Ladies and gentlemen, thank you for standing by. And welcome to the Exact Sciences Corp. First Quarter 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Thank you. Megan Jones, Senior Director of Investor Relations, you may begin your conference.

Thanks, Josh. Thank you for joining us for Exact Sciences’ first quarter 2022 conference call. On the call today are Kevin Conroy, the company’s Chairman and CEO and Jeff Elliott, our Chief Financial Officer and Chief Operating Officer. Everett Cunningham, our Chief Commercial Officer, will also be available for questions. Exact Sciences issued a news release earlier this afternoon detailing our fourth quarter financial results. This news release and today’s presentation are available on our website at exactsciences.com. During today’s call, we will make forward-looking statements based on current expectations. Our actual results may have material differences from such statements. Reconciliations to GAAP figures are available in our earnings press release and descriptions of the risks and uncertainties associated with Exact Sciences are included in our SEC filings. Both can be accessed through our website. I will now turn the call over to Kevin.

The Exact Sciences’ mission is to eradicate cancer by making earlier detection a routine part of medical care. The entire team at Exact Sciences helped us move toward achieving that mission with a strong start to 2022. Highlights from the first quarter include testing more than a million people globally, growing revenue 24% excluding our COVID testing, partnering with Katie Couric on an exciting new campaign to get more people screened with Cologuard, optimizing our sales force structure to reach primary care doctors more effectively and efficiently, guiding a record number of patients to more effective cancer treatments with Oncotype DX, generating evidence to support our next generation Cologuard and multi-cancer early detection tests, focusing intently on prioritization and growing our company efficiently, and beginning to integrate PreventionGenetics into our foundation. Jeff Elliott will now review our financial results.

Thanks, Kevin. Good afternoon. First quarter revenue was $487 million, an increase of 21% or 24%, excluding COVID testing. Screening revenue was $307 million, an increase of 28%. Excluding PreventionGenetics screening revenue, it was $297 million, an increase of 24% driven by Cologuard volume. 9,000 new healthcare providers ordered Cologuard during the quarter, and nearly 273,000 have ordered since launch. Precision Oncology revenue was $153 million, an increase of 18% driven by Oncotype DX Breast volume. Precision Oncology included eight points from our Ashion acquisition, which annualized in April. COVID testing revenue decreased 15% to $27 million in line with our expectations. First quarter GAAP gross margin was 68%. Non-GAAP gross margin, which excludes amortization of acquired intangibles, was 72%. We expect margins to gradually improve throughout the year as we absorb the additional lab capacity brought online for Cologuard and COVID testing. Sales and marketing expense was $232 million. G&A expense was $170 million, including a $26 million gain related to the Thrive acquisition. R&D expense was $102 million, net loss was $181 million, and adjusted EBITDA was a loss of $90 million. We ended the quarter with cash and securities of $817 million and we have about $150 million available on our credit facility. Additionally, we're exploring other non-dilutive asset-backed financing options. We expect our quarterly cash use to be lower over the balance of the year, and we're confident about being profitable in 2024 on an adjusted EBITDA basis. Turning to guidance, we expect total revenue between $485 million and $505 million during the second quarter, and between $1.985 billion and $2.032 billion for the year. We expect screening revenue between $335 million and $345 million for the second quarter, and between $1.35 billion and $1.372 billion for the year. This includes PreventionGenetics revenue of approximately $10 million during the second quarter, and between $40 million and $42 million for the year. We expect Precision Oncology revenue between $145 million and $150 million for the second quarter, and between $595 million and $610 million for the year. We expect COVID testing revenue between $5 million and $10 million for the second quarter, and between $40 million and 50 million for the year. We saw modest improvement in sales force access during the quarter. Guidance assumes continued gradual improvement throughout the year. As we said last quarter, we expect screening revenue to be more frontloaded than current consensus. In Precision Oncology, we expect mid-to-high single-digit percent growth in the U.S. and internationally. We reduced our international growth expectations due to a delay in our Oncotype DX Breast launch in Japan. This is related to requirements for ordering and resulting portal which we expect to complete by year-end. I'll now turn the call back to Kevin.

Thanks, Jeff. Our sales and marketing teams are fueling Cologuard growth by reaching more physicians and their staff in person, redesigning territories to improve healthcare provider targets and reduce overlap after completing our co-promotion agreement, and creating urgency around the importance of screening through our mission to screen partnership with Katie Couric. These efforts are increasing Cologuard adoption in the core 50 to 85 age group and they're supporting two of Cologuard’s biggest growth drivers, the 45 to 49 age group, and the three-year rescreens. Screening eligible people earlier starting at age 45 and keeping them screened every three years will help address this staggering increase in colorectal cancer incidence in this age group. When compared to a 65-year-old, keeping the 45-year-olds screened until they're 85 provides twice as much lifetime Cologuard usage. Since Cologuard was made available, we have invested heavily in our team's brand development, IT systems, and customer experience. This provides a head start in capturing eligible unscreened patients at every age. Our goal is to make rescreening for life automatic. Our experienced team, trusted Oncotype brand, and strong evidence generation capabilities are supporting our core oncology business and creating new growth opportunities. Our Precision Oncology team tested a record number of patients with our Oncotype DX Breast test in the first quarter, providing life-changing information to more than 40,000 people. We're partnering with a leading breast cancer research institution to conduct a study using our Oncotype DX Breast and minimum residual disease tests. The trial, which we plan to initiate in the coming weeks, demonstrates our unique ability to predict recurrence and help patients navigate their breast cancer treatment. Our Oncotype DX test guides about 70% of U.S. patients diagnosed with HR-positive, HER2-negative breast cancer to the most effective treatment based on the risk of recurrence. Knowing which patients are at the highest risk puts us in the best position to monitor them and detect recurrent cancer earlier. We're in a breakthrough period for our pipeline as we generate evidence for the three largest patient impact opportunities in diagnostics. In colorectal cancer screening, we've made great progress enrolling cases to power our prospective BLUE-C study, and we remain on track to complete stool enrollment mid-year; we expect BLUE-C results to support FDA submissions for our next-generation Cologuard and colon blood tests. In multi-cancer early detection, we presented data confirming our strong results using methylation and protein markers, which we'll discuss on the next slide. We're also initiating studies for our minimum residual disease test with a large trial enrolling in colorectal cancer and a breast cancer study starting soon. We expect to have validation data supporting our tumor-informed approach by the end of the year. We believe combining multiple classes of markers will provide the most accurate multi-cancer test for patients. We're building off the promising methylation and protein data presented at AACR. Our markers detected 88% of cancers at 97% specificity across six cancer types, including five with no screening option available today. We expect to have additional data later this year, combining methylation, protein mutation, and other marker classes. We'll also present validation data and expect to begin enrolling our prospective FDA registrational trials shortly thereafter. We recently agreed to acquire Omicara Diagnostics, an emerging leader in proteomics, biomarker discovery located in Germany. This highly skilled team will deepen our proteome profiling capabilities, helping uncover the best biomarkers to include in our advanced cancer tests. Our deep relationships with over 300,000 healthcare providers and more than 9 million patients put us in an ideal position to help detect most cancers earlier before symptoms appear. We have built the infrastructure and capabilities to support this large customer base. We also offer multi-cancer and hereditary testing to the same patient population as Cologuard. Those relationships will deepen in primary care where cancer can be prevented. When cancer is detected, we'll also have the data, tests, and relationships to support the patient at every step of their treatment. We look forward to providing updates on our progress throughout the year. And we're now happy to take your questions.

The first question comes from the line of Brian Weinstein with William Blair. Your line is open.

Hey, guys. Can you hear me? I appreciate the question. And I'm going to tell you upfront, probably break the rule here and ask you two things. So first, if we could get a question in on the sales structure and the optimization that you're going on and give a little bit more detail about kind of how that's playing out? And then second, if I could, just want to ask the question on blood-based testing and screening for colon cancer. Just with a lot of companies now going to be putting out data here, you guys and others. I just wanted to get your updated thoughts on the opportunities and challenges that you see in that space as that data starts to come out. So sales force structure and kind of how that's going and impact on Cologuard and then when they start to introduce blood-based testing.

Jeff, could you start with the first question, and then Everett, you can follow up.

Hey, Brian. It's Jeff. So on the sales force, I mean, I think you're starting to see it in the results. We're pleased with the results the team delivered in Q1. Notably, we started to see incremental productivity out of this expanded sales team, which we're really pleased with. When you dive into the numbers here, we had a really strong quarter when it comes to rescreens and 45. An area of the business that we are working to address is that 50 and over age group, first-time users. And that's right where the sales force restructure that Everett can fill in more detail. So that's where the sales force is focused now, making sure that population, which is over 25 million people who need to be screened right now is educated on the benefits of Cologuard. And that we're reaching these physicians frequently. So Everett, maybe you could provide more details on that.

Thank you, Jeff. Hello, Brian. As Kevin mentioned, we successfully integrated a highly skilled team from Pfizer, bringing over 400 colleagues on board at the end of last year. One key achievement has been merging the Pfizer team with our exceptional legacy Exact Sciences sales force, allowing us to operate as a unified organization. This alignment is crucial as we present ourselves to the market as a cohesive sales and marketing team. Additionally, we've redesigned our territories, establishing a single point of accountability, which is essential. Our representatives are now dedicated to specific regions, responsible for driving their growth targets, and we track their performance weekly, monthly, and quarterly. We've also equipped our representatives with more precise targeting data, enabling them to know where to focus their efforts, when to make visits, and how to communicate effectively, ensuring they connect with the most promising Cologuard physicians. As Jeff noted, the metrics in the first quarter have shown significant improvement, including an increase in in-person calls per representative, a greater reach to healthcare providers, and more orders generated per sales call. Our goal now is to maintain this momentum and continue enhancing our results throughout the year.

Brian, answering your second question about how we see the blood testing market evolve. As you know, we have our own blood testing program. At a high level, here's the way you should think about the opportunity. There is an opportunity for additional testing. The path, however, is a rigorous one as the path was very rigorous for Cologuard. You should think about five different elements to this. The first is that we know that blood testing will be less accurate than Cologuard and certainly less accurate than colonoscopy. The second is that FDA approval and getting an equivalent claim to Cologuard is probably going to be challenging for all of those who are aspiring to enter the colon cancer screening market with a blood-based test. Third, the bar for guideline inclusion is high, and there is no guarantee that blood tests will meet that bar. Pricing is likely to be below $200, and we'll talk about that as well. Finally, and maybe most importantly, there is going to be a challenge in getting physicians to order a less sensitive or less accurate test for colorectal screening. Let's take these out one at a time. If we could bring up a slide with the model comparison between Cologuard and a theoretical blood test. Regulators, guideline groups, and also physicians and patients will look at performance differences in tests. At a high level, of course, overall cancer sensitivity is important. When you drill down, those cancers that you screen for are Stage 1 and Stage 3 cancers. We would expect Stage 1 sensitivity to be approximately 70% because there are so many more early-stage cancers in a screening study, like there were 45% of all the cancers found in the DeeP-C study that were Stage 1; 75% were Stage 1 or 2. The overall cancer sensitivity is likely, we believe, to be in the 80% to maybe 85% range. Advanced adenoma or pre-cancer sensitivity is very important for guideline inclusion. We'll get into that, and specificity is similar between what we believe are the two technologies. But overall, the performance difference is stark. And the FDA, and this gets to the second point, is that the FDA historically does not like to see performance degradation with new technologies that are subject to PMA or de novo 510(k) approval. We’ve seen two examples of this in colon cancer screening in the recent past. One is Septin9, which is a blood-based test with inferior performance for detecting cancer and precancerous polyps compared to Cologuard. The panel meeting for that was at the same time, actually the day before the Cologuard test. FDA eventually approved Septin9, but they did it with a very limited label compared to Cologuard. Their label stated it must be offered, and first, patients must be offered and refused a range of other tests that were recommended by the main guideline group at that time. The second example is the Pillcam, which has a 510(k) de novo clearance for screening but only in instances when a colonoscopy can't be completed. Those are two examples of where you have performance degradation, and as a result, the claim language was changed. The FDA's view on this hasn't changed. We don't think it will change. We think there is a role for blood-based testing. But marketing a test with inferior claim language is certainly going to be a challenge. Next, guideline inclusion. As you know, I've been doing this for a long time and had been through the USPSTF process. You have to love modeling if you are going to dive into these details. The USPSTF is the main guideline group, and their guidelines are based on this rigorous statistical modeling approach that is largely dependent on advanced adenoma detection first. That's about 60% of all of the impact comes from advanced adenoma detection. This next slide shows that relative to Cologuard, a colorectal cancer blood test with a similar interval detects significantly fewer cancers and precancers and thus leads to a significant degradation in life years gained. It holds a number of colonoscopies constant or roughly constant, and that ratio is important. But as you can see there, the ratio of life years gained to the number of colonoscopies, which is the main test that USPSTF looks at, is significantly lower for a blood test at three years. The only way a blood test really gets into guidelines is if it's an annual test. And let me take a step back. This modeling assumes 100% adherence – that means everybody who is offered the test gets it, and they get it exactly when they should get it. We know that's not realistic, but that's the way the modeling is done. The FIT test outperforms Cologuard here because it assumes that a fit test has been done every year exactly on the anniversary. We know that's not remotely realistic, but that's how you end up in the same ballpark. As you can see, the FIT test past Cologuard colon has to be all outperformed a blood test, even with this pretty decent performance of relatively high cancer detection. If the test is not included in the guidelines at three years, which here it wouldn't be. It would have to be every year. What is the implication of that? Medicare is going to look at this as they consider pricing a test. You could think Cologuard at every three years was priced just under one-third of the Medicare average for colonoscopy screening, which was indicated for ten years. So ten divided by three roughly got you to $500 a test. 500 divided by three, we believe, gets you somewhere between $100 and $200 a test. That makes this very challenging with sequencing technology or for that matter, even PCR testing. Finally, this performance difference, guideline challenges, FDA challenges also creates hurdles for customer adoption. We have been actively promoting Cologuard to primary care physicians for eight years. We know this market well. Even with a large commercial organization and a large marketing effort, there is still a bias towards colonoscopy. We, obviously, based on this last quarter, are showing our progress there. But that is with sensitivity for cancer, strong precancer and specificity data. We believe that our blood test will be very challenged to perform. We believe our blood test will perform very similarly to others based on the data that we've seen today. But this is going to be a real challenge to get adoption. We believe this is the right way to look as the realistic way to look at blood cancer testing. We hear a lot about it. It’s usually only small pieces of this complex puzzle. This is the whole puzzle.

Your next question comes from the line of Derik De Bruin with Bank of America. Your line is open.

Hey. Good afternoon. Thank you. Hey, just help me understand this. I mean you beat the high end of your screening guide in Q1 by roughly $3 million, and yet you're lowering the high end of the range on screening for the full year by $5 million. I'm just curious what's driving that? And I have a follow-up.

Derik, we're raising and narrowing the range here. I guess check the press release there. But we're pleased with the first quarter results. Cologuard grew 24%, really across the board, broad-based strength. Importantly here, the main drivers, Cologuard rescreens, very good quarter on track for the full-year guide. Cologuard 45 to 49, another very good quarter on track for the full-year guide. Sales force productivity, as Everett talked about, we're seeing improvement there. So we're feeling good, which is why we did raise the guide even though it's only one quarter end. That said, it is one quarter end. When you dig into the business, as we've said before, sales force access remains muted. Where you see that primarily is in the 50 and over age group first-time users. That group is growing. We have seen improvement there. It isn't growing as fast as we would like, which is again why Everett and the team are pursuing some changes to go after that group. As we go through the year and we see improving sales force access, that should help that group grow even faster. So at this point, I assume gradual improvement to the extent that things open up more broadly, that could be a source of even greater growth. We know over time that segment of the market will open back up. But it sits here after one quarter, I think this is the right thing to do, raising guidance yet not by the full of the Q1 beat.

Thanks for the information. I'm interested in your tumor-informed approach regarding MRD and would like to hear your thoughts about tumor-naïve cases. Given that you have the Thrive multi-cancer detection test, why wouldn't it be beneficial to integrate that approach? Since MRD will have different sensitivity requirements, is there a reason the multi-cancer test wouldn't be applicable for naïve cases?

As we have mentioned before, we plan to take a twofold approach by integrating elements of our multi-cancer screening method, particularly the methylation aspect, with our tumor-informed approach, making us the only company to offer both. We believe this gives us a significant advantage in situations where a physician cannot or chooses not to acquire tissue from a patient. Our tumor-naive approach will be based on the technology we are developing. Your question is very relevant, and this technology is being incorporated into our testing. We are very excited about this strategy. There is still a lot of work to be done to validate the approach, so we do not want to get ahead of ourselves, but we are confident that the foundational technology investments we have made will be beneficial.

Thanks.

Your next question comes from the line of Catherine Schulte with Baird. Your line is open.

Hey, guys. Thanks for the questions. I guess first, how would you characterize rep access and wellness visit volumes versus pre-COVID levels in the quarter? And then how did those trend so far in April?

Yes. Thanks, Catherine. We are still not from an access standpoint at pre-COVID levels what we've seen because I've spent time in the field, I spent time talking to my commercial colleagues, but we see modest improvement in access. What we feel really good about is the redesigning of our territories and the culture of having our reps in the field every day. So as we see that access seeing that modest improvement, we're going to be there consistently to get in. What I've seen, I spent time in the field is when our reps bring value to the physician and to the health system and the health system and physicians see us as a way that we can increase screening levels. We get access. So we just have to continue to stay at it. It’s about blocking and tackling, and it’s about being consistent with a really good message to our customers.

Your next question comes from the line of Brandon Collier with Jefferies. Your line is open.

Hey, thanks. Good afternoon. Jeff, the leverage on the sales and marketing line in the first quarter was pretty impressive, down I think, $15 million or so sequentially if you exclude the Pfizer fee in the fourth quarter. Even though volume growth was up sequentially. Can you just talk about kind of moving parts in that line that enabled you to get that leverage? And should we assume that your OpEx guidance for the year is consistent with your prior outlook you had probably updated?

Thanks, Brandon. This is Jeff. No change to the OpEx assumptions for the year. I feel good about our ability to generate leverage over time because Everett and the team have built a world-class we believe, best-of-breed primary care sales team. Over time, that not only can we leverage that with Cologuard but we'll continue to leverage that as we introduce other new products like colorectal cancer testing and multi-cancer testing. So I feel good about that. Brandon, I would go back and check some of the moving pieces there Q-to-Q. In the fourth quarter, we did have, as we amended the Pfizer agreement, there were some one-time things in there. I don't think the math is quite right. Over the balance of this year, I think we'll see some really good leverage on that line. If you look at what we implied in the guide originally for the year, it was a step down from the Q4 run-rate for the entire year. So I feel good about that. Some of the new marketing efforts that Everett talked about, Katie Couric, and some of the TV ads are really helping drive awareness that over time, we'll see a really good return on the investment.

Your next question comes from the line of Matt Sykes with Goldman Sachs. Your line is open.

Hi, guys. Thanks for taking my question. It sounds like you've gotten some pretty good momentum in rescreenings and Cologuard 45 in Q1. I know on the last call, you had mentioned you're baking about $220 million in rescreening revenues within this year's full-year guide and about $100 million for Cologuard 45 million. Are those numbers still good to use? If so, do you see additional upside just given the momentum you've seen in Q1? Or have you adjusted those numbers?

Matt, I still feel very good about those numbers. As for additional upside, let's take rescreens to start with. Today, there are over a million people due right now for three-year repeat testing. Over time, that number will grow. In fact, if you look as a percent of revenue, it's going to continue to grow. I think in about three years, this will be a $500 million per year business for us. What really excites me as CFO is that this is essentially recurring revenue. It's higher-margin revenue, and it keeps going as a percent of our mix. On the 45 to 49 side, Kevin talked a bit in his prepared remarks about this. If you look at the average value to Exact of a typical 45-year-old, it's over twice as high. In fact, it’s really close to three times as high as somebody who is 65 or 70. Because for a 45-year-old, we could keep screened for 30 to 40 years. The lifetime value of that customer is significant. That’s what really gets me excited about the opportunity here between 45 and rescreens, they work hand-in-hand, and we’re off to a really good start this year.

Your next question comes from the line of Dan Arias with Stifel. Your line is open.

Good afternoon, guys. Thanks for the question. Jeff, just to push a little bit more on the outlook. I think last quarter, the view was that the market and the environment around doc visits and wellness wouldn't necessarily normalize this year. I'm just wondering if that's still how you would characterize the way that you're thinking about the full year, is the assumption still that you're kind of at a suboptimal level three quarters from now?

Yes, Dan. That is the assumption. As Everett mentioned, we noticed some modest improvements in sales representative access. It's important to note that Cologuard remains a relatively new product. We know that physicians are responsive to promotions and appreciate face-to-face interactions with our sales team. When we examine the ordering patterns closely, the group of doctors who accounted for the top 40% of orders before the pandemic is still lagging. The growth we are seeing is coming from the lower-performing doctors, who we historically have not targeted and who weren't frequent Cologuard customers. That segment increased by 60% in Q1 compared to the start of the pandemic. As we move forward and improve sales force access, we expect the order rates from the top doctors to recover, as these are the dedicated users, and we’re already observing some promising early signs there. Meanwhile, the doctors at the bottom are showing significant acceleration from quarter to quarter. This indicates a meaningful broadening and deepening of our ordering base. Our guidance assumes that we will continue to experience limited access to doctors, likely in the 50% to 60% range compared to pre-pandemic levels. Regarding wellness visits, the situation has remained fairly steady throughout the quarter. I anticipate modest improvement, but we are probably at around 85% of pre-COVID levels.

Yeah. If I could just add longer-term outlook, which we're all obviously focused on as well. Over the next five years, about 30% of GIs are expected to retire. Now, obviously, some of those will be replenished with new physicians, but the trend is towards fewer GIs, not more. That means a greater need to focus on higher-value colonoscopies rather than screening colonoscopy. This is happening just as the millennials start to hit the age of 45 and start screening. We know that today in the 45 to 49 population, we already lead colonoscopy as the preferred screening approach. They want accuracy, they want ease, and they want something that is inexpensive. They know it's going to be covered by their insurer. So we are tremendously excited not only about the near-term but the long-term opportunities for Cologuard, and we're just getting started. We believe we can not only achieve that 40% share goal but exceed it. I think this quarter demonstrates that.

Your next question comes from the line of Dan Brennan with Cowen. Your line is open.

Great, thanks for taking the questions, Kevin, Jeff, and Everett. I have a three-parter, if you don't mind. I guess the first one is, could you elaborate a bit on the specific changes to the sales force that you made? Number two, on blood-based competition. Kevin, you gave your view on what you thought the cancer sensitivity would be. What are your expectations for pre-cancer detection, particularly given how important that is for modeling? And then finally, on your own blood-based test, historically, I believe you've talked about being superior to what's on the market; maybe it's just a subtle change, but I think you talked about being in line with what's on the market. Just wanted to get some clarification there. Thank you.

Okay. But tell me the first question, those three came at me really quickly.

Let me double-click on the sales force and give it a little bit more color. I'll start with the sales force. The representatives that are out there calling on physicians. The territory design to me is so important. When you have individual accountability in your area to drive growth for Cologuard. And you're the one that's responsible for that position and really calling on a physician. To me, what we've seen is momentum with our sales reps because of that empowerment that they have to drive their individual growth. We've also made a change to our management structure. Before, our management structure was responsible for vertical lines of our business. Now, we've designed our management structure across geographies. They own a geography, and they own all the call points—primary care, specialty, and health systems. So our managers out there feel empowered to again, own that business and to drive it. Lastly, the partnerships that we have with the rest of our commercial organization, the way our sales organization is working with our marketing organization, the campaign with Katie Couric launched in March during Colorectal Cancer Awareness Month, the amount of hits from a social media standpoint. The commercial organization, again, while it just started in January, the progress that we're making throughout the quarter is very positive. I just want to pause and thank our sales team and marketing team for the focus that they've had in the quarter and also thank Katie Couric for her partnership around the campaign around the mission of the screen.

In response to your second question, Dan, we're assuming a 15% sensitivity for advanced adenomas or pre-cancer detection based on the modeling data we provided. It's notable that if you assume 100% cancer sensitivity and specificity, the model just barely supports the inclusion of a blood test. With a 100% sensitive and specific blood-based test under the USPSTF modeling approach, it struggles to justify a one-year interval, although it might just pass. Regarding our test's performance compared to new competitors, we've indicated in the past that we expect our performance to be at least equivalent, if not superior, due to our methodology. However, we cannot predict how others will perform. We've seen various studies, including those with South Korean cases matched against U.S. controls, but this is not the approach we or our clinical partners advocate for case-control studies. There are many different methodologies for case-control studies, making it hard to gauge their performance accurately. We maintain a rigorous method for matching cases with controls, ensuring a balanced distribution of precancers, early cancers, and later cancers, which significantly impacts our top-line performance. Should there come a day when those involved in such programs have to reveal their data, it will be interesting to see. Based on our previous experiences, we anticipate that performance in that forward-looking scenario will deteriorate, especially when the patient populations involved do not match our case-control data. This is our perspective on the matter, and we consistently assert that this approach provides a solid framework for evaluating the effectiveness of a blood test.

Your next question comes from the line of Vijay Kumar with Evercore ISI. Your line is open.

Hey everyone. Congratulations on the first quarter, and thank you for taking my question. I have a three-part question. Firstly, regarding the guidance, considering the first quarter and the annual increase for Cologuard, which reflected the first quarter's performance, is there any reason to believe that the productivity gains won't continue into the second half? Additionally, Jeff, during our last conversation, we discussed the lag between orders and revenue due to the Omicron impact in the first quarter. Are there any implications for the second quarter? Lastly, Kevin, looking at the clinical trial from a broader perspective, are there any differences in patient enrollment or how the trials are conducted when comparing your BLUE-C to your primary competitor in the blood sector?

I’ll begin with that. Clinical trials take place nationwide, and we concentrate on our own rather than others. We are enrolling a group of patients that closely resembles those in the DeeP-C study, including participants mainly aged 45 to 85. These large studies provide a wide representation of the U.S. population, meaning we encounter individuals who are healthy but may have varying immune responses and different comorbidities. In our DeeP-C study, we observed that this variability affected specificity, and as specificity declines, sensitivity may also be influenced based on the cutoff point. Our BLUE-C clinical trial enrollment has performed exceptionally well in the first quarter. We anticipate completing enrollment for the stool component of our test by midyear, followed closely by the blood component. Everything is back on track, and we are thrilled about it.

Vijay, this is Jeff. I'll take the other two. Starting with your second one, Omicron. Look, I think that was primarily a Q1 thing. It happened relatively early—late last year, earlier this year. We can track it fairly closely. I don’t expect the second quarter impact from Omicron. The team did light through a little bit of a headwind in Q1 and still deliver good results. On the first one on the annual raise. We're pleased with the results. We've raised guidance. To Derik's point, we did raise the high-end of the screening revenue by $5 million, even though it’s early in the year. It's early in the year; there are a lot of unknowns. The biggest one is around sales force access. Sales force access impacts us primarily in that 50-plus first-time user group. Everett and the team are doing everything they can to increase their productivity, the reps. We’re seeing some early good signs there. I think it’s important to stay cautious considering we're three months in. We still have some work to do to execute on the rest of the year.

Your next question comes from the line of Patrick Donnelly with Citi. Your line is open.

Hey, guys. Thanks for taking the questions. Jeff, probably a couple for you here. Maybe on the cash side, you guys burned I think around $200 million this quarter. As you mentioned, you have $800 million or so on hand. How should we think about the burn rate this year? Is this a decent run-rate? At what level would you look to shore up the balance sheet, maybe feeling more urgency on that front? You've done equity raises in the past. You mentioned you would look more for non-dilutive options in the future. Can you just expand on that? Is that just market volatility? What would those options look like? And then a second one just on Cologuard ASPs, if you could just talk about the trends there, what you're seeing.

Thanks, Patrick. This is Jeff. On the cash use rate, I think Q1 will be the high watermark for the year. I expect the average rate to step down throughout the year; there are some seasonal things that caused Q1 to typically be higher. What I think over the next several years with our balance sheet, it really starts with revenue and revenue growth. We are a growth company. The focus is on making sure we execute on Cologuard and Oncotype and bringing these massive pipeline opportunities to market. That will allow us to generate this year alone nearly $1.5 billion of gross profit. That's unique in this space. A significant amount of gross profit we can use to self-finance most of our investments. Over time, I expect gross margin improvement as we leverage that fixed cost investment in our lab and capabilities so that gross margin will improve. I also expect very good leverage across the OpEx lines. We talked a bit about sales and marketing; I expect very strong leverage in G&A over time as well. When you think of the balance sheet as of Q1, as you mentioned, we have over $800 million of cash. We also have $150 million available on our credit facility that we could draw on at any time. At the same time, we're looking at additional non-dilutive financing sources. A prime example of that would be our real estate facilities. We have over $300 million invested in those facilities that we can unlock through various sorts of financing mechanisms. We will do that. I think we're in a very good shape. We are very committed to being profitable for the full year on an adjusted EBITDA basis in 2024. I think the balance sheet we have in hand will allow us to get there without using any sort of equity financing. Your last question was on Cologuard revenue per test. It's still in about the $480 range. There are a few different things that are opposing forces that work here. The team has done a really nice job improving our internal capabilities and systems to drive that rate higher over time. Longer term, I still feel very good about our ability to raise the overall revenue per test or ASP. On the flip side, the rapid growth we're seeing in this younger population, the 45 to 49 crowd, temporarily puts a little downward pressure on that revenue per test. There’s also been a higher mix of Medicaid, which is absolutely the right thing to do. That puts a little downward pressure. When you look at the overall mix of Medicare and Medicaid Advantage, it's 38% in Q1. For perspective, it was 42% a year ago, Q1 of last year. I raised that because that group right now, given the well-established coverage, that group carries the highest revenue per test.

Let me reemphasize what Jeff just said that we will not do another equity raise because we don't have to. We are in a very strong position with our revenue growth and all the drivers and our ability to control our OpEx which we've taken steps to do. So that is—I want to make sure that, that is very clear to everybody who listens to this call or reads the transcript.

Your next question comes from the line of Jack Meehan with Nephron Research. Your line is open.

Thanks. Good afternoon. I wanted to focus on multi-cancer testing. First for Kevin, we've seen regulators like NCI last week focus on survival and mortality as the gold standard for multi-cancer test. So I was curious, do you think the FDA is going to use that as the bar? And can you talk about the implications for the size of your pivotal study? And any updated thoughts on timeline for FDA approval? And then for Jeff, what was the gain related to Thrive in the quarter?

So the first question is what will the endpoints be—how does NCI, how do others look at this if it's a mortality endpoint? That is a way of saying we don't want a blood-based test that could have a greater impact on cancer mortality than most therapies combined. There is no therapy as impactful as earlier detection. I've been part of many conversations with key opinion leaders, regulators, and NCI individuals that work for NCI, and there are a lot of different opinions. We know that with every cancer screening test that has been adopted, colon cancer screening, cervical cancer screening, breast cancer screening, a mortality endpoint was not required. I do not believe—we do not believe that one will be required here. We believe that sensitivity, specificity, positive predictive value, and negative predictive value, like with Cologuard, like with the Pap smear, like with HPV testing, all will be the main criteria that the FDA looks at—the guideline groups are surely going to look at modeling. You can look at proxy endpoints such as a stage shift, which occurs sooner than mortality. We think that this path needs to be clarified, but the power of the test and the number of high-quality companies who are actively pursuing this opportunity will lead the federal government. You can see this with the cancer moonshot to be very supportive of high-quality clinical studies and tests that move the needle. How is the FDA going to look at this? I mentioned that already.

Hey, Jack, on the gain related to Thrive. What this is, is related to the acquisition; there are some earn-out payments really tied to some milestones of FDA approval and Medicare coverage. Our expectations for timing have not changed at all for those. The discount rate we use, however, has changed given the increase in interest rates. It only relates to a different discount rate. It changed the current value of that contingent payment, which resulted in a $26 million gain. From an adjusted EBITDA standpoint, we do kind of exclude that, so there’s no impact on adjusted EBITDA.

Your next question comes from the line of Andrew Cooper with Raymond James. Your line is open.

Hey, everybody. Thanks for the questions. A lot has been asked, so maybe I'll mix it up a little bit and give you something that's not precisely Cologuard-related. So maybe just first, if you could dive in a little bit into the delay in the Japan launch for Oncotype. What hurdles do you need to cross to be able to get that launched and how it's maybe shifted a little bit? And then secondly, I know it hasn't been too long that it's been in your hands, but any kind of initial thoughts on Prevention and what's going on in the HCT space in your hands would be great.

Well, I'll take the high-level Japan question; Jeff, you can talk about the impact there. There were requirements; there are requirements on an order entry and resulting portal that are mandated by the Japanese Ministry of Health. We did not do as good a job as we should have done in delivering on that portal and all of the requirements associated with that. The team is working very hard to deliver precisely what the Ministry of Health is asking for. We're confident that will be complete by the end of this year. We expected that to be complete in the first quarter. The difference is—Jeff, you can describe that.

Yeah. The difference in timing there had an impact of about $15 million on the year. We did not change guidance for Precision Oncology because the base business, the U.S. business, and international outside of Japan performed very well in the quarter. We expect that strong performance to continue, but we did take out of our internal expectations for the year any Japan revenue. The second question was on PreventionGenetics. The PreventionGenetics team has really been amazing. It's such a high-quality group focused on hereditary testing. Our teams are working fast and furiously to very thoughtfully bring a complete hereditary cancer testing solution to our customer base, both healthcare providers and patients. We haven’t provided a lot of color on exactly when that will launch with reimbursement other than that the teams are working on making that a seamless solution. I expect that is end of year, beginning of next year in terms of when we start to introduce that.

Your next question comes from the line of Mark Casero with BTIG. Your line is open.

Hey, guys. Thanks for taking the question. Maybe on just M&A, recently, you've been doing some small tuck-ins, notably this proteomic biomarker provider in Germany. But I wanted to sort of test multiples in the space have contracted significantly. Some of the assets that may be available in the space would actually help you get to adjusted EBITDA sooner in my opinion, for 2024. So looking at companies where you could maybe strip out costs or leverage your best-in-class health channel. Can you just speak about any of your activities regarding doing larger M&A?

Now that Twitter is off the table. I will—our primary focus has been on Cologuard, Oncotype, and our three key pipeline programs. Our philosophy on M&A hasn't changed. If it contributes to our long-term strategy of participating in helping patients and physicians all along that cancer continuum. It's a good culture fit. It creates shareholder value. We'll look at it. Everybody on the team is hyper-focused, and that is the model for 2022. PreventionGenetics added an incredibly strong team and $40 million of profitable revenue. Matera provides some of the world’s best protein analysis and detection capabilities. That’s our framework for looking at things, and that hasn’t changed.

Your next question comes from the line of Puneet Souda with SVB Securities. Your line is open.

Yeah. Hi, Kevin, Jeff. Thanks for taking the questions. I won't have a three-parter, but just if I could ask just two simple ones. First is on the sales force. You were north of 1,000 sales reps after the Pfizer additions since September. So I'm wondering if you can provide us an exact count as part of this restructuring. And then just the second one, maybe Kevin, at a high level, I just want to clarify. I appreciate all the comments you made on blood-based assays. Technology for Exact Sciences and for the diagnostic industry has continued to improve. So when you look at Thrive Cancer Seek and the methylation technology that you've been involved with, those have continued to improve. Do you think that CRC screening would be amenable to success in liquid biopsy at a certain point or just not today? Because obviously, you're working towards technology and driving the success towards liquid biopsy in multi-cancer obviously. So I just want to clarify that point. Do you think it's possible with blood one day? Or is it just that today's trials you don't think it's possible with the trials that are in the market right now?

Yeah, that's a good question. So the first question: we're no longer going to provide clarity on the number of primary care sales reps. We're in a position to do that. We have an amazing team. I believe it at that, and it's large and impactful. On the second question, I'll go back to my—the first meaningful meeting that I had as CEO of Exact Sciences with Berk Bowl Goldstein and Johns Hopkins in 2009. I walked into his office, and I said, Bert, I know you were involved in the early part of Exact Sciences, and we think that a blood test makes more sense. Bert said you obviously haven't read my paper. He referred me to a paper from a few years before. In that paper, what they did is they found patients with stage 1, stage 2, stage 3, stage 4 cancer and also adenomas. They found a particular mutation within the tissue. They used digital PCR to detect even one copy of mutated DNA and they were looking in the blood with digital PCR for that patient's mutation, which they knew was in tissue. They showed an exponential amount of DNA going from pre-cancer all the way to late-stage cancer—hardly any DNA. What we're down to is that limit of detection. It’s either a molecule is there or it’s not there in many of those smaller tumors and certainly adenomas. There is just this biological barrier that you're limited to; proteins help, no doubt. But the world hasn't found a magic bullet protein that is prevalent in blood. Will that change? It could at some point. But the biomarker class of methylation or the brand mentomix approach, we have expertise in all of those areas. I wish there were a magic bullet; there is not. I believe that the world hasn't changed much. We can provide the reference to that paper if you call back. I recently did a leadership connection video conference with Bert for our leadership team, and we had a conversation about that meeting we had years ago. I asked him if anything has substantially changed; the answer is yes. Technologies have gotten better, more marker classes. But here we are. It's tough to detect stage 1 and 2 cancers in blood at the same level as you can in stool or with colonoscopy or visually or otherwise. Nothing has really changed there.

There are no further questions at this time. This does conclude today's conference call. Thank you for participating. You may now disconnect.