Earnings Call Transcript - EXAS Q2 2020

Operator, Operator

Thank you for joining us for the Exact Sciences Second Quarter 2020 Webcast and Conference Call. All participants are currently in listen-only mode. After the speakers finish their remarks, we will have a question-and-answer session. I would now like to turn the call over to your speaker today, Ms. Megan Jones. Please proceed, ma'am.

Megan Jones, Speaker

Thank you, Christina and thanks all of you for joining us for Exact Sciences second quarter 2020 conference call. On the call today are Kevin Conroy, the company's Chairman and CEO and Jeff Elliott, our Chief Financial Officer. Exact Sciences issued a news 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. Reconciliation 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. It's now my pleasure to introduce the company's chairman and CEO, Kevin Conroy.

Kevin Conroy, CEO

Thanks, Megan. The COVID-19 crisis has highlighted the need for more convenient and accurate cancer testing options. Experts estimate that over the next decade there will be an additional 10,000 deaths from colorectal and breast cancer due to screenings that have been canceled or delayed just to the end of June. This situation will continue to grow. Cologuard is an accurate at-home colon cancer screening test. We believe the COVID-19 crisis will accelerate the adoption of Cologuard by one to two years towards our 40% market share goal. Patients and physicians are also looking for smarter, faster answers to guide their cancer treatment decisions, elevating the importance of our precision oncology tests. Diagnostic testing will play a larger, more meaningful role in cancer care because of COVID-19. Exact Sciences is positioned to create value at every step along the way from cancer screening to late-stage therapy selection. Our CFO, Jeff Elliott will now review our financials.

Jeff Elliott, CFO

Thanks, Kevin. Good afternoon. Let's start with our second quarter results. Revenue was $269 million. We will break that down by screening, precision oncology, and COVID testing. In screening, revenue was $131 million down 34%. COVID-19 drove a decline in test orders and a temporary negative impact on patient compliance. In April, Cologuard hit a low point and then improved through June, outpacing colonoscopy growth during that time. We estimate the second quarter colonoscopy volumes were less than one third of the pre-COVID levels. About 5,000 new healthcare providers ordered Cologuard during the quarter and nearly 211,000 have ordered since launch. Precision oncology revenue was $103 million. There is a normal lag between screening mammograms and an Oncotype DX test. After a mammogram, a cancer diagnosis is confirmed and staged. Oncotype DX is an order for patients with early-stage breast cancer to help predict the chemotherapy response and recurrent risk. In April, there was a significant decline in mammograms as expected; starting in May, Oncotype DX test volumes softened. For the third quarter, we expect total precision oncology revenue to decline sequentially based on mammography volume trends in recent months. Despite this, the long-term outlook for Oncotype DX is very strong. That's due to the robust evidence and highly capable team supporting the test, a solid U.S. market position, and a significant international runway. COVID testing revenue was $35 million in the second quarter. Future COVID testing revenue depends on the course of the pandemic, our lab capacity, and supply availability, among other factors. Second quarter gross margin, including amortization of acquired annuals, was 63%. Non-GAAP growth margin, which excludes amortization acquired intangibles, was 71%. Non-GAAP gross margin declined 6 points sequentially as COVID temporarily reduced our test volumes and fixed cost leverage. In April, we implemented a cost reduction program lowering second quarter spend by over $100 million relative to our initial plan. Since the business has recovered faster than we expected, we're reinvesting some of those savings. I am proud of our team's ability to quickly re-prioritize spending. Sales and marketing expense was $119 million. G&A expense was $107 million and R&D expense was $33 million. We expect total operating expense to increase sequentially in the third quarter as the sales team returns to the field, we restart several clinical trials, and we invest to support our growth. Other operating income included $24 million from the CARES Act as previously disclosed. Net loss was $86 million. Adjusted EBITDA was negative $5 million and CapEx was $21 million. We ended the quarter with cash and securities of $1.2 billion. The recent rise in COVID infections has slowed the pace of recovery in our business. We are not providing guidance today because of that uncertainty. I will now turn the call back to Kevin.

Kevin Conroy, CEO

Thanks, Jeff. Currently, 46 million Americans remain unscreened for colorectal cancer. Our goal is to screen as many of them as possible with Cologuard and reach at least 40% market share of the total 106 million person colorectal cancer screening market. The value of an at-home convenience screening test was recognized quickly by patients and providers during the COVID-19 pandemic, helping pull forward the Cologuard adoption curve. We have seen increased Cologuard use among customers who were previously infrequent users. Cologuard ordering is now near pre-COVID levels and recovered more quickly than screening colonoscopies, which are down 30% to 40% year-over-year. This recovery occurred with significantly limited physician office access for our field sales force, a key driver of growth historically. We plan to solidify this strength and awareness by continuing to highlight Cologuard's value to providers. COVID has caused a significant backlog of screening colonoscopies, with more than one million missed during the second quarter alone. Gastroenterologists have limited capacity today and we expect they will continue prioritizing diagnostic colonoscopies and more urgent procedures even as the pandemic abates. Our team is taking action to help address this building colorectal cancer screening backlog. Key initiatives include virtual sales calls, easier ordering processes, and promotion of telehealth which allows people to request Cologuard from home. To stay engaged with patients, we introduced new advertisements; a key feature on the Cologuard website and campaigns to support screening compliance. Cologuard's convenience and accuracy, coupled with our additional promotional efforts, should accelerate adoption and increase brand awareness and loyalty. We expect this increased awareness will persist well beyond the pandemic. Identifying the best treatment options for cancer patients quickly and accurately has grown even more important during the COVID crisis. The risk of infection has increased and surgical procedures have been delayed. Exact Sciences helps provide these critical answers with expanding offerings in precision oncology. Oncotype DX and our recently acquired Paradigm PCDX test support patients facing difficult treatment decisions that are further complicated by COVID-19. Our Paradigm PCDX test is a broad panel to help guide late-stage cancer patients to the appropriate therapy. We plan to expand the launch of the tissue-based Paradigm PCDX test through our precision oncology team later this year, followed by a full year rollout next year. We believe this oncology sales team is one of the best in diagnostics. We're also working to enhance the tissue-based test and introduce a blood-based version of the Paradigm test. We're providing more precise, smarter answers across the cancer continuum with Cologuard, Oncotype DX, and Paradigm PCDX. These tests and the breadth of our commercial lab and IT infrastructure uniquely position Exact Sciences to support early and late-stage cancer patients. We successfully adapted our automated and differentiated platform to support COVID testing. We're extremely proud of how a team of more than a thousand people from R&D, our lab, IT and operations collaborated under demanding conditions to develop, secure FDA emergency use authorization and launch a scalable testing solution. This team rapidly raised capacity to tens of thousands of tests per week. We've tested more than half a million people for COVID-19 from all 50 states. We tackle COVID testing because it was the right thing to do for our employees and our communities. This effort also helps build relationships to support other areas of the business, demonstrates the capabilities of our team and technology, and shows the potential for future pipeline innovation. Our team's scientific capabilities and experience position us to be the leader in advanced cancer diagnostics. Cologuard's long-term outlook gives us confidence to invest in our current products' growth and our deep pipeline. We plan to expand our test offerings to our thousand-person commercial organization with sales teams in primary care, gastroenterology, oncology, urology, and women's health in the U.S. and internationally. Our goal is to lead the rapid shift to telehealth and convenient cancer diagnostic solutions, with hundreds of millions invested in IT over several years, including installing Epic internally to improve ease of ordering. We can maintain a deep connection with patients throughout their entire cancer journey with our customer experience engine. We have the key pieces in place supported by a long-standing R&D collaboration with Mayo Clinic to introduce new tests for colorectal, liver, pancreatic, esophageal, and prostate cancer in the U.S. and abroad. Our pipeline of future tests is strong. This was evident at the DDW and ASCO scientific conferences this year. We presented data across six cancers in different sample types including stool, tissue, and blood. The data spanned indications from screening to recurrence monitoring. The depth and breadth of our pipeline is matched by our commercial capabilities. We are in a unique position to create value from our pipeline and plan to invest accordingly. Our pipeline team moved several initiatives forward during the second quarter. We made progress towards the launch of our liver cancer test for the three million Americans at high risk of developing the disease. We presented another study at ASCO confirming the superior performance of our liver test compared to the current guideline recommended protein blood test. We are on track to launch our liver cancer test through our gastroenterology sales team next year. We're also reinitiating BLUE-C, our pivotal trial to support FDA approval of Cologuard 2.0 and our blood-based colorectal cancer screening test. Our primary goal with Cologuard 2.0 is to increase specificity while maintaining Cologuard's high sensitivity. Based on data presented last year, we believe Cologuard 2.0 will raise the bar even higher for aspiring market entrants. These case-control data showed an increase in specificity while maintaining a similar level of cancer sensitivity and higher pre-cancer sensitivity. These data also proved the superior performance offered by stool-based tests because DNA from pre-cancerous polyps and early-stage cancer is being shed directly into the stool but not consistently into the blood supply. We're confident in leading the colorectal cancer screening opportunity with our accurate, cost-effective approach and the significant primary care presence we've already established for Cologuard. We're now happy to take your questions.

Operator, Operator

Your first question comes from the line of Brandon Couillard with Jefferies.

Brandon Couillard, Analyst

Hey thanks. Good afternoon. Jeff, I certainly understand why you would be reluctant to offer any guidance but you're talking about the third quarter, but could you kind of share any detail as far as how Cologuard order trends progressed through the period and maybe some comments on where you exited the or how July should go?

Jeff Elliott, CFO

Sure Brandon, happy to. This is Jeff. So we previously talked about April trends where Cologuard was down; orders were down about 60%. Remember during April that was really the brunt of the impact from COVID when states were shutting down and implementing stay-at-home measures. So that month really felt the brunt of the impact both on orders and on patient compliance. Things started to recover from the low point in April and May was down 40% year-over-year in terms of Cologuard orders. With the actions we took and remember the convenient at-home nature of Cologuard, we returned to year-on-year growth in the month of June. So again, this is at a time when colonoscopy volumes for the quarter were down by about two-thirds and even today colonoscopy volumes are down 30% to 40%. Cologuard returned to slight growth in June. Now in July, with the increased growth of COVID that we're seeing, that has started to slow down some of that pace of recovery and in the month of July, Cologuard orders were about flat year-on-year.

Brandon Couillard, Analyst

Great thanks for that color. Maybe one for you Kevin. Between the two initiatives where you're trying to focus on capturing some of the colonoscopy backlog, you've also got this new telehealth your online ordering platform up and running. Either of those material contributions in the second quarter? How should we think about the contribution from those channels in the second half of the year and then over time do you think the telehealth and online platform can actually see higher compliance rates than the balance of your business, the core business?

Kevin Conroy, CEO

Well thanks, Brandon. We're really proud of all the actions the team has taken over the last several months with new initiatives that we think put Cologuard in an even stronger position as we think about at some point exiting the pandemic and all of these actions are contributing. One of them is television advertising, which we expect to spend about $70 million this year and that is certainly increasing awareness. Some of that is driving to the Cologuardtest.com website where you are able to order Cologuard by answering questions, making sure that you are appropriate for Cologuard, and then a physician reviews that, interacts with a potential patient. We're not breaking that out and it's modest to start but growing, and we expect over a several-year period of time for that to be impactful. Certainly, somebody who seeks out screening is more likely to complete screening. So hopefully that answers that part of the question that yes, we are seeing that there is a greater degree of compliance by people who hear the television or see the television commercial and then initiate testing through Cologuardtest.com.

Operator, Operator

And your next question comes from the line of Doug Schenkel with Cowen.

Doug Schenkel, Analyst

Good afternoon and thank you for taking my questions. So I appreciate the color. I think we all do on Cologuard volume trends since entering the quarter and also in July. I guess building off of that, what about the pace of new practice additions? How have those been pacing? What are you doing in the current environment to help drive new practice additions given it's still a little bit different than it was in the past then you're not able to get into doctor's offices quite as much as you did in the past? And then I guess finally how much does this metric matter? I mean, I know it's important but I guess what I'm getting at is as you increase your virtual efforts and you get more patients ordering direct, arguably is this metric going to be a little less important moving forward?

Kevin Conroy, CEO

Thanks, Doug. Yes, I think it will be less important. We added 5,000 new ordering physicians or first-time users of Cologuard in the quarter, which is pretty remarkable given the pandemic and given that our field force was largely not physically in the field during that time. That has increased to now 211,000, the total number of healthcare providers that have ordered Cologuard, and obviously our ability to focus on those customers is critical. Embedded in that question is kind of when does our field force get back to full capacity and the first thing that we're focused on there is the safety of both our field reps and our customers and although many of our reps are back in the field, access today is much more limited than it was at the beginning of the year. Our field representatives will be able to get into the field more frequently as the pandemic abates. There is patience on our part; we're engaging with physicians through multiple different avenues whether it is e-detailing through the Biba platform, through telephone, and through email and other ways to engage with our customers. Sales force productivity is not what it is, but Cologuard volumes are back to near pre-COVID levels, and that gives us a great confidence that as the pandemic abates we will be able to drive a continued use of Cologuard and go get those 45 million unscreened Americans screened.

Doug Schenkel, Analyst

Thank you, Kevin. I have a quick follow-up regarding COVID-19 testing. Is there a relationship between COVID testing and Cologuard revenue volume, or will there be in the future? Specifically, I'm wondering if there is a limit to COVID testing capacity that affects Cologuard volumes as they recover. Additionally, what was the impact of COVID testing on gross margin for the quarter?

Kevin Conroy, CEO

Doug, in my 11 years at Exact Sciences, one of the most energizing things I've ever seen is how the team came together to develop a COVID test, submit to the FDA in a rapid period, find the physical space, the instruments, develop the test, and do all of the things that were required to bring up a COVID test at scale initially to support our own employees and to make sure that people were safe and could deliver test results for our customers, and then to help support our community. So our goal really is to help as much as we can and then to exit this business, and there is a limit to the capacity that we have. We do have the ability to deliver more test results and we'll continue to support our communities and we won't have to toggle between the two. Jeff, would you like to provide more color?

Jeff Elliott, CFO

Doug, on your second question, you spoke about gross margin. The driver of gross margin change relative to the first quarter was really the decline in volumes as well as some changes in mix. It really had to do with Cologuard and precision oncology volumes coming down lower relative to the first quarter. So that was a big driver. When I look out to the second quarter or the start of the third quarter, I do expect gross margins on a non-GAAP basis to be flat to up slightly, as improved volume leverage in the Cologuard business is largely offset by a decline in the precision oncology business. As far as capacity, we're fortunate to have always taken a long-term approach when it comes to expanding our capacity. Recall for Cologuard in Madison, Wisconsin we now have two labs. The original lab we had built to sustain an annualized capacity of 3 million tests. The new lab that we opened up last year could add 4 million more. Obviously right now, Cologuard volumes are not yet to that 7 million annualized. We hope to get them there as soon as possible. Over that square footage in the lab does offer, as Kevin mentioned, room to expand our COVID testing from the 50,000 or so per week that we could do in the second quarter.

Operator, Operator

Your next question comes from the line of Brian Weinstein with William Blair.

Brian Weinstein, Analyst

Hey guys, thanks for taking the questions. Just to dig in on the July count a little bit and things flattening out. Is that really just in areas with rising cases in Texas, Florida, California, or are you seeing a flattening as well in the Northeast and in the Midwest where there's maybe less of an impact?

Kevin Conroy, CEO

Yes. Thanks for the question, Brian. Look, I don't want to get too granular here but the exciting thing for us is that when you look at the rise in COVID volumes now nationally, volumes are at or above where they were back in April. Yes, thanks to the actions the team has taken, Cologuard volumes are still at that pre-COVID level which is a very different scenario than we were at in April. So the business is showing to be very resilient. When you dig into the numbers here, there are some exciting trends so nationally, there are still a fair number of primary care offices that are closed down, by some math you see it's 20% to 30% easily that are still closed down, yet again, Cologuard volumes are back to their pre-COVID level. When you dig in further, what we are seeing is that some of the providers that previously had ordered occasionally, just really sporadic orders of Cologuard, are ordering at a much higher level now and I think that speaks to the nature of Cologuard as an accurate at-home test. So there are some really exciting data points when we dig in here that give us confidence that over time as this pandemic abates, that our adoption will accelerate by a year or two.

Jeff Elliott, CFO

And in terms of the July trend, certainly as we have seen a resurgent in COVID infections in states like California and Texas and Florida, obviously large populations, that has an impact on the Cologuard ordering rate as fewer people go into the office to see their physician. Again, the important thing though are these underlying trends which are quite positive for Cologuard short term and long term.

Brian Weinstein, Analyst

I appreciate that. Thanks for the answer there and then on the comments that you keep thinking about being back at that pre-COVID level that you are faring better than colonoscopies even without significant access to a lot of these physician offices. How does that change the way that you think about the investments that you make going forward in your sales force, in sales and marketing, and how you go at it? How should we think about the efficiency that you might be able to gain as a result of this type of stuff?

Kevin Conroy, CEO

Thanks Brian. Another thing that I'm really proud of the team here is that the team reacted very, very quickly to the crisis and as we saw volumes initially decreased, the team acted very quickly to reduce expenses so that we could be in the strongest position possible coming out as volume started to increase. Then the team also acted rapidly to make intelligent investments to support future growth. Jeff can provide more color there.

Jeff Elliott, CFO

Yes. The recovery we've seen in Cologuard speaks to the return on this investment. I'm confident that our reps and that the actions our marketing team took are what's driving this improvement relative to colonoscopy and relative to the broader landscape. So it speaks to the positive return and I know longer term, given the size of this market, there are 106 million Americans who are in this target market. I'm confident this investment over time will continue to pay off as it has since we launched the test.

Operator, Operator

And your next question comes from line of Derik de Bruin with Bank of America.

Derik de Bruin, Analyst

Hi, good afternoon.

Kevin Conroy, CEO

Hi Derik.

Derik de Bruin, Analyst

Hey, we saw some news recently that Humana was launching test kits for all and sending out FIT tests and I'm just wondering do you think that could have any impact on the business? I mean there could be some confusion between FIT tests and Cologuard and I'm just wondering if you're counter detailing against that?

Kevin Conroy, CEO

I remember Derik, going back about 10 years ago sitting down with a head of a large primary care practice who said one of the most frustrating things is how frequently they handed out FIT tests and how infrequently they came back. Being handed out by a health insurance company, you can send a million out and maybe get a hundred thousand back and then one year later that person is effectively still in the unscreened population because it's a test. To be effective, it needs to be done every year. One year later, they still need either a Cologuard test or a colonoscopy. That's a long way of saying that these FIT programmatic FITs just simply aren't very effective and that's one of the reasons we developed Cologuard, a more accurate test that makes patients good on their colon cancer screening for three years and then it also highlights the value of the infrastructure that we've built. This incredible customer experience engine not only delivers a Cologuard test kit but also prompts patients to return that test kit and helps them understand what they need to do as a next step. So no, we don't expect that one program like this are our common programs that occur all of the time. They're not really that unique; what we're delivering here is value over the life of a patient's experience because we can continue to engage with them and get them re-screened over time.

Derik de Bruin, Analyst

Great. Thank you. Just one follow-up on the precision oncology business. Can you talk if I miss it, I apologize on U.S. versus international trends in that business and also just a little bit more color on the Paradigm test and how much that contributed and sort of your expectations for revenues on that. Thank you.

Jeff Elliott, CFO

Sure Derik. This is Jeff, I'm happy to answer that. So international COVID trends were really a couple of months ahead of the U.S. trends and you're seeing that play out in a similar manner in our business whereas the U.S. precision oncology business stayed strong really through the end of April and started to decline in May. The precision oncology business was hurt a little bit earlier in the year; that business did perform relatively better. The international business performed better during the second quarter, I think a large part because of the way COVID has played out. Also, the international market is relatively under-penetrated and there's a large growth opportunity over time too, we have some positive trends there and reimbursement increasing adoption so the international business is a nice driver over time for that. Paradigm, not material, really excited to have that business in-house. It's a really solid growth platform for years to come. As Kevin talked about in his remarks, we plan to run an initial pilot through the precision oncology sales force later this year with a full launch to that sales team next year; given how large and experienced that sales team is, we expect very good growth next year. Over at this point it's not a material contributor to revenue.

Operator, Operator

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

Patrick Donnelly, Analyst

Thanks guys. Maybe just on the colonoscopy shift. Are you able to discern new patients who are shifting over from delaying colonoscopy to taking Cologuard? Any metrics like increasing Cologuard.com visits or online orders that can be tied back to that? I am just wondering how you guys are trying to track how effectively being capturing that obviously very large potential opportunity.

Kevin Conroy, CEO

Thank you, Patrick. We can see a significant increase in the usage of Cologuard among doctors who previously ordered it infrequently. Although we can't directly link the two, it seems these are patients who would have typically been referred for colonoscopy but are now being directed to Cologuard as an alternative testing option. This change has been observed without the influence of our field force, and we anticipate that it will enhance physicians' experience with Cologuard. They are witnessing their patients' satisfaction with this non-invasive option. A recent survey of 150 healthcare providers revealed that 70% believe Cologuard will be increasingly important in colorectal cancer screening going forward, and 75% expect our Cologuard volumes to rise over the next year. This shift is likely partly due to a movement from colonoscopy to Cologuard.

Patrick Donnelly, Analyst

That's definitely encouraging. Thanks Kevin. And then maybe just one on the Pfizer relationship, just something we get asked about a decent amount: how does that evolve from here? Obviously, it was tied to revenue numbers that did not anticipate COVID. So maybe just update us where that stands in your general thoughts. Thank you.

Kevin Conroy, CEO

Sure. We entered into our partnership with Pfizer not quite two years ago and it's been an incredible partnership that has achieved most of our goals. We've added new providers and health systems. We've increased awareness through our joint marketing campaign. We've reached more providers more frequently and presently we're in discussions to adjust the partnership for this COVID environment and optimize the incentive so that it is a partnership that continues at least through the end of the current partnership, which is the end of next year, and we have time here to decide whether to continue that, build our own capacity, or some version of both. That is a decision that will be made down the road.

Operator, Operator

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

Catherine Schulte, Analyst

Hey guys, thanks for the questions. First, you've talked a couple of times today about COVID accelerating the adoption of Cologuard by one to two years towards your long-term market share goals. So with that in mind, I mean by what do you think it does start to be a net positive to the Cologuard trajectory?

Jeff Elliott, CFO

Yes. Thanks, Catherine. This is Jeff. Well, I think part of what Kevin talked about before is what really gives us confidence is that we are seeing providers who typically had just dabbled, ordered sporadically, starting to order more frequently and that really speaks to the nature of Cologuard again, at-home convenient test, as well as the size of this market with 106 million Americans who are in the target market, 46 million of those still needing to be screened. So given that combined with the actions this team has taken, as far as bringing up the telehealth site quickly, as far as adapting to telesales and bringing out new TV advertisements that are adjusted for the COVID environment, we're pleased with the speed at which the team moved and we're pleased and pleasantly surprised by the pace of this recovery. I am not going to speculate or guide to the future because of the uncertainties with COVID, but given this increased adoption in these pockets and these trends that we're seeing, we are confident that we will pull ahead that adoption by at least a year or two.

Catherine Schulte, Analyst

Okay great and I know you've been putting a big focus on capturing the re-screen opportunity. Any comments on how that trended in the quarter and what kind of progress you've been able to make there?

Kevin Conroy, CEO

Re-screens are a really important growth opportunity for us both this year and long term. It's already a material part of the business. This year, there's over 370,000 new patients who become eligible for their three-year re-screening opportunity, and I am excited to say that because of the actions the team has taken, we are seeing an increased capture rate of those patients. Really, the new IT tools we've put in place allow us to quickly identify who is eligible, target them both directly to the patient as well as identify to the ordering provider when a patient is due, and a new feature we just rolled out this week can allow a healthcare provider to see all the patients that he has who are now eligible and quickly verify their information and place that three-year re-screen order through the click of a button. So the team is getting better at identifying and capturing this opportunity, and it's something that will be a material growth driver going forward.

Operator, Operator

And your next question comes the line of Dan Brennan with UBS.

Dan Brennan, Analyst

Thank you for taking the questions. I was hoping to dig in on the telehealth angle. Is it possible to discuss this quarter kind of what was the mix in order roughly between telehealth and in-person and how do you think that mix will shift kind of going forward say over the next year or so? And Kevin, I know and Jeff you both discussed a lot of actions being taken to optimize the ability to use telehealth. I'm just wondering how optimized are you today for telehealth? Are there any important steps that need to be taken in the next couple of quarters or a year that could further possibly accelerate that adoption?

Kevin Conroy, CEO

Thanks Dan. We are still very early in the adoption cycle of self-initiated through Cologuardtest.com. So clearly the waiting is very heavily towards the normal process of a physician ordering a test. And let me remind you that the number of office visits is down appreciably, probably more than 30%, and so for our Cologuard testing to be back at pre-COVID levels gives us a sense of excitement for the future. In terms of telehealth, this is one component of a broader strategy. For patients to self-initiate is one part of it. Another part of it is that wherever a doctor is engaging in a telehealth encounter with a patient is where we want them to be able to order Cologuard electronically. As you know, within the Epic environment, there can be a virtual patient visit or a telehealth visit and towards the end of this year, Cologuard or electronic ordering will be embedded and Epic as the next rollout and upgrade of Epic occurs across the country. So this is a multi-faceted effort and we think a very powerful one that sets us up and differentiates us and it provides a unique opportunity for us to plug in our pipeline test through that same capability. It is something that we have invested, as Jeff said in his earlier comments, over $300 million in IT that payoff for patients and physicians is going to occur over the next one year, five years, and ten years and we look forward to that.

Dan Brennan, Analyst

Great. Thanks Kevin and maybe just one on the comment about orders being back to normal. I'm just trying to put that in context. So I think by our math, you had about nearly 460,000 completed tests in Q1. That was pre-COVID. Is that what back to normal implies? Like we're going to go off that as the jumping point as we look forward, just trying to think about that comment and how we might utilize that as we think about forecasting going forward.

Jeff Elliott, CFO

Sure Dan. This is Jeff. Two comments that I gave, one was on the year-over-year change in orders. I mentioned in June Cologuard orders were up slightly and in July they were about flat. Keep in mind that's against a base of orders that grew through the year. We've also given loose commentary that Cologuard orders are about back to their pre-COVID level. Now year-over-year, we typically would expect growth. So I wouldn't say things are totally normalized. There is still a very big impact from COVID due to the decline in physician office visits, but things are headed. Sales force largely back out in the field with normal access and this is before some of the initiatives we've put in place like telehealth have had their full impact.

Operator, Operator

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

Dan Arias, Analyst

Good afternoon guys. Thank you. Kevin, you mentioned that you're back on track with Blue-C. Can you just speak to which of the other studies and where in the R&D plan you're turning things back on just given the recovery that you mentioned versus what might still be on the shelf as a part of the cost savings plan and then for Jeff what is the savings amount that you're targeting now that you're reinvesting back in the business?

Kevin Conroy, CEO

So a reminder that Blue-c is for Cologuard 2.0 and a blood-based test. We had chosen to pause the trial because of a significant decline in screening colonoscopies and now that screening colonoscopies are starting to occur again, those sites are showing an interest in re-engaging, and so Blue-C is kicking off in the near term and we think we'll be back to normal enrollment by the end of this year. We're confident in the timeline that we laid out for the Blue-C study, which again is for both a stool-based test and a blood-based test. Our study infrastructure coupled with our lab IT commercial infrastructure together allow us to launch additional studies like our studies in liver and a slew of other pipeline tests. We can go into those at some later date; suffice it to say that our clinical affairs team is happily re-engaged and that is accelerating. On the spending reduction program, I recall why we put that in place back in April given that period of heightened uncertainty. We wanted to preserve capital and make sure that we could stay nimble during this pandemic. Well, as the business recovered faster than we expected, we think it's the appropriate thing to do to reinvest back in the business because our priority here is to make the right investments for the long term and that means driving growth and building a solid infrastructure. We think that's the right way to drive value for the long term. In the third quarter, the big changes from the second quarter would be bringing our sales force back, putting the sales force back in the field as it's safe to do so, restarting the studies that Kevin talked about. So we do expect to step up in R&D and also hiring to support the continued growth when you think about the volumes we're putting through our labs now, this is very significant. These are higher volumes than we've ever done before when you consider the combination of COVID testing and Cologuard. So we have to hire to continue to support that growth.

Dan Arias, Analyst

Okay so but if we were basically our model math around the $400 million that you had talked about, what would be the number that we should now base our model math on?

Kevin Conroy, CEO

Yes. Dan, we're not going to update that number. It will be considerably less because the business has recovered far faster than we expected. I'm not going to provide guidance on how much. I do expect the sequential uptick in Apex, however.

Dan Arias, Analyst

Okay and then just a follow-up question on the re-screening opportunity and the expectations there. Do you still think that you can get half of that population? I mean, I think the math you guys had talked about was reaching 70% of them and then getting 70% compliance; how does that sound as an assumption at this point just given the way that things have evolved?

Kevin Conroy, CEO

Yes, Dan longer term that is the goal. Look, our goal is to get as many of these patients screened as possible and we're in a unique position to do that given that we know who these patients are, we know where they live, we know which provider they saw at least who they saw three years ago, we know when they're due for screening, and to-date we've tested over 4 million patients, so over time this becomes a kind of a revenue engine, a recurring revenue engine that eventually becomes over half of our revenue. So we will get this right; I think our goal is to capture at least 50%, and hopefully more than that.

Operator, Operator

Your next question comes the line of Kevin DeGeeter with Oppenheimer.

Kevin DeGeeter, Analyst

Hey thanks for taking my question. With regard to precision oncology, yes I guess these women for Oncotype DX can come in due to either positive screening mammography based further diagnosis or self-examination. So I guess my question is, is the reduction the magnitude of the reduction we're seeing in screening mammographies consistent with a magnitude of reduction we're seeing in actual diagnosis for these women which I think really is what is going to drive the Oncotype volumes?

Kevin Conroy, CEO

Well, thanks Kevin. We are so excited about our precision oncology business and team and opportunity. So just to frame this, Oncotype DX helps guide and answer the question in early-stage breast cancer whether a patient will benefit from chemotherapy, and based on the data, about 85% of women can avoid chemotherapy that are early stage and no negative. Yes, so for patients that are self-examined and then go visit a physician and that's how that cancer is first diagnosed, that is keeping that business strong coupled with now the recent uptick in screening mammographies. There has been a push and a greater awareness that in the April timeframe you saw a significant; April, May even June timeframe, a significant decrease in the number of screening mammograms in this country and that has certainly had a temporary impact. I think the thing to note here is that this is a large U.S. market about a $0.5 billion market with 73% adoption and right after this pandemic hit, what we saw was a short-term and dramatic increase in the number of Oncotype DX breast tests and prostate tests also saw an increase because ultimately what those tests do is decrease the impact and the aggressiveness of surgical treatment and we saw more oncologists in the case of the prostate test, urologists recommend a molecular test that helps a patient potentially avoid a more aggressive treatment. So long term we are awfully excited about Oncotype DX and then the PCDX test, which is a test for people with metastatic cancer, and it helps guide the right targeted chemotherapy, and that is a very small business today, but with our nearly 100-person precision oncology sales force, 50-person urology sales force, this test is going to be an important part of the future and what it does is delivers a result faster than the other tests today in about three to four days, and that turnaround time we believe will drive adoption.

Operator, Operator

And your next question comes the line of Max Masucci with Canaccord Genuity.

Max Masucci, Analyst

Hi, thanks for taking the questions. So we're just starting to see a wider scale COVID-19 testing for asymptomatic individuals in addition to health care providers and first responders. It's evident that the U.S. supply of COVID testing is below demand especially ahead of the traditional flu season. So how are you thinking about the duration of your COVID-19 testing opportunity and at COVID-19 test processing capacity of 50,000 tests per week, I think math would suggest you use just under 60% of that capacity in Q2. So are there any barriers, whether it's people or technology, that's preventing you from utilizing a higher percentage of that capacity going forward?

Kevin Conroy, CEO

We will be able to increase capacity over time and it really speaks to the incredible platform technology that we have. We had our first telephone call with an outside group that needed testing was on March 14 and we delivered our first COVID test on March 30. Capacity has scaled up ever since then, and we expect it to exceed 50,000 tests per week. The truth is though this is not a business that we hope to be in long term. We want to do our part to help our community and our state and our country and all the areas that we do business. What it really shows is the underlying value of the team and the platform and the science that we're able to deliver as we think about a pipeline that includes liver cancer testing and pancreatic cancer, esophageal cancer. You should know that we have the ability to deliver on that from an infrastructure scientific R&D regulatory capacity. That's the take home here.

Max Masucci, Analyst

Great and then lots of moving parts this quarter but what sort of traction are you seeing in the age of 45 to 49 age group for Cologuard ordering? Clinicians' willingness to order for this age group and just where you stand with any conversations you may continue to engage with commercial payers.

Jeff Elliott, CFO

Max, this is Jeff. 45 to 49 is an exciting opportunity. There are almost 20 million Americans who are in that target market. So it is a significant increase to the addressable opportunity; we have seen that tick up as a percent of total Cologuard orders and for me that's no surprise considering that Cologuard fits very well into the busy 45 to 49-year-old lifestyle and the clinical evidence there is very strong. Over the past 20 years, we've seen about a 50% increase in the incidence and mortality rate in that age group. So we think clinically there's a strong reason to adopt Cologuard in that age group, reimbursement continues to improve for that age group. I think the next big leg of growth we expect is through greater reimbursement that likely hinges on guideline inclusion over the team continues to work on driving the reimbursement higher given the strong value proposition for Cologuard in that age group.

Operator, Operator

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

Luke Sergott, Analyst

Hey guys. Thanks for taking the question. Just a quick one here on the COVID testing, on the logistics behind it, so I mean I realized it's a different way of the test getting to you guys than your typical Cologuard oncotype. Any chance on that these new channels are getting the COVID testing to present an opportunity to access new patients for Cologuard oncotype that previously wouldn't have been able to access with legacy channels, more so on the Cologuard obviously than Oncotype?

Kevin Conroy, CEO

Yes, one of the major advantages of COVID testing has been that we have enhanced our relationships with health systems, which will benefit both Cologuard and Oncotype DX in the long run. We have improved our partnership with Epic and established numerous interfaces between healthcare providers and our lab that facilitate electronic ordering, which will be advantageous for Cologuard over time. The most significant benefit has been demonstrating our capabilities and the collaboration of our scientists, laboratorians, and all the teams involved in launching a new test within weeks. There is a strong eagerness to introduce the next test, and over the next five years, you can expect a significant increase in the number of new tests launched through this infrastructure. The key takeaway from our COVID testing experience is our capacity to support the healthcare ecosystem moving forward.

Luke Sergott, Analyst

Okay great thanks. And then I guess last one here: are you seeing any change in the lag between the order rate and the actual test succession and any changes in compliance rates? I don't know if I caught that earlier.

Kevin Conroy, CEO

Look, the Cologuard compliance rate in the quarter was about 66% remember this is on a lag basis looking back 12 to 18 months, that's the typical way we report it. As far as the turnaround time, I think a question was done from order to completed test that was negatively impacted during the March/April timeframe, really in the early days of COVID since then things have largely recovered. Over time our goal is to get that compliance rate back above 70% and I'm confident we'll be able to do that.

Operator, Operator

And your last question comes to line of Bruce Jackson with Benchmark.

Bruce Jackson, Analyst

Hi thank you for taking my question. I wanted to circle back to the electronic ordering. Can you remind us what percentage of doctors order Cologuard electronically right now and are you thinking about becoming integrated with any of the other electronic health care systems?

Jeff Elliott, CFO

So Bruce, this is Jeff. Today about 35% of Cologuard orders are submitted electronically; when a provider orders electronically, she orders at over a 50% higher rate than ordering via fax and it's because it's an easier ordering process. It's an easier process for us to return that result back and it actually costs us less money each time we do it because the data come in clean. So we're looking forward to the Epic conversion that Kevin mentioned later. We are integrated today with some other the cloud-based electronic health systems like Athena Health. Cloud-based we've been integrated with that one early on and over time we will integrate with all the systems. Cologuard is just too big and too important for the product; we will make sure it integrates with all of them. So it will take time. On the precision oncology side, the electronic ordering rate is significantly higher. So that shows there is a path forward and one of the benefits of COVID testing that Kevin mentioned is deepening our relationships with health systems and providers. For COVID testing, the electronic ordering rate from the start has been very high. Today it's well north of 70% electronic ordering. So there are other benefits of COVID testing and that is one that we think will help Cologuard ordering, the electronic order rate go higher over time.

Kevin Conroy, CEO

You're welcome. I will now turn it back over to our presenters for any closing remarks. Thank you for joining us to review our second quarter results and thanks to especially to all of our employees for their unwavering commitment to our mission. The way this team reacted in the face of incredible challenges due to the COVID crisis and the quicker than expected Cologuard recovery give us great confidence in the path forward. We believe we are well positioned to reach 40% of the colorectal cancer screening market with Cologuard sooner, continue to grow our precision oncology offerings, and use our deep pipeline and infrastructure to bring many more tests to patients across the cancer continuum. Thank you.

Operator, Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.