Earnings call transcript: Exact Sciences Q2 2025 beats EPS forecasts

Exact Sciences Corporation (EXAS) reported its second quarter 2025 earnings, surpassing expectations with a narrower-than-expected loss. The company posted an earnings per share (EPS) of -$0.01, significantly better than the forecasted -$0.13, resulting in an EPS surprise of 92.31%. Revenue also exceeded expectations, reaching $811.1 million against a forecast of $773.8 million, marking a 4.82% surprise. According to InvestingPro data, analysts maintain a strong buy consensus with a target range of $54-90, suggesting significant upside potential. Despite this positive financial performance, Exact Sciences’ stock closed at $46.91, down 0.95% from the previous session.

Key Takeaways

• Exact Sciences’ Q2 revenue grew by 16% year-over-year.
• EPS beat expectations significantly with a surprise of 92.31%.
• Stock price fell by 0.95% post-earnings, despite positive financial results.
• The company raised its full-year revenue and adjusted EBITDA guidance.

Company Performance

Exact Sciences demonstrated robust performance in Q2 2025 with a 16% year-over-year increase in revenue. The company continues to lead in the non-invasive colorectal cancer screening market, benefiting from increased adoption of its Cologuard product. InvestingPro analysis shows the company maintains a strong financial health score of 2.66 (rated as GOOD), with liquid assets exceeding short-term obligations and a healthy current ratio of 2.73. Screening revenue rose by 18%, while precision oncology revenue increased by 9%. The company’s strategic acquisitions and product launches have further strengthened its market position.

Financial Highlights

• Revenue: $811.1 million, up 16% year-over-year
• Earnings per share: -$0.01, compared to a forecast of -$0.13
• Adjusted EBITDA: $138 million, a 26% increase

Earnings vs. Forecast

Exact Sciences reported an EPS of -$0.01, surpassing the forecasted -$0.13 by 92.31%. Revenue reached $811.1 million, exceeding the $773.8 million forecast by 4.82%. This marks a continued trend of outperforming expectations, reflecting the company’s strong operational execution and market demand for its products.

Market Reaction

Despite the positive earnings surprise, Exact Sciences’ stock closed at $46.91, a 0.95% decline from the previous day. This movement contrasts with the broader market trends and may reflect investor concerns over future growth prospects or market saturation. Trading with average daily volume of 2.79 million shares, the stock remains within its 52-week range of $39.97 to $72.83. InvestingPro subscribers can access detailed valuation metrics and comprehensive analysis through the Pro Research Report, one of 1,400+ deep-dive reports available on the platform.

Outlook & Guidance

Exact Sciences has raised its full-year revenue guidance to between $3.130 billion and $3.170 billion. The company also increased its adjusted EBITDA guidance to $455 million to $475 million. Upcoming product launches, including the CancerGuard multi-cancer test, are expected to drive future growth.

Executive Commentary

CEO Kevin Conroy stated, "We’re positioned not just to lead, but to transform how cancer is detected and treated," highlighting the company’s commitment to innovation. CFO Aaron Bloomer added, "We view this as additive to our overall revenue and to our long-term growth rates," emphasizing the strategic importance of recent acquisitions.

Risks and Challenges

• Market saturation in the non-invasive screening segment could limit growth.
• Restructuring costs of $90-$95 million expected in 2025 may impact profitability.
• Competitive pressures from other cancer screening technologies.
• Economic uncertainties that could affect healthcare spending.

Q&A

During the earnings call, analysts inquired about the impact of the Phrenome blood test acquisition and its integration into Exact Sciences’ product portfolio. Executives expressed confidence in their commercial capabilities to deploy the new screening technologies effectively. Additionally, questions regarding the ongoing R&D efforts highlighted the company’s commitment to enhancing testing technologies.

Full transcript - EXACT Sciences Corporation (EXAS) Q2 2025:

Conference Operator, Conference Call Operator: Thank you for standing by. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Exact Sciences Second Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

Thank you. I would now like to turn the call over to Derek Lekow. Please go ahead.

Derek Lekow, Unspecified, Exact Sciences: Thank you for joining us for Exact Sciences’ second quarter twenty twenty five 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 Conroy, Chairman and CEO, Exact Sciences: Kevin. Thanks, Derek. During the second quarter, the Exact Sciences team delivered a record 1,300,000 test results to patients, accelerated core revenue growth to 16% year over year and generated an all time high $138,000,000 in adjusted EBITDA. As a result, we are raising guidance at midpoint for revenue by $55,000,000 and adjusted EBITDA by $25,000,000 We also advanced our mission by expanding our agreement with two of our top 10 payers to make Cologuard Plus in network, entering an exclusive license with Phrenome for blood based colorectal cancer screening tests, gaining Medicare coverage for OncoDetect, our molecular residual disease test and announcing a multiyear productivity plan targeting $150,000,000 in annual savings by 2026. Aaron will now review our second quarter results, updated guidance and multi year productivity plan.

Aaron Bloomer, Chief Financial Officer, Exact Sciences: 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, dollars 39,000,000 above the midpoint of our guidance. Screening revenue increased 18% to $628,000,000 with Cologuard growth led by rescreens, CareGAP programs, and improved commercial execution. Precision Oncology revenue increased 9% to $179,000,000 on a core basis.

Growth was led by continued strength in Oncotype DX adoption internationally. We also recognized $7,500,000 in revenue from sublicensing Twin Strands technology. Adjusted EBITDA increased 26% to a record $138,000,000 Adjusted EBITDA margin expanded 130 basis points, driven by Cologuard plus pricing and productivity gains across our lab, supply chain, G and A and support functions. GAAP net income was negative $1,000,000 which included $15,000,000 in one time costs related to actions we took to increase operational efficiency and productivity over time. Free cash flow was $47,000,000 bringing year to date free cash flow to $46,000,000 or an increase of $95,000,000 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 Phrenome transaction with cash on hand. We ended the quarter with $858,000,000 in cash and marketable securities. Turning to guidance.

We are raising total revenue guidance to between 3,130,000,000.00 and $3,170,000,000 for the year, an increase of $55,000,000 at midpoint, with third quarter revenue between 800,000,000 and $815,000,000 This assumes screening revenue between $630,000,000 and $640,000,000 for the third quarter and between 2,440,000,000.00 and $2,470,000,000 for the year Precision Oncology revenue between $170,000,000 and $175,000,000 for the third quarter and between $690,000,000 and $700,000,000 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 $25,000,000 to between $455,000,000 to $475,000,000 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 Fresenome licensing agreement announced today. We will provide updated guidance upon the close of the transaction.

We are introducing a multi year 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 twenty twenty three Investor Day. We expect to deliver more than $150,000,000 in annual savings in 2026. Over $50,000,000 of these savings are included in our 2025 guidance, including actions taken during the first quarter. Savings will primarily come from G and A efficiencies through reducing external spend, restructuring support functions, and accelerating the use of AI and automation in core operations.

We anticipate approximately $105,000,000 to $120,000,000 in restructuring and transformation costs in total. For modeling purposes, we expect $90,000,000 to $95,000,000 of these costs to incur in 2025, inclusive of $40,000,000 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.

Kevin Conroy, Chairman and CEO, Exact Sciences: 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 health care providers, health systems and payers who rely on Exact Sciences and the ExactNexus platform. We delivered our twenty millionth Cologuard result, doubling from 10,000,000 in just three years. We are encouraged by indicators of sustainable growth coming from our commercial organization. During the second quarter, sales representative productivity and 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 depths. 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 2,500,000,000 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 non invasive 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 twenty million patients. A special thanks to the Exact team for increasing access to Cologuard Plus by securing favorable contracts with two of the top 10 payers, Humana and Centene, which together represent about 40,000,000 members. We also established positive coverage decisions with eight of the top 10 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 twenty twenty four Congress. Initial testing showed sensitivities of seventy three percent for colon cancer and fourteen percent for advanced precancerous lesions at ninety percent specificity. Although we met the primary endpoints of the pivotal study, we are disappointed with these results. Science is not always a straight path, and we are proud of our R and 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 color on our program. As we announced earlier today, we acquired exclusive rights to the current and future versions of FRENOM’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 Phrenome team has submitted the last module of the premarket application to the FDA. Phrenome is also advancing a next generation version of the test that is designed to improve advanced precancerous lesion sensitivity. Blood based colon cancer screening tests can help get unscreened 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 strategies. Results from our recent modeling analyses clearly show that only Cologuard plus and colonoscopy maximize the benefits to harm ratio 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, 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 seventy percent of cancers that currently lack a recommended screening solution. This represents a significant unmet clinical need translating to a largely untapped $25,000,000,000 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 touch points 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 NSAID 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 BetaCorrect study shared at ASCO with prior research helps secure broad coverage for Stages II through IV 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.

Conference Operator, Conference Call Operator: And your first question comes from the line of Andrew Breckman with William Blair. Your line is open.

Aaron Bloomer, Chief Financial Officer, Exact Sciences: Hi, Good afternoon. Thanks for taking the question. Kevin, you sound excited about the opportunity with Phrenome. Can you maybe just sort of unpack for us a bit more of the strategic fit that this agreement has, for Exact and how the product can further round out the portfolio that you have? Thanks.

Kevin Conroy, Chairman and CEO, Exact Sciences: Yes. Thanks, Andrew. First of all, in CRC screening, we’re a clear leader in this, the clear leader in the noninvasive screening market. With Cologuard Plus, we have the most accurate CRC screening test. Yet there is a role for blood to play.

This agreement adds a blood based option to our portfolio of tests, Cologuard, Cologuard Plus, now a blood CRC test, and a multi cancer screening test, CancerGuard. We have a portfolio. It’s supported by our platform, our commercial infrastructure, which is second to none, healthcare provider relationships, you just heard, over 200,000 ordering healthcare providers in the quarter and just tremendous growth. Here’s what we are excited about, about the Phrenome technology. Their v one test has strong data, and it accelerates our time to market.

Version two shows potential promise. We’ve seen data there that shows potentially improved APL detection. Now this is from a holdout portion of their preempt study, and that gives us you know, we have the optionality to take that technology should in in the pivotal study and the readout that we will be able to deploy that test if it does indeed have improved performance. The structure gives us maximum flexibility, as we continue to lead in this market. So, that’s what we like.

It’s a great technology. We have optionality. We have flexibility, and all of that leads to impact in a field that we’re currently leading.

Conference Operator, Conference Call Operator: Your next question comes from the line of Brandon Couillard with Wells Fargo. Your line is open.

Brandon Couillard, Analyst, Wells Fargo: Hey, thanks. Good afternoon. Aaron, can you

Dan Brennan, Analyst, Cowen: walk us through the beat in the quarter and kind of what’s contributing to the strong first half growth of the core business? It’d be helpful if you could unpack all the factors behind the momentum and maybe talk about sustainability. Thanks.

Kevin Conroy, Chairman and CEO, Exact Sciences: Thanks, Brandon. It’s Kevin. 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 the commercial organization is doing a great job.

Cologuard plus is getting them greater access. Our customer base is energized by a test that is 95% sensitivity and 94% specificity. We’ve seen strength in rescreens, care gap programs. Our brand awareness has never been higher. Aaron, do you

Aaron Bloomer, Chief Financial Officer, Exact Sciences: want to dive into the details a little more? Thanks, Kevin. Thanks, Brandon. Yeah. So we beat by $40,000,000 on the top line with really strength across all parts of the business, specifically within Cologuard.

And I would highlight comments that we’ve made in the past. We just continue to see momentum from the commercial improvements that we’ve made, and that is what is contributing to the majority of the beat. But we are seeing strength from everything, whether it’s from the traditional, where our reps are calling in on point of care, our new Caregap programs, which continues to accelerate, our new customer initiated ordering platform, as well as then from our rescreens and the recent launch of Cologuard Plus.

Kevin Conroy, Chairman and CEO, Exact Sciences: 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 patient is up to date with colon cancer screening and what comes to mind first is Cologuard.

Conference Operator, Conference Call Operator: Your next question comes from the line of Kathryn Schulte with Baird. Please go ahead.

Kathryn Schulte, Analyst, Baird: Hey, guys. Thanks for the questions. 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 FRENOM has submitted the final module of its PMA.

I guess what’s the expected time line for an FDA decision? And do you expect there to be another AdCom?

Kevin Conroy, Chairman and CEO, Exact Sciences: Well, thanks, Katherine. Science is obviously not linear, and we haven’t submitted yet to the FDA. Testing continues and work on on the 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 why we believe we’ll win in blood with this new program.

First of all, Phrenomes test delivered eighty one percent sensitivity for cancer, fourteen percent for precancer at a ninety percent specificity. And I wanna 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. I think you can take a look at what is typical out there, but we’re not going to guesstimate at this time. Remember, we have a tremendously large sales force that will be excited to have a blood test in their hand. 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 a meaningful niche in the market? Yes. We believe it can. And we believe we have the relationships with the health care providers, with patients, and their trust and the quality that we’ve delivered over the last eleven years with Cologuard.

Conference Operator, Conference Call Operator: Your next question comes from the line of Doug Schenkel with Wolfe Research. Your line is open.

Doug Schenkel, Analyst, Wolfe Research: Hey, Kevin. Let me well, first off, thank you for taking my questions. 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 eighteen months.

And you have the commercial infrastructure to really get after this market with existing relationships. So those are clear positives. Now now let’s, to be balanced, talk about the negatives. So as as I mentioned, and I used the words 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 and d hasn’t been great. And frankly, M and A hasn’t been great. Drive 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 and A spends and $400,000,000 in annual R and D from an ROI standpoint.

So my first question is this. What changes now in terms of resource allocation, operational spend? 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 wanna confirm that’s right. Essentially, is the position now that you will be the number two 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 45,000,000 people and that this will have a three year interval? Third, my last question, why shouldn’t investors now think that you view blood as a threat to Cologuard given the quick pivot on this data to quickly make a deal with Phrenom? Thank you.

Kevin Conroy, Chairman and CEO, Exact Sciences: I think there were multiple questions and multiple there was a long dialogue in there. And I would start, Doug, by saying I disagree with your conclusion that the Genomic Health acquisition was not a successful one. I also disagree that the Thrive acquisition is not successful. We will be launching CancerGuard next month, and the MSED technology that that relies on was fundamental to the was a part of the Thrive acquisition. So we just have a fundamental disagreement there.

I don’t think that you probably fully understand the potential of that multi cancer screening market. And I would also say you probably, Doug, don’t understand the power of our commercial organization based upon the question you asked, which is okay. But the commercial organization just delivered an unbelievable quarter, two quarters in a row. And what we have seen year over year in the eleven years since we’ve launched Cologuard and let’s take a step back and think about this impact. We’ve seen over a hundred thousand people, probably about a hundred and twenty thousand people diagnosed earlier with Cologuard than they would have been otherwise with, with cancer.

The impact is huge. Over six hundred thousand people with precancerous polyps leading to potential prevention. And finally, the mortality rate since Cologuard was launched has declined eleven percent. So if you want to talk about productivity and r and d, we’re happy to have that debate. Our r and d investment, has been over fifty percent, if if you look cumulatively in the CRC screening place where we have clear leadership.

And so that leadership will continue. In 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 FIT 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 who have a need to deploy cancer screening technologies to their patients who need it.

And, that is where our our new blood test based on the, free known PMA submission will be deployed. We welcome competition in that space. We and our team is ready to deploy tests to those patients who truly refuse both a colonoscopy and Cologuard. There 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.

Conference Operator, Conference Call Operator: Your next question comes from the line of Tycho Peterson with Jefferies. Please go ahead.

Tycho Peterson, Analyst, Jefferies: Hey, thanks. 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’ll 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 and A with real earn outs in an aggressive integration program where you would get all the IP cash in the balance sheet and not have

Analyst: to pay a royalty? Thanks.

Kevin Conroy, Chairman and CEO, Exact Sciences: Right. The deal structure that we have here with the royalty, we think is one that makes sense over the long call. We’ll see how all of this develops as the years go on. But what it does is gives us access for a modest investment. And, thankfully, we have the balance sheet and the strong financial profile to be able to deliver.

In terms of timelines, the you know, a typical PMA is about a year from submission. That is not what we are guiding to, to be clear, because we, you know, don’t know all of the dynamics that will occur here. Could it be shorter? Yes. Could it be longer?

Yes. We don’t know at this juncture. In terms of AA detection, the only thing that we well, I guess I’ll say two things. Number one is FREENOM intends to disclose their AA data at the appropriate scientific congress, and I think that will be in the nearer term. Ultimately, that will be up to them.

Secondly, we have built into this agreement that if AA detection does not achieve greater, than 19%, we have the ability to exit the agreement. And then finally, I would say our internal program, will continue. And so maybe, Aaron, you would want to comment on the cost structure.

Aaron Bloomer, Chief Financial Officer, Exact Sciences: Hey, 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 get with this deal. I would just reiterate, you know, we will drive costs down over time on this specific test.

Particularly as it scales and gets in the hand 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.

Conference Operator, Conference Call Operator: Your next question comes from the line of Jack Meehan, Nephron Research. Please go ahead.

Derek Lekow, Unspecified, Exact Sciences0: Thank you. Good afternoon. 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, you know, you know, existing methods like Cologuard? And as you look at the free Gnome data and the way that the test is developed, do you think it can be differentiated, or do you see this kind of standing kinda, like, in line with the way GARN is positioning Shield?

Thank you.

Kevin Conroy, Chairman and CEO, Exact Sciences: Sure. Know, 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 talks to health care 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 HCPs 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. 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’ve worked with us for over a decade. They know that we stand for quality. They have easy electronic ordering, electronic resulting, a customer care hotline that they can call with any questions, and they 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.

Aaron Bloomer, Chief Financial Officer, Exact Sciences: Jack, maybe one other thing to add on that too that I think is an important point. You know, aspiring 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, you know, an 18% growth quarter in screening. We’re guiding to a, you know, 17% growth in the back half of the year and for the full year. And so, you know, to Kevin’s point, we have multiple drivers of tailwinds for this year and years to come in our core Cologuard business as well.

Conference Operator, Conference Call Operator: Your next question comes from the line of Vijay Kumar with Evercore ISI. Maybe

Derek Lekow, Unspecified, Exact Sciences1: I’ll pivot to the guidance and P and L here. Maybe can you talk about gross margins here for second quarter? What drove the sequential step down? And on the guidance to your earlier point, Aaron, 18% growth here in second quarter, moderating to 17% in the back half. What drives the moderation?

Did your assumptions on pricing change at all versus prior? Thank you.

Aaron Bloomer, Chief Financial Officer, Exact Sciences: E. J, first, so 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 Caregap orders. We had our largest ever Caregap orders 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 Caregap business, it’s 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, our Caregap orders. And ultimately, we feel really good about the business and the progress that we’ve made. But if you look at kind of sequentially Q2 to Q3 as well as from a year over year perspective, it’s kind of in line with what we’ve done in the past.

And so no change to pricing assumptions. Midpoint of our guide, we would say, is the most likely outcome for the back half of the year.

Conference Operator, Conference Call Operator: Your next question comes from the line of Dan Brennan with Cowen. Please go ahead.

Dan Brennan, Analyst, Cowen: Great. Thank you

Analyst: for taking the questions here. Maybe just a multi partner. I think in the past, my impression was the exact team may have harbored some skepticism towards the Phrenome data or maybe the quality in the past, and that certainly obviously it’s changed now. But I guess the question would be kind of what can you say about your team’s confidence in like the clinical study rigor and performance data such that you believe it will allow for FDA approval? And then the second part was related just to the headline data itself that was in the press release, the 81% and the 14% and the 90%.

I know in the publication, it was a bit lower than that, I think it’s age adjusted. So is that the appropriate way to look at it on age adjusted? And then final point would be given you’re so dominant in stool, although the blood market is nascent, you envision any FTC issues with this deal? Thank you.

Kevin Conroy, Chairman and CEO, Exact Sciences: On the last point, we believe that this is a deal that should make it through HSR review. Obviously, there’s a process there that will play out. In terms of the performance of the tests, yes, on an age adjusted basis, which is the approach that the FDA and Phrenom have worked on. And again, I’m not making any comments. It is their submission, and we will benefit from it.

But eighty one fourteen ninety. In terms of the diligence that we did, we’re very impressed with the actual study design, the data, the rigor that the the study that that they designed and the performance of the test, which has been now validated. I just one other comment. You know, their new leadership, Aaron Elliott, is a is a real strong addition to the team. Would say adding Aaron to that team really made it a quite a positive for us to enter into this agreement.

And so, you know, all of our interactions with them have been quite positive, and we’ve been impressed.

Conference Operator, Conference Call Operator: Your next question comes from the line of Dan Arias with Stifel. Please go ahead.

Brandon Couillard, Analyst, Wells Fargo: Good afternoon guys. Thanks for the questions. Kevin, I I understand that science is not linear, but the team was 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 and d folks have concluded or what the thesis was that didn’t play out? I mean, 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 an MSED in order to be relevant.

So it just seems like asking what happened versus what you thought would happen is is a fair question.

Kevin Conroy, Chairman and CEO, Exact Sciences: Well, let me take you back to Cologuard Plus, which is a three marker methylation marker test plus protein. It we delivered, and the r and d team same r and d team delivered unbelievable performance with Cologuard Plus, which was a significant investment, which we think will have it in a a massive ROI. Think starting with patient ROI. Just with the 40% improvement in Cologuard Plus specificity, that could lead over the next thirty years to about a billion dollars of saving in terms of reduced colonoscopy. So the r and d team has done a tremendous job.

Our blood test is a that we ran as part of this study was three methylation markers on a kind of advanced, what we call TALKUS PCR based platform that we missed 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 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 our I would never bet against our r and 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.

Conference Operator, Conference Call Operator: Your next question comes from the line of Puneet Souda with Leerink Partners. Please go ahead.

Derek Lekow, Unspecified, Exact Sciences2: Yes. Hi, Kevin. Yes. I would just want 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 the will going to be the market share for blood based testing in this multimodal market?

Kevin Conroy, Chairman and CEO, Exact Sciences: 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 test, you’re just not at the point that blood these current versions of blood tests probably pass muster and get rated a or b by USPSTF. Why?

Well, 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 that’s critically, important. And then you couple that with a ten percent false positive rate, and and it leads to low impact at three year intervals and relatively, you know, kind of a medium impact in terms of unnecessary colonoscopies. If you run it as a one 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 on the quality measures. If you’re not on the quality measures, commercial payers aren’t going to rush to cover the test.

We saw that with Cologuard. 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 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 point 5% blood based CRC screen. Will that change over time? We’ll see.

In large part, it depends upon the guidelines. So, you know, where we do we think Phrenomes test can match others into the future? That depends. The version two data that we’ve seen, again, we built into the agreement that if the version two doesn’t deliver more than 19%, we can get out of the agreement and pivot to our own program. So, you know, it’s nobody has delivered version two.

We have a program. Freenom has a program. Others have programs. We’ll see where that plays out.

Conference Operator, Conference Call Operator: Your next question comes from the line of Michael Ryskin with Bank of America. Go ahead.

Derek Lekow, Unspecified, Exact Sciences3: For taking the question, Kevin. I want to follow-up on something that was just kind of asked. I realize there’s a version one and a version two, so there’s going be different considerations for both. But your earlier comment on you seeing having blood taking 5% to 10% of the market and how this compares to Shield. Just as we layer this into our model over the next couple of years, how should we think about what this could do to the exact model?

Should we use Shield as a benchmark in terms of volume and revenue ramp? And just sort of there’s the pros and cons of the lower sensitivity versus having your commercial engine and your market presence. Just what’s the right way to think about how you think volumes and revenue share could grow over time? Yes.

Kevin Conroy, Chairman and CEO, Exact Sciences: I think the right way thanks for the question. I think the right way to look at this is actually different than probably, analysts some analysts are are thinking about this right now. Start with the Cologuard brand. The brand awareness now is greater than colonoscopy in five of the last six months. The power of that brand means that not only are patients asking for Cologuard, but physicians are recommending Cologuard first even ahead of colonoscopy.

And then when you add more reps into the field talking about colon cancer screening, that feeds more Cologuard and now Cologuard plus growth. And that’s what we’re actually seeing in the market is that there is a and we believe we’ll see this if you look out over the next five years, even more of those 55,000,000 unscreened people are going to get screened. Now when you think about that, if this year approximately somewhere in the range plus or minus of five million people gets gets screened with Cologuard and and roughly six million people with colonoscopy, As you look over time, there’s a tipping point where Cologuard, too far from the future, is used more often than screening colonoscopy. And so we think that continues, and more reps in this field probably ends up a rising tide lifts all boats.

Aaron Bloomer, Chief Financial Officer, Exact Sciences: Then, Michael, specifically from a modeling perspective on the blood as well, keep in mind, like so as Kevin said, we’re not gonna opine as to exactly when FDA approval would come. But once we have that, it’s gonna 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.

Conference Operator, Conference Call Operator: Your next question comes from the line of Patrick Donnelly with Citi. Please go ahead.

Dan Brennan, Analyst, Cowen: Hey, guys. Thanks for the question. Kevin, maybe just on the internal program. I know you talked about the additional marker not being included. Can you just talk about the go forward there?

What the investments are going to look like on that piece now that you have this FRENOM option as well? And then just quickly on FRENOM, I know to the earlier question, in terms of the specifics around that in the past, the timelines dragged out, given the submission of the FDA dragged out. Can you just talk about what caused that and just the confidence in the data there? That would be helpful. Patrick,

Kevin Conroy, Chairman and CEO, Exact Sciences: you cut out on the second part of your question. Was it confidence around timelines?

Brandon Couillard, Analyst, Wells Fargo: Yeah. Just the timeline. Again, I know the FDA submission timeline dragged out a

Dan Brennan, Analyst, Cowen: little bit with Freedom. So just wanted to talk through what caused that and and what got you comfortable there. Thank you.

Kevin Conroy, Chairman and CEO, Exact Sciences: You know, a lot of work goes into a PMA submission. And for 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 is high, which is why we entered into this agreement. 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’re 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.

Conference Operator, Conference Call Operator: Your next question comes from the line of Yves Birstein with Bernstein. Please go ahead.

Derek Lekow, Unspecified, Exact Sciences4: Great. Thank you so much for taking the question. One thing that you seem to be giving up in this licensing deal with Phrenom is potentially some of the moat around your multi cancer test. So for example, in Phrenom’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 real world data they need to improve their existing tests and accelerate development of the multi cancer tests in their pipeline.

So from these points, I take away the fact that Freedom 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?

Kevin Conroy, Chairman and CEO, Exact Sciences: Sure. We’ll be launching our multi cancer screening test through a field force of about a thousand 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 lever 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 Phrenome, look, they have their own program, and we’ll compete quite vigorously there. We have the commercial organization. In terms of data 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 the patient has cancer or doesn’t have cancer does not, in our experience, provide you with tremendous ability to do product development. You you really need to have characterized samples to be able to do that. So that’s all I’ll comment on there. We are 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 ends up being good for patients.

Conference Operator, Conference Call Operator: Your next question comes from the line of Subbu Nambe with Guggenheim. Please go ahead.

Derek Lekow, Unspecified, Exact Sciences5: Hi, Kevin. Thank you for taking my question. 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 Phenome, 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 NSAID test 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?

Kevin Conroy, Chairman and CEO, Exact Sciences: You know, for the second part of your question, I would go back and point to Cologuard Plus. Again, because we approach the scientific part of our platform by first identifying the most discriminatory markers and and working backwards. That’s why we we were able to develop a test with 95% sensitivity and 94% specificity on a platform that allows us to reach millions of people in a way that allows us to make significant investments. And our MSED data, which is a combination of our Talkus platform and the Thrive technology, also delivers a high level of sensitivity. So, again, I’m not going to get into the areas where we believe that we learned, and this is an important thing.

We learned a lot with this three marker approach that we this three methylation marker plus one protein approach, and we think that those learnings will fuel improvements to our platform now and in the future. It stinks. No doubt. However, we think that it will make us better in the future, and I have enormous confidence in our r and d team. Again, I will point right to Cologuard Plus, which has delivered over a couple 100,000 results.

I’m looking around at the team right now, and that will grow quickly now with Humana and Centene adopting. So I understand why some may be disappointed, so are we. You’ve got to look at the same technology platform that has delivered incredible results in the past.

Conference Operator, Conference Call Operator: Your next question comes from the line of Luc Servat with Barclays. Please go ahead.

Derek Lekow, Unspecified, Exact Sciences6: Great, thanks. I just wanted to follow-up on that. Is that the couple 100,000 CG plus that you guys have offered? Is that I mean, what 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? How’s the progress there from a conversion standpoint?

Aaron Bloomer, Chief Financial Officer, Exact Sciences: Thanks, Luke. Progress is going really well. From a launch perspective, we started out in Q2 at launch with just the Medicare fee for service. And as we’ve said, that’s about 10% to 15% of our patient volume in any given month and quarter, and that is what we saw in Q2. The other thing from a launch perspective that we’re seeing is it’s driving increased access for our reps with physicians, which is very important for broader Cologuard growth.

On the payer side, conversations have been really productive. You know, we announced, obviously, now we have two of the top 10 payers, which will start to come online with Cologuard Plus here into the back half of the year. And we’re obviously really excited about that. We we are not coming off, you know, our our commitment to that this will take, you know, twelve to eighteen months. We will be sunsetting at some point in time because we feel we have a responsibility to bring the best test to patients.

We haven’t set a specific date just yet, but we will be sunsetting. And, obviously, the team is making just tremendous progress. I’d close by just thanking our lab, and our entire operational team that’s just done a phenomenal job of ensuring that we can bring our Cologuard and Cologuard Plus test results to patients in a seamless way.

Conference Operator, Conference Call Operator: This concludes our question and answer session. I will now turn the call back over to Kevin Conroy for closing remarks.

Kevin Conroy, Chairman and CEO, Exact Sciences: Thank you all for joining us today. We look forward to sharing our progress throughout this transformational time at Exact Sciences as we became 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.

Conference Operator, Conference Call Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

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