Exact Sciences Corp

NASDAQ:EXAS

Earnings Call Transcript 2019-Q3

[Operator]

Ladies and gentlemen, thank you for standing by. And welcome to the Exact Sciences Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today’s conference is being recorded.

I would like to hand the conference over to your speaker today, Megan Jones. Thank you. Please go ahead, madam.

[Megan Jones, Manager, Investor Relations]

Thank you, Vinita, and thank all of you for joining us for Exact Sciences third 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 third 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. Descriptions of the risks and uncertainties associated with Exact Sciences are included in our SEC filings, which can be accessed through our website.

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

[Kevin Conroy, Chairman, President and Chief Executive Officer]

Thank you for joining us this afternoon. The Exact Sciences team delivered another solid quarter and made significant progress enhancing our internal infrastructure, positioning us for long-term sustainable growth. We screened 456,000 people with Cologuard in the third quarter and more than 3 million people over the last five years. During the quarter, the team delivered $219 million in revenue. We also implemented Epic’s best-in-class electronic health record system as the foundation of our IT infrastructure, began processing Cologuard samples at our lab and prepared for the Genomic Health combination. We made meaningful progress on our pipeline with an expanded label for Cologuard to include people aged 45 through 49 and new data for Cologuard 2.0 and our liver cancer test.

Exact Sciences is positioned to be the cancer diagnostic leaders for years to come. The strong foundation we’ve built for Cologuard and the capabilities being added by the Genomic Health team will help us capture a significant portion of our combined 20 billion total addressable market and deliver more innovative diagnostic tests to people in need. Today, we will review our third quarter financial performance and full year guidance and discuss progress on our 2019 priorities.

Our CFO, Jeff Elliott, will now review our financial results.

[Jeff Elliott, Chief Financial Officer]

Thanks, Kevin. And good afternoon, everyone. Third quarter revenue increased 85% to $219 million on strong Cologuard volume growth. Average Cologuard revenue per test was $479 in line with the second quarter. We expect revenue per test in the $480 range during the fourth quarter. Third quarter Cologuard cost of sales improved $10 to $114 per completed test. Lab and operational efficiencies helped offset additional costs from the opening of our new lab.

We expect fourth quarter cost per test to be in the low to mid $120 range, as we will have a full quarter impact of the new lab. Over time we'll work to offset the new lab costs through volume leverage and operational efficiencies. And we continue to see a clear path to Cologuard costs per test $100 or better.

Third quarter gross margin was 76%, an increase of 130 basis points. Third quarter operating expense totaled $202 million, up 56%, which was 29 points lower than revenue growth. Total selling and marketing expense of $86 million was better than expected due to the timing of certain marketing programs. Selling and marketing included the Pfizer service fee of $16 million, which was about $2 million more than we had assumed in guidance.

G&A expense of $81 million included $7 million in transaction-related costs for the planned Genomic Health combination as well as $2 million in integration related costs, neither of which were factored into guidance. We also invested in our IT infrastructure with the launch of Epic and an upgrade to our SAP ERP system.

R&D expense was $35 million, invested in sample collection activities and studies to support our pipeline, including expanding Cologuard label to age 45, Cologuard 2.0 and our liver cancer test. In the fourth quarter we expect operating expense to increase about $10 million sequentially, due primarily to additional digital selling and marketing efforts. We expect G&A to be relatively flat, excluding any fourth quarter Genomic Health costs. We expect R&D to be relatively flat in the [third quarter].

Total third quarter CapEx was $41 million. For the full year we expect CapEx of approximately $185 million. Third quarter cash used totaled $79 million, including $43 million paid to Pfizer for service fees incurred from beginning of the partnership through the end of June. We ended the quarter with cash and securities of $1.2 billion.

Turning to our guidance, we expect revenue of $802 million to $810 million and Cologuard volume of 1.67 million to 1.68 million tests. With just two months left in the year and the major holiday still in front of us, you should focus on the guidance range as the most likely view of how we see results playing out.

For the fourth quarter, we expect revenue of $221 million to $229 million.

I will now turn the call back to Kevin.

[Kevin Conroy, Chairman, President and Chief Executive Officer]

Thanks, Jeff. The Exact Sciences team is focused on three priorities in 2019. One, powering our partnership with Pfizer; two, enhancing Cologuard; and three, advancing our pipeline of blood-based cancer diagnostic tests.

Starting with our first priority. We're confident that we can capture at least 40% of the U.S. colorectal cancer screening market from about 5% today. Our talented sales teams, partnership with Pfizer, innovative marketing campaign and deep payer relationships provide a powerful commercial organization to support Cologuard's growth.

The Pfizer partnership has been valuable in driving Cologuard's adoption and the teams are working well together. Partnering with gastroenterologists will help Cologuard reach more people. In July, we launched a new GI sales team to call on these important influencers in colon cancer screening.

During the third quarter, we accomplished two major milestones in building a robust infrastructure to support Cologuard's growth. We began processing tests at our new lab in Madison, increasing our total lab capacity to 7 million tests per year. We also successfully implemented Epic’s powerful health IT platform. Epic’s EHR system will provide an enhanced experience for Cologuard users, physicians and our employees. In the future, Epic will enable electronic ordering for a greater share of our customers. It will also allow powerful analysis and enhance our understanding of the entire Cologuard experience, improving our patient compliance and re-screening efforts.

Our second priority is enhancing Cologuard. There are two main components of this goal for 2019; expanding Cologuard’s label to include ages 45 to 49, and laying the foundation for an improved version of Cologuard. Expanding Cologuard’s label is an important opportunity for growth and for detecting colorectal cancer earlier. Last month, the FDA approved our label expansion providing access to Cologuard for the 19 million average risk unscreened Americans ages 45 to 49, and increasing its total addressable market by $3 billion to $18 billion.

Over the last 25 years, colorectal cancer incidents has increased more than 50% in people under the age of 50. It's incredibly important to screen younger people earlier. Cologuard is a convenient effective option that fits well into this younger age group’s busy lifestyle.

Insurance coverage is essential to broad adoption in healthcare. Several national and regional payers have lowered their coverage screening age for Cologuard to 45, following the American Cancer Society guideline update last year, including Aetna, CareFirst and BlueShield of California. This is encouraging progress and our team is engaging with other payers, educating our salesforce in developing new marketing plans to help increase awareness for the importance of screening in this age group.

Cologuard 2.0 has the potential to lift Cologuard's clinical and economic value proposition even higher and further differentiated as a frontline screening test. Our primary goal is to increase Cologuard’s specificity, while maintaining a high level of sensitivity. Higher specificity further enhances the overall health economic performance of Cologuard in the screening setting.

Today, we presented data at the American College of Gastroenterology Scientific Meeting demonstrating that we have identified markers with the potential to achieve our performance goals. At 92% specificity, the new markers were 92% sensitive for cancers and 65% sensitive for precancerous polyps. We are pleased with these strong results as we saw a 5 point increase in specificity, while maintaining a similar level of sensitivity.

It's important to note that precancerous polyps tested in this study were typically larger in size than we saw in our large prospective trial for Cologuard and therefore likely easier to detect. We may see some pre-cancer sensitivity improvement with Cologuard 2.0 from the current markers. However, the size of the pre-cancers polyps, stage of the cancer, timing of sample collection relative to colonoscopy and many other factors can enhance performance in case-control studies.

Based on these strong results we’re initiating BLUE-C a prospective pivotal to validate the performance of this new enhanced version of Cologuard and prepare for an FDA submission. We plan to enrol our first patient in BLUE-C next month. This is an exciting step towards setting an even higher bar in the early accurate detection of colorectal cancer.

Real world evidence is critical to supporting continued Cologuard adoption over time. Working with Mayo Clinic we recently initiated Voyage, a 150,000 patient prospective observational study of individuals using Cologuard for routine screening. The seven year study will follow individuals to evaluate the real world impact of Cologuard on screen, incidents and mortality rates.

Our third priority is advancing our blood-based cancer diagnostic program. We are uniquely position to be the leading cancer diagnostics company for years to come. Our collaboration with Mayo Clinic and the success of Cologuard provide a platform for future advancement. The combination with Genomic Health will build on our success creating an even stronger growth platform for Cologuard, Oncotype DX and our pipeline.

We’re bringing together some of the greatest minds in cancer diagnostics to form a best-in-class research, development, clinical and commercial organization. Together, we’ll have the global infrastructure and a stronger financial profile to accelerate the availability and growth of new innovative tests to patients in need.

Liver cancer is the number two cancer killer globally and patients with advanced liver disease need more accurate and convenient testing options. We’re presenting data at the American Association for the Study of Liver Diseases Meeting next month demonstrating superior performance of our liver tests compared to the alpha-fetoprotein test. We’ll provide more details about these data after their presented at AASLD and no longer under embargo. We’re also enrolling additional patients to finalize test development and plan to make the test available in the second half of next year. Our goal is to generate real world evidence to support guideline inclusion, broad reimbursement and adoption over time.

We believe tests that can accurately detect pre-cancer and early stage colorectal cancer like Cologuard and colonoscopy will lead the U.S. screening market while a blood-based test could provide another option for some people. To support validation of our blood-based colorectal cancer screening test and create significant cost and time efficiencies, we plan to collect blood and store in our BLUE-C study beginning in the coming weeks.

Our years of work with Mayo Clinic combined with our low cost accurate testing platform and extensive clinical trial, regulatory and commercial capabilities, position us as the leader in the space.

We’re now happy to take your questions. We really are happy to take your questions.

[Operator]

[Operator Instructions]. Your first question comes from the line of Brian Weinstein with William Blair.

[Brian Weinstein, William Blair]

I wanted to start out just on -- a broad question on the Cologuard franchise right now. It sounds like things are going okay relative to your expectations. But I mean, you do have a lot of things going on with Epic and GI salesforce and some other things I think you guys mentioned. So Kevin, can you just talk a little bit about any kind of an impact that those things might have right now relative to the Cologuard franchise in total? And then as part of that also just, how you’re seeing the salesforce working with Pfizer? Are we seeing the kind of full efficiency between the salesforces at this time? Or is there still more to go if those two groups get together?

[Kevin Conroy, Chairman, President and Chief Executive Officer]

Thanks, Brian. What we see is a continued strong progress towards our goal of reaching 40% penetration or market share of what today stands at about 106 million person market opportunity. And all of the signals that we see and the work that we're doing is preparing for that long-term. There are always some minor disruptions at any time. We did implement Epic during the quarter, really proud of the work that the team did there to make a major IT transformation during the middle of a quarter and still achieve record results. We also saw some of our very best reps move into new roles with -- in the GI sales force. And as it relates to Pfizer, the partnership there is stronger than ever. The teams really join the marketing, the sales, the health system sales are -- we're seeing significant progress and we have high expectations for next year.

[Jeff Elliott, Chief Financial Officer]

Hey Brian, this is Jeff, just to add what Kevin said. When I look across the key leading indicators of the business, I see very strong momentum. So for example, when I looked at our salesforce, I can look at the productivity of each cohort of reps that we've hired over time, recall, we've typically hired a new cohort every year. Every cohort of reps continues to get most productive. So even the reps of five years ago continue to get more productive each year.

On top of that, it’s physicians that have ordered Cologuard, right, so over 180,000 total providers that have ordered. Every cohort of providers based on when they first ordered, when I look at different quarters of first order, they continue to get more productive. So we're seeing very good incremental productivity across our reps and across the physician base. So I see very strong momentum across the business.

[Brian Weinstein, William Blair]

And I'll let some others I think follow-up on some of that. But just on the blood stuff, can you give us just an update where you guys are as far as collection of data internally? You've doubled the number of blood samples. I think you were getting out of one clinical trial or just an enrollment of trying to get samples. Now you're collecting in 2.0 the blood samples. So can you give us an idea just where you think you are in development here and when we could get an update on something more formal as far as timeframes to see some data from you guys? Thank you.

[Kevin Conroy, Chairman, President and Chief Executive Officer]

Brian, we have recently completed a case-control data or case-control study demonstrating strong performance with the blood-based colorectal cancer test. Let me take a step back here, the way that we see the opportunity is that, colonoscopy penetration had leveled off for about the 10 year period prior to Cologuard being FDA approved and with colonoscopy you have a highly accurate but a low patient-friendly test. And with Cologuard, you have high accuracy and high patient friendliness. And what you've seen is, significant adoption among people that never been screened before with Cologuard. The FIT test, you see the opposite, you see our lower performance yet high ease-of-use on the patient’s part and what we're seeing now overall is Cologuard taking share from colonoscopy in the screen setting and the FIT test and importantly, expanding the overall population.

A blood test has -- like any of the data that we have seen has lower performance than even the FIT test in terms of pre-cancer detection, which is really important as models -- as the data then feeds these models, and similar performance for cancer detection at a similar specificity.

So, we believe as a result of that, that a blood test has to be priced appropriately and that it has more of a niche, because of its performance characteristics, it’s likely to model out as an annual test, it's unlikely to model as in every three-year test putting pretty significant pressure on pricing.

The other thing to know about a blood-based program is we don't anticipate having this study done completed until after it's too late to be in the next USPSTF guidelines, that's true we think of any other entrants in the space. So, the first time a blood-based test would potentially be in the USPSTF guidelines would be in the 2026 to 2027 timeframe.

During that time, we intend to continue to grow the market penetration of Cologuard and to continue to -- like we referenced with the Voyage study and Cologuard 2.0 to continue to raise the standard of the bar and enhance our standard of care position in the guidelines. So, that's how we see the overall opportunity with the blood-based tests. We're pleased with our performance and we have not yet decided when we will make that performance available publicly.

[Operator]

You next question come from the line of Brandon Couillard with Jefferies.

[Brandon Couillard, Jefferies]

Thanks. Good afternoon. Kevin, just coming back to the third quarter. To what extent you think Genomic Health was a distraction at all in the period? I know you also pulled the reps out for some period of time to go through training for Cologuard 45. Do you think either of those two dynamics had an impact on the third quarter? And then, Jeff, as we look at the fourth quarter guide, it seems to imply about sequential increase of about 15,000 tests which would suggest that the utilization per doc might actually decline sequentially. Can you help us seeking through some of the moving parts and factors that kind of influenced your guidance on the fourth quarter?

[Jeff Elliott, Chief Financial Officer]

Brandon, this is Jeff. First question on the third quarter Genomic Health and GI transition. The team has done a very good job of working through all these things. And like I said before we have very broad momentum throughout the Cologuard business. I always go back to the size of this market, a 106 million people, long-term we’re headed to at least 40% share, we have 5% today. Nothing has changed about this business. It is very strong. You had commenting about fourth quarter guide, I would say for the fourth quarter keep in mind when you look over the five years now of history, in all those years but one we did see a small downtick in the fourth quarter in terms of tests per doctor. The simple reason is seasonality. When you head into the fourth quarter you have seasonal headwinds from the holidays. Patients don’t go out to see the doctors as much around the holidays and that impacts our business temporarily.

Over the long-term we expect continued momentum. When we look at the next year this is significant number of drivers and Mark can add to this, but we have a lot of new drivers coming on next year and the following year. So, we are very optimistic about this data of Cologuard.

[Mark Stenhouse, President, Cologuard]

Yes. Thanks Jeff, this is Mark. There are so many positive drivers, the first that Jeff highlighted I think is the size of the market over a 100 million Americans and our share position, which gives you a sense of the possibility going forward. A big part of that is Cologuard 45 and 90 million Americans that need to be screening. It’s our moral obligation to screen that population. The incidents rate of increase is over 50% and we’ve seen obviously the label change and very good training, the training was done quickly in an expedited format. We’re not communicating the doctors about that. The other piece about the business, I’m really excited about is the fact that 96% of our patient population is able to receive Cologuard without any cost share, a zero dollar co-pay for almost the entire available market. You take that, you add on the re-screen business, the three year interval and all patients have to start come back to us next year. You add back that health systems we’re starting to see an increase in electronic ordering out of our health systems which is a by-product of strong collaboration with Pfizer. I really think it gives you a sense that what’s in front of us is a really, really strong business model.

[Brandon Couillard, Jefferies]

That’s helpful. Then Mark maybe sticking with you, one follow-up. Do you still plan for the Veeva CRM rollout in the fourth quarter? And what impact do you think that has on productivity and how quickly that should begin to sort of boost the productivity of the salesforce? Is it something that happens fairly soon or is it more measured over a period of time as they get more familiar with the platform?

[Mark Stenhouse, President, Cologuard]

Yes, we are launching Veeva the first week of December. Yes, I think it makes us more productive over time. I don’t think you see a immediate productivity in part because of the timing of year but launching the tool. It enables the representatives to better manage their business, their doctor engagements. We will also be putting our marketing content on the Veeva platform to their iPad which will enable them to have a better conversation with their physician. So I think you’d really see the productivity in next year.

[Operator]

Your next question comes from the line of Derik de Bruin with Bank of America.

[Derik de Bruin, Bank of America]

So I’m just curious, the pro forma deal model that you put out there basically implies standalone -- growth of standalone Exact on a year-over-year basis of about 40%. Are you comfortable with that number as it’s out there right now and you’ve got something with that?

[Jeff Elliott, Chief Financial Officer]

Derik, This is Jeff. We plan to issue 2020 guidance on our fourth quarter call, which is when we typically give it. I'm not sure which model you're referring to, but always said about next year is what we said in the last call of $1.6 billion of revenue, and $1.2 billion of gross profit, we haven't commented beyond that.

[Derik de Bruin, Bank of America]

Doing the math on the pro forma number for the company and the standalone number in terms of the filing just sort of back into the 40% growth rate on Exact that way, that’s how I was getting there. Anyhow, so can you talk about progress in getting rescreening, given that there's a number of people who are re-testing?

[Mark Stenhouse, President, Cologuard]

Hey Derik, this is Mark, the rescreening business is obviously a growing opportunity for us and is sizable next year. We've continued to outreach to patients and see not only a better compliance when a patient actually has rescreened test ordered, they return it at a higher compliance rate than our rest of patients, the new screened patients. We continue to look for productivity gains. I would say we've not completely solved this yet. But we have made measured performance. We continue to try ways to better engage patients both digitally and through written communication to get them to activate to come back to us.

I will say that once we get more embedded electronically, both with Epic and into electronic medical record, we'll continue to see leverage in this opportunity.

[Derik de Bruin, Bank of America]

And what was the compliance over the quarter?

[Mark Stenhouse, President, Cologuard]

67%. And then when I look ahead to next quarter, I expect it to be at least 66%. There's always a bit of a seasonal impact. Again, similar to what we said about the holidays from a completed test standpoint, around the holidays, patients comply to study slower rates. So expect it to be done a little bit in the fourth quarter.

[Operator]

Your next question is from the line of Doug Schenkel with Cowen.

[Doug Schenkel, Cowen]

So both Brian and Brandon asked about Q3 performance and what's implied in guidance for Q4. I apologize but I don't think we got out of you what we're looking for. So I'm going to take another shot. I think almost all of us on this call know about the market opportunity. It's huge and we're excited about your positioning to get more people screened for what's a very treatable cancer. That said, what we appreciate that I know you appreciate part of our job is also understand -- to understand how well you're executing the plan underlying trends in the business. So again, maybe to take another angle on this, in the third quarter while orders for doc improved point 0.07 in Q3 relative to Q2, this was actually a moderation relative to the average we’ve seen in terms of sequential growth in that metric over the past six quarters. Were there transitory dynamics in the quarter? Several of them have been listed already. Were there transits or dynamics in the quarter that impacted productivity as measured by that metric that you don't expect to continue in the long-term? That's the first question.

The second question, again going to guidance, is you talked about a seasonal moderation Jeff, but I don't think that, that was true last year. And if we think about things like the fact that the Pfizer reps as well as your reps that you hired in the back half of last year are just hitting their stride, spending on advertising is not only increasing but increasingly going for Pfizer which is supposed to actually increase the efficiency of spend. Why wouldn't those things -- especially given as you said how early the stage of market penetration is, why wouldn't those things overpower any seasonality of a business?

[Kevin Conroy, Chairman, President and Chief Executive Officer]

Hey, Doug. I'll first take this and I’ll pass it to Jeff. We appreciate the fact that you have a job to do and I think what we're trying to say is, our over time you have seen fluctuations in the performance. What you're looking at here is a record quarter of 90% order growth and you have to put all of this in the context that there are always puts and takes at any given time, when you are moving reps around, when you are putting in a new IT platform, when you have a large partner with dynamics on their own. And what we’re trying to say is, put all of that noise aside and look at the track record of continued growth and the growth is driven by this underlying growth in the overall number of people, who are willing to get screened, and we have seen this not change much since we launched Cologuard that 50% of people get a Cologuard test have never been screened before. With 19 million Americans in the 45 to 49 age group and about 35 million Americans in the older age group that had never been screened, this market is going to grow and it's going to continue to grow at a steep pace. So, we're not going to get into all of the dynamics of a quarter that was a really strong quarter. What we will say is we're very confident as we look at next year. Jeff, do you want to provide any additional color?

[Jeff Elliott, Chief Financial Officer]

This is Jeff. Just a comment on Q4. So, when I look back over every year since launch, Q4, the completed tests per physician have been down sequentially relative to Q3. So, all the year that was not the case with 2018. In 2018, keep in mind that we had just added some reps during the middle of the third quarter. In September, we had some new coverage wins with the [FIT] momentum, and then the start of the fourth quarter our Pfizer partnership began. So, there was a large unique tailwind to the fourth quarter. The more normal trend though and one that you should expect going forward is to have a slight downtick in the completed test per physician in the fourth quarter. That's necessarily that the longer term trends aren’t clear, which Kevin talked about. Longer-term, the number of completed tests per physician should grow up significantly. To-date, we've only captured just about 5% of the available patients per physician. There is about 300 patient on average out there today per physician that could today use Cologuard. So, it’s a huge market and we're just getting started.

[Doug Schenkel, Cowen]

Okay. Thank you guys for that. I appreciate you indulging on those topics again. Just a couple on BLUE-C. It looks like you have reduced the age cut off to 40. Could you just walk us through why you did that and what the broader implications are? And then just from a performance standpoint, if I remember correctly, there was a drop-off in sensitivity when you moved from the case-control study to DeeP-C, are the reasons you wouldn’t expect the same type of drop-off this time? Thank you.

[Kevin Conroy, Chairman, President and Chief Executive Officer]

Sure. Thanks. Well, the reason that we included age 40 plus is to make sure that we have data showed there ever be a further lowering of the age in the colon cancer screening guidelines. Most likely, we see that the guidelines staying at age 45 for some time. It's an opportunity though for us to evaluate performance in that even lower age group. The other key differences here between BLUE-C and DeeP-C is we’re including patients with the second -- with more than two first degree relative with CRC or one first degree relative with CRC before the age of 60. So, people with a family history or patients with a family history of the genetically previous position to colorectal cancer like FAP or linked syndrome. We also have a 120 sites versus 90 sites in the DeeP-C study and we’re also doing optional blood collection. We expect to get blood -- collect blood from most patients in this study. Obviously people are a lot more familiar with Cologuard now than they were when we initiated the DeeP-C study. So, we’re confident that we can meet our enrolment goals in the timeframe we’re looking at.

And in terms of the performance, do we expect the performance drop off as we look from a case-control study to a prospective study? That is almost always the case that you see that performance drop off. The key thing here though is specificity. The specificity of 92%, we’re fairly confident that we will be north of 90% specificity given that that’s where we set to cut off in the large number of patients that we have studied, many in that prospective environment. But yes, you will always see whether it’s a blood-based test or a stool-based test you would expect to see some performance degradation.

[Doug Schenkel, Cowen]

Okay. Thank you very much.

[Kevin Conroy, Chairman, President and Chief Executive Officer]

Yes. And one thing to note Doug that is we’ve put out the data comparing Cologuard, the current version to Cologuard 2.0 to show the relative performance difference, because that can give you some indication of our confidence level that Cologuard 2.0 is actually a better test.

[Operator]

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

[Catherine Schulte, Baird]

Hi guys. Thanks for the question. First for BLUE-C. How long do you expect that trial to take in? And when do you think the all-in cost of the study will be?

[Kevin Conroy, Chairman, President and Chief Executive Officer]

We have not provided clarity on the former, I’ll let Jeff decide whether he wants to provide clarity. Yes. Here is all within the former, the Cologuard DeeP-C study took I think between 18 and 21 months thereabout and we shouldn’t be longer than that, that’s …

[Jeff Elliott, Chief Financial Officer]

That’s right. Yes Catherine, this is Jeff. DeeP-C took about 18 months to enroll and we’ve said before it cost around $50 million all-in. This one, over time Exact has gotten even more efficient at running these big studies. We’ve got a lot of experience running these studies. So, it is a core competency, so as Kevin mentioned our goal will be to get this done as quickly and efficiently as possible.

[Catherine Schulte, Baird]

And then just to clear on the blood test piece of that. If the test performs well, is your intention to use BLUE-C as the FDA pivotal trial for the blood test as well? And then off of that I know you aren’t talking about performance of that blood test, but can you just say how many patients you’ve included in that case-control study you mentioned Kevin?

[Kevin Conroy, Chairman, President and Chief Executive Officer]

In terms of the blood case-control study?

[Catherine Schulte, Baird]

Yes.

[Kevin Conroy, Chairman, President and Chief Executive Officer]

We haven’t disclosed that but it was sufficiently powered to give us confidence in terms of the number of cancers.

[Jeff Elliott, Chief Financial Officer]

And then yes, Catherine, this is Jeff. We do intend to use these blood specimens collected as part of BLUE-C towards an FDA submission.

[Catherine Schulte, Baird]

And then last one for me on 45 to 49, on your website it says that 74% of Cologuard patients in that age group have had no out of pocket costs for screening, which seems pretty high for this early on. And for that 1.6 billion revenue number you've talked about for 2022, now how much of impact do you think that age group could have on results next year?

[Mark Stenhouse, President, Cologuard]

Catherine, it’s Mark Stenhouse. So the 74% number is a reflection of some of the positive news we seen from Aetna, CareFirst and BlueShield of California that Kevin mentioned. We're in active conversations with all the other national payers. We have confidence that those conversations are progressing. I would say that a lot of them are anchored to the USPSTF evidence review of this age cohort, which we likely believe will happen in 2021. So I think we'll have to wait and see on the payer coverage that the portion of the 45 to 49, I think will be gated by the access that's available for that patient population as it grows, I think that business will grow with it.

[Jeff Elliott, Chief Financial Officer]

Kevin this is Jeff. Just to add to what Mark said, part of why we're so excited about 45 to 49 is that this 19 million person addition to our target market includes patients that are most all unscreened. So when you look at the number of incremental people who are available, it's about a 50% growth and people who can today use Cologuard. On top of that in the 45 to 49 year old patient population, Cologuard fits very well into these patients’ lifestyles. So we're very optimistic that we can have a very strong start. As far as what's baked into the prelim guidance for next year, we will give more color on that on the fourth quarter call.

[Operator]

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

[Dan Brennan, UBS]

I wanted to -- first question just on Pfizer, maybe Kevin, Mark or Jeff. In terms of the relationship, maybe post Lyrica going off patent, has that kind of impacted maybe the salesforce kind of where they're carrying, where they're pushing Cologuard? And then maybe Mark, could you speak to kind of where we are in the productivity curve? And then typically, there's a number of visits where doctors will begin or start to become more productive with Pfizer coming on board last October, kind of have we hit that point yet or we part of the way in there. Just kind of walk us through that productivity on reps? Thanks. And then I have a couple of follow-ups.

[Kevin Conroy, Chairman, President and Chief Executive Officer]

Dan, it's Kevin. Pfizer really has been an incredible partner and there have been some moving pieces there. They are fully committed to Cologuard. Their commercial efforts have been remarkable. And we've learned a lot from them. We're obviously getting a lot of attention, because -- and that was really a driving force behind partnering with Pfizer and Pfizer wanting to partner with us. We're getting a lot of their attention, their health systems team is really kicking in. We're seeing the results of that. And we expect that to continue into next year. Mark?

[Mark Stenhouse, President, Cologuard]

Dan, what I would say is, as you know, we're about a year or move from the start of the collaboration with Pfizer, and this is about the time six to 12 months post from promoting Cologuard that you start to see the productivity curve ramp up. Let's also remember that Pfizer is delivering most of their calls in a second or third position. So, where we see the greatest strength and the co-promotion between Pfizer and Exact Sciences is one we share focus on a single doctor, when that happens is where we see the most lift. I would echo what Kevin has said, this is a very productive partnership. The teams are working collaboratively very well together, the qualitative feedback continues to be positive, and we continue to believe with a large market that we're operating in and our share position that we have got a great future ahead of us.

[Dan Brennan, UBS]

And then maybe one quick follow-up to that. So is it fair to say that possibly the productivity impact that you expect to see kind of that's largely ahead of us here?

[Kevin Conroy, Chairman, President and Chief Executive Officer]

I think that's a fair statement. We're right at the point where you would see the productivity picking up. And this is the time that with the organization between Pfizer and Exact where we're focusing our call effort, we have had a year of behavior to observe where Pfizer has made calls, where Exact has made calls, where we have had made them together that allows us to optimize where we go next. It has also the time that reps naturally start to become more productive.

[Jeff Elliott, Chief Financial Officer]

This is Jeff. Add to what Mark said, I would expect the Pfizer reps and the Exact reps to continue to get more productive every year for the foreseeable future. I mentioned earlier that the reps that we had from the time of launch so about five years ago, continued to get more productive. So, it's not that you get say six, 12 months then and you peak, now you keep getting better and better at your job.

[Dan Brennan, UBS]

And then maybe just on some of these other big opportunities that are ahead of you and you kind of alluded to maybe 2020 and beyond obviously, Kevin, you’re 5% penetrated. But between the IDN and the reorder and the electronic order, those are the three big kind of opportunities. Could you just briefly touch upon kind of where we are with kind of traction on those three? Thanks.

[Kevin Conroy, Chairman, President and Chief Executive Officer]

IDN reorder and...?

[Dan Brennan, UBS]

And electronic order.

[Mark Stenhouse, President, Cologuard]

Dan, it’s Mark. I think you framed it correctly. Where we see an electronic ordering, we know that anytime we have a system or physician that’s using electronic means to order, they order on average at least 20% more than those on traditional facts order. So, we know that when that happens, we see growth. What we see in health systems in general is movement, so as we focus with Pfizer on accounts, one of the measures of productivity of that partnered effort against the account is increased electronic ordering and a bidirectional interface.

We see growth in that number. Number of systems using a bidirectional interface growing every quarter. We see that starting to pick up traction. I answered the rescreening question earlier, but it is an opportunity that grows over time. We are seeing performance both in the compliance rate in terms of number to kits that come back to us in the second order of the eligible patient population. We saw tactics we're deploying to drive incremental growth of the rescreening population in a number of patients to come back to us. There's still room for improvement there.

And then the last one was on...

[Dan Brennan, UBS]

I think you had on IDN reorder and electronic order. Yes. Kevin, I mean, I know, and kind of asked you third question but you talked about liquid biopsy kind of during your prepared remarks. I think you mentioned in the prepared remarks that your expectations are for your tests and for other tests that are working through the different levels of development that you think the best case would be similar to FIT. So basically can you just remind us of FIT, as I recall 95% FIT specificity, 74% sensitivity. Is that kind of what you think the best case is kind of your test and/or any of the other tests that are working their way through development? Thanks.

[Kevin Conroy, Chairman, President and Chief Executive Officer]

In 24% specificity for -- I'm sorry, sensitivity for advanced adenomas and we have built a model of very sophisticated enhanced version of the models that exist in colorectal cancer screening. So we have the advantage to be able to scenario play with those models in terms of -- if you increase the advanced adenoma sensitivity, bring down the stage one cancer sensitivity and play with the specificity then does that meet the USPSTF criteria for inclusion. And the challenge that you see with most of the data for those who are aspiring entrants into colorectal cancer screening with a blood-based test is low early stage cancer sensitivity, poor specificity, relatively poor specificity relative to the FIT test. And no data on advanced adenoma. And do get advanced adenoma data you need to run a prospective study because the adenomas are typically cut out before -- they’re typically cut out by the time you have an opportunity to get a blood drawn. So if you collect the blood drop before, the colonoscopy, that works and you can collect those samples. What you saw in the data that we just presented was 65% advanced adenoma detection. We do not expect the ultimate Cologuard 2.0 test to deliver 65%. Those advanced adenomas were larger because they were left in and that’s how we were able to get a blood drop before colonoscopy.

So, when you take a look at what is required, you need to have some measure of advanced adenoma sensitivity and that’s the hardest thing to do because there is one layer of cells that are starting to progress towards cancer and they are being shed into the colon not into the blood supply which is why it’s really hard to find signal. That’s the context here. As a result of all of that, there is one big takeaway. A blood-based test is likely to model as an annual test. There is another take away from that is that the price is probably in the area of a third of what Cologuard is priced today. That doesn’t leave a lot of room for all the costs associated with the DNA sequencing which is why we are focused on a lower cost approach so that we can bring the test to market for people who refuse both Cologuard and colonoscopy, which we think will be a small fraction of the overall opportunity.

So we’ve spent 10 years really digging in here, we’ve looked at every way that we could get to a 100% screening, this is one of those ways. We don’t think it’s going to take share in a major way from either colonoscopy or Cologuard, especially as you project where colonoscopy and Cologuard end up a decade from now where we think we have 85% penetration between those two approaches and probably roughly split. I know that maybe a long winded explanation but that’s the context with which we plan to launch a blood-based test.

[Operator]

Your next question is from the line of Puneet Souda with SVB Leerink.

[Puneet Souda, SVB Leerink]

Yes. Hi, Kevin, Mark, thank you and Jeff. Mark, if I could ask on the reps as they go out there and you get feedback from the new physicians and new docs and as well as the multiyear Cologuard prescribers, has the feedback changed from either of those two groups in the near-term here? Just trying to get a sense of what the exact reps themselves and the Pfizer reps are hearing? Has that changed at all? And is it any different than the Exact versus the Pfizer reps? If you can elaborate there, that will be really helpful.

[Kevin Conroy, Chairman, President and Chief Executive Officer]

So there's no qualitative feedback difference between the cohort of doctors or the reps, and how they call on doctors. Certainly, where we associate collaborative effort on a single doctor, so a doctor that has a large opportunity to screen patients, we see the greatest lift. So in that doctor, they've been convinced to use Cologuard as a more frontline option than those that had lower value or current lower writing. So, the only qualitative difference there is that they're stronger believers in Cologuard as the frontline screening test, by way of the frequency of the effort and their acceptance of the message. But the underlying story is still true, which is doctors are responsive to promotion and we don't see a degrade in the -- when we make more calls and their willingness and use of this product.

[Puneet Souda, SVB Leerink]

And if I could ask on DeeP-C, a number of questions have been asked here. So, I mean, I appreciate that you're starting DeeP-C blood sub study here. Just wanted to confirm that your confidence appears to be coming from this case-control study or internal study that you've conducted here. Given the investment into this and your confidence behind this, I mean, when can we see this data? And the second part of that question is, as you start enrolling here, just I was just curious if you have -- among the 120 sites that you have, do you have any enrollment concerns? Obviously, a number of colonoscopies are conducted every day. But we have a few other trials that are ramping now in the next year or three that I can see 10,000 patients trial. So just wanted to get a sense of, is there any competitive concerns in these trials?

[Kevin Conroy, Chairman, President and Chief Executive Officer]

We have no plans in the near-term to publish our internal data. There are 120 sites that are enrolling. We have tremendous confidence that we will be first to complete studies. We have the scale, we have the relationship with physicians and the commercial organization and the brand awareness and focus. So we're confident that we will be first…

[Jeff Elliott, Chief Financial Officer]

Puneet, this is Jeff, just to add what Kevin said, we have multiple prospective studies underway now, many of these samples are being used for price development. Many of the sites in these studies we expect to convert over to the BLUE-C study. So I think we are in a very good position to enroll the 10,000 patients that we need and move very quickly with BLUE-C.

[Puneet Souda, SVB Leerink]

And last one, if I could -- appreciate, if I could squeeze in. With the 45 to 49 contribution in the quarter, Jeff, and what was the expectation for the contribution in the fourth quarter, for the 45 to 49 year olds? Thank you.

[Jeff Elliott, Chief Financial Officer]

So the revenue impact of 45 to 49, given when the FDA approval happened, was that material for the quarter? We will not promote a product off label and that approval came through late in the quarter that it wasn't material. And what was the second question Puneet?

[Puneet Souda, SVB Leerink]

Just in the fourth quarter if you could -- this was September 23rd I believe when it came through. So I just wanted to get a sense of what would be potentially here in the fourth quarter because it was marketed I believe on the first day. I mean, it could have been marketed on the first day. Thank you.

[Jeff Elliott, Chief Financial Officer]

We're very excited about the opportunity here. Again 19 million people is a huge opportunity long-term. However, keep in mind that we're just now out there training reps, laying the foundation from a marketing perspective. So, I wouldn't expect the material impact in the fourth quarter either.

[Operator]

This question is from the line of Mark Massaro with Canaccord Genuity.

[Mark Massaro, Canaccord Genuity]

Hey guys. Thanks. So, my first question I guess is two-parter on marketing. First is, do you expect to initiate the consumer initiated pilot in Q4 or have you started that? And then the second one is, when should we expect to see the age 45 change to some of these direct-to-consumer commercials on TV?

[Mark Stenhouse, President, Cologuard]

So, this is Mark. I'll take the second question first. So, one of the things we know to be true is that as we've talked about this is a big opportunity. We know the 19 million, the 50% increase American Cancer Society's recommendations really triggered our FDA labeling effort. And you've heard that we’ve got 74% coverage, and that coverage needs to grow over time to really get leverage in this screaming population that vastly remains unscreened. So, we believe the most important thing to do is communicate to doctors first. So that's why our training has started and we're out communicating to doctors, and frankly, to payers. We expect to convert our TV commercials to say eligible for 45 starting early next year. So that -- and I think that trigger is appropriate because then we will have talked to our physician population first. I have also mentioned previously that we were looking at a [consumer] initiated pilot this year and we're still on track to do a small pilot on capabilities this year.

[Mark Massaro, Canaccord Genuity]

Got it. And then, I did want to ask a question about the blood test initiative. Can you just clarify that this is expected to rollout in Europe or outside the U.S., just want to clarify that -- I don't believe you have plans to launch a blood-based test in the U.S. And if you do, can you please comment on that?

[Kevin Conroy, Chairman, President and Chief Executive Officer]

This will -- the study that we're doing now, BLUE-C would support an FDA submission in U.S. Our comments, right, so far on this call have been aimed at the U.S., not the European market. The European market is an opportunity we look at. We will do that in combination with the Genomic Health international team which is about 100 people strong and they'll help us evaluate the opportunity outside the U.S.

[Mark Massaro, Canaccord Genuity]

Excellent. And then one last quick one, on the Epic health record system that was implemented are in the third quarter, I could be wrong, but I think there may be another piece to this sometime next year and I think it's related to capabilities surrounding text messages or emailing to drive reordering. Is that something that we can expect later next year or was that also implemented in Q3?

[Kevin Conroy, Chairman, President and Chief Executive Officer]

Mark, I think what you are recalling is that towards the end of next year we expect Epic to enable electronic ordering for virtually all physicians who use the -- any instance of Epic, and that is an important long-term driver of adoption because it enables a tremendously easy ordering for physicians. And as you know, Epic has about 70% market share. So, that I think is the question or is the thing that you’re remembering.

[Jeff Elliott, Chief Financial Officer]

And Mark, this is Jeff, to add to what Kevin said. Today when we look at all the providers that order electronically compared to providers that order via fax, the ones that order electronically order over 60% more than ones the order via fax. And as Mark said, when you see that conversion to electronic order you see a pretty quick bump up in their order rates. So, we’re very excited about the opportunity over time that I think can help us with.

[Operator]

And we have reached our allotted time for Q&A. I will now turn the call back over to Kevin Conroy for final remarks.

[Kevin Conroy, Chairman, President and Chief Executive Officer]

Well thank you for joining us today to review our third quarter results and the progress we made toward our 2019 priorities. The Exact Sciences team delivered another strong quarter and made significant progress enhancing our internal infrastructure and advancing our pipeline, positioning us for long-term sustainable growth. Thank you to the entire team at Exact Sciences for your hard work and continued commitment to our mission.

[Operator]

This concludes today’s conference call. Thank you for your participation. You may now disconnect.