Exact Sciences Corp Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Brandon Collier - Wells Fargo - Analyst : Hey, thanks, good afternoon. Kevin or Aaron. Do you just kind of walk through what changed in the second half outlook relative to where you stood 90 days ago. Would be helpful if you could maybe unpack some of the moving parts and contribution be it between care gap, the hurricane disruptions, slow ramp from new reps and have you seen any bounce in orders following the hurricane in those effective areas? Thank you.

Question: Tycho Peterson - Jefferies - Analyst : Hey, thanks. I'm going to pick up right there. So you're not willing to quantify each of the impacts. And then how long do you expect care gap and rep productivity issues to linger. And then fourth quarter guidance, you're down sequentially. I'm just curious as to why that, that would be the case. And then lastly anything you're willing to say about '25 at this point. Thanks.

Question: Andrew Brackmann - William Blair & Company LLC - Analyst : Hi, good afternoon. Thanks for taking the question. You know, I think one of the things folks are going to want some comfort around is just your ability to forecast the business, especially in the context of how things sort of played out this quarter. But can you maybe just sort of talk about the signs that you saw inter quarter that this was sort of playing out against your favor? And I guess specifically how those changed or evolved over the last couple of years and I guess bigger picture here, the number of variables in the model. How are those sort of moving in and out of your control as we look forward? Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 10:00PM, EXAS.OQ - Q3 2024 Exact Sciences Corp Earnings Call

Question: Doug Schenkel - Wolfe Research, LLC - Analyst : Hey, good afternoon. So question on the guidance and then just thinking ahead from here for the next couple of years. So Aaron, doing some quick math, if we assume 18% of your revenue went to zero for one month, I think that would equate to $35 million to $40 million in revenue. You cut guidance for the year by more than half that. So just want to make sure I'm in the right neighborhood. I want to be crystal clear that even if it were not for the hurricanes, you would be cutting guidance here because of your lack of visibility and just not executing to plan. So that's my first question. My second is your guidance implies that Cologuard fourth-quarter volume growth is going to moderate, I think, to around 10%. And this is in a period where you talked about again, material care gap benefits coming in, the reps you hired that were completed in May but were hired earlier than that in some cases starting to become more efficient as they're supposed to be. And then the opportunity to convert reorders from three years ago, as we look at the second half of this year, that's as big as ever. So if that's what's going on with Cologuard, your other major product line, Oncotype, great product, but it's mature. That's a mid-single-digit growth franchise. Pulling those things together and acknowledging the tailwinds that you talked about in your prepared remarks, let's just cut to it -- recognizing a key part of the buy thesis for Exact is your ability to grow revenue double digits, can you do that over the next one to two years unless you get the ASP increases or get help from other products like MRD or Cologuard Plus? Thank you.

Question: Dan Brennan - TD Cowen - Analyst : Great, thanks. Since there's been a lot of questions on the quarter in care gap, maybe I could focus on 2.0. Kevin, you talked about the upside driver a couple of times for 2025. Can you just kind of remind us of the pricing strategy for 2.0. Sounds like ADLT will be the focus given the clinical fee schedule. I think the interim update didn't go your way. So can you let us know what price you look to seek with ADLT status? You talked about it'll apply to Medicare. Just remind us what percent of volumes it'll apply to. And then how do you deal with the commercial payers? Like any kind of thoughts about what commercial payers will sign up for it and won't. And then if that's the case, then how do you deal with maybe running two tests in terms of the margin profile of that? Thank you.

Question: Matt Sykes - Goldman Sachs & Company, Inc. - Analyst : Yeah, thanks for taking my questions. Maybe just to dig a little bit deeper on the commercial side, Kevin, you talked about the response you see from some of those newer doctors and systems that you brought on post-COVID. But clearly, the calls weren't going into them, and you've been dealing with sort of the lack of in-office visits for some time now. So could you maybe just talk a little bit about what the breakdown was? I know you've had some turnover in sales management. Was it a sales management issue? Was it turnover of reps? Was it just new reps ramping up? It seems like something that you had focused on previously where the focus was lost. So I'm just wondering kind of what the breakdown was there. Thanks.

Question: Vijay Kumar - Evercore ISI Institutional Equities - Analyst : Hey, guys. Thanks for taking my question, Kevin, maybe to back up those comments you made, when you look at them -- how third quarter played out and you look at the guidance for Q4, is the change here between the 45 to 49 age group or is this the above-50, first-time screening -- screened REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 05, 2024 / 10:00PM, EXAS.OQ - Q3 2024 Exact Sciences Corp Earnings Call patients? Was there any regional variants? I guess, what were the learnings? And when you say commercial execution will improve, what is going to change here that resolves or fixes the execution issues? Thank you.

Question: Dan Arias - Stifel, Nicolaus & Company, Incorporated - Analyst : Hi, guys. Thanks for the questions. Kevin or Aaron, I'm sure you don't want to give exact numbers on total number of reps in the field, but I'm hoping you can sort of provide us with a 4Q snapshot if you will on commercial, just when it comes to how many more reps you'll have in the field come mid-4Q when everybody should sort of be up and running versus 4Q of last year. It would just be helpful to try to understand the productivity difference year over year as you're finishing the year this year versus finishing the year last year.

Question: Jack Meehan - Nephron Research LLC - Analyst : Thank you. Good evening. Wanted to ask more about care gap. Kevin, just more directly, has the recent Medicare star situation led to increased engagement with large payers? Is it possible to talk about your hit rate and then use of Cologuard relative to FIT? And for Aaron, not sure if I heard this wrong, but just wanted to be clear, are the care gap sales expected to be lower in 4Q sequentially? If you could just talk about why some programs were pulled forward versus pushed out, that would be great.

Question: Patrick Donnelly - Citigroup Group Markets Inc. - Analyst : Hey, guys. Thanks for taking the questions. Kevin, maybe the first one just in terms of the headwinds. Curious how they developed as the quarter went. Was this something you guys picked up steadily as the quarter progressed? Was it a little later? Obviously, the hurricanes and when those happened, but just curious in terms of when you guys realized the shortfall is going to happen and the headwinds were there. And then secondly, just on the EBITDA guide down, how you guys are thinking about the cost structure going forward. It sounds like you reiterated the confidence in that EBITA target a few years out, but just how to think about the trajectory near term here and launching off into '25 on the EBITA piece would be helpful. Thank you, guys.

Question: Dan Leonard - UBS Securities LLC - Analyst : Thank you. Just a couple of questions on the Cologuard Plus mechanics. I think, Kevin, you mentioned the launch would be in Q2. For some reason, I thought it might be Q1. So could you educate me on why Q2? And then secondly, on the ADLT pricing mechanics, I just would like to better understand the way that mechanism works. If you went the ADLT route, you get paid list price by nine months -- or for nine months by Medicare. But your list price for Cologuard is actually quite a bit higher than your ASP. So are you going to get an increase from that list price and then get paid at a far, far higher rate from Medicare for a period of time? But I'd just like to understand that better. Thank you.

Question: Puneet Souda - Leerink Partners LLC - Analyst : Yeah. Hi, thanks, Kevin. Thanks for taking the question. So just a clarification. Is there any air pocket that you saw from switching due to the Nexus or due to the care gap switching of the patients? And just a quick follow-up on there was a launch of a product in early August in blood just wondering if you're seeing that in any of the accounts. I'll just leave it at that. Thank you.

Question: Subbu Nambi - Guggenheim Securities, LLC - Analyst : Hey, guys. Thank you for taking my question. Regarding 2025 revenue growth, your comments suggest that you're confident in the outlook for high-single-digit or even double-digit screening revenue growth and continued low- to mid-single-digit Oncotype growth. Is that right? If so, are you confident you can do this while growing operating spend at mid-single-digit levels? And finally, is your 2027 20% EBITDA target still intact?

Question: Andrew Cooper - Raymond James & Associates, Inc. - Analyst : Hey, everybody. Thanks for the question. A lot already asked. So maybe just one more on sort of the comments that you've reiterated in response to a couple of questions on the docs being promotionally responsive, but at the same time saying, it's taking longer to ramp these new reps and kind of some of the comments there. Can you help us adjudicate those two things? And what gives you the confidence that doctors are truly as responsive as they -- or receptive as they always have been versus potentially a change in their behavior, not as much directly tied to your execution as we think about 3Q and 4Q and beyond?

Question: Mark Massaro - BTIG LLC - Analyst : Hey, guys. Thank you for taking the questions. The first one is, Kevin, did you make any changes in the field to people's territories? And if you did, are those folks sort of in their new territories at this time? And then the second part is on the transition to Cologuard Plus next year. So I'm just curious, if a clinician orders a Cologuard for someone with a commercial health plan -- let's just call it in Q3, if there's no contract there, what happens? Do they automatically default to Cologuard 1.0? I'm just really asking how you can prevent potential zeros or no pays?