Thank you for being on the line. My name is Kate, and I will be your conference operator today. I would like to welcome everyone to the Exact Sciences First Quarter 2025 Earnings Call. All lines are muted to avoid background noise. Following the speaker's remarks, there will be a question-and-answer session. I will now hand the conference over to Derek Leckow, Vice President of Investor Relations. Please go ahead.

Thanks, operator. Thank you for joining us for Exact Sciences first quarter 2025 conference call. On the call today are Kevin Conroy, the Company's Chairman and CEO, and Aaron Bloomer, our Chief Financial Officer. Exact Sciences issued a news release earlier this afternoon detailing our first 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 can be accessed through our website. I'll now turn the call over to Kevin.

Thanks, Derek. Highlights in the first quarter include delivering 1.2 million total results to patients, growing core revenue 11% while non-GAAP operating expenses grew just 4%, improving our profitability by increasing adjusted EBITDA more than 60%, launching Cologuard Plus our next generation Cologuard test with Medicare coverage and quality measure inclusion, and being recognized as a Gallup Exceptional Workplace for the second year in a row. Cologuard is driving significant and durable growth because it satisfies an unmet need in an expanding market. We're pleased to share some of the early successes from the commercial initiatives we began last year. Our purpose-built commercial organization and expanded field team are engaging providers with the highest potential to order at record rates. The shift to territories and calling on providers with the highest potential to order is making our team even more effective. Our team is expanding the number of providers we engage each quarter. As a result, they are helping reach new ordering providers much faster. We're also seeing positive feedback from new advertising campaigns and customer satisfaction was at an all-time high in the first quarter. Our customer-initiated ordering platform grew triple digits in the first quarter and we have plans to improve these initiatives further. We are incredibly proud of our entire commercial organization and their positive impact on advancing our mission. Commercial improvements are just one of many drivers that will fuel growth over the coming years. Others include our Rescreen program. We have a growing base of loyal customers, which now represent more than 25% of our revenue. This provides a predictable, recurring source of revenue and we are getting better at keeping those patients screened. Our care gap program helps payers and health systems close gaps in screening. This program grew triple digits last year and will continue to grow strong double digits this year. We are still in the early innings of driving higher adherence in these programs. The launch of Cologuard Plus will deliver increased value, improved performance, higher adoption, and improved margins. New products are starting to show the benefits of investments we've made to launch and scale new tests in large and growing markets. These growth drivers will continue to play out over 2025 and beyond. It's never been a more exciting time at Exact. I'll now pass it on to Aaron to discuss our first quarter financial results and provide an updated outlook for 2025.

Thanks, Kevin, and good afternoon everyone. Our team delivered strong results in the first quarter ahead of our expectations while navigating through one of the worst flu seasons we have seen in years. The team's dedication to our mission also enabled us to deliver two product launches, which will fuel growth and create value for years to come. First quarter revenue grew 11% on both a reported and core basis, $19 million above the midpoint of our guidance. Screening revenue exceeded guidance, increasing 14% to $540 million. Broad-based Cologuard growth was led by continued success in rescreens, care gap programs, and growth in new ordering providers. Precision Oncology revenue also exceeded guidance, increasing 4% to $167 million on a core basis. Growth in the quarter was led by continued strength in Oncotype DX adoption internationally. Adjusted EBITDA increased 61% to $63 million. Adjusted EBITDA margin expanded 280 basis points driven by volume leverage, productivity, cost-cutting initiatives, and improvements in G&A. As a percentage of revenue, adjusted G&A improved more than 520 basis points and was down 7% year-over-year. This was partially offset by sales and marketing investments to drive near and long-term growth. We expect continued leverage across the P&L. In the first quarter, we took $25 million in actions to optimize costs and increase operational efficiency over time. We expect these actions to deliver annual savings of $18 million, with $9 million coming in 2025. We have additional operational excellence initiatives planned and will provide additional updates in the coming quarters. Free cash flow reached breakeven during the first quarter, a year-over-year improvement of $120 million. We are making progress to generate meaningful free cash flow growth through productivity and working capital initiatives and expect strong full-year cash generation. Looking at free cash flow cadence, we expect a meaningful build in our AR balance as we launch Cologuard Plus temporarily impacting our cash flow in Q2. We expect to collect on these in the back half of the year, driving our full year cash flow to a new record. We ended the quarter with cash and securities of $786 million, which reflects the $249 million convertible note paydown. Turning to guidance, we are increasing total revenue guidance to between $3.07 and $3.12 billion for the year, an increase of $40 million at midpoint, with second quarter revenue between $765 million and $780 million. This assumes screening revenue between $595 million and $605 million for the second quarter and between $2.39 billion and $2.425 billion for the year, with precision oncology revenue between $170 million and $175 million for the second quarter and between $680 million and $695 million for the full year. We're also raising adjusted EBITDA guidance to between $425 million to $455 million for the full year, or 14.2% adjusted EBITDA margins at midpoint. Annual guidance at midpoint implies total revenue growth of 12%, including 14% in screening and 5% in precision oncology. Underpinning our increased screening guidance are early signs of improved commercial execution. As Kevin noted earlier, we're seeing several leading indicators fueling growth ahead of our expectations in new Cologuard orders. Customer engagement by our field force is up more than 30% year-over-year, and over 190,000 providers ordered during the first quarter, an increase of nearly 10% year-over-year. These factors are coupled with continued momentum in rescreens, care gap orders, and Cologuard Plus pricing, which help inform our increased annual guidance. Specific to Precision Oncology guidance, we are excited about the Oncodetect launch, and the core business is performing as expected. Shifting to profitability guidance, we are pleased with the leverage in the first quarter and continue to find ways to drive improved margins. Additionally, we have little to no impact from tariffs as we manufacture and perform our lab work in the United States. Guidance at midpoint implies more than 35% adjusted EBITDA growth, or about 250 basis points of adjusted EBITDA margin expansion. Back to you, Kevin.

Thanks, Aaron. Cologuard Plus is one of the most accurate screening tests ever developed and will help revolutionize colorectal cancer screenings. The test detects 95% of colon cancer at a 94% specificity, resulting in a 40% reduction in false positives. Cologuard Plus fits into our best-in-class primary care commercial organization and proprietary ExactNexus platform. Our team is seamlessly bringing Cologuard Plus to physicians and patients. We have rapidly achieved Medicare coverage, pricing, and quality measure guideline inclusion. Cologuard Plus builds on the strong Cologuard brand, and top of mind awareness of Cologuard surpassed colonoscopy for four out of the last six months. All of these benefits equip our commercial team with a practice changing message for healthcare providers. Cologuard First Colonoscopy, as needed, we are working to ingrain Cologuard Plus as the first option in healthcare provider screening toolkit. The launch is going well and we are excited about the test's potential. We know which patients are covered for Cologuard Plus through our Exact Nexus platform and can triage them accordingly. We've already completed over 30,000 tests and are engaging commercial payers to bring Cologuard Plus to more patients. In April, we advanced Exact Science's unique position to guide a cancer patient's journey every step of the way by launching Oncodetect, our molecular residual disease test. This vital tool could help benefit six million cancer patients. Oncodetect fits right into our precision oncology portfolio led by Oncotype DX. Deep relationships with oncologists, a global footprint, our customer experience, and our evidence generation strategy will drive adoption of Oncodetect for years to come. We are actively working with Medicare to secure reimbursement for our test in colorectal cancer, which we expect to occur this quarter. We look forward to sharing updates on Oncodetect over the course of the year. We remain on track and there is no change to our timeline to share mid-summer top line results from our pivotal Blue Sea study supporting our blood-based colon cancer screening test. Over the last few months, our product development team took important steps to bring the best possible science to patients and physicians. Since our last update, we have completed three studies to optimize and lock our algorithm. Based on those results, we believe we have a high-quality test and optimized algorithm. As we head into the testing of the clinical trial samples, our team is focused on final steps ahead of running samples including lab, IT, manufacturing, quality, and sample readiness. After we have run the BLUE-C samples, we plan to announce via press release top line data including overall cancer and pre-cancer sensitivity and specificity. Our blood test features our unique scientific approach and a differentiated cost profile. The test will fit into our existing commercial infrastructure and our Exact Nexus platform. Shifting to multi cancer screening, we remain on track for the launch of Cancerguard in the second half of 2025 through our large screening and precision oncology commercial organization. Cancerguard also fits into our unique Exact Nexus technology platform. Our test enables population-level screening for cancer, and we look forward to bringing this test to patients later this year. In summary, we are off to a very strong start in 2025. We launched two new innovative products that will make positive impacts on patients. The commercial improvements we made are building momentum and we believe will deliver sustained growth. The Exact Sciences platform, our deeply embedded standard-of-care tests, and our growing portfolio of innovative diagnostics puts us in the best position to make early detection and personalized treatment the new standard. We're now happy to answer your questions.

Our first question comes from Tycho Peterson with Jefferies. Please go ahead.

Okay, thanks. Yes, I'll keep it to one. Let others ask in the pipeline. But Kevin, I want to focus on commercial execution. You highlighted this a number of times. You made a lot of changes in the last two quarters. Obviously, we're now seeing the results. You talked about the shift to territories, dynamic calling lists, but maybe what are some of the other changes you made on the commercial front that are really working? How is that driving new to Cologuard orders, rescreens, and care gap, and then the 30% year-over-year increase in customer engagement? Can you clarify? Is that Doc calls? Is that Doc calls per rep? Thank you.

It's Doc calls. The volume of calls is up and thanks, Tycho. Yes, we are really pleased with the leading indicators based on the changes that we made. You have to go back to December of last year when we made many of the changes. And then throughout the first quarter, these changes have shown responsiveness. We're really pleased. We have the right number of reps. We are engaging with the right customers with the right frequency. The rep productivity, the per rep productivity is up about 10%. That's fantastic. That tells you that you have an engaged sales force that is out there really making sure that people are getting screened. Cologuard Plus is making a difference. We have the benefit of having a test that is 95% sensitive, 94% specific. Docs and healthcare providers are really excited to learn more about Cologuard Plus. We're equipping our sales force with the right data on who to call on in their geographic territory and the geographic territory alignment that's clearly having an impact. We're targeting the right providers with the right frequency. We think that builds out as you go throughout the year and beyond. And one of the things that we're really happy about is three out of four new ordering providers in the quarter have been reached actively by either our inside team or our field team within a week or two of that first order. We call that no order left behind. It's having an impact. It always has, and we believe it always will. We'll just keep aggressively surrounding every new customer with education, demo kits, etc. The engagement, the depth of our relationship with our customers continues to strengthen. So here's a data point: our customer satisfaction has reached an all-time high. We track this rigorously. It's part of, typically part of our bonus structure has been in the past, and it's at an all-time high in Q1. Our care gap programs continue to be robust. We're on track there. We also, our brand awareness is high. So when you poll customers, which we've done this for years, and ask them on an unaided basis, 'What is a way to get screened for colon cancer?' more people say Cologuard than colonoscopy in four of the last six months. That's telling you something. You're moving towards Cologuard becoming the frontline way that people think about screening. And as you know, there are a lot of people out there, 50 million to 60 million people who are not up to date with screening. One final thing is ordering Cologuard through our website. If anybody on this call is listening and hasn't done screening, go to the Cologuard.com website; you're going to have to answer some questions and put in your health card, health insurance information, and you can get screened quickly. That CIO customer-initiated ordering business is growing in triple digits. So firing on all cylinders, but it's a start. We have a lot of work to do throughout the course of the year.

Your next question comes from the line of Catherine Schulte with Baird. Please go ahead.

Hey guys, thanks for the question. Maybe one for you, Aaron. Can you just unpack guidance a bit? How should we think about cadence in the back half of the year? And then can you walk us through the puts and takes there of the raised revenue outlook? How much of that is care gap versus rescreens versus broader commercial execution or any other color you might have? Thanks.

Hey, Catherine, it's early in the year, and any increase in guidance at this early point, we'd treat with caution. But coming off of the strong Q1 that we have, and we've got excellent visibility now into how Q2 is shaping up in terms of orders. Kevin just outlined all the reasons why we're really pleased with the changes that we made last December—the leading indicators that we're seeing are starting to translate into orders, which is giving us visibility to raise not only from Q1 but also Q2. It is still early, and as we think about revenue pacing, first half versus second half, the back half of the year already implies slightly higher revenue growth. If you look at screening as an example, this revenue guidance will imply about 13% growth in the first half of the year, stepping up to about 15% growth in the back half, primarily driven by the launch of Cologuard Plus, the pricing benefit that we'll see from that, and some of the benefit from the commercial execution. The increased guidance raise was entirely attributable to improvements related to commercial execution.

Your next question comes from the line of Brandon Couillard with Wells Fargo. Please go ahead.

Thanks. Good afternoon. Aaron, back to you. On just margins, sales and marketing is a lot higher than we had modeled. Can you kind of unpack where you made investments in the first quarter? Was there anything one time in there? How should we think about that line over the balance of the year? And where do you expect free cash flow to land for the year? Thank you.

Hey, Brandon, first of all, we're really pleased with the progress that we made on overall profitability in the first quarter, so we grew it by more than 60%. I think it just shows the power of what we have and we have multiple ways in order for us to expand our margins. I'll start with gross margin. We had some headwinds last year just as it pertains to care gaps. We challenged our manufacturing, lab, and supply chain team to figure out how to get costs down over time. I’m really pleased with the hard work that they put in in the back half of last year, and that showed in the first quarter. We saw gross margins expand again in the first quarter going down the lines of the P&L. The next area I'd highlight is G&A. G&A has been an area we've talked about. We've taken some actions there. We saw more than 500 basis points of margin growth in the first quarter alone. Sales and marketing we highlighted on our initial call this year that was going to be an area of investment. Yes, it went up in the first quarter, but I'd like to unpack that just a little bit. If we think about the investments we've made within our screening portfolio supporting everything we’re doing from a Cologuard perspective, the growth that we saw in revenue in the first quarter significantly outpaced the growth and the investments that we made within sales and marketing. We saw leverage on that in the first quarter and will see leverage throughout this entire year and in the years to come. The bigger investment from a sales and marketing perspective is really to support the new product launches we have this year. We just launched Oncodetect recently, and we have the Cancer Guard launch coming later this year. These are brand new markets for us, and we wanted to make sure that we were enhancing the size of those teams to be able to support those launches in a big way. Just you had asked about free cash flow as well. We saw a $120 million improvement year-over-year in free cash flow. Again, kudos to the entire Exact team. This has been an area of focus for us. We've taken a number of steps to drive improvements in working capital. Of note, we've seen a significant improvement within our days to pay, so how we manage our suppliers, and that showed up in a meaningful way here in the first quarter. As we think about pacing, as I said in the prepared remarks, we expect a build in the second quarter. We want to make sure that that’s incorporated into everybody's models, and that just has to do with the launch of Cologuard Plus. We're able to recognize higher revenue right away, but the MACs have to come into Q3 until all of that coding gets updated into the system, at which time we would build a bill for that and then collect into the back half of the year. On the pacing of sales and marketing, we expect it to be pretty consistent as we pace throughout the year. As we’ve talked about before, I think the team is loaded to bear, fully ready to go to support the full year. You saw that in Q1 and we would expect that to pace throughout the balance of the year.

Operator, next question please. Operator, next question please. The operator has indicated that there is a challenge and to give her a minute. So please bear with us.

Apologies for the delay. Your next question comes from the line of Doug Schenkel from Wolfe Research. Your line is open.

Hi, this is Colleen Babington on for Doug. Thanks for taking our question. So I believe in the prepared remarks that rescreens are now about 25% of total Cologuard orders. Is it reasonable to assume rescreens could get to 26% to 28% of total volume this year? Or should we assume that those should stay stable at around 25% as patients get access to Cologuard Plus for first time testing? Also, we know patients become more compliant with rescreening with subsequent rescreens. So as patients become eligible for their third or second and third Cologuard test, how should we be thinking about the pacing? From your path of your current hit rate of about 55% to your long-term goal of 70% plus. Thank you.

Rescreens continue to be just an unbelievable growth driver for us. It's a great predictable recurring form of revenue that's going to provide a long-term annuity for our screening business. We've talked about how there are more than 2 million patients eligible for rescreen this year; that's up more than 30% versus where it was a year ago. Yes, we have opportunities to get even better in terms of driving adherence. We continue to get a couple of points of improvement per year over the last several years and will continue to drive that forward. In terms of just the guide, more than 25% of our revenue in the first quarter came through rescreens. Yes, it is a fair assumption that rescreens would add a couple of points in terms of their overall contribution to our volume this year.

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

Hey guys, thanks for taking the questions. Kevin, maybe just to pick up on the pipeline, helpful commentary there on the blood piece. Can you just talk about, I guess, the hurdles left—the timeline? It sounds like pretty well locked in here, tracking towards the mid-summer. But yes, maybe just talk about the milestones needed, what we should be keeping an eye on to get there, and just confidence in the timeline. And again, obviously, the data—I think the expectation is maybe some dilution from the case control, but help us on the expectations as well would be great. I appreciate it.

Yes, sure. We’re to that point in moving forward to testing clinical trial samples that our team excels at. We’ve done this with Cologuard. We’ve done it with Cologuard Plus. It’s a big undertaking. You have one chance to do it. You want to do it really well, so you have to prepare the lab. You need multiple software systems that need to be validated, reagents, manufacturing, quality, the actual testing of the samples. There’s a ton of work that goes into that. As you know, it’s a 20,000 patient study overall; there’s just a lot of work, and you want to do it well. We are on track from a timing standpoint. There’s no change. We believe we’ll be competitive. The assay team has done a ton of work to validate and lock that algorithm. But I also want to take a step up a little bit. All roads lead to getting into the quality measures, which is gated by USPSTF. That’s going to take a few years. We don’t have a clear idea of when the guideline group will meet and then starts quality measures. In terms of blood modeling, we know from multiple different studies that have been published in the last year that blood doesn’t model at anywhere near a substantial reduction in life years gained and a substantial increase in total costs. We believe there will be a niche for blood testing, but don’t know whether it will get into the guidelines. It’s certainly not going to be an easy road there. We believe, tying back to something Aaron just said, this big base of customers we have in our data—specifically, we have 30 million people today that have had a Cologuard test ordered. We believe that could grow to 50 million over the next several years, allowing us to parse the people willing to get screened with Cologuard. Most are, and then the fraction that aren’t, we have a solution for. We have a great commercial team, to deploy our blood tests to make sure that if there are patients who refuse guideline-recommended forms of screening, we can get them screened. We believe we’ll win due to the brand, commercial capability, and cost. I talked with one of our area managers yesterday and asked, 'What are customers saying?' The answer was that people are waiting for Exact’s blood tests. I believe that because of the depth of our relationships over the last eleven years of engaging with customers. So that’s where we are; we’re really pleased with the progress. We’re at that point in time where the operations and lab and IT teams excel. Looking forward to the midsummer readout.

Your next question comes from the line of Michael Ryskin from Bank of America. Your line is open.

Great. Thanks for taking the question, guys. Apologies if I missed this earlier, but the update to the guide on revenues makes sense, and you kind of talked through some of the screening contributions. On EBITDA, I just want to get a little bit more color there on where and how that’s flowing through versus reinvestment in some of the commercial initiatives, especially the upcoming pipeline. So just want to talk about the EBITDA margin raise to guide. How we should think about that throughout the course of the year? Thanks.

Hey, Michael. We're really pleased with the progress again that we made in the first quarter that gave us the belief to raise the guide for the full year in line with the revenue guide. I already called attention to the world-class gross margins we have in place, continuing to get better, the productivity we're seeing within G&A. I also alluded to some actions we took in the first quarter to not only impact the back half of the year margins but also set ourselves up for long-term cost out initiatives as well, and we have more operational excellence initiatives planned on that front. In terms of the rest of the drop-through, we will continue to invest in sales and marketing, particularly in Oncodetect launch costs this year. But again, seeing great productivity out of the investments we’ve made on the CRC side, which we expect to get meaningful leverage on throughout each of the quarters this year.

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

Hi guys. Thanks for taking my question and congrats on a nice sprint here. Kevin, maybe if I can just ask a big picture sort of question. If I look at the stock, we’re at the low end of the trading range. I look at your test volumes; you’re doing north of 1 million tests here within screening. The market doesn’t seem to give you credit. Part of it, I suspect, is this fear on blood, right? You have one of the largest sales forces. When you put all of these elements together, it’s hard for us to see why the market does not give you credit. When you think about blood, A, on the data itself, when you look at it versus competition, why is the market fearful of Exact’s data not being comparable? Would love your thoughts on the work you’ve done internally. And second on pricing, I do think like you guys have a pricing advantage when it comes to blood; wouldn’t that negate the entire competitive thesis? Thank you.

Thanks, Vijay. I found over the years that you control and focus on what you really can control. We have focused on getting more people screened and driving that with an incredible commercial focus. I would say that if you look out over the past nine months, we’ve been more challenged by the commercial execution of Cologuard than any noise around blood testing. That’s my particular view. What we can control is execution, and on the commercial front, we’re executing. On the CRC colon cancer blood front, we’re executing, and we’re going to have a readout this summer. The key thing for the management team is to focus on long-term value creation. A lot of what happened in this quarter is because of things that we did two years ago and three years ago. We’ll keep focusing on building a company that has a sustainable impact.

Yes. Hi, Kevin and team, and thanks for taking my question here. First one on Cologuard Plus. It’s been a month since the launch. Could you provide a view on what traction you’re seeing? What’s the mix of current Cologuard versus Cologuard Plus? How should we think about that in the Q2 guide and for the full year? Thank you.

Well, thanks. You should think about Cologuard Plus as being available for Medicare Part B patients, which is right around 14% to 15% of our customer volume. Medicare Advantage is becoming a much bigger part of the Medicare patient population, and we think that will grow over time. Around 15% is what we expect for now. As we get more payers to change their contracts to include Cologuard Plus, we will be able to flip those orders. Bottom line is that we are testing a large volume of Cologuard Plus tests presently, and that will grow over time as those new patients gain access based on their payer coverage and contracting with our team. We’re excited. If we can get more of those payers on board sooner, that means more lift earlier. Right now, we’re focused on meeting the demand that we’re already seeing. I think it was a couple hundred thousand orders that converted to Cologuard Plus pretty early on in the launch and then a lot of new orders coming in.

And just in terms of what’s embedded in the guide for Q2, it’s exactly what Kevin said. It’s the Medicare Part B that obviously then would grow as we go into the back half of the year. But think right around that 15%. To the extent we’re successful with securing contracting with any of the larger payers, we will keep you all updated and then obviously reflect that.

Your next question comes from the line of Subu Nambi from Guggenheim. Your line is open.

Thank you guys for taking my question. On the commercial payer front, could things still be a source of upside this year? Or is that too far out? Or maybe early next year is the right time frame to think about? And then my second question was, have you settled on the Cancer Guard pricing yet? You previously said folks were willing to pay roughly 500 to 700 out of pocket. Would it be reasonable to think that it’ll be in that range? Thank you.

On the first question, in terms of coverage for Cologuard Plus, I think the base assumption is that there will be modest to little non-Medicare Part B patients being tested this year. The team is working really hard, and the early indications are positive. Payers like Cologuard Plus; they see a 40% lower false positive rate, meaning fewer unnecessary colonoscopies. We’re engaged in discussions, and those conversations are quite positive, which I think will make it easier than the first time. Nine out of the top 10 payers are running care gap programs with us. We've become partners with the payers, which has become increasingly important to them. On the second question regarding Cancer Guard pricing, we have not decided yet.

Your next question comes from the line of Andrew Brackmann from William Blair. Your line is open.

Hi, guys. Good afternoon. Thanks for taking the question. Kevin, maybe one for you on the pipeline. In the proxy, there’s mention of Cologuard 2.5. Can you talk about that product, the milestones you’ve met, and are expected, and just how we should think about potentially launching that in the future? Thanks.

Cologuard 2.5 is our internal name for Cologuard Plus, which has a smaller collection kit. We want to ensure that we meet the needs of all patients, and there are patient populations that would like to have a very small kit they could put inside a purse, backpack, or even their back pocket. We have a program running right now. We’re having conversations with the FDA about that program, which could be used in patient populations like care gap programs because it would be less expensive and much more efficient. It is also an opportunity; this collection device started as an opportunity to consider Cologuard outside of the U.S., where cost sensitivity is even higher. There are several attributes we believe will be beneficial to expand Cologuard in the U.S. and beyond. More to come later.

Your next question comes from the line of Luke Sergott from Barclays. Your line is open.

Great. Thanks for the question. I just want to follow up on Ryskin’s question about the margin ramp. You guys have three big launches, but I wanted to touch on the gross margin here. You had a good jump-off point in Q1. You talked about some of the drivers there, but with Cologuard Plus coming later on, you also have some better pricing. How should we think about the gross margin progression throughout the rest of the year? Is there a risk that as volumes ramp up with Oncodetect, you could have a little bit of leverage or underutilized leverage?

It was a great launch point that we had off of Q1. We saw sequential improvement versus Q4 and also year-over-year improvement versus where we were Q1 a year ago. Obviously, launching Cologuard Plus, even if it’s just in the Medicare Part B at an increased value, we’ll realize improved gross margins. This will offset any potential headwinds we may experience from sorting and having to run two different lines at the same time. Keep in mind too, Cologuard Plus has a cost to run the test that is lower by about 5% or 6% than for Cologuard. Oncodetect will be a headwind on our gross margins in the back half of the year if we’re very successful with that launch, and we’ll keep everybody apprised of any impacts from that. But looking at gross margins throughout the year, we expect to sustain at that rate, potentially even see it improve heading into the back half of the year.

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

Great. Thanks. I just wanted to circle back to something that has been mentioned numerous times on this call and recently, Kevin, regarding this concept of Cologuard first. Can you discuss what has to happen for that to be the paradigm? Are there guidelines that would need to be changed? Is it more of a payer-driven phenomenon? Can you discuss how we might think about this significant change taking place?

Bill, I would say we are driving this, and you are starting to near the point that there will be more people screened with Cologuard in a given year than with colonoscopy. I’ll repeat that. We’re nearing the point that more people will opt for Cologuard than colonoscopy in a year. There’s a limit in the U.S. to how many screening colonoscopies can be performed, somewhere between five million and six million. It’s hard to get that accurate data. Between five and six million screening colonoscopies are performed every year. There are 55 to 60 million people not up to date with screening. It would take nine or ten years to screen those people. What Cologuard has been able to do, and this is based on a ton of work we’ve done, is now moving towards the point where when I speak with people, they say they are up to date with their colon cancer screening by saying they use Cologuard. This is a sea change. The question is: How much can we expedite it with innovative marketing, our commercial organization, our field force, our MSLs, our ExactNexus platform, which is becoming more sophisticated with rescreens that will keep growing over time, plus our consumer-initiated ordering capabilities and care gap programs? What’s going to come along next? Are employers going to want to drive this? Will other growth avenues occur? Then, is international growth possible? This is exciting for Exact, and there are many possibilities for the future. We’re confident Cologuard will be first; colonoscopy will be utilized as appropriate.

And your final question comes from the line of Jack Meehan from Nephron Research. Your line is open.

Hello. Thanks for squeezing me in. I wanted to follow up on the discussion around coverage contracting for Cologuard Plus. Any additional color on progress signing up Medicare Advantage plans and commercial payers, the discussions there as well? Thank you.

Sure. Those conversations tend to be one and the same because most plans we talk to have commercial lines, Medicare Advantage lines, and Medicaid lines. So those conversations all go hand in hand. We’re pleased with our discussions. Payers are excited about the higher sensitivity for both cancer and pre-cancer with a lower false positive rate. They’re excited about our progress with care gap programs. The potential of these conversations to progress faster than the first time is quite positive, primarily because of three sequential events: FDA approval, Medicare including us with a price in the clinical lab fee schedule, and immediate inclusion into the quality measures. Those three things happening quickly was not accidental. That was an incredible team effort. We’ll leverage these conversations—keep you updated as the year progresses—but the assumption should be Medicare fee-for-service only this year. Thanks for joining us on today’s call. We look forward to updating you on all of our progress throughout this transformational year at Exact Sciences. Most importantly, thanks to the dedicated team at Exact Sciences for your commitment to our purpose of eradicating cancer. Thank you.

That concludes today’s conference call. Thank you for your participation. You may now disconnect.