Exact Sciences Corp (EXAS) 2004 Q4 法說會逐字稿

Good morning.

My name is Trinity and I will be your conference facilitator today.

At this time I would like to welcome everyone to the 2004 Fourth Quarter and Year End Conference.

All lines have been placed on mute to prevent any background noise.

After the speakers’ remarks there will be a question and answer period.

If you would like to ask a question during this time, simply press “*” then the number “1” on your telephone keypad.

If you would like to withdraw your question, press “*” then the number “2” on your telephone keypad.

Thank you, Ms. Hedison, you may begin your conference.

Thank you.

Good morning everyone.

Welcome to Exact Science’s fourth quarter and year end conference call.

I have Don Hardison, our President and CEO, Harry Wilcox, our CFO, and Tony Shuber, our CTO, who will all be making brief comments this morning.

Prior to their comments, however, I would like to remind you that any forward-looking statements made during this call are based upon current expectations and are subject to change based upon various factors that could affect the company’s financial and operating results.

These factors are set forth in detail in Exact Science’s 2003 Form 10K and subsequent filings.

Don?

Thank you, Amy, and good morning everyone.

And thank you for joining us.

As is our usual format, I will make a few comments followed by Harry, our CFO.

And following Harry’s comments, I’ve asked Tony, our CTO, to give an update on our applied research efforts.

As Tony will be speaking about the science, I will stick primarily to the commercial side of the business in my remarks.

And following Tony’s comments, we’ll be glad to take any questions you might have.

2004 represented the first full year of commercialization for PreGen-Plus.

Over the course of the year, we learned a great deal about the market for PreGen-Plus and we are more convinced than ever about the absolute need for a better, noninvasive, accurate colorectal cancer screening test.

This need was most clearly demonstrated just last week with the publication of 2 papers in the Annals of Internal Medicine, highlighting the shortcomings of fecal occult blood testing.

In those studies, it was revealed that 33% of physicians do a fecal occult blood test while performing a digital rectal exam.

Another 41% use it in combination with an at-home fecal occult blood test.

The resulting sensitivity is approximately 5% when performed as part of a digital rectal exam.

In other words, 95% of the cancers are missed.

The authors and editorialists concluded that performed in that way, a fecal occult blood test is, and I quote, “almost useless”.

Additionally, even when the standard 6 panel fecal occult blood test is conducted over 3 days as the FDA label suggests, the sensitivity is in the neighborhood of 24%.

That is a little better than the sensitivity that was shown in our multi-center study for fecal occult blood testing, but a great deal less than PreGen-Plus at its worst.

Now the purists might say that these results, once again, demonstrate that colonoscopy is the best colorectal cancer screening method.

However, from the many colorectal cancer screening leaders that we have talked with over the recent past, I believe that they are realistic enough to know that most people are not going to get a colonoscopy for a variety of reasons.

And even if they hold to the belief that colonoscopy is the only screen, they are certainly aware that there are not enough qualified people to screen the entire population with colonoscopy.

This theory’s shortfall in qualified providers of colonoscopies was recently highlighted in the December issue of Gastroenterology.

According to the article, as of the year 2004, 42m people had never been screened for colorectal cancer by any method in the United States.

Furthermore, the authors concluded that it would take 5 to 10 years to screen all of these people through endoscopy and here’s the catch.

That would require all gastroenterologists to perform only screening colonoscopies to the exclusion of what I would term diagnostic colonoscopies for symptomatic patients.

That is simply not going to happen.

Needless to say, for several reasons, screening colonoscopies are not a viable solution to the problem of getting all the unscreened adequately screened.

A much more viable solution to the problem, we believe, is PreGen-Plus.

Because it’s non-invasive, because it doesn’t require anything more than a physician order and a patient’s stool sample, because it has been shown in the New England Journal of Medicine to be significantly more accurate than fecal occult blood testing, because it’s widely available and it’s the type of product that can help solve this screening challenge.

When you add to all of that the soon to be published data that indicates a clear patient preference for stool based DNA testing versus fecal occult blood testing and colonoscopy, I believe that you have the makings of a clear winner.

Unfortunately, the market need for a diagnostic product does not always translate into sales of that product as quickly as we would like.

The adoption of new technologies can be a slow process, and this is especially true when one figures in the potential influence of professional guidelines and Medicare reimbursement.

Now let me change gears for a moment.

I’ve always been of the belief that even though you set a firm course in the beginning of a product launch and move aggressively towards your goal, I also believe that it is imperative that you gather data as you go and make proper course adjustments.

Thus, the focus of our most recent efforts and the focus for 2005 on the commercial side of our business, is to continue to evaluate sales and marketing efforts and to make the necessary adjustments to better leverage those things that have worked.

Fourth quarter 2004 we implemented a number of sales and marketing experiments that had produced some encouraging trends.

Although we’re not ready to talk in any detail about these experiments as several of them continue, we are confident that from what we’ve seen to date, there are some potential tactical adjustments that will lead to increased sales.

What I can tell you is that it has become increasing clear from our reference with LabCorp in this deal that one of the keys to success with any high value and complex product, is a specialized sales approach much like that of a pharmaceutical company’s support of their product.

The fact that PreGen-Plus needs to be sold like a pharmaceutical is not totally new thinking.

But the sales experiments are providing us some confirmatory evidence.

And in fact, those sales people who have taken a pharmaceutical sales approach within LabCorp are the sales people that have been the most successful in selling PreGen-Plus.

One of our objectives in 2005 is to broadly replicate these best practices.

We are also finding some success in the self insured employer market.

We work very closely with one major industrial company that has made PreGen-Plus a regular part of their employee health fair.

We have not only picked up sales volume from this important account, but have also greatly increased our knowledge of how to work with these types of employers.

In addition, we have identified colorectal cancer in a couple of employees already who otherwise might not have been screened.

These type of self insured employer accounts will be a larger focus for us in the future.

It’s encouraging after reviewing our sales call report and talking with our own sales team that most physicians are pleased with the product performance characteristics of PreGen-Plus.

In addition we have confirmed, although this was no real surprise, that even though physicians who are using fecal occult blood testing are not big proponents of fecal occult testing, a superior noninvasive DNA based test has appealed to many of them.

However, there is also a very clear perception from many other physicians that all, or most of their patients, actually get colonoscopies because that’s what the physician tells them to do.

We know that the data simply suggests otherwise, so it is incumbent upon both our sales team and the LabCorp sales team to overcome this misconception through the use of data available to us and by working closely with the physicians office staff to get the physicians the correct data on their own practices.

It also has become increasingly clear from our sales experiments that both the physician and patient want a simple process in which any reimbursement questions can be addressed up front.

Samples can be tracked to make sure that every collection kit that the physician orders is brought back and that there is a qualified physician to consult with the ordering physicians.

We are in the process of working with LabCorp to address these issues and to help find workable solutions.

We know that most physicians are also looking for compelling proof that a new technology such as PreGen-Plus really works before giving it a try.

That proof can manifest itself in peer reviewed publications or through inclusion into the appropriate guidelines or through the incorporation of a new technology to a large payer organization covering policies.

With the publication of our study in the New England Journal last month, we have an important information source that sales people use with these physicians.

We are in the process of screening the last 4 sales organizations on the best use of this publication.

Certainly the key message from the New England Journal article is that the primary endpoint of the study was achieved.

The objective of the study was to demonstrate the superiority of stool based DNA over the most widely used fecal occult blood test and that objective was achieved.

The colorectal cancer screening guidelines specifically state that new technologies do not have to demonstrate a mortality benefit, but if proven to be equivalent or better than fecal occult blood testing, can assume at least the mortality benefit, same mortality benefit, of fecal occult blood testing.

This is critically important as no other screening test on the market today, other than Guiac based fecal occult blood testing, has demonstrated an impact on mortality.

Because of our multi-center study, anyone reviewing stool based DNA for inclusion into a program can assume that it’s use will contribute to reductions in mortality.

We believe that this is powerful and will use it with all the people who will set guidelines for reimbursement.

With the publication of the multi-center study, we are now in the process of meeting with a number of payers who were waiting for this publication in order to consider stool based DNA as part of their coverage policy.

In addition, we sent in our national coverage decision memorandum in late December after publication of the New England Journal study to be included in the Medicare program.

All the major guideline groups have also been contacted and we have provided them updated information that includes our New England Journal publication.

I am sure that the recent Annals of Internal Medicine articles that I referred to have also not escaped their attention.

I’d like to close my part of the morning with a few observations.

The first cannot be emphasized enough, and that is one of our strengths is the support and commitment we have from our partner, LabCorp.

LabCorp is as committed to the success of PreGen-Plus as we could ask and continues to provide many levels of support as we develop and implement our 2005 sales and marketing strategies.

The second observation is that at the end of the day, making an impact on mortality is our goal.

If we can do that, everything else should follow.

The good news is that we already know of instances in which PreGen-Plus caught cancer early in individuals and can very well have saved patients lives.

We also know that more than half of the people who have used PreGen-Plus had never been screened before, so we are increasing the screening population.

Left to the other options available, we believe it’s highly unlikely that these patients would have been screened at all.

We know that many of the patients who received positive PreGen-Plus tests have gone onto get colonoscopies and had lesions removed.

As more and more patients use the test, more and more people will have their risk of colorectal cancer reduced.

I continue to say and believe that if we told physicians and payers that we had a vaccine that could reduce someone’s risk of colorectal cancer by 65% if used regularly, there would be no end to the demand for that vaccine.

In a real sense, that is what PreGen-Plus is except for that fact that it’s a test rather than a vaccine.

Another observation is that this test not only saves lives, but it most likely also saves money.

With the introduction of drugs such as Erbitux and Avastin, the average cost of treating late stage colorectal cancer has skyrocketed.

Some reports put the number as high as $250,000.

In that scenario, colorectal cancer screening is not only cost effective, but also cost saving.

This is obviously extremely helpful to a company such as our, particularly when we are talking to groups such as Medicare which is so cost conscious.

The final observation is that during this call, 6 more people will die from colorectal cancer and triple that number will be diagnosed with colorectal cancer, most of them in later stages with a very poor prognosis.

These are astounding numbers to me and to our company.

We want to change this and we believe that with PreGen-Plus we can make a large dent in this terrible disease.

We’ll keep you informed of our progress on the commercial front as we move forward through 2005.

With what we’ve learned in 2004, and what we have planned for 2005, I myself am extremely excited about the opportunity ahead of us.

I’m confident that we have the right senior management team in place to deliver it for all of our constituents.

I also believe that we are well on our way to developing and implementing the plans necessary to increase the use of our product.

Now I’d like to turn it over to Harry Wilcox, our CFO.

Thank you, Don.

Revenue for the fourth quarter of 2004 was 1.3m compared to 1.2m for the comparable period last year.

For the year, revenue increased from 2.9m in 2003 to 4.9m in 2004.

This increase in revenue for the year was attributable to an increase in the balance of deferred licensing fees being subject to amortization as a second $15m license fee was paid by LabCorp in association with the launch of the product in August of 2003.

As a result, the 2004 license fee is based upon amortizing a portion of $30m of upfront payments versus amortizing on a balance of 15m for most of 2003.

The number of accessions in the fourth quarter was essentially flat when compared to the third quarter.

The net loss for the quarter was 4.5m versus 5.7m and for the full year was 18.5m compared to 28.3m in 2003.

The loss per share in 2004 was 73 cents versus $1.50 for 2003.

The decline in the loss for the quarter was primarily attributable to lower research and development expenses, and to a lesser extent, lower sales, general and administrative expenses.

For the full year, the decline in the loss reflects these lower expenses as well as the increase in license fees described above.

The company ended the year with slightly more than $50m of cash, cash equivalents and short term investments.

We have adopted a goal of allocating our resources so that existing cash reserves could last for at least 3 years.

In the near term, we will be allocating more of this cash to direct sales efforts and emphasizing product improvements which will not require heavy investments in clinical trials.

I will now turn this call over to Tony Shuber who will update you on our applied research efforts.

Thank you, Harry.

And good morning everyone.

I’m glad to take a few minutes this morning to update you on the exciting work we are doing at Exact Sciences involving the second phase of our company’s applied research effort.

Based on our company’s strategy from day one, Phase I has been completed and we’re already working on Phase II.

Our objective in Phase I was simply to develop a stool based DNA assay that can detect early stage cancer in an asymptomatic average risk population and demonstrate superiority over fecal occult blood testing.

With the publication of our multi center study results in the New England Journal of Medicine last month, there should be no question, both internally and externally, that Phase I is now complete.

So this morning I’m going to spend most of my time talking about Phase II, which is to increase the performance of the assay for the detection of cancer and to begin to target the detection of pre-cancer’s adenomas.

While we know that the assay in the market is saving lives and its current configuration has the potential to be a very successful product, we always knew from the beginning that the advantage of working with DNA as a target analyte allows us to always continue to improve the assay.

In fact, even as we were working on version one, we knew that there would be later and better versions.

So what exactly is in Phase II?

There are two major components.

First of all, optimizing the stability of DNA in stool.

As we identified in our multi center study, as well as the Mayo NCI study, sample handling methods affect the stability of DNA in a stool sample which resulted in a reduction in the sensitivities of our analytical panel.

We have identified and submitted a manuscript reporting that the portion of our panel most affected by this issue is the DNA integrity assay, or DIA, which looks for long strands of DNA in stools.

When we analyzed the results from our MCS, we found that DIA, which historically had provided between 10 to 20% of the sensitivity seen in the assay, provided virtually nothing.

The multiple mutation marker panels which looked at 21 specific point mutations, provided the same sensitivity that it has since we developed the assay, so we know that that portion of the assay has greater stability than DIA.

In addition to identifying the problem of DNA stability, we have also developed a novel method of stabilizing stool samples which we know will result in greater DNA stability in stool and therefore should result in higher assay sensitivity.

We are currently in the process of validating these results and will then move on to demonstrating the benefit in clinical samples.

The second component of Phase II was to develop novel and analytical methods that will allow us to reformulate the panel to include new markers such as PIK3CA gene and the mutated cluster region within APC.

In addition to increasing the sensitivities in detecting colorectal cancer, the development of the scanning methodology and the analysis of the MCR within APC allows us to start targeting the detection of adenoma.

I recently presented that this new market formulation had a detection frequency in colorectal cancer tissues of greater than 90%.

However, we still do not know the detection frequency of these marker panels in adenomas.

We are currently analyzing abnormal tissues to determine that number.

Although the detection frequency of this marker set in cancer is significantly higher than the tissue informativeness of our current assay, it is very important for everybody to remember that tissue informativeness does not directly translate into clinical sensitivity.

With the completion of the tissue analyses, we are now beginning to validate these results in stool samples.

As always, the key to creating a panel that has the highest sensitivity but does not sacrifice specificity is the answer.

As you can tell, I’m extremely excited about all these programs we have ongoing.

The early results are encouraging as is the success we have had with what I call Version One.

As you can tell, for a small company, we have a lot going on.

Our focus has been and will continue to be the area of colorectal cancer.

However, it’s also important to remember the technologies we have developed and are in the process of developing, can expand our reach beyond screening for cancer, to screen for adenomas as well as possibly surveillance, staging and monitoring.

And I’d like to thank everybody at this point and at this time, we’ll be glad to open the call to questions.

[Operator Instructions].

Your first question is from Lee Brown

Hi, good morning.

Just a quick question on sales or on test volumes there.

You mentioned that there were in line with the levels seen in the third quarter.

But I believe in the press release you had mentioned that you had 3,300 plus tests year to date at the close of Q3.

So it appears that Q4 testing volumes might have been down a bit sequentially which obviously is a bit of a concern when you’re expecting a sales ramp.

Well, it was down a little bit in the fourth quarter versus the second, third quarter, excuse me, Lee, and part of the numbers like this - - they ran 1,000 units in the fourth quarter.

Bear in mind, the fourth quarter, particularly in the lab business, after Thanksgiving through December, is not a real strong time versus what the third quarter would look like.

We’d like to see a different trend and that’s we’re trying to address with some of the sales experiments we began in the fourth quarter and will conclude sometime in the near future.

We’ll make some tactical changes to try to stop that trend.

Okay, and one other question in terms of your spending rate.

I know you’re going to be pushing more towards SG&A as opposed to R&D.

Any full year guidance for ‘05 in terms of your R&D spend rate versus your SG&A?

We’re not giving guidance.

I think that what you can expect going forward is to continue the trend that we saw from 2003 to 2004 as far as the reduction overall in operating expenses.

Okay, but just in general [technical feedback].

I guess just in general terms, if you were to break out operating expenses, how much would you factor in as being funneled towards SG&A versus R&D?

I mean, SG&A and R&D were pretty close in ‘04 in terms of absolute dollars.

So I’m just wondering if that sort of level of spending was going to be maintained or if more and more was going to be funneled towards SG&A and less towards R&D.

I think that we expect in the future to be able to spend less in R&D because we won’t be doing large clinical trials that we’ve done in the past which has consumed a lot of dollars in R&D.

And going forward, we would expect to build the SG&A number as we spend a little more on direct sales.

Okay, and just one last question going back to testing.

What is your reorder rate looking like?

Are the people that have ordered the tests sticking to ordering it again?

Are they satisfied or are you seeing a drop off there?

Well, we’re seeing a reasonable reorder rate, Lee.

I’m not going to kid you and tell you we’re seeing exactly what we want to see.

But what we are seeing in some of the pilots we talked about is a very, very high reorder rate.

And what we’ve done with that is targeted - - one way to think about it, targeting peer physicians, being in more often, making sure that everything goes according to plan when they do order the tests.

And LabCorp has been very helpful with that and we’re starting to see, at least with those physicians, a nice reorder rate, even higher than I would expect.

So we seem to have that trend across all the physicians who are ordering the tests now.

Okay, well I appreciate it.

Thanks, Don, and the rest of you, and have a nice day.

Your next question is from Benner Ulrich.

Hey, guys, good morning.

Two quick questions.

First, I’m not sure if you commented on it or not, but with respect to pricing, is that something that you’ve seen pretty steady this quarter with respect to last quarter?

Yeah, it actually is.

We haven’t made comments about pricing because it’s, as you know, through LabCorp, but we’ve been pleased with the level of reimbursement.

It’s stayed steady from day one.

Okay.

And in terms of - - and I don’t know if this is something that you have a lot of visibility on, but time that it’s taking LabCorp to collect or collection issues in general.

Is that something that’s okay right now or is it something that’s fluctuating?

I think what we’ve seen on the collection side is that the pipeline is fairly long in that LabCorp has to submit their bills and then work through the system and that takes about between 50 and 60 days.

And then there’s a lag in us getting paid from there.

I don’t think that it’s a problem, I think it’s just - - it’s not a problem in reimbursement, it’s just a fairly long pathway and because this is a new test, it takes a while for reimbursers to react.

So I don’t think we’ve seen any change in the reimbursement pattern.

It just unfortunately takes a long time for the dollars to end up in our cash register.

Right.

And I would imagine that ultimately with reimbursement from CMS and then potentially coverage from other third parties, that’s timeframe would compress?

Absolutely

Okay.

Thanks.

Your next question is from David Lewis.

Good morning.

Couple of quick questions, Harry, for you.

Obviously if you have 3 years left in cash, we can assume that you’re going to be burning less than 15 to 16 million per year over the next 3 years.

Is that a safe assumption?

That’s a safe assumption, yes.

Great.

Okay.

And then just do you have - - our DSO number continues to rise over the last 3 quarters.

Do you have an actual number for DSOs that you’re modeling?

I mean, our number is now kind of popping up over 210 days.

No, we don’t because we really don’t have enough consistency in visibility of the process yet.

Okay, and you mentioned that your price has not changed the last 6 months or so.

It’s basically stayed within a very tight range, David.

Okay.

Tony, there was a comment in the press release that ongoing R&D initiatives were going to be directed more at the performance of the test and not cost.

Is that just a priority issue or does that signify that LabCorp is going to be spending more of their time working on the cost of the assay?

Well, David, as you know, when we did the deal with LabCorp, their expertise is really in processing and reducing costs.

Our expertise has always been more the applied research of increasing the performance.

But there’s also another reason for that.

If we, today, had no confidence whatsoever in being able to significantly increase the performance of the assay, then we would put all our efforts on reducing costs more so that the price could come down.

But in fact, there’s clear opportunities to increase performance significantly and what we don’t want to have happen is to think short term where we drop costs significantly to drop price so that you can drive uptake.

And at the same time we increase the sensitivity to a level where we add some complexity which drives up cost a little bit and now you lose the match of cost with price.

So I hope that answers your question, but if we - - the reason why we’re focusing most on performance, is that we believe that the performance will increase significantly to therefore justify the cost and the price.

Okay, on the performance front, not to oversimplify your efforts, but with this PIK gene, you’ve obviously validated it already, you believe it improves performance of the assay.

Because this is an ASR and because you’re really talking about one additional gene, are the efforts ongoing here to find the appropriate titration with the mix of the old genes plus the new PIK genes and is it possible that you could roll this thing out relatively quickly through LabCorp?

First of all, the first part of your question is absolutely on - - it’s not necessarily termed titration, but we are looking at all of the markers that were involved with Version One as well as the new markers and analytical methods in Version Two and ultimately we’ll come up with the lowest common denominator, the least number of markers to generate the maximum amount of performance.

When I meant titration, I was just thinking of rock curve.

And is that the dynamic here?

You’re just trying to find the, I guess, the highest area under the curve?

Yes, that’s exactly it.

So we’re going to look at every single marker and then come up with a combination that maximizes sensitivity and specificity.

Okay.

Don, let me just jump you back here to sales volumes.

Obviously it’s been commented on already, but these 1,600 physicians, obviously you’re not seeing a reorder rate of in excess of 50% or we’d probably see better volumes.

So these 1,600, were there a certain percentage of them that just kind of said they kind of tried it as a one-off but were not seeing kind of repeat business?

I guess the question is what fraction of those 1,600 would you say are getting that significant attention that you referenced?

That’s a great question, David, and I don’t have the precise number, but I would suspect half of that 1,600.

What we’re seeing is, it truly is like a pharmaceutical sale.

And for those people within LabCorp, within our own organization, we treat it as such and get in to see not only the doctor, but to educate the doctor’s staff.

And we’re seeing interesting positive reorder rates.

This idea that most doctors have, as I mentioned in my comments, that their patients all get colonoscopies, we obviously know that’s not true.

But we have to find a way to overcome that at least in the doctor’s mind.

And one way of doing that is to work with the office staff to try to find people who really are not getting colonoscopy.

And then inform the doctors and try to get the doctor to order for that.

It’s also very - - we’ve learned that the doctor and patient need to have a simple experience with this test.

That is, they don’t need to have any kind of hang ups on reimbursement or, if there’s a collection from the doctor, there needs to be somebody, a physician on staff here, that can answer their questions.

We need to find ways to track the specimens to make sure that when the doctor orders the test, the patient brings it back.

It’s a number of those things that we’re trying to tighten up on, that I think will ultimately increase reorder rates from the 1,600 physicians you mentioned, but also bring new physicians into the network.

And the final thing I’ll say is we never expected this New England Journal publication itself to generate tremendous volume.

It did allow us to make our application to Medicare and work with the people at guidelines.

But it would be silly to say that some doctors are not looking for proof and the New England Journal is a very powerful proof source to walk into a doctor’s office with and talk about.

And we want to make sure that as we move into the latter part of January and into February that everybody in LabCorp and everybody at Exact is flashing that article to every doctor they call on because in my experience that’s been very, very compelling in selling products in the past.

Okay and just maybe a last question here.

There are 4 principal catalysts that we see here obviously in 2005 or early ‘06.

And I guess those would be timing of Medicare, reimbursement approval, obviously traction with the New England Journal Medicine article, ACS and then maybe the sensitivity performance of the assay.

Of those 4 catalysts, can you give us any updated sense on timing and/or a sense of importance of those 4 in order as it relates to growing volumes?

As far as growing volumes, I probably could give you a better sense of that, at least of my opinion.

The timing, I wouldn’t want to attempt that because we’ve found in the past that when things are out of our control or we don’t have the visibility we need, we don’t predict timing very well.

But in my opinion, and this is based on other diagnostic tests I’ve seen, either - - I think Medicare would be a huge upside, or could be a huge upside for the product simply because it opens up the testing market to 42m people that are not being screened, or 40m people who are not being screened.

And if you look at, again Erbitux and Avastin, as you know, the brunt of that expense is going to be felt in the Medicare program.

So if we can come in with a screening test, I think that could be very powerful.

And then the guidelines.

I can’t underestimate the idea of guidelines and I would say those 2 things are 1 and 1A.

And they happen to affect, as you know, other payer policy decisions.

A lot of the payers will wait until Medicare occurs or guidelines occur.

But I believe that a higher sensitive test in the future can be very important to us and Tony is on track to deliver that as he always is.

But I think it’s very important for us to sell this test we have today.

I haven’t seen anything that says it can’t be sold.

Okay, thank you very much.

Your next question is from Bob Parente.

Thank you very much, Ma’am.

Good morning.

A couple of quick questions.

Average reimbursement per test, where do we stand right now?

I know you keep saying nothing has really changed, but what is the average reimbursement per test?

I don’t know if we’ve ever given a number for that.

It’s somewhere over $500, Bob.

Okay.

And now at the end of Q3, there were 150 payers reimbursing.

What happened at the end of Q4?

Did you add any?

Yes.

It’s pushing up to 200 now, pretty close.

Okay.

And now the last question regarding some milestones for ‘05.

Now that the submission is in for Medicare with CMS, is it typically a 9 month review process?

The way it’s supposed to work, although we may be the poster child test case for this with the new Medicare law, is once you submit your application, there’s a period of time that they review it and they let you know if the application is complete.

Once you get that notification, it’s supposed to take 9 months from that point on.

Nine months from the original submission date or from the acceptance date?

No, from the acceptance date.

And is the acceptance date like 60 days in or?

I think it’s probably 30 to 60 days in.

But again, the reason I’m being hesitant is because I don’t know right now of any other products who have been through this with the new Medicare law, so I don’t want - - I know what the old law said and that they rarely every followed that, so I don’t know if they’re exactly going to follow this new law either.

Okay, and then the last question is on the American Cancer Society guidelines.

Do you have any timetable or approximate time when they might review the PreGen-Plus, the committee reviews PreGen-Plus?

Well, we’re obviously hoping it will be this year, Bob.

And our only way of dealing with it is just to in as nice a way as we can, to continue to meet with and send data to all the people who affect those guidelines.

And it’s kind of a convoluted process in that they also look to the gastroenterology community for their endorsement.

So we believe that this Annals of Internal Medicine article that I referred to that came out last week that talked about the way that fecal occult blood testing is being done today and even the sensitivity of fecal occult blood testing is done the way the package insert suggests, gives us some ammunition.

We’ve proven we have a test that’s much, much better than a fecal occult blood test and it’s already in the guidelines, so our case is very simple.

Here’s a test that’s better than and it’s also a test that is cost effective and could possibly be cost saving if they factor in the cost of these new drugs.

All right.

Well, last question regarding Lab Corp.

Is there a sense of frustration with LabCorp or is LabCorp making the calls but now we just need to fine tune the calls and maybe make them more of a pharmaceutical sale?

Or are you just not happy with the number of calls LabCorp’s making?

It’s number two in you list there.

We just think that we and they need to - - we’ve learned enough from what happened so far how to tweak the calls, how to make the calls more efficient.

Who are the right doctors to call on, what are the right messages and that sort of thing.

We’ve been very pleased with the effort LabCorp has put into this product.

I can’t imagine any product they’ve ever had they put more effort into it.

So it’s not that.

It’s just being even smarter about it and I would term our relationship with them, our overall relationship as excellent.

Okay.

Thank you very much.

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There are no further questions at this time.

Thank you very much, everyone.

Yeah, thank you.

This concludes today’s teleconference.

You may now disconnect.

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