Exact Sciences Corp (EXAS) 2018 Q2 法說會逐字稿

Good afternoon.

My name is Chris, and I'll be your conference operator today.

At this time, I would like to welcome everyone to the Exact Sciences Corporation Second Quarter 2018 Earnings Call.

(Operator Instructions) Megan Jones, Associate Manager of Investor Relations, you may begin the conference.

Thank you, Chris, and thank all of you for joining us for Exact Sciences' Second Quarter 2018 Conference Call.

On the call today are Kevin Conroy, the company's Chairman and CEO; Jeff Elliott, our Chief Financial Officer; and Mark Stenhouse, President of Cologuard.

Exact Sciences issued a news release earlier this afternoon detailing our second quarter financial results.

If you have not seen it, please go to our website at exactsciences.com.

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 can be accessed through our website.

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

Thanks, Megan.

Thank you for joining us this afternoon.

The Exact Sciences team delivered strong second quarter results, with record high revenue, Cologuard test volume and gross profit.

Demand accelerated broadly within our existing physician ordering base and from new customers, with more than 10,000 physicians and other health care providers ordering their first Cologuard test.

Better-than-expected revenue per test largely offset a 2% shortfall compared to the low end of our volume guidance and kept us on track for our 2018 revenue goals.

We remain confident in our ability to capture the long-term opportunity for Cologuard and are building a solid foundation to support sustainable growth and profitability.

Our CFO, Jeff Elliott, will now review our second quarter financial results.

Thank you, Kevin, and good afternoon, everyone.

Please note that when discussing financial results, I'll refer to changes compared to the second quarter of 2017, unless otherwise stated.

Second quarter revenue increased 78% to $103 million.

Relative to the first quarter, revenue increased $13 million, easily exceeding the trailing 4-quarter average.

Completed Cologuard test volume grew 59% to 215,000.

Sequential growth of 29,000 completed Cologuard tests was the second fastest since launch as demand from new customers accelerated and the physician reorder rate reached its highest full quarter level since launch.

There were 2 main reasons test volumes fell short of our guidance.

First, we did not see the full increase in Cologuard orders that we had expected during June.

Kevin will discuss the steps we're taking to further improve our sales force efficiency and capitalize on recent reimbursement progress.

The sales force hiring we announced earlier this year and 3-year rescreening should also help us continue to expand order volume.

The second reason Cologuard test volumes were lighter than expected is that we didn't see the expected amount of patient returns late in the quarter.

Patient response times for Cologuard can temporarily vary for a variety of factors.

We haven't seen any changes to the underlying Cologuard patient compliance trends.

At 68%, Cologuard's patient compliance rates easily surpasses rates for other colon cancer screening tests, and we see room to improve that performance over time.

Second quarter average recognized revenue improved 12% to $479 per test on market access gains and strong collections.

After a successful start to the year, we now expect full year revenue per test of about $475.

On a time-lag basis, our average recognized revenue per test was $462 at the end of the second quarter, an increase of $39.

Second quarter cost of sales totaled $125 per completed test, a 6% improvement.

The lab and operations teams continue to drive efficiencies while scaling capacity to meet rapidly growing customer demand.

Investments required to expand our current lab capacity by more than 20% in the second half of the year will likely increase our cost per test to the low $130 range in the third quarter.

We continue to see a path to 80% gross margin long term.

Second quarter gross margin improved 510 basis points to 74% on better-than-expected revenue and cost per test.

Second quarter operating expense totaled $109 million, an increase of $5 million from the first quarter.

Selling and marketing investments included our sales force expansion and additional media and public relations activities.

R&D increased primarily for pipeline development and medical affairs.

G&A investments included IT and personnel to support our expansion.

Total CapEx was $41.5 million, and we continue to expect $150 million to $175 million of CapEx for the full year.

Second quarter cash use totaled $45.3 million.

We ended the quarter with cash and securities of $1.2 billion, including $225 million from our recent convertible debt offering.

Turning to our guidance.

We reaffirm our full year revenue outlook of $420 million to $430 million and Cologuard volume of 900,000 to 920,000 completed tests.

Based on our year-to-date results and our expectation for the second half, we expect to finish the year near the low end of the test volume range.

For the third quarter, we expect 227,000 to 237,000 completed Cologuard tests.

I'll now turn the call back to Kevin.

Thanks, Jeff.

Our first priority for 2018 is to command the core Cologuard business.

Today, we estimate that about 90% of patients have access to Cologuard with no out-of-pocket costs.

That's a very strong and simple reimbursement message.

We are excited to announce that we recently signed an agreement to be in the Anthem Blue Cross and Blue Shield network in the states of Indiana, Ohio, Kentucky, Missouri and Wisconsin.

We are also working together to complete contracts for additional Anthem states.

With this progress and additional contracts in the pipeline, we're approaching an estimated 95% patient access to Cologuard with no out-of-pocket costs.

We also added 33 million additional covered lives, and more than 270 million total lives that are in plan that now have a positive medical policy for Cologuard.

We've already seen the benefits in our revenue per test from the market access progress made since launch.

We expect additional benefits to Cologuard adoption for years to come as our sales and marketing teams spread this reimbursement message to physicians and patients.

Our approach is to make decisions with the long term in mind.

Reaching the current level of in-network insurance coverage took several years of focus and pricing discipline.

To preserve physicians' and patients' trust while we expanded coverage, we were transparent about the potential out-of-pocket cost for Cologuard when insurance companies failed to provide coverage.

Survey data show that this transparency temporarily reduced our physician customers' order rate and impacted patient compliance in the second quarter.

Thanks to the impressive progress our market access team is making, we are now able to deliver a simpler, more effective reimbursement message to patients and providers that we believe will help increase Cologuard utilization and patients' compliance.

Cologuard is seeing robust physician adoption, with 40,000 new health care providers ordering the test in the last year alone.

Changing the standard of care in colon cancer screening does take time.

That's especially true when we're trying to change behavior across such a large group with a relatively small sales force.

To continue improving our sales force efficiency, we have analyzed our current base of health care providers to identify a subset of high-potential physician targets.

This focused approach is commonly used by primary care sales teams in health care.

We're confident that with our recently expanded field sales force of about 350 reps, now is the time for us to adopt that approach.

Frequency matters.

Our data show that there's a direct relationship between the frequency of calls on a health care provider and the frequency with which they order Cologuard.

We look forward to improved productivity from this updated targeting strategy and from the previously announced sales force expansion.

Health systems are one of the biggest opportunities for Cologuard growth during the next 3 to 5 years.

Getting more systems to fully adopt Cologuard will improve the efficiency and leverage of our sales force.

More than half of primary care physicians in the U.S. are employed by or affiliated with health systems where Cologuard is currently underpenetrated.

We continue to lay the foundation and put the pieces in place to execute on this opportunity.

During the second quarter, we achieved an annualized revenue run rate of more than $400 million, and Cologuard is only 3% penetrated in an 85 million person market.

The investments we're making in sales and marketing are aimed toward achieving our 40% long-term market share goal.

We are refreshing and enhancing our television ads to extend the effectiveness of our successful direct-to-consumer campaign.

Our new 60-second television ad launched in late June, highlighting reasons why healthy people are reluctant to get screened with invasive procedures, while emphasizing the convenience and accuracy of Cologuard.

We plan to unveil additional ads this fall to reinforce this message.

We see opportunities to reach an even greater number of consumers and increase awareness of Cologuard through digital and social media and other marketing channels to health care providers.

The talented team at Exact Sciences is helping to achieve our second priority of meeting future demand.

We recently conducted our annual employee engagement survey and are happy to report that Exact Sciences is ranked in the 81st percentile of life sciences companies for overall employee engagement.

Overall satisfaction with Exact Sciences as a place to work increased from 2017, which is gratifying, especially considering our rapid growth during that time.

We are proud of the culture this team has built and their dedication to our mission.

We are confident that we have people in place to meet our 2018 goals.

Thanks to the capabilities of our team, we are prepared to meet the rapidly growing demand for Cologuard, the construction projects in our current and new labs continue to progress on schedule, and we have successfully implemented additional automation and efficiency enhancements at our lab.

We continue to expect annual lab capacity of 3 million tests by the end of this year, and 5 million tests with the addition of our new lab next year.

Moving to our third priority, advancing the pipeline.

The recent American Cancer Society guidelines update represents a 40% increase in the unscreened population and a significant increase in the addressable opportunity for Cologuard.

Moving the screening age to age 45 means that an additional 21 million Americans should be screened for colorectal cancer.

Among adults younger than 55 years old, the incidence of colorectal cancer increased 51% between 1994 and 2014.

Our team is working to expand Cologuard's label to include people in the 45- to 49-year old age group who are at average risk for colorectal cancer.

Respondents to a survey we conducted of 500 individuals in this age group indicated that they are 3x more comfortable taking an at-home stool test than they are in having a colonoscopy.

We are working to ensure the millions of Americans in this age group have access to Cologuard, and that we are prepared to meet their demand for an easy, convenient and accurate screening option.

Among surveyed cancer screening tests, including mammography, Pap smear and prostate exams, patients are most comfortable with an at-home stool test.

This gives us further confidence that individuals between 45 and 49 would prefer Cologuard to other colorectal cancer screening methods.

We also see a significant unmet need in liver cancer testing for more than 3 million eligible Americans.

Our liver cancer research and development program has produced very promising data for a test to potentially address that need, which presents a $1.5 billion market opportunity.

We have 2 case control studies, each showing 95% sensitivity, one at 97% specificity and one at 93% specificity.

More than half of people with liver cancer are diagnosed late stage because the current testing options are less than 65% sensitive for early stage cancers and compliance rates are persistently low.

The data we presented at the Digestive Disease Week conference in June and at a previous conference demonstrates substantial improvement over the current options of ultrasound and the AFP protein test.

Building from these promising results, we've begun to enroll patients in a third larger case-control study to further validate and finalize the liver cancer test design.

We are excited about the progress we are making with the liver test and look forward to providing further updates later this year.

We're now happy to answer your questions.

(Operator Instructions) Our first question comes from Brian Weinstein with William Blair.

Kevin, I'm still not sure that I totally understand the rationale or the reasons for the miss here.

Did things fall off in particular in June?

Or were they light sort of all quarter?

And you mentioned that you guys were more transparent, or transparent with out-of-pocket costs, and that reduced the order rate and impacted Q2 a little bit.

But why would that impact something in Q2?

Was there something in particular that changed there in how you were presenting that in the quarter?

And then just going back to the first question on sort of the trending through the quarter, was it more late in the quarter or not?

Yes, Brian, typically, we don't address intra-quarter results.

We were tracking at the upper end of our range until the beginning of June, the middle to the upper end of the range.

And then we didn't see the increase that we would typically see in June in terms of test orders.

And then additionally, we saw a decrease in June in the kit return rate, which obviously affects the compliance rate, or is the main driver of the compliance rate.

So it was really those 2 things that caused us to miss our volume.

And we're very confident based upon 2 things.

We're very confident in the full year guidance based upon 2 things: One, adding more sales reps; two, focusing all of our reps on a more concentrated number of health care providers that we have identified as higher potential.

Mark will -- Stenhouse will talk more about that.

Additionally, on the question around reimbursement, late last year, we started delivering a really specific message to patients and physicians, that patients would be responsible for up to $649 in response to people who were complaining about getting a bill.

As we've made progress over the last 9 months in terms of bringing large plans, United, and now Anthem and others in network, and we've seen the in-network contracting percentage increase pretty dramatically, we're able to start to deliver another message.

The impact that, that has is largely on patient compliance.

Because when the patient gets that message, again, it was the first thing -- message that we started to deliver late last year on our compliance calls, just to be transparent with the patient to make sure that we preserved our long-term reputation, that did have an impact on compliance.

And we teased that out as we did -- as we really looked into what was going on with the compliance rate and have a plan now to, as we approach 95% of patients who get a Cologuard test, will get $0 co-pay, we have a wonderful message to deliver.

So there is -- no doubt, this is a challenge.

We're not happy with it.

We have a very clear kind of two-pronged plan to address this.

More efficiency with our sales force, 1; 2, a really wonderful message around reimbursement.

On the more efficiency side, does this make you more likely to potentially consider bringing in some other product to increase the frequency with which you are seeing primary care physicians?

No.

I don't think so, because the key thing we want to make sure the team is focused on here as we're making the shift is that they are calling on the highest potential prescribers of Cologuard, and making sure that they're delivering the right messages in the right sequence.

Again, Mark will talk about this.

And Mark has been here and had a significant impact in a very short period of time about the best way to increase the efficiency and help our current sales force to become even better at what they do.

And that requires a discipline that has been -- has worked in many other areas, not only primary care but in specialty areas as well.

Okay.

Last one for me.

Have you had specific discussions with FDA on the expansion to the 45 to 49 year olds at this point?

Are you confident that you have what you need sort of in-house?

Or any thoughts on what you guys might need to do in order to formally expand the label?

Brian, we are putting our plans together for label expansion.

And obviously, we want to have a really buttoned-up plan before we sit down with the FDA.

We haven't spoken with the FDA yet.

After we do and have a clear plan in place, we'll share that with investors.

Your next question comes from Derik De Bruin with Bank of America Merrill Lynch.

I'm just wondering, if you go back and you look at the Blue Cross -- the BCBS decision back in January, and -- how quickly do you sort of expect that volume to snap back now that the central region's on board?

And I guess, when do you expect some of the other Anthem Blues to come on board as well?

We -- there's no doubt that going out of network with Anthem had an impact on ordering volumes and also compliance rates.

We -- it was the right thing to do, long term, and we are really happy with the news that we announced today that we are in-network with 5 states.

As you'll remember, previously, when we -- going into network with Anthem occurs in stages as you work across the 14 states where they have plans.

And it is -- we are working towards contracts with the remaining Anthem plans.

We haven't provided guidance.

We hope that occurs as soon as possible.

Great.

And I'm sort of -- I'm still a little bit confused as to why the compliance rate dropped by patients.

Just that one still just makes a little bit -- that just still doesn't make any sense to me.

Just simply why suddenly at the end of June, would this drop off.

Can you give a little bit more color?

Well, some of that is just variability that you see month-to-month.

The overall compliance though during this period time post us delivering message to patients, there are many patients who, when they heard they may get stuck with a $649 bill, they simply won't return the test, and despite extensive compliance efforts.

And so there are really 2 things there, Derik.

The broader issue that delivering that message, which again, we think was the right thing to do reputationally, had an overall impact.

And then in June, we saw variability that sometimes you see on a month-to-month basis.

Yes.

And it seems like the holidays and summer vacations kind of affect that.

In the short term, it's very difficult to predict the patient compliance behavior, so.

Your next question comes from Doug Schenkel with Cowen and Company.

So going back to the third quarter of last year, orders per physician have been stuck between roughly 2.9 to 3 per quarter.

Your volume guidance for Q3 assumes this continues, and this annualized to well -- to something that's well below 10% of a typical physician's CRC screening volumes.

It just doesn't seem like you should be anywhere close to hitting a wall, especially as you're in the midst of spending a lot on advertising and essentially doubling your sales force.

So recognizing this isn't a 1 quarter thing -- at this point, it's not even a 1 month thing -- why is this not improving?

Is it just taking longer for new reps to ramp versus your expectations?

Are territory recuts possibly being more disruptive than anticipated?

What do you think's going on?

Because it doesn't seem like you should be hitting a wall, but by this metric, it kind of looks like you are.

Yes, Doug, thanks for the question.

I would say we are absolutely not hitting a wall.

In fact, if you'd looked at the prepared remarks here, we saw the highest full quarter reorder rate we've ever seen during the quarter.

And this is the reorder rate as we look at it, which is number of orders per week, per provider.

So that reached the highest level we've ever seen during the quarter.

We saw an acceleration in new physicians back to over 10,000.

And you're correct to point out that we've just started penetrating these offices.

There's a huge opportunity in the existing base of 121,000 providers, and there's an even bigger opportunity out there to grow the pie further.

Kevin talked before about some of the approaches we're putting in place to improve that reorder rate, I think Mark can chime in here, but there's a long ways to go.

You hit the nail on the head.

Keep in mind that, that reorder rate is always diluted somewhat by the rapidly growing base of new physicians.

So when you're adding 10,000 new physicians, new providers in a quarter, that temporarily puts some downward pressure on the number until the sales force has a chance to get in and educate the provider and the practice and make sure they understand the message.

So maybe Mark could chime in there, too.

Yes.

Look, I think your insight here is smart, and that is the -- as we were scaling the sales force and cutting territories, that can have a detrimental effect on reorder rate.

The other more I think important salient point relative to reorder is that we really drove home this concept in the June sales meeting we had in our organization this year.

Both in the identification of the segments themselves in terms of who is most likely to prescribe based on past ordering history, and likelihood to prescribe on a go-forward basis on their patient demographic.

Once that was set with the selling organization, then it's really about operationalizing their effort against that segmented group and really focusing both the -- where they spend their time and the message delivery that they give to that physician.

And we're really starting to see, as has been mentioned by Jeff and Kevin, a really strong second quarter and reorder rate on a historical basis and growth in new prescribers.

Okay.

Yes, I mean, I certainly think, for what it's worth, at this stage of the roll out, every quarter should be a record, Jeff.

But I appreciate the color, and I think most folks on the line would agree they're happy to some extent with the progress.

But yes, you've been stuck in the range here for a little bit, so, yes, that's why I make the point.

But your color and your answers are somewhat helpful in trying to get a better handle on what's going on here.

So maybe building off of that, your guidance implies that Q3 orders per physician are essentially right around 3. But in the fourth quarter, essentially, what you're telling us is you expect this to increase to 3.2 per practice.

And that's in a quarter where, at least last year, you told us things tend to come under pressure due to typical seasonality.

So can you help us make sense of what seemed to be an end of June abnormality, no assumption for an improvement in Q3, but a material improvement in Q4?

Before you comment, Jeff, let me first say, remember that during this time frame, Doug, just in the last 12 months, we've added 40,000 new health care provider customers.

While during that time frame, our sales force stayed relatively flat.

That means that the frequency that you can call on those physicians during that time frame, by definition, decreases.

We are proactive in that we have added 150 additional sales reps, about 100 -- or 50 inside and 100 in the field, that may cause a little disruption.

It's the right thing to do long term.

And we -- to Jeff's point, we hit an all-time high in terms of the physician reorder rate despite the fact that we're not calling on the physicians as frequently as we know we can.

And Mark will talk more about how focusing on those high-potential physicians we expect to see a greater efficiency, coupled with the addition to our sales force.

So I think that patience is required to see the impact of those investments while we continue to grow, and the underlying business fundamentals remain strong.

Jeff?

The only thing to add to that, Doug, is remember, the 3-year rescreen opportunity is very significant.

If you look back to 2015, there's about 70,000 patients that we can go out and capture for rescreening.

Some of the early data is very promising in terms of seeing these patients comply.

We're seeing them comply at a much higher rate than the first time users.

I think there's some room to -- for us to improve the execution, in terms of going out and getting these patients back in the door.

But when they do get the order, they comply at a really high rate.

So this is a huge opportunity for us in the rest of this year.

It's an even bigger opportunity when you look out to 2019 and beyond.

So just to wrap up on this, understanding the opportunity and all the tailwinds that, that should afford you over the next several quarters and into next year, just thinking about your guidance for the next couple of quarters, what is it in Q4 that you expect to kick in that gets you out of this range we've been in for a little while in terms of orders per practice?

Is it the sales force?

Is it reorder rate?

Is it -- what helps you in Q4 to get this ramp?

It is both of those things, coupled with what Jeff said, is you basically have about 70,000 patients from 2015 who we have an opportunity to get rescreened yet this year.

Now obviously, you're not going to get all of them rescreened.

The key thing here is to get the physician to reorder a test and make the patient aware of that reorder.

It's -- we're able to -- we're able directly to engage with both of those parties.

The bulk of those parties are people who got screened in the back half of 2015.

So that big -- larger opportunity is in the back half of this year.

And you can trust and be assured that there will be intense focus on making sure that we get to those patients who need to be rescreened now 3 years after their last test.

The only thing I would add, Doug, is through the back half of the year, we should start to see the benefit of these significant market access wins.

We talked through some of the contracts, the additional covered lives.

These are significant.

When you combine that with the new messaging that we're communicating, we expect that to have a big benefit in the coming quarters.

Your next question comes from Brandon Couillard with Jefferies.

Maybe just a question for Mark.

In terms of how you're sort of recalibrating the sales targets, would you sort of describe how that process is different in terms of identifying the highest-value doctors relative to how you were sending the field -- the sales force out into the field?

Happy to do that.

Thanks for the question.

I think it's relatively straightforward.

We look at the historical prescribing of our physician population of Cologuard, and then we look at their patient demographics.

What's their volume of Medicare, Medicare Advantage and in-network access lives that allow to address go forward opportunity?

The intersect of those 2 things puts physicians, 110,000 or so that have ordered Cologuard, into buckets of opportunity, and we're narrowly focused on those that have high-potential, high-growth opportunity or currently are high prescribers and really directing our effort against that.

And through these questions that we've had so far in the call, I would just again refocus your thinking on 2 core points.

One is focusing our effort with our current sales force is going to drive incremental lift, especially when you have a growing access base.

You can't underestimate the impact of a low-access environment when a representative is trying to convince a doctor to prescribe Cologuard.

The fear of a bill or a patient noncompliance is a reason it's not prescribed.

What we've learned in our messaging strategy is that the messaging that matter to physicians starts with sensitivity and specificity, then goes to compliance, and then goes to market access.

So if you're not able to deliver an assured message across those 3 points to a core prescribing base with strong market access, you don't get the lift you need.

The ability to do that, which, frankly, is just happening now, gives us the confidence in the back half of the year that can drive the performance we need.

One for Jeff.

What -- give us any color your OpEx expectations and gross margin for maybe 3Q and the back half?

Sure.

Happy to.

So for the third quarter, I mentioned in the remarks that we expect cost per test in the low $130 range.

Remember that we keep seeing more and more efficiencies in the lab and operating functions.

At the same time, we're scaling the lab significantly by over 20% in the second half.

So as that new capacity starts to come online, you see some upward movement in the COGS per test.

And I do expect that upward movement to continue into next year and beyond as we bring the new lab on.

Long term, though, very clear path to 80% gross margin.

From an OpEx perspective, we expect to step up in the $20 million range in the third quarter.

Remember that in the first half of the year, we've been trending slightly behind our forecast, and I think we expect some catch up in the third quarter.

The primary driver of that is the increased sales force spending.

There's also some additional marketing investments in the third quarter.

To a lesser extent, there's a bit more R&D on both the Cologuard side as well as the pipeline, and some G&A primarily there, some IT and personnel to support the growth.

Your next question comes from Catherine Schulte with Baird.

First, could you just give us an update on electronic ordering progress?

And any discussions you may be having with health systems for broader adoption?

Sure, yes.

Happy to, Catherine.

So last quarter, we had broken out that number, it was around 30% at the time.

We do continue to make progress in terms of educating doctors on the portal and other electronic connections that are available as well as integrate with health systems.

That's not a number we plan to break out every quarter, we'll probably give it once a year or so.

But we have a team focused on electronic adoption.

We are making progress.

And we look forward to updating that number in the future.

Okay.

And now that you've checked the boxes on reimbursement coverage, going in-network, quality measures and the like, what do you view as the main limiting factor in uptake at this point in the launch?

And what do you think the most important driver will be in reaccelerating growth in the completed tests per doc metric?

I think that the answer is very straightforward, it's frequency of effort against a core prescribing base.

Right?

It's driving representative messaging against the core opportunity that will influence reorder on a go-forward basis.

Your next question comes from Patrick Donnelly with Goldman Sachs.

Maybe one for Kevin.

I mean, I certainly understand the need for more sales reps and that more sales reps drive more revenue.

But as you have more data now on how much docs need to be called, how much that impacts tests ordered, how are you thinking about the size of sales force medium to longer-term?

And then how do you balance the sales force adds with a focus on profitability as well?

The -- nothing changes in our view in terms of the number of sales reps that we are adding this year.

We said that we would add about 200, about 100 inside reps and 100 in the field.

So far, we've added about 150 so I think we'll continue to make progress there.

Long term, it's -- we would grow our commercial effort as the business justifies doing so, as we have done in the past.

The opportunity is a huge one, and I think that's the thing that can't be overstated.

There are 85 million Americans today.

With the American Cancer Society update that is now over -- well over 100 million.

And so with a great opportunity like this in most primary care settings, you'd have a much larger sales force than we have today.

We have added in what we thought is a prudent way.

We're, obviously, from a core cash perspective, approaching profitability when you net out the CapEx investments that we're making.

And so you can see the fundamental cash-generating potential of Cologuard well before we reach $1 billion in revenue, which we think is north of that is eminently attainable.

Okay.

And then Jeff, I know you mentioned the cash balance, $1.2 billion now after the most recent raise.

Can you just give us updated thoughts on cash use, the rationale behind the most recent raise given you guys had a pretty good amount already?

Just general thinking on the cash.

Sure.

Yes, our philosophy has always been to raise capital when you're in a position of strength, when you don't necessarily need it, to allow us to make the right investments to drive value probably for the long term.

And right now, we see a significant number of ways to make investments that will, long-term, set us up for sustainable growth and profitability.

So we've gone through the investments in things like the sales force and the pipeline, the facilities.

We see a really attractive ROI on all those investments.

As far as other opportunities beyond that, we continue to take a look at whether it's M&A activity.

But right now, the focus is on Cologuard and we feel very good about the balance sheet we have to allow us to stay nimble.

Your next question comes from with Puneet Souda with Leerink Partners.

Just wanted to understand on June specifically, is this something that extended beyond June into July?

And as you have taken these steps of the messaging around 90%, 95% coverage contracting, how is that -- can you give us any color on how is that resonating with the sales reps and how is that translating into tests?

Yes.

We -- again, we are reaffirming our full year guidance, both in terms of volume and in terms of revenue.

So I think that speaks to our confidence in the full year.

And I think that's the way that you should think about it.

Yes, Q2 was lighter than expected.

We don't want to provide color specifically on Q3.

I'm sorry, what was your second -- the second piece of that question, Puneet?

Yes.

Just wanted to understand, as the new message is going out to the sales force about more contracting, more covered lives of these -- of the patients, I just want to make sure, is that resonating well?

We can't really overstate how positive that message is.

Mark, why don't you touch upon that?

Yes, I mean, you can imagine, put yourself in the shoes of a representative who has to go in an office who may have historically had a patient with an out-of-pocket exposure or a bill.

And now walk in today and be able to confidently stand in front of that customer and declare we're not 90% out-of-pocket with no exposure.

It's just a very, very lean forward, positive message.

That, coupled, again, I'd go back to -- it is about coverage in terms of inspiring confidence.

But the brand itself in terms of its sensitivity and specificity and its compliance engine, coupled with compliance -- or excuse me, with coverage, is what drives, really, reorder rate.

But I would say they're very enthusiastic by where we sit today.

(multiple speakers)

Sorry, go ahead, Kevin.

Just to put that in perspective, since December of '16 when we added Humana, and then in July of '17, we added Aetna and UnitedHealth.

And then March of this year, Blues of Illinois, Tennessee; Alabama, CareFirst; Horizon, Texas recently; and Anthem, this has been an accelerating environment in terms of coverage and in-network contracting, which we haven't yet seen the pull-through on in full.

And you can quantify the pull-through from the earlier ones, UnitedHealth, Aetna, Humana.

We expect to see similar progress, not only in terms of physician ordering as that message gets through, also in terms of patient compliance.

There are a lot of folks out there who are sitting with a kit that we can reach out to now and deliver a message, "Hey, look, you have $0 co-pay, let's get screened." That's a really positive place to be from the entire business perspective.

Okay.

I wanted to understand, Mark, I have a broader question, more longer-term.

You obviously have a significant experience with large sales forces in the drug world.

And as we look at the reproductivity and the recent changes that have been made here, tell us how should we, in the longer run, think about reproductivity versus in Cologuard specifically, which is more of a monoindication versus HUMIRA which was a multi-indication?

Help us understand the longer term, how you're looking at the reproductivity world.

Great question.

Thank you for asking.

So first, it's very clear that frequency matters.

And the data is compelling.

So compelling that we have a linear relationship between the calls delivered and the reorder rate.

And that's unusual.

You'd normally see a law of diminishing returns, which would suggest we have significant opportunity to drive volume of calls to this core population.

That's number one.

Number two, what I've also been impressed with is that each subsequent launch of a cohort of sales representatives in the market has gotten effective in a faster basis.

They're able to demonstrate ability to drive message, profitability, in part because our customer base is more mature with the product.

So I think there's always opportunities for us to find efficiencies in the sales force with other products or other opportunities.

But what I would say right now is I'm absolutely focused on driving the sales force effort at this core prescribing population and trying to maximize our effort there, which helps Cologuard in the long term.

Your next question comes from Per Ostlund with Craig-Hallum Group.

I wanted to ask a question about sort of the evolution of the television campaign as you're looking ahead to fall.

I know there's been a good amount of discussion on the changing messaging to physicians over the course of the last quarter and forthcoming quarters.

But wondering how you're sort of looking at changing the messaging to the patient, to the consumer?

And is there a way that you sort of harmonize that messaging with the messaging that goes to the physician, so that it's really kind of augmented and putting the 2 sides together to really drive that reacceleration that you're looking for?

Great question.

I would think the answer is yes.

The first thing we've done with the most recent launch of our commercial is juxtapose Cologuard against colonoscopy.

And making sure that in the narrative of the commercial, it's clear to the consumer that Cologuard is a primary choice for colorectal cancer screening with very high sensitivity and very broad coverage.

So that message is consistent with the message we're delivering to you today.

The other thing we're looking at is how do we drive a share of voice, right?

So we've mentioned on previous calls that we're doing an in-market test.

We spend all of our money today in syndicated cable because that's where our patients spends the most of their time watching TV.

But we're also going into open market to double our share of voice to sense -- to understand, if we double our share of market in our spend, do we see the expected returns?

So I think it's a 2-part answer.

One is the messaging alignment, to your point, is there, as well as the incremental spend is being tested to determine long-term benefit.

Your next question comes from Mark Massaro with Canaccord Genuity.

Kevin, you indicated that there are 70,000 patients that ordered dating back to September 30, 2015 in that early initial launch.

But looking -- 36,000 patients ordered through June 30, 2015, so it looks like you have maybe 36,000 patients that you've already been reaching out to.

Could you maybe provide some clarity as to how that's going in terms of the response you're getting when you reach out to physicians?

Maybe what percentage are coming back and reordering?

Because hypothetically, 20% of the opportunity would net you an incremental 15,000 orders or so in the back half.

Just looking for any clarity there.

Yes, sure.

Take a look at full year 2015, there were 104,000 completed tests, and then you want to back out the positive Cologuard tests because, presumably, they go on to colonoscopy and aren't indicated for another Cologuard test.

And back off some patients whose addresses have changed, and we look at the full year opportunity as being around 70,000.

Execution and focus on this in the first half of the year has been suboptimal.

In the back half of the year, there's -- there will be an intense focus, starting now, to make sure that we reach out to the physician -- not just the patient, but also the physician -- to get to the physician initiating that reorder, which is what has to occur.

So that's -- when I refer to the 70,000, that wasn't through September, that is a full year availability.

Many of those patients aren't yet ready for their 3-year rescreen.

And remember that the bulk of people still were in Q3 and Q4 of '15 that got screened in the first instance.

So the real opportunity is in the back half, and that's where the real focus will be.

Okay.

And for clarity, the folks that you've reached out to today have largely been directly to the patient and not the physician?

It has been largely to the patient encouraging them to call the physician.

And with some effort, to the physician.

It just needs to be more robust and coordinated with our sales force and our customer contact team.

So there are areas that we execute well.

This is not one of the areas that we have I think lived up to what we expect.

The good news, I guess, coming from that is trust -- rest assured that we will execute really well on this very discrete, very achievable opportunity in the back half of the year.

That's great.

And then, Jeff, you indicated that you may be making some tweaks to marketing initiatives.

Was wondering if you could maybe walk us through how the Harry Connick Jr.

campaign is going?

How many live events do you expect in the back half of the year?

And have you seen much ordering from the initial events?

So this is Mark.

I think the way I would answer your question first is we think that Harry and Jill are doing a great job of really raising awareness.

And we know that not only because of the traffic and the media at the live events, but also the website traffic that surrounds an event.

While we don't get into very specific details about each channel, what I would say is that I'm convinced that the new 50 campaign, Cologuard Classic and the TV spend have done a great job of raising the awareness of Cologuard, which is over 90% to our patients and our physicians.

The awareness is strong.

Now it's really about driving reorder and, sometimes, just investment in different channels.

One of those channels could be, as an example, we know that about 1/4 of the population doesn't have a primary care physician.

So how do we reach that opportunity?

So we're going to be looking at our mix of investments over time, discretely looking at each channel, and then determining what's the impact.

And then making different go forward investments as we learn.

This concludes the Q&A session for the conference.

I'd now like to turn it back to Kevin Conroy, Chairman and CEO, for any closing remarks.

Thank you for joining us today as we reviewed our second quarter financial results and discussed progress towards our 2018 priorities.

The Exact Sciences team delivered a strong second quarter with strong volumes, revenue and gross profit.

We're confident that Cologuard will reach our long-term market share goal of at least 40%, and that we can help play a role in the eradication of colon cancer.

We have the right product and team in place to execute, and a solid foundation that will help future growth and profitability.

We look forward to providing you with updates as we work to get more people screened and advance our pipeline.

Thank you.

This concludes today's conference call.

You may now disconnect.