Exact Sciences Corp (EXAS) 2015 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Exact Sciences Corp.'s first-quarter 2015 earnings call. (Operator Instructions). As a reminder, the conference is being recorded.

I would like to introduce your host for today's conference, JP Fielder, Senior Director, Corporate Communications. You may begin.

Thank you, Taria, and thank you all for joining us for a Exact Sciences' first-quarter 2015 conference call. On the call today we have Kevin Conroy, the Company's Chairman and CEO; Maneesh Arora, our Chief Operating Officer; and Bill Megan, our Senior Vice President of Finance.

Exact Sciences issued a news release earlier this morning detailing our first-quarter 2015 financial results. If you have not seen it, please go to our website, 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 first-quarter financial results, then Kevin will provide an update on our corporate priorities.

During today's call we will make forward-looking statements based on current expectations. Our actual results may differ materially from such statements. Descriptions of the risks and uncertainties associated with Exact Sciences are included in our SEC filings, which also can be accessed through our website.

It's now my pleasure to introduce the Company's Senior Vice President of Finance, Bill Megan.

Thank you, JP, and good morning, everyone. We reported a strong growth trajectory in the first quarter. Our financial results include revenue of $4.3 million on 11,000 completed tests. Operating expense for the quarter was $36.1 million, an increase of approximately $5 million from the prior quarter, reflecting the commercialization of the business and investment across all of our functions. Cost of sales was $4.3 million, or $383 per test. We used $37.6 million in cash in the quarter, and ended the quarter with a cash balance of $245 million.

It's now my pleasure to introduce the Company's Chairman and CEO, Kevin Conroy. Kevin?

Thanks, Bill. We are pleased with the Cologuard launch and the accelerating demand from physicians and people over 50. Both the number of ordering physicians and completed Cologuard tests increased significantly during the quarter. The number of physicians who are placing repeat orders is growing rapidly.

The reach and frequency of our sales team is expanding, and during the quarter we signed a co-promotional agreement with Ironwood Pharmaceuticals. Exact Sciences' laboratories and our customer care center are driving value for our customers, both people over 50 and physicians. Finally, we continue to make progress with commercial payers.

Let's start by talking about the number of Cologuard tests completed. The strong launch of Cologuard remains on track. We reported 11,000 Cologuard results during the first quarter, an increase of 175% over the fourth quarter. We expect more than 18,000 completed tests during the second quarter.

Our results demonstrate that our launch strategy is working, and Cologuard's traction is increasing. Our launch strategy incorporates active outreach to both physicians and people over 50. The early feedback is that there is great demand for Cologuard -- an accurate, non-invasive colorectal cancer screening tool.

Let's take a look at the number of physicians who are ordering Cologuard for the first time. The number of ordering physicians continues to grow rapidly. After a strong fourth quarter, we added 4,200 new physicians during the first quarter, a 102% quarter-over-quarter increase. As the number of ordering physicians has grown, so has our primary care physician market penetration. It has grown from less than 1% in the fourth-quarter 2014 to 3% in the first-quarter 2015, an indication of the growth we're driving and the opportunity that remains.

This performance was achieved by approximately 80 sales professionals. Our marketing efforts are helping to increase physician awareness and Cologuard ordering behaviors as well.

Our marketing activities are having a significant impact on Cologuard's growth. These graphs illustrate the influence of Cologuard marketing on two key metrics: physicians who are ordering for the first time, and their proportion of Cologuard orders.

About half of physicians who are ordering Cologuard for the first time do so without first being contacted by our sales team. They are responding to our marketing campaigns, which include direct-to-consumer programs, such as digital marketing and print advertising; direct-to-physician programs, like the medical education campaign that I will discuss in a minute; targeted public relations in national and local media, driving Cologuard awareness.

The total Cologuard test orders that have been made by new physicians is about 22% of all orders to date. This represents a significant opportunity to convert these physicians new to Cologuard into high ordering physicians.

Our Web traffic indicates that our digital marketing efforts are working. We are seeing rapid growth in traffic to our three websites, especially Cologuardtest.com, with 1.6 million total views to date. This Web traffic is having a positive effect on ordering, as well. For example, 1,000 Cologuard doctor discussion guides are being downloaded from Cologuardtest.com every week.

People take this guide to their doctor's appointment to help educate their physicians about Cologuard. We are seeing significant growth in the number of physicians who have ordered Cologuard more than 20 times.

The number of physicians who are placing the highest number of orders are growing the most rapidly, by nearly 3X. We are pleased with the absolute number of new physicians and the percentage of physicians who are becoming high-volume orderers. Typically, physicians wait to see their patient's experience with Cologuard before they begin ordering with frequency. On average, it takes about 2 to 3 months before a physician becomes a high-volume orderer. We are pleased with these results, and it is still early in our launch of Cologuard.

Let's turn now to how we will continue to drive growth. Our outstanding commercial team is focused on three priorities: one, increasing the reach and frequency of our sales team to primary care physicians; two, promoting physician-to-physician engagement; and, three, securing coverage from commercial payers. We will discuss each of these priorities in greater detail.

Let's review the expansion of our sales team. Our sales professionals have an average of 10 years' experience in healthcare. We had 80 of these professionals at launch in October 2014. By our national sales meeting in March, there were 140 people on the team. We are adding 60 more sales professionals by June 1.

In March, we announced a one-year co-promotional agreement with Ironwood Pharmaceuticals. Ironwood markets LINZESS, an FDA-approved treatment for adults with certain GI disorders. This agreement became effective on April 20. And Ironwood is promoting Cologuard as a second position product to its 25,000 physicians, including both GIs and primary care physicians.

Our partnership with Ironwood also includes a joint medical education effort. Ironwood has a robust group of guest GI speakers in its program that will enable us to expand our efforts. Our med ed program is one of the key drivers of continued growth.

Our program is aimed at driving awareness of Cologuard. It is focused on physician-to-physician engagement. These efforts include lunch and dinner programs, online videos and webinars, presentations that highlight Cologuard at key scientific meetings, and online continuing medical education. Our med ed efforts are paying off. Physicians who participate in one of our med ed programs order 50% more than those who don't.

Let's turn to the significant value we have in our lab. The biggest problem with colon cancer screening is the lack of compliance when physicians order a screening test. One frustration of GIs is that of those who agree to schedule a colonoscopy, 20% simply don't show up for their scheduled procedure.

The team at our customer care center is at the heart of our effort to change this compliance challenge by actively engaging physicians and their patients. It's working. Our compliance rate for Cologuard is currently 71%.

As part of our effort to increase compliance, we make reminder calls and send letters to those people who haven't returned their Cologuard kit. Physicians also benefit from our customer care center because we take much of the colon cancer screening follow-up out of their office and into our customer care center. People benefit because they have a resource to answer questions about colon cancer screening and Cologuard.

Let's turn to the progress we're making with commercial insurers. We continue to make steady progress securing coverage of Cologuard by additional commercial payers. We added Anthem, one of Blue Cross/Blue Shield's largest affiliates; Tufts Health Plan, ranked the number-one health plan for quality in the country; CareFirst in Maryland, DC, and Northern Virginia; Excellus, with members across Western New York, and Dean in Central Wisconsin.

We also are working with some insurers to secure an in-network contract. As a result, we have more than 60% of people over 50 years of age covered for Cologuard, an impressive number, given how early we are in Cologuard's launch.

As a reminder, there is a two-step process for reimbursement from commercial payers. The first is securing a medical policy decision to cover Cologuard. The second is entering into a contract to make Cologuard an in-network test at an agreed-upon price. Our managed care team is in active discussions on both fronts.

We are encouraged that the payer community believes in the value of offering Cologuard to its customers. We look forward to working with payers to bring Cologuard to those they cover.

Let's turn now to an upcoming event. I'm pleased to announce that our Investor and Analyst Day will be held on June 25 in Madison, and webcast live. We look forward to discussing our strong foundation, including an in-depth tour of Exact Sciences' laboratories and customer care center, Cologuard launch dynamics, and our exciting pipeline.

As you see, our first quarter was another period of success and growth for Cologuard, and Exact Sciences remains on a strong path.

We are now happy to answer your questions.

(Operator Instructions). Jeff Elliott, Robert W. Baird.

Great quarter. Kevin, you've talked before about the lack of broader coverage as being the biggest rate limiter to broader adoption. However, you had a really nice pickup in coverage during the quarter, some of which you highlighted in the press release.

Would you still say that coverage is the biggest rate limiter today? And, if so, when do you think we reach the tipping point in terms of coverage, such that that is no longer the case?

It is the biggest limiting factor, and will probably continue to be because there's a lot of work to do with the vast number of payers in the US. That dynamic is, I think, starting to change, as you can see in the quarter with the decision by Anthem to cover Cologuard.

You start to see that payers understand the value of Cologuard, both from a medical standpoint, a customer satisfaction standpoint, and a cost standpoint. There's a lot of work that remains to be done with payers, and I don't think that is a story that will change this quarter or next quarter. It will take time to educate payers and to enter into agreements with them.

Got it. During the quarter, the revenue per test was a lot higher than I modeled, at around $388. How should we think about that figure? Is that a good baseline number to use, near term? And I guess maybe this is a question for Bill, but how much of the revenue in the quarter was on a cash basis versus accrual?

I think that the way to think about this is less about the recovery from the commercial side, and more about a higher proportion of Medicare tests. So, it is substantially accrual, but Medicare has been a very good payer so far. So when you model out, I think you have to consider that we will seek more commercial patients, and that number could trend down as we get broader participation from commercial insured patients.

Okay, got it. That's helpful. And then one last one for me. Kevin, is there any update on where the new insurance contracts are coming in terms of reimbursement? Is the weighted average -- is that still above CMS -- I guess the weighted average for commercial -- is that above CMS?

The weighted average of the commercial contracts that we have entered into is above the CMS rate.

All right. Thanks, guys. Nice job on the quarter.

Isaac Ro, Goldman Sachs.

Just curious about the tracking you have with the existing docs. Can you give us a sense of what percentage, at this point, of May repeat orders? I think you made some allusions to it, but I didn't remember hearing a number.

We have not discussed yet, Isaac, the percentage of physicians who we categorize as high orderers. We group them into the -- we call a physician a high-ordering Cologuard physician if they order 20 or more tests. We have just said that that number has increased 3X. We will be able to provide more detail around that at our June 25 Investor and Analyst Day. But at this time, we're not talking about that overall percentage.

Got it, thanks. And then on the payer coverage, you mentioned some of the highlights in the quarter. Curious, with the Blues, in my experience at least, they tend to follow through together. So would it be fair to say that by end-of-year you would expect at least another couple of regional Blues to follow through and offer coverage as well?

We have been in discussion with a number of the Blues, as well as the Tech Assessment Group. If you take a look at the Tech Assessment decision, it seemed that the biggest challenge that that group had was not knowing the appropriate interval for the use of Cologuard. And with more data on that coming from the pharmacoeconomic analysis that will become available this year, we think that dynamic will start to change.

We've also had many Blues tell us that their cost of screening, particularly the cost of screening colonoscopy, is quite high. And Cologuard is an attractive option to see more people screened at an overall lower price. So we expect to see some of the Blues start to move, and I think Anthem is just an indication of that.

Got it. Thanks so much, guys.

Peter Lawson, Mizuho Securities.

Kevin, I wonder if you could give us some greater granularity of the guidance just around the incremental and test volume. Where do you think that comes from next quarter? Is that mostly from the higher prescribers, or are you factoring in new payers coming through? That would be great, thank you.

It's actually not coming from the increase in commercial payers. It is really being -- still, today, most of the patients who undergo Cologuard are Medicare patients, either conventional fee-for-service Medicare or Medicare Advantage. And the increase is coming both from new ordering physicians who are trying Cologuard with one of their patients for the first time, and also physicians who are moving from ordering Cologuard once or twice to ordering Cologuard 10 or even 20 times. It's a mix of both there, and we expect to see continued growth in both of those categories.

Thank you. And then what's the biggest worry for you over the next year, Kevin?

Well, what we're focused on -- I wouldn't say -- we're really pleased with the trajectory of launch. What we're really focused on is working with commercial payers to understand the value of Cologuard to their patients, to their overall cost structure.

And one thing that we have heard, time and time again, from payers is that they are concerned that with any new technology you'll see increased utilization that will overwhelm any individual cost savings they see. And we believe that we can offer a value proposition with Cologuard to help them make sure that Cologuard is used by the appropriate patients.

And let me give you an example. Patients who are under 50 are not indicated for Cologuard. And we have the ability to let those payers know which patients are under 50, and those patients that are over 50. That is something that is very valuable that only can be done because we have a single lab that offers Cologuard.

We also can let payers know when patients have been screened more frequently than the indicated three-year intervals by guidelines and other groups. So we have the ability to moderate overutilization, which today is a significant problem with colon cancer screening. And people who are screened with colonoscopy, for example -- they tend to be screened every 5.7 years. So there is a massive overutilization problem. And then there is a significant underutilization problem with those who refuse to be screened.

Cologuard is able to answer both. And we think that value proposition addresses one of the concerns that these payers have. It just takes time, and that is something that we are really focused on.

Thank you. I'll get back in the queue.

Brian Weinstein, William Blair.

Kevin, can you talk a little bit about the difference between your IDN sales force and the primary care guys? Can you talk about the funnel on that large contracting side of the business, and the difference between utilization dynamics between the two different groups, if there are any? Thanks.

Sure, Brian. It's Maneesh. One of the things that we've talked about all along has been the success of getting these primary care physicians to order. We are also pleased with the progress that we're making on the systems side. We've had a number of systems adopt, and we have a number of systems in the funnel.

The one consistent theme we've heard from the systems is they are -- one of the biggest barriers is inclusion in the quality guidelines. So, all of them are looking to HEDIS quality measures. And unfortunately, today, based on the timing, Cologuard is disruptive innovation and it's not yet included in the HEDIS quality guidelines.

So, it's odd; but, today, for a fecal occult blood test, they get quality credit, but for Cologuard they don't get credit. We are confident that this is going to get rectified in the near term, and that will start to drive meaningful volume in the future. But for right now, we've got a good pipeline of systems that have adopted, and another 15 systems that are in process. But it is going to be gated and triggered by USPSTF guidelines, which are expected -- hopefully draft guidance yet this summer.

Okay, great. That was very, very helpful. Can you talk a little bit about some of the dynamics that you guys have on the front end when you receive an order from a physician, the fall-off rate from contacting those guys and getting a kit out? Any progress that you?ve made and any commentary that you can make about what that fall-off percentage is, outside of how you define compliance, so more of the front-end compliance stuff? Thanks.

Sure. So, we have seen an increase in compliance. Initially, there was this fall-off rate. And traditionally that's driven by not getting an address right from a patient, or a patient not having commercial coverage and not wanting to do the test. As we have seen better education out there, we are seeing that percentage come down from initial order and patients' willingness to accept it. The other thing Kevin mentioned was physicians are skewing towards ordering this more for their Medicare patients. So we are seeing an improvement, and we expect to see it more in the future.

Okay, last one for me. Kevin, this is not on the launch, per se, but longer-term can you talk about thoughts on competitive dynamics and how Cologuard is positioned against possible new entrants that are in the market? I'm curious on your thoughts there. Thanks.

You mean blood tests?

Yes, exactly. Thanks.

Yes, Brian. We hear consistently about new blood tests that are in development to try to address the colon -- the need for increased colon cancer screening. We have probably seen at least 10, maybe a dozen, attempts at developing a blood test over the last six years since we have been involved with Exact Sciences.

There are a number of challenges that a blood test faces. The first is poor performance. We have yet to see a blood-based test that performs as well as even the FIT test, which is not a strong performer. The biggest problem that they -- two performance problems that plague these blood tests is, number one, low sensitivity for early-stage cancers, especially stage 1 cancers. And stage 1 and 2 cancers represent about 75% of all cancers found in a screening setting.

So that poor performance is a challenge, sensitivity-wise. Also from a specificity standpoint, you see a very high, typically around a 20%, false positive rate for an annual test. We believe that the poor performance of these tests makes it a challenge for FDA approval, makes it a serious challenge for commercial coverage, and makes it almost a non-starter with Medicare.

We are also aware of some who have developed screening tests that plan to seek to go to market as a lab developed test, and we think there are two serious challenges with that approach. Number one, the FDA, particularly since the decision to approve Cologuard, does not look favorably on screening tests that are lab developed tests.

Maybe more importantly is that Medicare is very specific about what can be billed for payment by the Medicare system. And the Medicare statute does not allow billing for or payment of screening tests, unless there is a specific statutory provision and national coverage decision that allows that. We believe that Medicare looks at billing for a screening test for colon cancer that lacks an NCD, a national coverage decision, as Medicare fraud.

And so, we think that there is only one path forward with a new blood test: A, really high performance, so a test of that works. We haven't seen that yet. B, FDA approval; and C, a national coverage decision. So we have our own blood-based screening program, and we continue to look at ways to increase performance, but we don't believe there are any shortcuts to developing and launching a new screening test.

So, that's our view of how this works. I think investors have seen, over time, all of the tremendous amount of work and investment that is required to achieve all three of those things. And we don't think that will change in the future.

Mark Massaro, Canaccord Genuity.

Congratulations on a great quarter. On your guidance for 18,000 tests for Q2, can you just walk us through the dynamics you use in modeling for that? Obviously it's a nice step-up. It is a meaningful step-up off this quarter. Can you just help us conceptually how you think about modeling the ramp? Not just how you thought about it for the second quarter, but maybe for the back half of the year?

Well, we've only provided guidance for Q2, so I will start with that. We are able to look at the number of test orders that have occurred in March and April, which we have a pretty good idea of what percentage of those turn into a completed test in Q2. So we have a sneak preview of that, and we know the number of completed tests that we have seen to date. That gives us a fair amount, although not perfect, but a fair amount of visibility into where we'll end up in Q2, and we feel confident that we will be able to get to at least 18,000.

We haven't provided guidance for the full year, but we do a good job of tracking that and analyzing it. I think the factors that will allow us to see a strong year is the increased reach and frequency of our field force and our efforts with Ironwood, and also the efforts around medical education, and then eventually payers as well.

Great. And the 71% compliance rate, I thought was quite good in the quarter. I know last quarter you commented on bulk orders potentially serving as a drag to that number. Can you maybe just comment on the 71% of rate, and what you're thinking over maybe the next quarter or two?

Sure. So, this is not the result of any drag from any bulk orders. We think this is steady-state, and think that this is consistent. So we're pleased with the compliance rate. We're going to continue to find ways to try and bring this number up, because that is meaningful. We think it's possible. But this is, we think, a steady-state and something we'd like to improve on.

Great. And then maybe my final question, if I can. I think the sales rep number will go to 360 with Ironwood. Just want to confirm that. And then, how should we think about the productivity of the Ironwood reps relative to your direct sales force? Obviously the Ironwood folks, I believe in their contract, have a principal obligation to the IBS drug. So any color on that would be helpful.

I think that's right. The truth is, we don't know yet. And we will be able to start to track that -- we're starting to track that right now. It's very early in the co-promotion relationship that we have with Ironwood. It was just a couple of weeks ago that they had their national sales meeting. And we know that it typically takes 4 to 8 weeks for reps to start to become productive.

And Cologuard is in a P2 position relative to LINZESS. So we don't know what the efficiency is going to be. We expect that it will be less than the Cologuard or the Exact Sciences reps. We will have a better idea of that, I think, by June 25.

Great, thank you.

Chris Lewis, ROTH Capital Partners.

Kevin, you talked about 50% of the new customers generated by your marketing efforts, and not your sales force early on. It looks like maybe the initial utilization with that group is a bit lower. So could you just walk us through the steps you are taking to convert those new customers generated by your marketing campaign into high-ordering physicians?

Sure, this is Maneesh. So the first thing we do -- again, we're really pleased with the outreach that is pulling -- the marketing efforts that are pulling new orders in and ordering physicians in. One of the first things we do is make sure that the sales force in the territory is alerted to that new ordering physician, but we also have an internal sales team. And those inside sales reps, their specific role is to follow up with everyone that has come in without a sales touch to make sure they get a sales touch, and begin the process of converting them into a regular orderer.

So those two steps: making sure that the rep in the territory is aware; but also from a central point, outreaching actively to make sure that that doctor doesn't become a single orderer, but rather a higher volume orderer.

Great. And then given the success you are having with those marketing campaign efforts, do you have plans in place to expand those campaigns this year?

Yes. So one of the beauties of having a sole-source lab is an ability to test what's working and emphasize it, and deemphasize the things that aren't working. So we are actively right now testing things in different metro areas so that we can get smarter about what works and what doesn't.

So, for example, if you live in the Phoenix area or the Tampa area, you might see billboards. You might see full-page ads. But these are local, targeted activities, so we don't come out -- we take measured and efficient investments rather than broad scale. And that's what we have done to date in launch, and will continue to do as we roll forward. So don't know the answer to that, but we want to make sure, whatever we do, we do it efficiently.

Great. And then just one more for me. Can you, Kevin -- I think last quarter you gave an update on the number of additional physicians you had registered, and those that were ordering since the end of the prior quarter. Can you provide a similar update in terms of the number of additional physicians you've seen since the end of the first quarter? Thanks.

This is Maneesh again. At the beginning, we started talking about enrolled versus ordering physicians. We think that the metrics we've laid out are strong, and that's really what's most important -- that by the end of the quarter, we had a doubling since the end of the year. So on June 25, we will provide a deeper look at what has happened in the interim. But you can see that rate of growth, week over week, new physicians being brought in. We think, just so -- we haven't given the number, but that rate is continuing.

Yes, and it's important to note that the new physicians ordering Cologuard, the vast majority of physicians that are signing up with our lab, are ordering Cologuard for the first time. So that dynamic has changed from the real early days when we had FDA approval but didn't have Medicare coverage, and we saw a lot of physicians who had signed up but hadn't ordered. And so going forward, we will talk only about the number of new physicians. It's important to note that over the last 4 to 6 weeks, we have seen a nice increase and acceleration of the number of new ordering physicians on a weekly basis.

Okay, that's great. Congrats on all the continued progress, guys.

Zarak Khurshid, Wedbush Securities.

What was the weekly run rate at the end of the quarter, and currently?

The weekly run rate of what?

Of tests.

We haven't disclosed that, but it continues to grow: both the test orders, completed tests, and the number of physicians, as expected. So all of the marketing programs and our sales force are generating strong results here. Gives us really good confidence going into the end of the year.

Understood. And then if you look at the ordering doctors now, do you have a sense for the theoretical average number of tests per doc at, call it, full penetration?

That's a really good question. And the truth is, we don't know this point. What we do really like to keep track of is the percent increase in brand-new ordering docs; and then the percent increase in, say, docs who have ordered over five times, ordered over 10 times, and who have ordered over 20 times.

And one thing that we're happy about is the percent increase in the larger ordering groups -- say, the over 10 and over 20 -- is increasing at an even greater rate than the new docs coming in. So that's a good sign for now and the future that physicians, once they start ordering Cologuard, it takes two or three months before they start ordering it more frequently, but eventually they start to move over to the right in terms of being high-frequency orderers.

They are not giving up their other screening methods at this point. And part of that is that many physicians don't want to order one test for a Medicare patient and another test for a patient under the age of 65, because that's just too much for them to keep track of. So we expect to see as we get broader commercial adoption, that that rate of ordering, even among our current physician customers, will increase.

Understood. Thanks, that's very helpful. And then last one. Any new thoughts on how many PCPs can effectively be serviced by each rep?

That maybe is the most important question of all, in terms of the commercial trajectory. With the number of sales professionals that we have calling on doctors right now, the goal is to have them move from their list of 75, once they have converted those physicians, to a new group of 75 to bring on new physician customers.

I think that by the end of this year, we will have a much better idea of the ability to back off our sales efforts and touches with those physicians as they become a high-ordering physician.

One interesting data point was that during the week of our national sales meeting, where everybody was out of the field, that we saw continued movement up and to the right in terms of test orders, new physicians added. And that's one positive data point. We didn't have people in the field. Physicians kept ordering Cologuard at an increased rate, and new physicians were signing up. So, we feel good about that. But it's going to take another quarter or two or more to really understand the dynamics of being able to stop calling on physicians and to continue to see them ordering Cologuard.

That sounds good. Thanks.

Brandon Couillard, Jefferies.

Kevin or Maneesh, can you give us an update on the cycle times between tests ordered and a completed test result when you send it back?

It takes a couple of months; from 30 days to 60 days from the time a test is ordered until you have a completed result, on average.

And the vast majority of that time, Brandon, is with a patient. Some people are fast to get the kit, and get it back right away. Others will take a little bit more time, but that's really the key driver of that time frame.

So is it fair to say, it has been consistent with the fourth quarter?

I would say yes. I think that it has been consistent in terms of the cycle time.

Okay. And then in terms of the comment, Kevin, you made about adding the additional 60 reps by June 1, is that a little earlier than you anticipated? And in the context of your second-quarter guidance, would it be fair to say you have contemplated minimal contribution from the Ironwood reps?

So, there are two questions there. Yes, we have polled those reps. We were looking at between June and September. We made the decision to try to bring them on all at once, and have one training session, which was really driving that from a cost efficiency standpoint -- let's train those reps all at once; and the sooner we bring them on, the more of an impact that they can have next year.

And in terms of the impact of the Ironwood reps, we would see that they would have an impact in the back half of this year and moving into next year, more than they would have -- we don't expect much of an impact in the current quarter.

Thanks, I appreciate it.

Jose Haresco, JMP Securities.

Congratulations on a good quarter. Just one question for me. You guys added a lot of new accounts in the quarter. And at what point do we expect the rate of additions to level out, where more of your sales force starts to focus on recurring revenue as opposed to adding new accounts?

Can you ask that question one more time?

Yes, sure. So you added about 4,000 new accounts in the quarter. Should we expect a similar rate of growth of new accounts next quarter and in the September quarter? Or will it start to moderate towards the end of the year as your sales team starts to look at re-order rates, as opposed to adding new physicians?

Well, the goal actually with the current field force is to move them to new physicians, to target a new group of physicians, before the end of the year so that they are not focused on the same group of physicians all year.

We don't know what that rate of growth will continue to be. We track it on a daily basis, but we don't think that that rate of new physician ordering will grow. We said that we were at under 1% in Q4 penetration of the 280,000 primary care docs, and 3% by Q1. We have a long way to go. And our goal is to drive penetration among primary care physicians throughout the country very broadly.

We really like the fact that we've been able to put together a meaningful sales force. And our belief is that, unlike a pharmaceutical, Cologuard will eventually be adopted as a regular part of a screening program, one of the tools that primary care physicians use to screen their patients for colon cancer, and that we'll be able to less frequently call on those high-prescribing physicians who have made it part of their practice.

I think you have seen this occur in colon cancer screening with colonoscopy, and also with the FIT test. And so we believe the same will be true. We need more data to convince ourselves of that, though.

Okay. Could you talk about the split between primary care and OB/GYN customers? Are you still seeing about 25% of your customer base being OB/GYN?

I think, Jose, your -- that data point, 25% of OB/GYN patients are over 50 years old. OB/GYNs represent less than 10% of the physicians who have ordered Cologuard. And since we have not called on them, most of them who are ordering Cologuard are doing so because of our marketing efforts. They are not ordering at the same rate and pace as those physicians that we have a sales professional speak with.

So, that's one way of saying, presently OB/GYNs represent a very small percentage of the overall Cologuard test results. That's a group that we are not focusing on today, although we may in the future. Right now, the focus is on primary care physicians.

Okay. Thank you very much.

Bruce Jackson, Lake Street Capital.

With the sales force adds in the quarter, did they come on towards the end of the quarter, or was it earlier?

Did what come on towards the end of the quarter?

The new salespeople.

The Ironwood relationship kicked off on April 20. The new salespeople, the majority of them started in March at our national sales meeting, so really the end of the first quarter. And the impact -- again, it takes a number of weeks before they start to have any meaningful impact -- 4 to 6 weeks.

Okay. And then with the test mix, was there any change in the test mix during the quarter between the Medicare and the commercial tests?

So we saw consistently the predominant ordering -- the physicians that are predominantly ordering for Medicare patients. And we saw that continue, slightly tick up, in the first quarter.

Okay. Last question. Did you experience any impact from weather during the quarter?

Because this is a new launch, I want to hope that we did. But we don't have any comps yet to know that. We are really pleased with the progress that we made. It's encouraging to think we could have done better. But we know that in the first quarter, significant portions of the East Coast were shut down. So I could only conjecture, would say yes, but we'll know more in the future.

Okay. Thank you very much.

Raymond Myers, Alere.

Most of my questions have been answered, but maybe you could discuss the cash collection cycle, and whether you have enough experience yet to describe it.

Ray, as we alluded to just a moment ago on the mix, it is predominantly Medicare. And Medicare has been, for the traditional fee-for-service side, a really good payer. So that collection cycle has been very prompt and efficient. On Medicare Advantage, we talked about that being accrued at 50%, and we're advocating hard on patients' behalf. That will take a little bit more time to recoup. And then we're actively working on commercial payers to advocate on behalf of patients. That cycle is going to be quite a bit longer. And that's our experience.

But we don't have enough history that we could give you a prediction or a forecast of how that recognition would go. Right now, we're on a cash basis for those.

That sounds great. Thank you.

Mark Massaro, Canaccord Genuity.

Kevin, maybe could you speak to your confidence around the upcoming USPSTF decision? Obviously with the New England Journal of Medicine study, clearly shows the value of Cologuard. But maybe can you speak to some of the other pieces of literature in the public domain that you think the Task Force will consider when they issue their decision?

Sure. Well, we feel confident that USPSTF will rate Cologuard as an A or B test. The USPSTF looks at a balance of the benefits to the harms of screening. And they look at the quality of the evidence. It's an evidence-based group, and it's a group of very well-respected primary care physicians, public health people, and people who think pretty deeply about these issues.

Let me take a step back and say that the United States Preventive Services Task Force is not a group that you interact with directly. Rather, we have provided publications to AHRQ, which is a group within CMS that helps provide evidence to the Task Force.

The evidence that they are -- we believe that they are probably looking at -- include the New England Journal study of Cologuard. Probably, as well, the earlier stool DNA study that was published in 2004 in the New England Journal, as well as some of the other publications that represented the case control studies. They then couple that with modeling, typically that they commission, to look at what the benefit is from using a screening test with known point-in-time sensitivity and specificity performance characteristics.

And so the modeling that they have used, and they have used in the past, it substitutes the long-term, 20-year, government-funded studies that are typically done to assess a particular screening modality.

One of the things that gives us confidence about an A or B rating is that the benefit of screening with Cologuard is at least equivalent to screening with a FIT test, which is rated A. The harms associated with screening with Cologuard are clearly less than colonoscopy, which the harms have been detailed previously by USPSTF in terms of the adverse events associated with screening colonoscopy.

So when you take a look at the performance characteristics, the modeled impact on a decrease in colon cancer incidence and mortality, coupled with the fact that the harms associated with Cologuard are less than colonoscopy, which is also A rated, we feel really comfortable with where Cologuard should be rated.

The important thing about USPSTF is not only that it is really probably considered the preeminent guideline for a screening modality; it also feeds into the HEDIS quality measures, and also the STARS ratings. The HEDIS is relied upon primarily by physicians and group practices, and the STARS ratings by payers that participate in the Medicare program.

Great. And then, timing-wise, I know previously you have communicated expectations for the end of this year or early next year. In your prepared remarks, I think you mentioned draft guidance this summer. Not sure if that's early summer. And have your expectations for timing changed at all?

No. And let me say, we don't know. USPSTF has not put out any type of explanation in terms of when they will have draft guidance out. We would expect that it would be sometime this summer, maybe early fall. But we don't know that. And that is a best guess on our part, based upon the schedule that is available on their website, and then there is a public comment period. And then potentially that guidance would become final late this year or early next year.

We do think that there is a real positive from a draft guidance, should Cologuard be rated A or B.

Thanks.

Thank you. And at this time, I am showing no further participants in the queue.

I would like to turn the call back over to Kevin Conroy, Chairman and CEO, for any closing remarks.

Thank you. In summary, the number of ordering physicians more than doubled, and completed tests nearly tripled quarter to quarter. The reach and frequency of our sales team is growing through expansion and our relationship with Ironwood. Our med ed programs are engaging physicians in new ways that are directly affecting order volume. We're making strong progress with commercial payers.

We're looking forward to our Investor and Analyst Day on June 25 in Madison. I'm pleased to say that Cologuard recently won gold at the Edison Awards in the Science/Dental/Medical category. Named in honor of Thomas Edison, these awards highlight the best innovation each year. It's an award that everyone at Exact Sciences has earned.

The work our team has done, and continues to do, is amazing. We are fortunate to have the team that we do, and it's a privilege to work beside them every day. Thank you, and we look forward to updating you on our progress as we move forward.

Ladies and gentlemen, thank you for your participation on today's conference. This concludes the program. You may now disconnect. Everyone have a great day.