Q4 2023 Exact Sciences Corp Earnings Call

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Operator: Good afternoon. And welcome to the Exact Sciences fourth quarter 2023 earnings call. Please be advised that this call is being broadcast on this call is being broadcast on this call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star followed by the number one on your telephone.

Speaker Change: Good afternoon, and welcome to the exact Sciences fourth quarter 2023 earnings call. Please.

Speaker Change: Please be advised.

Speaker Change: This call is being recorded.

Speaker Change: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Speaker Change: If you would like to ask a question during that time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star One again please.

Operator: If you would like to withdraw your question, press star 1 again. Please be advised, we ask you to limit your request to one question. [inaudible] I would now like to turn the conference over to Mr. Nate Harrell, Vice President of Investor Relations. You may begin your...

Speaker Change: Please be advised we ask you to limit your questions to one question.

Speaker Change: Thank you I would now like to turn the conference over to Mr. Nate Harel Vice President Investor Relations you May begin your conference.

Nathan Harrill: Thanks, Jeanne. Thank you for joining us for Exact Sciences' fourth quarter 2023 conference call. On the call today are Kevin Conroy, the company's Chairman and CEO, and Jeff Elliott, our Chief Financial Officer. Everett Cunningham, our Chief Commercial Officer, and Brian Baranick, our General Manager of Precision Oncology, will also be available for questions. Exact Sciences issued a news release earlier this afternoon detailing our fourth quarter financial results

Nate Harel: Thanks, Jamie Thank you for joining us for exact Sciences fourth quarter 2023 conference call on the call today are Kevin Conroy, the company's chairman and CEO and Jeff Elliott, Our Chief Financial Officer, Everett Cunningham, our Chief commercial Officer, and Brian Bennett, Our general manager of precision oncology will also be available for a question.

Nate Harel: Exact sciences issued a news release earlier this afternoon detailing our fourth quarter financial results. This news release and today's presentation are available on our website at exact sciences Dot com.

Nathan Harrill: This news release and today's presentation are available on our website at exactsciences.com. During today's call, we will make forward-looking statements based on current expectations. Our actual results may be materially different from such statements. Discussions of non-GAAP figures and reconciliations to GAAP figures are available in our earnings press release, and descriptions of the risk and uncertainties associated with exact sciences are included in our SEC filings. Both can be accessed through our website.

Nate Harel: During today's call we will make forward looking statements based on current expectations. Our actual results may be materially different from such statements discussions of non-GAAP figures and reconciliations to GAAP figures are available in our earnings press release and descriptions of the risks and uncertainties associated with exact sciences are included in our SEC filings.

Nate Harel: It can be accessed through our website I'll now turn the call over to Kevin.

Kevin T. Conroy: I'll now turn the call over to Nate. Thanks, Nate. 2023 was another record-breaking year for Exact Sciences, and our fourth quarter results set the tone for an impactful year ahead. A special thanks to our team for testing a record number of people during the quarter with our established brands, ColoGuard, Oncotype DX, and Prevention Genetics. We've built an unrivaled platform that will allow us to achieve our purpose to help eradicate cancer. And we're hosting today's call from our San Diego R&D Center. Our talented scientists are harnessing the power of DNA, RNA, and protein.

Kevin T. Conroy: Thanks, Nate 2023 was another record breaking year for exact sciences, and our fourth quarter results set the tone for an impactful year ahead.

Kevin T. Conroy: A special thanks to our team for testing a record number of people during the quarter with our established brands Cologuard, Oncotype Dx and prevention genetics.

Kevin T. Conroy: We've built an unrivaled platform that will allow us to achieve our purpose to help eradicate cancer.

Kevin T. Conroy: We're hosting today's call from our San Diego R&D Center.

Kevin T. Conroy: Our talented scientists are harnessing the power of DNA RNA and proteins, they're developing a range of new tests that will change how cancer is diagnosed and treated.

Kevin T. Conroy: They're developing a range of new tests that will change how cancer is diagnosed and treated. We're set to gain momentum as we bring these new tests to physicians and patients at regular intervals over the next few years. Highlights in 2023 include testing a record 4.1 million patients for cancer and rare diseases, growing core revenue by 24% to $2.5 billion, and improving Adjusted EBITDA by $362 million year-over-year, making Turning Free Cash Flow Possible. Submitting Next Generation ColoGuard for FDA approval, launching Archetype DX in Japan on a reimbursed basis, Accelerating our Molecular Residual Disease or MRD Program, launching OncoXtra, our solid tumor therapy selection test, and adding OncoLiquid, our liquid therapy selection, and Advancing Our Multi-Cancer Early Further embedding COLAGARD as standard.

Kevin T. Conroy: We're set to gain momentum as we bring these new tests to physicians and patients at regular intervals over the next few years.

Kevin T. Conroy: Highlights in 2023 include testing a record $4 1 million patients for cancer and rare diseases.

Kevin T. Conroy: Growing core revenue by 24% to two 5 billion.

Kevin T. Conroy: Improving adjusted EBITDA $362 million year over year, turning free cash flow positive.

Kevin T. Conroy: Submitting next generation Cologuard for FDA approval.

Kevin T. Conroy: Lunching Oncotype Dx in Japan on a reimbursed basis.

Kevin T. Conroy: Accelerating our molecular residual disease or <unk> program.

Kevin T. Conroy: Launching uncle extra or solid tumor therapy selection tests, and adding uncle liquid or liquid therapy selection tests.

Kevin T. Conroy: And advancing our multi cancer early detection.

Kevin T. Conroy: The exact sciences team is laser focused on five things this year.

Kevin T. Conroy: Further embedding cologuard as standard of care.

Jeffrey T. Elliott: Increasing Oncotype DX Adoption Internationally. Advancing Key Pipeline Program. Deepening Relationships with Health Systems, and Delivering Experiences that Patients and Providers Love. Jeff will now focus on our financial results and our outlook for 2020. Thanks, Kevin.

Kevin T. Conroy: Increasing oncotype Dx adoption internationally.

Kevin T. Conroy: Advancing key pipeline programs.

Kevin T. Conroy: Deepening relationships with health systems.

Kevin T. Conroy: And delivering experiences that patients and providers love.

Kevin T. Conroy: Jeff will now focus on our financial results and our outlook for 2020.

Thanks, Kevin fourth quarter revenue of $647 million grew 17% or 18% at a core basis, excluding COVID-19 testing FX and M&A screw.

Jeffrey T. Elliott: Fourth quarter revenue of $647 million grew 17% or 18% on a core basis, excluding COVID testing, FX, and M&A. Screening revenue of $487 million increased 21%. We continue to see broad-based momentum in ColoGuard adoption by healthcare providers, with an all-time high 172,000 ordering ColoGuard during the quarter. This expanding base of warden providers supports our long-term growth outcome. Precision Oncology revenue of $160,000,000 through 12% or 11% on a core basis. Growth was led by Archetype DX, which expanded 48% internationally. Fourth quarter gross margin was 70%. Non-GAAP gross margin, excluding amortization of unacquired intangibles, was 73%.

Jeffrey T. Elliott: <unk> revenue of 487 billion increased 21%, we continue to see broad based momentum in cologuard adoption by health care providers with an all time high 172000 ordering cologuard during the quarter. This expanding base aboard and provider supports our long term growth outlook.

Jeffrey T. Elliott: Precision oncology revenue of $160 million grew 12% or 11% on a core basis.

Jeffrey T. Elliott: Led by Oncotype, Dx, which expanded 48% internationally.

Jeffrey T. Elliott: Fourth quarter GAAP gross margin was 70%.

Jeffrey T. Elliott: non-GAAP gross margin, excluding amortization of acquired intangibles was 73%.

Jeffrey T. Elliott: The net loss was $50 million, and adjusted EBITDA was $50 million, an improvement of $45 million, driven by better-than-expected revenue and continued operating expense discipline. Free cash flow was $35 million, an improvement of $55 million. We had a year of cash insecurities of $778 million. Turning to guidance, we expect total revenue between $615 and $630 million for the first quarter and between $2.81 and $2.85 billion for the year. This assumes screening revenue between $460 and $470 million for the first quarter, and between $2.155 and $2.175 billion for the year, and precision oncology revenue between $155 and $160 million for the first quarter, and between $655 and $675 billion for the year. [inaudible] Annual guidance implies 13% core revenue growth, with 16% growth in screening and 6% growth in precision oncology. We expect to generate between $325 and $350 million of adjusted EBITDA for the year. We also expect CapEx to be around $150 million. We expect first quarter screen revenue to be down sequentially because of typical seasonal trends.

Jeffrey T. Elliott: Net loss was $50 million and adjusted EBITDA was $50 million, an improvement of $45 million driven by better than expected revenue and continued operating expense discipline.

Jeffrey T. Elliott: Free cash flow was $35 million, an improvement of $55 million we.

Jeffrey T. Elliott: We ended the year of cash and securities of $778 million.

Jeffrey T. Elliott: Turning to guidance, we expect total revenue between 615 630 million for the first quarter and between $2 eight one and $2 85 billion for the year.

Jeffrey T. Elliott: This assumes screening revenue between 460, and 470 billion for the first quarter and between 215 and $2 175 billion for the year.

Jeffrey T. Elliott: In precision oncology revenue between 155 and $160 million in the first quarter and between $6 55, and 675 for the year.

Jeffrey T. Elliott: Annual guidance implies 13% core revenue growth with 16% growth in screening and 6% growth in precision oncology.

Jeffrey T. Elliott: We expect to generate between 325 and $350 million of adjusted EBITDA for the year. We also expect capex to be around $150 million.

Jeffrey T. Elliott: We expect first quarter screen, you read that to be down sequentially because of typical seasonal trends.

Jeffrey T. Elliott: Primary care utilization is lower in December and early January because of the holidays, and this impacts screening revenue during the first quarter due to the normal timing between a Kolograd order and a completed test. We expect first quarter screening to be about 22% of full-year revenue, consistent with the historical approach. In Precision Oncology, we expect steady Oncotype DS growth in the US and strong double-digit growth internationally this year. Exact Sciences acts as a reference lab and processes tests for other lab customers.

Jeffrey T. Elliott: Primary care utilization is lower in December and early January because of the holidays disinfect screening revenue during the first quarter due to the normal timing between a cologuard order and a completed test.

Jeffrey T. Elliott: We expect first quarter screening to be about 22% of full year revenue consistent with the historical average.

Jeffrey T. Elliott: And precision oncology, we expect steady oncotype Dx growth in the U S and strong double digit growth internationally this year.

Jeffrey T. Elliott: <unk> Sciences acts as a reference lab and processes test for other lab customers start in the first quarter, we're assuming that $20 million headwind or three points of revenue growth purposes in oncology as various agreements related to whole exome sequencing and prostate cancer testing a transition in house by those for relapse.

Jeffrey T. Elliott: Starting in the first quarter, we're assuming a $20 million headwind or three points of revenue growth for precision oncology as various agreements related to whole exome sequencing and prostate cancer testing are transitioned in-house by those ordering labs. The team did a great job implementing automation within our state-of-the-art labs, which will drive gross margin expansion this year and beyond. We're also expecting continued OPEX leverage this year, especially within GNA. Sustainable double-digit revenue growth and industry-leading gross margins are powering Adjusted EBITDA and free cash flow as we continue investing in growth and efficiency. Priority areas of investment this year include reaching more people through new digital and TV advertising campaigns for Colgard, further improving the patient and physician experience through our technology platform, and advancing our MRD program. Back to you, Kevin.

Jeffrey T. Elliott: The team did a great job in polluted automation within our stated that labs, which will drive gross margin expansion this year and beyond.

Jeffrey T. Elliott: We're also expecting continued opex leverage this year, especially within G&A.

Jeffrey T. Elliott: Sustainable double digit revenue growth and industry, leading gross margins are pouring adjusted EBITDA and free cash flow as we continued investing in growth and efficiencies.

Jeffrey T. Elliott: Priority areas of investment. This year include reaching more people through new digital and TV advertising campaigns for Cologuard.

Jeffrey T. Elliott: Further improving the patient and physician experience through our technology platform and advancing our MLD program back to you Kevin.

Kevin T. Conroy: Thanks, Jeff brand awareness and loyalty are fueling cologuard adoption and helping reach 60 million Americans, who are not up to date with colon cancer screening the.

Kevin T. Conroy: The number of health care providers ordering cologuard and the number of Cologuard tests state.

Kevin T. Conroy: Thanks, Jeff. Brand awareness and loyalty are fueling ColoGuard adoption and helping reach 60 million Americans who are not up to date with colon cancer screening. The number of health care providers ordering ColoGuard and the number of Cologuard tests they order have consistently grown. Cologuard is an essential part of their screening toolkit, in part because patients prefer it and ask for it. During the fourth quarter, Cogar brand awareness reached 89%, an all-time high, and our market research showed people have never been screened for Colgard 2 to 1 over colonoscopy.

Kevin T. Conroy: <unk> have consistently girls cologuard as an essential part of their screening toolkit in part because patients preferred and passport.

Kevin T. Conroy: During the fourth quarter Cologuard brand awareness reached 89% an all time high.

Kevin T. Conroy: And our market research showed people who have never been screened FERC cologuard two to one over colonoscopy.

Kevin T. Conroy: We're building on this momentum by helping health systems achieved positive clinical and financial outcomes.

Kevin T. Conroy: <unk> innovative ways to get more patients re screened and partnering with federally qualified health centers and health care providers that serve diverse communities.

Kevin T. Conroy: Our precision oncology team has guided treatment decisions for more than 2 million cancer patients around the world, including a record 230000 last year.

Kevin T. Conroy: We're building on this momentum by helping health systems achieve positive clinical and financial outcomes by designing innovative ways to get more patients rescreened and partnering with federally qualified health centers and health care providers that serve diverse communities. Our precision oncology team has guided treatment decisions for more than 2 million cancer patients around the world, including a record 230,000 last year. Archetype DX recently celebrated its 20th anniversary.

Kevin T. Conroy: Oncotype Dx recently celebrated its 20th anniversary during those years Oncotype Dx has become the global standard of care for patients diagnosed with early stage <unk>.

Kevin T. Conroy: Our positive her two negative breast cancer, the most common subtype.

Kevin T. Conroy: We have received Oncotype dx orders for more than 120 countries.

Kevin T. Conroy: And 98% of U S oncologists.

Kevin T. Conroy: I have ordered arc.

Kevin T. Conroy: Archetype Dx has helped spur over one 3 million patients from unnecessary chemotherapy.

Kevin T. Conroy: Increased international adoption led by Japan will be a key growth driver in precision oncology this year.

Kevin T. Conroy: During those years, Oncotype DX has become the global standard of care for patients diagnosed with early-stage, HR-positive, HER2-negative breast cancer, the most common subtype of breast cancer. We've received orders for Oncotype DX from more than 120 countries, and 98% of U.S. oncologists have ordered it. Oncotype DX has helped spare over 1.3 million patients from unnecessary chemotherapy. Increased international adoption, led by Japan, will be a key growth driver in precision oncology this year. We also plan to move our precision oncology portfolio onto our proprietary IP platform, making prior authorizations, billing, and reimbursement highly efficient. This will also enable rapid scaling of future tests, including OncoDetect, our MRD test, and OncoLiquid, our blood-based therapy selection. We're using our deep scientific capabilities and regulatory expertise to advance impactful pipeline programs, including multiple home cancer screening initiatives and MRV.

Kevin T. Conroy: We also plan to move our precision oncology portfolio onto our proprietary platform.

Kevin T. Conroy: Making prior authorizations billing and reimbursement highly efficient.

Kevin T. Conroy: This will also enable rapid scaling of future tests, including auto detect our MLR deep test and uncle liquid or plus blood based therapy selection tests.

Kevin T. Conroy: We are using our deep scientific capabilities and regulatory expertise to advance impactful pipeline programs, including multiple colon cancer screening initiatives and MRP.

Kevin T. Conroy: In colon cancer screening, we shared data from the prospective Blue C study demonstrating next generation Cologuard will raise the performance bar in noninvasive screening.

Kevin T. Conroy: We submitted our pre market approval application to the FDA in December and expect to make the test available to patients in 2025.

Kevin T. Conroy: Most blue C study participants also provided a sample for evaluating our novel blood based colon cancer screening test this.

Kevin T. Conroy: This year, we plan to announce top line results.

Kevin T. Conroy: Blue C or our colon cancer blood test.

Kevin T. Conroy: In <unk>, we plan on sharing several sets of data this year, including evidence that will support reimbursement and colon cancer. We're excited about the performance of Aqua detect and look forward to integrating it into the powerful technology, we licensed from the broad Institute.

Kevin T. Conroy: In colon cancer screening, we shared data from the PROSPECTIVE Blue Sea Study demonstrating next-generation Colgard will raise the performance bar in non-invasive screening. We submitted our pre-market approval application to the FDA in December and expect to make the test available to patients in 2025. Most Blue Sea Study participants also provided a sample for evaluating our novel blood-based colon cancer screening.

Kevin T. Conroy: Our mission is to help eradicate cancer by preventing that detecting that earlier and guiding personalized treatment.

Kevin T. Conroy: Our unique platform deeply embedded standard of care tests.

Kevin T. Conroy: Pipeline of life, changing diagnostics willpower years of growth and continued profitability, helping us achieve our mission.

Speaker Change: Now happy to take your questions.

Speaker Change: Again, if you would like to ask a question.

Speaker Change: Star followed by the number one on your telephone keypad.

Speaker Change: Your first question comes from the line of Brandon Couillard with Jefferies. Your line is open.

Speaker Change: Yeah.

Kevin T. Conroy: This year we plan to announce top-line results from Blue Sea for our colon cancer blood. In MRD, we plan on sharing several sets of data this year, including evidence that will support reimbursement for colon cancer. We're excited about the performance of ENCODE-DETECT and look forward to integrating it into the powerful technology we licensed from the Broad Institute. Our mission is to help eradicate cancer by preventing it, detecting it earlier, and guiding personalized treatment. Our unique platform, deeply embedded standard of care test, and pipeline of life-changing diagnostics will power years of growth and continued profitability, helping us achieve our mission. We're happy to take your questions now. Again, if you would like to ask a question, Press Star, followed by the number one on your telephone keypad.

Brandon Couillard: Hey, Thanks, good afternoon, two part or for Jeff.

Brandon Couillard: First on the first quarter revenue guidance can you just unpack that $20 million headwind I think in the precision oncology business that you referenced a little more detail on that and then secondly, as we think about the guide for 'twenty four what do you pencil in for kind of Opex and gross margins for the year. Thank you.

Speaker Change: Sure Amit.

$20 million this is an annual impact.

Speaker Change: Yes.

Speaker Change: <unk> as a reference lab for others in the space and some of those contracts were not surprised by some of these are rolling off as those labs take that work in house.

Speaker Change: So that that's over the year expected to be a $20 million headwind, probably hurts Q1, a bit more than before but that's the annual impact I'll, let the true growth drivers for Oncotype overtime are going to be continued uptake in the node positive indication.

Brandon Couillard: And your first question comes from the line of Brandon Couillard with Jeffreys. Your line is open. Good afternoon.

Speaker Change: International which in an awesome quarter in Q4 grew 48% and that over time. This serves as a perfect foundation for for new product launches like <unk> and therapy selection. So the business is very healthy we have a comparison item this year.

Jeffrey T. Elliott: Two-parter for Jeff. First, on the first quarter revenue guidance, can you just unpack the $20 million headwind, I think, in the precision oncology business that you referenced, a little more detail on that? And then secondly, as we think about the guide for 24, what are you penciling in for kind of op-ex and gross margins for the year? On the $20 million, this is an annual impact. Like I said, ExactX is a reference lab for others in the space.

Speaker Change: On the margin side.

Speaker Change: You've heard me talk for years about gross margin expansion. This year. We expect continued progress we've put in lab automation that team did a fabulous shop, they're automating those labs. Many of you have seen it if you haven't you're welcome to come and tour facilities. They are stated the art automating those labs further will help we expect as we grow this year leveraging that fixed cost will be.

Jeffrey T. Elliott: And some of those contracts, we're not surprised why some of these are rolling off as those labs take that work in-house. So that's, over the year, expected to be a $20 million headwind, probably hurting Q1 a bit more than Q4, but that's the annual impact. The true growth drivers for Alcatype over time are going to be continued uptake in the node positive indication, international, which had an awesome quarter in Q4, grew 48%, and then over time, this serves as the perfect foundation for new product launches like MRD and therapy selection. So the business is very healthy. We have a comparison item this year.

Speaker Change: It's a big deal.

Speaker Change: Broadly speaking.

Gross margin improvement Opex leverage another hallmark, we built a strong foundation and you've seen the impact over the last couple of years, we've had significant adjusted EBITDA leverage we expect that to continue again, probably the highlight this year will be within G&A, we expect that to be our biggest source of leverage over I do expect leverage across all three lines G&A.

Speaker Change: Sales and marketing and R&D.

Speaker Change: Yes.

Speaker Change: Your next question comes from the line of Catherine Schulte with Baird. Your line is open.

Catherine Ramsey Schulte: Hey, guys. Thanks for the question I have a two partner for you any firsthand the screening guy I've been clear in the past to expect <unk> to be down sequentially, but can you just talk through stable for the rest of the year and what gives you confidence in the ramp there and then second Kevin I know you have a fairly big chunk of options that are expiring later.

Jeffrey T. Elliott: On the margin side, you've heard me talk for years about gross margin expansion. This year, we expect continued progress. We put in lab automation. The team did a fabulous job there of automating those labs. Many of you have seen it.

Kevin T. Conroy: This week any comments on what you're planning to do with those thanks.

Jeffrey T. Elliott: If you haven't, you're welcome to come and tour the facilities. They are state-of-the-art. Automating those labs further will help, we expect, as we grow this year. Leveraging that fixed cost is a big deal. Broadly speaking, gross margin improvement, OPEX leverage, another hallmark.

Speaker Change: Let me start with the second first yes.

Kevin T. Conroy: Have options that are expiring their 10 year grants. So they were granted in 2014.

Kevin T. Conroy: And I plan to exercise.

Jeffrey T. Elliott: We've built a strong foundation, and you've seen the impact. Over the last couple of years, we've had significant adjustability, but lower leverage. We expect that to continue again. Probably the highlight this year will be within G&A.

Kevin T. Conroy: And hold while selling just enough to pay the cost of exercising in the taxes, but.

Kevin T. Conroy: The goal is to hold the difference and I will just say before handing it over to Jeff.

Kevin T. Conroy: We came off a great year in 2024 the momentum.

Catherine Walden Ramsey Schulte: We expect that to be our biggest source of leverage. However, I do expect leverage across all three lines, G&A, sales and marketing, and R&D. Your next question comes from the line of Catherine Schulte with Baird. Your line is open. Hey guys, thanks for the question. I have a two-parter for you.

Kevin T. Conroy: It is something that is generating enthusiasm across internally and also our important customer and patient base that we take care of.

Jeffrey T. Elliott: There is still 60 million people out there still this year like there was last year that are not up to date with screening.

Jeffrey T. Elliott: And we have a huge opportunity there and we're making incredible progress with health systems payers.

Kevin T. Conroy: Maybe first on the screening guide, you've been clear in the past to expect one cue to be down sequentially, but can you just talk through the phasing for the rest of the year and what gives you confidence in the ramp there? And then second, Kevin, I know you have a fairly big chunk of options that are expiring, I believe later this week. Any comments on what you're planning to do with those?

Jeffrey T. Elliott: The brand awareness of Cologuard, it's an exciting time, where precision oncology continued growth in node positive internationally and then just a number of new product launches over the next two years. So we couldnt be more excited Jeff why don't you take the rest sorry, Katherine on Youre facing.

Speaker Change: Question, we've talked about this many times before but as a reminder.

Jeffrey T. Elliott: Let me start with the second. First, yes, I have options that are expiring on their 10 year grant. So they were granted in 2014. And I plan to exercise and hold while selling just enough to pay the cost of exercising and the taxes. But the goal is to hold the difference. And I will just say before handing it over to Jeff, you know, we came off a great year in 2024. The momentum is something that is generating enthusiasm internally and also among our important customer and patient base that we take care of. It's an exciting time with precision oncology, continued growth, and no negative international impact. And then just a number of new product launches over the next two years. We couldn't be more excited. Jeff, why don't you take the rest?

Speaker Change: Primary care utilization typically impacted around the holidays. So basically we lose about two weeks of the quarter around Christmas and new years, two weeks for patients and physicians take off qualifications. So thats. The fact that there's fewer office visits during that time been the Stewart Cologuard orders that.

Speaker Change: That means about 30 days later, when we complete that task that's less revenue we recognize the holidays really impact Q1. So I would continue to expect a sequential step down Q4 to Q1 as you model out forever I think of our screening business down sequentially. This is very similar to what you see in precision oncology the Oncotype brand continues.

Speaker Change: To grow but you do see that step down is related to physician office visits or a Christmas and new years are slower, which hits hurts Q1 revenue. So from a phasing standpoint, typically expect pretty strong growth in orders for cologuard throughout the early part of the year up until May things typically flatten out over the summer months and then Steve.

Jeffrey T. Elliott: Sure. Catherine, on your phasing question, we've talked about this many times before, but as a reminder, primary care utilization is typically affected around the holidays. So basically, we lose about two weeks of the quarter around Christmas and New Year's, two weeks for patients and physicians take off going on vacations. So that's the fact that there are fewer office visits during that time. I mean, there are fewer Colgard orders then.

Speaker Change: Ramp again, some labor day through Thanksgiving, that's what we expect this year from a revenue standpoint, I would again I said in my remarks, 22% of Q1 revenue for screening this year, that's consistent with the historical average when you look at our growth standpoint.

Speaker Change: Hey.

Speaker Change: We're expecting 23% on a two year stack basis, a two year compounded growth in Q1, so as Kevin said very strong trends here you just have a phasing dynamics in Q1 to keep in mind.

Jeffrey T. Elliott: That means about 30 days later, when we complete that test, that's less revenue we'd recognize. So, the holidays really impact Q1, so I would continue to expect a sequential step down, Q4 to Q1, as you model out forever. Think of our screening business down sequentially. This is very similar to what you see in precision oncology. The Oncotype brand continues to grow, but you do see that step down. It's related to physician office visits around Christmas and New Year's being slower, which hurts Q1 revenue. So, from a phasing standpoint, typically expect pretty strong growth in orders for Cologuard throughout the early part of the year, up into May. Things typically flatten out over the summer months and then ramp up steeply again from Labor Day through Thanksgiving.

Speaker Change: Your next question comes from the line of Doug Schenkel with Wolfe Research. Your line is open.

Doug Schenkel: Hey, good afternoon, guys. Thanks for taking the questions. My first one is just a guidance clarification question I think you've guided to 16% screening revenue growth for the year I think you talked about back in January.

Doug Schenkel: Just keeping in mind, the bigger opportunity for repeat orders this year.

Doug Schenkel: Which I think I don't have my model in front of me, but I think could be between 250 to 300000 tests. What does this imply for first time orders in terms of the growth there. It seems like it's a moderation there and if thats. The case I just I just want to make sure that that is conservatism versus anything else and then my second question is.

Jeffrey T. Elliott: That's what we expect this year. From a revenue standpoint, I would again, as I said in my remarks, 22% of Q1 revenue for screening this year. That's consistent with the historical average. And when you look at growth from a standpoint, we're expecting 23% on a 2-year stack basis. So, 2-year compounded growth in Q1. So, as Kevin says, very strong trends here. You just have a phasing dynamic in Q1 to keep in mind. Your next question comes from the line of Doug Schenkel with Wolf Research. Your line is open.

Doug Schenkel: Just competition question, obviously, some big Readouts expected from blood based competition coming up soon as we head into that I'm wondering if you'd be willing to share. What you think the bar should be as we look at key data like advanced adenoma detection as lesser Readouts come in thank you.

Doug Schenkel: So I'll, let there Doug this is Jeff I'll take the first one on screening. So yes, we did guide to 16% growth for the year coming off of a year just a tremendous year of 'twenty three Kevin talked about some of the highlights there where company gets 31% growth so 60% feel good about that and there's a long runway ahead here.

Douglas Anthony Schenkel: Hey, good afternoon, guys. Thanks for asking the questions. My first one is just a guidance clarification question. I think you've got it to 16% screening revenue growth for the year, as I think you talked about back in January. I'm just keeping in mind a bigger opportunity for repeat orders this year, which I think, I don't have my model in front of me, but I think could be between 250 to 300,000 tests. What does this imply for first time orders in terms of growth there? It seems like there's moderation there, and if that's the case, I just want to make sure that that is conservatism versus anything else.

Speaker Change: The slides we share today showed the broadening of the ordering base and the deepening of the Oregon base. This has continued for nine years, we expect that to grow for many years to come.

Speaker Change: Re screens this year, yes to.

Speaker Change: To frame this last year re screens that three year repeat customer was about 20% of screening revenue. This year, it's going to be call. It a couple of points higher. So it is growing rapidly. It is one of our biggest growth drivers. The reason why it's growing really twofold. One is that the pool of new patients becoming eligible accelerates. This year, it's up to $1 6 million it was.

Speaker Change: At 1.2 million new patients become eligible for last couple of years and also our success rate of getting those people back to Cologuard continues to grow the team has done a nice job executing there. What this implies for first time users. We typically think of that age 50, plus first time users is still double digit growth. That's one of the beauties of this business model is dead.

Jeffrey T. Elliott: And then my second question is just a competition question. Obviously, there are some big readouts expected from blood based competition coming up soon. As we head into that, I'm wondering if you'd be willing to share what you think the bar should be as we look at key data like advanced adenoma detection when those readouts come in. Thank you. So a lot there Doug, this is Jeff. I'll take the first one on screening.

Speaker Change: Because this is such a massive market 110 million people in total you can expect predictable sustainable growth double digit growth from that key Oregon grip ducks.

Jeffrey T. Elliott: So yes, we did guide to 16% growth for the year coming off of a year, just a tremendous year in 23. Kevin talked about some of the highlights there. We're competing against 31% growth. So, 16% feel good about that. And there's a long runway ahead here. One of the slides we shared today showed the broadening of the ordering base and the deepening of the ordering base. This has continued for nine years, and we expect that to grow for many years to come. Restreams this year are the frame that last year's restreams that three-year repeat customer was about 20% of screening revenue this year. It's gonna be called a couple of points higher.

Speaker Change: And then Jeff Let me just add a couple of things Doug.

Speaker Change: As Jeff said in cabinets that we're coming off an incredible year in 'twenty three.

Speaker Change: Recently, just participated in our global sales meeting and I am just telling you are too.

Speaker Change: Our head everybody feels that we have an incredible opportunity to continue this growth to fulfill our mission.

As we've said Cologuard has grown by 31% last year and one thing that we're continuing to do is to smartly invest in areas, where we know we can grow profitably.

Speaker Change: We're looking at our core business, our sales leaders and marketing these were understanding the tradeoffs between investments and growth.

And a couple of things that I feel really really confident about is how we're getting at this marketing as an example, we're being very smart way, we're taking advantage of key growth levers like re screens are 45% to 49 segment, which is fantastic opportunities for growth and then secondly in sales we are investing wisely.

Jeffrey T. Elliott: So it is growing rapidly. It is one of our biggest growth drivers. The reason why it's growing is really twofold. One is that the pool of new patients becoming eligible for the service is growing faster this year. It's up to 1.6Million.

Jeffrey T. Elliott: It was that 1.2Million new patients have become eligible in the last couple of years, and also our success rate at getting those people back to Cologuard continues to grow. The team has done a nice job executing there.

Speaker Change: The areas that we know we can put additional heads in the marketplace to talk to the right customer at the right time with the right message, we're going to continue to do that so 2024 can be another incredible year.

Jeffrey T. Elliott: Well, this implies for first time users. We typically think of that age 50 plus, but first time users is still double digit growth. That's one of the beauties of this business model is that because this is such a massive market, 110 million people in total, you can expect predictable, sustainable growth, double-digit growth from that key ordering group, and then Everett. Yeah, Jeff, let me just add a couple of things. Doug

Speaker Change: The second question.

Doug Schenkel: Doug on.

Doug Schenkel: Competition blood tests.

Speaker Change: What's the bar, let me first just reiterate whatever it sounds like this is never a straight line. We're always sober there are always opportunities for improvement that has been every quarter. Since we launched cologuard almost 10 years ago, and it's going to be every quarter. This year and next year and beyond but the team is focused in.

Everett V. Cunningham: As Jeff said and Kevin said, we're coming off an incredible year in twenty-three. I've recently just participated in our global sales meeting, and I'm just telling you, head on, everybody feels that we have an incredible opportunity to continue this growth to fulfill our mission. As we've said, Colgar grew by 31 percent last year, and one thing that we're continuing to do is to smartly invest in areas where we know we can grow profit. We're looking at our core business, our sales leaders, and marketing leaders; we're understanding the trade-offs between investments and growth. And a couple of things that I feel really, really confident about are how we're approaching this.

Speaker Change: We're really excited about the path ahead in terms of blood tests, we've talked about this many times, so I'm not going to add a lot here.

Speaker Change: The final arbiter of whether a blood test would be widely adopted as the main guideline group USPS Tms they do sophisticated modeling their modeling nets out at two key factors. One is life years gained 83% of life years gained in their model comes from Precancer.

Speaker Change: Detection.

Speaker Change: And then the second factor comes from.

Kevin T. Conroy: As an example, we're being very smart in the way we're taking advantage of key growth levers like rescreens, our 45 to 49 segment, which is a fantastic opportunity for growth. And then, secondly, in sales, we are investing wisely in areas that we know we can put additional heads in the marketplace to talk to the right customer at the right time with the right message. We're going to continue to do that, so 2024 can be another incredible year. The second question: Doug, on competition blood tests, what's the bar? I mean, first, just reiterate, whatever it says, like, you know, this is never a straight line. We're always sober.

Speaker Change: Is the question of unnecessary colonoscopy is generated per.

Speaker Change: People screened.

Speaker Change: And what you see there is that that model is the bar not anything we believe it's very objective and it's very difficult to get into the guidelines with the performance.

Speaker Change: Eric jurisdiction.

Speaker Change: What we see today in this category of tests.

Speaker Change: So I think you'd really do do the digging into the USPS TF guidelines anybody investing anybody study in this space, that's where all roads lead to long term commercial traction and impact.

Speaker Change: Your next question comes from the line of Dan Brennan with Cowen Your line is open.

Kevin T. Conroy: There are always opportunities for improvement. That has been the case every quarter since we launched ColoGuard almost ten years ago, and it's gonna be the case every quarter this year and next year and beyond. But the team is focused, and we're really excited about the path ahead. In terms of blood tests, we've talked about this many times, so I'm not gonna add a lot here. The final arbiter of whether a blood test would be widely adopted is the main guideline group, USPSTF.

Daniel Brennan: Great. Thank you. Thanks for thanks for taking the questions guys.

Daniel Brennan: Maybe first one would just be on 45% to 49 Everett you mentioned it just wondering kind of where that finished up for the year and kind of what you guys are baking in for further traction in 'twenty four.

Daniel Brennan: And then Kevin if I could just go back to the question on blood based.

Speaker Change: Appreciate exactly what you said, which is completely fair, but it's hard for us to untangle, we'd have to build a model to kind of untangle that with some of US have tried to do is is there a way to think about just bluntly when that data hits like how kind of you have been pretty open about.

Kevin T. Conroy: They do sophisticated modeling. Their modeling nets out at two key factors. One is life years gained.

Kevin T. Conroy: Eighty-three percent of life years gained in their model come from pre-cancer detection. And then the second factor comes from the question of unnecessary colonoscopies generated per 1,000 people screened. And what you see there is that that model is the bar, not anything we believe. It's very objective. And it's very difficult to get into the guidelines with the performance characteristics of what we see today in this category of tests.

Speaker Change: Dialogical barrier for blood, but I am just wondering assuming 90% specificity.

Speaker Change: Where do you still view like the most likely outcome for that data.

Speaker Change: Is there an upside case that would kind of make you worry. Thank you.

Speaker Change: Well, so if you take a look at the fit test the reason that the fit test model as well as because it's a <unk>, 24% of precancerous polyps and it only has a 5% false positive rate not not a 10% false positive rate.

Kevin T. Conroy: So, you know, I think you really need to dig into the USPSTF guidelines. Anybody investing, anybody studying this space, that's where all roads lead to long-term commercial traction and impact. Your next question comes from the line of Dan Brennan with Cowan. Your line is open.

Speaker Change: Most of the blood tests do you have a 10% false positive rate as you can imagine you do that test every year generates voices met unnecessary colonoscopy is a fit test.

Speaker Change: It also if a blood test, let's let's say it detects in the teens in terms of pre pre cancers.

Daniel Brennan: Great, thank you. Thanks for taking the questions, guys. Maybe our first one would just be on 45 to 49 Everett.

Kevin T. Conroy: You mentioned it, just wondering kind of where that finished up for the year and kind of what you guys are baking in for further traction in 24. And then B, Kevin, if I could just go back to the question on blood-based, you know, appreciate exactly what you said, which is completely fair, but it's hard for us to untangle. You know, we'd have to build a model to kind of untangle that, which some of us have tried to do. Is there a way to think about just bluntly when that data hits, like how, you know, kind of, you've been pretty open about the biological barrier for blood, but I'm just wondering, assuming 90% specificity, you know, where do you still view the most likely outcome for that data? And is there an upside case that would kind of make you worry? Thank you.

Speaker Change: Hugh.

Speaker Change: It doesn't drive the life years gained so you are in this.

Speaker Change: Difficult place to get onto this efficient frontier as it's called.

Speaker Change: So.

Speaker Change: You can do the rough modeling by comparing it to the fit test and what Youll see is these blood tests generate a lot of false positives.

Speaker Change: It also generate not enough light viewers gained and the cost of them is significantly more than the fit test and certainly the guideline group considers these.

Speaker Change: Rod parameters.

Speaker Change: They look at including or not including this in AARP rated test, which part to become an a or B rated test and so I'll go back to the real value that we've created cologuard.

Speaker Change: Is because we set the bar for the test that we were developing based upon these inputs from the start that's the way we designed cologuard was to make sure that we would be at that efficient frontier of that modeling exercise and thats why we feel very confident that for years and years to come.

Kevin T. Conroy: Well, so if you take a look at the FIT test, the reason that the FIT test models well is that it detects 24% of precancerous polyps. And it only has a 5% false positive rate, not a 10% false positive rate like most of the other tests. If you have a 10% false positive rate, as you can imagine, you do that test every year; it generates twice as many unnecessary colonoscopies as a 15% false positive rate. It also, if a blood test, let's, let's, you know, say it detects in the teens in terms of pre-cancers, you, it doesn't drive the life years game.

Speaker Change: Colonoscopy and Cologuard will be the two leading tests and youre seeing that today as cologuard take share away from the fit test colonoscopy volume screening colonoscopy volumes haven't changed in a meaningful way in a decade right around five to 6 million screening colonoscopy per year.

Speaker Change: Changing now the backlogs are growing.

Speaker Change: So our challenge is to get to the patients our challenge is to make this to hit the <unk>.

Speaker Change: But our challenge is to.

Speaker Change: Make sure that every patient who turns 45 thinks about colon cancer screening and then thinks about cologuard and these aren't these are difficult challenges. Unfortunately, we built built a team a technology platform that is built for purpose to achieve our goals.

Kevin T. Conroy: So you're in this difficult place to get onto this efficient frontier, as it's called. So, you know, you can do the rough modeling by comparing it to the fit tests, and what you'll see is these blood tests generate a lot of false positives, and they also don't generate enough life years gained.

Kevin T. Conroy: And the cost of them is significantly more than a fit test. And certainly, the guideline group considers these broad parameters when they look at including or not including as an A or B rated test. It's hard to become an A or B rated test.

Speaker Change: Dan This is Jeff on 45 to 40, Danielle. This is one of the many ways that exact as competitively unique is that we've had now almost three years of working to build awareness and penetrate this younger population and what that means it's approaching 20% of our screening revenue today. So it has been a massive growth driver I expect that to continue.

Kevin T. Conroy: And so I'll go back to the real value that we created for Polo because we set the bar for the test that we were developing based upon these inputs from the start. That's the way we designed ColoGuard to make sure that we would be at the efficient frontier of that modeling exercise. And that's why we feel very confident that for years and years to come, colonoscopy and ColoGuard will be the two leading tests. And you're seeing that today as Cologuard takes share away from the fifth test.

Speaker Change: When you look at the need here as Kevin said Theres, a relatively limited capacity for colonoscopy is in this country. So when you add 20 million more people into the screening pool that the guidelines did three years ago.

Speaker Change: Cologuard is the best option. So we are taking significant share there. It is a above and above growth driver above the overall base business and I think that will continue for many years to come evident yes. All that's just maybe some field entail around a 45% to 49 segment.

Kevin T. Conroy: Colonoscopy volumes, screening colonoscopies volumes haven't changed in a meaningful way in a decade, right around five to six million screening colonoscopies per year. It's not changing now, but backlogs are growing. And so our challenge is to get to the patient. Our challenge is to make this, to hit the easy button.

Speaker Change: Our field organization knows this is a great opportunity to grow Cologuard and we're helping our customers I'll give you two examples around health systems. There are still some health systems that don't have the new guidelines and their help maintenance.

And it's kind of set the easy button, we know where these health systems are so we're targeting these health systems to make sure that they had in their health maintenance system. The second is this the data that our sales representatives.

Kevin T. Conroy: Our challenge is to make sure that every patient who turns 45 thinks about colon cancer screening and then thinks about colon cancer. And these are difficult challenges. And fortunately, we built a team and a technology platform that is built for purpose to achieve our goal. Dan, this is Jeff.

Speaker Change: Our sales representatives know by individual prescribers, which health care providers are ordering cologuard for the 50 plus audience, but are not ordering for the 45% to 49.

Speaker Change: So then they will gear their message to making sure that they know the new guidelines to making sure we get our fair share in that younger cohort and then lastly, as I mentioned earlier, we have specific marketing campaigns for the younger segment, 45% to 49 will continue that.

Jeffrey T. Elliott: On 45 to 49, you know, this is one of the many ways that X-ray is competitively unique, is that we've had now almost three years of working to build awareness and penetrate this younger population. And what that means is it's approaching 20% of our screening revenue today. So it has been a massive growth driver. I expect that to continue. When you look at the need here, as Kevin said, there's a relatively limited capacity for colonoscopies in this country. So when you add 20 million more people to the screening pool, like the guidelines did three years ago, Cologuard is the best option. So we are taking a significant share there. It is above growth drivers, above the overall base of business, and I think that will continue for many years to come. Yeah, I'll add just maybe some field entail around the 45 to 49 segment.

Speaker Change: Okay.

Speaker Change: Your next question comes from the line of Vijay Kumar with Evercore ISI. Your line is open.

Hey, guys. Thanks for taking my question I had a two parter.

Speaker Change: Kevin.

Vijay Muniyappa Kumar: <unk> gained share.

Vijay Muniyappa Kumar: I'm just curious what you are.

Vijay Muniyappa Kumar: Sensitivity for advanced Adenoma being.

Vijay Muniyappa Kumar: 43, 44%.

Vijay Muniyappa Kumar: The blood basis around 25, or 30 I'm curious.

Vijay Muniyappa Kumar: What the likelier skein differential would be.

Jeff on Unadjusted EBITDA margins it looks like the guide implies 300 basis points expansion year on year, that's a little light I think it implies opex growing high singles.

Jeffrey T. Elliott: Perhaps I think when you go back to your longer term model, maybe there was a little bit more leverage expected. So curious if this is your staff.

Everett V. Cunningham: Our field organization knows it's a great opportunity to grow Cologuard, and we're helping our customers. I'll give you two examples around health systems.

Jeffrey T. Elliott: <unk>.

Jeffrey T. Elliott: On the Opex assumptions.

Everett V. Cunningham: There are still some health systems that don't have the new guidelines in their health maintenance systems. And as Kevin said, the easy button, we know where these health systems are. So we're targeting these health systems to make sure that they have it in their health maintenance system. The second is this data that our sales represent. Our sales representatives know by individual prescribers which health care providers are ordering Cologuard for the 50 plus audience but are not ordering it for the 45 to 49.

Speaker Change: So on the first question you are testing my memory of the ranking.

Speaker Change: Hello Guard has the best ratio of any screening tests Cologuard is the best ratio of life years gained to unnecessary colonoscopy.

Speaker Change: Colonoscopy has the highest life years gained some of that is simply because of the assumptions in the model.

It also as the highest number of <unk>.

Speaker Change: Necessary colonoscopy, so colonoscopy that has performed that doesn't find it.

Vijay Muniyappa Kumar: So then they will gear their message to make sure that they know the new guidelines to make sure we get our fair share in that younger cohort. And then lastly, as I mentioned earlier, we have specific marketing campaigns for the younger segment, 45 to 49. We'll continue that. Your next question comes from the line of Vijay Kumar with Evercore ISI. Your line is open. Hey guys, thanks for taking my question. I had a two-parter.

Speaker Change: Which is the majority of colonoscopy.

Speaker Change: Between the fit test and Cologuard.

Speaker Change: The fit test.

Speaker Change: Every single year, which by the way only about three people on a 1000 to the fit test every year for a decade.

Speaker Change: But if you model it that way compared to Cologuard every three years the fit test detects.

Speaker Change: File.

Speaker Change: But maybe seven or 8% more light peers it saves.

Speaker Change: 5% to 10% more life years than Cologuard.

Speaker Change: CRC blood falls off by like 25% because of the lack of sensitivity if for finding precancerous polyps.

Kevin T. Conroy: Kevin, on the life years gain here, I'm just curious, with your sensitivity for advanced adenoma being 43-44%, if the blood base is around 25 or 30, I'm curious what the life years gain differential would be. And Jeff, on adjusted EBITDA margins, it looks like the guide implies 300 basis points of expansion year-on-year. That's a little light.

Speaker Change: And this is the challenge so I'd go back and reread. This part of the script and reiterated again. This is the challenge to getting an a or b rating test. They don't even know AIDS or b is very easily if the USPS deal.

Speaker Change: This isn't like great inflation in some U S colleges.

Jeffrey T. Elliott: I think it implies optics showing high signals. Perhaps, I think when you go back to your long-term model, maybe there was a little bit more leverage expected. So, I'm curious if this is just a conservative assumption on the optics assumptions. So on the first question, you are testing my memory of the ranking. ColoGuard has the best ratio of life years gained to unnecessary colonoscopies. Colonoscopy has the highest number of life years gained.

Speaker Change: Yes.

Speaker Change: If there is a standard and it's our it's driven off of this model pre cancer detection matters.

Speaker Change: P. J. This is Jeff on your EBITDA question look we give the guidance less than where we ended last year a lot further along towards our long term goals remember our long term goal is for at least a 20% EBITDA margin in 2027.

Jeffrey T. Elliott: Last year, we're at 9%.

Jeffrey T. Elliott: Is it a plan here this year, we expect another three points improvement over time makes the continued increase every year. That's what we built here we built a foundation across our technology platform. Our labs. Our sales teams you name it to scale scale very effectively when you look at the numbers this year.

Kevin T. Conroy: Some of that is simply because of the assumptions in the model. It also has the highest number of unnecessary colonoscopies, a colonoscopy that is performed but doesn't find it, which is the majority of colonoscopies, between the FIT test and ColoGuard. The fit test done every single year, which, by the way, only about three people in a thousand do the fit test every year for a decade. But if you model it that way, compared to COLAGAR every three years, the BIT test detects just like maybe 7 or 8% more life years, or it saves five to 10% more life years than coal. PSC blood falls off by like 25% because of the lack of sensitivity for finding precancerous polyps. And this is the challenge. So I'd go back and reread this part of the script and reread it again. This is the challenge to getting an A or B-rated test. They don't hand out A's or B's very easily at the USPS deal.

Jeffrey T. Elliott: I do expect to see leverage again across all three major opex lines sales and marketing after the last two years, where that had come down in absolute terms ever seen a really nice job leading this team, but we see such strong return on investment there that we are going to raise some investment there just it makes sense to what's the right way to Globus business is the right way to take care of patients today.

Jeffrey T. Elliott: Value to the system so.

Jeffrey T. Elliott: We will intestinal III, we talked about last year mid year, we accelerated investment in our <unk> program, given the near term opportunity there and as some of the bigger programs get towards market the investment dollars to increase temporarily.

Jeffrey T. Elliott: And then G&A G&A I think the biggest source of leverage we've got major initiatives there.

Kevin T. Conroy: This isn't like grade inflation in some U.S. colleges. This is a, it's, there is a standard, and it's, it's, it's driven off of this model pre-cancer detection map. So Vijay, this is Jeff.

Jeffrey T. Elliott: Our customer care teams of customer experience teams and it broke.

Jeffrey T. Elliott: But over time, we will not only help accelerate growth further but also help us run the business more efficiently.

Jeffrey T. Elliott: On your EBITDA question, look, we gave guidance last summer, and we ended last year a lot further along towards our long-term goals. Remember, our long-term goal is for at least a 20% EBITDA margin in 2027. Last year, we were at 9%.

Speaker Change: Yes, and let me add on to that what Jeff just emphasized about continued investments as we've mentioned we've taken.

Speaker Change: Our sales and marketing spend down by over $100 million over the last two years.

Speaker Change: We believe that if we.

We're investing more we would be growing even faster. This isn't sub position, we have very sophisticated modeling that shows the responsiveness of marketing and sales activity to the output and during that same period of time, we have grown $870 million from a revenue base. So.

Jeffrey T. Elliott: We're way ahead of plan here. This year, we expect another three points of improvement. Over time, I expect a continued increase every year. That's what we built here. We built a foundation across our technology platform, our labs, our sales teams, you name it, to scale very effectively. When you look at the numbers this year, I do expect to see leverage across all three major OPEX lines. Sales and marketing, after the last two years where that had come down in absolute terms, Everett's done a really nice job leading this team, but we see such a strong return on investment there that we are going to raise the investment there. It makes sense, too.

Speaker Change: Its judicious, it's prudent for us to make additional investments so that we can grow faster.

Speaker Change: And grow profits faster, so that we can reinvest and move forward.

Speaker Change: No.

Speaker Change: I'm glad we're at the point that we are because our data and analytics get better as I speak.

And that matches really nicely with our market structure to where.

Speaker Change: The data and analytics, just don't sit at my level, but they go all the way down to the local level. So we can invest in resources smartly and thats driven by our local leaders they make the call in terms of where that opportunity of growth is.

Jeffrey T. Elliott: It's the right way to grow this business. It's the right way to take care of patients and add value to the system. So we will invest in all three. As we talked about last year, mid-year, we accelerated investment in our MRD program given the near-term opportunity there. And as some of the bigger programs get closer to market, the investment dollars do increase temporarily. And then G&A.

Speaker Change: Where we can grow our business.

Speaker Change: And continue to be a real value to our patients and customers.

Daniel Anthony Arias: Your next question comes from the line of Dan areas with Stifel. Your line is open.

Daniel Anthony Arias: Good evening guys. Thanks for your question here, Kevin I too wanted to go back to the blood based assay development topic, which I'm sure you don't love, but hopefully you can appreciate just how much that's playing into the stock compensation for you guys right now or at least for US Anyways. My question is really though on process rather than performance you mentioned the importance of USP.

Jeffrey T. Elliott: G&A, I think, is the biggest source of leverage. We've got major initiatives there across our customer care teams, our customer experience teams, and IT. But over time, it will not only help accelerate growth further but also help us run the business more efficiently. Yeah, and let me add to that what Jeff just emphasized about continued investments. As we've mentioned, we've taken our sales and marketing spend down by over $100 million over the last two years. We believe that if we were investing more, we would be growing even faster. This isn't speculation; we have very sophisticated modeling that shows the responsiveness of marketing and sales activity to output. And during that same period of time, we have grown $870 million on a revenue basis.

Daniel Anthony Arias: When we think about that can you just talk to the confidence that you have when it comes to getting everything squared away in time for consideration there.

Daniel Anthony Arias: Other words, if the data reads out mid year and the guideline folks want everything to them by say early 2025 is there any reason why you wouldnt make the cutoff there for whatever they need for their evaluation.

Speaker Change: No we will make that cut offs.

Speaker Change: We will make that cut off.

Speaker Change: And is that is that the right timeline that you are assuming plays out on that by the end of this year USPS TF is ready to accept data in.

Speaker Change: And have what they need in front of them in order to do this thing.

Speaker Change: So.

Speaker Change: If you look at this historically.

Speaker Change: The last cycle was I believe five years in between updates the cycle before that was eight years.

Daniel Anthony Arias: So it's judicious, it's prudent for us to make additional investments so that we can grow faster and grow profit, so that we can reinvest and move forward. I'm glad we're at the point that we are because our data and analytics get better as I speak. And that matches really nicely with our market structure, where the data analytics just don't sit at my level, but they go all the way down to the local level. So we can invest in resources smartly. And that's driven by our local leaders. They make the call in terms of where that opportunity of growth is, where we can grow our business and continue to be of real value to our patients and customers. Your next question comes from the line of Dan Arias with Stiefel. Your line is open. Evening, guys.

Speaker Change: It's a group of volunteers, they do dozens and dozens and dozens of guideline updates every year they have limited resources. So.

Speaker Change: They are due to have the final update by 'twenty six does that get pushed out we don't know we would expect in the knee.

Speaker Change: Mirror term to see something from USPS, TF, where they lay out what's called their study plan.

Speaker Change: Topics they review the essential timing et cetera.

Speaker Change: We haven't seen that yet but.

Speaker Change: It was eight years and then it was five years, we'll see if it is it five years is it six years as the longer we don't know.

Speaker Change: Your next question comes from the line of Andrew Backman with William Blair. Your line is open.

Andrew Backman: Hi, guys. Good afternoon, thanks for taking the question.

Kevin T. Conroy: Thanks for your question here. Kevin, I too wanted to go back to the blood based assay development topic, which I'm sure you don't love, but hopefully you can appreciate just how much that's playing into the stock conversation for you guys right now, or at least for us anyways. My question is really about process rather than performance.

Andrew Backman: Want to go back to some of the comments on health system efforts, obviously it sounds like you guys are providing.

Andrew Backman: Systems, a lot of value with some of the things that youre doing internally, but can you maybe just talk structurally about those partnerships is there anything in those contractually or sort of what you guys are had with those partnerships that can potentially ward off competition, if that does come in over the next handful of years. Thanks.

Kevin T. Conroy: You mentioned the importance of USPSTF. When we think about that, can you just talk about the confidence that you have when it comes to getting everything squared away in time for consideration there? In other words, if the data reads out mid-year and the guideline folks want everything for themselves by, say, early 2025, is there any reason why you wouldn't make the cut off there for whatever they need for their value? No; we will make that cutoff.

Andrew Backman: Yes.

Andrew Backman: Less about.

Andrew Backman: Tracks really are more about the value that we're bringing to health systems.

Andrew Backman: Health systems.

Andrew Backman: We've seen this over the past couple of years, they are coming to us and they're coming to us to solve.

Andrew Backman: Health care problems and issues one is around screening.

Andrew Backman: So we find that and I also have helps us and tell us on a daily basis.

Andrew Backman: We need to go beyond the product.

Kevin T. Conroy: We will make that cut. And is that the right timeline that you are assuming plays out that by the end of this year, USPSTF is ready to accept data and have what they need in front of them in order to do this thing? So, if you look at this historically, the last cycle was, I believe, five years in between updates. The cycle before that was eight.

Andrew Backman: So the one thing that many things that we bring to health systems are great products and outstanding customer support of which they are looking for.

Andrew Backman: We have an outstanding medical.

Andrew Backman: Organization that partners with them and so they love our surround sound.

Andrew Backman: Cologuard Oncotype Dx Arco Xtra and what's also exciting is our portfolio that drops right into our into our bag and we can sell a portfolio to them. So it's all about partnership and it really separates us from the competition in terms of our products our portfolio and <unk>.

Kevin T. Conroy: It's a group of volunteers. They do dozens and dozens and dozens of guideline updates every year. They have limited resources, so... They are due to have the final update by 26. Does that get pushed out?

Kevin T. Conroy: We don't know. We would expect in the nearer term to see something from USPSTF where they lay out what's called their study plan, the topics they review, the essential timing, et cetera, and we haven't seen that yet, but you know it was eight years, and then it was five years. We'll see if it is five years, is it six years, is that longer. We don't know. Your next question comes from the line of Andrew Brackmann with William Blair. Your line is open. Hi guys, good afternoon.

Andrew Backman: All of the surround sound that we can partner with them and helping them better.

Andrew Backman: Better health care for their patients.

Andrew Backman: Incredible the technology stack that we've developed that creates a.

Andrew Backman: Competitive uniqueness and.

Andrew Backman: And that investment has been well over $1 billion, it's about 100 different applications internally built externally sourced debt.

Andrew Frederick Brackmann: Thanks for taking the questions. I want to go back to some of the comments on health system efforts. Obviously, it sounds like you guys are providing these systems with a lot of value with some of the things that you're doing internally, but can you maybe just sort of talk structurally about those partnerships? Is there anything in those contractually or sort of what you guys have with those partnerships that can potentially ward off competition if that does come in over the next handful of years? Thanks.

Andrew Backman: That lead to this compliance engine that Everett referred to the ability to automate things like reimbursement.

Andrew Backman: Your authorization.

Andrew Backman: Campaigns.

Andrew Backman: To remind people to get screened population health initiatives and so this isn't a contractual based relationship Thats a relationship based on real value for health systems patients.

Everett V. Cunningham: Yeah, it's less about contractually and more about the value that we're bringing to health systems. Health systems, we've seen this over the past couple years, they're coming to us. And they're coming to us to solve health care problems and issues. One is around screening.

Andrew Backman: And.

Andrew Backman: It all ends up leading to significant growth and profitability.

Andrew Backman: I'll layer in one additional comment this is Brian by the way.

Brian Weinstein: We are having very meaningful conversations with a number of health systems, just to reiterate what whatever it was talking about around the portfolio.

Brian: While it is not walling off the competition a lot of these vendors are looking at us as a one stop shop and thinking about preferred vendor agreements. They are realizing the benefits of transacting with one company talking to one customer service Rep, calling one service number sending samples to one company for testing. So we are having very meaningful in real time.

Everett V. Cunningham: And so we find that, and I also have health systems tell us on a daily basis, we need to go beyond the product. So the one thing, many things that we bring to health systems are great products, outstanding customer support, which they're looking for. We have an outstanding medical organization that partners with them. And so they love our surround sound, and it fits Cologuard, Oncotype DX, and OncoXtra.

Brian: Conversations.

Brian: Around this preferred vendor agreement type of structure with some of our key customers.

Brian: Okay.

Brian: Your next question comes from the line of Matt <unk> with Goldman Sachs. Your line is open.

Kevin T. Conroy: And what's also exciting is our portfolio that drops right into our bag, and we can sell a portfolio to them. So it's all about partnership, and it really separates us from the competition in terms of our products, our portfolio, and all the surround sound that we can partner with them in helping them have better health care for the patient. Yeah, you know, it's incredible the technology stack that we've developed that creates competitive uniqueness, and that investment has been well over a billion dollars. It's about 100 different applications internally built and externally sourced that lead to this compliance engine that Everett referred to, the ability to automate things like reimbursement, prior authorization, campaigns to remind people to get screened, and population health initiatives. And so this isn't a contractual-based relationship.

Matt: Good afternoon, and thank for taking my question is just two quick ones from me one just I know you talked about Oncotype Dx international growing 48% in the quarter.

Matt: And I realize that Japan was just launched in October but could you maybe unpack what Japan represented within that overall international and what type of traction you're seeing there.

Matt: And then just secondly, Kevin you talked about I think at Jpmorgan, you talked about the Oncotype business going from $600 million plus $2 billion.

Matt: You Didnt give a timeframe, but I'm just wondering could you maybe talk about some of the key drivers to get you there just given sort of the law.

Matt: Low to high single digit growth, we have seen what kind of acceleration that you're expecting to get to that $1 billion and what are the key drivers for that thanks.

Matt: I think Brian can actually take both.

Brian: So the first question related to Pan Let me put Japan, if I may in the context of our broader international business, which is approaching about $200 million in annual revenue I tend to think about our our international business and three Oncotype <unk>. We have one group of countries think Canada. The U K for example were very established market molecular.

Kevin T. Conroy: It's a relationship based on real value for health systems and patients, and it ends up leading to significant growth and profitability. I'll layer in one additional comment. This is Brian, by the way.

Brian Baranick: We are having very meaningful conversations with a number of health systems, just to reiterate whatever it was talking about around the portfolio. So while it's not walling off the competition, a lot of these vendors are looking at us as a one-stop shop and thinking about preferred vendor agreements. They're realizing the benefits of transacting with one company, talking to one customer service rep, calling one service number, and sending samples to one company for testing. So we are having very meaningful and real-time conversations around this preferred vendor agreement type of structure with some of our key customers. Your next question comes from the line of Matt Sykes with Goldman Sachs. Your line is open. Good afternoon, thank you for taking my question. It's just two quick ones for me.

Brian: Penetration is standard of care in Oncotype brand share and market share is very very high.

Brian: Archetype is where we are we are driving rapid adoption both of molecular testing and of Oncotype sure and I'll give you examples like Germany, and Italy as two key countries, where we're seeing that grow thirdly, we're launching in new markets. The biggest which is Japan, which is our largest opportunity in.

Brian: In Japan, there is about 45000 eligible patients in that important geography, and we expect that to contribute about $30 million of growth to 2024 for our for our international business more broadly.

Brian: On the second assumption again, I think growing to Oncotype for 600, and the broader <unk> business to $1 billion to get to 600, we have to do a lot of things.

We're continuing to as I mentioned penetrate underpenetrated market, we have an opportunity to launch.

Brian: In new markets and then we have an opportunity to convert indirect markets to direct markets, where we actually have oncotype sales teams and resources in country that are under our direct control. So those are some of the key drivers for Oncotype and then outside of Oncotype, the broader business I would really focus on.

Matthew Carlisle Sykes: One, I know you talked about Oncotype DX International growing 48% in the quarter, and I realize that Japan was just launched in October, but could you maybe unpack what Japan represents within that overall international and what type of traction you're seeing there? And then, just secondly, Kevin, you talked about this morning, you talked about the Oncotype business going from 600 million plus to a billion. You didn't give a time frame, but I'm just wondering, could you maybe talk about some of the key drivers to get you there, just given sort of the low to high single-digit growth we've seen, you know, what kind of acceleration you're expecting to get to that billion, and what are the key drivers for that? Thanks. I think Brian can actually take both.

Brian: The expanding pipeline within 24 months, we already launched Oncall extra our tissue therapy selection tests, we will launch Arco detect which is our mrna platform. We acquired uncle liquid from the resolution Biosciences acquisition, which we will introduce in due course and then we also have risk our hereditary cancer tests.

Brian: Of that growth from 600 to a $1 billion will be driven by that pipeline.

Brian: Your next question comes from the line of Patrick Donnelly with Citi. Your line is open.

Patrick Bernard Donnelly: Hey, guys. Thanks for taking the questions.

Patrick Bernard Donnelly: Maybe just on <unk> can you talk a little bit about expectations for this year, what we should be looking for both on the data side and then just the ramp.

Patrick Bernard Donnelly: And also how do you think about the incremental dollars investment I know previously <unk> was above blood on the early detection side, maybe just talk a little bit about priorities there would be helpful. Thank you.

Brian Baranick: The first question related to Japan, let me put Japan, if I may, in the context of our broader international business, which is approaching about $200 million in annual revenue. I tend to think about our international business in three archetypes. We have one group of countries, think Canada and the UK, for example, where the market is very established, molecular penetration is standard of care, and archetype brand share, and market share is very, very high. The second archetype is where we are driving rapid adoption, both of molecular testing and Ivanka-type market share. And I'll give you examples like Germany and Italy as two key countries where we're seeing that growth.

Patrick Bernard Donnelly: I'm going to hand, this one over to Brian as well, thanks, Kevin and thank you for all the questions about precision oncology welcome them.

Brian: Let me just say that I'll reiterate Kevin mentioned the top of the call that we're here in San Diego and I'm. So proud of the team.

Brian: Worked so hard over the last months and years to develop and organic MRV product, which we're now calling on side effects. So hugely proud of the team here in San Diego and also equally proud of the team and our community flat who is working through the validation of that.

Brian: Breakneck speed.

Brian: So in terms of what you can expect from them already.

Allergies.

Brian: Sound of freedom behind Us here in San Diego.

Brian: There is noise in the background. What you can expect in terms of MLD, we are already having a very meaningful and material discussion with customers as well as Medicare on the payer side of the equation.

Brian Baranick: Thirdly, we're launching in new markets, the biggest of which is Japan, which is our largest opportunity. In Japan, there are about 45,000 eligible patients in that important geography, and we expect that that could contribute about $30 million of growth to 2024 for our international business more broadly. On the second assumption, again, I think growing ONCOTYPE to 600 and the broader PO business to one billion. To get to 600, we have to do a lot of things.

Brian: We're excited to share the powerful data that we believe will help us secure Medicare reimbursement later this year and then we're working very closely and the business unit with effort and the commercial team.

Brian: To work through the commercial planning activities and very much look forward to introducing that test into the commercial team later this year or very early next year and that timeline is very dependent on how quickly Medicare it gets back to us.

Brian: On the reimbursement side of the equation, which can vary by a few months, but ultimately that will determine when we really step on the accelerator somewhat on the commercialization perspective, one of the things that I'll add before Jack you can comment on some of the contributions financially. We I believe we are really competitive with unique.

Brian Baranick: We're continuing to, as I mentioned, penetrate under-penetrated markets. We have an opportunity to launch in new markets. And then we have an opportunity to convert indirect markets to direct markets, where we actually have Oncotype sales teams and resources in-country that are under our direct control. So those are some of the key drivers for Oncotype.

Brian: In the in the <unk> space, we are thinking very creatively about how to integrate the portfolio, particularly the oncotype portfolio into our evidenced development plans around conoco detect and then I'll take you back to the it platform that.

Brian: Kevin mentioned earlier on the call it will allow us to do prior authorization billing and reimbursement, but it will also allow us to bring forward a lot of the great tools that we're developing for cologuard around adherence compliance when you think about the work that they're doing we're asking patients to do a test every three years with respect to uncle attack will be asking.

Brian Baranick: And then outside of Oncotype, the broader business, I would really focus on the expanding pipeline. Within 24 months, you know, we already launched OncoExtra, our tissue therapy selection test. And we will launch OncoDetect, which is our MRD platform.

Brian: Ah patient to do a test every three months, which is very difficult and challenging particularly in the out years. When a patient is tested negative for three four years consecutively, we need to get that patient tested in year, four and five and I believe strongly that adherence and compliance engine can be ported over to support the patients around <unk> over to you Jeff.

Brian Baranick: We acquired OncoLiquid from the Resolution Bioscience Acquisition, which we will introduce in due course. And then we also have RiskGuard, our hereditary cancer test. So that growth from 600 million to a billion will be driven by that pipeline. Your next question comes from the line of Patrick Donnelly with Citi. Your line is open.

Brian: Patrick This is Jeff from a modeling standpoint, we've been as usual been sober about the revenue contribution we're assuming this year, it's really more of a 2025 events you've given the base of this business $2 8 billion <unk>. While this is one of our biggest pipeline opportunities I don't expect a material contribution from a revenue standpoint until next year.

Patrick Bernard Donnelly: Hey guys, thanks for taking the questions. Kevin, maybe just on MRD, can you talk a little bit about expectations for this year? You know, what we should be looking for, both on the data side and then, you know, just the ramp. And also, you know, how do you think about the incremental dollars invested? I know previously MRD was above blood on the early detection side. Maybe just talk a little bit about the priorities there.

Jeffrey T. Elliott: From an R&D investment standpoint, this has been and continues to be one of our top three investment areas.

Jeffrey T. Elliott: Colon cancer screening broadly.

Jeffrey T. Elliott: D and multi cancer are the big three in <unk> last year, we did step up the investment given that the.

Jeffrey T. Elliott: The near term opportunity we see.

Speaker Change: Operator can we go to the next person in the queue.

Brian Baranick: It'd be helpful. Thank you. I'm gonna hand this one over to Brian as well.

Speaker Change: Your next question comes from the line of Jack Meehan with Nephron Research. Your line is open.

Jack Meehan: Thank you good afternoon.

Brian Baranick: Thanks, Kevin. And thank you for all the questions about precision oncology; I welcome them. Let me just say that Kevin mentioned at the beginning of the call that we're here in San Diego, and I'm so proud of the team that worked so hard over the last months and years to develop an organic MRD product, which we're now calling OncoDetect. So, hugely proud of the team here in San Diego, and also equally proud of the team in our clinic lab who are working through the validation of that test and break next to you. So in terms of what you can expect from MRD, apologies; there's the sound of freedom behind us here in San Diego, if there's noise in the background.

Jack Meehan: For Kevin or Jeff I was hoping for an update on multi cancer, we're still waiting on progress in D. C. Around the Medicare benefit is there any context, you can share around Watson the earnings forecast around R&D investment for <unk> and are you still planning to move forward with <unk> at this point.

Speaker Change: Well as we've been saying for probably the prior 18 months, if Congress did not move to pass legislation to explicitly give Medicare the authority to pay for a multi cancer early detection tests, we would likely scale back on <unk>.

Speaker Change: <unk>, we have scaled back our investment in them said in the long term, we still believe that multi cancer early detection is going to be much more impactful even than cologuard.

Brian Baranick: What you can expect in terms of MRD, we are already having a very meaningful and material discussion with customers as well as Medicare on the payer side of the equation. We're excited to share the powerful data that we believe will help us secure Medicare reimbursement later this year. And then we're working very closely in the business unit with Everett and the commercial team to work through the commercial planning activities and very much look forward to introducing that test in the commercial team later this year or very early next year. And that timeline is very dependent on how quickly Medicare gets back to us on the reimbursement side of the equation, which can vary by a few months. But ultimately, that will determine when we really step on the accelerator from a commercialization perspective. One of the things that I'll add before Jeff, you can comment on some of the financial contributions. I believe we are really competitively unique in the MRD space.

Speaker Change: In terms of creating real value for patients.

In terms of this year's impact, Jeff you can give color or not.

Jeffrey T. Elliott: Oh, we did moderate the level of investment in multi cancer temporarily.

Jeffrey T. Elliott: As Kevin said until we see a more clear pathway to reimbursement.

Jeffrey T. Elliott: From an R&D standpoint, though it is still one of our big three investment areas. Those three areas to add more color to it again colon cancer broadly multi cancer in MLD or over two thirds of our R&D investment by closer to three quarters. So.

Jeffrey T. Elliott: They are investments that.

Jeffrey T. Elliott: The opportunity that we see and the value we can provide for both shareholders and patients.

Jeffrey T. Elliott: Your next question comes from the line of Puneet <unk> with Leerink partners. Your line is open.

puneet: Yes, hi, guys.

puneet: Jeff Thanks for taking my question so Kevin if.

puneet: If you could you covered the blood competition questions very well.

puneet: But I was just wondering.

puneet: Can you elaborate a bit on the expectations for the Blue C. Blood readout I mean should we expect that to be in line with the comments you made on blood broadly and maybe just around advanced adenoma performance. There how important is that in the Blue C blood read out and just remind us how this.

Brian Baranick: We are thinking very creatively about how to integrate the portfolio, particularly the ONCA type portfolio, into our evidence development plans around ONCA to TEC. And then I'll take you back to the IT platform that Kevin mentioned earlier in the call. It'll allow us to do prior authorization, billing, and reimbursement, but it will also allow us to bring forward a lot of the great tools that we're developing for Colgard around adherence and compliance. If you think about the work that they're doing, we're asking patients to do a test every three years. With respect to ONCA to TEC, we'll be asking a patient to do a test every three months, which is very difficult and challenging, particularly in the out years when a patient is tested negative for three, four years consecutively, and we need to get that patient tested in years four and five. And I believe strongly that that adherence and compliance engine can be ported over to support the patients around MRD and ONCA at TEC. Over to you, Jeff. Patrick, this is Jeff.

puneet: Assay is as positioned in your portfolio. Thank you.

Speaker Change: Sure Let me start with the last question first.

Our blood test and we think as a class most likely blood tests will be we will receive asbestos second line screening declined by the FDA.

Speaker Change: That means and you've seen this before with this up to nine test or tests to be used.

Speaker Change: When a patient refused as frontline tests that are in the USPS TF guidelines.

Speaker Change: So we know who the patients are that refuse high quality test like Cologuard and colonoscopy and when they refused those test is an opportunity for us too.

Speaker Change: To help those patients at least get screened even if the Doc isn't going to get a quality credit or the Medicare advantage plan et cetera, still an uphill battle no doubt.

Jeffrey T. Elliott: From a modeling standpoint, we've been, as usual, sober about the revenue contribution we're assuming this year. It's really more of a 2025 event. You've given the base of this business $2.8 billion. MRD, while this is one of our biggest pipeline opportunities, I don't expect a material contribution from a revenue standpoint until next year. From an R&D investment standpoint, this has been and continues to be one of our top three investment areas; colon cancer screening, broadly, MRD, and multi-cancer are the big three. In MRD last year, we did step up the investment given that the near-term opportunity, Operator, can we go to the next person in the queue? Your next question comes from the line of Jack Meehan with Nephron Research. Your line is open. Thank you. Good afternoon.

Speaker Change: One of the things that best competitively unique about our approach is just the cost structure.

Speaker Change: <unk>.

Speaker Change: It's a test that's built on it supercharge Pcr platform.

Speaker Change: And that provides a cost structure that we believe will be best in class and provide real value to the health system and add to those patients that get tested.

Speaker Change: So that will allow us we think to be that coupled with our commercial organization our it infrastructure to lead in this field.

Speaker Change: I'll take you back to.

Speaker Change: 2014, 15, and 16, when we first launched Cologuard without being included in the quality measures until I believe 2017.

Jack Meehan: Kevin or Jeff, I was hoping for an update on multi-cancer. You know, we're still waiting on progress in D.C. around the Medicare benefit. Is there any context you can share around what's in the earnings forecast around R&D investment for MCAD, and are you still planning to move forward with SOAR at this point? Well, as we have been saying for probably the prior 18 months, if Congress did not move to pass legislation to explicitly give Medicare the authority to pay for a multi-cancer early detection test, we would likely scale back our investment. We have scaled back our investment in MSET.

Speaker Change: We were really limited in terms of the patients that we could address.

Speaker Change: <unk>.

Speaker Change: We believe that that's going to be the case with any tests that isn't in the guidelines are quality measures. So that's how we're looking at things in terms of what our expectations are for data, we're getting pretty close to that date. So.

Speaker Change: The data speak for themselves.

Speaker Change: Okay.

Speaker Change: Your next question comes from the line of Andrew Cooper with Raymond James Your line is open.

Hey, everybody thanks for the time.

Andrew Cooper: Maybe just sticking with MRV since we've talked a lot about about cologuard.

Kevin T. Conroy: In the long term, we still believe that multi-cancer early detection is going to be much more impactful, even than ColoGuard. In terms of creating real value for patients, in terms of this year's impact, Jeff, you can give color or not. We did moderate the level of investment in multi-cancer temporarily, as Kevin said, until we see a more clear pathway to reimbursement. From an R&D standpoint, though, it is still one of our big three investment areas.

Andrew Cooper: You called out re submitting for reimbursement are expecting reimbursement. This year I think for Colin I think the slide also said validation data for breast as well I just wanted to get a little bit better understanding of should we expect that that's the sort of data to support reimbursement is it broadly is it more narrow for a portion of <unk> patients.

Andrew Cooper: I'm a bit of help there and then as we think about these launches I know Jack you called out a little bit of kind of increased R&D in our increased opex in the prep for the launch but anything we should think about in terms of gross margin impact versus sort of the tailwind you'll have with next generation cologuard and things like that as we think longer term, especially.

Jeffrey T. Elliott: Those three areas, to add more color to it, again, colon cancer broadly, multi-cancer, and MRD are over two-thirds of our R&D investment, probably closer to three-quarters. So they are investments that represent the opportunity that we see and the value we can provide for both shareholders and patients. Your next question comes from the line of Puneet Souda with Lerig Partners. Your line is open.

Andrew Cooper: If some of these are not widely reimbursed by commercial upfront.

Speaker Change: Thanks for the question in terms of the breadth data most of the data that we're generating right now is really validating.

Speaker Change: The platform and the plan would be to look towards Medicare more in the 2025 horizon on the breast side.

Puneet Souda: Hi guys, thanks for taking my question. So, Kevin, if you could, you covered the blood competition questions very well. But just wondering, can you elaborate a bit on the expectations for the Blue Sea blood readout? I mean, should we expect that to be in line with the comments you made on blood broadly, and maybe just around advanced adenoma performance there? How important is that in the Blue Sea blood readout? And just remind us how this assay is positioned in your portfolio. Thank you. Sure, let me start with the last question first, Puneet.

Speaker Change: As you may or may not know some of these subtypes of breast cancer can be can be somewhat challenging they tend to be sort of what are known as low shedding tumors meeting is not a lot of Cte DNA.

Speaker Change: In the blood and so one of the things that we're doing is setting up study such that we can look at.

Speaker Change: Our current version of banquet attacks, but also look at what the technology that we licensed from the broad interest due notice maestro might allow us to do and what that technology allows us to do is is really twofold. One it allows us to shift from <unk> to whole genome to design the assay and thereby we can we can find more mutations that we then want to track into.

Kevin T. Conroy: The blood test, and we think as a class, blood tests will probably receive, at best, a second-line screening claim by the FDA. That means, and you've seen this before with the SEPTA-9 test, a test to be used when a patient refuses frontline tests that are in the USPSDS guideline. So, we know who the patients are that refuse high-quality tests like Cologuard and colonoscopy, and when they refuse those tests, there's an opportunity for us to help those patients at least get screened, even if the doctor isn't going to get a quality credit or the Medicare Advantage plan, etc. It's still an uphill battle, no doubt.

Speaker Change: Patients blood and two it allows us to track more mutations in a patient's blood at a very very attractive cost point. So we maintained very high gross margin on that particular.

Speaker Change: Product so it's a little bit too early to say about when we go full force in blood, because we do want to deliver.

Speaker Change: A technology that is competitively unique and differentiated and we are not sure based on the data that we've seen to date from some of the players in the field whether in certain subtypes.

Speaker Change: The performance is really there and so we're being very careful about how we think about evidence building and investment and breast based on the different technology stacks that we have.

Kevin T. Conroy: One of the things that's competitively unique about our approach is just the cost structure. It's a test that's built on a supercharged PCR platform, and that provides a cost structure that we believe will be best in class and provide real value to the health system and to those patients that get tested. So that will allow us, we think, to be that coupled with our commercial organization, our IT infrastructure, to lead in this field. It's just, I'll take you back to 2014, 15, 16, when we first launched ColoGuard without being included in the quality measures until, I believe, 2007. We were really limited in terms of the patients that we could address, and we believe that's going to be the case with any test that isn't in the guidelines or quality measures. So, that's how we're looking at things in terms of what our expectations are for data. We're getting pretty close to that date, so we'll let the data speak for themselves. Your next question comes from the line of Andrew Cooper with Raymond James. Your line is open. Hey, everybody, thanks for the time.

Speaker Change: On gross margins more broadly I expect steady improvement for years to come when you look at our pipeline Cologuard two should carry even better gross margins at Cologuard, one given that the team did a fabulous job of finding efficiencies to build into the cost of goods. So I think we've talked before about having a at least a 5% reduction in cost per test for Cologuard.

Speaker Change: Go to.

Speaker Change: Based on the investment and the efficiencies we gain so new product. So overall should help to drive better gross margins temporarily some as you highlighted that don't carry full reimbursement in the beginning could put a little downward pressure, but I think the overall gross margin still continues to work higher from an opex standpoint, though given the investment in this broader foundation again is that the teams that are.

Speaker Change: On the field, Brian could talk all day long about the Fabulous team, we've got out in the fields with precision oncology the deep relationships. They have that foundation provides a very attractive incremental leverage.

Andrew Harris Cooper: Maybe just sticking with MRD, since we've talked a lot about Colagard. You called out submitting for reimbursement or expecting reimbursement this year, I think, for Colagard. I think the slide also said validation data for breast as well. I just want to get a little bit better understanding of should we expect that that's the sort of data to support reimbursement? Is it broad? Is it more narrow for a portion of breast patients? Just a little bit of help here.

Speaker Change: <unk> and <unk>.

Speaker Change: Introduce new products.

Speaker Change: A lot of the same physicians, who are calling on in many cases the same patients in the same bucket tissue that youre using for both Oncotype Dx today, and then Mardi and therapy selection down the road. So from a margin standpoint. These are really good investments for us to make now and for years to come.

Speaker Change: Your next question comes from the line of Dan Leonard with UBS. Your line is open.

Brian Baranick: And then as we think about these launches, I know, Jeff, you called out a little bit of kind of increased R&D or increased OPEX in the preparation for the launch. But anything we should think about in terms of, you know, gross margin impact versus sort of the tailwinds you'll have with next generation Colagard and things like that, as we think longer term, especially if some of these are not widely reimbursed, at least by commercial up front? Thanks for the question. In terms of the breast data, most of the data that we're generating right now is really validating the platform, and the plan would be to look towards Medicare more in the 2025 horizon on the breast side. As you may or may not know, some of these subtypes of breast cancer can be somewhat challenging. They tend to be sort of what are known as low-shedding tumors, meaning there's not a lot of ctDNA in the blood.

Daniel Brennan: So I have a couple of questions on Cologuard two <unk> first can I get your latest thinking on what pricing could look like for that product and then secondly.

Daniel Brennan: When would you expect the Blue C study could get published.

Daniel Brennan: In terms of publication of the Blue C study, we would hope that would be.

Daniel Brennan: In the near term.

Daniel Brennan: You never can tell but in the nearer term.

Daniel Brennan: In terms of pricing all we will say here is we are creating value in particular, we've developed a test that detects 30% fewer false positives directly saves the health care systems significant money it saves patients from having to.

Daniel Brennan: Unnecessarily undergo an.

Daniel Brennan: An invasive procedure and so.

Daniel Brennan: Tangible value and because of the huge investment we've made and.

Brian Baranick: And so one of the things that we're doing is setting up studies such that we can look at our current version of oncodetect but also look at what the technology that we license from the Broad Institute, known as Maestro, might allow us to do. And what that technology allows us to do is really twofold. One, it allows us to shift from whole exome to whole genome to design the assay, and thereby, we can find more mutations that we then want to track in the patient's blood.

Daniel Brennan: Resetting a much higher bar.

Daniel Brennan: We expect to get value from that but in terms of providing.

Daniel Brennan: Any specific pricing guidance that is not going to happen until you see the date that it is.

Price by Medicare.

Daniel Brennan: And commercial Payors. So that's all we can offer.

Daniel Brennan: Your next question comes from the line of Cebu NIMBY with Guggenheim. Your line is open.

Cebu NIMBY: Hey, guys. Thank you for taking my question and extension to Doug's question Akshay.

Brian Baranick: And two, it allows us to track more mutations in a patient's blood at a very, very attractive cost point. So we maintain a very high gross margin on that particular product. So, a little bit too early to say about when we go full force in blood, because we do want to deliver a technology that is competitively unique and differentiated. And we're not sure, based on the data that we've seen to date from some of the players in the field, whether in certain subtypes the performance is really there. And so we're being very careful about how we think about evidence building and investment in breast cancer based on the different technology stacks that we have.

Cebu NIMBY: What's 30 screen hit rate in the past you said it was 55% do you expect it to increase in 2024.

Cebu NIMBY: And just from an observation perspective do you see individuals who are eligible for the screen stick to the to your CEO Mark or do you see your Lago for few quarters.

Cebu NIMBY: What percent of 'twenty 'twenty, four we screen eligible patients.

Cebu NIMBY: Spillover into 2025.

Cebu NIMBY: Sure. This is Jeff. Thanks for the question. The success rate is a bit below what you said today. However, it is moving higher quickly we see consistent progress every quarter.

Jeffrey T. Elliott: <unk> goal is to get to at least 70% on that.

Jeffrey T. Elliott: But when you put into perspective.

Jeffrey T. Elliott: For fit testing for example on the first go round. The first test is often at say, 20% overtime that that Kevin talked earlier only about three out of the 1000 people complete the tests.

Jeffrey T. Elliott: On gross margins more broadly, I expect steady improvement for years to come. When you look at our pipeline, Coligard 2 should carry even better gross margins than Coligard 1, given that the team did a fabulous job of finding efficiencies to build into the cost of goods. So I think we've talked before about having at least a 5% reduction in cost per test for Coligard 2, based on the investment and the efficiencies we've gained. So new products overall should help drive better gross margins. Temporarily some, as you highlighted, that don't carry full reimbursement in the beginning could put a little downward pressure, but I think the overall gross margin still continues to go higher. From an OPEX standpoint, though, given the investment in this broader foundation, again, it's the teams that are in the field. Brian could talk all day long about the fabulous team we've got out in the field with Precision Oncology, the deep relationships they have. That foundation provides a very attractive incremental leverage opportunity as we introduce new products. It's a lot of the same positions you're calling on.

Jeffrey T. Elliott: Every year for 10 years, so even where we're at today is a good outcome. We think we can do even better though.

Jeffrey T. Elliott: Of the people who become eligible in a given year.

Jeffrey T. Elliott: It takes about three years called three and a half years for them to come back. So it's $1 6 million people become elsewhere. This year. Some of those people will become eligible let's say December well, they're not kind of probably get retested till next year. So if you look at the median time to re screen, it's closer to three and a half years again that timeframe is coming in but.

Jeffrey T. Elliott: It doesn't happen immediately it takes a little bit of time to go out and get that person back to the doctor and get them re screens and if I could just add something from a customer standpoint from a re screen.

Jeffrey T. Elliott: In many cases, it's the same patient in the same block of tissue that you're using for both Alcatep DX today and then MRD and therapy selection down the road. So from a margin standpoint, these are really good investments for us to make now and for years to come. Your next question comes from the line of Dan Leonard with UBS. Your line is open. Thank you. So I have a couple questions on Coligard 2.0.

Jeffrey T. Elliott: When we look at our re screen population, we give them that customer experience our customers are doctors health care providers, they built confidence in the brand and ordering cologuard.

Jeffrey T. Elliott: And I see that as the <unk> population gets bigger as we get more ordering prescribers. The re screen population helps all around in terms of confidence compliance custom.

Jeffrey T. Elliott: Customer experience.

Jeffrey T. Elliott: And we're seeing that across countries.

Jeffrey T. Elliott: Okay.

Kevin T. Conroy: First, can I get your latest thinking on what pricing could look like for that product? And then, secondly, when would you expect the Blue Sea study to be published? In terms of publication of the Blue Sea Study, we would hope that would be, you know, in the nearer term. You never can tell, but in the nearer term. In terms of pricing, all we will say here is that we are creating value. In particular, we've developed a test that detects 30% fewer false positives, which directly saves the healthcare system significant money. It saves patients from having to unnecessarily undergo an invasive procedure.

Jeffrey T. Elliott: And your last question comes from the line of Mark Massaro with <unk>. Your line is open.

Mark Anthony Massaro: Hey, guys. Thank you for including me in the call. So my first question is on <unk> liquid.

Mark Anthony Massaro: When can we see data.

Mark Anthony Massaro: When do you think we can see this commercially launched and can you discuss the timing around Medicare reimbursement and then my second question is.

Speaker Change: Obviously, we've been getting a lot of questions on what the minimum bar might be.

Speaker Change: <unk> advanced Adenomas to be considered a first line test Kevin you talked about 24% for fit is it reasonable to think that.

Speaker Change: Perhaps.

Kevin T. Conroy: And so that's a tangible value. And because of the huge investment we've made and resetting a much higher bar, we expect to get value from that. But in terms of providing any specific pricing guidance, that is not going to happen until you see the day that it is priced by Medicare and commercial payers. So that's all we can offer.

Speaker Change: Folks might anchor the 24 number or.

How are you thinking about that minimum level. Thank you.

Speaker Change: Well.

Speaker Change: Other thanks, Mark others.

Speaker Change: They have gone out. This ultimately this is an FDA decision.

Speaker Change: Theyre getting input on this decision and the public.

Speaker Change: Forum in March.

Speaker Change: I'm sure they're thinking hard about this.

Kevin T. Conroy: Your next question comes from the line of Sabu Nambi with Guggenheim. Hey guys, thank you for taking my question. An extension to Doug's question, actually, what's the rescreen hit rate? In the past, you said it was 55%. Do you expect it to increase in 2024? And just from an observation perspective, do you see individuals who are eligible for rescreening stick to the three-year mark, or do you see a lag of a few quarters? Basically, what percent of 2024 rescreen eligible patients actually spill over to 2024? Sure. Samudra, this is Jeff.

Speaker Change: What's the general sense, its probably going to be in the 20.

Speaker Change: <unk> 20 plus range.

Speaker Change: Hard to tell.

Speaker Change: So that is not that is supposition at its best but again it goes back to the performance in the modeling the modeling part that.

Speaker Change: Efficient frontier.

Speaker Change: Is that the fit test defines that in part with 24% of Texas. So you can't be too far away from that.

Speaker Change: Ankle liquid I can this is Brian again, I can take that one so we're really excited about the technology.

Speaker Change: That we inherited as part of the <unk> bio team as well as the team that we inherited up in up in Kirkland, Washington, just outside of Seattle, So very robust chemistry platform that has been developed over many years by that team.

Jeffrey T. Elliott: Thanks for the question. The success rate is a bit below what you said today, but it is moving higher quickly.

Speaker Change: Really excited to get that in the hands of our commercial team. The team right now is working on validating.

Jeffrey T. Elliott: We see consistent progress every quarter. And, you know, the longer-term goal is to get to at least 70%. That's very good.

Speaker Change: That that test and backbone so that we can get Medicare reimbursement as well as New York State approval.

Everett V. Cunningham: When you put it in perspective for fit testing, for example, on the first go-round, the first test is often at, say, 20% over time. And, as Kevin talked earlier, only about three out of a thousand people complete the test every year for 10 years. So, if 1.6 million people become eligible this year, some of those people will become eligible in, say, December. Well, they're probably not going to get retested until next year. So, if you look at the median time to rescreen, it's closer to three and a half years. Again, that timeframe is coming in, but it doesn't happen immediately. It takes a little bit of time to go out and get that person back to the doctor and get them rescreened.

Speaker Change: We have a goal to submit to Medicare.

Speaker Change: This calendar year for reimbursement on the liquids out of the equation, let me come back one more time too.

Speaker Change: Our topic that people have a lot of interest in <unk>.

Speaker Change: Remember with USPS TFS when they analyze our new screening test. They look at two factors not just like yours gains, but they also look at the false positive rate of the test leading to unnecessary colonoscopy and the challenge with any of this whole category a blood test is that with 10.

Speaker Change: <unk>.

Speaker Change: 10 ish percent false positive rate youre generating twice as twice as many unnecessary colonoscopy is the fit test.

Speaker Change: Net.

Speaker Change: You can't get away from that fact, as you look at the model and whether you get to the efficient frontier.

Everett V. Cunningham: If I could just add something from a customer standpoint from a re-screen. When we look at our re-screen population, we give them that customer experience. Our customers are doctors and health care providers. They build confidence in the brand and are ordering Colgar.

Speaker Change: So it's really a combination of adenoma detection.

Speaker Change: Large part.

Speaker Change: Cancer detection and minor Ironically, and then what is the false positive rate. So the FDA looks at this one way.

Speaker Change: CMS looks at it probably in a similar way as FDA USPS TF puts it in a totally different.

Everett V. Cunningham: And I see that as the re-screen population gets bigger, as we get more ordering prescribers, the re-screen population helps all around in terms of confidence, compliance, and Customer Experience, and we're seeing that across. And your last question comes from the line of Mark Massaro with BTIG. Your line is open. Hey guys, thank you for including me on the call. My first question is about OncoLiquid.

Thank you everyone for your participation. This concludes today's call you may now disconnect.

Speaker Change: Please wait the conference will begin shortly.

Speaker Change: [music].

Mark Anthony Massaro: When will we see data? When do you think we can see this commercially launched? And can you discuss timing around Medicare reimbursement? And then my second question is, you know, obviously, we've been getting a lot of questions on what the minimum bar might be for Advanced Adenomas to be considered a first-line test. Kevin, you talked about 24% for fit. Is it reasonable to think that it, you know, perhaps folks might anchor the 24 number or not? How What are you thinking about that minimum level?

Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: [music].

Kevin T. Conroy: Thank you. Well, other thanks, Mark, others have gone before this. Ultimately, this is an FDA decision, and I believe they're getting input on this decision in a public forum in March. And, you know, I'm sure they're thinking hard about this, but I, you know, what's the general sense? It's probably going to be in the 20 plus range. Hard to tell. So that is not that. It is speculation at its best.

Kevin T. Conroy: But again, it goes back to the performance in the modeling and the modeling bar that Efficient Frontier defines, is that the FIT test defines that in part with 24% detection. So you can't be too far away from that. Uncle Liquid, I can, this is Brian again. I can take that one.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: [music].

Brian Baranick: So we're really excited about the technology that we inherited as part of the res bio team, as well as the team that we inherited up in Kirkland, Washington, just outside of Seattle. So a very robust chemistry platform that has been developed over many years by that team. I'm really excited to get that in the hands of our commercial team.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Brian Baranick: The team right now is working on validating that test and backbone so that we can get Medicare reimbursement as well as New York state approval. We have a goal to submit to Medicare this calendar year for reimbursement on the oncoliquid side of the equation. Let me come back one more time to a topic that people have a lot of interest in. Remember, with USPSTF, when they analyze a new screening test, they look at two factors, not just life years gained, but they also look at the false positive rate of the test leading to unnecessary colonoscopies. And the challenge with any of these whole categories of blood tests is that with a 10 plus percent, a 10-ish percent false positive rate, you're generating twice as twice as many unnecessary colonoscopies as the fifth test. And you can't get away from that fact as you look at the model and whether you get to the efficient frontier. So it's really a combination of adenoma detection in large part, cancer detection in a minor part, ironically, and then what is the false positive rate?

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Kevin T. Conroy: So the FDA looks at this one way, CMS looks at it probably in a similar way to the FDA, and USPSTF looks at it totally differently. Thank you everyone for your participation. This concludes today's call. You may now disconnect. Please wait, the conference will begin shortly.

Speaker Change: Okay.

Speaker Change: Please wait the conference will begin shortly.

Speaker Change: [music].