Exact Sciences Corp (EXAS) 2012 Q4 法說會逐字稿

Good day ladies and gentlemen, and welcome to EXACT Sciences Corporation fourth quarter 2012 earnings call. (Operator Instructions) I'd now like to turn the conference over to your host, Mr. Ron Hise. Please go ahead.

Thank you for joining us for EXACT Sciences fourth quarter 2012 conference call. On the call today are Kevin Conroy, the Company's President and Chief Executive Officer, and Maneesh Arora, our Chief Operating and Financial Officer. EXACT Sciences issued a news release earlier this morning, detailing our fourth quarter 2012 financial results. If you've not seen it, please go to our website at exactsciences.com or call 608-807-4607 and I'll send it to you. Following the Safe Harbor statement, Maneesh will provide a summary of our fourth quarter financial results. Next, Kevin will provide a corporate update.

Before we get underway, I'd like everyone to take note of the Safe Harbor paragraph that appears at the end of the news release issued this morning, covering the Company's financial results. This paragraph states that any forward-looking statements that we make 1) Speak only as of the date made, 2) Are subject to inherent risks and uncertainties, including those described in our most recently filed annual report on form 10-K, and our subsequently filed quarterly reports on form 10-Q, and 3) Should not be unduly relied upon. Except as otherwise required by the Federal Securities law, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein or elsewhere. to reflect any change in our expectations with regard thereto, to any change in events, conditions, or circumstances on which any such statement is based.

It is my pleasure now to introduce our Chief Operating and Financial Officer, Maneesh, Arora.

Thank you, Rod, and good morning everyone. As you know, patient enrollment for our DeeP-C clinical trial closed on November 15th of last year. Kevin will provide an update on the trial and on our FDA submission in just a moment. We're continuing to prepare for commercialization of the test once it's approved by the FDA. These efforts including quality, manufacturing, and marketing readiness are on track and will intensify as we approach FDA approval.

We ended the year with $108 million of cash, meeting our 2012 cash utilization target. In 2013, expenses and cash utilization will be driven by the timing of the FDA's review of our PMA submission, and its potential approval of our test. It's now my pleasure to introduce EXACT's President and CEO, Kevin Conroy. Kevin?

Thanks, Maneesh. Let's start by reviewing our 2012 accomplishments. The DeeP-C clinical trial was our most important priority last year. As Maneesh said, we closed patient enrollment in November with more than 12,700 patients. We submitted the first of three PMA modules to the FDA in December and initiated the analytical studies needed to complete our second FDA module which was submitted last week.

On the operations side we implemented a robust quality management system. With quality in other systems in place we began manufacturing the reagents used to test patient samples in the clinical trial. We also continued to lay the foundation for both public and private coverage and reimbursement.

Let's now turn to our 2013 priorities. In 2013 we have three priorities. 1) Launch readiness, namely preparing to make our test available to patients. 2) Ensuring operational excellence and 3) Continued innovation.

One of our top launch preparation priorities is to have the results of our DeeP-C study accepted for publication in a top peer-reviewed medical journal. This peer-reviewed publication will be a key part of our efforts to educate physicians in an important tool as we work with key medical societies to raise the profile of stool DNA testing in their screening guidelines.

We will also complete our Medicare coverage application and continue to engage with private payers to make sure we receive optimal reimbursement for our tests. We will also build and deploy our core market access team and put in place the infrastructure for both patient and provider education, service and support. These activities are critical to our efforts to maximize market adoption at launch.

Our operational activities will start with the completion of our FDA PMA submission. We'll complete validation of our manufacturing process in preparation for our FDA inspection and scale up manufacturing capacity in anticipation of launch.

We also are establishing a CLIA-certified clinical laboratory. The high touch approach at our lab will, 1) Improve the patient experience and patient screening compliance. 2) Assume the burden of compliance tracking from the physician's office and 3) Accelerate market penetration. We will establish our own CLIA lab of record and partner with an established lab to deliver test results.

During the past six months we have evaluated a number of established, experienced high complexity CLIA labs that we would potentially partner with. The key advantages for EXACT entering into a partnership with an existing lab is the ability it gives us to leverage the existing infrastructure, systems and know how without having to build all of it on our own. This is very attractive to potential lab partners because of the significant test volume potential.

We have narrowed our partner discussions and will provide an update in the coming months. Finally, we will work to establish the feasibility of pancreatic and esophageal cancer tests. We will complete the clinical trial for our IBD-related screening test and make an assessment of improvements that could be made to Cologuard.

Let's now turn to an update on our clinical trial. Of the more than 12,700 patients who enrolled, approximately 10,800 were compliant with all three tests in the trial. Cologuard, FIT and colonoscopy.

The largest driver of non-compliance among enrollees was failure to undergo a colonoscopy. There were 56 cancer patients identified in our study population. As a result our study is very well powered. The study also has identified more than 800 patients with pre-cancerous polyps. The trial also enrolled 9,000 patients with no cancer or pre-cancerous polyps.

Let's review the key milestones of our FDA submissions. Earlier this week we were pleased to announce that we submitted our second PMA module to the FDA. This module included analytical studies that assess the analytical sensitivity and specificity, cross reactivity and other similar characteristics of our test and instrument platform. We put a great emphasis on these studies and passed all of them.

We also are pleased to report that we remain on track with completing our PMA submission and we will submit the third module in May. All three of our clinical trial testing sites have passed proficiency testing. FDA required reproducibility testing has begun at each of the sites.

Following reproducibility testing we will begin testing clinical trial samples. When the testing of clinical specimens is complete the date -- the data will be unblinded. We won't have access to the data until it is unblinded. As soon as the data is unblinded we will disclose the results in an 8-K and news release.

As we move toward our final FDA submission and the submission of our Medicare national coverage application, we are very appreciative of the FDA's and CMS's engagement and responsiveness. As soon as we receive an FDA panel date from the agency we will share that news with investors. We also continue to strive for publication of our clinical trial data in a peer-reviewed medical journal during the fourth quarter.

Let's turn to how we anticipate presenting those top line results. Let's review the performance targets we set for the test before starting the trial. These targets form the basis of a strong commercial product that will allow us to readily gain market penetration and significantly affect colorectal screening rates.

Our target for cancer sensitivity is equal to or greater than 85%. While we would be pleased to achieve 98% cancer sensitivity in our clinical trial we do not expect to do so. The target for detection of pre cancerous polyps is equal to or greater than 50%.

Our target for the test specificity is equal to or greater than 90%. We will release the top line cancer sensitivity, pre cancerous polyp sensitivity and overall specificity in both an 8-K and news release. Our market research gives us confidence about the potential for widespread acceptance of our test once it is approved and launched.

This research includes interviews with a significant number of physicians and patients. 96% of the physicians we interviewed said they are likely to order Cologuard for some or all of their patients. 92% of patients said they are likely to use our test. The research indicates the significant potential for adoption among the 80 million Americans who need to be screened and to significantly increase screening compliance rates which is our goal.

Let's turn to another opportunity we are pursuing, a test that detects cancer and pre cancerous polyps in those with inflammatory polyp disease. Patients with IBD, both Crohn's disease and ulcerative colitis, have a significantly increased risk of colorectal cancer and guidelines recommend annual screening for those patients.

However, inflammation associated with IBD makes detecting colon cancer by optical colonoscopy very difficult. Approximately 40 random biopsies are taken during the colonoscopy and sent to determine if the patient has cancer or dysplasia. This approach unfortunately misses far too many instances of disease.

We are on track to provide a new, better solution to IBD patients and the physicians who treat them. Data that was presented last year at DDW by our collaborator, Dr. David Ahlquist suggests that with a modified version of our current test there is a potential for a very high level of sensitivity for both cancer and high-grade dysplasia. We are running our [Oceana] study this year with 300 patients targeting 30 cancer patients and 20 with high-grade dysplasia.

The primary endpoint of the trial is the sensitivity and specificity of the test and the detection of colon cancer while the secondary endpoint includes the test sensitivity and specificity in the detection of dysplasia. This represents a significant market opportunity. There are 1.5 millionIBD patients in the U.S. alone who are supposed to be screened every year starting 10 years after initial diagnosis.

In conclusion EXACT has a unique patient-friendly test that will address a valuable market under-served currently. The clinical trial and FDA submission for that test are on track and will be completed in the second quarter. Our lab strategy enables physicians to improve screening rates by helping to ensure patient compliance through an outstanding high touch experience.

Our commercialization efforts are focused on two segments. 1) Large health care providers that employ and set screening guidelines for a majority of primary care physicians and 2) The physicians who today are ordering the highest number of FIT and FOBT tests. Our work to secure optimal public and private reimbursement is on track.

Before taking questions, I would like to thank all of the employees and collaborators of EXACT Sciences who have worked tirelessly to develop a great new product and we look forward to the upcoming released of the results of our DeeP-C study. We are happy now to answer your questions. Thank you.

(Operator Instructions)Our first question comes from Jeff Elliott from Robert W. Baird. Please go ahead.

Good morning, thanks for all of the comments. First a question on the timing of the FDA submission. Last update you mentioned that was possible in either April or May. Today you are saying May. Did anything change there or are you just getting a better read on when you will have that available?

We are getting a better read. We really wanted to make sure we invested a sufficient amount of time and energy to get the PMA module two submitted. And that took a little bit more time than we anticipated . People really have been working weekends and nights to make sure that we get that right . We are really pleased with those results.

That probably pushed back the schedule a couple of weeks so both the data release is now -- we are striving for March, but April is a possibility. That does not change, however, the May date, so we are targeting May for the full, complete PMA submission that will then trigger, of course, the FDA panel and potential FDA approval.

That's helpful. And then just to be clear, the top line data that you are going to release, there are three data points we're looking for. Is that correct? It's the sensitivity and specificity for cancer, for pre cancer -- it is three data points we are going to get, is that correct?

That is correct.

And the data you submitted within the analytical module, is that data you will release separately?

That data is typically not released publicly. So I don't think that that data would be released. It is typical that with the PMA submission that that data would not be released.

That's it. Thank you very much.

Our next question comes from Jon Wood of Jefferies. Please go ahead.

Thanks a lot. Good morning.

Good morning, Jon.

So, Kevin, just referencing some of the market perception survey work you have done, obviously strong response rates there. Have you learned anything incremental over the last three months on the resources needed and the allocation of those resources to appropriately prepare the market for this launch? I guess I am looking for, is anything that has changed in your head or incremental information that you have that gives us a sense on how you will go to market to prepare the -- both the physician and the patient community for the launch?

Nothing really material has changed in the last three months. We have learned a lot more as we have surveyed and engaged with and surveyed both patients and physicians . In terms of our approach though, the approach is really clear and it is two-pronged. Number one, we will target and focus on the large systems that today employ at least half of primary care physicians and they set their own screening guidelines.

So we are targeting about 400 large employers of primary care physicians all over the country. Secondly, we will target the high-prescribing FOBT-FIT prescribers that -- those primary care physicians. There are about a thousand of those primary care physicians who today order an average about a thousand FIT and FOBT tests per year. These are the physicians who really strongly believe in and get engaged with colon cancer screening. We know who these physicians are.

We in our study we're comparing directly against the FIT tests. We believe that there will be a very powerful value proposition to both the physician and the patient that a better test that detects cancer at a higher rate, detects pre cancerous polyps at a significantly higher rate. We think that we will be able to get both the systems and those high-prescribing PCPs to adopt our test. That is really the focus. We will keep that focus for the first couple of years into launch before we expand in a broader way.

Understood. Have you started formulating a plan around any money that will be spent going direct to patients? I am looking for obviously the focus being the physician community, completely understand that. But any work you are doing to see the feasibility of more of a DTC-type campaign whether it is over the web or media? Is that something we should look for in the next let's call it six months or so?

I wouldn't -- it is not something that you should expect. What we have learned to date, and we have looked pretty closely at other diagnostic companies who have conducted DTC. The effectiveness is limited really until you have educated physicians in a broad way.

We don't want to -- we want to be wise about how we utilize cash, and our research indicates that there is a significant likelihood of uptake by large systems and the education that would occur for patients would be in those regions where large number of the systems have adopted our test as a primary means -- basically as a way to replace the FIT or FOBT tests. Then there would more engagement with patients and a web strategy is clearly a part of our plan and it's a lot less expensive than conventional DTC.

Understood. Thank you for the comment. The follow-up for Maneesh. I Understand there are a lot of moving parts on timing, can you give us parameters around operating expense targets for 2013? I guess the flex depending on the approval or the submission and approval timelines? What can most significantly change over the course of the year?

Sure. If you look at the three components from an R&D perspective we know there will be a decline. Total R&D will decline at least $10 million from 2012 . Probably ramping down over time , returning in Q1 to more like Q1 2012 levels and then declining from there. You will see as we grow the commercial infrastructure, the G&A side there will be modest increases, but not huge increases in G&A.

So the big flex comes in the sales and marketing and that's where the dependencies are around the FDA approval -- the review and approval timeline. If you think about it, we are going to be investing as Kevin mentioned modestly, but without a full blown launch of huge head count until we have more clarity around that. So the big flex is going to come in the S&M line and it we will provide more clarity on that as the year progresses. Does that help, Jon?

Yes, perfect. Thanks for the comments.

Thank you.

Our next question comes from Brian Weinstein of William Blair. Please go ahead.

Hi, guys, this is actually Matt in for Brian. Thanks for taking my question.

Hey, Matt.

Obviously you have been very clear about your expectations for the sensitivities and specificities of the test. As we think of the top line data we will see in a couple of months, which of those numbers do you think has the greatest risk of moving around a little bit relative to your expectations?

First, please let Brian know I said congratulations on his college, his victory over Michigan State last night. Secondly, so the number that is least powered obviously is the cancer detection number. Which has 56 cancers. That has the greatest air bars. The specificity number has 9,000 patients so the air bars around that are approximately 0.6% so that is going to be exceedingly tight and the pre cancerous polyp air bars are somewhere in between, but still pretty tight in the low single digits.

Statistically speaking the most room for flex would be in the cancer sensitivity number. And that's one of the reasons we are just trying to make sure that people understand that cancer sensitivity here we have set in every presentation we have given over the last three and a half years has been 85% has been the target . We certainly hope to exceed that . We expect to exceed that, but the real value of the test, and the reason people on this call would someday want to get this test, is that it detects pre cancerous polyps. And with repeat testing, the cumulative sensitivity is what's really important.

Thanks, Kevin. And just a quick follow-up here. If you could share anything here about the manufacturing analytical modules. I know they've gone to two different divisions of the agency, but if there's anything you can share that's come out of that, positive, negative, surprises relative to expectations, or any feedback on the manufacturing modules so far.

The way the manufacturing submission works is that you submit to the agency and then they take that submission, make sure it has all of its components, I think they have 45 days to reject that, but they send that -- in our case it goes to the field office in Minneapolis, and then later this year we would expect they would schedule an inspection of our facility. And then they would come along with the manufacturing submission , review the entire manufacturing submission, review our quality system here. And that is just kind of ordinary course as we go forward. So we are really pleased with the manufacturing package that we put together and would not expect to have problems with that going forward.

Great, thanks, Kevin.

Thank you.

Our next question comes from Peter Lawson of Mizuho Securities. Please go ahead.

Kevin, sorry to get into the granular side of this, but what is the time gap between the data being unblinded and then being released?

Very, very short. There is a time gap in between the data being generated and the data being unblinded when bio statisticians review that data from a quality perspective and make sure that everything ties off, but then management and the investigators wouldn't see that until it is unblinded and we would likely then immediately the following day or even at the end of that day issue the press release and file an 8-K. So 24 to 48 hours within.

Great, thank you. And then the survey that was interesting, the 96% of physicians that use the test, what kind of subset of patients was that?

Well, it was actually statistically powered. There were 55 physicians and 161 patients. And the data was also interesting because there were 67% of the physicians were -- said they were very likely to utilize this test and 29% said moderately likely and among patients 73% said they were very likely and 19% moderately likely. It is obviously impressive and it is statistically significant.

And another point there, Peter, was that on average physicians would order this test for slightly over half of their average risk patients. So in their mind, and this came out of the research, there are patients that they know that simply won't undergo colonoscopy. It is one of the big problems we have with colon cancer screening today is a lack of compliance. A patient with certain co-morbidities or is a certain age, or in the past has rejected colonoscopy as an idea. Their primary care physicians know who these patients are and it is pretty clear that they would utilize a test that detected pre cancerous polyps among that subsection of their patients.

So the patients themselves were open for a colonoscopy? They were eligible for a colonoscopy?

Yes. These were polled patients who were average risk, 50 and older. So the same patients that were studied in our clinical trial and who will be the focus of our launch, obviously.

That helps a lot. And then on the new codes coming out from CMS, how does that change the outlook for you on pricing?

So far positively. As you know we have a KRAS component in our test and KRAS, which has been reimbursed anywhere from $200 to $1200 depending on the technology used, today that seems to be coalescing around $230, and that's just -- there are 7 KRAS mutations in our test, and there are a total of 11 bio markers in our test. We think that things are playing out appropriately . Again, we are not one of the $2,000 to $4,000 molecular diagnostic tests. We will provide a great value at we think a really good price point.

And just one quick question from Maneesh, around the G&A. Is that going to be flat for the rest of the year and the R&D ramp down that happens after Q1?

So you are going to see from in Q1 probably a return to Q1-2012 levels and then lower from there, ramp down. As far as G&A you will see a modest increase over the course of the year, not huge, but as we continue to build out the infrastructure in the systems to be able to launch this, there will be modest increases. It is not flat for G&A.

Thanks so much.

Our next question comes from Jeff Frelick from Canaccord. Please go ahead.

Good morning, folks. Kevin, in the survey , the patients that you had collected info on, did you identify what they were currently doing for any type of screening if at all?

You know, I would have to look deeper into the research. I think it was a-- that data is probably there, I would have to take a look at you.

And where do you stand now with progress on society endorsements?

First of all as you know the American Cancer Society and Multi-Society Task Force in 2008 recommended that stool DNA testing be one of the recommended means in the guidelines. So presently we are working very hard with the societies to engage with them so that they are ready to take a look at the DeeP-C data, understand that data and as those -- as their guideline committees form to further highlight or strengthen the position that stool DNA testing or in particular our tests has in those guidelines.

But there is also developing the relationships with the guidelines because then you have to reach into the physicians that are going to ultimately help make this test a successful test. And so that has been an ongoing effort over the last four years and is intensifying as we go forward . We are presenting at an AGA conference coming up in the next couple of months and there just seems to be a lot of interest among the medical societies for something so new and differentiated as this test.

And then lastly, which advisory panel will you likely appear on?

It will likely be immunology. That's what the agency has initially communicated, but that will obviously be up to the agency.

Thanks Maneesh, thanks folks.

Thanks, Jeff.

Our next question comes from Raymond Myers of Benchmark company. Please go ahead.

Thank you. Kevin and Maneesh, curious if you could give us a little breakdown in your R&D spend. How much have you earmarked for applications other than colon cancer in 2013?

So what we have said publicly is that the [Oceana] trial will be $1 million to $2 million and that is really what we have said. There will be some additional modest monies that we use to achieve the goal that Kevin outlined, the prototypes for esophageal and pancreatic cancer, but the vast majority will be on the -- on Cologard.

And is the [Oceana] trial still due to be complete by the end of this year?

We are targeting completion by the end of this year.

Excellent. Have you determined whether EXACT may be able to charge patients a nominal amount similar to a co-pay amount for the test kit themselves?

You know, That's something that we are working through. Right now we don't anticipate at launch doing that, but we'll -- as we explore that we will -- we'll share more. Right now we don't anticipate doing that.

Good. And Maneesh, you talked about there being the most flex in the sales and marketing line and so that is the area of my question. How high do you expect that to flex upward this year?

You know, Ray, until we see the data and get feedback from the agency and look at that timeline, I am just not comfortable commenting on that. Until we know more.

Okay, thank you very much. That's all of my questions.

Thanks, Ray.

Our next question comes from Yale Jen of Roth Capital. Please go ahead.

Good morning and thanks for taking the questions. Kevin, just a quick question in terms of the sensitivity that you mentioned that you were comfortable talking exceeds 85%, but not necessarily to the 98% , but since the last two study is in the ballpark. Would you just be more conservative, or is there more to it from the (inaudible) statement?

Let me emphasize one thing first, Yale. Again, we have not seen data. We will not see data until shortly before we issue the 8-K release. We will be totally blinded to the data.

But this is a prospective study versus case control study and typically what you see in a prospective study is some fall off in sensitivity . I, again, don't have any reason to believe the sensitivity will fall to 85% from 98%, but I want to make sure that we are setting expectations and driving home the point that the real value of this test is in the cumulative sensitivity like the Pap smear which is -- which detects on average about 47% of pre cancer -- pre cancerous lesions for cervical cancer, that the real value is in repeat testing and that increases the sensitivity over time.

Great. Secondly are you going to be presenting at ASCO this year or the AGA will be needing to present?

We have not yet determined what scientific conference we would present this data at. That will be dependent on the timing of the conference . Obviously some of these are awfully tight between the submission of the abstract and when those conferences are held relative to when our data is coming out. We'll let you know as soon as we know.

And the third one is for the CLIA lab that you inform us which partner you may choose later. Within the parameter of criteria you have set for the prospect and also do you have any color in terms of this will be a first half or second half year of decisions?

We do have well established parameters for identifying labs that would be a good fit for us. EXACT Sciences will be the lab of record. It will be our CLIA lab and we will be working with a partner to implement and using existing facilities and infrastructure, and that is something that we plan to do in the coming months. So that is a first half event so that we can be adequately prepared for launch.

Great. And the last question actually Maneesh, in terms of sales and marketing budget , I know that timeline may be a little difficult to decide right now, but overall would you have a sense what the first or second year S&M budget might be for the launch?

Again Yale, until we see the data and understand timing and impact for -- of that with discussions with FDA , we are not going to talk about that. What we can say is that in terms of size of sales force we do expect that at the end of the first full year of launch we expect to have a commercial organization of approximately 100. That is consistent with what we have said in the past. That will help range-find a right size for you at maturity or first full year of launch given our lack of visibility on the review in the timeline, That's really why we can't share more at this time about when it is going to happen.

Great, thanks a lot. Appreciate it.

Our next question comes from Zarak Kurshid of Wedbush Securities. Please go ahead.

Hi, good morning. Thanks for taking my questions.

Good morning.

Just curious on the economics of the lab partnership, how would that work? And if you could clarify a little bit what exactly the partner would be doing, and if they would be educating physicians, that would be great.

I think it is a really important question, and I want to make sure we are crystal clear here. Again, EXACT will be the lab of record. The partner lab , think of it this way, EXACT would most likely do the up front stool processing at our facility and take that down to extracted DNA. The lab partner would provide a facility and capability and infrastructure and robotics and automation to process that sample .

We would leverage their I.T. system, but it would be on our patient report, and we would report out directly to the physician, directly from the EXACT Sciences lab. Think of them as a real partner in this and their economics would reflect the role that they play. Basically we looked at the cost of us doing this ourself and compared it to the cost with a partner and the ability to quickly scale up and to focus on our core competency. So we are not comfortable sharing the break down there, but it has to be clear that we will be the lab of record and we will be doing -- taking on a significant amount of the over-all expenses.

Got it. And should we think of someone like a Quest or LabCorp or some type of smaller entity closer in proximity?

At this point in time we are not comfortable talking about this, but this company in the past has been down the road of partnering with large labs , and this isn't really their business model. They are focused on delivering test results themselves to their physician customers. We will be able to provide more details in the coming quarters.

Understood. Thanks. And then on the doctor survey, just curious what types of docs were those, and have you done any more targeted surveys around the IBD specialists? What are they saying about potential adoption and utility of the test?

So the 55 docs were a mix of primary care physicians and GIs. weighted in proportion to how they are represented out there in the real world.

I want to come back to one of Peter's earlier questions, he asked on the patient side. What was the break down in the testing those patients did? And it was about half of the -- 49% of the patients had never taken -- had never undergone colon cancer screening which is dead on to the data that we have seen reported. 51% had taken some type of a test and of those that had taken some type of a test 57% did both invasive and non-invasive . 23% did invasive only. 15% did non-invasive only and 5% were other.

And then to your question in terms of have we done work around IBD docs and the answer to that is yes we have done a significant amount -- more qualitative, but we have polled several dozen GIs about what they perceived to be the need for a test that would augment their screening programs for IBD patients. Their colon cancer screening programs for IBD patients. It's really clear that the two most challenging issues they face is non-compliance among the IBD population and the current tools' failure to identify dysplasia. This is a test that several of these doctors qualitatively have said this is a test I would potentially use every other year in between colonoscopies. They also indicated that patients are increasingly taking a role in helping set -- these IBD patients are taking a role in basically negotiating what their screening program is going to look like.

So the GIs don't look at this test as something that is a threat, rather would potentially bring more patients in to be screened that are IBD patients that need to be screened. Hopefully that answers your question.

Yes, very interesting. Thank you. And then a couple of follow-ups. I think I may have missed it in the commentary, but when should we expect some of the data from the IBD study?

Well, the study will complete in December , and then I suspect shortly thereafter, so the beginning of next year we would present that data publicly.

Got it. And then maybe one last one for Maneesh. With respect to the manufacture scale up and the clinical lab expansion, what sort of CapEx should one anticipate around that this year?

So for the manufacturing scale up, we are anticipating about $4 million to make sure that the facility is scaled up and ready to handle a launch. And then for the lab it is anticipated to be right around $3 million. So a total of $7 million from a CapEx perspective.

Got it. Great. Thanks.

Our next question is a follow-up from Jeff Elliott of Robert W. Baird. Please go ahead.

Just a question on the modeling. I want to make sure I have this right. I'm using $300 a test today to split between exact and the ordering doc. Under the CLIA lab model you would keep the entire $300 or whatever the reimbursement would be. Could you first verify that is correct?

Well, in terms of the number that you are using I can't confirm that . What I can confirm is that with a direct lab approach, we will not obviously be sharing the economics with a partner lab. We will -- the partner lab that is doing some of the analytical testing for us will obviously share in a small portion of the overall economics, but overall the economics will flow to EXACT Sciences. And in terms of the actual price for the test, obviously that hasn't been set yet.

We are very confident in our approach to this. We are not talking about what reimbursement level we would target. We do think there is a strong rationale for private payers to pay more than Medicare for this test. Currently private payers are paying nearly a two-and-a-half times premium to perform colonoscopy relative to what Medicare pays, and we think private payers will see this test and our conversations to date have indicated as much, that they see this as valuable relative to the front costs they are paying for other screening (inaudible).

That's helpful. As a follow-up then on day one , what sort of capacity do you expect to have available both internally and through your lab partners? And then digging in a little deeper what fixed costs or fixed costs of goods sold would you expect to go along with that as far as running your own lab?

I think that we will provide more of that color as time goes on here. So if we could wait a quarter or two I think That's what we would do. Maneesh, do you have any color to add?

The only overarching comment is from a gross margin perspective, the long-term gross margin is with this model still in line with our guidance of 65%. We will provide more color as Kevin said as things roll out as to how long some of the questions you addressed, but at steady state this is 65% gross margin or better.

Got it. Thank you very much.

With no further questions I would now like to turn the conference over to Mr. Kevin Conroy for any closing remarks.

Thank you very much for your participation in the call. We look forward to seeing you at conferences in the future and talking to you on our next earnings call. Thank you.

Ladies and gentlemen, this does conclude today's conference. You may all disconnect and have a wonderful day.