Thank you for joining us. My name is Jeannie, and I will be your operator for today's conference. I would like to welcome everyone to the Exact Sciences Second Quarter 2025 Earnings Call. I will now hand the call over to Derek Leckow. Please continue.

Thank you for joining us for Exact Sciences Second 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 press 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 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. During the second quarter, the Exact Sciences team delivered a record 1.3 million test results to patients, accelerated core revenue growth to 16% year-over-year, and generated an all-time high $138 million in adjusted EBITDA. As a result, we are raising guidance at midpoint for revenue by $55 million and adjusted EBITDA by $25 million. We also advanced our mission by expanding our agreement with two of our top ten payers to make Cologuard Plus in network, entering an exclusive license with Freenome for a blood-based colorectal cancer screening test, gaining Medicare coverage for Oncodetect, our molecular residual disease test, and announcing a multiyear productivity plan targeting $150 million in annual savings by 2026. Aaron will now review our second quarter results, updated guidance, and multiyear productivity plan.

Thanks, Kevin, and good afternoon, everyone. The Exact Sciences team delivered another strong quarter in both screening and precision oncology. Second quarter revenue grew 16% on both a reported and core basis, $39 million above the midpoint of our guidance. Screening revenue increased 18% to $628 million, with Cologuard growth led by rescreens, care gap programs, and improved commercial execution. Precision oncology revenue increased 9% to $179 million on a core basis. Growth was led by continued strength in Oncotype DX adoption internationally. We also recognized $7.5 million in revenue from sublicensing TwinStrand's technology. Adjusted EBITDA increased 26% to a record $138 million. Adjusted EBITDA margin expanded 130 basis points, driven by Cologuard Plus pricing and productivity gains across our lab, supply chain, G&A, and support functions. GAAP net income was negative $1 million, which included $15 million in one-time costs related to actions we took to increase operational efficiency and productivity over time. Free cash flow was $47 million, bringing year-to-date free cash flow to $46 million or an increase of $95 million to the same period last year. As expected, the Cologuard Plus launch temporarily increased accounts receivable and impacted second quarter cash flows. These claims are now being paid, and we expect this will increase cash flow in the second half of the year. This further strengthens our balance sheet and positions us to complete the anticipated Freenome transaction with cash on hand. We ended the quarter with $858 million in cash and marketable securities. Turning to guidance. We are raising total revenue guidance to between $3.13 billion and $3.17 billion for the year, an increase of $55 million at midpoint, with third quarter revenue between $800 million and $815 million. This assumes screening revenue between $630 million and $640 million for the third quarter and between $2.44 billion and $2.47 billion for the year. Precision oncology revenue between $170 million and $175 million for the third quarter and between $690 million and $700 million for the year. Annual guidance at midpoint implies total revenue growth of 14%, including 17% in screening and 6% in precision oncology. We are raising full year adjusted EBITDA guidance by $25 million to between $455 million to $475 million for the full year. Guidance at midpoint implies more than 44% adjusted EBITDA growth or about 300 basis points of adjusted EBITDA margin expansion. For modeling purposes, please note, our adjusted EBITDA guidance does not reflect any potential impact from the Freenome licensing agreement announced today. We will provide updated guidance upon the close of the transaction. We are introducing a multiyear productivity plan to strengthen our operational foundation and unlock meaningful cost synergies. With our flywheel fully engaged, this is the next step in driving long-term performance and we reaffirm our 2027 long-term target of 15% compounded revenue growth and more than 20% adjusted EBITDA margins, which we provided at our 2023 Investor Day. We expect to deliver more than $150 million in annual savings in 2026. Over $50 million of these savings are included in our 2025 guidance, including actions taken during the first quarter. Savings will primarily come from G&A efficiencies through reducing external spend, restructuring support functions, and accelerating the use of AI and automation in core operations. We anticipate approximately $105 million to $120 million in restructuring and transformation costs in total. For modeling purposes, we expect $90 million to $95 million of these costs to incur in 2025, inclusive of $40 million in actions already taken in the first half of the year. These efforts represent a pivotal step in strengthening our foundation for long-term success and continue investing in the highest impact areas towards advancing our mission, including research and development, lab and operational capacity, and sales and marketing. Back to you, Kevin.

Thanks, Aaron. During the second quarter, we continued to gain momentum across our portfolio of advanced cancer tests, serving more patients and expanding the number of healthcare providers, health systems, and payers who rely on Exact Sciences and the ExactNexus platform. We delivered our 20 millionth Cologuard result, doubling from 10 million in just 3 years. We are encouraged by indicators of sustainable growth coming from our commercial organization. During the second quarter, sales for representative productivity in calls reached all-time highs, driven by better coverage, segmentation, and targeting enhanced by AI. A record 200,000 providers ordered Cologuard with growth across all segments at record depth. Orders per provider grew strongly with robust growth among new customers. Accelerated growth in rescreen patients, driven by our enhanced patient navigation journeys, Cologuard brand awareness hit all-time highs with top-of-mind awareness matching or exceeding colonoscopy. 2.5 billion media impressions driven by increased digital investment and customer-initiated ordering grew triple digits as our team continues to enhance customer experience and better engage patients through our digital channels. The colon cancer screening landscape is shifting towards a Cologuard first colonoscopy when needed approach. The AGA Work Group recently published a paper advocating that the most effective screening approach is to lead with a noninvasive stool test first. With colonoscopy backlogs extending for months, screening rates below target, and incidents rising especially with young adults, Cologuard is the most effective tool to improve screening rates. A decade in, Cologuard's momentum speaks for itself, and Cologuard Plus, possibly the most sensitive and specific noninvasive cancer screening test ever developed, accelerates our path to screening the next 20 million patients. A special thanks to the Exact team for increasing access to Cologuard Plus by securing favorable contracts with two of the top ten payers, Humana and Centene, which together represent about 40 million members. We also established positive coverage decisions with eight of the top ten payers. Turning to blood-based colorectal cancer screening. We tested samples from the pivotal BLUE-C study using a version of our blood-based colon cancer screening test. This test included three methylation markers and a protein marker. It did not include the additional marker class presented at the ESMO 2024 Congress. Initial testing showed sensitivities of 73% for colon cancer and 14% for advanced precancerous lesions at 90% specificity. Although we met the primary endpoint of the pivotal study, we are disappointed with these results. Science is not always a straight path, and we are proud of our R&D team's work. We gained many insights that we believe will lead to future portfolio benefits. We are continuing internal testing and evaluation. Because we have not yet made an FDA submission, we will not presently be providing additional detail on our program. As we announced earlier today, we acquired exclusive rights to the current and future versions of Freenome's blood-based colon cancer screening tests and underlying technology subject to customary regulatory approvals. In June, complete results for the first version test were published in JAMA. The Freenome team has submitted the last module of the premarket application to the FDA. Freenome is also advancing a next-generation version of the test that is designed to improve advanced pre-cancer solution sensitivity. Blood-based colon cancer screening tests can help get people screened. Guideline groups, such as USPSTF, typically rely on modeling studies to inform their recommendations by evaluating the balance of benefit to burden to determine the most efficient screening strategy. Results from our recent modeling analysis clearly show that only Cologuard Plus and colonoscopy maximize the benefits to harm ratios over the guideline recommended age range. This aligns with the NCCN recommendation, which positions blood tests as an option when patients are unwilling to complete frontline guideline recommended tests such as Cologuard or colonoscopy. Together, these screening tools can expand access and drive better outcomes across broad populations. With Cologuard Plus, the most accurate guideline-included stool test, and now a blood-based screening test, we've created a portfolio designed to continue leading cancer screening. These tests will be powered by the strong foundation and scale we built. First, we have the largest and most effective cancer diagnostics commercial organization in primary care, a segment where education and engagement are critical. Second, the scale and infrastructure of our data. We have a large customer base of providers and the tools to identify those who have refused guideline-recommended tests. Third, our deep relationships. We can reach these patients through deep relationships with payers, electronic connections to nearly 400 health systems, and over 250,000 ordering healthcare providers each year. This reach is connected and powered by our ExactNexus technology, which uses advanced analytics and smart tools to make the process seamless from order to result. This foundation enables us to scale, drive awareness, and build the most trusted brands in cancer screening. Next month we are launching Cancerguard, our blood-based multi-cancer early detection test. Cancerguard is designed to address the approximately 70% of cancers that currently lack a recommended screening solution. This represents a significant unmet clinical need, translating to a largely untapped $25 billion addressable market. We are uniquely positioned to bring Cancerguard to patients by leveraging our commercial and operational scale. We have over 1,000 reps calling on primary care physicians, oncologists, and health systems. Our patient navigation engine delivers millions of multimodal touchpoints to millions of patients annually. We have world-class lab operations, quality systems, and operational capabilities. We also have the ability to reach patients and providers with powerful digital tools through our ExactNexus technology. We are confident in our ability to lead the MCED market. Backed by our clinical evidence, we are energized by the opportunity over time to help reduce cancer-related mortality. During the second quarter, our Precision Oncology team unlocked access for cancer patients by securing Medicare reimbursement for Oncodetect. Combining data from the Beta-CORRECT study shared at ASCO with prior research helped secure broad coverage for stages 2 through 4 colorectal cancer patients. This supports our belief that Oncodetect will play a critical role in monitoring and guiding treatment after a patient's cancer diagnosis. We're proud of our team for focusing on what matters most and we're more energized than ever on the road ahead. Together, we're expanding our portfolio, increasing access, and strengthening our platform for long-term impact. We're positioned not just to lead but to transform how cancer is detected and treated. That's how we will achieve our purpose of eradicating cancer and the suffering it causes. We're now happy to answer your questions.

And your first question comes from the line of Andrew Brackmann with William Blair.

Kevin, you sound excited about the opportunity with Freenome. Can you maybe just sort of unpack for us a bit more the strategic fit that this agreement has for Exact, and how the product can further round out the portfolio that you have?

Thanks, Andrew. In colorectal cancer screening, we are clearly the leader in the noninvasive screening market. With Cologuard Plus, we offer the most accurate colorectal cancer screening test. There is also a role for blood tests. This agreement introduces a blood-based option to our portfolio: Cologuard, Cologuard Plus, a blood colorectal cancer test, and a multi-cancer screening test, Cancerguard. Our portfolio is supported by our exceptional platform and commercial infrastructure, along with strong healthcare provider relationships, including over 200,000 ordering providers this quarter and impressive growth. We are particularly excited about Freenome's technology. Their B1 test has robust data, which accelerates our time to market. Version 2 shows potential promise, demonstrating improved advanced precancer detection in data from their preempt study. This gives us the opportunity to utilize that technology if the pivotal study proves favorable. The structure provides us with significant flexibility as we continue to lead in this market. We're enthusiastic about the great technology, our options, and the flexibility it offers, all contributing to our impact in a field where we are currently ahead.

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

Aaron, can you walk us through the beat on the quarter and kind of what's contributing to the strong first half growth of the core business? If you could unpack all the factors behind the momentum and maybe talk about sustainability.

Thanks, Brandon. I'll take the first part and then pass it over to Aaron. So there have just been multiple tailwinds here. And it really starts with the launch of Cologuard Plus and the incredible work that our commercial team has done. The commercial organization is doing a great job. Cologuard Plus is gaining them greater access. Our customer base is energized by a test that has 95% sensitivity and 94% specificity. We've seen strength in rescreens and care gap programs. Our brand awareness has never been higher. Aaron, do you want to dive into the details a little more?

Thank you, Kevin and Brandon. We achieved a $40 million increase in revenue, driven by strong performance across all business segments, particularly with Cologuard. I want to emphasize the momentum we've experienced from the commercial enhancements we've implemented, which are the primary reason for this increase. We are witnessing strength across the board, including our representatives engaging at points of care, the acceleration of our new customer-initiated ordering platform, and the recent introduction of Cologuard Plus, as well as our rescreen initiatives.

I think I'd add one other thing to that with other aspiring entrants into this market out there calling on physicians. What we have seen is an overall lift to Cologuard. So we think more attention in this market is leading to more awareness and reminding physicians, especially in the busy primary care segment, to think about making sure their patients are up to date with colon cancer screening, and what comes to mind first is Cologuard.

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

Maybe just first on the blood data. As you look back, have you been able to identify the drivers of the more severe degradation than you expected? And then you mentioned Freenome has submitted the final module of its PMA. I guess, what's the expected timeline for an FDA decision? And do you expect there to be another AdCom?

Well, thanks, Catherine. Science is obviously not linear. And we haven't submitted yet to the FDA. Testing continues and work on that program continues. Because we haven't submitted to the FDA, we're not in a position to comment publicly on all of the inner workings. So I would say while we believe we'll win in blood with this new program, first of all, Freenome's test delivered 81% sensitivity for cancer, 14% for pre-cancer at a 90% specificity. And I want to make this clear. This test is now ours. We exclusively licensed it. We're very excited about bringing it to a niche in the market that is an important one. They have submitted the final module to the FDA. We're not going to guess how long that will take. So I think you can take a look at what is typical out there, but we're not going to guesstimate at this time. And remember, we have a tremendously large sales force that will be excited to have a blood test in their hands. And the niche of patients that will benefit from a blood-based colon cancer screening test are those patients who refuse a frontline guideline-recommended test. The NCCN guidelines were clear that there is a role for blood-based testing and it's for those patients who are active refusers of screening. So could this ultimately represent a meaningful niche in the market? Yes, we believe it can. And we believe we have the relationships with the healthcare providers, with patients and their trust, and the quality that we've delivered over the last 11 years with Cologuard.

Your next question comes from the line of Doug Schenkel with Wolfe Research.

Kevin, so let me start with the positive. Via the license, you seem well-positioned to have access to an FDA-approved product. You probably can launch it within the next 18 months, and you have the commercial infrastructure to really get after this market with existing relationships. So those are clear positives. Now let's be balanced to talk about the negatives. So as I mentioned, and I use the word access to a product, because you didn't develop it. You have definitely been great in stool, but CRC blood was acquired via a license. Oncotype was acquired. Beyond stool, the ROI on R&D hasn't been great. And frankly, M&A hasn't been great. Thrive looks like a mistake, and there's other examples. I think it's fair to say there's questions about billions of dollars of M&A spend and $400 million in annual R&D from an ROI standpoint. So my first question is this, what changes now in terms of resource allocation, operational spends? And how do you change and improve strategic prioritization? What are the lessons here? And how do you want investors to think of Exact through this lens? Second, specific to CRC, presumably due to the COGS profile of Freenome, your stance on testing interval flexibility has changed. I want to confirm that's right. Essentially, is the position now that you will be the #2 entrant to the CRC blood screening market, and you view this as a multiplayer market test area going after the screening resistant population of about 45 million people and that this will have a 3-year interval? Third, my last question, why shouldn't investors think that you view blood as a threat to Cologuard given the quick pivot on this data to quickly make a deal with Freenome?

I believe there were several questions and a lengthy discussion. First, Doug, I have to disagree with your assessment that the Genomic Health acquisition was unsuccessful. I also disagree with your view of the Thrive acquisition. We plan to launch Cancerguard next month, and the MCED technology included in this acquisition was critical to its development. It seems we have a fundamental disagreement here, and perhaps you don't fully grasp the potential of the multi-cancer screening market. Additionally, it appears you might not appreciate the strength of our commercial organization, which has delivered outstanding performance over the last two quarters. Over the past 11 years since the launch of Cologuard, we've seen about 120,000 individuals diagnosed with cancer earlier than they would have otherwise been. This is a significant impact, along with over 600,000 people with precancerous polyps, which could lead to prevention. Furthermore, the mortality rate since the launch of Cologuard has decreased by 11%. If you want to discuss productivity and R&D, we can have that conversation. Our R&D investment in CRC screening has exceeded 50% cumulatively, where we maintain clear leadership, and we intend to continue that leadership. In terms of blood-based screening, I think that you probably have that market not fully understood. If you take a look at the size of that market, it is small. Blood-based screening is not recommended by guidelines at this point in time. The pivotal guideline group USPSTF may not weigh in for a number of years. And the data of any of these blood tests just does not hold a candle to colonoscopy. It doesn't hold a candle to Cologuard, and to date, it doesn't hold a candle to a fifth test in terms of precancer detection. So we will see how that market develops. We are the company that has the ability to reach hundreds of thousands of physicians who have a need to deploy cancer screening technologies to their patients. And that is where our new blood test based on the Freenome PMA submission will be deployed. We welcome competition in that space, and our team is ready to deploy tests to those patients who truly refuse both a colonoscopy and Cologuard. There is a very real market to be able to reach those patients. But until blood testing is fully deployed and is in guidelines, which is a big question, we think that your view on this is probably different than our view.

Your next question comes from the line of Tycho Peterson with Jefferies.

A few follow-ups on the deal here. Kevin, given going external was not necessarily part of the plan at least publicly discussed. Anything you can provide on timelines? Doug alluded to the fact that this came together quickly. How should we think about the timing of the next-gen test? And how much better do you think it will be at AA? What can you say on the cost structure, cost per test, given that it's NGS-based? And then I guess, lastly, I appreciate this deal structure gives you a lot of flexibility, but you are committing to a potential 10% royalty. Why was this the right structure as opposed to M&A with real earnouts in an aggressive integration program where you get all the IP, cash on the balance sheet, and not have to pay a royalty?

The deal structure we have with the royalty is designed for long-term benefits. It allows us access with a modest investment, and our strong financial profile supports this. Regarding timelines, while a typical PMA takes about a year from submission, we are not committing to that timeframe since there are many unknown factors. It could take less time or longer, and we cannot predict that right now. On AA detection, Freenome plans to present their AA data at a suitable scientific congress soon, although that is their decision. Additionally, our agreement includes a provision that allows us to exit if AA detection does not reach over 19%. Our internal program will continue as well. Aaron, would you like to discuss the cost structure?

Tycho, so from a cost of goods sold perspective, yes, it's sequencing. We haven't yet determined where we're going to price this product. But again, Kevin talked about all of the optionality and flexibility that we gain with this deal. I would just reiterate, we will drive costs down over time on this specific test, particularly as it scales and gets in the hands of our commercial organization, we're able to drive volume. And then from a broader macro perspective, I think this quarter is good evidence. Our guide is good evidence that we have so many different levers to continue to not only expand gross margins but importantly, total profitability, which is just going to further strengthen that already strong financial profile Kevin alluded to.

Your next question comes from the line of Jack Meehan, Nephron Research.

I wanted to ask about CRC competition in a slightly different way. Now with Guardant on the market, can you just talk about what you're seeing in terms of the real-world adoption of blood in terms of the interplay versus existing methods like Cologuard? And as you look at the Freenome data and the way that the test is developed, do you think it can be differentiated? Or do you see this kind of standing in line with the way Guardant is positioning Shield?

Sure. It's been interesting. We're not seeing that the current promotional activity is diminishing Cologuard orders. In fact, the opposite seems to be occurring. The more the aspiring entrants talk to healthcare providers, especially those that are our customers, the more we see growth in Cologuard utilization. So we think what's happening is sales reps are going into offices and reminding healthcare providers about the importance of colon cancer screening, and they're reflexing to Cologuard. We saw the same dynamic when we launched Cologuard, that colonoscopy utilization increased. So we have tremendous goodwill with HCP customers. And these primary care customers see a role for CRC blood testing, and many of them have told us that they intend to wait until we bring a test to market where you can imagine they worked with us for over a decade. They know that we stand for quality. They have easy electronic ordering, electronic results, a customer care hotline that they can call with any questions, and they know their patients will be treated well. So we think that all of this leads to a strong option for us to really take care of this niche patient.

Jack, maybe one other thing to add on that, too, that I think is an important point. Aspire entrants have now been out in the market for a bit. And while they continue to drive some limited adoption, we just put up an 18% growth quarter in screening. We're guiding to a 17% growth in the back half of the year and for the full year. And so to Kevin's point, we have multiple drivers of tailwinds for this year and years to come in our core Cologuard business as well.

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

Maybe I'll pivot to the guidance and P&L here. Maybe can you talk about gross margins here for the second quarter? What drove the sequential step down on the guidance to your earlier point, Aaron, 18% growth here in the second quarter moderating to 17% in the back half? What drives the moderation? Did your assumptions on pricing change at all versus prior?

First, just on the second quarter gross margin, it was down slightly sequentially and year-over-year. That just had to do with the timing of some of our care gap orders. We had our largest ever care gap order ship out at the end of the second quarter, which we would expect to see now results flowing in here in Q3. If you back that out, gross margins would have been up sequentially and year-over-year. And so I think this dynamic that's taking place with our care gap business is going to create some quarter-to-quarter fluctuations in our gross margin. But as we commented on in the past, we still expect gross margin expansion for the full year and obviously, meaningful adjusted EBITDA expansion as these programs are highly, highly accretive to total profitability. And then as we're looking at the back half of the year guide, what I would say is we continue to see the positive signals on the new to Cologuard orders, the commercial strength that we talked about, and our care gap orders. Ultimately, we feel really good about the business and the progress that we've made. But if you look at sequentially Q2 to Q3 as well as from a year-over-year perspective, it's in line with what we've done in the past. And so no change to pricing assumptions, midpoint of our guide, we would say it's the most likely outcome for the back half of the year.

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

I think there may be multiple partners involved. In the past, I had the impression that the exact team might have had some doubts about the Freenome data or its quality. However, that perspective has clearly changed. My question is about your team's confidence in the rigor of the clinical study and its performance status, and whether you believe it will support FDA approval. Additionally, regarding the headline data mentioned in the press release—specifically the 81%, 14%, and 90%—I noticed that in the publication, the figures were a bit lower, likely age-adjusted. Is that the correct way to interpret it? Finally, since you have a strong presence in stool testing and the blood market is still developing, do you foresee any FTC concerns with this arrangement?

On the last point, we believe that this is a deal that should make it through an HSR review. Obviously, there's a process there that will play out. In terms of the performance of the test, yes, on an age-adjusted basis, which is the approach that the FDA and Freenome have worked on. And again, I'm not making any comments. It is their submission, and we will benefit from it. But 81%, 14%, and 90%, in terms of the diligence that we did, we're very impressed with the actual study design, the data, the rigor that the study that they designed and the performance of the test, which has been now validated. Just one other comment. The new leadership, Aaron Elliott, is a real strong addition to the team. I would say, adding Aaron to that team really made it quite a positive for us to enter into this agreement. And so all of our interactions with them have been quite positive, and we've been impressed.

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

Kevin, I understand that science is not linear, but the team is definitely bullish multiple times in a way that people just really couldn't understand last year. So can you offer something on what your R&D folks have concluded or what the thesis was that didn't play out? I mean, it sounds like we have a sort of a long road ahead of us when it comes to just asking what performance needs to be in MRD or in MCED in order to be relevant. So it just seems like asking what happened versus what you thought would happen is the fair question.

Well, let me take you back to Cologuard Plus, which is a three-marker methylation marker test plus protein. We delivered and the R&D team, same R&D team delivered unbelievable performance with Cologuard Plus, which was a significant investment, which we think will have a massive ROI. I think starting with patient ROI, just with the 40% improvement in Cologuard Plus specificity, that could lead over the next 30 years to about $1 billion of saving in terms of reduced colonoscopy. So the R&D team has done a tremendous job. Our blood test, that we ran as part of this study was three methylation markers on kind of advanced, what we call, TELQAS PCR-based platform that we missed the mark. Now remember, you are dealing with a lot of small numbers. In terms of the actual performance difference, when you look statistically, there's not a significant difference here between the various tests that are in market. But we didn't hit the endpoint. So I do understand the frustration, and we own that. And all I can say is I would never bet against our R&D team, and that program will continue. It's just not the right time for us to dig into those details because, number one, we just licensed a great test. And two, we are still submitting to the FDA, so there's more work to be done there.

Your next question comes from the line of Puneet Souda with Leerink Partners.

Kevin, I would just want to go back a bit. You've always appreciated and invested into technology development. Obviously, blood is a hard problem to crack. But given where you stand today, do you think this assay that you're acquiring or your own efforts can match what the competition can continue to improve on? And then my second question is, what do you think is going to be the market share for blood-based testing in this multimodal market?

Let me start with the last question first. I think over time you may see about 5% to 10% of the market being blood. USPSTF, the guideline group will play a very critical role with the current modeling and the current performance of blood tech, you're just not at the point that what these current versions of blood tests probably can pass muster and get rated A or B by USPSTF. Why? While these blood tests are just slightly better than blind to precancerous polyps, and precancerous polyps drive about two-thirds of the positive impact from screening in this field. So that's critically important. And then you couple that with a 10% false positive rate, and it leads to low impact at 3-year intervals and relatively kind of a medium impact in terms of unnecessary colonoscopies. If you run it at a 1-year interval, you get better impact, but at a steep cost. So it's somewhere between the efficient frontier where Cologuard and colonoscopy are, and no screening at all. It's somewhere in the middle. Does that get an A or B rated test? It's hard to see that with the current performance. If you're not in USPSTF guidelines, you're not in the quality measures, and if you're not on the quality measures, commercial payers aren't going to rush to cover the test. We saw that with Cologuard, and we're currently seeing that play out with blood-based testing. So is there a role? Yes. Medicare will pay for those tests. And Medicare is a portion of the market. But that performance delta is a real issue. We've been saying this for a long time. I think you're seeing that play out today in the market, which is 99.5% Cologuard and 0.5% blood-based CRC screening. Will that change over time? We'll see. In large part, it depends upon the guidelines. So do we think Freenome's test can match others into the future? That depends on the version 2 data that we've seen. Again, we built into the agreement that if their version 2 doesn't deliver more than 19%, we can get out of the agreement and pivot to our own program. So nobody has delivered version 2 yet. We have a program, Freenome has a program, others have programs, and we'll see where that plays out.

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

I want to follow up on the previous question. I understand there are two versions to consider, which will present different factors. However, regarding your earlier statement about expecting blood tests to capture 5% to 10% of the market and how this stacks up against Shield, as we incorporate this into our model over the next few years, how should we approach the potential impact on the model? Should we use Shield as a reference point for volume and revenue growth, considering the advantages and disadvantages of lower sensitivity compared to having a commercial strategy and market presence? What is the best way to view the potential growth in volumes and revenue share over time?

Thank you for the question. I believe there's a different perspective to consider than what some analysts might currently think. Let's start with the Cologuard brand. Brand awareness has surpassed that of colonoscopy in five of the last six months. This strong brand presence means patients are not only requesting Cologuard, but physicians are also recommending it before colonoscopy. Additionally, increasing the number of sales representatives discussing colon cancer screening further promotes Cologuard, leading to growth in Cologuard and Cologuard Plus. What we're observing in the market suggests that, over the next five years, even more of the 55 million unscreened individuals will undergo screening. Currently, about 5 million people get screened with Cologuard, while roughly 6 million opt for colonoscopy. Over time, we anticipate reaching a tipping point where Cologuard will be used more frequently than screening colonoscopy. We believe this trend will continue, and having more representatives in the field will elevate overall market growth.

Then Michael, specifically from a modeling perspective on blood as well, keep in mind, like so as Kevin said, we're not going to opine as to exactly when FDA approval would come. But once we have that, it's going to be additive to our overall revenue and to our overall growth rates. We view this again as additive to our portfolio, additive to our long-term revenue growth, and additive to the strong financial profile that we've established.

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

Kevin, could you provide an update on the internal program, specifically regarding the additional market that was not included? What are the expectations for investments moving forward now that we have the Freenome option? Also, concerning Freenome, I understand there have been previous technical difficulties. Can you explain the reasons behind the delay in submitting to the FDA and clarify the confidence level in the data?

Patrick, you cut out on the second part of your question. Was it confidence around timelines? A lot of work goes into a PMA submission. And we're a smaller company, it's just a huge effort, and we looked at every one of their modules, and the quality of work they did is very high. And so we believe that there are no major issues in terms of their submission and our confidence level, which is why we entered into this. In terms of our current program strategy going forward, again, we're not going to get into those details. We have exclusively licensed a well-performing test with an option to potentially an even better performing test, and we look forward to deploying that. We will really put our back into that program, and we're excited about it. We think that we're in the natural position to have the biggest impact in this field.

Your next question comes from the line of Eve Burstein with Bernstein.

Great. One thing that you seem to be giving up in this licensing deal at Freenome is potentially some of the moat around your multi-cancer test. So for example, in Freenome's press release, they noted that they will have access to all multimodal data from colorectal cancer screening patients to power future AI and ML models across multiple cancer indications. And they were even quoted as saying the partnership gives them the real-world data they need to improve their existing tests and accelerate development of the multi-cancer test in their pipeline. So from these points, I take away the fact that Freenome wants to lean really hard into their multi-cancer screening test, and you're giving them a platform to improve their product, which will ultimately compete with your test. So what made you agree to this term in the agreement? And how do you see this choice impacting sales of your own test?

Sure. We'll be launching our multi-cancer screening test through a field force of about 1,000 people next month. We couldn't be more excited about it. It's a tremendous opportunity to have a huge impact on human health over time. There's no company that has the reach, the customer reach, the sales reach, the global reach, so we get to leverage off of our incredible reach through the Genomic Health and Oncotype DX reach. We intend to launch also globally in select markets. So in terms of the deal with Freenome, look, they have their own program, and we'll compete quite vigorously there. We have the commercial organization. In terms of data and access to data, to the extent that they do get data, whether that really helps them develop the test. Remember, you need to have the patient characterization, not just the raw data. The raw data itself, without understanding whether the patient has cancer or doesn't have cancer, does not, in our experience, provide you with tremendous ability to do product development. We really need to have characterized samples to be able to do that. So that's all I'll comment on there. We will be licensing their technology and competing with them. We think that's a positive thing for patients over time because more investments in this field usually end up being good for patients.

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

Regarding the additional biomarker, I'm unclear why they weren't included in the readout. Can you clarify? And does the fact that you went after Freenome, does that tell that you don't have the confidence that the biomarker will take you to an acceptable sensitivity level? And does that say something to your performance for the MCED, given it's a PCR-based approach? Many of us, including me, have wondered if PCR could ever perform at the level of NGS. Does this answer that question for class of assays?

In response to your second question, I want to highlight Cologuard Plus. Our approach to the scientific aspects of our platform starts with identifying the most effective markers and then developing our tests accordingly. This strategy has enabled us to create a test that achieves 95% sensitivity and 94% specificity, allowing us to reach millions and invest significantly. Our MCED data, which combines our TELQAS platform and Thrive technology, also demonstrates a high level of sensitivity. While I won't dwell on where we see our learnings, I can say that our experience with the three-marker approach—two methylation markers and one protein—will enhance our platform both now and in the future. It’s undeniably challenging, but we believe it will ultimately improve our capabilities, and I have great confidence in our R&D team. Cologuard Plus has already provided over a couple of hundred thousand results, and I see our team expanding rapidly with Humana and Centene’s involvement. I recognize that some may feel disappointed, and we share that feeling. However, it’s crucial to remember the same technology platform has achieved remarkable results in the past.

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

I just wanted to follow up on that. Is that a couple of hundred thousand CG plus that you guys have offered? I mean, what do you guys end up doing in the quarters as you're thinking about the ramp here from what's embedded in the guide for the back half? And how's the progress there from a conversion standpoint?

Thanks, Luke. Progress is going really well. We launched in Q2 with the Medicare fee-for-service, which accounts for about 10% to 15% of our patient volume each month and quarter, and that was reflected in Q2. Additionally, the launch is improving access for our representatives with physicians, which is crucial for the growth of Cologuard. On the payer side, our conversations have been very productive. We now have two of the top ten payers that will start to engage with Cologuard Plus in the latter half of the year, and we are very excited about that. We remain committed to the timeline of 12 to 18 months for this process. We will eventually phase out certain offerings because we believe in our responsibility to provide the best test for patients. Although we have not set a specific date for this, the team is making significant progress. I want to take a moment to thank our lab and operational team for their outstanding work in ensuring that we deliver Cologuard and Cologuard Plus test results to patients seamlessly.

This concludes our question-and-answer session. I will now turn the call back over to Kevin Conroy for closing remarks.

Thank you all for joining us today. We look forward to sharing our progress throughout this transformational time at Exact Sciences as we become a one-stop solution for comprehensive genomic testing. Most importantly, thanks to the dedicated team at Exact Sciences for their commitment to our purpose of eradicating cancer. Thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.