Q3 2023 Exact Sciences Corp Earnings Call

Hey, standby, we're about to begin.

Good afternoon, ladies and gentlemen, and welcome to the exact Sciences third quarter of 2023 earnings Conference call. At this time all participants are in a listen only mode and please be advised that this call is being recorded.

After the speakers prepared remarks, there will be a question and answer session. Thank you would like to ask a question. During this time simply press star one on your telephone keypad. If you would like to withdraw your question simply Quest Star one again.

This time I would like to turn the call over to Mister Erick holes that manager of Investor Relations. Please go ahead Sir.

Okay. So thank you for joining us for exact sciences third quarter of 2023 conference call on this call today are Kevin convoys, the company's chairman and CEO and Jeff Elliot, Our Chief Financial Officer ever Cunningham Archie commercial officer will also be available for questions.

Scientists issued a news release earlier this afternoon detailing our third quarter financial results.

He was released in today's presentation are available on our website that exact sciences dot com.

Today's call your neck forward looking statements based on current expectations are actual results may be materially different from such statements.

Discussions of non-GAAP figures and reconciliation stick out 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 well it can be accessed through our website I'll now turn the call over to Kevin.

Thank you Eric our third quarter results reflect our commitment to help eradicate cancer would test that prevented detected earlier and guidance treatment.

Cologuard and archetype Dx fuel are growing two and a half billion dollar business and the next wave of breakthrough cancer diagnostic innovations are focus on solving the needs of patients and healthcare Provider's powered outstanding third quarter results.

Allowing us to raise our 2023 guidance for both revenue and adjusted EBITDA.

Highlights from the third quarter include delivering more than 1 million total tests, including a record number of Cologuard and archetype the actual results.

Growing core revenue up 23% to $625 million also a record.

Generating 56 million of adjusted EBITDA 69 million dollar improvement exceeding 1 million people screen with Cologuard between ages, 45, and 49 and the two and a half years since the recommended Stark age was moved from 50 to 45.

And the impact of angst I D X by launching in Japan reimburse basis.

Beginning to integrate resolution biosciences, and our new liquid therapy selection test into our portfolio.

Presenting pivotal Blue Sea study results at the American College of Gastroenterology Conference demonstrating next generation Cologuard met all endpoints.

And showcasing the breadth and depth of our research with five abstracts with our precision oncology and multi cancer tests at the European Society of medical Oncology Congress.

[noise] investments we've made in our core business are returning sustainable revenue growth and margin expansion.

Allow us to strengthen our world class team and develop new life changing solutions for patients.

Jeff will now review, our third quarter results. Thanks.

Thanks, Kevin third quarter revenue of 648 million grew 20% or 23 per cent at a core basis, excluding COVID-19 testing M&A and FX.

Scrutiny revenue of $472 million has increased 31% driven by broad based momentum and cologuard adoption <unk>.

Was fueled by commercial productivity and our deep relationships with payers and providers.

More than 10000, new health care professionals ordered cologuard during the quarter.

More than 331000 aborted since launch.

We set last quarter about 75% of primary care physicians devoted cologuard. So we don't plan to provide the number of new physician starting next year.

<unk> How'd, you revenue grew a 3% to $156 million or 5% on our core basis.

Both with led by archetype, Dx, which expanded 14% globally.

Third quoted Captaris margin with 70% <unk>.

<unk> gross margin, excluding amortization of acquired intangibles with 73%.

Get that income with $1 million, including a gain of $72 million related to the prostate business sale.

Adjusted EBITDA was $56 million, an improvement of $69 million driven by a better than expected revenue and continued operating expense discipline.

Cash provided by operating activities was $24 million.

Free cash flow with a loss of less than $1 million, an improvement of $85 million.

Third quarter included one time payment of $33 million for a previously disclosed and reserved manner.

We ended the quarter with cash and securities of $734 million.

Certainly the guidance for raising total revenue to between 2.476 and 2.486 billion for the year.

Screening revenue between 1.848 and $1.853 billion.

<unk> revenue between 622 and $627 million.

Covid revenue of $6 million with this <unk> COVID-19 testing in July.

For the year came to place 23 per cent core revenue growth with 30 per cent growth in screening and seven per cent core growth and precision oncology.

Will raise it adjusted EBITDA guidance to between 195 and $205 million.

This implies it adjusted EBITDA margin of 8% given us confidence to reach you at least 20% by 2027.

The exact Sanchez platform was built to drive sustainable double digit revenue growth and steady margin improvement the.

The privacy. It made this year puts us in a great position to reach our longterm financial targets.

Kevin Thanks, Jeff, we've delivered or 13th millionth Cologuard test resolved during the third quarter based on known prevalence data. We estimate Cologuard has helped find precancerous polyps in early stage cancer nearly half a million people over the past 10 years.

Guard is becoming deeply ingrained in clinical practice for example last quarter of 169000 healthcare providers ordered Cologuard a new record.

Those providers are ordering cologuard more frequently than last year.

We received nearly 70% of Cologuard orders electronically and.

And Cologuard brand awareness with consumers reached 87 per cent, an all time high.

There are 60 million Americans H 45 to 85, not up to date with colon cancer screening.

Old guard is the ideal solution to get people screen accurately inconveniently.

Cologuard is included in all major guidelines quality measures in nearly universally covered by commercial insurance with no cost to the patient.

We've demonstrated cologuard can scale rapidly.

<unk> for screening colonoscopy says relatively fixed at about 6 million procedures per year.

Our sales and marketing teams are creating urgency around the importance of screening by one partnering with health system and payers to address their screening rates.

And related quality measures to educating providers about the benefits of cologuard through more than 1 million face to face engagements each year.

<unk> using a multichannel marketing approach to elevate colon cancer screening.

These efforts are increasingly making cologuard a first line screaming choice.

Could take Dx is internationally recognized as standard of care and it anchors are precision oncology portfolio.

And can take Dx helps early stage breast cancer patients determine whether they will benefit from chemotherapy and assesses their likelihood of recurrence.

We're using its global presence to enter new markets and accelerate the availability of future advanced cancer tests all around the world.

For example, we launched onsite the accident, Japan, two months ago, Japan will soon become our largest market outside the U S.

Breast cancer is the most common cancer among Japanese woman with about 45000, new diagnosis of early stage HR positive bird too negative breast cancer.

Cancer each year.

To provide a more comprehensive understanding of each patient's disease, we're planning to introduce new genomic tools, including auto detect are molecular residual disease tests.

And Ah recently acquired blood based therapy selection tests that complements our tissue based uncle extra off.

Expanding our portfolio allows our oncology customers to work with one trusted advanced diagnostics partner.

Binding information from our tests will help guide each of their patients to the most effective cancer treatment.

The exact sciences team has made progress and our three most impactful pipeline programs colon cancer screening molecular residual disease and multi cancer screening.

So next generation Cologuard, our data presentation that a C. G. In October demonstrated the pivotal head to head Lucy studies.

New gold standard for evidence and colon cancer screening.

The study was designed to validate our pre specified algorithm.

Lucy enrolled over 20000 people, including 98 with cancer and more than 2000 with pre cancerous polyps.

This provided excellent statistical power for analyzing our predefined primary and secondary.

Next generation Cologuard metal and points, achieving 94 per cent cancer sensitivity 93 per cent sensitivity for gerbil stage cancer or stages, one to three and 91% specificity is calculated by F. D H.

Specificity, excluding small adenomas in patients with no findings was 93%.

The results also confirm next generation Cologuard is superior to the fifth test in detecting cancer and pre cancerous polyps our team plans to finalize the F. D. A submission in December and we're working to make next generation cologuard available to patients and early 2025.

In molecular residual disease or on track to make her tumor inform test available for colon cancer patients by year end and for breast cancer patients next year.

An exact sciences, we will help eradicate cancer by preventing detecting it earlier anxiety nets treatment.

Innovated innovative patient focused culture Ah deep scientific understanding of cancer in the best portfolio and advanced diagnostics.

The strength of our business allows us to invest in solving the most pressing challenges our customers face.

While delivering sustainable double digit revenue growth and expanding profit margins.

We are in a leading position to help achieve are important mission.

Before we take your questions I'd like to congratulate Megan Jones on her new role as V. P of finance International.

Through her six and a half your tenure leading R. I R T <unk>.

<unk> has proven herself as a strategic popped leader and an outstanding business partner, we have big plans for her going forward. We're now happy to take your questions.

Thank you ladies and gentlemen at this time. She do you have any questions simply press star one and we do ask that you. Please lend yourself to one question and one follow up question will pass or just a moment to assemble the kid.

We'll go first this afternoon Katherine shopping at there.

Yeah. Thanks for the questions Kevin I, just wanted to kick things off with a big picture question on <unk>, it's giving <unk> today around 10 per cent market can yeah. How do you think Clark hired his position quite a long time and can you just help us think about the strategy that get some lately I today T X S D.

<unk> <unk> <unk> <unk>.

Thanks Catherine.

We're so excited about the impact that cologuard can have over the longterm and as you know it's been a long road to start to change the standard of care and screening you're talking about a population of over 100 million Americans that need to be screened and.

60 million, who are not up to date today. So if you take a look at this over the next decade, you have to look at who who who is the best team. We believe we have the best team we have the best test.

Constantly and our next generation Cologuard test.

And the best clinical evidence is blue C data is sterling and such.

A strong case for moving screening generally too noninvasive at home testing and then you're a couple this with the incredible services in I T infrastructure and commercial organization that we have we believe that we can go.

Get.

A large percentage of those 60 million people screen and we also believe we can leverage. This then outside the U S over the next decade, and and reach well over 100 billion people outside the U S. So we're excited we're we're excited about the other programs we have in colon cancer screen.

<unk> and the ability to surround our customer patience and.

Physicians and health systems large organized health systems to get more people screen. So over the next decade word we see <unk> continuing for as far as we can see with all of the strikes.

Thank you. The next now two brand new courtyard at Jefferies.

Good afternoon, Jafar, Kevin I'm, just curious how you're thinking about the fourth quarter. It's usually it's tricky in terms of seasonality do you think this year will be any different insurances, Ethan Allen just thinking about you know cologuard being so much more ingrained into much deeper penetrated and health systems I'm. Just curious if you anticipate a big ball.

Mm gap testing, let me think about that I guess fourth quarter dynamics.

<unk> I'll start then maybe ever congestion look what we're really pleased with the result through three quarters. The timid delivered I think I'll standard results. We've made very good progress towards out longterm 2027 financial goals.

If you just look at what we've done so far what you know what were the new guy at the up to the Guy calls for is over 420 million is incremental growth. This year, which is the best So far you know it's it's it's a.

Really good year. So we feel good about that when you look at your comments on on a three to four to that trend.

Just took a step back here I <unk> I don't expect to the differences here because the main reason the the reasons for the seasonal effect is not really hours. It really relates to the the holidays. When you think of Thanksgiving Christmas and new year fewer people go out and get physicals, they're spending time at home with.

Their families and friends, which they should be as opposed to going out and seeking preventative care. So that leads to fewer physicals and fewer colgate orders temporarily during the holidays.

Patients are also slower to return the kids out in the field during that time, so getting temporarily queue for feels a bit of that and then Q1. She was a bigger impact from the holidays. So that I don't expect that to change. This here yeah that that trend is always gonna be there again, it's not specific to us it's more primary care in general.

That you mentioned that the care get business. It's a it's a smaller part of the business I do expect it to be a little weighted towards Q for but you know whatever it is you might do with are looking to build that up as big a part of the business as we scale I did notice. This year. That's some of the business. We had previously expected to come in queue for actually fell into.

Q3, so that explains part of the dynamic three Q to force you this year.

Oh.

Thank you. We go next out to you Gareth Debruin Bank of America.

Hi, good afternoon. Thanks, a lot for taking my question. So I got a couple so color guard to point out really good data, how should we think about pricing and reimbursement versus.

Cologuard classic I guess, if they gotta be a price benefit to that.

And Henri screening.

What with a tailwind from re screens and twenty-three and how do you think about the appertain for re screening in 24. Thank you.

I'll take the first part of that and and add tell us the re screening over to Jeff and Everett.

<unk> <unk> <unk> <unk> in terms of pricing.

We are you know, we're not prepared to talk about price at a detailed level.

Taking a step cologuard.

2.0, our next generation Cologuard is provided significant increment in value because they are 30% fewer false positives false positives lead to unnecessary colonoscopy sleep to unnecessary complications et cetera.

The bleeding to cost and diminish care so.

Bye.

Eliminating those but 30% of all false positives it gibbs tremendous value to commercial Payors and.

And to Medicare. So those are conversations that we plan to have it's too early to tell where that will go but we'll talk more.

More about those plans as we head into 2025, when we launch a coke or two point at all next year.

Thanks for the question. This is Josh uhm, even without a change in pricing for to find out we expect incremental revenue to exact sciences, because it's Kevin mentioned.

<unk> is false positives means more patient stay with exact sciences and Cologuard overtime. So I should really help the recipient business, which is it was doing well today and I think it can do even better going forward also to remind you the cost of goods for two point out we expect to be at least five per cent below what we see today, so that should help that that's the <unk>.

Test cost cost of goods, so that should help up both of revenue growth and Martian profile to your second question on on re screens.

You've reached <unk>, we had a good core to the team is doing a very nice job messages through the headwind did we face this year that the headwind to remind folks on the call relates back to 2020, when Covid first hit that led to a temporary pause and people getting screams. So now three years later as people are looking to.

Do or would normally would look to do a re screened for cologuard, we see a bit of a headwind that's about a 50 million dollar headwinds to the business. This year. So again the team is doing a nice job of of navigating that when you look at the number of new patients who are becoming eligible for re screens. This year, it's $1.2 million. That's the same as what what it was last year. However, when you.

A look ahead to next year it jumps up to 1.6 million. So not only are we improving our success rate it could even more people rescreened. The pool of patience is also growing who are eligible for pre screening and <unk> I'll just add something commercial it's a great example of our commercial organization from a re screen execution standpoint.

Our field force, it's one of their major messages to our providers that are out there from a marketing standpoint, we have specific marketing materials for the re screen population and input from our customer experience standpoint, we're actually reaching out to those patients that are super overdue from a re screen population.

Do text messaging through phone calls through emails and making sure that we remind them that they're up for their date. So that focus has been really really solid and twenty-three and we're looking to continue that in 24.

Thank you the next night to Dan Brennan at T D Cowan.

Great. Thanks, Thanks for taking the question congrats Megan so maybe two part our first would just be on call. The guard you know you've had 30 per cent I think <unk>. The last couple of years, you just talked about the restraint opportunity being you know even greater <unk> next year given the headwinds. So just wondering if there any factors.

That you would see today that would slow down the 30 per cent type growth rate as we look ahead and then B could you just provide an update on M or day I know a Q2 you gave some color in terms of the launch timing and then the time it would take to get coverage and things of that nature, but just wondering if you can just update us on how we should be thinking about the breath launch in in the color I can launch thank you.

Why don't I start with this Dan. Thanks M. R. D will as we mentioned in the earlier comments will be available for colon cancer.

If the by the end of this year and breast cancer next year in terms of the <unk> submission that will occur next year for colon cancer screening and most likely breast cancer the year after.

Jeff <unk> why don't you take the other question sure.

Yeah, I'll take the one on Cologuard.

Kevin and never to talk to about some of the things we're doing commercial eight to keep that girls going in luck, we have very broad based on that <unk> <unk>.

There are 60 million people on screen in our goal as you well know is to get two of the 7 billion of revenue longterm. So we expect many years of robust growth ahead back in June we guided two total company revenue growth of 15% about from the period of 2022, <unk> 2027 with a real.

Implied was colgate grows a bit faster than that and then some of the other non cologuard areas grow out a bit slower. So obviously over time with the law of large numbers kicking in from a growth rate standpoint, yeah. We expect it to go down to slow down but over time, but just like very sustainable double digit growth which is.

Will be guided to <unk>.

Thank you for the next night to Andrew Revkin William Blair.

Good afternoon, thanks for taking the questions and congrats to Megan I wanted to ask and resolution bile. It seemed like a nice talking business for you guys you know.

Maybe just sort of talk about the rash now they're broadly and then also just as it relates to emanate capital allocation anything that you would call out with respect to changes in your philosophy, there as we look to 2024.

No change to our perspective on capital allocation in terms of our acquisition of resolution bio.

Very strong company with a culture of innovation and they have an amazing liquid biopsy tests.

We believe it's gonna be a home run of an acquisition for us over the long call that the quality of their therapies selection tests compliments uncle extra which is R. Solid tumor tissue test for therapy selection liquid as a preferred solution.

And many situations, enabling faster turnaround times <unk>.

And it also helps us expand our biopharma opportunity is a C. D export nine small cell lung cancer. So the next steps here are to generate evidence and submit them all the extra reimbursement make this available through our.

Archetype <unk> precision oncology commercial organization and continue to deliver.

Additional new tests to the oncologists that are such a strong customers. So we're thrilled about this acquisition, it's a great team and to Seattle, Washington area High quality people that add to the culture and capabilities of exact sciences.

Thank you for the next now to U D J Kumar at Evercore ISI.

Hey, guys. Thanks for taking my question, Kevin actually I had a two parter Kevin one on M. R. D. Here, what can you just compare and contrast with the screening.

You know when you think about the launch curb what what's the level of evidence how should we think about the launch curve you know screening you need U S. P. S. T F recommendation, etc. How does it work and I'm, Marty and Jeff under guidance here.

The guide right into a resolution biosciences, and if you don't mind quantifying everyday data to us. Thank you.

So did you why don't I start with the second one and then let me just jump in and clarify the first question B J on when you were talking about screening and M. R. D. Do you mean screening and multi cancer early detection or do you mean screening and M. R. D. I think you're probably.

Unknown Executive: Please stand by, we're about to begin.

Unknown Executive: Good afternoon, ladies and gentlemen, and welcome to the Exact Sciences 3rd quarter, 2023 earnings conference hall. At this time, all participants are in a listen only mode, and please be advised that this call is being recorded.

Unknown Executive: After the speakers prepare to march, there will be a question and answer session. If you would like to ask the question during this time, simply press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again.

<unk> screaming and M said.

Yeah Yeah.

Yeah, yes, when I <unk> when you compare and contrast, that's two different <unk> you know it seems like in screening M. C. D. You know a lot of evidence data how does that work in M. R. D. Do you need some datasets too.

Erik Holznecht: And now, this time, I would like to turn the call over to Mr. Erik Holznecht, Manager of Investor Relations. Please go ahead, sir. Thanks, Bo.

Make us commercially successful what do I have success and M. R D.

Kevin Conroy: Thank you for joining us for Exact Sciences 3rd quarter, 2023 conference call.

Okay, I understand that better <unk>, you wanted to check the Europeans.

Erik Holznecht: On the call today, our Kevin Conroy, the company's chairman and CEO, and Jeff Elliott, our Chief Financial Officer. Everett Cunningham, our Chief Commercial Officer, will also be available for questions.

Europeans and I'll take the other sure yeah, I'll I'll take the the guidance question. So <unk> some of revenue standpoint now material. So.

Erik Holznecht: Exact Sciences issued a news release earlier this afternoon detailing our 3rd quarter financial results. This news release, and today's presentation are available on our website at exactsciences.com. During today's call, we make forward-looking statements based on current expectations. Our actual results may be materially different from such statements. Discussions of non-gap figures and reconciliations to gap figures are available in our earnings press release, and descriptions of the risks and uncertainties associated with exact sciences are included in our SEC filers. Both can be accessed through our website.

There is no contribution it into the Guy so that the guide raise was was based on the strength of the core business.

So M. M. R. D. Evidence is is developing at a rapid clip many studies in the U S and around the world are occurring because of the promise of being able to answer two questions number one post initial treatment is there still.

Tumor present did the surgeon to the oncologist the treatment get all of the cancer and then the second question that M. R. D. Testing answers is is the cancer returned as it recurred.

Kevin Conroy: I'll now turn the call over to Kevin. Thank you, Eric. Our 3rd quarter results reflect our commitment to help eradicate cancer with test bed prevented detected earlier and guided treatment. Polar Guard and Akita DX fuel are growing $2.5 billion business and the next wave of breakthrough cancer diagnostic innovations are focused on solving the needs of patients and health care providers powered outstanding third quarter results.

So what is the evidence that has been developed their number of prospective studies that are occurring globally and.

No I think the question is is that going to occur on a tumor tight by tumor type or is it going to occur like you did with the therapy selection, where after a few tumors were proven out tumor types were proven out that there was widespread utilization we are starting to see <unk>.

Jeff Elliott: This allows us to raise our 2023 guidance for both Revenue and Adjusted EBITRA. Highlights from the 3rd quarter include delivering more than 1 million total tests, including a record number of Polar Guard and Akita DX results. Growing core Revenue of 23% to 625 million, also a record generating 56 million of Adjusted EBITRA by 69 million dollar improvement exceeding 1 million people screened with Polar Guard between ages 45 and 49 in the 2.5 years since the recommended start age was moved from 50 to 45. Expanding the impact of Akita DX by launching in Japan on a reimbursed basis. Beginning to integrate resolution biosciences and our new liquid therapy selection test into our portfolio.

Signs of the of the ladder that there will be enough evidence develop that.

M. R. D testing will be used Broadway so it's very different than the screening markets, which are unlocked generally by one group called the <unk> United States Preventative services Task Force and M. R. D. An oncologist, there's a number of different guidelines that will come to your place.

We are making progress in terms of our own studies to support our M. R. D test and you know we think this is going to be a huge change in oncology a huge market and one that we're excited to participate in.

Thank you and the next night too <unk> Goldman Sachs.

Hi, good afternoon. Thanks for all my questions and congrats Megan maybe one for ever just on the commercial penetration and previous quarters, you've given some pretty good color on health system penetration I don't know if there's any update on that and then secondarily related to that there's obviously a lot of opportunity given the penetration rate, where we are today and where you want to get too could you.

Kevin Conroy: Presenting pivotal blue sea study results at the American College of Gastroenterology conference demonstrating next generation cold guard met all end points and showcasing the breadth and depth of our research with five abstracts with our precision oncology and multi cancer test at the European Society of medical oncology, and Energy Congress. The investments we've made in our core business are returning sustainable revenue growth and margin expansion. This allows us to strengthen our world class team and develop new, like changing solutions for our patients.

Kinda like prioritize the white space opportunities that you provide for your commercial team in terms of what they're going after over the course of the next one to two years.

Yeah. Thanks, Thanks for the question Yeah, our health system volume in case, you bear largest lever of growth. This year, we knew that and that's why we put additional resources on the health system, So I'd be more than doubled our team.

Jeff Elliott: Jeff will now review our third quarter results. Thanks, Kevin. Third quarter revenue of 628 million grew 20% or 23% out of core basis, excluding COVID testing, MNA and FX. Screening revenue of 400 72 million increased 31% driven by broad-based momentum and colegured adoption. This momentum was fueled by commercial productivity in our deep relationships with payers and providers. More than 10,000 new health professionals ordered colegured during the quarter. More than 331,000 have ordered since launch.

Health systems, and we're also finding a different type of of of of shipped a dynamic in the health systems to where we're actually calling on health systems. We're gonna always do that or also health systems are actually requesting meetings with us because they know in in Kevin's set it that the capacity of screening colonoscopy is relatively fixed it.

$6 million per year and helps us understand we need help and his colonoscopy a loan strategy is not going to get us there. So.

Jeff Elliott: As we said last quarter, about 75% of primary care physicians have ordered colegured, so we don't plan to provide the number of new physicians starting next year. Precision and ecology revenue grew 3% to 156 million or 5% on a core basis. Growth was led by archetype DX, which expanded 14% globally. Third quarter gap growth margin was 70%. Non-gap growth margin, excluding amortization of acquired intangibles, was 73%. Gap debt income was $1,000,000, including a gain of 72 million related to the prostate business sale.

So we have several health systems that have documented that hey, listen if it's average risk patient first line with cold or will be used and we're seeing volume go up that way. So we're really help happy about that also I look at it as a as a multi pronged approach of good product, but we also have to make it easier for health systems.

Right and order Cologuard and as we said 70 per cent of our core dot ordered are coming in electronically and what I like about that is is we're not gonna stop there. We know that there are additional targets to get this year and next year and if we could make it easier to prescribed or to order cologuard, we know that we're gonna be or even a better partner moving for us.

Jeff Elliott: Adjusted debata was $56,000,000, an improvement of $69,000,000, driven by a better than expected revenue and continued operating expense discipline. Cash provided by operating activities was $24 million. Precash flow was a loss of less than $1,000,000, an improvement of $85,000. Third quarter included a one-time payment of $33 million for previously disclosed and reserved matter. Weighted the quarter with cash and securities of $734 million.

Far as in the future, we see we know that there's a lot of opportunity as we stated earlier you know we're only 10 per cent penetrated with total guard 260 million people. There that are not up to date with their screening a lot of those people sit in that health system segment, and I really liked the way we're structured now add exact sciences with <unk>.

<unk> health systems talking to the C suite, making sure that we can get unique partnerships and how that fall through to be affiliated physicians in those geographies, where perfectly structure to continue to make this a grilled level.

Jeff Elliott: Turn into guidance for raising total revenue to between $2.476 and $2.486 billion for the year. This assumes screening revenue between $1.848 and $1.853 billion. Precision oncology revenue between $622 and $627 million and COVID revenue of $6 million with this COVID testing in July. For the year, guidance applies 23% core revenue growth with 30% growth in screening and 7% core growth and precision oncology. We're raising adjusted EBITDA guidance to between $195 and $205 million.

Thank you and the next night to Patrick Donnelly at city.

Hey, guys. Thanks for taking the questions Jeff maybe one just on the expense side on the go forward can you help us think about just moving pieces as we work our way into 24, obviously you have some trials that wrapped up this year some trial that might be ramp up next year.

Maybe touch on E. S. P. N a piece I know historically you felt that is clearly going to grow expenses. If we're gonna grow below Reds, but does that kind of low mid single digit the right area to think about on expenses and then a very quick follow up just I think you called out some pull forward on Reds and three Q. If you could just quantify it that'd be great. Thank you guys.

Jeff Elliott: This implies an adjusted EBITDA margin of 8%, given its confidence in reaching at least 20% by 2027. The exact science platform was built to address sustainable double digit revenue growth and steady margin improvement. The progress it made this year puts us in a great position to reach our long-term financial targets.

Sure.

This is Jeff Uhm, you'll be typically provide guidance center February call, which is that that's when we do plan to provide it for now but over time you can think about continued very good expensive clinic across the board.

Kevin Conroy: Back to you, Kevin. Thanks, Jeff. We've delivered our 13th millionth Colleguard test result during the third quarter. Based on known prevalence data, we estimate Colleguard has helped find pre-cancer follow-ups and early stage cancer nearly half a million people over the past 10 years. Colleguard is becoming deeply ingrained in clinical practice. For example, last quarter, 169,000 health care providers ordered Colleguard a new record. Carter, Those providers are ordering Colleguard more frequently than last year.

Walked on the full P&L gross margin I mean, many of you saw the the tour of our lab. This summer that seemed to set a fantastic job of finding ways to increase efficiencies automate more task and scale. The business. So I'd expect continued to study gross margin improvement. This year, yeah, we're tracking in at seven.

83, and a half to 74 range probably towards the higher end. So no change there, but over time I expect us to get to our goal is 80 per cent. When you look at sales and marketing ever did seem upset a very nice job focusing on the highest impact areas to grow this business.

Kevin Conroy: We receive nearly 70% of Colleguard orders electronically, and Colleguard brand awareness with consumers reached 87% in all time high. There are 60 million Americans, age 45 to 85, not up-to-date with colon cancer screen. Colleguard is the ideal solution to get people screened accurately and conveniently. Colleguard is included in all major guidelines, quality measures, and nearly universally covered by commercial insurance with no cost to the patient. We've demonstrated Colleguard can scale rapidly.

<unk> you see the result of that two years in a row with sales and marketing down in absolute terms now to go forward basis, as we launch new products I expect us to to start to reinvest in sales and marketing so that will grow dollar terms, but I think we'll we'll manage it down on a per cent of revenue basis R&D.

Look at that as more project by project.

You know as well that we we scrutinize all of our Iron D investments to make sure the carrier very good or wise I think we'll continue to do that that has been a hallmark of exact so what time you may see some movement there a big one would be our our multi cancer study if we see that pathway forward from Congress for reimbursement for Medicare.

Kevin Conroy: Capacity for screening colonoscopies is relatively fixed at about 6 million procedures per year. Our sales and marketing teams are creating urgency around the importance of screening by one partnering with health systems and payers to address their screening rates and related quality measures to educating providers about the benefits of Colleguard through more than 1 million face-to-face engagements each year, and three using a multi-channel marketing approach to elevate colon cancer screen. These efforts are increasingly making Colleguard a first-line screening choice.

Yeah that would help US then make the decision to move forward with a big study in M said, so yeah that study would lead to a higher growth rates temporarily but overtime.

I think you can see our D coming down as a per cent of revenue pretty steadily barring the cause of the one off studies Genie.

<unk> that there's been a lot of focus for us.

It's an area that I do expect over time to see is probably the most incremental leverage from here. The biggest series investment have been building. This foundation. This foundation that has served us so well to to get the first billion dollar diagnostic to market and over time support multiple billion dollar diagnostics you are longer term goals.

Kevin Conroy: OnCaptite DX is internationally recognized as standard of care, and it anchors our precision oncology portfolio. OnCaptite DX helps early-stage breast cancer patients determine whether they will benefit from chemotherapy and assesses their likelihood of recurrence. We're using its global presence to enter new markets and accelerate the availability of future advanced cancer tests all around the world. For example, we launched OnCaptite DX in Japan two months ago. Japan will soon become our largest market outside the US.

To get you in a down to the 10% to 12% of revenue range to do that we have to keep automated that is a challenge to the <unk> scientists team finding ways to continue to drive efficiencies. So over the next five years or so I think that's gonna be the biggest area of improvement to drive Martin expansion.

Kevin Conroy: Breast cancer is the most common cancer among Japanese women with about 45,000 new diagnosis of early-stage HR positive pertune negative breast cancer breast cancer each year. To provide a more comprehensive understanding of each patient's disease, we're planning to introduce new genomic tools including OnCaptite DX, our molecular residual disease tests, and are recently acquired blood-based therapy selection tests that compliments our tissue-based OnCaptite DX. Expanding our portfolio allows our oncology customers to work with one trusted advanced diagnostics partner. Combining information from our tests will help guide each of their patients to the most effective cancer treatments.

Thank you to the next now to Jackman and that sound research.

Thank you good afternoon.

Kevin would be great to get your latest thoughts in the competitive landscape for CRC screening there was some additional updates at a C. G from another school based competitor Uhm just loved to get your thoughts on what that might mean, if anything for you guys. Thanks.

You know ever since I've been with exact sciences, there's been a litany of aspiring entrants into this field.

There is just a.

A long list of things you need to do to get into the field and first of all you need high quality.

Products high quality studies high quality data published you need to get through the gauntlet of F. D. A.

Kevin Conroy: The exact sciences team has made progress in our three most impactful pipeline programs, colon cancer screening, molecular residual disease, and multi-cancer screening. For next-generation cold guard, our data presentation at ACG in October demonstrated the pivotal head-to-head blue-sea studies is the new gold standard for evidence in colon cancer screening. The study was designed to validate our pre-specified algorithm. Blue-sea enrolled over 20,000 people, including 98-foot cancer and more than 2,000 with pre-cancer. Powers.

Medicare CMS, United States Preventative services Task Force U S. P. S T S.

Quality measure inclusion commercial insurers and we've yet to see any of these aspiring entrants skip past first base, there, namely Ah high quality evidence and high quality study. So there's a lot of work to be done for.

Kevin Conroy: This provided excellent statistical power for analyzing our predefined primary and secondary. Next generation, Colorguard Metval, and points achieving 94% cancer sensitivity, 93% sensitivity for curable stage cancer, with stages 1 to 3 and 91% specificity as calculated by FDA. Specificity excluding small adenomas and patients with no findings was 93%. The results also confirm next generation Colorguard is superior to the fit test in detecting cancer and precancer as polyps. Our team plans to finalize the FDA's submission in December, and we're working to make next generation Colorguard available to patients in early 2025. In molecular residual disease, we're on prep to make our tumor informed test available for colon cancer patients by year end and for breast cancer patients next year.

These folks before they will you know earn the ability to serve patients and physicians and other than that you know I'm not going to we're not gonna comment on other People's studies.

We'll go next now to <unk> <unk>.

Yeah, Hi, Kevin Thanks for taking my question and good luck to Megan Uhm, So uhm, Kevin following up on the competition side, just wondering how should we think about sort of the timing for color guard blood, whereas cause there.

<unk> of that any updated thoughts on the positioning of Cologuard blood is a product and I'm. Just wondering if you have any updated thoughts on blood based assays that are potentially suggesting improvements in advanced out of them. We haven't seen the data yet remains to be seen I. Appreciate it. Thank you.

Kevin Conroy: At Exact Sciences, we will help eradicate cancer by preventing it, detecting it earlier and guiding its treatment. We have an innovative, innovative, patient focused culture, a deep scientific understanding of cancer and the best portfolio in advanced diagnostics. The strength of our business allows us to invest in solving the most pressing challenges our customers face, while delivering sustainable double digit revenue growth and expanding profit margins. We are in a leading position to help achieve our important mission.

No update here you know what we've talked about this field for a long time the data that we've seen to date has been very impressive in terms of pre cancer detection or in terms of specificity. So <unk>.

To see how this class of tests makes it into the guidelines and and into commercial viability.

[noise] reimbursed by commercial insurers.

Kevin Conroy: Before we take your questions, I'd like to congratulate Megan Jones on her new role as VP of Finance International. Through her six and a half year tenure leading our IR team, Megan has proven herself as a strategic thought leader and an outstanding business partner. We have big plans for her going forward.

So there's really no update there in terms of the <unk>.

<unk>, who hope to get into the field, we have our own test as we've articulated there are many people who refuse a colonoscopy refused a cologuard test and still need to be screened and so we know who those people are they are in our massive database and the only national.

Unknown Executive: We're now happy to take your questions. Thank you, ladies and gentlemen, at this time, if you do have any questions, simply press star of one. And we do ask you to please lend yourself to one question and one follow-up question. We'll pause for just a moment to assemble the queue.

<unk>.

Database of colon cancer screening of it's size and accuracy. So we're able to reach out to patients who for example refused frontline screening tests like colonoscopy or Cologuard and help get those people screened and we think that there is a need.

Catherine Schulte: We'll go first this afternoon to Catherine Schulte at there. You guys, thanks for the questions.

To address there and we believe that are tested is going to be able to meet that need in terms of when to expect to see that data again. That's next year likely we will complete that study mid year and then make the data available thereafter so.

Kevin Conroy: Kevin, I just wanted to kick things off with a big picture question on coal aguard. Just given where you sit today around 10% market share, you know, how do you think coal aguard is positioned for the long term? And can you just help us think about the strategy to get from where we are today to your 50% long term market share target? Thanks Catherine. We're so excited about the impact that coal aguard can have over the long term.

So that's where we are with the blood base colon cancer screening.

Think it was the next now to Dan areas at stifle.

Kevin Conroy: And as you know, it's been a long road to start to change the standard of care and screening. You're talking about a population of over a hundred million Americans that need to be screened and 60 million who are not up to date today. So if you take a look at this over the next decade, you have to look at who has the best team. We believe we have the best team. We have the best test.

Afternoon, guys. Thanks for the questions I wanted to just ask a follow up on re screening ever at at the analysts say you talked about a pilot program that you guys have or your.

Auto mailing kids directly to the patient says they're recommended screening date arrives.

That's something that you think might get deployed more broadly.

And if so do you think that could that could start to move the needle on volumes just given that it you know it seems for re screeners that they would be pretty receptive to that idea.

Kevin Conroy: Christ, President Lee, and our next-generation co-aguard test. And the best clinical evidence, this blue-sea data is sterling and such a strong case for moving, screening generally to non-invasive at home testing. And then you couple this with the incredible services and IT infrastructure and commercial organization that we have. We believe that we can go get a large percentage of those 60 million people screened. And we also believe we can leverage this then outside the US over the next decade and reach well over 100 million people outside the US.

Yep, Thanks, and just a clarification, it's not an auto mail, even though it might be a nine point of care visit is still a prescription.

And I go back to this these are from a re screen population. These are different ways that we're partnering with health systems with payers with physicians in terms of getting hard to screen patients screened.

The re screen population the 45 to 49 or just the general population. We're happy that we can do these different partnerships. It will continue to partner definitely with health systems again I go back to a lot of these different partnerships are being generated by the health systems themselves and they know that we're.

<unk> good partner because of what we have our sales or marketing arm the way in which our customer call center can reach out to patients and remind them. The importance of re screening are advanced order workflow. We have there. So they like that and then secondly, we're at three year intervals versus fit which is a one year.

Kevin Conroy: So we're excited, we're excited about the other programs we have in colon cancer screening and the ability to surround our customer, patients and physicians and health systems, large organized health systems, to get more people screened. So over the next decade, where we see growth continuing for as far as we can see with all of these strengths. Thank you.

Where they've been using these different reach out care gap programs. So now they're looking at us and they they are finding that we're we're a better partner will continue these are throughout the rest of the year years ago.

Jeff Elliott: We look next now to Brandon Couillard at Jeffries. Good afternoon. Jeff or Kevin, I'm just curious how you're thinking about the fourth quarter, which usually is tricky in terms of seasonality. Do you think this year will be any different in terms of seasonality? Just thinking about co-aguarding so much more ingrained, it's so much deeper, penetrated, and health systems, is curious if you anticipate a big ballast of gap testing. I would think about, I guess, fourth quarter dynamics.

Thank you the next now too damn Leonard at U B S.

Thank you and Kevin I'd love to learn how or if you're planning for additional F. D. A oversight of L. D. Ts specifically in your precision oncology business and what do you think are the applications.

<unk>, we do have a lab develop test to type Dx is a lap develop test.

Jeff Elliott: Hey, Brandon, this is Jeff. I'll start in the maybe ever can jump in. Look, we're really pleased with the results through three quarters. The team has delivered, I think, outstanding results. We've made very good progress towards our long-term 2027 financial goals. If you just look at what we've done so far, what we're, the new guy, the updated guy calls for, is there were 420 million of incremental growth this year, which is the best so far.

<unk> and.

Because of the level of evidence that we have with the Oncotype Dx that would not be a huge burden for us to make a submission the quality standards at that test has undergone we've already submitted for I D. D R and C E marketing for the.

Jeff Elliott: It's a really good year, so we feel good about that. When you look at your comments on 3Q, 4Q, that's friends. Just take a step back here. I don't expect any differences here because the main reason, the reason for the seasonal effect is not really ours. It really relates to the holidays. When you think of Thanksgiving, Christmas, and New Year, fewer people go out and get physicals. There's been in time at home with their families and friends, which they should be, as opposed to going out and seeking preventative care.

<unk> tests, so the quality system there is incredibly strong.

You know the interesting thing about the proposed L. D T regulation is that.

Exact sciences was built R. S. As a P. M. A R. I D D company because of Cologuard that means that the people. The incredibly complex systems data that is collected processes that you fall follow from quality systems in manufacturing too good manufacturing.

Jeff Elliott: So that leads to fewer physicals and fewer cold-hearted orders temporarily during the holidays. Patients are also slower to return the kids that are out in the field during that time. So again, temporarily Q4 feels a bit of that, and then Q1 feels a bigger impact from the holidays. So I don't expect that to change this year. That trend is always going to be there. Again, it's not specific to us. It's more primary care in general.

Fax rain processes and all that goes into that that's who we are as a company. So we are better suited and anybody really in our field of advanced diagnostics to be able to comply with the proposed slap develop regulations that puts us in a good position because we do have those.

People and systems in place to succeed.

So although we have our view on <unk> develop test regulation and there we we believe that it would've been better.

Jeff Elliott: You mentioned the care gap business. That's a smaller part of the business. I do expect that to be a little weighted towards Q4, but I know whatever it is you are doing are looking to build that up as a bigger part of the business as we scale. I did notice this year that some of the business we had previously expected to come in Q4, actually fell into Q3. So it explains part of the dynamic. 3Q to 4Q this year. Thank you.

And we still hope that Congress steps in and passes the ballot Act.

We are very well prepared to be able to comply with the proposed Ltte regulations.

Thank you. We go next amount to Mark Macero at D. T I G.

Kevin Conroy: We go next down to Derik Bruin of Bank of America. Hi, good afternoon. Thanks a lot for taking my question. So, I got a couple. So, on Colegart 2.0, really good data. How should we think about pricing and reimbursement versus you know, Colegart Classic, I guess? Is there going to be a price benefit to that? And on re-screening, what would the tailwind from re-screens in 23? And how do you think about their opportunity for re-screening in 24?

Hey, guys. Congrats on the progress just a two parter it looks like you invested about 54 million to acquire resolution Biosciences I would just be curious as you think about valuations being down in the space, whether or not you have an appetite to do something larger and then on the second part.

You guys have indicated plans too soon launch M. R. D. In CRC in breast in 2024, obviously, both solid tumors can you just give us a sense of how you view the opportunity and M. R D and blood cancers. Thank you.

Kevin Conroy: Thank you. I'll take the first part of that and ask the re-screening over to Jeff and Everett. It's the first part of Colegart. Yeah, in terms of pricing, we are, you know, we're not prepared to talk about price at a detailed level. Taking a step of Colegart 2.0 or next generation Colegart is provide a significant increment in value because there are 30% fewer false positives. False positives lead to unnecessary colonoscubes lead to unnecessary complications, etc, leading to costs and diminished care. So, by eliminating those 30% of false positives, it gives tremendous value to commercial payers and to Medicare. So, those are conversations that we plan to have.

In terms of M&A, our our view hasn't changed there we have a disciplined approach to the way we think about this.

That false around our capital allocation processes, you know we look at number one cor growth would take a look at our pipeline we'd look at retaining cash flow. That's it is <unk> in terms of capital allocation.

Were highly focused on continuing to grow color guard.

Investing in Kohler Garden Cologuard growth.

And I could type the X growth internationally, both provide significant returns on investments.

In terms of our process wrong M&A, we look at what can help us accelerate our mission what is the right culture fit what creates fail you.

And you know where we just don't comment on any particular regions. We think it's probably.

Jeff Elliott: It's too early to tell where that will go, but we'll talk more about those plans as we head into 2025 when we launch Colegart 2.0 next year. Derek, thanks for the question. This is Jeff. Even without a change in pricing for 2.0, we expect incremental revenue to exact sciences because as Kevin mentioned, a reduction in false positives means more patients stay with exact sciences in Colegart over time. So, that should really help the re-screen business, which is doing well today and I think it can do even better going forward.

Irresponsible for those to guess at what we may do or not do and.

Because we have a disciplined approach to the way we look at these things and in terms of <unk>. A great example, we had a need for a liquid biopsy therapy selection test we had an internal program that eventually we we're gonna get around two and a test was available.

Jeff Elliott: Also, to remind you, the cost of goods for 2.0, we expect to be at least 5% below what we see today. So, that should help. That's the per-test cost of goods. So, that should help both the revenue growth and margin profile.

<unk> through <unk>.

That <unk> those needs it accelerated our mission in in our core solid tumor business. It was a great fit culturally amazing innovators scientists <unk>.

Jeff Elliott: So, here's the second question on re-screens. In re-screens, we had a good quarter. The team is doing a very nice job of managing through the headwind that we face this year and that headwind to remind folks on the call. It relates back to 2020 when COVID first hit. That led to a temporary pause and people getting screens. So, now, three years later, as people are looking to do, or would normally look to do a re-screen for Colegart, we see a bit of a headwind.

Jeff Elliott: That's about a $50 million headwind to the businesses this year. So, again, the team is doing a nice job of navigating that. When you look at the number of new patients who are becoming eligible for re-screens this year, it's 1.2 million. That's the same as what it was last year. However, when you look ahead to next year, it jumps up to 1.6 million. So, not only are we improving our success rate, it could be more people re-screens.

And we believe it's gonna create value over the long haul. So I think that's kind of right up the alley of the way that we think about things.

Thank you the next Matthew Kyle Nixon at Canaccord.

Thanks take us Thanksgiving questions. Congrats on the quarter, Congrats and that can great to hear on the new Apple So any updated twenty-three revenue guidance system Clyde annual screening about three per cent.

That's demonstrates model and 16 per cent of your of your Prescreening next year I know you're gonna talk about that more early next year, but it's actually part of a step down in grocery considering it looks like a drop off point in fork. He was going to be over 20 per cent. If you have a that'd be screen headwind. Thanks.

Thanks.

Jeff Elliott: The pool of patients is also growing who are eligible for re-screening. And Jeff, I'll just then add something commercial. It's a great example of our commercial organization from a re-screen execution standpoint. Our field force is one of their major messages to our providers that are out there. From a marketing standpoint, we have specific marketing materials for the re-screen population. And then from a customer experience standpoint, we're actually reaching out to those patients that are super overdue from a re-screen population through text messaging, through phone calls, through emails, and making sure that we remind them that they are up for their date. So, that focus has been really, really solid in 23.

Hello. This is Jeff there's a question earlier about is there anything changing the landscape and the answer to that is no. The the in fact as you heard today, we're very confident in Italy next year, but the growth opportunity for many years to come and you know part of wise, we've got the best team.

And diagnostics, we've got the highest quality of evidence and there was a massive massive unmet need will be met in one ear. It won't be minutes five years, So 60 million people out there with more enter it everyday about 10000, new people agent to this market every day. So we're very optimistic on the growth from a growth rate standpoint, though the laws large <unk>.

Numbers is gonna kick in and we'll have that growth rate come down, but as you can see this year regarding to over 420 latest incremental revenue the best yet an exact sciences has been around for awhile. So I think from a gross income it'll dollar standpoint, very optimistic here from a percentage standpoint, it is gonna come down as it would.

Everett Cunningham: And we're looking to continue that in 20 minutes. Thank you.

Daniel Brennan: We'll go next now to Dan Brennan at TD Calendar. Great. Thanks. Thanks for taking the question. Congrats, Megan. So maybe two-barter, first would just be on Colegard. You know, you've had 30 percent, I think plus growth the last couple of years. You just talked about the risk-free opportunity being, you know, even greater next year, given the headwind. So just wondering if there are any factors that you would see today that would slow down the 30 percent type growth rate as we look ahead and then be, could you just provide an update on MRD?

With any company as they as they grill.

Thank you. The next now two E Burstein Adam Bernstein.

Hi, there. Thanks, so much I kept them in a question and to park at the first <unk>.

<unk> called out capacity constraints on colonoscopy, when you talk about your <unk>.

Daniel Brennan: I know with Q2, you gave some color in terms of the launch timing and then the time it would take the coverage and think of that nature, but just wondering if you can just update us on how we should be thinking about the breast launch and then the color right to launch. Thank you.

Obviously, if if all you think that some geography that the problem is definitely <unk>.

<unk> 45 to 49 year old patients that are suddenly eligible for screaming. So can you talk about how that Diana <unk> is this something that's giving you a one time <unk> forget that terrible driver oppressed going forward.

Kevin Conroy: When I start with this, Dan, thanks. MRD will, as we mentioned in the earlier comments, will be available for colon cancer at the, by the end of this year and breast cancer next year in terms of a maldeic submission that will occur next year for colon cancer screening and most likely breast cancer the year after.

I'm second question, just a clarification and you talked about you've been Telegraphing rescreened headlines in the corner at all so sad.

He looks back with the follow up to four K. Two three so can you just help us understand how 'bout quantify that the hardware anything can I went on the corner and let you see a startup that.

Jeff Elliott: Jeff, why don't you take the other question. Sure, yeah, I'll take the one on Colorguard. You know, Kevin and Everett have talked about some of the things we're doing commercially to keep that growth going and look, we have very broad base momentum. There are 60 million people on screen and our goal, as you well know, is to get to at least 7 billion of revenue long-term. So we expect many years of robust growth ahead.

<unk>.

Let me start with the <unk> the capacity constraints around colonoscopy.

You basically have very little growth in the number of Gastroenterologists in the U S.

Jeff Elliott: Back in June, we guided to total company revenue growth of 15 percent about from the period of 2022 through 2020. What they really implied was Colorguard growth a bit faster than that. And then some of the other non-colorguard areas growing a bit slower. So obviously, over time, with the law of large numbers kicking in from a growth rate standpoint, yeah, we expected to grow to slow down. But over time, we expect very sustainable double digit growth, which is what we guided to back in June. Thank you.

<unk>, there's a fixed capacity for those residency programs and and what you saw was a significant number of retirements coming out of Covid.

And so there is overall flat or reduction in the total number of people scoping, what we're saying is about 6 million screening colonoscopy. This year next year and as far as the eye can see it's about that's about the capacity that we see no.

<unk> added 19 million Americans, who need to be screened.

And that's in the 45 to 49 year old age groups. So it's a permanent shift in the way that these health systems are thinking about getting their patient screened and they're highly incentive and pushed to get their quality measures up in one important quality measures colon cancer screening. So maybe you can touch it upon.

Kevin Conroy: We'll go next now to Andrew Raffin and William Blair. Hey guys, good afternoon. Thanks for taking the questions and congrats to Megan. I wanted to ask in Resolution Bio, it seems like a nice tuck-in business for you guys. Can you maybe just sort of talk about the rationale there, broadly, and then also just as relates to M&A and capital allocation, anything that you would call out with respect to changes in your philosophy there as we look to 2024.

Again.

The way that the commercial organization is addressing this important neat yeah and I love It when we say commercial because in addition to sales having to be a focus of ours. We had a specific value proposition that we lay out to our customers around the 45 to 49 year.

Kevin Conroy: Thanks. No change to our perspective on capital allocation in terms of our acquisition of resolution bio. It's a very strong company with a culture of innovation and they have an amazing liquid biopsy test. We believe it's going to be a home run of an acquisition for us over the long call. The quality of their therapies selection test compliments uncle extra, which is our solid tumor tissue test for therapy selection liquid is a preferred solution in many situations enabling faster turnaround times.

It's a different patient type as a patient typed it they're busy.

Parents are racing around dealing with kids Cologuard is the perfect product for that 45 to 49 year old plus we know commercially when we get them at 49 to 45 45 to 40 Niner, we have them for multiple years moving forward. So that that's one marketing where marketing different to this cohort.

It's important that we have a different marketing message that really like plays out the different lifestyle that 45 to 49 year old hat and our marketing mixes decor.

In addition to T V. We're finding out that they go through social media and digital more so we've changed our mix more to market towards towards that that cohort, so where where where where where.

Kevin Conroy: And it also helps us expand our biopharma opportunity has a CDX for non small cell lung cancer. So the next steps here are to generate evidence and submit to all the expert reimbursement, make this available through our. An archetype de-actor precision oncology commercial organization and continue to deliver additional new tests to the oncologist that are such strong customers. So we're thrilled about this acquisition. It's a great team in the Seattle Washington area, high quality people that add to the culture and capabilities of exact science. Thank you.

Clearly explain this to our health system customers, our health system customers are coming to us because of the the the the scenario that Kevin mentioned and this will continue to be a growth leather for us this year in years to come.

So there was two parts to the question. This is Jeff there was one on <unk> the head with that I've talked about before was it it's about $50 million for the year. If you think about that hidden second quarter third quarter, and fourthquarter third quarter. It gets a bit more than a third of that and second and for us to get a bit less than a third but it's it's fairly <unk>.

Vijay Kumar: We'll go next now to Vijay Kumar at Evercore ISI. Hey guys, thanks for taking my question. Kevin, actually, I had a two-parter, Kevin one on the MRD here. What can you just compare and contrast with screening? You know, when you think about the launch curve, what's the level of evidence? How should we think about the launch curve? You know, screening, you need USPSTF, recommendation, et cetera. How does it work in MRD? And Jeff, on the guidance here, did the guide race include resolution by a scientist and if you don't mind quantifying if we did. Thank you.

Really spread the team did a very nice job working to offset at least partially offset the headwind during the quarter. Yeah. You also send <unk> business. Like this is a really small part of it I had previously guided to somewhere just over 10 million and the whole second house for this business <unk> more weighted towards Q4 that was <unk>.

Jeff Elliott: So Vijay, why don't I start with the second one and then Kevin? Let me just jump in and clarify the first question, Vijay, on when you're talking about screening and MRD, do you mean screening and multi-cancer early detection? Or do you mean screening and MRD? I think you probably meant screening and M said. Yes, what I meant was when you compare and contrast this to different end markets, you know, it seems like in screening and CD, you know, a lot of evidence data.

Previous guidance and what we find out during the court or is it a bit a bit more of that fell into Q3 than I previously expected all told it it's a pretty small part of the business today, what really drove the quarter was the core underline.

Jeff Elliott: How does that work in MRD? Do you need some data sets to make this commercially successful? What drives success in MRD? Okay, I understand that better. Jeff, do you want to take your piece and I'll take the other? Sure. Yeah, I'll take the guidance question to resbyel some of revenue standpoint material. So there's no contribution into the guide so that the guide race was was based on the strength of the core business.

Business It will sustain it is a very durable leg of girls for us.

Thank you the next Matthew Alex Novak at Craig Howell.

Alright, good after everyone. This is ever who on for Alex.

So after the F D. A approval for the next and call a guard.

Can you give us some rollout plans to physicians across the U S that you guys have right as of right now.

And we're also the lad in June and.

What's the latest plan to belt. The next Gen color Guard and then taken footprint for the lab and how do you guys plan to confirm the existing process over to next gen without running into any backlog issues.

Yeah, Let me take the second part of that and he had the first part in terms of promoting and educating next gen. Cologuard to primary care docs alright in terms of lab capacity during that tour you saw the additional 200000 square feet of <unk>.

Jeff Elliott: So MRD evidence is developing at a rapid clip, many studies in the US and around the world are occurring because of the promise of being able to answer two questions. Number one, post initial treatment, if they're still tumor present, the surgeon to the oncologist, the treatment, get all of the cancer. And then the second question that MRD testing answers is as the cancer return is that recurred. So what is the evidence that has been developed?

<unk> that we have that is prepared for.

Current and future product growth.

So we have ample capacity at the two labs that we have today coupled with automation.

That constantly is being implemented to increase to Ah capacity easily if 10 million tests per year in switching over to Cologuard 2.0, we have plenty of space.

Physical space here in Madison, Wisconsin to be able to meet that need we have a very thoughtful plan from top to bottom about how that is going to.

Jeff Elliott: There are a number of prospective studies that are occurring globally and you know, I think the question is, is that going to occur on a tumor type by tumor type or is it going to occur like it did with therapy selection? Where after a few tumors were proven out, tumor types were proven out that there was widespread utilization. We are starting to see signs of the of the ladder that there will be enough evidence developed that MRD testing will be used broadly.

To happen in our team over the last 10 years I'm very proud to say our operations D. R. Lab team had never missed we've never had a had a day a week a month that we couldn't generate cologuard results. This is an amazing team of professionals automation X.

<unk> scientists laboratory and so we'll make this a smooth changeover.

In terms of getting Cologuard ready ready for the next kind of year, what we're gonna do I look at it two ways first of all we have a year to get ready, but the most important thing we can do commercially itself cologuard.

Jeff Elliott: So it's very different than the screen markets, which are unlocked generally by one group called the United States Preventive Services Task Force. In MRD in oncology, there's a number of different guidelines that will come to work. We are making progress in terms of our own studies to support our MRD test.

And focus on making sure that we get both providers that are writing it's right for most for both providers that are not writing it just to get to start writing Cologuard, what we like about the next generation Cold art is there's 30% fewer false positive.

Kevin Conroy: And you know, we think this is going to be a huge change in oncology, a huge market and one that we're excited to participate.

And we know those physicians for whatever reason is a major.

Roadblock with it.

They they they they stay away from cold or because of the false positive we know exactly who those physicians are and that will be our first kind of low hanging fruit is to go to those physicians and talk about the next generation Cologuard and get them excited what I like about the next generation Cologuard is internally are our entire company.

Unknown Executive: Thank you.

Matthew Sykes: We go next now to Matt Sykes at Goldman Sachs. Thank you, Anthony. Thanks for your questions and congrats, Megan.

Everett Cunningham: Maybe one for Everett just on the commercial penetration. In previous quarters, you've given some pretty good color on health system penetration. I don't know if there's any update on that and then secondarily related to that. There's obviously a lot of opportunity given the penetration rate where today and where you want to get to.

He is excited about this and so we're gonna use that excitement that excitement in the field to increase again the people that are writing colder.

Everett Cunningham: Could you kind of like prioritize the white space opportunities that you provide for your commercial team in terms of what they're going after over the course of the next one two years. Yeah, thanks. Thanks for the question. Yeah, our health system volume in things of our largest lever of growth this year. We knew that and that's why we put additional resources on the health system, so I'd be more than doubled our team on health systems.

Thank you and that does conclude our question and answer session for this afternoon, ladies and gentlemen, and it will bring us to the close of the call we'd like to thank you. All so much for joining the exact sciences third quarter 20 twenty-three earnings call again, Thank you for joining and have a great afternoon Goodbye.

Everett Cunningham: And we're also finding a different type of of of of shift or dynamic in the health systems to where we're actually calling on health systems. We're going to always do that or we're also health systems are actually requesting meetings with us because they know and Kevin said it that the capacity of screening colonoscopies is relatively fixed at six million per year. And health systems are saying we need help and this colonoscopial loan strategy is not going to get us there.

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Everett Cunningham: So we have several health systems that have documented that, hey, listen, if it's average of risk patient, first line, cold, cold are going to be used. And we're seeing volume go up that way, so we're really help happy about that. Also, I look at it as a multi-pronged approach of good product, but we also have to make it easier for health systems to write and order colo guard. And as we said, 70% of our cold guard orders are coming in electronically.

Everett Cunningham: And what I like about that is we're not going to stop there. We know that they're additional targets to get this year and next year. And if we can make it easier to prescribe or to order colo guard, we know that we're going to be even a better partner moving forward.

Everett Cunningham: As far as in the future, we see we know that there's a lot of opportunity. As we stated earlier, you know, we're only 10% penetrated with colo guard. There's 60 million people that are not at the date with their screening. A lot of those people sit in that health system segment. And I really like the way that we're structured now at exact sciences, with reaching out to health systems, talking to the sea suite, making sure that we can get unique partnerships and how that falls through to the affiliated conditions in those geography. We're perfectly structured to continue to make this a growth letter.

Jeff Elliott: Thank you. We'll go next now to Patrick Donnelly at city. Hey guys, thanks for taking the questions. Just maybe one just on the expense side on the go forward. Can you help us think about just the moving pieces as we work our way into 24? Obviously, you have some trials that wrap up this year, some trials that maybe ramp up next year. You know, maybe touch on the SG&A piece. I know historically you felt that it was clearly going to grow expenses.

Jeff Elliott: We're going to grow below revs. But is that kind of low mid single digit the right area to think about on expenses? And then a very quick follow up just I think you called out some poll forward on reds in three Q. If you could just quantify it, that would be great. Thank you. Thank you guys. Sure. Thanks, Patrick. This is Jeff.

Jeff Elliott: We typically provide guidance on our February call, which is that's when we do plan it right up for now. But over time, you can think about continued, very good expense discipline across the board. If you walked on the full P&L gross margin, I mean, many of you saw the tour of our lab this summer. That team has done a fantastic job finding ways to increase efficiencies, automate more tasks and scale the business.

Jeff Elliott: So I'd expect continued to study gross margin improvement. This year, we're tracking in that 73.5 to 74 range, probably towards the higher end. So no change there. But over time, I expect us to get to, you know, our goal is 80%. When you look at sales and marketing, ever in the team have done a very nice job focusing on the highest impact areas to grow this business. And so now you see the result of that two years in a row with sales and marketing down in absolute terms.

Jeff Elliott: Now, to go forward basis as we launch new products, I expect us to, to start to reinvest in sales and marketing. So that will grow in dollar terms, but I think we'll, we'll manage it down on a percent of revenue basis. R&D, I look at that as more project by project. You know as well that we scrutinize all of our R&D investments to make sure they carry very good ROI's. I think we'll continue to do that.

Jeff Elliott: That has been a hallmark of exact. So over time, you may see some movement there. A big one would be our multi cancer study. If we see that pathway forward from Congress for reimbursement for Medicare, you know, that would help us then make the decision to move forward with a big study in MCED. So, you know, that study would lead to a higher growth rate temporarily, but over time. I think you can see R&D coming down as a percent of revenue pretty steadily, barring the, kind of the one off studies.

Jeff Elliott: Genie is an area that there's been a lot of focus for us. You know, it's an area that I do expect over time to see probably the most incremental leverage from here. The biggest areas of investment have been building out this foundation, this foundation that has served us so well to get the first billion dollar diagnostic to market in over time, support multiple billion dollar diagnostics. Our longer term goal is to get Genie down to the 10 to 12 percent of revenue range.

Jeff Elliott: To do that, we have to keep automated. That is a challenge to the broader ex-excientist team finding ways to continue to drive efficiencies. So over the next five years or so, I think that's going to be the biggest area of improvement to draft margin expansion. Thank you.

Unknown Executive: Thank you for the next now to Jack me and that's on research. Thank you.

Kevin Conroy: Good afternoon. Kevin would be great to get your latest thoughts on the competitive landscape for CRC screening. There were some additional updates at ACG from another school based competitor. I would just love to get your thoughts on what that might mean if anything for you guys. Thanks. You know, ever since I've been with exact sciences, there's been a litany of aspiring entrance into this field. There is just a long list of things you need to do to get into the field.

Kevin Conroy: And first of all, you need high quality products, high quality studies, high quality data published. You need to get through the gauntlet of FDA, Medicare, CMS, the United States Preventive Services Task Force, USPSPF. Quality Measure Inclusion, Commercial Insurers, and we've yet to see any of these aspiring entrance gift past first base there, namely high quality evidence in high quality study. So there's a lot of work to be done for these folks before they will earn the ability to serve their patients and physicians, and other than that, you know, I'm not going to, we're not going to comment on other people's studies.

Puneet Souda: We'll go next now to Puneet Souda at Merrick. Yeah, hi Kevin, thanks for taking the question and good luck to Megan. So, Kevin, you know, following up on the sort of the competition side, just wondering, how should we think about sort of the timing for cologard blood, where's the positioning of that, any updated thoughts on the positioning of cologard blood as a product?

Kevin Conroy: And just wondering if you have any updated thoughts on blood based assays that are potentially suggesting improvements in advanced Alzheimer's, we haven't seen the data yet, but remains to be seen. Appreciate it. Thank you. No update here, you know, we've talked about this field for a long time. The data that we've seen to date hasn't been very impressive in terms of precancer detection or in terms of specificity. So hard to see how this class of tests makes it into the guidelines and into commercial viability reimburse by commercial insurers.

Kevin Conroy: So there's really no update there in terms of those who hope to get into the field. We have our own test, as we've articulated, there are many people who refuse a colonoscopy, refuse a cologard test, and still need to be screened. And so we know who those people are. They are in our massive database and the only national database of colon cancer screening of its size and accuracy. So we're able to reach out to patients who, for example, refuse frontline screening test like colonoscopy or cologard and help get those people screened.

Kevin Conroy: And we think that there is a need to address there. And we believe that our test is going to be able to meet that need in terms of when to expect to see that data again, that's next year. Likely, we will complete that study mid-year and then make the data available thereafter. So that's where we are with blood-based colon cancer screening. Thank you.

Everett Cunningham: We'll be next now to Dan Arias at Stiple. Thank you guys, thanks for the questions. I want to just ask, follow up on re-screening, Everett, at the analyst day, you talked about a pilot program that you guys have where your auto male and kids directly to the patients as their recommended screening data arrives. Is that something that you think might get deployed more broadly? And if so, do you think that could start to move the needle on volumes, just given that it, you know, it seems for re-screeners that they would be pretty receptive to that idea.

Everett Cunningham: Yes, thanks, Dan. And just a clarification, it's not an auto male, even though it might be a non-point-of-care visit, it's still a prescription. And I go back to this, these are, from a re-screen population, these are different ways that we're partnering with health systems, with payers, with positions in terms of getting far-discreen patients screened. Whether it's the re-screen population, the 45 to 49, or just the general population, we're happy that we can do these different partnerships, and we'll continue to partner differently with health systems.

Everett Cunningham: Again, I go back to a lot of these different partnerships are being generated by the health systems themselves, and they know that we're a good partner because of what we have. Our sales arm, our marketing arm, the way in which our customer call center can reach out to patients and remind them the importance of re-screening, our advanced order workflow we have there. So they like that, and then secondly, we're a three-year interval versus fit, which is a one-year interval, where they've been using these different reach-out care gap programs. So now that we're looking at us, and they're finding that we're a better partner, we'll continue these throughout the rest of the year in New York City Council.

Unknown Executive: Thank you.

Daniel Leonard: We'll go next now to Dan Leonard at UDS. Thank you.

Kevin Conroy: Kevin, I'd love to learn how or if you're planning for additional FDA oversight to LDTs, specifically in your precision oncology business, and what do you think are the implications? We do have a lab-developed test on to type DX is a lab-developed test, and because of the level of evidence that we have with on to type DX, that would not be a huge burden for us to make a submission, the quality standards that that test has undergone. We've already submitted for IDDR and CE marking for that test, so the quality system there is incredibly strong.

Kevin Conroy: You know, the interesting thing about the proposed LVT regulation is that exact sciences was built as a PMA or IDD company because of Colorguard. That means that the people, the incredibly complex systems, data that is collected, processes that you follow from quality systems and manufacturing to good manufacturing processes, and all that goes into that, that's who we are as a company. So we are better suited than anybody really in our field of advanced diagnostics to be able to comply with the proposed lab-developed regulations.

Kevin Conroy: That puts us in a good position because we do have those people and systems in place to succeed. So although we have our view on lab developed past regulation and we believe that it would have been better, and we still hope that Congress steps in and passes the Valid Act, we are very well prepared to be able to comply with the proposed LED regulations. Thank you.

Mark Massaro: We go next now to Mark Massaro at BTIG. Hey guys, congrats on the progress. Just a two-parter, it looks like you invested about 54 million to acquire resolution biosciences. I would just be curious as you think about valuations being down in the space, whether or not you have an appetite to do something larger. And then on the second part, you guys have indicated plans to soon launch MRD and CRC and breast in 2024. Obviously both solid tumors. Can you just give us a sense of how you view the opportunity in MRD and blood cancers.

Kevin Conroy: Thank you. In terms of M&A, our view hasn't changed there. We have a disciplined approach to the way we think about this that falls around our capital allocation processes. You know, we look at number one core growth, we take a look at our pipeline, we look at retaining cash flow that's as the in terms of capital allocation. We're we're highly focused on continuing to grow color guard, investing in color guard and color guard growth.

Kevin Conroy: And how could the X growth internationally both provide significant returns on investments in terms of our process around M&A. We look at what can help us accelerate our mission, what is the right culture fit, what creates value. And you know, we just don't comment on any particular regions that we think it's probably irresponsible for those to guess at what we may do or not do. And because we have a discipline to approach to the way we look at these things.

Kevin Conroy: And in terms of res bio, that's a great example. We had a need for a liquid biopsy therapy selection test. We had an internal program that eventually we were going to get around to and a test was available through res bio that met those needs that accelerated our mission in our core solid tumor business. It was a great fit, culturally amazing innovators, scientists, bioinformanticians. And we believe it's going to create value over the long call.

Kevin Conroy: So I think that's kind of right up the alley of the way that we think about things.

Kyle Nixon: Thank you. We go next now to Kyle Nixon at cancors. Thanks, Tycho.

Kyle Nixon: Thanks for the great questions, congrats on the core, congrats to Megan Great to hear on their new role. So in the updated 23 revenue guidance is implied annual screening growth is about 30%. That's seven series model and 16% year of year for screening next year.

Kyle Nixon: I know you're going to talk about that more early next year, but is that too far of a step down in growth or a considering looks like the top point in 4Q is going to be over 20% if you happen to be screening headwind. Thanks.

Unknown Executive: [inaudible] Standpoint. It's going to come down as it would with any company as they grow. Thank you.

Unknown Executive: It was the next amount to eBursing at Bernstein.

Kevin Conroy: Hi there. Thanks so much for taking the question. Two part. The first is you'd called out capacity constraints on colonoscopies when you talked about your health system partnerships. Obviously, the ball has existed in some geographies, but the problem is definitely exacerbated by this influx of 45 to 49-year-old patients that are suddenly eligible for screening. Can you talk about how that dynamic is evolving? Is this something that's giving you a one-time bump in growth but isn't a durable driver of growth going forward?

Kevin Conroy: And then second question, just a clarification. You talked about you've been telegraphing free screen headwinds in the quarter. You'd also said some of the business you expected to fall into for came in Q3. So can you just help us understand of us quantify the headwinds and tailwinds on the quarter and what you see is sort of the base rate of sales?

Jeff Elliott: Let me start with the capacity constraints around colonoscopies. You basically have very little growth in the number of gastroenterologists in the US. There's a fixed capacity for those residency programs. And what you saw was a significant number of retirements coming out of COVID. And so there is an overall flat or reduction in the total number of people scoping. What we're saying is about 6 million screening colonoscopies this year, next year, and as far as the eye can see, that's about the capacity that we see now.

Jeff Elliott: But you added 19 million Americans who need to be schooled. Grant, and who, that's in the 45 to 49 year old age group. So it's a permanent shift in the way that these health systems are thinking about getting their patient screened and they're highly incentive and pushed to get their quality measures up. And one important quality measure is calling cancer screening. And so, Everett, maybe you can touch it upon again. The way that the commercial organization is addressing this important need.

Jeff Elliott: Yeah, and I love it when we see say commercial because in addition to sales having to be a focus of ours, we have a specific value proposition that we lay out to our customers around the 45 to 49 year old. It's a different patient type. It's a patient type that they're busy parents, they're racing around dealing with kids, Polo Guard is the perfect product for that 45 to 49 year old plus we know commercially when we get them that 49 to 45 to 49 year old.

Jeff Elliott: We have them for multiple years. They're moving forward. So that that's one marketing. We're marketing different to this cohort. It's important that we have a different marketing message that really like plays out the different lifestyles at 45 to 49 year old have and our marketing mixes different in addition to TV. We're finding out that they go through social media and digital more. So we've changed our mix more to market towards towards that that cohort.

Jeff Elliott: So we're clearly explaining this to our health system customers. Our health system customers are coming to us because of the scenario that Kevin mentioned and this will continue to be a growth letter for us this year and years to come.

Jeff Elliott: There's two more parts to the question. This is Jeff. There's one on the screens. The head one that I've talked about before was it's about 50 millions for the year. If you think about that hitting second quarter third quarter and fourth quarter third quarter gets a bit more than a third of that and second and fourth get a bit less than a third, but it's fairly evenly spread. The team did a very nice job working to offset at least partially offsets that had went during the quarter.

Jeff Elliott: Yeah, so you also said the care gap business. Look, this is a really small part of it. I had previously guided to somewhere just over 10 million in the whole second half for this business. It was more weighted towards Q4. That was the previous guidance and what we found out during the quarter is that a bit more of that fell into Q3 than I previously expected. All told it's a pretty small part of the business today.

Jeff Elliott: What really drove the quarter was the core underlying business that will sustain it is a very durable leg of growth for us. Thank you.

Matthew Alex: With the next Matthew, Alex, no act at Craig, how long?

Kevin Conroy: Hi, good afternoon, everyone. This is over who on for Alex. So after BFBA approval for the next strength call of guard, can you give us some roll out plans to physicians across the US that you guys have. Right as of right now and we're also in the lab in June and what's the latest plan to build the next trend call of guard in the vacant footprint for the lab and how do you guys plan to convert the existing process over to the next trend without running into any back.

Kevin Conroy: Medical Odd Issues. Let me take the second part of that and hand the first part in terms of promoting and educating next-gen Colorguard to primary care docs. In terms of lab capacity during that tour, you saw the additional 200,000 square feet of space that we have that is prepared for current and future product growth. So we have ample capacity at the two labs that we have today coupled with automation that constantly is being implemented to increase to a capacity easily of 10 million tests per year and switching over to Colorguard 2.0.

Kevin Conroy: We have plenty of physical space here in Madison, Wisconsin to be able to meet that need. We have a very thoughtful plan from top to bottom about how that is going to happen and our team over the last 10 years. I'm very proud to say our operations team, our lab teams have never missed. We've never had a day, a week, a month that we couldn't generate Colorguard results. This is an amazing team of professionals, automation, expert, scientist, laboratory, and so we'll make this a smooth change over.

Kevin Conroy: In terms of getting Colorguard ready for the next kind of year, what we're going to do, I look at it two ways. First of all, we have a year to get ready, but the most important thing that we can do commercially is sell Colorguard and focus on making sure that we get those providers that are writing it's right or those providers that are not writing it to start writing Colorguard. What we like about the next generation Colorguard is there's 30% fewer false positives and we know those positions for whatever reason.

Kevin Conroy: It is a major roadblock for them. They stay away from Colorguard because of the false positives. We know exactly who those positions are and that will be our first kind of low-hanging fruit is to go to those positions and talk about the next generation Colorguard and get them excited. What I like about the next generation Colorguard is internally our entire company is excited about this. We're going to use that excitement, that excitement that feels to increase again the people that are writing Colorguard.

Unknown Executive: Thank you and that does conclude our question and answer session for the afternoon ladies and gentlemen and it will bring us to the close of the call. We'd like to thank you all so much for joining the exact sciences third quarter 2023 earnings call. Again, thank you for joining and have a great afternoon. Goodbye. Please wait.

Unknown Executive: The conference will begin shortly.