Exact Sciences Corp (EXAS) 2013 Q1 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Exact Sciences Corporation First Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions)

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Rod Hise. Please go ahead.

Thank you for joining us for Exact Sciences first quarter 2013 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 first quarter 2013 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 first quarter financial results. Next, Kevin will discuss our clinical trial data and provide an updated commercialization update.

Before we get underway, I'd like to ask 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 speak only as of the date made, 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 should not be unduly relied upon. Except as otherwise required by the federal securities laws, 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 changes 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. We were very pleased to announce the results of our successful DeeP-C pivotal clinical trial two weeks ago. The Company's top priority now is completing and submitting the final module of our PMA applications to the FDA. We're also focused on preparing an analysis of the clinical trial's full dataset for submission to a premier peer-reviewed medical journal.

We ended the quarter with a very strong cash balance of $95.5 million with the majority of the DeeP-C clinical trial expenses behind us. As we look ahead to cash utilization during 2013, expenses and cash utilization will be driven largely by the timing of the FDA's review of our PMA submission and its potential approval of our test as we've stated previously. We do expect the reduction in DeeP-C clinical trial expenses to be offset by an increase in expenses related to commercialization.

In addition, there are three incremental items that will likely cause 2013 cash utilization to be higher than it was in 2012. First, we anticipate legal expenses related to the FDA submission [at] an advisory panel of between $1 million and $2 million. Second, our IBD related clinical trial Oceania will cost between $1 million and $1.5 million. Finally, we will be making a decision soon about whether to build out or outsource elements of the clinical laboratory that will be key to our commercialization strategy. If we elect to build the lab, we expect to spend between $4 million and $5 million. These expenses would include everything needed to get the lab up and running including IT, software and other infrastructure.

Again, our 2013 cash utilization is dependent on the timing of the FDA's review of our submission and its potential approval of Cologuard. We look forward to updating you as the year progresses.

It is now my pleasure to introduce Exact's President and CEO, Kevin Conroy. Kevin?

Thanks, Maneesh. As Maneesh said, we are excited about the results of our DeeP-C clinical trial. The DeeP-C results point to the great potential Cologuard has to provide a powerful new paradigm for colon cancer screening. During the trial Cologuard achieved sensitivity for cancer detection that rivals colonoscopy. It also demonstrated sensitivity for pre-cancer detection on the level of the Pap smear, which has significantly reduced cervical cancer in the screening population since its introduction.

Cologuard's cancer and pre-cancer sensitivities form the foundation of not only a strong submission to the FDA but of an outstanding product poised to make a significant impact and turning the battle against colon cancer into a winnable one.

Let's look at the data another way. Colonoscopy is a gold standard for detecting colorectal cancer in the screening population with studies showing approximately 95% cancer sensitivity. The 10,000-patient DeeP-C trial demonstrated that Cologuard detects colorectal cancer at substantially the same sensitivity level as colonoscopy which, again studies show, misses about 5% of cancers. Pre-cancerous polyps that are greater than two centimeters in diameter are the most dangerous. They are the most likely to progress to cancer like CIN 2 and CIN 3 lesions in the cervix.

During DeeP-C, Cologuard demonstrated a sensitivity of 66% for pre-cancerous polyps of two centimeters or greater, slightly better than the Pap smear sensitivity for [analogous] pre-cancers. Cologuard and Pap smear had similar ability to detect pre-cancerous lesions with similar specificities.

The Pap smear's ability to detect 58% of CIN 2 and CIN 3 lesions is an essential element of its success in combating cervical cancer.

Let's turn now to how Cologuard performed against FIT, Fecal Immunochemical Test, during the DeeP-C trial. Cologuard achieved superiority to FIT, not just for pre-cancer sensitivity, but for cancer sensitivity as well. Our Cologuard trial was designed with a sequential approach to analyzing the performance of Cologuard compared to FIT. After determining that Cologuard achieved non-inferiority to FIT for cancer sensitivity, our statisticians were able to make a calculation regarding superiority.

We are very pleased to report that Cologuard demonstrated superiority to FIT for cancer sensitivity with a statistically-significant P-value. Claims of superiority to FIT for both cancer and pre-cancer detection will be included in our FDA submission.

Let's take a look at the performance characteristics of the test we will be competing against once Cologuard is approved. Here you'll see the results of the Fecal Immunochemical Test or FIT, the Guaiac Fecal Occult Blood Test or FOBT and blood DNA from comparable prospective studies like DeeP-C. As you can see, the cancer sensitivities of each of them are significantly lower than Cologuard's, up to 80 percentage points lower. This is important.

When looking for cancer no one wants to test that miss between a third and 87% of cancers. Pre-cancer sensitivity isn't close to comparable either. In fact, the ability of most of these tests to detect pre-cancerous polyps is negligible. By definition, a test that doesn't detect pre-cancerous polyps doesn't meaningfully prevent cancer.

Let's talk now about the size of a pre-cancerous polyp and how it affects cancer risk. Studies show that the risk of a pre-cancerous polyp progressing to cancer increases dramatically as it grows. Small polyps between one and two centimeters are about 10% likely to progress to colorectal cancer. Polyps that continue to grow and become larger than two centimeters are the most dangerous. As the polyps grow and become more dangerous, Cologuard becomes even more effective at detecting them. Cologuard has demonstrated a sensitivity of 66% for detecting these larger polyps. Cologuard's ability to detect these riskier polyps is a key element of its potential effectiveness through repeat screening.

Studies show that fewer than 40% of pre-cancerous polyps continue to grow past one centimeter. Those that do grow, tend to grow slowly taking about 10 years to progress to cancer. The slow growth of these polyps provides screening tests with an ample window to detect them through repeat testing. In our case, with Cologuard, we would expect it to be utilized every three years. These screening intervals and the slow growth of polyps between them provides the potential for a cumulative pre-cancer sensitivity of approximately 90% for Cologuard based upon our internal calculations. Systematic, repeat screening with Cologuard has the potential to have a tremendous impact on this horrible disease.

Let's turn now to the market and our strategy for capturing the significant opportunity it presents. There is a major need to increase screening compliance. To date, only about half of Americans are being screened properly for colorectal cancer. As a result, more than 60% of cancers are detected at a late stage when it is more difficult and more expensive to treat with worse patient outcomes. Despite these facts, there are 14.5 million colorectal cancer screenings performed in the US each year. The vast majority of them, more than 10 million, are fecal blood tests which, as we just discussed, are relatively poor performers. You'll recall that FOBT and FIT tests have cancer sensitivities of 13% and 66% respectively in previous studies and pre-cancer sensitivities of 11% and 20%.

Let's turn now to early adoption targets for Cologuard. We have a two-pronged strategy for the early adoption of Cologuard. First, our strategy is focused on large healthcare systems and groups. These networks employ a high percentage of the physicians in the United States. The networks typically have a strong screening program that is defined by centralized system-wide decisions. This concentration of physicians and strong centrally-controlled testing programs presents a great opportunity for Exact Sciences to drive significant adoption of Cologuard.

Another key element of our strategy is aimed at the highest-prescribing physicians. 2,000 physicians, for example, account for about 2 million FOBT and FIT tests ordered each year or approximately 20% of the non-invasive market. This clustering of the highest test prescribers presents another robust early-adoption opportunity similar to that of the largest healthcare networks.

I'd now like to introduce Exact Sciences' service strategy that will be offered in conjunction with Cologuard. This service will facilitate organized screening programs with healthcare systems, physicians and patients alike.

Let's look at the three components of our strategy to dramatically increase compliance in partnership with physicians and patients. First, the physician experience. Exact Sciences will make it as easy as possible for a physician to order Cologuard. All a physician must do is place an order with our lab. The physician does not deal with sample collection or patient reminders. We'll do that for them. Second, the patient experience. We will send the sample collection kit to the patient, answer any follow-up questions through our call center or secure messaging and track whether the patient has returned the collection kit. Third, the compliance engine. This final piece of our strategy is highly valuable. This is the part of our system that removes a significant burden from physician and takes on a [test] that will tell us in a -- is a consistent pain point for physicians. We will track patient compliance with their test order and provide reminders to those who had not returned a sample. Working with physicians and their [stats], we will follow up with non-compliant patients.

We will handle everything related to compliance including patient tracking and follow-up and compliance reporting to physicians. This dedicated tracking and follow-up should have a meaningful, positive influence on screening rates. These strategies are proven to increase screening rates. Kaiser Permanente Northern California implemented a patient outreach program in 2004 that includes reminder letters, phone calls, emails and other tools that explain and promote screening to patients. Others have run similar programs.

From 2004 to 2010, in the Kaiser Northern California program, colorectal cancer screening rates jumped from 41% to 78% in the Medicare population and from 37% to 69% in the commercial population, in the non-Medicare population. As screening rates jumped, the detection of earlier treatable cancers grew. Our market strategy also underscores the commercial value of the compliance strategy.

The percentage of physicians who said that they were very likely to order Cologuard increased to 82% after they heard about our compliance program plans, a 15 percentage point increase. Even before hearing about our compliance program, more than two-thirds of the physicians we spoke with were very likely to order Cologuard. Note that 96% of physicians we surveyed said that they were either likely or very likely to offer Cologuard to some or all of their patients. This and other market research we've conducted bode very well for the adoption of Cologuard. This research in particular underscores the significant value of the compliance component of our strategy.

Let's turn now to our upcoming milestones. We continue to anticipate a tight sequencing of events as we move forward. As soon as our analysis of the full dataset is concluded, we will complete our PMA submission to the FDA. The entire team at Exact Sciences is deeply committed to this top priority and are working hard to complete our PMA application. We anticipate making this final submission in May or early June. We believe that our modular submission with earlier submissions in December and February will help make the agency's review more efficient. We expect that this review will include an advisory panel meeting. We'll provide the timing of this meeting to investors when we know more.

In parallel to PMA submission work, we will complete and submit our Medicare national coverage application to CMS. Later this year, we will submit the full clinical trial dataset to a premier peer-reviewed Medicare journal for publication.

In conclusion, the results of our DeeP-C trial demonstrate the potential for Cologuard to provide a powerful new paradigm for colon cancer screening. During the DeeP-C trial, Cologuard performed at cancer sensitivity's level that viable colonoscopy and pre-cancer sensitivity levels similar to the Pap smear.

Cologuard is well suited for detecting the most dangerous pre-cancers. It provides the potential for a cumulative pre-cancer sensitivity of approximately 90% based on our internal calculations. Systematic repeat screening with Cologuard has the potential to have a tremendous impact on this horrible disease.

Our commercial strategy is focused on the networks and physicians that order the most FIT and FOBT tests today. Our service offering, bundled with Cologuard has the potential to increase screening compliance like similar programs elsewhere and the likelihood that physicians will order Cologuard. These and other factors give us great confidence in the strength of our FDA submission and the potential for Cologuard once it's approved to fundamentally change how millions are screened for colorectal cancer each year. The results could be many, many lives saved which is our goal.

We're now happy to answer your questions.

(Operator Instructions) Brian Weinstein, William Blair.

Hi. Good morning. Thanks for taking the question. Question is on the data. Do you guys have any more explanation as to sort of what happened versus expectations? I know that we're talking much more about two centimeters here and I agree that I think that's much more relevant. But can you talk about anything else as far as what might have gone differently here on the smaller, the one centimeter and then also on the specificity, any idea on that yet?

Thanks, Brian. We have had a chance to look at the data much more closely and analyze that data carefully. And we have determined that the test actually performed as you would expect it to in the populations that we previously studied. The difference is nearly entirely accounted by the difference in the demographics of the patients involved and the size of the polyps.

For example, there were polyps included as advanced adenomas that were actually smaller than one centimeter, those with a villous component that clearly had an impact and they were more of those subjects with those types of polyps in the trial than could have been anticipated.

We, however, will not go further into this data until we have an opportunity to present the data completely in a publication and we will be focused on getting that publication submitted as soon as humanly possible.

Okay. And then on the cost here, I think Maneesh you said it was $4 million to $5 million to build or outsource. I just wanted to clarify, is that including the cost or kind of this Exact Sciences guarantee or the service component as well. How much will that cost to kind of get up and going as well?

Just to clarify, so we have to yet make that decision of whether we are going to partner key components for that or build it. If we elect to build it, it does -- that $4 million to $5 million incorporates all of the IT, the infrastructure and now you have context, after Kevin explained it, it includes all of the elements needed to support the compliance engine and the service offering that we would make in conjunction with Cologuard.

Great. And last question, anything at DDW that we should be looking forward to seeing from you guys either on this or other things you're working on? Thanks.

Yes, Brian. At DDW, we expect to see abstracts and posters presented by our collaborators that focus on some of the pipeline products that we have discussed including pancreatic cancer, esophageal cancer and Barrett's esophagus. Some early data around those potential pipeline products, which as you may know, we're very excited about the potential for the technology that we've developed to serve as a platform for detecting GI cancers in a way that today there's no effective tools to screen for some of these other GI cancers, so early data will be shown and discussed at DDW that will be interesting.

Jeff Elliott, Robert W. Baird.

Thanks. Yes, just a quick follow-up on the lab. Can you walk us through your thinking there in terms of whether you would go to work with a partner or you'd build that internally? What's the trade-off in your mind?

The trade-off is lab expertise and some of the core competencies that we would want to have as well as the trade-off of the expense it would take. So it's a core competency. We're doing that evaluation right now. And so, we look forward to sharing more in the second quarter, but it's essentially a straightforward analysis.

One of the things to note, Jeff, is that we fairly recently hired, a couple of months ago, a senior 17-year veteran from ARUP to join us as our Director of our lab who had the experience of building out 23 labs for ARUP which, as you know, is one of the highest-quality labs in the country. And she is a very strong leader and is responsible for helping us do this analysis. And should we decide to build this lab on our own, which is a distinct possibility, we are very confident that we'll be able to do so quickly and efficiently. And I think it's important to remember that most labs are built out to have a high volume of multiple tests. Remember that this lab will have one test available.

That's great. And the numbers you threw out there, the $4 million to $5 million, how big of a lab would that support?

So that would support up to 1 million tests per year.

Got it, okay. It's been a while since I've heard you talk about the international opportunity. Can you just give us an update on what you're thinking there and perhaps comment on timing?

Yes, we are not really prepared to talk about international at this point, but we are -- there is an increasing focus on it. We think there is a significant opportunity noting that colonoscopy is not widely used outside of the US. So throughout most of the world, the options for screening for colon cancer are the options that we discussed earlier in the call which are at inferior detection capabilities for both cancer and pre-cancer detection.

China is a potentially significant market opportunity. Europe is a significant opportunity and the Board and the management team have made the decision to increase our focus internationally over the next couple of years so that we are in a position to build out an international franchise which could be a significant component of our revenues and profits over time. And again, this is a Board level decision to focus in this area.

Okay, thank you.

Raymond Myers, Benchmark.

Thank you. Kevin, I'm wondering whether you've made any more progress in determining how you will distribute the test kits to patients and whether there will be a co-pay for the test kits.

Thanks, Ray. We have determined that the most efficient way to interact with a patient in a test kit is to shift the kit directly from our lab -- that we would be responsible for shipping the kit directly to the patient and the kit would be shipped by mail or an overnight service provider.

We do not want to burden physicians with the responsibility of storing and managing and handing kits out to patients. We want to take on that responsibility. And that is a key component of the approach that we're taking here is to make it really easy for a physician to offer a test to a patient. Our experience from the DeeP-C trial backs that up that where we ship the kit to the patient had a call center, answered any questions that the patients in the clinical trial had about the collection kit. So that is -- the delivery mechanism will be one approach.

In terms of a co-pay, we would expect long term under the Affordable Care Act, the provisions there that screening tests like Cologuard would not be subject to a co-pay. And that presently our thinking is that the collection kit would be part of the overall cost of the test. That thinking may change down the road but that's our present thinking.

Okay, thanks for that color. And now if we step back, and you had a little bit of time to look at the data, have you had any opportunity to gauge the reaction to the data from key individuals at the FDA, CMS that's handling your reimbursement and influential clinicians who might be involved in the determination at these large health networks?

Yes. Ray, the difference between the Wall Street reaction, which I understand, and the physician reaction couldn't have been more stark. Physicians not only in the US but we got emails from around the world indicating that the tests were -- the results from the DeeP-C study were outstanding or even more superlative than that.

And I think that's the most important thing to note is that clinically these results are really powerful and will, now for once, provide the ability with a non-invasive approach to detect 92% of cancers in a screened population and 66% of dangerous polyps. So that difference is pretty stark.

We are not in a position to discuss or share with you our conversations with FDA or CMS but I would like to drive home the point that we are part of a parallel review program with both agencies, and we have been working very closely with both FDA and CMS to do our best to expedite the potential approval of the product and coverage of the test through FDA and CMS.

Great. Kevin, one point that I think may have caused some confusion when the data was first released was misinformation around the sensitivity of FIT to particularly pre-cancer. Can you give us some more detail about what you believe the sensitivity of FIT is to pre-cancer and how that stacks up with Cologuard?

Yes. If you take a look at the presentation that we just gave, we cite the Morikawa study in Japan which was a prospective screening study showing 66% cancer sensitivity and 20% pre-cancer sensitivity for the Fecal Immunochemical Test. We have not disclosed specifically how that test performed in this clinical trial and here is why.

We have been in discussions or in contact with a premier leading journal and they have indicated that excessive -- that we should only discuss the top line data to meet investor obligations, but that we shouldn't go into any more details than is necessary. So we just don't want to dribble out the data other than to say -- and I'll reconfirm this that we hit our endpoints by a wide margin and that we achieved superiority over FIT, which is a widely-used test for both cancer and pre-cancer detection. It's a big deal and we really can't wait to have this data published in a really high quality peer-reviewed journal.

Great. Thanks for that color. We look forward to it as well.

Thanks.

Peter Lawson, Mizuho Securities.

Hi. Good morning. This is Eric, filling in for Peter. Thanks for taking the question. I guess on the panel review, you still expect that to occur in 2013, correct?

Presently we do expect that to occur this year, yes.

Okay. And then do you know approximately what the time lag would be between the panel review and then the full potential approval?

We're not in a position at this point to discuss or comment on the time between a advisory panel and a potential approval. I think that you can take a look at other tests and see that there are some that the FDA acts very quickly and others that take more time.

Okay, thanks. And then just I guess on the Medicare discussion, has there been any recent updates with them? Have they came back after the top line data was released with anything that's either unfavorable or favorable to you?

We have been in nearly constant contact with CMS. And it's important to note that there are two different groups within CMS. There's the Coverage and Analysis Group. That group makes the decision on whether or not to cover a test, and if so how frequently to reimburse for it, but not how much to reimburse for the test.

The payment level is decided by the Hospital and Ambulatory Policy Group, HAPG. And we've also been in contact with that group. And I don't want to disclose those specific communications. I will say that we believe that the appropriate approach, and the approach most likely to be taken here, would be that this test which does not require physician interpretation would be on the clinical lab fee schedule. And we also believe that the most likely approach to determining a payment level would be using the crosswalk approach. And the crosswalk approach is the first approach that is typically used for new diagnostic tests. This is all explained in the relevant regulations. You can look them up in the CFR for new diagnostic tests.

That crosswalk is the first approach that is used and you use that approach if CMS can look to similar codes for payment levels, either a code or multiple codes that they would then add together.

What is very favorable as we look forward over the next year is that CMS is already deeply into a process of establishing codes and payment levels for molecular diagnostic tests. And they are actually establishing them through a get point process where they come up with a payment level for each of those codes. There are very specific codes including codes for KRAS which as you know is a component of our test, Methylation -- the detection of methylation variance, which we have two of those markers in our tests and already there is a code established for the FIT test which is also one of the markers in our tests.

So we think it's most likely that CMS would utilize that crosswalk, and I think it's important to note that if you -- if analysts and investors looked into those codes and the proposed payment levels by the regional Medicare payers that this is a test that would reimburse at higher than the levels that many analysts have plugged into their models. And so -- we think that's important because we think this is a really valuable test in colonoscopy with the only other way of detecting high levels of cancers and high level of pre-cancers is a much more expensive test than those numbers that are plugged into those models. And this test can have a huge impact long term on increasing compliance and decreasing the $14 billion to $17 billion a year we spend treating colon cancer.

So the value of this we think is -- the Company thinks is higher than it's plugged into many models. That's a long explanation, but it's important because I think there is going to be an increasing focus on where Cologuard is going to reimburse and we are awfully optimistic about what that level will be.

I appreciate the color on that. And then just lastly, will there be any or do you plan on having any other clinical trials for Cologuard, economic analysis or anything like that following expected approval?

Yes, we're working right now on the economic analysis that will establish the cost-effectiveness of Cologuard and varying price levels and varying frequency intervals. We believe that that data will establish a three-year interval being cost-effective as a screening test. And if you take a look at, well, [when will I hold up] that data I think will be compelling at the time that data is published.

Jeff Frelick, Canaccord.

Yes, Kevin, can you give us a sense maybe any insight you can share just how will the healthcare system that you guys are targeting and their physicians in the system, how are they going to position the Cologuard test with their patients? Will they give the patient a choice or will they lead with a test that that healthcare system is behind like Cologuard?

Jeff, the approach is widely variable between physicians, between individual group practices or these large healthcare systems. Today what is going on is that there are typically options provided. And when there are options provided the screening rate tends to increase dramatically.

So we would hope to position this as an option among the many. First of all, there is no one single recommended way of screening for colon cancer. Colonoscopy is not the only method that is recommended either in the guidelines or in practice. And what you see is a lot of physicians look at their patient population, and for many of their patients they look at them and they categorize them as patients who are unlikely to undergo colonoscopy either because of comorbidities or because those patients in the past have declined the physician's request to undergo colonoscopy. And that's where Cologuard fits in really, really nicely as an option to increase the screening compliance, especially among those patients who are unwilling or not interested in undergoing colonoscopy.

When you take a look at those non-compliant patient populations, there is a recent study that was published in the Kaiser Oregon system where they went into their EMR and looked for patients who were non-compliant, and they got a above 25% compliance rate just by doing automated telephone calls and follow-ups among those patients who were non-compliant. There is a significant opportunity for us to partner with healthcare providers, and I think there is a significant interest in this to reach out to their non-compliant patient population with a test now that detects a high level of cancer.

And there was one physician who raised this point with us is now Exact Sciences and Cologuard has the ability to partner with either a community, a employer or even a state to say we want to go out there and find 92% of the cancers. You can do that because our robots can scale up and reach that capacity -- reach the capacity needed to actually screen these large populations that today are non-compliant. That's really the exciting part of our offering here, and it's very critical that we partner with those systems to reach those patients.

That's great. And additionally kind of a follow-up to that, Kevin, on the non-compliant patients, do you see maybe the earlier testers coming from the bucket of not enrolled in any program, doing no testing currently or patients who are really fully compliant with a FIT or FOBT program, meaning they're not doing it every year like they're supposed to? (multiple speakers)

I think that it's a great question, Jeff. I think that where we will see the highest early adoption is among the, and I want to stress this, 2,000 physicians that account for 2 million fecal blood tests, either FIT or FOBT tests every year. If we reach those 2,000 physicians effectively, they will have the opportunity to take a look at the data themselves. They're clearly physicians who believe in the value of a non-invasive colon cancer screening.

We need to learn a little bit more about why they're such high volume providers. But we know who they are, we know them by name and where they're located, and that is the group that we think will be the first to adopt. And again we did a head-to-head study against FIT and showed superiority for cancer and pre-cancer sensitivity. So there is a big potential impact there even without going into the large systems and we believe that large systems will be very interested in this test too.

Great. Thank you.

Thanks.

Yale Jen, Roth Capital.

Good morning, gentlemen and thanks for taking the questions. First one is that in terms of Palmetto recently has [different] pricing for the different molecular diagnostics. You might have actually answered this question a little bit earlier, but I'd like to get a sense of is that process impacting anything on the Cologuard pricing at this moment or that's a little bit too early or irrelevant?

I'm sorry, you cut off there a little bit, Yale, when you asked. Did you say something about pharmacogenetics?

No, no, Palmetto they have contracted for the pricing of the molecular diagnostics and it seems to be -- the industry seems to be disappointed because of their low pricing. My question is, was that relevant at this point to the Cologuard or [that's something if not]?

That's a great question. No, the pricing put out there by Palmetto and Cahaba and others, because now it's not just Palmetto that has published their molecular diagnostic codes. Our payment levels that we find acceptable when you take a look again is the KRAS level I think that Palmetto rate for KRAS as the tier one code was in the [230 to 240] range, and methylation detection for each variant was in the [140] range. So, as you could imagine -- and I think the FIT test, the national limitation there is about $22 a test.

I think what Palmetto and others are doing is, attacking the problem in that the old code stacks which went away at the end of last year, for the same result a payment level for a test can vary say for KRAS between $250 and $1250. So we think that Palmetto's work here, CMS' work here is going to drive to consistent payment levels which then we can look to crosswalk [to]. It's important and I think there's an opportunity for that to be clarified even more over time.

In fact, I think CMS any day now is supposed to come out with their summary of all of those payment levels established by the regional contractors and further clarify what the national payment level will be for those codes.

Okay, great. (inaudible) Also that EPO is not going to present DeeP-C data on the DDW. [Were] there any other medical meetings you will provide more data there or you want to just wait for the publication before you start putting things into a medical conference?

Yes, that's another good question. After looking at the data, our collaborators encouraged us not to -- our principal investigator and other investigators encouraged us to make this data available through a publication as rapidly as possible and not dribble out the data at scientific conferences. So that's our thought process right now. It could possibly change, but our goal is to get that publication out as soon as humanly possible where investors, clinicians, patients will be able to take a look at the full impact of the data.

Another follow-up here is that the data so far from the DeeP-C, do you think they are sufficient at this moment for potentially submitted to USPSTF for review next year or you need to do additional studies or other type of work?

That's an important question. So, the USPSTF does a review every five years, and their review for colon cancer just happens to be this year. So we're very fortunate there. And one of the reasons we want that publication out as soon as possible is so that we can submit it to the USPSTF as they conduct their review which we would expect to take at least a year.

And presently it's important to note that the FIT test is rated B by the USPSTF, and we would expect that this test, which is superior to the FIT test, to be rated either A or B. And an A or B rating does trigger under the Affordable Care Act the rule that screening tests are not subject to co-pays and must be covered by payers.

Okay, lastly, in terms of pipeline development, in terms of the [IDB] studies, any updates in terms of the commencement of the trial as well as the timeline for potential data releases?

We haven't yet discussed specifically the ordering of our next products other than the colon cancer screening test in the IBD population of study which is underway right now. We'll talk about that more as the year goes on, but right now, our focus is on Cologuard, the market opportunity for which is just huge.

Okay, great. Thanks a lot. I appreciate it.

Zarak Khurshid, Wedbush.

Great. Thanks for taking the questions, guys. Regarding the CMS application, can you remind us when that would be submitted and when we might expect a decision on the reimbursement particularly with respect to the FDA decision?

Yes. We want to submit that at the same time as our final component of our FDA submission because they have a really tight time frame that they need to make these decisions on. So in our discussions with CMS we've concluded that it's best for us to do that around the time of the FDA advisory panel hearing. So we would expect that to occur later this year.

Got it. And then you just mentioned co-pays [today], maybe I wasn't paying attention, but can you just talk more specifically how you're thinking about co-pays or any out of pocket costs to the patient over the next couple of years?

Sure. In the commercial market, obviously that's going to vary by commercial payer. And in the Medicare market, screening tests are -- there is no co-pay associated with the colon cancer screening test.

In the commercial market, USPSTF, A or B rating would trigger two things; a mandatory obligation for insurers to cover the screening test and an obligation that they did not charge any co-pays. That first point is important because one of the reasons we want to have our own lab is so that we can negotiate the appropriate value for our test directly with those payers. And certainly USPSTF rating of A or B would help us in that endeavor.

Great. Thank you.

Thank you. I'm not showing any further questions at this time. I would like to turn the call back over to Kevin Conroy for closing remarks.

Well, first of all I would like to thank all the investors who have been so incredibly supportive over the last four years. The great news that we have with the DeeP-C study is something that's incredibly impactful to the Company.

And I'd also like to thank the entire team at Exact Sciences and our collaborators and our investigators and all the people who enrolled in this study to complete a groundbreaking clinical trial, developing a groundbreaking product and preparing it for eventual release into the market and being made available to patients. So, thanks to everybody and we look forward to talking to investors again soon. Thanks.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.