it's great to see your planned <unk> launch later this year in colorectal cancer.
When can we expect to see.
Additional data, which would support reimbursement and have you had discussions with any Medicare contractors and then my second question is on the thrive multi cancer initiative.
I appreciate that additional data will be rolling out this year, but maybe Kevin can you just give us a sense. This is not like you're rolling out in <unk>. This is kind of a higher risk.
Bigger opportunity.
What types of.
Factors do you think might change in the landscape over the next few years that could perhaps increase their probability of success and then can you give us a sense for the size of the patient enrollment is it somewhere near the 80 to 100000 plus mark.
Okay. So the first question in terms of what are the things that are going to change to make multi cancer early detection. This whole category of testing more likely to be successful certainly.
Congress, creating Medicare benefit category is one that's important and we expect legislation to be reintroduced and this congress.
Remember last year, there were more than 50% of Congress, where corresponds as equal number of Democrats and Republicans.
So we're working hard right now to make sure that Medicare beneficiaries have access to this incredible new category of testing.
The evidence that is being built.
Exactly.
There is in this field shows.
Great promise for the ability to shift.
The.
Stage of cancer detection broad across many many different types of cancers.
From later stage more difficult to treat cancer too earlier.
Cancers, where.
<unk> therapy frequently is surgery.
An intent to cure.
That's a big shift and more evidence that is generated.
We.
There is more excitement that is being built in this space.
We believe that we have are significant.
It's vantage because of the strength of our Cologuard screening team infrastructure lab capability et cetera perfectly positions us for success.
This is going to play out over a long period of time.
Believe there are.
Well north of a 100 million people in the U S alone many more outside the U S and theyre going to benefit from the test and the key takeaway here is that there is no therapy.
That is.
As earlier detection earlier detection needs your therapy plan is going to be very good.
And that's the goal of the program. We're excited about it we're committed to making this happen.
And we're doing the work.
Rigorous scientific work to develop divestments.
Mark you also asked on MRI.
You've published data in upcoming scientific conference in the tumor informed version of our test recall, we're working on both tumor informed in tumor nave.
At $2 4 billion in colon cancer puts us one step closer to bringing that test to market, which is going to do later this year first as an LDC.
Next year, we will submit retrospective prospective data two mol Dx hope into security versus what's that.
The thing is we've been working on pivotal studies for both colon and breast that should will help set the standard for evidence in this space.
We feel good with multi cancer and leveraging the foundation, we built in primary care MRV, given our positioning with oncologists whatever to see that done Theyre building deep deep relationships as you know 98% of oncologists have ordered.
Next from Us.
We think we can leverage that same strength of the commercial foundation and the MRP.
Your next question comes from the line of Dan Arias from Stifel. Your line is open.
Good afternoon, guys. Thanks, Kevin back on the pipeline just any update on the thoughts around commercialization for Cologuard to point out I think at one point that was a potential 23 event. So.
Just curious if that's still a possibility and then how dependent on that would it would put commercialization beyond just.
Performance and data around the test versus other factors like sales training reimbursement et cetera. Thanks.
Yes.
Sure what do you expect into some yet.
This year.
At least six months with the FDA.
Before approval, so that puts us into next year with the launch a lot of prelaunch activity will go on certainly.
That launch will incorporate the new and different sensitivity and specificity.
Specificity.
And then some of the more mundane aspects of launch would include.
But the billing code.
As for the new version of Cologuard does it change doesn't change payer relationships Medicare et cetera, you need to do a lot of work there before you switch over to a new test.
Have automation.
Changes et cetera, so that will be a very thoughtful.
Transition from the current version of Cologuard to an even better version of Cologuard. The nice thing is we have a great test in Cologuard today, and it's all upside for patients health systems and.
At exact sciences shareholders.
The new innovation to patients.
Just to add to that recall that late last year. We hope it has one of the key benefits of Cologuard two.
Pull ahead internally, what we call Cologuard, one five but one quarter one five.
Extended the stability of that patient at all by a third that's.
That's important because it helps get more of those tests back toward lab samples.
But we can still use.
That expired.
To date this new version of the kit this new Cologuard one five that's helped over 45000 samples come back to our lab without expire.
Now some of those we could have gone to reflect before but.
It creates an overall better efficient experience more revenue for us better gross margins for us. So the team is outstanding by idly by any means that they are pulling ahead.
Overall this year that will increase completed test by at least 10 points.
And then commercially we're already there.
Our targets, obviously as Kevin said with.
Cologuard on the market now.
It will be a seamless transition from a selling and marketing standpoint.
Your next.
Next question comes from the line of Pony sooner from SBB Securities. Your line is open.
Yeah, Hi, Kevin Jess Thanks for taking the questions. So first of all you mentioned, the 8% penetration for 49% to 40 549 year olds.
The ceiling for that penetration given the momentum youre seeing here and then on the <unk> data I mean should we be expecting that at ACR or <unk> or later in the year at ESMO. Thank you.
I'll take the first part Jeff you take the second part in terms of the Sealy.
Think that the sealy is higher than the 40% penetration that we have long guided too for cologuard.
That earlier age groups because.
People, who are 45 to 49 typically are busier.
Then retirees and it's more of a challenge for them to schedule, a screening colonoscopy, which can take a day in a handful of years.
Typically you're <unk>.
A portion of your weakness you're normally work.
No.
We also have been able to educate and reach people digitally our digital investments.
Show media marketing will increase over time.
So cologuard is a test that fits within their lifestyle do we get to FID.
<unk> to 60% penetration that wouldn't surprise me more time in that age group.
And what Youre seeing is youre seeing.
The endoscopy suites are very very busy.
Any notion that cologuard was going to.
<unk> slowed down the business.
Gastroenterologists.
Endoscopy suites is just not proven to be accurate in fact has allowed them to focus there.
And there is.
An opportunity for Cologuard, and it's being ordered more frequently in that patient population because the risk of colon cancer.
Is lower and Gis are.
And health systems are focusing on getting those people screened goes into their colon cancer quality ratings.
Peru Cologuard visiting.
Last week with primary care physicians, who are very busy practices.
We're focused on Cologuard, one office on that would switch 100% of the quarter.
Why.
Because.
Gis are so busy in that part of the country.
They don't want to see more average risk patients.
So we see that Cologuard will continue to grow because it's easy it's at home.
Alright.
Jeff I think there was a second part of it.
This is just the <unk> team has done a really good job generating a wealth of evidence to help build out this new category.
As Kevin talked about there is two sets of data coming this year.
First of all I don't think we'll get ACR I don't know what the conference for sure, but I would think mid year on the first scent and then a fall timing for the second set when we go what conference, though we'll let you know.
Your next question comes from the line of Patrick Donnelly from Citi. Your line is open.
Hey, guys. Thank you for taking the question.
Jeff maybe one for you just on kind of the cadence of the year coming out of a strong <unk>.
I know even going back to the conference in January you were talking about <unk> had some benefit I think you mentioned the billing enhancements on the call here.
No surprise <unk> down sequentially on Cologuard can you just talk about are we getting back to that normal seasonality. Obviously again <unk> had that great inflection you talked about all the factors there, but how do we think about that going forward into 'twenty three it's been a weird couple of years, obviously in terms of the impacts you guys have seen.
So how do you think about the cadence of this year both on the topline with Cologuard and then also maybe on the EBITDA side. If there is anything we should be looking out for there in terms of the expense timing. Thank you guys.
Patrick the typical cadence of Cologuard.
It Hasnt changed there, it's really driven by primary care utilization trends.
What those are is that typically start the year.
If people who are coming off the holidays deductibles reset. So primary care uses would be lower in January things build until memorial day.
At the end of May and then over the summer this impetus letter.
Oh go on vacations, and our focus as much on primary care.
Mid August or labor day things pick back up.
Typically climb pretty steeply until Thanksgiving timing and then slowdown over the holidays as people go on to get onto vacations.
That means for Cologuard, there's about a 30 day lag between primary care visit and we would recognize revenue. That's typically why you see a step down but Q4 to Q1.
And I always thought that to change going forward. However, our business is becoming more predictable.
A more predictable.
Stable growth drivers as efforts, even set a really nice job building a whole wealth of different drivers as such is tied to one thing anymore.
From an <unk>.
Q1 of this year standpoint, there's a couple of unique things that are happening in <unk>.
The fluid into the fluids is really mild this year.
Relative to most years flu is normally a headwind to us and others in early Q1.
It's really not existed this year. So I think all else equal Q1, a little stronger. This year also some of the carryover benefits that I talked about earlier.
Enhancements to both our patient compliance engine.
Our billing systems.
Picking up a little bit of a catch up revenue on both of those things.
So all told Q1 seasonally stronger this year. So as you think about phasing throughout the year don't expect that that same sequential build Q1 to Q2.
This year as you would normally from an adjusted EBITDA standpoint, Q1, typically has the lowest profitability of the year.
Because of the top line being a little lighter seasonally and expenses are a bit higher as you roll into a new year and because of unique sales and marketing events in Q1 also.
Later on profitability in Q1, but overall strength through the year from a profit standpoint, again significant pick up year on year and adjusted EBITDA.
Your next question comes from the line of Andrew Cooper from Raymond James Your line is open.
Hey, everybody. Thanks for sneaking me in here towards the end.
Maybe first just Jeff you mentioned some of the prior to you collect in some of the improvements in compliance can you give us a sense for precisely move that in the fourth quarter and then I think it was about a year ago. Maybe this call last year, you talked a little bit about our transfer pricing and ASP to continue to climb a little bit. So can you just give us an update have you been able to capture a little bit more on sort of.
Apples to apples ASP and what that can look like and how that impacts the move to profitability as well assuming pretty steep dropdown there.
Andrew in Q4 the.
Base business exceeded expectations.
Things that Kevin talked about the strength of the relationships with health systems, the Salesforce productivity.
Cologuard re screened 45 all of those things drove the upside.
The reason I called out some of these items because we didn't want people to take Q4 and assume thats kind of the new base run rate going forward.
Look at this more sweetener sweetener in terms of.
Couple of things again as enhancements to our affiliates systems enhancements of patient compliance.
What happened, let's say you turn those on early October .
Because of those enhancements.
To capture patients and revenue that otherwise would have hit in Q2 and Q3, we picked up in Q4.
So it's all good guy there on a go forward basis now our revenue per test or ASP is higher.
And our patient compliance rate should improve on a go forward basis.
And you see it another way do you see as things like our DSO improvement improved by 15 days year on year. So while the team has done a really good job at enhancing our overall kind of affiliate systems and processes.
Run rate basis, ESP of a cologuard the right way to think of this is around $480 of revenue per test.
There are some puts and takes there obviously you've got this new or newer ACG grew 45% to 49 for a while.
Carried a lower revenue per test as we built up the insurance coverage. There is also some other classes like Medicaid that right. They still come in about 80% of the meta trade oftentimes because you're going to hear the team has done a nice job in longer term I think we can work that that rate towards towards $900.
Our final question comes from the line of Dan Leonard from Credit Suisse. Your line is open.
Hello, Thank you for taking the question.
Have a question on your precision oncology guide it doesn't seem like you're expecting much from uncle Xtra is that accurate and can you walk through the path for some of these new products like <unk> extra mardi to contribute to the sales ramp in precision oncology. Thank you.
I can start with maybe ever can jump in so what's baked into the appeal got globally.
So we've talked about for a long time, given the strong credit market position.
A class the penetration rate there is over 70%.
We do a nice job, we said that given the strong position the growth in the U S for the Oncotype Dx business think of low single digits. This is prevalent plus maybe a point.
The strength of that foundation will allow us to launch other programs like co extra.
Extra like MRI.
Like the risk guard, which is the hereditary cancer products.
Internationally.
The growth there is.
That business think of kind of $150 million a year right now growth there over time, it should be double digits for many years to come year to year. It can be a little different depending on which markets open up at year.
This year, the big new market that we expect to come online mid year.
What's baked in as stronger growth in the U S but.
Not that we won't see the full year impact from Japan.
It's a strong double digit growth this year, it's probably high single or low double digit baked in.
Nicole extra there.
Consider north of $10 million.
This year. It is the first year of launch.
As ever the team are excited about the launch but it's early so we'll come back to you and look forward to provide updates as the year unfolds. There alright, yes, I'll just add we often talk about the productivity of our cologuard sales and marketing team.
Off to a precision oncology sales and marketing team, we had the launch of <unk> extra a couple of weeks ago.
The training team and marketing team did a great job of preparing our sales organization to launch at day one.
And again, the granularity of who we're focused on on who we need to drive extra was really evident at our at our sales and market launch of Banco extra.
We are already generating orders so as Jeff said, we're going to look to.
Hit exceed our targeted Rocco extra in 2023.
Yes.
Just to understand the differentiation of uncle extra.
This is an enhanced version of a therapy selection tests, which is ultra comprehensive panel that includes DNA and RNA.
The text of clinically actionable mutations or fusions, including whole exome whole transcriptome sequencing.
It also includes patients niche tumor normal sequencing.
And it has.
Credibly easy to interpret result.
Ports.
Or.
The approved therapies immuno oncology signatures et cetera.
And then one thing that you didn't ask this question but.
But I don't think we touched upon was.
Round.
Follow up colonoscopy rule changes ever if maybe you wanted to just touch on that absolutely. Thanks, Kevin.
The biggest objections from our customers around Cologuard was hey, if they get a positive cologuard test that patient is burdened with paying for the follow up colonoscopy.
CMS and commercial last year made the pod.
A positive development that there will be no.
Zero co pay for a follow up call atrophy.
Our organization is now focused on getting that message out it takes time.
We have to educate over 300000 primary care physicians and health systems on that new ruling.
We're really excited about that new development legislation and we're out there every day talking about the positive development.
And this does conclude today's conference call. Thank you for your participation you may now disconnect.
Please wait the conference will begin shortly.
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