Exact Sciences Corp (EXAS) 2013 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Exact Sciences Corporation fourth quarter 2013 earnings call. (Operator Instructions). As a reminder today's conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Rod Hise. Mr. Hise please begin.

Thank you for joining us for Exact Sciences fourth quarter 2013 conference call. On the call today are Kevin Conroy, the Company's President and Chief Executive Officer, Maneesh Arora, our Chief Operating Officer, and Bill Megan, Senior Vice President of Finance. Exact Sciences issued a news release earlier this morning detailing our fourth quarter 2013 financial results. If you have not seen it, please go to our website at exactsciences.com or call 608-807-4607 and I will send it to you. Following the Safe Harbor statement, Bill will provide a summary of our fourth quarter financial results. Next, Kevin will provide an update on our corporate priorities.

Before we get underway, I would ask everyone to take note of the Safe Harbor paragraph that appears at the end of the news release issued this morning that covers the Company's financial results. This paragraph states that any forward-looking statements that we make, one, speak only as of the date made, two, 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 three, 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 statements 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 Senior Vice-President of Finance, Bill Megan.

Thank you, Rod. And good morning, everyone. For 2013, we used $49 million in cash, below our guidance of $52 million, ending the year with $133 million in cash. 2013 was a year of great accomplishment across the Company and in the fourth quarter we completed our lab construction on schedule and recently earned CLIA certification. Our IT infrastructure is in place and our lab, ordering, billing, and other IT systems are nearing completion. We also made great progress in enhancing our leadership team. Looking ahead we will continue to execute our commercialization and launch plan which Kevin will discuss in more detail in just a moment. Before he does, we want to address financial guidance. Presently, we do not know the date of the potential FDA approval of Cologuard, which would obviously impact the timing of launch and associated revenue and expenses. As a result, we will provide only general color on cash utilization in 2014.

As we move into full launch mode we will substantially increase our investment in several areas, particularly building our sales force, including hiring and training our team of 75. It is important to note that the majority of sales force hiring will occur upon FDA approval through our contract sales partner. Developing and executing our comprehensive marketing content and related media plans, building inventory to fulfill demand, and staffing and equipping our lab. We also will be continuing our R&D program which supports the launch of Cologuard and also is building our pipeline of new products. We have been metering spending according to the projected regulatory timeframe. As we have greater visibility into approval timeframes we will adjust the timing of our spending. It is now my pleasure to introduce Exact's President and CEO, Kevin Conroy. Kevin?

Thank you, Bill. In 2013 the team at Exact Sciences laid a strong foundation for the potential approval and launch of Cologuard this year. We had three priorities during 2013 and we advanced each of them. We made great progress towards the launch of Cologuard. The top line results of the clinical trial were announced, and a paper detailing those results has been accepted for publication in a top-tier peer reviewed journal.

The FDA and CMS parallel review process continues to move forward and we submitted our graph application to CMS for a national Medicare coverage decision. Experienced sales and marketing leaders are in place and they are planning for the buildout of their teams. We also selected our contract sales partner, Quintiles. Quintiles has extensive CSO experience and we chose them after a thorough competitive process. Significant market research was done in 2013 that has helped us better understand our target customers including physicians, payers and patients. We also made significant operational strides during 2013. We completed our PMA submission to the FDA. An FDA advisory committee will meet to evaluate our application on March 27.

As Bill said, the construction of our lab has been completed and we have the IT infrastructure in place to support both Cologuard testing and our patient compliance engine. In addition we made great strides towards being ready to manufacture Cologuard and prepare for our FDA facilities audit. Exact Sciences always will be a company that is driven by innovation. During 2013 our R&D team completed critical validation studies to support our PMA application. We made good progress on our product pipeline through our collaboration with the Mayo Clinic including advancing our work on IBD, pancreatic, and esophageal cancers. We also expanded work with Mayo last year through a collaboration on upper GI tract cancers that is ongoing.

Let's turn now to our 2014 priorities. We have three priorities in 2014. A strong launch for Cologuard providing world class service through our lab and patient compliance engine and continuing to innovate and expand the business. Let's talk about the Cologuard launch first. We are continuing to work with CMS to secure the appropriate Medicare reimbursement for Cologuard. We will execute a strategy for securing reimbursement from private payers that is focused on large payers in targeted areas. The sales and marketing leaders we hired in 2013 are preparing their staffing plans to be ready at launch. We want to be known as a company with a special commitment to serving our physician customers and their patients. Our goal for the patient compliance engine is to generate at least 70% screening compliance among patients to whom Cologuard is recommended. During 2014 we hope to both expand our pipeline and the reach of our business.

We will continue to explore the feasibility of new GI products with the Mayo clinic. This has been an incredibly productive relationship. We recently hired business directors for both Europe and Asia to assess our entries into countries in those large and valuable markets. Let's turn now to some recent market research we conducted. We recently completed market research that reinforces and underscores our belief in the large market opportunity for Cologuard among the 80 million average risk Americans 50 and older. The research showed that primary care physicians don't believe that fecal blood tests are very good. It also found that approximately 25% of primary care physicians still rely on a digital rectal exam as their primary screening method.

DRE with an in office FOBT test has a cancer sensitivity of 9% and is not recommended. As stated in 2008 by the joint guidelines of the American Cancer Society, the multi-society task force which included the AGA, the ACG, the ASGE, and the American College of Radiology, the accuracy of this test is so low that it cannot under any circumstances or rationale of convenience be considered as a method of colorectal cancer screening. Finally, the two most important factors identified by physicians when they select a screening test are cancer sensitivity and patient compliance. Through our Cologuard test and our patient compliance engine, we believe there is no other company that can deliver this combination to physicians. Let's talk now about our Company milestones.

We are very excited about 2014 and the launch of Cologuard. We expect the DeeP-C data set to be published before the FDA panel meeting on March 27. We look forward to presenting this powerful at the meeting. We also anticipate that the FDA will make the full data set from the DeeP-C Study available in a panel pack on or about March 25. CMS should make its final national coverage decision within approximately 90 days of FDA approval. The coding and payment decision are made by a separate group at CMS and we anticipate that those decisions will occur generally around the same time as the final coverage decision. We are excited about 2014 because we believe that Cologuard has the potential to positively affect many patients by the testing done in our lab and through our patient compliance engine. The goal of our lab and call center is to make Cologuard easy for physicians to order and patients to use. The 30,000 square foot lab is designed to be scalable to a million tests per year.

The lab is state-of-the-art and connected with our 24/7 customer service center which is the heart of what we call our patient compliance engine. The goal of the patient compliance engine is to get more patients screened. Our team and systems will work to remind non-compliant patients to follow through with the Cologuard test. We know these compliance efforts work. A peer reviewed study by Kaiser Northern California showed that the compliance rate among Medicare patients nearly doubled to 78% after Kaiser initiated a similar program. Let's turn now to our product pipeline. We have had a deep collaboration with the Mayo clinic since 2009 that is focused on two areas. First, developing new tests that can screen general asymptomatic populations for pre-cancers and cancer across the entire GI tract. Second, developing new applied diagnostic tests for specific GI cancers that would potentially be used with high risk and symptomatic patients.

We anticipate that this broader collaboration will be very productive in 2014. We are working together on 21 studies. Exact is funding these studies and we expect roughly a dozen publications to be produced in 2014. In addition we anticipate having more than ten joint abstracts at DDW, Digestive Disease Week. In conclusion, 2013 was a year of strong achievement by the team at Exact and we are committed to continuing that achievement in the year ahead. 2014 is an important and exciting year for all of us at Exact.

We are continuing to prepare the launch of Cologuard and look forward to setting a new standard of service to physicians and patients at our lab and customer service center. We will also be working to continue Exact's tradition of innovation while we assess new markets which will create future value for physicians, patients and shareholders. We begin 2014 in a strong financial position to advance these priorities. We are now happy to answer your questions.

Thank you. (Operator Instructions). Our first question is from Jeff Elliott of Robert Baird. Please go ahead.

Hi, Jeff.

Hi. My first question on the compliance rate, 70% is a bit higher than what I was thinking. I guess, what gives you confidence that you can achieve the rate that high? As a follow-up, what sort of annual adherences do you expect? Or repeat testing adherence would you expect over time?

The first question is in terms of the compliance rate. If you take a look at the work done where systems for example, Kaiser Northern California simply sends reminder letters out for patients to come in and get tested they have been able to achieve north of the 70% rate. We believe that with a more robust compliance engine and repeated reminders to patients along with the excitement around the benefits of stool DNA test, we believe that we can get to at least 70%. Our market research confirms that and the work of other groups outside of Kaiser also confirms this. It is a goal and we will work hard to achieve that goal.

In terms of adherence, we know that adherences to an annual test is very low so the FIT and FOBT tests as shown in the large V.A. study, the compliance over a five-year period of time was abysmal, only about 14% of patients complied throughout that five-year period annually. We believe that with a test that has a longer interval and I want to reinforce we don't know what that interval is yet but if the interval is every three years that automatically you are going to have a higher adherence rate because you are not requiring somebody to do that every single year. Couple that with the compliance engine and we believe we can do a very good job of getting patients to adhere. We have a rich information source to remind patients or to remind their physicians when it is time to get screened. This is a powerful value proposition that we offer to physician and physician groups.

Got it. And just shooting over to the cash burn, I understand it you won't provide detailed guidance, but could you help us think of what level of inventory you expect to build as you approach the launch?

If you think about launching and commercialization here, one thing that we have not been doing is building inventory. We will make an investment in it. Importantly, Jeff, the timing of the regulatory approval decisions, the decisions made by CMS will impact how we think about that inventory. So our projection in terms of the amount will be very dependent upon critical unknowns. I can't give you a number.

Got it. Okay. I'll jump back in the queue. Thank you.

The next question is from Brian Weinstein of William Blair. Please go ahead.

Good morning. Thanks for taking the question. My question is really directed at Maneesh a little bit here. Maneesh I would like you to talk a little bit if you could about the launch preps and how you feel about where you guys stand at this point and how we should measure your preparation as you get ready to launch the product. Specifically, I guess what are some of the biggest hurdles that remain that you are trying to check the box on? Thanks.

Thanks, Brian. Thanks for the question. We've had a good amount of time to prepare. So I would tell you overall we are ready and we are really excited about the potential for FDA approval and launch. The thing that has us most excited is really the quality of the team and leadership in place. Being in this industry for some time the ability that we have had over the last three to six months to just attract top tier talent, the leadership from a sales perspective and building that sales infrastructure and preparing to, the resumes we have so that when we are ready to launch, has really been exciting. We also have the sales training and infrastructure in place. So that is something we have been prepared for and are very ready for. The other thing that we have done is as Kevin mentioned before, in the market research we know that the market opportunity is there and that physicians are looking for an ability to increase screening rates but we also know exactly who those physicians are.

We have the data around the highest prescribing fecal immuno-chemical testing phobic prescribers and believe that just by converting the 25% of people that are doing something that is not recommended, that represents an enormous opportunity. So we feel good about deploying both the talent that is coming as well as the data that we have in marrying those two. We have in addition, the marketing and medical education programs in place. Overall, feeling very bullish and excited about the potential for launch later this year.

Okay, thank you. And then Kevin, I just want to clarify. Can you go back to the comments in the script about when you expect to get the CMS preliminary and then final national coverage determination. It was our understanding or our belief that that preliminary decision would be within a couple of weeks of FDA approval. I don't know if I heard you say 90 days or if anything changed in the thinking.

Sure, thanks Brian. Nothing has changed. We would expect the preliminary national coverage decision issued by [CMS] to occur around the time of FDA approval, within a couple of weeks. Then there is a process that is required by Medicare, a notice and comment period that will take about 90 days. So that the public can provide comments to Medicare's potential decision to cover this test. At the end of that 90 day period, the Medicare coverage decision becomes final and becomes a national coverage decision. And the import of that is that regardless of what region of the country you live in or what MAC, which is the Medicare Administrative Contractor which has a contract for those states, this test would be covered. That is -- so the timing is FDA approval and preliminary coverage decision around the same time. Approximately 90 days later that decision would become final. And around that time you would also have a different group within Medicare make a decision on the code to be used for the test and also the payment level.

This is unprecedented and one thing to note, unlike most molecular diagnostic tests that have been launched, at launch about 40% to 45% of our targeted patients will -- their insurer, i.e., Medicare will have covered this test.

Is there a chance that you get payers, other payers on board before the CMS final coverage determination, and how does that impact when you will actually physically start selling the product? That is my last question, thanks.

We would expect to have a soft launch prior to the Medicare coverage decision. The test will be available not immediately following FDA approval but let's say within that month following FDA approval. And then the full bore launch will occur once the Medicare population is able to take the test and have it reimbursed. We do believe that this -- the process of getting private payers will be triggered off of FDA approval, CMS coverage, and publication in a peer reviewed journal. Those three things will trigger the payers. Many payers will pay after Medicare has made the decision. Other payers will do their own analysis and that will take a longer period of time. Our area of focus, of course, will be on the large regional payors in the areas that we are focusing our launch efforts on.

Okay. Thank you.

Thanks.

The next questioner is Brandon Couillard of William -- of, pardon me, Jefferies. Please go ahead.

Hi, good morning. This is Kate in for Brandon. Thanks for taking the questions. Could you share your thoughts on the key things you would expect the panel to discuss this March and would you expect there to be any overlap in discussion between the technology scheduled to be discussed the day prior? Thanks.

Well, we don't have any comment on the technology that will be discussed on March 26. We think that there are two different products with two different datasets and applications to FDA. In terms of our discussion, I think that the bulk of the discussion will be around the data generated from the DeeP-C data. Taking a look at how well this test performs relative to its primary and secondary endpoints. Happy to note that we met both primary and secondary endpoints. How well it performs in different patient populations. And how the test is intended to be used. I think that it is also fair game during that time period is what is the appropriate post approval study and how will that post approval study help answer the question of the appropriate interval? So I think those will be the primary areas of focus. We really look forward to the panel decision and we have a greater insight now into what the FDA intends to focus on during that time period. And March 27 is right around the corner and we are well prepared for that meeting.

Okay, great. Thanks. And just one follow-up. When should we expect to see the economic study data specifically? Would you publish that ahead of the final CMS decision?

No, we have submitted that data to CMS upon their request. And at some time -- we would expect the various economic studies to be published by us, by others after FDA approval, CMS coverage or potential FDA approval and potential CMS coverage.

Okay, great. Thanks.

Thank you.

The next question is from Jeff Frelick of Canaccord. Please go ahead.

Good morning, maybe first one for Maneesh as you are finalizing the checklist. Has the lab gone through or scheduled CLIA inspection and where do you stand with certification?

I think Kevin mentioned on the call but we are really pleased that we do have CLIA certification on the lab and having that CLIA certification is an important first step to securing all of the necessary state licenses that we need and that is something that is now in process. We are pleased by that and we expect to be ready to go shortly after FDA approval.

Okay. and Kevin, so the PMA submission was module which I guess was great because you got a head start on the first modules that went in. Third module submitted last summer. As much as you can comment, does the FDA seem satisfied at this point with everything they've had or is there still a lot of back and forth with questions, anything you can share there?

You know, out of an abundance of caution I think we would prefer not to provide too much color on communications with the FDA. Here is what I will note. From the outset we have had total engagement by a really high quality group of professionals at FDA and CMS and this process of parallel review was unique. So I have said this over and over again publicly. This is an example of innovation by these two agencies and they should be complemented for that. But it is our job to provide the data for them and to have speakers ready to comment on that data. We feel very positive based upon a multitude of conversations with FDA which are occurring maybe not daily but certainly weekly and frequently multiple times a week.

We've had total engagement. We think that we will get a fair shake from the FDA and from CMS.

Okay. And this last question, on the commercial side, what does the ideal ordering doc look like -- and does Quintiles, do they have obligations to meet with respect to timing and numbers and so forth? Thanks.

Sure, Jeff. So we actually have done a whole lot of work on what the ideal doc looks like and incorporated through our market research and applied -- it's not just a simplistic who's the high prescribing FIT and FOBA doc? We actually have done deep research on what the attributes and characteristics are of that physician. Male, female. Age, regions of the country. And that is really what is guiding and dictating. So we are taking a very quantitative approach of applying that qualitative profile across the list of the 350,000 docs and their FIT/FOBA profile. So it is pretty sophisticated. We are excited to be able to do that at launch. So what was the second part of your question?

Will Quintiles have obligations?

We are taking a very hands on approach and what we have tried to do is make sure we take a flexible approach. So what going with Quintiles does for us is it gives us the flexibility to deploy and meter our investment and, yes, absolutely they have obligations but the management and direction of those reps will be -- they will be directed by us at our direction. So it will be a joint effort but we are taking that responsibility and Quintiles will -- that gives us that flexibility.

Great. Thanks.

One important thing, Jeff, is the reps that Quintiles provides will be dedicated reps. They are not shared reps. They are going to be dedicated to us and our efforts.

So they will have all of their marching orders from Exact Sciences?

That is exactly right.

They will more or less internally be considered part of the Exact Sciences team. There will be no differentiation from a company culture standpoint and from a standpoint of being onboard with the Exact Sciences mission.

Understood. Great. Thank you.

The next question is from Zarak Khurshid of Wedbush Securities. Please go ahead.

Thanks. Good morning, guys.

Thanks, Zarak.

Can you provide a little bit more detail just building on the last question. Can you provide a little more detail around the decision to work with Quintiles? Are there any examples where they've successfully launched a product into the primary care channel?

So that was really one of the key criteria as we evaluated -- as we evaluated all of these companies because we looked at a whole number of them and they are all of the usual suspects. So typically not however in diagnostics as you know what we are doing is a little bit unique, but not unique in terms of what Quintiles does or what their business model is. We took a close look at their prior launches not just in primary care but across multiple disease areas including GI.

Okay. Any specific examples of where they have been particularly successful with a certain product?

You know, that is not something we are prepared to discuss but that was part of the evaluation process that we went through last year.

And it was critical that they had prior primary care experience. You can talk to Quintiles yourself and you will get color. But their depth of experience in the primary care market is something that was a helpful factor in us deciding to go with them.

Understood. Thanks for that. And then just a quick question on the technology side. You mentioned some of the activities of Kaiser North. Are they employing things like text messaging and other technologies to increase compliance or are you doing something -- are you planning things that are different and above and beyond what Kaiser North and other folks are doing?

Kaiser North their main approach was simply sending letters reminding patients to call and talk to their primary care physician and set up an appointment for colon cancer screening. In some cases they also sent out FIT tests directly to patients asking them to return them. We plan to go another level and use the most advanced technologies. I think we will evolve over time in terms of various forms of messaging. The initial rollout will focus on communication with patients via the telephone and also through the mail. But also as we gain greater access to cell phones and e-mail addresses we will be able to communicate with patients in more advanced ways.

All right. Thanks.

The next question is from Chris Lewis of Roth Capital Partners. Please go ahead.

Hi, guys. Thanks for taking the questions here.

Hi, Chris.

I guess first I know it is still early but can you go into more detail on the types of feedback and overall interest levels you are getting in some of those earlier stage discussions with the larger health care systems at this point? And then I guess the follow on to that, what types of information are they looking for and asking about in order to bring on the test over time?

Right. So it is important to note that we have been out there talking to systems to get a better understanding of what their general colon cancer screening needs are and we have done this in a way that would help inform how we offer this test to those customers. There are in our database over 800 group practices that employ primary care physicians that are responsible for colon cancer screening. Those groups are acquiring more and more primary care physician practices and we expect to see about 50% of primary care physicians employed in those groups around the time of launch. Their needs around colon cancer screening, their number one need, is to get more of their patients screened. It is a number that they track. They frequently are just shooting to get 50% compliance.

And any new screening method that can help get more people screened, and also they know that the FIT and FOBT testing, the noninvasive testing that they are doing today largely in patients who refuse to undergo colonoscopy, is significantly deficient so they want to improve -- to increase their screening rate they want to improve the quality of the screening that they are doing. And what we are hearing back from them is that an improvement by Cologuard over the current non-invasive screening test is something that would be very meaningful to them to offer as an option to those patients who are unwilling to undergo colonoscopy. It's about quality, it is about access, and cost is always a question that they have, too. When they hear where our test could potentially be priced and we get their sense of that, we get great comfort that this is -- that as we are thinking about pricing that we are thinking in the right area. It gives us great enthusiasm because that is a huge segment of the market long term.

That's great. And then can you talk a bit about the expectations for a rep, I guess in terms of a successful conversions during the first year of launch?

Yes, so if you are a rep, Chris, you are going to get a list from us of X-number of primary care physicians that are high prescribing FIT and FOBT docs in your region, and your job is to convert those docs. Not just broadly to go out there and convert any docs. We want to convert those docs who we know today are prescribing on average 400 noninvasive tests a year. And what we want to do is to get those docs to use the best test. You wouldn't be compensated on a bonus basis by getting physicians who are not on that list. Our goal is to get the physicians who are ordering a high volume of tests today to do -- to offer Cologuard which we believe is a better test than the current noninvasive methods. And with 50 reps out there calling on these high-prescribing primary care physicians you can do the math and see that you could have a very productive group of the first group of primary care physician sales reps that are out there doing the great work that we anticipate they will do upon launch.

Okay, great. Thanks.

Thanks, Chris.

The next questioner is Raymond Myers of Alere financial. Please go ahead.

Yes, thank you. Kevin, you touched upon Europe and Asia. It is not something we talk about a lot but as we develop the marketing plans for the United States I'm wondering if you might elaborate on what the size of potential markets you see in those areas?

Well, I'll preface this by saying we are really just beginning that work. What we see is there is a large -- well, this is obviously a huge population outside the U.S. Everybody in the world over the age of 50, maybe even younger, needs to be screened for colon cancer. It is a huge problem outside the U.S. It is actually a larger problem in Europe, significantly larger problem in Europe than it is in the U.S. Because there is not a massive colonoscopy infrastructure, there's not a huge -- there's not even a moderate colonoscopy infrastructure in Europe and in Asia, screening by colonoscopy is not really an option. Then the question becomes is FIT or FOBT testing widely used? By and large, the answer is no, it is not.

In the high risk population in Asia and Europe we believe there is a huge opportunity for Cologuard. These are patients with a significant family history or who have had prior disease and need to be screened. Cologuard is a very cost-effective way of screening those populations. What we need to do is design and conduct the appropriate studies in the appropriate populations to show the efficacy of Cologuard in those populations. We will focus our efforts here because the biggest return on the investment that we can make is to hire more primary care reps to call on people in the U.S. But in Europe and in Asia, there is a significant opportunity and we need to start doing the fundamental work now in order to make those markets a reality down the road.

Great. And if I could ask one more. In the past we had talked about there being a plan for 100 reps in the U.S. roughly by year end. Is this now changing to 75 reps hired by Exact and then supplemented by Quintiles? Is that the right way to think of it?

Think of it this way, there will be about 100 people in the commercial organization at launch, 75 in the sales organization. Of those 75, you have about 50 being employed by -- directly by Quintiles and calling on primary care physicians. The other 25 in the sales organization will be calling on systems and in sales management. And then there will be 25 others in the commercial organization including in the marketing organization. As we see uptake of Cologuard most likely the first people that we will add will be reps calling on primary care physicians. Does that help clarify?

Yes, exactly, it does. Thank you.

Okay, thanks, Ray.

(Operator Instructions).

The next questioner is Jan Wald of Benchmark Company. Please go ahead.

Jan?

You may want to check your mute button.

Any other questions?

If you have a follow-up from Raymond Myers of Alere Financial. Please go ahead.

Thanks, Kevin. I did have one other question which was did you receive any more clarity recently regarding Cologuard's likely CMS reimbursement level?

Those discussions have continued and I would rather not provide any color on them other than nothing has changed. We feel confident that the process of the new molecular codes will be followed. We feel confident that there will be a crosswalk analysis and so I don't really have any additional color Ray, on that topic.

Okay. Thank you very much.

And the next questioner is Eric Criscuolo of Mizuho. Please go ahead.

Good morning. Peter Lawson. On the CMS pricing, how long after that initial decision is made and the pricing is locked in, how long is that in effect for and when can CMS come back and positively or negatively make a change to that price?

Good question. So we would expect that Cologuard would go on to the clinical lab fee schedule and historically tests that go on to the clinical lab fee schedule are more or less permanent in terms of their pricing subject to an increase or reduction in the payment levels to all of the tests on the clinical lab free schedule. So this is a process that is -- provides clarity for the long haul and we again expect this test to be on the clinical lab fee schedule, not the physician fee schedule because this test doesn't require a physician's interpretation.

And then assuming that both get approved, how do you view the market positioning of your test versus the blood-based test?

You know, we think there is room in this market with 80 million Americans, many of who are not screened to be screened by multiple methods. And I would rather not comment directly on the blood tests. They are -- there is a blood test that is being reviewed by FDA and they have a separate pathway and a separate reimbursement pathway. Our focus is on getting more people screened and we don't believe that a -- the -- a potential entry of a blood test will affect the Cologuard adoption rate.

Okay. Got you. And just lastly, the FDA approval clause, did that start on the first modular submission or the last one that it was in?

I'm sorry, one more time?

The FDA's approval clause that they try to get everything under. Did that start at the final module submission or was that sometime before?

That starts with the final modular submission.

Great. Thank you.

Thank you.

The next question is from Jan Wald of Benchmark Company. Please go ahead.

Hello. Sorry, I dropped off for some reason. I guess a lot of my questions have been asked but let me try to dig a little deeper into a couple of things. One of the things I'm wondering is why you made a buy decision on Quintiles rather than a build decision?

As Maneesh said, the goal of working with the CSO is it gives you first the ability to ramp up very quickly and it then gives you the ability to scale quickly. They have the infrastructure, and people, and resumes, and access to primary care sales reps that we don't have. So it -- to hire 50 sales reps, high quality sales reps, would take us longer than it would take Quintiles. Our goal with Quintiles sales reps is eventually for them to become Exact Sciences employees when they prove their mettle and are able to show their long-term value to the Company.

And in terms of that, since you are expecting a quick turnaround on the Quintiles sales force how long do you think it is going to take that sales group to become proficient and be a full-blooded sales force going out and selling the product?

With the quality of people that we expect to hire and the quality of people who are really lining up to come work for Exact and the simplicity of this story, we he would expect them to be very effective shortly after FDA approval and as they get out into the field.

Okay. So there is no ramp up so in terms of how we think about the sales and revenues it is going to be almost instantaneous once CMS approves?

I'm not saying that. Of course, it always takes a little while to get the customer to understand the product and understand the data and to change physician behavior. But in terms of the quality of the sales force, this sales force is going to be high quality and really well trained and raring to go shortly after coming onboard. They will be extensively trained. They will understand the product inside and out. They will understand the data inside and out. They will understand the value proposition inside and out. In terms of the ramp that doesn't necessarily translate to immediately seeing millions of tests being ordered on day one.

Okay. And in terms of a ramp, how do you see us -- how do you see that ramp progressing?

That is something that we are not prepared to talk about at this point but I think there will be an opportunity to talk about that in the near future.

Okay. And I guess back to the panel. You said you are excited about the panel and you can't wait for the panel to happen, but what worries you about the panel? What are some hot buttons that might come out at the panel that make you have a sleepless night?

Well, I'm happy to tell you that I have been through two mock panels and we expect to have one more and I haven't had a sleepless night through this process. The story is really compelling, the data is compelling, the manuscript in the peer reviewed publication is compelling. There are a lot of things I lose sleep over. This panel is not one of them.

Okay. Well, thank you very much.

Thank you, Jan.

Next a follow-up from Zarak Khurshid of Wedbush Securities. Please go ahead.

Hi, guys. Thanks for taking the follow-up. Just curious how should one think about the economic split between Exact and Quintiles?

Good question. We are not splitting economics of the tests with Quintiles. We are paying them on top of what we pay the actual sales rep. We would pay X to Quintiles for a particular sales representative and Quintiles would pay that rep Y. So we are basically paying cash on top of what we would pay a fair economics to the sales rep.

Okay. Thanks.

Thank you.

I am showing no more questions in the queue and would like to turn the conference back to Mr. Kevin Conroy, CEO.

Well, first of all, I would like to thank everybody for participating in the call and I would especially like to thank the team here at Exact Sciences that is working so hard to prepare for the panel prep and to prepare for launch. They are doing an outstanding job and we really look forward to 2014 this important year of launch. Thank you very much.

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.