Exact Sciences Corp

NASDAQ:EXAS

Earnings Call Transcript 2019-Q1

[Operator]

Good afternoon. My name is Emily, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Exact Sciences Corp. First Quarter 2019 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. [Operator Instructions] Thank you.

Megan Jones, Manager, Investor Relations, please go ahead.

[Megan Jones, IR]

Thank you, Emily, and thank all of you for joining us for Exact Sciences first quarter 2019 conference call. On the call today are Kevin Conroy, the company's Chairman and CEO; Jeff Elliott, our Chief Financial Officer; and Mark Stenhouse, President of Cologuard.

Exact Sciences issued a news release earlier this afternoon detailing our first quarter financial results. This new release and today's presentation are available on our Web site at exactsciences.com.

During today's call, we will make forward-looking statements based on current expectations. Our actual results may differ materially from such statements. Descriptions of the risks and uncertainties associated with Exact Sciences are included in our SEC filings, which can be accessed through our Web site.

It is now my pleasure to introduce the company's Chairman and CEO, Kevin Conroy.

[Kevin Conroy, Chairman and CEO]

Thank you for joining us this afternoon. The first quarter was a strong start to 2019 for Exact Sciences. Cologuard's momentum gives us confidence we'll reach our long-term goal of at least 40% share of the U.S. colon cancer screening market. During the first quarter, the Exact Sciences team screened the 2 millionth person with Cologuard, delivered $162 million in revenue, and continued to build the foundation for future growth. We are well-positioned for success in 2019 and the long-term. Today, we will review our first quarter financial performance, full-year guidance, and discuss progress on our 2019 priorities.

Our Chief Financial Officer, Jeff Elliott will now review our financial results.

[Jeff Elliott, CFO]

Thanks, Kevin, and good afternoon everyone. When discussing the financial results, I'll refer to changes compared to the first quarter of 2018, unless otherwise stated. First quarter revenue increased 79% to $162 million, and Cologuard test volume grew 79% to 334,000 competed tests.

First quarter Cologuard revenue per test declined $2 to $483, primarily due to mixed shift towards commercially insured to customers. On a time length basis, our average Cologuard revenue per test was $480, an increase of $28. First quarter Cologuard cost of sales was $128 per completed test, an increase of $4 to a new capacity expenses partially offset by lab operating efficiencies. We expect second quarter Cologuard cost per test to be in the low $130 range. Bringing our new lab on in the third quarter, we'll about $5 to $10 of cost per test that we will work to offset with volume leverage and operating efficiencies.

First quarter gross margin was 73%, a decline of 130 basis points mainly due to capacity expansion costs. First quarter operating expense totaled $187 million, slightly above our guidance to the higher revenue, and the corresponding Pfizer service fee. Selling and marketing included the Pfizer service fee of $19 million, which was about $4 million more than we had assumed in our guidance. G&A included the additional personnel and IT investments to support the FX project and other IT initiatives. R&D increased primarily due to our pipeline initiatives, including expanding Cologuard label and Cologuard 2.0. We expect operating expense to increase by $6 million to $8 million in the second quarter, driven primarily by IT investments and general hiring to support growth.

We're investing to support our long-term market share goal of at least 40% of the growing colon cancer screening market. We estimate there are 87 million average risk Americans between the ages of 15 to 85. In 2030 that number is expected to grow to 97 million. In 2030 there will also be 20 million average risk people between 45 years and 49 years old for a total available market of a 117 million people assuming Cologuard labels is expanded. That equates to a $20 billion U.S. opportunity, and our goal is to capture at least 40%.

In order to support this goal, we're investing in our people, infrastructure, and lab capacity. Total first quarter CapEx was $52 million. For the full-year, we continue to expect CapEx of a $175 million to $200 million. First quarter cash used totaled $77 million. We expect the majority of our cash used in 2019 to be CapEx-related similar to last year. We ended the quarter with cash and securities of $1.3 billion, including a $236 million net raised in relation to the refinancing of outstanding convertible notes.

Turning to our guidance, based on our first quarter performance and our updated expectations for the rest of 2019, we're raising our full-year revenue outlook to $725 million to $740 million from a prior range of $710 million to $730 million. This assumes $1.52 million to $1.54 million completed Cologuard tests. For the second quarter, we expect revenue of $178 million to $183 million, and Cologuard volume of 372,000 to 382,000 completed tests.

I will now turn the call back to Kevin.

[Kevin Conroy, Chairman and CEO]

Thanks, Jeff. The Exact Sciences team is focused on three priorities in 2019: powering our partnership with Pfizer, enhancing Cologuard, and advancing our pipeline of blood-based cancer diagnostic tests. Our sales and marketing teams are executing at a high-level. During the past year, they successfully implemented new selling strategies and techniques to continue to grow Cologuard. Demand from new healthcare providers also remain strong with nearly 14,000 ordering their initial Cologuard test during the first quarter. The team is collaborating effectively with Pfizer in embracing a shared commitment to grow Cologuard and screen more people.

We're seeing a positive impact from Pfizer's January launch of Cologuard through its women's health field force. The number of OB/GYN providers ordering their initial Cologuard doubled in the first quarter. More than 5,000 in total have ordered since launch. There are more than 30,000 OB/GYNs in the U.S. and approximately 25% of their patients are 50 years and older, making them an important market segment to help screen more people with Cologuard. The marketing team introduced new television ads in the first quarter to maintain the effectiveness of our national advertising campaign.

We continue to work closely with Pfizer's team to enhance creative messaging, optimize the mix of advertisements and effectively invest to raise Cologuard awareness. Gastroenterologists are key influencers in colon cancer screening and partnering with them, will play an important role in achieving our long-term goal of capturing at least 40% of the colon cancer screening market. We're hiring a GI sales team, so we can reach them more frequently and expect them to be in the field in the third quarter. We're also implementing a robust peer-to-peer program to educate primary care providers about the value of Cologuard. This program will provide a new format for providers to learn about Cologuard's benefits from their peers.

As our sales and marketing efforts grow Cologuard demand, we're investing in our infrastructure to ensure we can efficiently support that growth. Our lab expansion projects remain on schedule and within budget. Necessary approvals are progressing to support a significant increase in total lab capacity by the end of this year. We also expect to have Epic's electronic health record system implemented this year. This will reinforce our IT infrastructure, help us scale cost effectively, and enhance the Cologuard user experience for our employees and our customers.

Our second priority is enhancing Cologuard. To expand access to Cologuard in its total market potential to nearly 18 billion, we recently submitted our application to the FDA for a label expansion to age 45. Expanding Cologuard's FDA label to the nearly 19 million average risk Americans between ages 45 and 49 is an important opportunity. More than 10% of the total years of life lost to colorectal cancer are due to a diagnosis between ages 45 and 49. This exceeds the impact on every five year age group above age 70. Since 1994, the incidence of colorectal cancer increased more than 50% in people younger than 55. We believe Cologuard could help solve this problem.

Since the American Cancer Society updated its guidelines last May, several large insurance providers have lowered their coverage screening age to 45 including Anthem for Federal employees, Aetna and CareFirst. We're excited about this early progress and look forward to working with the agency to ensure more Americans have access to an easy-to-use noninvasive accurate screening option.

We are pleased with the initial data from the new markers we're evaluating for Cologuard 2.0 in terms of both sensitivity and specificity. These markers have the potential to increase Cologuard performance and further improve the overall health economic case for Cologuard. We will provide updates as we validate these markers and work with the FDA on an approval pathway.

Our third priority is advancing our blood-based cancer diagnostics program. The strong foundation we've built for Cologuard, and it's commercial momentum positions Cologuard to lead this field. Though our long-term collaboration with Mayo Clinic, we have discovered biomarkers associated with 15 of the deadliest cancers. We have identified markers for most of those cancers through our rigorous research and development process. Once we have identified markers for a cancer in tissue, our team performs multiple studies to validate the best markers for that cancer.

Next month, we'll share several pieces of new early data at Digestive Disease Week. These data are evidence of the strength of our partnership with Mayo Clinic, and the power of our platform for early cancer detection. In addition to our pipeline work, we will present real world evidence supporting continued Cologuard use for providers and guideline groups at DDW.

One of the liquid biopsy tests we're working on in collaboration with Mayo Clinic is for liver cancer, a disease that kills 30,000 Americans and 600,000 people worldwide each year. There are more than three million people who should be tested regularly in the U.S. and our goal is to provide a better option than the current standard of care, ultrasound, either with or without the alpha fetoprotein test. Early-stage cancer sensitivity for ultrasound alone is estimated to be 45% and combined with AFP; it is still less than 65% sensitive.

Patients failed to comply with recommended testing more than two-thirds of the time. A more accurate and convenient test may unlike like a large market opportunity encourage more people to get tested. We're enrolling a large case control study to further validate and finalize development of our liver cancer test. We've also begun evaluating potential sites to open a new lab for our future pipeline products. We look forward to providing updates as we continue this work and refine the go-to market strategy.

We're now happy to take your questions.

[Operator]

[Operator Instructions] And our first question comes from the line of Patrick Donnelly from Goldman Sachs. Your line is open.

[Patrick Donnelly, Goldman Sachs]

Great. Thanks, guys. Maybe one for Kevin or even Mark, just on the Pfizer reps, you know, now that we're a few months into this, can you just help us think about how those guys are ramping relative to the Exact reps historically, whether it's on the utilization side or the new doc adds, obviously the new doc adds of 14,000 this quarter was an impressive number, so maybe just help us think about how those guys are ramping again -- versus historical with Exact guys?

[Kevin Conroy, Chairman and CEO]

Our guidance for Pfizer would be consistent to how we've guided the Exact Science representatives. It takes six to 12 months for a representative with Cologuard to become effective on their response curve with doctors. What we're most excited about is the opportunity to grow this business through the partnership, both the qualitative relationship in terms of the engagement between the field representatives, the marketing organization, the health system teams we believe is going to enable us to grow this business from the 4% to 40% share that we're guiding, but it is encouraging to see the new doc adds, and it's encouraging to see all of the organic growth in the business as a result of the partnership.

[Patrick Donnelly, Goldman Sachs]

Okay. That's helpful. And then just maybe on the new doc adds, you did 15,000 last quarter, another 14,000 this quarter, the historic run rate for the past couple of years was around 10,000, so is this kind of the new normal and then on top of that what's the real driver? I mean is it Pfizer, is it the 100 reps you added mid-year last year, maybe just help us think about that run rate there?

[Kevin Conroy, Chairman and CEO]

Sure. The drivers are broad-based there, Patrick. When you think of historically, we had seen -- a number we have broke out, typically about 90% of the new providers that ordered Cologuard were marketing converted. So we're continuing to see strength in our marketing programs and their ability to drive new providers to Cologuard. Our sales force continues to add more providers, and now the addition of the Pfizer team has been a very nice contributor. So the drivers are broad-based.

As far as where this can go forward, our focus is on driving long-term sustainable growth for the company. For us to achieve that, we want to capture as many of those providers as possible. Today there there's still over 60% of the primary care providers out there have not ordered Cologuard. So, we want to capture as many of them as possible. Can we sustain this level of pacing? Well, historically that growth had been 10,000 a quarter before Pfizer. I hope that we can sustain that level or better at least near-term. I don't expect this to reach the 15,000 level, which we did in the fourth quarter. I don't expect that to be sustainable near-term.

[Patrick Donnelly, Goldman Sachs]

All right, thank you.

[Operator]

Our next question comes from the line of Brandon Couillard from Jefferies. Your line is open.

[Brandon Couillard, Jefferies]

Hey, thanks. Good afternoon. Jeff, I didn't hear you speak to the compliance rate number in the first quarter, could you just share that with us and kind of your expectations for the next few periods relative to what was an expected uplift in that metric?

[Jeff Elliott, CFO]

In Q1, the compliance, it was 65%. That did tick up from 64% in the fourth quarter, and what we continue to expect for Q2 is 67%. So the teams are making some progress there. Long-term nothing has changed. We think we can get that rate over 70% long-term.

[Brandon Couillard, Jefferies]

Super. Then a question for Mark, when we spoke in January, I think you mentioned moving to a new sales CRM system, could you give us an update on that progress and then more specifically what you're doing around digital marketing efforts and some of the closed-loop marketing and sort of follow-up communications that I think you kind of expected to roll out to the team, in terms of functionalities this year?

[Mark Stenhouse, President of Cologuard]

Yes. So we're going to go on the Veeva or Salesforce.com that platform as a company late this year. So we've not migrated to that new platform system. It will enable all the benefits that you've outlined, closed-loop marketing, better management of the field execution. All that will be driven off iPad platform for the reps to engage their physicians and the selling message as well as to engage them in follow-up.

The journey to get there though is not just sticking with the status quo. We've kind of tailored our messaging to specific physician segments as a way to grow our ordering base for the providers as well as deep in their penetration of the use of the brand. So, we are evolving kind of the selling strategy as well as the technology platform in parallel. It just takes time with the weight of the different IT transformations that are happening at Exact Sciences to include the move to Epic, create a sequence to Veeva, onboarding appropriately behind the Epic platform change.

[Brandon Couillard, Jefferies]

Got you, thank you.

[Operator]

Our next question comes from the line of Brian Weinstein from William Blair. Your line is open.

[Brian Weinstein, William Blair]

Hey, guys. Thanks for taking the questions. Mark, I've been obsessed with these performance response curves and just wanted to ask you are those still holding, can you give us some metrics around that and are you seeing it matter if it's an Exact rep or a Pfizer rep or a joint call that sort of influences those performance response curves at this point?

[Mark Stenhouse, President of Cologuard]

Hey, Brian. The response curves are fascinating to look at. We look at weekly performance metrics of call activity. And as you've indicated, we see that data in the share targets and the independent targets between Pfizer and Exact. The curves themselves are holding true and as curves signal the more rep effort applied to an ordering physician you see greater consumption of our product. So that fundamental is still there. You also see where we have a shared target between Pfizer and Exact Sciences, deeper penetration in that cohort of doctors. So that holds up that piece because where they're sharing targets, there is also more activity. So I think the entire story is still what is I think driving a lot of the value that we're seeing quarter-over-quarter.

[Brian Weinstein, William Blair]

Is that concept of six and nine still -- does that still hold the calling on six times and the nine times as many orders? Does that still hold?

[Mark Stenhouse, President of Cologuard]

Yes, roughly that's the model that we're looking at internally.

[Brian Weinstein, William Blair]

Great. And then, Jeff, I think you mentioned or Kevin mentioned the GI sales force, can you just tell us how big that is and is a corollary to that, how does that influence your operating expense spend for the year and what do you expect that expense to be for total OpEx for the year?

[Kevin Conroy, Chairman and CEO]

Brian, why don't I take sizing and I'll give it back to Jeff for operating expense? So the sizing of the sales force is 60 representatives plus management, over half of that group has already been hired, all the management and half the reps, the half that's been hired was an internal promotion for the very best of our front-line PMR representatives rather than field sales force in primary care. The other half will be externally hired with significant GI experience, and that'll be in the field in the third quarter.

[Jeff Elliott, CFO]

So for the second quarter, I guided to a sequential OpEx increase of $68 million. That assumes selling and market relatively flat sequentially with about two-thirds of the sequential growth from G&A and the rest from R&D. If you look at selling and marketing for the year in total and compared to the fourth quarter of last year, about two-thirds of the growth that we expect this year in selling and marketing is related to the Pfizer service fee, about one-third is related to internal investments primarily the GI sales force. That will more likely hit the back half of the year as those reps come on line.

[Brian Weinstein, William Blair]

Last question for me on data, Kevin, like you said that you have something at DVW, is there other - are there other datasets for products that we should be expecting later this year as DVW is sort of the main place that we see something in any of your products in the pipeline this year?

[Kevin Conroy, Chairman and CEO]

Well, we do have data and Cologuard 2.0 that is internal data presently, and we are looking for the right conference to present that data, showing the performance of -- with the new markers, what Cologuard 2.0 looks like relative to Cologuard, and we can talk about that more later.

[Brian Weinstein, William Blair]

Thank you.

[Operator]

Our next question comes from the line of Derik de Bruin from Bank of America Merrill Lynch. Your line is open.

[Unidentified Analyst]

Hi. This is [indiscernible] on for Derik today. Thank you for taking the question. We've heard a lot of noise at OCR in past month on additional mix market developments from a lot of smaller players. We know that the heart of the Cologuard 1.0., but just we appreciate any additional color on that and then any color on the Cologuard 2.0 biomarker that we just talked about? Thank you.

[Kevin Conroy, Chairman and CEO]

Why don't we start with Cologuard 2.0? We have seen data that's quite promising internally and our goal with Cologuard 2.0 is to maintain the same level of sensitivity for detecting cancer 92% and 90% Stage 1. So when you're in a screening setting, you don't want to miss cancers, especially your early stage cancers. And then our primary goal thereafter is to improve the specificity and therefore lower the false positive rate. We saw that with the Cologuard 2.0 markers in stool and we had a head to head comparison in those samples with the current Cologuard test. So we're really pleased with a sufficient number of samples that gives us confidence to continue moving forward with the program and to sit down with the FDA, which we'll yet this year and then thereafter begin a prospective, most likely a prospective study. In terms of any data from blood based tests, we don't comment on what others may do in terms of presenting data.

The thing that is important to us and to key opinion leaders, why most importantly to key opinion leaders is the ability to detect early stage cancers with confidence at a high specificity. If you're going to have a blood based test and most blood based tests that we've looked at don't have the ability to detect pre-cancerous polyps, so by definition, you have a test that detects cancer, remember that, almost half of cancers screening population are found stage I. And so, it is at a minimum you really want to be pretty close to where the FIT test is detecting two out of three cancers. We haven't seen data like that in a prospective study from anybody and that's the data that you want to see even then that indicates that there's probably a biological barrier to detecting early stage cancers. And we think such a blood-based test would have to be priced appropriately. And it is not likely to displace the two leading test Cologuard and a colonoscopy as the preferred high sensitivity ways to detect stage I colon cancer.

[Unidentified Analyst]

And thank you for the color. Just a couple timings updates, congrats on submitting the FDA application for Cologuard 45 I just wanted to see if we have any updates on the timing for approval. And once approved, how long should we expect to get any traction of that? Thank you.

[Mark Stenhouse, President of Cologuard]

So, there's no change in guidance to the FDA approval, because that we've given previously which is first half of next year. We don't want to speculate in terms of how the agency may come back to us with questions, but obviously we have confidence in our submission based on the strength of the evidence that was submitted in our conversations to the agency themselves. And you had a second question? And you've had a second question beyond timing of review by the agency?

[Unidentified Analyst]

Yes, just how long we could get, we should expect to for that to get attraction. And then yes…

[Mark Stenhouse, President of Cologuard]

So, I think the traction question is really a byproduct of coverage and reimbursement. And I think there're a couple of things that we can signal here. One is that you know the ACS mandate for coverage of this green population which is grounded in the underlying science the epidemiology incidence rise in this population really inspired the submission and are charged to really screen this important age cohort. And it is central to the idea of detecting cancer early. And I would also say what we're saying is not only did the ACS decision influence payers like Aetna and CareFirst, and the Anthem FEP business that Kevin mentioned earlier. But even in our early discussions with our partners, and our payer partners were seeing many that we believe will likely move in the direction similar to Aetna and others that will wait for USPSTF guidance. So my view is that we will have a variable access market at the label indication approval, and that we'll see how that matures over time.

[Unidentified Analyst]

Great, thank you.

[Operator]

Our next question comes from the line of Doug Schenkel from Cowen. Your line is open.

[Doug Schenkel, Cowen & Company]

All right. Good afternoon and thank you. Q1 test volume of 334,000 tests was 19,000 better than the midpoint of your guidance. I'd be curious how much of this was new doctor additions versus order rates in terms of how those tracked versus your internal plan. I guess really what I'm trying to get at is exactly that last point I guess which is what are the key drivers to the volume upside and what is really going much better than you expected when you issued guidance earlier this year?

[Jeff Elliott, CFO]

So, this is Jeff, I can start and then maybe Mark could chime in at some of the broader drivers. So as far as the first quarter upside, most of the growth in the business comes from the increasing order rate from physicians. So if you think back to historically, we had been adding about 10,000 new providers per quarter. Q1 was a bit better at 14,000. Now remember, that's just an order, not all those orders result in a completed test during the quarter. So, by far the biggest contributor in the quarter is an increasing the order rate from physicians and they are in the, the drivers are extremely broad-based and maybe Mark could chime in some of those.

[Mark Stenhouse, President of Cologuard]

Yes. I think the things we've guided to you historically Doug, we're still in play here and there that 100 rep ads that we put in the business in August of last year. Obviously, the strength of the region frequency at the Pfizer sales force, the overlapping performance and the share targets in terms of the responder growth, the value of the TV, the value of broad market access and reimbursement, the value of health systems, all of those are maturing drivers of growth. That really I think contributed to this quarter and last quarter's a little bit.

[Doug Schenkel, Cowen & Company]

Okay. So, that's a perfect setup for my second question, which is if we look back over the past six quarters, the number of completed orders per physician has increased, or per practice has increased by an average of 0.6 sequentially meaning quarter-to-quarter. This quarter has increased by 0.9 or should -- yes, 0.9, and then I guess looking forward as the Pfizer reps increase their physician detailing as the new exact reps you hired last year continue to gain efficiencies and as the new Exact reps you hired last year continue to gain efficiencies and as the practice prioritization tools put in place last year continue to improve and gained stream, would you think it's fair to expect that if all tracks of your internal plan that the slope of improvement and orders per practice will continue to ramp over the next several quarters?

[Kevin Conroy, Chairman and CEO]

So obviously, our goal is to keep driving that rate higher. If you look today, we are only between 5% and 10% penetrated into the average providers' office. So there's a long ways to go. The internal data we have on provider stickiness and provider adoption is incredibly attractive. So we're very optimistic about the long-term. We are making the investments today to get through our long-term market share goal of at least 40%. So, we do expect that orders per provider number to continue to raise. It won't always be a straight line now. When you look at that the guidance for the year, it does reflect our confidence in the business. It also reflects some soberness when you think of the uncertainties for the remainder of the year. For example, Mark talked about the new GI reps. Well, we have to factor in a range of outcomes for the productivity of those GI reps. In addition, we are making some significant IT upgrades this year. We have to allow for a range of outcomes and a range of impacts from those changes in the business.

[Doug Schenkel, Cowen & Company]

So, okay, another good set up for my last question. Your Q2 guidance for volume and revenue suggests that you expect at least partial continuation of Q4 and Q1 trends when it comes to completed order growth sequentially and ostensibly by extension the number of new ordering providers and the number of completed orders per practice. That said, when I take your new full-year guidance and back out Q1 results and your Q2 guidance, it seems to imply that you are expecting a moderation in the pace of new practice additions and/or growth in orders for practice. And that's different from being cautious on the other impact of the OB/GYN detailing. It, I didn't hear anything on the call that suggests a second half moderation in the pace of momentum is likely to occur. Again, new advertising and the efficiencies associated with the Pfizer agreement would seemingly yield more gains in practice additions over time and Pfizer should help with practice detailing frequency and by extension order rates. Am I missing something here or are you just trying to be prudent early in the year?

[Kevin Conroy, Chairman and CEO]

Well, you're correct, Doug, that it is early in the year. We've raised the full-year guidance by more than the first quarter upside. For the second quarter, will be baked into guidance there's the highest re-order rate that we've ever seen and the second largest sequential step up in growth off of a very good first quarter. So we're extremely confident in the business. We do expect continued growth both near-term and long-term, again 40% plus is what we're targeting long-term. In the second half of the year, what we've implied for the sequential growth is a pacing above the rate that we had historically seen pre the Pfizer relationship. So we do expect continued strong growth, it is early in the year.

[Operator]

And our next question comes from the line of Catherine Schulte from Baird. Your line is open.

[Catherine Schulte, Robert W. Baird]

Hi. Thanks for the questions. First any thoughts on Medicare's recently announced primary care first program including colorectal cancer screening as one of its measures. How much of the tailwind could this be for you guys, do you typically see higher order rates from providers that are in value based models?

[Kevin Conroy, Chairman and CEO]

We're still evaluating the impact, it's early. So I think we'll be able to give you more guidance after we've had a little more time.

[Catherine Schulte, Robert W. Baird]

Okay. And then how are the cost of reps hired last summer reps relative to your expectations and then we've not to get any go-to-market strategy color for the GI sales force and how that might differ from your traditional primary care reps?

[Kevin Conroy, Chairman and CEO]

It's in every new cohort of rep we add into the population continues to outperform its precedent, and even the original cohort continues to grow over time. So it's a good news story, there's growth everywhere. I think the conditions obviously for the latter cohorts are better in terms of you know coverage and reimbursement which allows for kind of incremental growth. And we're getting better at training and knowing that you know better ways to activate our reps once they get into the market.

Specific to GI, you know here's the fundamentals are clear. We have 8,000 ordering doctors but they've ordered very thinly in the GI community, but yet we know they influence their primary care network. So the idea here is really twofold. One is we have a pipeline that Kevin's acknowledge that has an opportunity for our GI sales force to gain efficiencies on this pipeline, assets when they come to the market. But for Cologuard specifically, the idea and go to market is to make sure that they can not only educate the doctor clinically on the value of our product, but then use their partnership to then unlock their community of referring physicians. Clearly GIs are biased to call and ask the, but they also recognize the value of a non-invasive test, and they recognize the value of Cologuard as the best noninvasive test available. And now that it has universal coverage, we see that there's a real partnership opportunity here that will enable us to grow this brand to 40% market share over time.

[Catherine Schulte, Robert W. Baird]

Okay. And last one for me. Now that you have Pfizer helping out on the health system side, any potential for care gap programs be it with those health systems or payers?

[Kevin Conroy, Chairman and CEO]

I think we've just lapped a very productive collaboration meeting with Pfizer across our health system team and theirs to continue to evolve our strategy. The thing that I was most excited about is less about care gaps, but really about focusing on the fundamental strategy of putting in a Colo to cancer screening pathway within the health system and then making sure that Cologuard sits appropriately within that care pathway. And we're already seeing evidence of this partnership and the focus on those two core fundamentals to include electronic ordering to include physician access, which are things that we've got into historically. Those four things pathway, Cologuard's appropriate placement, electronic ordering, and access to physicians really unlocks value, and that's one of the things we're seeing embedded in the revenue guide. And I think that will only mature over time. The sales cycle is still long because you've got to move across a large matrix organization, but we definitely see that we focus on the right fundamentals.

[Catherine Schulte, Robert W. Baird]

Great. Thank you.

[Operator]

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

[Dan Brennan, UBS]

Great. Thanks. Thanks for taking the question. So the first one is on the test utilization back to Doug's question, I was wondering maybe Mark or Jeff or Kevin for that matter, what are the reasons you hear why doctors amongst your say 160,000 that have so ordered at least once? Why they might order once or twice and don't reorder, and kind of one of the methods in place to overcome that pushback? I mean we just finished a second survey that showed nearly 40% of docs still cite lack of insurance coverage or out-of-pocket expenses. I heard obviously you have that messaging last year but now the time has elapsed. I'm just wondering why that's still such a hurdle?

[Kevin Conroy, Chairman and CEO]

I think there're two answers. One is the one-year survey acknowledged, which is once you have broad access and you have 300,000 potential ordering physicians getting the message to that universe of doctors takes time and it takes repetitive effort to really stick the message in their mind space before converts to actual ordering behavior. I think the other real issue is you've got a market that's been anchored to colonoscopy for uterus right and you will find some physicians that believe that any non-invasive test is an alternative test versus offering patients the choice at the offer at the age of 50 when they convert. So I think it's really converting doctors to believe that Cologuard is a frontline screening option for all patients and doctors get to that adoption cycle at different points in time. If you look underneath that what motivates them to move faster is more frequent rep contact, the more rep contact we have between Pfizer and Exact Sciences it does drive that behavior over time so it does signal where we need to place our reps the frequency of which we need to place them in doctors which should give you some sense of how we think about sizing of the sales force and how we then also apply the media TV effort that mirrors it.

[Dan Brennan, UBS]

Okay. Thank you for that. And then maybe on the retest opportunity, Jeff, maybe could you just talk through if you don't want to give us an exact number but biomass nearly 240,000 patients are eligible and if you kind of take out positives and assume some kind of move or patient or excuse me patients lost due to move or whatever else might be still coming up, but probably north of a 150,000 patient opportunity. So I'm just wondering kind of what you've assumed in your guidance for 2019 and any other color on how that retest opportunity is developing?

[Jeff Elliott, CFO]

We've assumed that we continue to make steady progress which we have done. We're not satisfied with the rates that we're at. We've got a Tier 1 project team on this one and I'm confident that long-term we will do a better job at capturing more of these patients. I think Mark could talk to some of the initiatives underway to capture them?

[Mark Stenhouse, President of Cologuard]

Yes, I mean I think it's very clear that we've made some progress, but not enough to address this. So the way that you really anchor patients to reorder is to, you know part of this is the early cohort at a variable experience and we had a modest coverage in terms of reimbursement. They may have had a bill, right, so getting that patient back to us requires different types of marketing initiatives and we're really kind of testing it if it doesn't work, trashing and trying something different, so there's a lot of testing control experimentation going on to try to find the right sequence of engagement with patients. But I would say there's a still lot to learn here. This is an area of opportunity for us and I think we'll get better at this simply by going through that experimentation phase.

[Dan Brennan, UBS]

And maybe just one final one for Kevin, Kevin as you kind of look back at the way the Pfizer relationship has progressed two quarters of live action under your belt kind of, can you to speak to anything that may have surprised you or anything that's either going better or maybe not as well as expected? Thank you.

[Kevin Conroy, Chairman and CEO]

Thank you. Dan, Pfizer is a tremendous partner with quality people who are committed to the same cause that we are, so we're thrilled with the caliber of the team we're working with and it's early where we still have a lot of work to do together and so I think the best is yet to come there.

[Dan Brennan, UBS]

Great. Thanks.

[Operator]

Our next question comes from the line of Puneet Souda from SVB Leerink. Your line is open.

[Puneet Souda, SVB Leerink]

These practices -- I was hoping to understand what's your sense of overlap now among the sales forces and sort of I'm wanting to understand are you still employing the same targeted strategy of select high potential physicians or has that broadened a bit or what's the timing, when do you think that can potentially broaden out that you have more reps?

[Mark Stenhouse, President of Cologuard]

So, yes, the targeting strategy is biased based on previous ordering history and Medicare affiliation is the kind of two-by-two grid that we use, that exact sciences, you have to remember that Pfizer has a portfolio of products that they're targeting strategies based on the range of products. So there is an exact overlap in the targeting methodologies at nor will there it be because Pfizer isn't selling Cologuard in a P2 or P3 position again against the portfolio. So we have overlapping targets, we have independent targets. What we see is in the overlap targets, you see a greater traction and growth and the new order rate. I think we will evolve based on our understanding of responsiveness as response curves that we've talked about over the past several calls. We will use that data to inform our sales force sizing strategy at exact and where we decide to take the size and scale of our frontline sales force going forward.

[Puneet Souda, SVB Leerink]

Okay, great. And this one is for, Kevin, maybe if I could ask around DDW, is it safe to assume that the highlight there is going to be really around liver or should we be actually looking for some of the markers maybe not specifically around blood, but may be around Cologuard 2.0? Thank you.

[Kevin Conroy, Chairman and CEO]

Two main things, number one, a number of abstracts focused on Cologuard wait to DDW to see what those abstracts are, I think five or six altogether. And then also data around pancreatic cancer detection from blood a sizable study in collaboration with the Mayo Clinic. So those - those are the key things that you'll see Cologuard 2.0 will come at a later date Cologuard for a colon cancer from blood. I'd like to restate what we've said in the past. We think that we have a product that is best positioned to enter the market at some point. It's still not a test that would displace Cologuard or cannibalize Cologuard in a meaningful way. Eventually, we think that is something that we would want to bring to patients and physicians who refuse either colonoscopy or Cologuard. And that data, we haven't decided that the right time to present.

[Operator]

And our next question comes from the line of Mark Massaro from Canaccord Genuity. Your line is open.

[Mark Massaro, Canaccord Genuity]

Hey, guys. Thanks for the questions and congrats on a good quarter. My first question is not all Americans have a primary care physician, and so there are some lab providers that do enable consumers to go online and request a physician that order a test. Can you just speak to how or whether or not this is something that you're thinking about employing going forward because theoretically it could drive some additional utilization?

[Kevin Conroy, Chairman and CEO]

We agree that there is a disconnected patient physician base that could be activated with consumer initiated testing being able to go online and activate with a ordering doctor Cologuard. This is something we are actively researching and exploring. And I think you would likely see us pilot something within the back half of this year or early next year.

[Mark Massaro, Canaccord Genuity]

Okay, great. And I know since working with Pfizer, I think it's my understanding that you've been able to go in network at a lower rate, say, per commercial. So, I guess my question is, is there an opportunity at some point to find an optimal level of advertising that's effective that can drive enhanced utilization while perhaps shrinking the dollar amount of the spend?

[Kevin Conroy, Chairman and CEO]

So, we definitely have response curves like we have in the sales force for TV media investment. That level of responsive medicine where we are in the curve guides the overall level of investment we need to make. The shifting patterns of consumer consumption of network TV versus video on demand versus cable and the expense of each of those cohorts of TV consumption or media consumption drives ultimately our media and buying plan. We gain the efficiencies of Pfizer, but frankly, some of our demographic target is consuming media and more expensive channels. So, we actually have to figure out the right level of investment in aggregate and then we have to figure out where to place that investment in terms of where our consumers are actively watching TV. And that is how we are going to guide the investment. Whether the overall investment goes up, down or stays neutral, we don't fully know at this point in time, but I definitely think it's an evolving strategy.

[Mark Massaro, Canaccord Genuity]

Great. And then my last question on the liver test, can you give us a sense for the size of this case controlled study? When you expect to potentially initiate a clinical trial? And then, can you speak to any regulatory pursuits?

[Kevin Conroy, Chairman and CEO]

We have not disclosed whether we will launch a liver test as a lab-developed test or as a FDA cleared or approved test. We certainly will have conversations with the agency and work with them. In terms of the size, if a case control study is in terms of the number of cancers, it's several hundred and in terms of the number of controls it's approximately in the 1,000 range. And we don't plan to run at the present time a prospective study at -- three months ago that was the plan. We know based on further conversations with key opinion leaders, we plan to launch either as an FDA approved test or a lab developed test with a large what will be a fourth or maybe even a fifth case control study that gives us confidence in the sensitivity and specificity.

[Operator]

And we do have one more question from Bruce Jackson from The Benchmark Company. Your line is open.

[Bruce Jackson, The Benchmark Company]

Hi. Good evening and thank you for taking my question. I was wondering if I could get the Medicare percentage of the test mix for this quarter, and then do you have a forecast for the -- where you're thinking you might end up by the end of the year?

[Kevin Conroy, Chairman and CEO]

So in Q1, the Medicare volume mix was 50%. That's down from 52% in the fourth quarter. As far as where that goes, I would expect that over the course of this year to continue shifting away from Medicare towards commercial. Long-term, I think they're both somewhere in the mid-40% range both commercial and Medicare. Keep in mind that outside of commercial and Medicare there's some smaller components of this market such as Medicaid that collectively add up to 5 points or 10 points.

[Bruce Jackson, The Benchmark Company]

Thank you.

[Operator]

And our last question comes from the line of Per Ostlund from Craig-Hallum. Your line is open.

[Per Ostlund, Craig-Hallum]

Great. Good afternoon, everybody. I wanted to follow up on one of Mark's answers to Mark Massaro's question related to the television campaign so you went on to network TV kind of full bore for the first time in Q4. Do you hold network to a different bogey or a bar than you held cable? Do you measure the ROI any differently do you -- can you really delineate it from each other all that well and or I guess at a point does it even matter as media just media?

[Mark Stenhouse, President of Cologuard]

I mean I think the idea with media is to try to drive viewership to your asset and you're trying to chase your demographic target where they're actually consuming media. So our move to network and sports NFL which you saw in fourth quarter and you'll see us likely play in sports going forward because there's broad viewership there is really a mix of optimizing our mix the way I think of it is you should look at our what we're trying to do is gain efficiencies in two different places. We're gaining efficiencies of the Pfizer buy because they buy at a better aggregate rate and we're learning from Pfizer and through our own team, where are our demographic targets consuming media then optimizing that mix of investment by channel and overall that should drive a better return on that investment.

[Kevin Conroy, Chairman and CEO]

I would add the ROI on TV is already very, very strong. What Mark talked about is looking for ways to always improve the ROI. So, even as it stands today, the ROI is great. We've seen payback numbers when you look at the, the amount of ad spending that it takes to drive new physicians. We've seen payback numbers that it takes perhaps fewer than four Cologuards worth of gross profit to cover the payback on each new provider that orders the test. And that assumes that all of the TV spending goes towards new provider adoption, which we know that it does help drive incremental orders from existing providers. So it's an incredibly good ROI.

[Per Ostlund, Craig-Hallum]

Excellent. Thanks, guys. Appreciate it.

[Operator]

And I'll now turn the call back over to Kevin Conroy for closing remarks.

[Kevin Conroy, Chairman and CEO]

Thank you for joining us today to review our first quarter results and the progress we made towards our 2019 priorities. Our strong start in this year, the execution of our sales and marketing teams, the foundation we've built for future growth gives us confidence that Exact Sciences is uniquely positioned to become the leader in early cancer detection. Thank you to the entire team at Exact Sciences for your hard work and continued commitment to our mission. Thank you.

[Operator]

And this does conclude today's conference call. You may now disconnect.