EXACT SCIENCES CORP Q4 FY2024 Earnings Call

Good day, everyone, and welcome to the Exact Sciences Fourth Quarter 2024 Earnings Call. Today's call is being recorded. All lines have been muted to minimize background noise. After the speaker's remarks, there will be a question-and-answer session. I would now like to turn the conference over to Derek Leco, Vice President Investor Relations. Please go ahead, sir.

Thanks, operator. Thank you for joining us for Exact Sciences fourth quarter 2024 conference call. On the call today are Kevin Conroy, the company's Chairman and CEO, and Aaron Bloomer, our Chief Financial Officer; Brian Baranick, our General Manager of Precision Oncology, 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 be materially different from such statements. Discussions of non-GAAP figures and 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 of which can be accessed through our website. I'll now turn the call over to Kevin.

Thanks, Derek. Good afternoon, everyone. Our purpose is to help eradicate cancer by preventing it, detecting it earlier, and guiding personalized treatment. We are making this a reality by extending and leveraging our platform. Highlights in 2024 include delivering more than 4.6 million results to patients with our portfolio of cancer tests, growing core revenue 11%, while non-GAAP operating expenses grew just 2%, increasing EBITDA by 48% and more than doubling free cash flow, securing FDA approval and Medicare pricing for Cologuard Plus, our next-generation colon cancer screening test. Completing two studies for Oncodetect, our molecular residual disease test. Generating evidence for our liquid biopsy colon cancer screening test, as well as our multi-cancer screening test Cancerguard. And being recognized as a great place to work for the sixth consecutive year. This year, we'll increase adoption of our current tests and launch three new tests. Exact Sciences’ scale and reach, with a large commercial engine and tens of millions of additional touch points with patients and healthcare providers will power continued leadership across the largest impact opportunities in cancer diagnostics. We'll also create an even better customer experience with our secure ExactNexus technology platform. Aaron will now discuss our fourth quarter financial results and outlook for 2025.

Thanks, Kevin, and good afternoon everyone. We're proud of our team's resilience and continued focus on operational excellence, enabling us to deliver another solid quarter. Fourth quarter revenue grew 10% or 11% on a core basis. Adjusted EBITDA increased 52% to $75 million. Screening revenue increased 14% to $553 million. Growth was led by momentum in Cologuard adoption amongst providers, health systems, and payers. On average, more than 900 providers became new Cologuard customers each week, and 35 of the top U.S. health systems and payers closed gaps in care with Cologuard, a new record. Our expanding customer base supports our long-term growth outlook. Precision oncology revenue increased slightly to $161 million. Growth in the quarter was led by increased adoption of Oncotype DX internationally. Adjusted EBITDA margin expanded nearly 300 basis points driven by volume and expense controls. As a percentage of revenue, adjusted G&A improved more than 400 basis points. This allowed us to reinvest back into growth and innovation, while still meaningfully expanding margins. During the fourth quarter, we recognized an $830 million non-cash impairment charge related to the Thrive acquisition, which closed in January 2021. The write-down reflects changes in external factors since the acquisition, primarily the expected reimbursement outlined in the recent MCED Act legislation. Additionally, to better reflect our current operations, costs related to customer care were reclassified from G&A to sales and marketing. For modeling purposes, we have included a quarterly view of our updated historical income statement within our 10-K. Moving to the full year, core revenue grew 11% to $2.75 billion and adjusted EBITDA margin expanded nearly 300 basis points. We also strengthened our balance sheet in 2024 by more than doubling free cash flow, ending the year with $1.04 billion in cash and securities. Our strong free cash flow generation and outlook also allowed us to use cash on hand to repay the full $250 million in maturing convertible notes. Turning to our 2025 guidance, including some key assumptions underpinning our outlook, we expect total revenue between $680 million and $695 million for the first quarter and between $3.025 billion and $3.085 billion for the full year. This assumes screening revenue between $520 million and $530 million for the first quarter and between $2.35 billion and $2.39 billion for the year. And precision oncology revenue between $160 million and $165 million for the first quarter, and between $675 million and $695 million for the full year. We expect $410 million to $440 million in adjusted EBITDA for the full year. Annual guidance at midpoint implies total revenue growth of 11%, including 13% in Screening and 5% in Precision Oncology. In Screening, we're including approximately 2 points of lift from Cologuard Plus, which will primarily benefit second half revenue. Cologuard Plus will initially be available in the second quarter to Medicare fee-for-service patients who represented about 15% of Cologuard volumes last year. We are also starting to add coverage with some commercial and Medicare Advantage plans, and growth from price and volume acceleration will phase in over the next 18 to 24 months as we establish contracts with payers. Specific to Q1, please recall first quarter Screening revenue tends to be down sequentially because of seasonal trends. Primary care utilization is lower in December and early January because of the holidays. This impacts Screening revenue during the first quarter due to the normal timing between a Cologuard order and a completed test. Additionally, about two-thirds of Care GAAP revenue in 2024 was recognized in the second half, and our 2025 outlook assumes similar phasing. In Precision Oncology, we expect steady Oncotype DX growth in the U.S. and strong double-digit growth internationally this year. Shifting to profitability, guidance at the midpoint implies 220 basis points of adjusted EBITDA margin expansion. Key drivers include: volume leverage across our fixed cost structure, price from Cologuard Plus, and continued OpEx leverage and productivity, especially within G&A as well as in our lab and supply chain. These initiatives allow us to reinvest back into near- and long-term growth areas, including educating patients and providers about the benefits of Cologuard, the launch of Oncodetect, and research and development to support continued innovation. Back to you, Kevin.

Thanks, Aaron. Our efforts to get more people screened with Cologuard are setting the stage for a strong 2025. The number of people eligible for their next Cologuard test grows about 30% to 2 million this year and the rate of rescreening is at an all-time high. Health systems and payers are turning to Cologuard as the standard of care within large organized screening programs. Our expanded field sales team is deployed in new territories and are actively engaging with the highest potential ordering providers. Our sales team has completed training at Cologuard Plus and will become even more productive as we launch one of the most accurate cancer screening tests ever developed. These tailwinds will fuel growth for years to come, improve screening rates and help decrease sales and marketing costs as a percentage of revenue over time. Exact Sciences is uniquely positioned to guide a cancer patient's journey every step of the way. Last year, our Precision Oncology team delivered actionable insights for a record 230,000 patients around the world. We're leveraging our trusted Oncotype DX brand, deep oncology relationships, and global footprint to increase adoption of our broad portfolio. These advantages will continue powering strong double-digit growth internationally for Oncotype DX, which has become the global standard of care and holds the preeminent position in cancer guidelines. We are applying the same approach with Oncodetect by generating clinical evidence and positioning it as a vital tool for patients. We recently published data in the Journal of Surgical Oncology showcasing the clinical strength of Oncodetect. Results from a well-designed study of monitored colon cancer patients found those with a positive Oncodetect test were 50 times more likely to recur than those with a negative result. This study also demonstrated that Oncodetect identifies residual disease up to 10 months earlier than imaging, a current standard of care. Findings from a second clinical validation study extended the test prognostic benefits for patients with stages three through four colorectal cancer. Earlier this month, we submitted results to Medicare for reimbursement. We remain on track to launch Oncodetect in the second quarter. We're also generating solid clinical evidence for Oncodetect across multiple solid tumor types, including breast cancer. Shifting to multi-cancer screening, we shared new evidence in the fourth quarter supporting our test Cancerguard. The data showed at a 98.5% specificity overall sensitivity, excluding breast and prostate cancer, was 62.3%, sensitivity was 67.1% for the most aggressive cancer types. This was from the ASCEND 2 study. We remain on track for the launch of a laboratory developed test version of the test in the second half of 2025 through our large screening and Precision Oncology commercial organization and unique ExactNexus technology platform. We're also making progress with our blood-based colon cancer screening test and remain on track to share top line results from our pivotal BLUE-C study by the middle of 2025. Our blood-based colon cancer screening test features unique science and a differentiated cost profile. Once available, it will be supported by our existing commercial infrastructure along with the patient navigation program embedded within ExactNexus. We will use these capabilities to deepen our leadership in colon cancer screening while ensuring patients and providers understand Cologuard is the superior non-invasive test. Exact Sciences' platform, deeply embedded standard of care tests and pipeline of innovative diagnostics put us in the best position to make early detection and personalized treatment routine. This year is set to be the most productive in company history, with continued execution from our team and the launch of three significant advancements in diagnostics. This will power years of growth and profitability, helping us achieve our purpose. Before we turn to questions, I'd like to congratulate Erik Holznecht and his wife, Katie, on the birth of their son. We have big plans for him when he returns from parental leave. We'd also like to welcome Derek Leckow to the Exact Sciences team as our new Head of Investor Relations. We're now happy to answer your questions.

Thank you, sir. Our first question comes from Catherine Schulte, Baird.

Hey, guys. Thanks for the question. Maybe first just starting on Screening guidance. You're looking for 13% growth for the full year. Some acceleration throughout the year is implied there. So maybe just talk about the build what growth drivers get you excited as you get into the back half? And then if we look back to your 2027 outlook that you laid out at your Investor Day, also take some acceleration over the next few years to hit that target. So maybe just talk through your confidence there and some of the opportunities that might drive that acceleration. Thanks.

Yes. Thanks, Catherine. We're really excited about 2025. It's set up to be another great year. We entered the year with tailwinds, including rescreens, care gap programs, Cologuard Plus launch, commercial execution, obviously, the strength of our platform, our commercial reach, our payer relationships, the IT platform, ExactNexus, and then we're launching three new tests this year. Three of testing the largest areas of opportunity colon cancer screening, Cologuard Plus, Oncodetect in MRD, and Cancerguard in multi-cancer screening. Aaron?

Yes. Building up through then the building blocks of what our growth is in 2025 for screening, it starts with rescreens. The success rate continues to steadily improve. The pool of patients eligible for a rescreen is going to grow again this year from 1.6 million patients in '24 to 2 million in 2025. We continue to make improvement in progress in terms of driving adherence in that as well. And it's a huge engine for growth for us, driving more than 30% growth in that space alone. Next is care gap programs. This continues to rapidly expand. We expect to build on the momentum that we generated from 2024. We talked about the launch of Cologuard Plus. We expect about 2 points of price for the full year. Most of that is going to be back-end weighted. And so if you're looking at the sequential, you'd have about a 3- to 4-point impact on screening growth in the back half of the year alone. There's a lot of heavy lifting that's going to have to go into preparing for that launch, and we're making progress already in terms of contracting with commercial and Medicare Advantage payers. And then lastly, we've made a number of changes to drive improved commercial execution. We're starting to see green shoots of positivity with that customer base and off to a solid start to the year. In terms of the point on the long-term guidance, really pleased with the progress we've made and confident in our long-term goals, both in terms of growth and on profitability. There's no change to our thinking in terms of long-term goals on either growth or profitability. Our 2025 guidance includes modest assumptions from Cologuard Plus. That's going to ramp up as we head into '26 and '27 over time as we begin to work to renegotiate those contracts with payers. And then on the margin side, made great progress again in 2024. We're expecting another 220 basis points implied in the guide in '25 and multiple levers to continue to drive margin expansion towards that 2027 outlook.

And up next, we'll hear from Doug Schenkel, Wolfe Research. Mr. Schenkel, your line is open. Please check your mute button.

Okay, thank you for that. Good afternoon everybody. Thanks for taking the questions and congrats to both Derek and Erik. Two questions, and then I'll get out of the way. The first is on your press release and in your prepared remarks, you talked about 2025 possibly being the most productive year in the history of the company. Can you just unpack that a little bit and just define what you mean by that, as you think about balancing the launch of a record number of products in a single year, the goal of driving robust Cologuard revenue growth and volume growth and also demonstrating that you can do all of those things, while growing SG&A at a rate that is meaningfully below sales, essentially giving us more operating leverage. I just want to see how you're balancing those three big things as you talk about the most productive year in the history of the company. And then the second question is the guidance question. In terms of MCED and MRD contributions in guidance, how are you thinking about those? Essentially, what's in guidance for both of those numbers at the revenue line? Thank you.

Thank you, Doug. I'll address the first part and then hand it over to Aaron. You've pinpointed the reason we're anticipating our best year ever. We expect Cologuard to continue its strong growth with many factors contributing to that. Additionally, we're launching three significant tests. We've adequately supported this initiative, and we're seeing not only revenue growth but also an increase in margins. Our team is more than capable of achieving these goals. We have two distinct businesses managed by strong general managers and highly motivated teams. Recently, we held a major global sales meeting, and the team is excited about these new product launches, which have resulted from several years of dedicated research and clinical trials.

Yes. And then just on the sales and the SG&A productivity. G&A, unpacking that specifically, that's going to continue to be the largest driver of margin expansion for us over time. Doug, a lot of work has been done. There's more to do, and there's a lot more that we can and will do within G&A. On sales and marketing, we're really pleased with the leverage and productivity that we got out of 2024. As an example, revenue per rep in Cologuard continues to go up. We saw that go up in 2024. We'd expect that to continue to go up again in 2025. As you think about the unpacking investing in the product launches that we have in 2025, we feel good about the resources that we have to be able to support Cologuard Plus, dropping that into the infrastructure that we've got. Similar for Cancerguard, we're going to leverage the existing sales force that we have. And then MRD, it's a new product and a new space for us, and we're going to look to invest to make sure that, that launch is successful. On the comment of just how much do we have contemplated within the guide on both Cancerguard and MRD, we're really looking forward to launching both of those products in 2025 and we have a modest impact. We just submitted results recently to MolDx on MRD and we'll provide dates throughout the year as we launch.

Next, we'll hear from Tycho Peterson, Jefferies.

Thank you. I would like to ask about the margin outlook since you are guiding below expectations for EBITDA. Will the spending on sales and marketing be higher than previously indicated? Are you looking to make deeper cuts in G&A? Is that the main point here? Additionally, Aaron, could you elaborate on whether there are current programs in place regarding G&A? Lastly, I want to confirm that the blood assay is finalized, as it seems there is still some uncertainty around it. Thank you.

Tycho, again, really pleased with the progress we've made on margin expansion in 2024. I think it puts us in a really strong position, walking into our longer-term outlook of 20%-plus by 2027. If you look at the guidance in 2025, it is another 220 basis points of margin expansion, and that's 30% growth. We've outlined there's kind of four key drivers that we're going to look to deliver margin expansion over the long haul, starting with growth and fixed cost leverage across our labs, supply chain, and G&A. We're also driving productivity now across each one of those organizations, along with a lot of our enabling functions. We'd expect to get a meaningful lift from Cologuard Plus on the margin line. We called out about 2 points this year, that's going to have an even more meaningful impact as we head into 2026 and 2027. And then lastly is on G&A optimization, which is an area we've made a lot of progress. It was the biggest driver of margin expansion in '24. There is more work that we will do there. Specific then to a couple of the components of the P&L in ‘25, starting with gross margin. We'd expect modest gross margin expansion in 2025. That's going to come through volume leverage, Cologuard Plus pricing. If you think about the current products that we have on the market, Oncotype DX, Cologuard, we see a path to 80% plus gross margins through both productivity initiatives as well as the Cologuard Plus pricing. G&A, as I mentioned, that's going to be a huge driver of margin expansion for us moving forward. There is more to be done, pleased with where we're at, more to come. Areas that we're going to invest in R&D. R&D, we're going to continue to invest in growth and innovation in R&D, largely in CRC and MRD, and think about in 2025 at about a similar percent-to-sales investment as what we had in 2024. Rounding out then with sales and marketing, again pleased with the leverage and productivity we had in '24. 2025 is a year of investment of note in supporting the launch of MRD. But we would expect to get leverage on that line of the P&L again over time. Kevin?

Yes. And Tycho, we're going to try to limit this to one question and piece. If nobody asks a similar question, we'll come back to that at the end. Thanks.

We'll go next to Matt Sykes, Goldman Sachs.

Hi, good afternoon. Thanks for taking my question. Maybe just along the lines of the commercial team for this year, given the number of new launches you've got and just given some of the challenges you had in Q3 of last year, can you maybe just talk a little bit about maybe some changes you made? Post that, what were some of the new focuses for the sales team going into this year based on some of the lack of acceleration we saw from Q3 to Q4 last year?

Yes, thank you for that. We are pleased to have the right-sized team of field representatives and coverage as we enter this year. These representatives are equipped with the necessary data to effectively engage with the appropriate primary care providers, as well as oncologists, pathologists, and surgical oncologists in precision oncology. They are well-prepared with the right information. We are satisfied with the team's performance at the recent sales meeting, where they received comprehensive training on new products, including Cologuard Plus, which boasts a sensitivity of 95% and specificity of 94%. There is no other colon cancer screening test that compares to this. While colonoscopy remains an important procedure, the revitalization of our field force has generated significant enthusiasm as we begin this new year. We expect this to lead to positive results, although it will take a couple of quarters to see the outcomes. We have observed an increase in total calls and a higher percentage of outreach to the right healthcare providers, both of which indicate a more focused effort in the screening sector. This strategy has historically proven effective. It's important to note that there are still 50 million to 60 million individuals who have yet to be screened, presenting us with an opportunity to improve this year, particularly among new customers who have adopted Cologuard in the last three years. This gives us a strong sense of excitement at the start of the year, and we are confident in our ability to execute effectively.

We'll go to Dan Brennan from TD Cowen.

Great, thank you. Thanks for the questions. Congrats. Just on Cologuard Plus, Kevin, I am just wondering you're baking in a price benefit given the higher price, but I'm wondering if you're taking any volume lift. It is a materially better test. So you guys are always surveying doctors. I'm just wondering kind of what you were hearing from the field and is there a chance that you could see conversion of some of the docs that have stayed on the sidelines for the Cologuard? And then just kind of related more broadly to Cologuard, if you would. I guess, we'll hear from Gardner Marnie. I'm just wondering, it's obviously very early in the blood launch, but any color from the field that you're hearing on the profile of Cologuard as it compares to the shield test as it's early in this launch? Thanks.

Thank you, Dan. I'll address the first question and will return to the topic of Blood later. Regarding Cologuard Plus, we are excited to lead with this test, which demonstrates 95% sensitivity and 94% specificity. We anticipate launching it in early Q2, and due to its impressive performance, we're experiencing strong engagement from healthcare providers. This test is new, with compelling data, generating significant enthusiasm among both our field team and customers. We predict a positive volume trend. We are also emphasizing Cologuard as the primary screening method. Experts have highlighted a substantial backlog in screenings, estimating that 50 to 60 million people are not up to date. The current U.S. capacity for screening colonoscopies stands at 6.3 million. If only those 6.3 million are screened without using Cologuard, we would miss 90% of cancers in the population, which would typically present symptomatically. Implementing Cologuard can greatly enhance the detection rate, cut costs, and improve outcomes. That's the strength of Cologuard Plus: it detects more cancers while reducing the number of unnecessary colonoscopies, ultimately saving significant resources for the healthcare system and enabling earlier cancer detection. We will revisit the topic of blood-based colon cancer screening later.

The next question comes from Jack Meehan, Nephron Research.

Good afternoon. It will be my honor to follow up on Tycho's question. I'll just ask the status of getting the colon blood test lockdown and that leg of the BLUE-C study. Thanks.

Our CRC blood test, which has not yet been named, is on schedule for data unlocking in the middle of summer. The team is working diligently to ensure we are fully prepared to present our best efforts with the multi-marker class test, and there is no significant news to share at this time. The team remains focused on this project. I want to emphasize that we are not experiencing any volume impacts due to competitive factors. The issue of colon cancer is a major concern in the U.S., with many individuals not current on screening. To effectively address this issue, certain requirements must be met to bring these tests up, and we will focus our comments on our test rather than the competition. For our test to have a meaningful impact, we believe it requires Medicare coverage, FDA approval, and inclusion in the USPSTF guidelines, which we anticipate may not happen until late 2027 or 2028, with potential delays beyond that. Typically, it takes about a year to integrate into quality measures. Without these conditions and an affordable test, it is challenging to address the significant number of patients needing blood-based screening. However, there is considerable opportunity to increase screening rates. We believe that while blood testing can positively influence outcomes, it will not reach the same level of impact we have achieved with Cologuard and Cologuard Plus.

And next up from William Blair is Andrew Brackmann.

Him guys. Good afternoon. Thanks for taking the question and Derek, looking forward to working with you. And Erik, I'm sure you're listening. Congrats again. Maybe on Cologuard Plus, can you maybe just talk about some of the progress you've made on the reimbursement front with commercial payers? What's been their receptivity to sort of this higher price? And also, any change in tone from then just in light of the upcoming Braidwood case head into the Supreme Court? Thanks.

Yes, regarding the first question about Cologuard Plus reimbursement, we recently achieved a significant milestone with Medicare, which set a pricing of $592 that will initially apply to Medicare fee-for-service patients, accounting for about 15% of our current volume. We've also had several payers agree to cover the product and contract with us at that same price. Since Medicare is the largest payer, we see this as a baseline for pricing. Over the next 18 to 24 months, we plan to leverage our strong relationships with around 800 payers to secure contracts. Notably, one major national payer has already covered Cologuard in their policy and recognized the associated code. Additionally, some smaller plans, including a sizable state BLUE plan, have also contracted with us. We will share more updates in future quarters, but we are optimistic about our starting position and believe we have a clear path ahead, primarily driven by Cologuard’s performance of 95% sensitivity and a significantly reduced false positive rate, which we believe offers real value to payers.

The next question is Patrick Donnelly, Citi.

Kevin, maybe another one on the pipeline side. I know you said maybe some of the tests aren't material this year. Can you just talk about, I guess, the pathway here on Oncodetect, the MRD side, Cancerguard, NSAID and then the unnamed blood CRC, which of those do you feel like become material first? What does that trajectory look like? Just curious how you think about the path for the three of them and just the contribution on the revenue side as we look out over the next few years?

Cologuard Plus is clearly our most significant product, with MRD testing following closely and multi-cancer screening coming in as well. In the short term and long term, the multi-cancer screening potential represents one of the largest opportunities in cancer diagnostics. We have three tests addressing the major segments: Cologuard Plus for colon cancer screening, which is a well-defined but significantly underserved market; Oncodetect, which is rapidly expanding in the impactful area of MRD testing; and Cancerguard for multi-cancer screening. I can't determine which will have the greatest long-term impact, but we strongly believe we can achieve double-digit growth for at least the next decade, significantly improve patient outcomes, and enhance profitability. This progress will allow us to reinvest, largely thanks to our substantial investments in technology and commercial operations, enabling us to scale effectively.

And that's the beauty of it is we're going to be able to, with very attractive test economics, one of the best in the field, drop it into our existing commercial infrastructure and our ExactNexus platform and get huge leverage on that as these tests scale over time.

The next question today comes from Vijay Kumar, Evercore ISI.

Hi guys, thanks for taking my question. Kevin, maybe on that last question around MRD, your comments here on this being perhaps a more near-term opportunity. We had the data from Alpha-CORRECT. I think there was some confusion on the data, the algorithm which was used. Could you remind us on what algorithm is being used in Beta-CORRECT? Timing of when we can see the data for Beta-CORRECT? And based on those results, right, like how should we think about the revenue ramp? I think you submitted the more DX. How critical is that reimbursement? What percentage of the population is that covered? And how do you compete against your largest competitor in that space?

I think there's one overarching question in there, Vijay, and that's all about MRD. So why don't I pass it over to Brian Baranick, our GM of Precision Oncology.

Thanks, Kevin. There was a lot in there. I'll start with the first question, which was really around the adjustment we made to the cut point in our Alpha-CORRECT study. What I'll say here is that the teams were kept blind. These were independently validated and we outlined all the methodology that we followed in the JSO publication that was referenced earlier in the call. We then took that algorithm into the Beta-CORRECT study. And if you reference the press release and the language we used within that study, which is under embargo, we'll do a couple of things. One, it will confirm the performance of the assay in Stage III colon. It will extend us into Stage II, IV colon cancer, as well as all of rectal cancer. And then, again, because the data is in embargo, what we're going to say here is that we believe the data looks very promising in the sub-study of the GALAXY study, and we look forward to sharing those results, which we will do at ASCO in the June timeframe. With respect to the overall MRD program, I mean, there's a lot of excitement within our team. If we just step back and think about where we are, we have a large underpenetrated market. There's over 6 million patients just in the U.S. alone that are within five years of their original cancer diagnosis. You layer on top of that a very, very large clinical unmet need. We're excited about the program, Alpha- and Beta-CORRECT data. We also believe that we have some really strong unique competitive advantages. You've heard reference to the ExactNexus platform several times on this call already. We think that's going to create a unique and differentiated customer experience. We arguably have one of the strongest, if not the strongest brands. Prior to Genomic Health, there really wasn't a market for high-value centralized cancer diagnostics. We help build that playbook. We intend to utilize that playbook and those skills to propel Oncodetect forward. And then we have a deep tenured sales team that, quite frankly, is hungry to leverage those relationships, bring new products to the patients and customers that they serve. So we're looking forward to the launch. We're excited about what we're going to do in Q2, and we look forward to driving forward.

The next question today is Subu Nambi, Guggenheim Securities.

Hey guys. Thank you for taking my questions. Can I ask a follow-up to Vijay's question? Is the test performance expected to be consistent with what you had presented at ASCO GR or can it be better a few percent points either on the sensitivity or specificity?

Yes. Thanks for the follow-up question. Unfortunately, the data is under embargo. Well, I'll go back to my previous statement and just say we're encouraged, the data looks promising, and we look forward to sharing the details. If you just look at the study that we published in the Journal of Surgical Oncology back in January, Kevin mentioned this earlier in the call, if you look at the performance of the assay, patients who were positive on Oncodetect were 56 times more likely than a patient who is negative to go on and have a cancer recurrence. We showed 10-month lead time to standard-of-care imaging and being able to stop that recurrence. And if you look at the longitudinal setting, the serial sensitivity and specificity was very competitive with other assays that are out there. The well-known GALAXY study, we were excited to get access to a subset of that parent study, and we look forward to sharing the data at ASCO. And we've also got a number of investments in prospective clinical studies across colorectal, breast and then the work that we announced with our partner, Flatiron, which will bring us into the multisolid tumor scenario as well.

Puneet Souda from Leerink Partners has the next question.

Great, thanks. So simple one for me on pricing. Why shouldn't we see more than 2 points of lift from Cologuard Plus pricing? And what are the levers and pieces that you think that can potentially drive that higher versus what you provided? And wondering if you can give a pricing assumption from Cancerguard? Thank you.

So the two points assume a launch in Q2 within the Medicare fee-for-service population, which, as Kevin alluded to earlier, represents roughly 15% of Cologuard volume and that obviously has now an increased value to Medicare of about 16%. Implying the guide is essentially just that Medicare fee-for-service volume. Keep in mind, too, there's a typical lag between when we get an order in and when we recognize revenue when we get that test back in our lab. And so most of the contribution from Cologuard Plus pricing lift is going to be in the back half of the year. As Kevin alluded to earlier, we are beginning those conversations with payers to be able to re-renegotiate that price, and we'll give updates on that as we go on. Kevin?

Yes. There's potential upside as we update contracts. And right now, the assumption is that, that's going to occur more beginning of next year than this year. So there is upside, our team is hard at work having those conversations. In terms of the Cancerguard price, we'll come back to that if somebody else asks that question. We're keeping the list.

And next up is Dan Leonard, UBS.

Thank you. I have a question on your Screening guidance for 2025, that 13% growth at the midpoint. I thought a few months ago, you were messaging that 15% would be a floor given Cologuard Plus pricing, rescreens, etc. I was hoping you could comment on that variance. And I'd love to learn more about what's changed in your thinking over the past three months?

In what form do you recall that we signaled 15% growth?

I think it was that analyst after-party you had post the earnings call.

No. Well, if you heard something, that’s not something we have ever communicated, but is there potential for our Screening guide? Yes, there is. If we observe the commercial execution impact in the second half and if we have more contracts updated in the first half of this year on the commercial side, including Medicare Advantage plans and commercial plans. But it’s February right now. As Aaron mentioned, we’re noticing some positive signs in terms of the metrics related to the revitalized and strengthened sales force on the Screening side, and we have new product launches planned for this year. So our guidance for Screening is slightly higher than what you saw last year. The team is eager and ready to proceed. I want to emphasize that there are chances for us to continue to perform well in automating rescreens and ensuring more individuals due for their second, third, or fourth Cologuard test are screened close to their three-year anniversary. We also see an opportunity to expand our care gap. We started the year with a solid rescreen outlook, care gap program, Cologuard Plus, and then commercial execution. Those are the four major factors. We believe we will be able to execute well this year.

And what we said at JPMorgan was that we were comfortable with where consensus was. And if you look at the midpoint of our guide for Screening, it's right on where consensus was, which was 13% growth.

The next question is Bill Bonello, Craig Hallum.

Hey, guys. Thanks for taking the call and welcome, Derek. So just given your comments that you're seeing actually improvement in the rate of rescreen and we see a big uptick to the 2 million people eligible, I sort of back on the envelope math, it seems like the kind of implicit expectation on people screened for the first time is that, that population is maybe growing in the low to mid-single digits. Is that kind of consistent with how you're thinking about the numbers?

Hey Bill, directionally, your math isn't that far off with what we've included in our guidance. Important to keep in mind is care gaps are a channel for us to get more patients screened for the first time. With Cologuard, Kevin alluded to a number of changes we've made to the commercial organization, really targeting the newest ordering providers that have the highest propensity to order and drive growth for us moving forward. And that's a channel that we're going to look to continue to grow over time. And the last thing I'd call out is we continue to target the younger population. Care gap is a great way for us to get to that younger patient population, but you've also probably noticed some new ads and marketing experiences that we're trying to deliver that to the younger patient population as well.

Up next is Sung Ji Nam, Scotiabank.

Hi, thanks for taking the question. Just one on Cancerguard as well. Without having third-party reimbursement when you launch, just could you elaborate a little bit more in terms of your go-to-market strategy there? You mentioned leveraging your existing sales force, but I was curious kind of where you expect to see the biggest traction in terms of the different channels that you have there? Thank you.

Yes, you have significant leverage with the current field force. Health systems are more interested in Cancerguard at this stage in the product lifecycle than they were with Cologuard. The reason for this is that they recognize a pressing need to detect cancers earlier, to retain their patient population within community cancer centers, and to support those patients by addressing other needs. As we engage with large health systems through our dedicated sales team, we believe this represents a strong opportunity. Our field force and screening teams are eager to deliver Cancerguard, and our Precision Oncology team is also excited about providing it to patients who have been previously diagnosed with cancer. We can offer this at a price point that is likely to be competitive and more suitable for out-of-pocket expenses.

Next up is Eve Burstein, Bernstein Research.

Hello there. Thank you for the question. I would like to follow up on Andrew's inquiry regarding Braidwood. My understanding is that if the court decision is upheld by the Supreme Court, then recommendations from the USPSTF made after March 2010 would no longer require coverage without cost-sharing. This means that both Cologuard and any upcoming blood tests would not need to be covered by private payers without requiring patient cost-sharing. Is that accurate? If so, how quickly could payers revoke the no cost-sharing requirement? I assume there are regulatory processes that prevent such changes without prior notice. This represents a significant challenge for Exact's business. How are you preparing or strategizing in case the Supreme Court upholds that appeal?

We do not anticipate any negative impact on the business because payers are strongly incentivized to ensure their patients receive screenings to enhance their quality measures. Consequently, the emphasis on prevention remains robust from the perspectives of health plans, health systems, and patients, and we expect no significant alterations. For instance, if a major payer were to implement a co-pay while their competitors did not, that payer would likely see a decline in their quality measures related to prevention, which they cannot afford due to the bonuses linked to these quality measure scores. Regarding Braidwood, it is a lawsuit that challenges the Affordable Care Act's requirement for zero out-of-pocket costs for covered services with Grade A or B recommendations from the USPSTF. The incoming administration, like the Biden administration, is opposing this lawsuit, which is a positive sign for the prevention sector. Payers remain highly motivated to maintain their screening scores, and plans for 2025 are already in place, meaning that any potential changes would not occur until 2026.

The next question comes from Andrew Cooper, Raymond James.

Thank you for the question. We've had several inquiries, so let me provide some insights on Precision Oncology. If we consider our guidance and account for the $10 million Nexus transition headwind as we near the end of the year, growth appears somewhat slower. We anticipate some contribution from Oncodetect, so could you explain the underlying assumptions and why we aren't seeing faster growth? Additionally, in a previous answer, Aaron mentioned increased investments in sales and marketing for Oncodetect. We've previously viewed this as an enhancement for the Oncotype DX sales team. What has changed, and how should this additional spending be allocated to effectively support Oncodetect within the commercial team?

Andrew, so just in terms of the full-year guide, yes, kind of mid-single-digit growth for PO. We would expect a tailwind from the ExactNexus change. One, the non-repeated that, but two, just that we know from putting things onto the ExactNexus platform that the cash collection rate will improve over time. If you think about like the core business, growth is again going to be led by international, anticipating strong double-digit growth from our oncology business internationally again. And then in the U.S., just continued growth and momentum with the U.S. Oncotype business as well. Specific to maybe piece of the Q1 piece of PO guide, I would just highlight the underlying growth is steady. If you back out and kind of look at this on a core revenue basis, we essentially have low single-digit growth in Q1. That's backing out the impact from FX where we're seeing some headwinds on the euro and the yen as well as the reference lab business that we have. With respect to the sales and marketing side of the Oncodetect, we're not going to comment on the exact size of the sales force. But what I will say is we're being intelligent with the investments that we're making on the sales and marketing side to make investments, to make sure that we come out of the gate strong, and have a really successful product launch. In addition, we're making the needed investments we need to make on the clinical evidence side of the equation. We haven't talked a lot about the studies that we're investing in. But in colorectal, we have CORRECT-I and CORRECT-II which collectively have over 1,400 patients that we're going to be deploying Oncodetect on. We have what is probably the largest prospective clinical study in breast cancer that collectively will enroll 1,800 patients. And then on the multicancer side of the equation, in the press release related to Flatiron in multi-cancer, we have over 1,300 patients that we plan on enrolling. So making smart intelligent investments on sales and marketing to support the existing Oncotype team, but also investing aggressively on the development side of the equation to make sure that we can quickly move from colorectal into breast and ultimately into multi-solid tumor.

Hey, guys. Thanks for the questions. Kevin and Aaron, just could you talk about the care gap revenue contribution '25 versus '24 in terms of dollars and the year growth rate implied? And relatedly, any update on any business shifting from standard primary care Cologuard ordering to care gap. Thanks.

Hey Kyle, so if you think about the full year guide, we did more than 250,000 patients through the care gap program in 2024. That was triple-digit growth last year and without exactly sizing what it will be this year, I would just say we expect to build on that momentum heading into 2025. We're seeing meaningful growth in that part of the business in Q1 as well. From a phasing perspective, about two-thirds of care gap revenue came in the back half of 2024. We're assuming similar phasing in 2025. And we've talked a lot about adherence in the past as well. We're doing a lot of things to continue to improve the adherence or the return rate in care gap programs. But from a guidance perspective, we're assuming similar adherence rates to what we saw in 2024.

Yes. And just the drivers of care gaps. I just want to remind people, it's this ExactNexus technology platform that allows us to do it our deep relationships with payers, brand awareness of Cologuard and that Cologuard is in the guidelines, in the quality measures and comes along with a three-year credit because that's the interval for testing. That's awfully powerful, and what we're seeing is a shift in the way that a lot of health systems and payers are starting to think about screening. And so a lot of the first-time screeners are going to come in through these programs in the future. And over time, we've said, hey, look, this could be a $500 million-plus opportunity where we're screening 1 million-plus people per year. And it can grow from there.

The next question is Luke Sergott, Barclays.

This is Sam on for Luke. Thanks for squeezing me in here. Maybe picking off of Dan Leonard's question here. I appreciate the color on upside to Screening growth. You're guiding to a similar Screening growth this year as to '24. You talked about the 2% pricing contribution already. And I'm wondering if regarding rescreening and care gap, you guys kind of talked about maybe 10% growth contribution maybe a quarter or so ago. So I'm wondering if that is still intact. And I'll just leave it there. Thanks.

Yes, that is still very much intact. And so what we've talked about is that collectively, between rescreens and care gap, that gives you to something maybe slightly north of 10% growth. Rescreens continue to be the largest growth opportunity for us over time. It's growing more than 30% per year. And so we'll contribute kind of mid to high-single digits, and then you can kind of do the math on what that means for care gap.

And everyone, that was our last question. That does conclude our conference for today. We would like to thank you all for your participation. You may now disconnect.