EXACT SCIENCES CORP Q2 FY2022 Earnings Call

Good day, and welcome to the Exact Sciences Second Quarter 2022 Earnings Call. Today's call is being recorded. I would now like to turn the call over to Megan Jones, Senior Director of Investor Relations. Please go ahead.

Thanks for joining us for Exact Sciences' Second 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 release earlier this afternoon detailing our second 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'll now turn the call over to Kevin.

Thanks, Megan. During the second quarter, the team made several advancements toward our vision to eradicate cancer through earlier detection and smarter answers for patients and their healthcare providers. The highlights from the quarter include being a Great Place to Work certified for the fourth consecutive year, screening more than 700,000 people for colon cancer with Cologuard, securing an improved position in ASCO guidelines for Oncotype DX Breast as the preferred test for early-stage breast cancer patients, improving our path to profitability and cash liquidity position. Cutting adjusted EBITDA loss in half quarter-over-quarter, showcasing the breadth of our screening and precision oncology pipeline with 13 abstracts at ASCO. We are making progress towards completing BLUE-C, our pivotal study to support our next-generation Cologuard and colon cancer blood test, publishing evidence for our tumor minimum residual disease testing colon cancer. We are generating additional evidence for our multi-cancer early detection test, which we plan to share at the European Society for Medical Oncology or ESMO conference in September. And finally, enhancing our sequencing capabilities by partnering with Ultima Genomics. We're focused on executing our core business of Cologuard and Oncotype DX, prioritizing the highest-impact projects to reach profitability and generating high-quality evidence for our pipeline of advanced cancer tests. Jeff will now review our financial results.

Thanks, Kevin. Good afternoon. Second quarter revenue was $522 million, an increase of 20% or 20% excluding COVID testing. Screening revenue was $354 million, an increase of 34%, including four points from PreventionGenetics. Cologuard growth was driven by improved sales team productivity, our marketing partnership with Katie Couric, three-year streams, and usage in the 45 to 49 age group. 9,000 new healthcare providers ordered Cologuard during the quarter and nearly 282,000 have ordered since launch. Precision Oncology revenue was $154 million, an increase of 12%, driven by Oncotype DX Breast and therapy selection. Foreign exchange was a $2 million headwind. COVID testing revenue decreased 58% to $14 million. Second quarter GAAP gross margin was 68%. Non-GAAP gross margin, which excludes amortization of acquired intangibles, was 72%. Margins were lower than expected due to inflation, especially in shipping and wages. We expect inflation and unfavorable foreign exchange to be about a two-point headwind in the second half of the year, compared to our prior guidance of about 73%. We expect margins to expand, as we absorb the additional lab capacity brought online for Cologuard and introduce new automation. Sales and marketing expense was $216 million. G&A expense was $182 million, including a $24 million net gain, mainly related to Thrive and a $5 million expense from cost reduction activities. R&D expense was $106 million. Net loss was $166 million, and adjusted EBITDA was a loss of $46 million. This improved $76 million from two quarters ago and $44 million from last quarter. We ended the quarter with $728 million. We established an AR securitization facility during the quarter, with up to $150 million in borrowing capacity. For the agreement, we borrowed $50 million under the facility. We also have about $150 million available on our revolving credit facilities. This provides total liquidity of almost $1 billion. We're also exploring ways to unlock capital from our real estate facilities. We expect our cash used to be lower in the second half of the year compared to the first half, and we're confident in achieving adjusted EBITDA profitability in 2024, while continuing to invest in future growth and efficiencies. For example, we're investing $300 million in IT this year to improve our digital tools and support initiatives like Cologuard rescreens, enhance our customer experience and billing systems, and limit redundant costs from legacy IT platforms. Turning to our guidance, we expect total revenue between $490 million and $505 million during the third quarter and between $1.98 billion and $2.022 billion for the year. We expect screening revenue between $350 million and $355 million for the third quarter and between $1.35 billion and $1.372 billion for the year. This includes PreventionGenetics revenue of approximately $10 million during the third quarter and between $40 million and $42 million for the year. We expect Precision Oncology revenue between $135 million and $140 million for the third quarter and between $580 million and $590 million for the year. Our expectations for global Oncotype DX Breast are unchanged. We're raising our guidance to reflect product portfolio changes and a $4 million incremental FX headwind for the year. We divested our Oncotype DX Genomic Prostate Score test to ensure our team is focused on the highest impact projects and improving our profitability. A number of our urology team members will transition to MDX Health, a commercial-stage precision diagnostics company, focused solely on prostate cancer and other urological diseases. We have agreed to provide certain transition services to MDX Health, including lab services to ensure a smooth transition for patients. For the agreement, Exact Sciences received $30 million upfront, including $25 million in cash and $5 million in MDX Health Equity. An additional $70 million is payable to Exact Sciences upon achievement of certain revenue milestones. We expect COVID testing revenue between $5 million and $10 million for the third quarter and between $50 million and $60 million for the year. Moving to OpEx for the full year, we're lowering our sales and marketing expense by $30 million and now expect between $870 million and $890 million. In the second quarter, we saw improvement in key sales and marketing metrics, such as revenue per sales representative. We expect this to improve further as we grow Cologuard and make more products available. We're also lowering our research and development expense by $5 million and now expect between $425 million and $445 million. Our expectations for G&A, CapEx and intangible amortization remain the same. I'll now turn the call back to Kevin.

Thank you, Jeff. A recent study showed that about half of Americans between the ages of 50 and 75 are not up to date with colon cancer screening. That means as many as 60 million Americans need to be screened. Cologuard is helping to solve this problem. Almost half of first-time Cologuard users are new to screening. The Centers for Medicare and Medicaid Services or CMS recently proposed removing a barrier to getting more people screened by eliminating Medicare cost sharing for a follow-up colonoscopy after a positive stool-based screening test. This follows a federal regulation requiring private payers to eliminate cost sharing starting in 2023, addressing a top concern patients and providers have about using Cologuard. A powerful data and digital infrastructure is key to unlocking the full potential of Cologuard, Oncotype DX and our future tests. We have spent nearly a decade thoughtfully designing and enhancing our IT systems, including a custom-built laboratory information system, and installing Epic as the backbone of all processes from ordering to billing. This will provide one interface to meet our health system and physician partners' testing needs in hereditary cancer, colon cancer, multi-cancer, cancer prognosis, minimum residual disease, and late-stage therapy selection. Our goal is to make it easy for healthcare providers to order all advanced cancer tests through one partner, making prevention and diagnosis as simple and personalized instead of complicated and fragmented. Exact Sciences has the foundation in precision oncology to provide answers to key questions of cancer patients, oncologists, and biopharma or academic partners may have. The Oncotype DX Breast test is now the most strongly recommended in ASCO guidelines with the highest evidence quality of all multi-gene tests. To expand our precision oncology test offering, we're developing a minimum residual disease test, enhancing our therapy selection test, and partnering with biopharma companies to help identify and develop better therapies for patients. In therapy selection, we're taking aspects from our current tests, Oncomap and Oncomap ExTra, to bring one market-leading comprehensive test to patients. PreventionGenetics recently received approval for the first FDA-authorized Class II molecular companion diagnostic device. Developing collaboration with Rhythm Pharmaceuticals, with 40 biopharma partnerships, the PreventionGenetics team provides invaluable relationships to build upon for future diagnostics. The team is also planning a focused pilot launch of hereditary cancer testing later this year to help breast cancer patients make better treatment decisions based on the genetic makeup of their team. In the next 12 months, we plan to deliver evidence supporting three of the most important cancer diagnostic advancements for patients: colon cancer screening, multi-cancer early detection, and minimum residual disease testing. We displayed the breadth and depth of our pipeline at ASCO with 13 abstracts. In our prospective BLUE-C trial, we have enrolled the necessary number of cancers to support an FDA submission for our next-generation Cologuard test. We will continue enrollment to ensure we have enough cancer cases to support our colon cancer blood test. In multi-cancer early detection, we plan to share data at ASMO in September that demonstrates the power of our multimarker approach. In minimum residual disease, we published evidence supporting our tumor-naive panel in colon cancer at ASCO. We also initiated a study with the West German Study Group to validate our tumor-informed approach in breast cancer and expect to have additional data in colon cancer later this year. We want to provide patients with better information before diagnosis and across all stages of cancer treatment. We have a team with expertise across many technologies and biomarker classes. This provides flexibility to deliver the best test on the right platform for each question we're answering before and throughout a cancer diagnosis. Our development work with Ultima Genomics and Singular Genomics may provide future access to a differentiated and affordable sequencing technology and another tool to help achieve the best outcomes for patients. We're now happy to take your questions.

Thank you. We'll take our first question from Derik De Bruin with Bank of America.

Hi. Good afternoon. Thank you for taking my question. I guess to start off, I mean, there was a $12 million beat on Cologuard relative to consensus and our estimates on the quarter, yet you're still maintaining the full year guide. I guess why the conservatism for the second half of the year, given you should have a number of tailwinds that are sort of there given the sales force and less COVID? And I guess additional thoughts on how we should think about Cologuard for 2023?

Well, let me start and then hand that over to Jeff as well. I start by saying, we are guiding to 22% growth in the back half of the year. And taking a step back, Cologuard has a tremendously long runway ahead of it. There are between 45 million and 60 million unscreened people who need to be screened. The people aged 45 to 49 are starting to be screened at an increasing rate. And the environment for access to physicians has not changed. It has essentially remained flat over the first half of the year. We expected that to increase, and eventually, it will again. What we're seeing is that we've moved from a period where access was limited because of COVID to now access being more limited because of office staff shortages. All of those things are temporary in nature and the need for colon cancer screening is persistent, and we're seeing a fundamental shift that Cologuard is becoming more commonly accepted within large health systems, among primary care physicians, and importantly, among patients as a great way to get screened. It's becoming more common and the data backs that up. Jeff, can you provide some insights on some of the aspects of ordering behaviors?

Derik, this is Jeff. As Kevin talked about, we're guiding to 22% growth in the back half of this year for Cologuard, which represents $120 million of incremental revenue. Keep in mind, Cologuard, as you know, is a $1 billion-plus product. It is profitable today. But we're emphasizing profitable growth going forward. We want to ensure that we build a sustainable business and consistently generate cash flow. We'll guide to next year as we typically do in our fourth quarter call. There was a ton that we are excited about, as Kevin mentioned, regarding the efficiency of things we’re doing with health systems, which is now at 54% electronic ordering. That number will continue to rise with the backlog of systems that are signing up and just waiting to convert to electronic ordering. When you do that, you see a nice flip in orders. So, I feel good about the progress we’ve made on growth. Today, we are about 3.5 months from year-end from a Cologuard order perspective, because our ability to turn orders into revenue really declines after Thanksgiving. So, today, we have about 3.5 months left in the year, and we will try to do everything we can, but you should think of the midpoint of guidance for the year as the most likely outcome.

We'll take our next question from Brandon Couillard with Jefferies.

Hey, thanks. Two-part question for Jeff. First, the million reduction in sales and marketing – on the drivers of that? And then on G&A, I think there was a $25 million gain in the second quarter. But your spending outlook remains unchanged. Is that right?

Yes. It's a two-part question, Brandon. This is Jeff. The first one, I'll start on sales and marketing. What we’re seeing is an emphasis on prioritization and investing in the highest return areas of growth. So Everett and the team have done a nice job ensuring we're targeting the right doctors and territories while always closely examining marketing spend. So, I’m really pleased to see the improvement that we saw, with overall growth of 7%, but a sequential decline in sales and marketing of 7%. This shows some nice efficiencies. I mentioned in my remarks that we're seeing improved efficiency from our sales team and that is part of the plan we kicked off earlier this year to enhance productivity there. Regarding the G&A, we had this dynamic from the last two quarters, a $25 million gain. This relates to the earnout for the Thrive acquisition. The only thing that really happened here was that interest rates went up, causing the calculation around the accretion of that earnout to show a gain. So that's the dynamic there. That could happen again in the future, but I'm not counting on it. As for G&A in the back half, we’re continuing to invest in IT, and that's likely to see an increase because IT is crucial for the efficiencies we expect over time.

Yes. Jeff, just around the optimal deployment, we've taken a look at putting our resources toward those largest opportunities. I'm excited about where we've invested in our commercial organization and health systems organization. We know that health systems have been and will continue to be important as we move through this year and into 2024. That investment in health systems has allowed us to develop deep partnerships and ensure that Cologuard is a major choice for those large systems.

We'll take our next question from Brian Weinstein with William Blair.

Hey, guys. Thanks for taking the question. Not really thrilled that you brought up 3.5 months until Thanksgiving – Sunny in Chicago. I don't want to think about that yet. So you guys divested an asset this quarter, clearly looking at what makes sense, and I get that. Maybe Kevin or Everett, could you discuss the portfolio more broadly, any thoughts on the right time to potentially add to the bag to maximize kind of salesforce more broadly and even potentially help Cologuard? And beyond that, like even in Precision Oncology, you guys have been acquirers. Should we expect that to continue? This is a strategic question regarding intent, but also just wondering how M&A or other types of opportunities factor into your previous comments about not raising equity, of course, and achieving profitability.

Yeah. Thanks, Brian. This is Kevin. If you look back to 2016, I think we generated $99 million of revenue, and this year we're guiding to $2 billion. The company has transformed, and an important part of that transformation was our merger with Genomic Health, building what we believe is the best reach from primary care, GI, OBGYN, and other specialties all the way to oncology. Our portfolio strategy includes two of the best brands in cancer testing, Cologuard and Oncotype DX Breast, which are anchored to our long-term growth. Our pipeline includes multi-cancer early detection testing, a next-generation Cologuard test, and minimum residual disease tests, collectively accessing a total combined total addressable market of about $60 billion. We can deliver on this because of our robust IT platform, which supports everything from the initial order to billing, and we have the best commercial organization not just in cancer diagnostics but across diagnostics. This team of professionals engages deeply in sales, lab, clinical, and regulatory capacities. Our M&A philosophy is driven by whether the product or technology will contribute to this long-term strategy I just articulated, whether it's the right culture fit, and whether it creates shareholder value. Our Oncotype DX Prostate test is an excellent test. I personally know people who have benefited from its information. MDX Health is a very strong company entirely focused on urology, and we will continue to be important shareholders. We want to support them in their success, and we believe this is the right home for Oncotype DX Prostate.

Yeah, Kevin, I will add one thing. I've been out in the field over the last 1.5 months, talking to large health systems about our portfolio approach to cancer care. The response from health systems' CEOs and CMOs is clear: they want to simplify the number of lab partners they deal with, and they value your comprehensive IT solutions that help their workflow. As a result, they’re increasingly likely to partner with us. We're transitioning from selling individual products to being their cancer continuum partner, and that's what they're looking for.

We'll take our next question from Catherine Schulte with Baird.

Hey guys. Thanks for the question. Yes, first, in the past, you've talked about the group of doctors that represented the top 40% of orders pre-COVID being down, while the bottom group is ordering much more than they did pre-pandemic. Did that trend continue in the second quarter? And how long do you think it will take for that top tier of orders to come back?

Hey Catherine, this is Jeff. This is a really exciting part of the business; something I know Kevin and I keep a close eye on. So, that trend actually accelerated in the quarter relative to prior quarters. We saw those doctors who historically had ordered most frequently improve their orders, now down just under 10% relative to the start of the pandemic, comparing favorably to about down 15% in the first quarter. Those doctors are true believers; they order at a higher rate and patient flow is ticking back up. As access improves, they will return to their previous levels. Doctors who ordered infrequently have essentially doubled their order rate since the start of the pandemic. This improvement creates a huge growth opportunity for us in the years to come, as we can selectively target the most promising doctors in this group. This broadening of the order base bodes particularly well for Cologuard and other products like hereditary cancer and multi-cancer as we launch them.

We'll take our next question from Dan Brennan with Cowen.

Great, thanks, guys. Thanks for the question. Kevin, I thought I'd just ask you about Eclipse coming. Obviously, you've spoken prominently on expectations, but net-net, by the time we get to the next call, the data could be out. Just wondering if you can update us on any incremental thoughts on how you’re thinking about different scenarios and how Exact will react depending upon the scenarios and how Cologuard will be positioned versus these scenarios?

Well, let me remind you that there are many challenges in bringing a blood-based colon cancer test to market as a leading way to screen people for cancer. There are five main reasons for this. First, blood tests, based on the data we've seen, are less accurate than Cologuard and colonoscopy and other established screening approaches. Equivalent FDA approval and claim language is unlikely. This poses a challenge when it comes to introducing a new test into the already complicated screening paradigm. The bar for guideline inclusion, which drives commercial coverage, is also very high. Pricing is likely to be below $200. And there’s the question of where the blood test fits in with existing standards like colonoscopy and Cologuard. So I think the market is challenged. Our view hasn't changed here. We have a blood test that we expect to be priced appropriately and we have a commercial team, lab infrastructure, and IT systems that will allow us to integrate our blood test into that ecosystem seamlessly, making it easy for doctors to order should they choose not to use Cologuard. In terms of the timeline, data collection is step one, followed by FDA approval, claim language, and Medicare coverage, which will likely take several years. USPSTF's next output is probably three to four years away.

Our next question comes from Vijay Kumar with Evercore ISI.

Hi, guys. Congrats on the update, and thanks for taking my question. I had one on this path to profitability. Jeff, it looks like your gross margin assumptions changed. I heard some comments on inflation. What's your updated free cash flow burn rate for the year? Also, when thinking about the 2024 adjusted EBITDA profitability path, assuming revenues grow in the teens and gross margins remain consistent, I believe your OpEx has to grow in low singles over the next two years. Are those assumptions reasonable? Did that make sense for you, given that we are looking at Exact Sciences potentially achieving the high end of your growth guidance?

Thanks, Vijay. This is Jeff. I want to reiterate that we are firmly committed to adjusted EBITDA profitability for the full year of 2024 and we have made great progress towards it. This team has come together with innovative ideas to increase efficiency as we grow. It will start with revenue growth, and Everett and the team are doing a solid job growing the top-line. I expect some gross margin improvement over that period. The inflation we see now may be in wages and other headwinds compared to our last update, but we have significant lab automation projects in flight that will help us improve margins. I'm confident in the path moving forward.

We'll take our next question from Dan Arias with Stifel.

Good afternoon, guys. Thanks. Kevin, maybe a couple on the pipeline. Starting with Cologuard 2.0, is the 2023 commercial launch for that assay in the picture at all, given the current submission time line expectations? And then on MRD and the dual approach you have, there seems to be a need for data generation. It sounds like there's some data on the way. So how are you thinking about the timelines for those tests? Should they arrive together, or is the development path not something that will allow that to happen? Thanks.

Our Cologuard 2.0, or what we call next-generation Cologuard, will have a 2023 launch as a possibility. However, we have not yet made an internal determination about the timing of that launch, which will depend heavily on the test performance. There are many things we need to finalize, such as possibly needing a new CPT code affecting the timing of launch, Medicare coverage, and insurance coverage. We want to ensure everything is ironed out to provide a seamless billing process and patient experience. Regarding MRD, we have access to some important sample sets, which will allow us to seek LDT status and work toward inclusion as one of the reimbursed tests. We see this space developing nicely, which sets us up for a product launch in MRD, likely next year.

We'll take our next question from Matt Sykes with Goldman Sachs.

Hey, guys. This is Dave on for Matt. Congrats on the strong print. Could you tell us about the percentage of pre-pandemic access your sales reps are getting in person? Any directionality there?

Yes. This is Jeff. I'll take that one, too. Access has remained relatively unchanged since our last call, with a newer dynamic that isn't just us—you're seeing critical staffing shortages in the healthcare provider setting. So, that limits access further. I would say that relative to pre-pandemic, you're probably at 50% to 60% of those access levels, as I mentioned on our last call. Everett and the team are getting creative and finding ways around that, making sure that we are a reliable partner to health systems and other providers. That's helped us deliver upon that growth, including projecting 22% growth in the second half of the year.

We'll take our next question from Patrick Donnelly with Citi.

Thanks. Maybe following up on that aspect. In terms of the improvement in the second half, I think the Cologuard guidance is implying kind of flat to down sequentially from what you did in 2Q. Typically, 3Q seasonality is a little bit better. Obviously, there are a few factors working your way as you've discussed in terms of building momentum. Is that just conservatism baked into that 3Q number you discussed? Trying to figure out the moving pieces as to why that number would be better than 2Q sequentially for Cologuard specifically? Thanks.

Yeah, this is Jeff. The guidance represents the most likely view of where we will end the year based on everything we've seen. There are many trends out there, including access, but I think I echoed earlier comments about the trends in Cologuard and how we are reshaping historically in response to evolving conditions. Historically, if you look at prior calls, I talked about the seasonal trends of Cologuard as the business continues to grow. You'll see that the seasonal pattern shifts a bit over time. I think the Street has missed that point, so in light of that, we are probably going to see flat activity for the rest of the year.

We'll take our next question from Jack Meehan with Nephron Research.

Thank you. Good afternoon. So Kevin, one of your competitors launched a colorectal cancer liquid biopsy test as an LDT back in May. So obviously, very early days, but I was wondering if you noticed any impact at certain accounts and what you may or may not be observing regarding the interplay between Cologuard and liquid biopsy in the field?

We saw zero impact from any aspiring entrants into colon cancer screening during the quarter. We're unlikely to see any impact because tests that aren't reimbursed, that aren’t present in guidelines, and that don't count towards options for quality measures simply do not gain significant uptake. We screened over 700,000 people in the quarter, and we expect that growth to continue in the upcoming years and beyond. Blood tests can play a role in colon cancer screening, if they achieve at least the same level of cancer sensitivity as a FIT test and better advanced adenoma or pre-cancer detection than seen from case-control studies. If so, detailed reimbursement and validation will be critical for their success; this won't happen in the near term.

We'll take our next question from Mark Massaro with BTIG.

Hey guys. Thanks for taking the question. Maybe a two-parter. Jeff, the first one is for you on Oncotype Prostate. You lowered the guidance by $15 million to $20 million for the year. I wanted to confirm that the rough GPS revenue run rate was around $30 million to $40 million? And then secondly, I wanted to follow up on the profitability topic. Clearly, you have significant investment coming in multi-cancer early detection and MRD. I understand you divested Oncotype Prostate, a small part of your business. But could you help clarify how you expect to achieve adjusted EBITDA profitability in 2024 when you have those investments? Would you expect to continue investing in DTC, since that's a significant line item? And since you're divesting the prostate sales force, any comments on your GI sales force?

Sure, Mark, this is Jeff. On the first one, you're in the right ballpark there with Oncotype Prostate’s revenue run rate around $30 million to $40 million. On the second point, we are very committed to achieving profitability in 2024. Our internal focus is on keeping savings so we can invest in our highest impact priorities, allowing us to keep growing this business and serving more patients. I'm confident we can invest in all three key initiatives, which Kevin mentioned earlier, especially our colon cancer business, MRD, and multi-cancer. We have a solid foundation to grow from. With our lab, IT, and sales force investments, we don't have to allocate much additional funding to launch these new products to market, improving our incremental profitability. I'm happy to go over the math with you offline. I look forward to seeing continued leverage from our sales and marketing team and G&A in the coming years. G&A will probably see greater improvements over the next few years. We will keep investing in DTC, as that continues to yield a strong return. The GI sales team remains a critical part of our business, especially with Cologuard now and in the future with more products.

We'll take our next question from Puneet Souda with SVB Securities.

Yes, hi, Kevin, Jeff. Thanks for taking the question. Two simple ones for me. First on CMS coverage of diagnostic colonoscopy. I'm wondering if there's been any change in the marketing approach among the sales force as a result of this for full coverage of follow-on colonoscopy? And can you remind us how wide the coverage of follow-on colonoscopy is by commercial payers? Just one for Jeff on PreventionGenetics. We've seen a disruption from one of the competitors in the marketplace. I heard your diagnostic peer is reducing their workforce by a third. Just wondering in terms of share-taking perspective and opportunity to gain talent. Thank you.

So, for CMS coverage of diagnostic colonoscopy, that is pretty uniform today. The proposed CMS rule is a change that would state when a patient has a positive stool test, be it a FIT test or a Cologuard test, a follow-up colonoscopy should be considered a screening colonoscopy and therefore, should not involve any cost sharing. Currently, there is a 20% cost share for that test. The rule, if finalized, won’t go into effect until next year. So, today we’re not actively marketing this, but in the future, we will.

To add some context, the seamless uptake will follow the Department of Labor regulation that applies to commercial plans. Essentially, this change will lead to universal coverage starting in January, meaning diagnostic colonoscopy will have no cost sharing for the patient. It's a significant win; it's something we've supported for a long time. Regarding your second question about PreventionGenetics, we're thrilled with its growth this quarter and the future opportunities. The biopharma partnership is a highlight, and we couldn't be happier with this acquisition and its capabilities. It's a strong foundation from which to grow the hereditary cancer testing market. Our primary goal is centered on making sure more men and women can access this innovative technology.

We'll take our next question from Kyle Mikson with Canaccord.

Hey, guys. Thanks for the question. I just want to discuss BLUE-C. You mentioned enrolling enough patients to power our update submission. I believe this was expected, but you will continue to enroll for patients in the blood arm. How long will that take? Can you also remind us of the timeline for the CRC blood test? Thanks.

This is not a separate blood arm; unfortunately, about 10% to 20% of people willing to take a stool test do not complete a blood draw. This often requires a trip to a blood collection center or is because they dislike needles. Therefore, we are continuing the study, as having more patients increases the data’s power, which is beneficial. We'll likely need a few more months to gather sufficient participants. Currently, we are excited that if we opted to end the study for the next-generation Cologuard, we could do so today. We’re enthusiastic about the opportunities blood tests provide to patients.

We'll take our next question from Alex Nowak with Craig-Hallum Capital Group.

Great. Good afternoon everyone. Going back to the portfolio strategy, one thing that Exact Sciences doesn't have is what I'd call bread-and-butter old-school cancer typing like FISH flow, pathology, and cytogenetics. Do you need to own a broader testing menu to succeed with that portfolio strategy, or do you see these relatively commoditized tasks eventually getting phased out, replaced with newer modalities that Exact would have?

We don't think that those tests will be replaced by molecular tests. Rather, molecular tests will address new and different questions that tissue tests don’t always answer. Do we need a flow business or a FISH business to be successful? The answer is no. We don’t need that business in order to succeed over time. We have clearly laid out our strategic plan and we’re excited about it, and we’re going to execute that plan as diligently as possible because it is the right path for patients.

Thank you. This concludes today's presentation. Thank you for your participation. You may now disconnect.