EXAS - NASDAQ

Good day, everyone, and welcome to the Exact Sciences Fourth Quarter 2024 Earnings Call. Today's call is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Derek Leco, Vice President Investor Relations. Please go ahead, sir.

Thanks, operator. Thank you for joining us for Exact Sciences fourth quarter 2024 conference call. On the call today are Kevin Conroy, the company's Chairman and CEO, and Aaron Bloomer, our Chief Financial Officer; Brian Baranick, our General Manager of Precision Oncology, will also be available for questions. Exact Sciences issued a news release earlier this afternoon detailing our fourth quarter financial results. This news release and today's presentation are available on our website at exactsciences.com. During today's call, we will make forward-looking statements based on current expectations. Our actual results may be materially different from such statements. Discussions of non-GAAP figures and reconciliations to GAAP figures are available in our earnings press release, and descriptions of the risks and uncertainties associated with Exact Sciences are included in our SEC filings, both can be accessed through our website. I'll now turn the call over to Kevin.

Thanks, Derek. Good afternoon, everyone. Our purpose is to help eradicate cancer by preventing it, detecting it earlier, and guiding personalized treatment. We are making this a reality by extending and leveraging our platform. Highlights in 2024 include delivering more than 4.6 million results to patients with our portfolio of cancer tests, growing core revenue 11%, while non-GAAP operating expenses grew just 2%, increasing EBITDA by 48% and more than doubling free cash flow, securing FDA approval and Medicare pricing for Cologuard Plus, our next generation colon cancer screening test. Completing two studies for Oncodetect, our molecular residual disease test. Generating evidence for our liquid biopsy colon cancer screening test, as well as our multi-cancer screening test Cancerguard. And being recognized as a great place to work for the sixth consecutive year. This year, we'll increase adoption of our current tests and launch three new tests. Exact Sciences’ scale and reach, with a large commercial engine and tens of millions of additional touch points with patients and healthcare providers will power continued leadership across the largest impact opportunities in cancer diagnostics. We'll also create an even better customer experience with our secure ExactNexus technology platform. Aaron will now discuss our fourth quarter financial results and outlook for 2025.

Thanks Kevin and good afternoon everyone. We're proud of our team's resilience and continued focus on operational excellence, enabling us to deliver another solid quarter. Fourth quarter revenue grew 10% or 11% on a core basis. Adjusted EBITDA increased 52% to $75 million. Screening revenue increased 14% to $553 million. Growth was led by momentum in Cologuard adoption amongst providers, health systems, and payers. On average, more than 900 providers became new Cologuard customers each week, and 35 of the top U.S. Health systems and payers closed gaps in care with Cologuard, a new record. Our expanding customer base supports our long-term growth outlook. Precision oncology revenue increased slightly to $161 million. Growth in the quarter was led by increased adoption of Oncotype DX internationally. Adjusted EBITDA margin expanded nearly 300 basis points driven by volume and expense controls. As a percentage of revenue, adjusted G&A improved more than 400 basis points. This allowed us to reinvest back into growth and innovation, while still meaningfully expanding margins. During the fourth quarter, we recognized an $830 million non-cash impairment charge related to the Thrive acquisition, which closed in January 2021. The write-down reflects changes in external factors since the acquisition, primarily the expected reimbursement outlined in the recent MCED Act legislation. Additionally, to better reflect our current operations, costs related to customer care were reclassified from G&A to sales and marketing. For modeling purposes, we have included a quarterly view of our updated historical income statement within our 10-K. Moving to the full-year, core revenue grew 11% to $2.75 billion and adjusted to EBITDA margin expanded nearly 300 basis points. We also strengthened our balance sheet in 2024 by more than doubling free cash flow, ending the year with $1.04 billion in cash and securities. Our strong free cash flow generation and outlook also allowed us to use cash on hand to repay the full $250 million in maturing convertible notes. Turning to our 2025 guidance, including some key assumptions underpinning our outlook, we expect total revenue between $680 million and $695 million for the first quarter and between $3.025 billion and $3.085 billion for the full0year. This assumes screening revenue between $520 million and $530 million for the first quarter, and between $2.35 billion and $2.39 billion for the year. And precision oncology revenue between $160 million and $165 million for the first quarter, and between $675 million and $695 million for the full-year. We expect $410 million to $440 million in adjusted EBITDA for the full-year. Annual guidance at midpoint implies total revenue growth of 11% including 13% in Screening and 5% in Precision Oncology. In Screening, we're including approximately 2 points of lift from Cologuard Plus, which will primarily benefit second half revenue. Cologuard Plus will initially be available in the second quarter to Medicare fee-for-service patients who represented about 15% of Cologuard volumes last year. We are also starting to add coverage with some commercial and Medicare Advantage plans and growth from price and volume acceleration will phase in over the next 18 to 24 months as we establish contracts with payers. Specific to Q1, please recall first quarter Screening revenue tends to be down sequentially because of seasonal trends. Primary care utilization is lower in December and early January because of the holidays. This impacts Screening revenue during the first quarter due to the normal timing between a Cologuard order and a completed test. Additionally, about two-thirds of Care GAAP revenue in 2024 was recognized in the second half and our 2025 outlook assumes similar phasing. In Precision Oncology, we expect steady Oncotype DX growth in the U.S. and strong double-digit growth internationally in this year. Shifting to profitability. Guidance at midpoint implies 220 basis points of adjusted EBITDA margin expansion. Key drivers include: volume leverage across our fixed cost structure, price from Cologuard Plus, and continued OpEx leverage and productivity, especially within G&A as well as in our lab and supply chain. These initiatives allow us to reinvest back into near- and long-term growth areas, including educating patients and providers about the benefits of Cologuard, the launch of Oncodetect and research and development to support continued innovation. Back to you, Kevin.

Thanks, Aaron. Our efforts to get more people screened with Cologuard are setting the stage for a strong 2025. The number of people eligible for their next Cologuard test grows about 30% to 2 million this year and the rate of rescreening is at an all-time high. Health systems and payers are turning to Cologuard as the standard-of-care within large organized screening programs. Our expanded field sales team is deployed in new territories and are actively engaging with the highest potential ordering providers. Our sales team has completed training at Cologuard Plus and will become even more productive as we launch one of the most accurate cancer screening tests ever developed. These tailwinds will fuel growth for years to come, improve screening rates and help decrease sales and marketing costs as a percentage of revenue over time. Exact Sciences is uniquely positioned to guide a cancer patient's journey every step of the way. Last year, our Precision Oncology team delivered actionable insights for a record 230,000 patients around the world. We're leveraging our trusted Oncotype DX brand, deep oncology relationships and global footprint to increase adoption of our broad portfolio. These advantages will continue powering strong double-digit growth internationally for Oncotype DX, which has become the global standard of care and holds the preeminent position in cancer guidelines. We are applying the same approach with Oncodetect by generating clinical evidence and positioning it as a vital tool for patients. We recently published data in the Journal of Surgical Oncology showcasing the clinical strength of Oncodetect. Results from a well-designed study of monitored colon cancer patients found those with a positive Oncodetect test. We're 50 times more likely to recur than those with a negative result. This study also demonstrated that Oncodetect identifies residual disease up to 10 months earlier than imaging, a current standard-of-care. Findings from a second clinical validation study extended the test prognostic benefits for patients with stages three through four colorectal cancer. Earlier this month, we submitted results to Medicare for reimbursement. We remain on track to launch Oncodetect in the second quarter. We're also generating rock solid clinical evidence for Oncodetect across multiple solid tumor types, including breast cancer. Shifting to multi-cancer screening. We shared new evidence in the fourth quarter supporting our test Cancerguard. The data showed at a 98.5% specificity overall sensitivity, excluding breast and prostate cancer, was 62.3%, sensitivity was 67.1% for the most aggressive cancer types. This was from the ASCEND 2 study. We remain on track for the launch of a laboratory developed test, version of the test in the second half of 2025 through our large screening and Precision Oncology commercial organization and unique ExactNexus technology platform. We're also making progress with our blood-based colon cancer screening test and remain on track to share top line results from our pivotal BLUE-C study by the middle of 2025. Our blood-based colon cancer screening test features unique science and a differentiated cost profile. Once available, it will be supported by our existing commercial infrastructure along with the patient navigation program embedded within ExactNexus. We will use these capabilities to deepen our leadership in colon cancer screening while ensuring patients and providers understand Cologuard is the superior non-invasive test. Exact Sciences platform, deeply embedded standard-of-care tests and pipeline of innovative diagnostics put us in the best position to make early detection and personalized treatment routine. This year is set to be the most productive in company history with continued execution from our team and the launch of three significant advancements in diagnostics. This will power years of growth and profitability, helping us achieve our purpose. Before we turn to questions, I'd like to congratulate Erik Holznecht and his wife, Katie on the birth of their son. We have big plans for him when he returns from parental leave. We'd also like to welcome Derek Leckow to the Exact Sciences team as our new Head of Investor Relations. We're now happy to answer your questions.

Thank you, sir. [Operator Instructions] Our first question comes from Catherine Schulte, Baird.

Hey, guys. Thanks for the question. Maybe first just starting on Screening guidance. You're cling for 13% growth for the full-year. Some acceleration throughout the year is implied there. So maybe just talk about the build what growth drivers get you excited as you get into the back half? And then if we look back to your 2027 outlook that you laid out at your Investor Day, also take some acceleration over the next few years to hit that target. So maybe just talk through your confidence there and some of the opportunities that might drive that acceleration. Thanks.

Yes. Thanks, Catherine. We're really excited about 2025. It's set up to be another great year. We entered the year with tailwinds, including rescreens, care gap programs, Cologuard Plus launch, commercial execution, obviously, the strength of our platform, our commercial reach, our payer relationships, the IT platform, ExactNexus, and then we're launching three new tests this year. Three of -- testing the largest areas of opportunity colon cancer screening, Cologuard Plus, Oncodetect in MRD and Cancerguard in multi-cancer screening. Aaron?

Yes. building up through then the building blocks of what our growth is in 2025 for screening, it starts with rescreens. The success rate continues to steadily improve. The pool of patients eligible for a rescreen is going to grow again, this year from 1.6 million patients in '24 to 2 million in 2025. We continue to make improvement in progress in terms of driving adherence in that as well. And it's a huge engine for growth for us, driving more than 30% growth in that space alone. Next is care gap programs. This continues to rapidly expand. We expect to build on the momentum that we generated from 2024. We talked about the launch of Cologuard Plus. We expect about 2 points of price for the full-year. Most of that's going to be back-end weighted. And so if you're looking at the sequential, you'd have about a 3- to 4-point impact on screening growth in the back half of the year alone. There's a lot of heavy lifting that's going to have to go into preparing for that launch, and we're making progress already in terms of contracting with commercial and Med Advantage payers. And then lastly, we've made a number of changes to drive improved commercial execution. We're starting to see green shoots of positivity with that customer base and off to a solid start to the year. In terms of the point on the long-term guidance, really pleased with the progress we've made and confident in our long-term goals, both in terms of growth and on profitability. There's no change to our thinking in terms of long-term goals on either growth or profitability. Our 2025 guidance includes modest assumptions from Cologuard Plus. That's going to ramp up as we head into '26 and '27 over time as we begin to work to renegotiate those contracts with payers. And then on the margin side, made great progress again in 2024. We're expecting another 220 basis points implied in the guide in '25 and multiple levers to continue to drive margin expansion towards that 2027 outlook.

And up next, we'll hear from Doug Schenkel, Wolfe Research. Mr. Schenkel, your line is open. Please check your mute button.

Okay, thank you for that. Good afternoon everybody. Thanks for taking the questions and congrats to both Derek and Erik. Two questions, and then I'll get out of the way. The first is on your press release and in your prepared remarks, you talked about 2025 possibly being the most productive year in the history of the company. Can you just unpack that a little bit and just define what you mean by that, as you think about balancing the launch of a record number of products in a single year, the goal of driving robust Cologuard revenue growth and volume growth and also demonstrating that you can do all of those things, while growing SG&A at a rate that is meaningfully below sales, essentially giving us more operating leverage. I just want to see how you're balancing those three big things as you talk about the most productive year in the history of the company. And then the second question is the guidance question. In terms of MCED and MRD contributions in guidance, how are you thinking about those? Essentially, what's in guidance for both of those numbers at the revenue line? Thank you.

Yes. Thanks, Doug. I'll take the first part and pass it over to Aaron. I think you hit upon the reason we're looking at what we believe will be the best year in our history. Not only do we expect to see continued strong growth with Cologuard with a lot of drivers there, but as you mentioned, we're launching three really impactful tests. I think we've resourced this in an appropriate aggressive way, and we're seeing lift not only in the top line but also margin expansion. So we are -- we have a team that is capable of doing each of these things. We have two different businesses led by strong general managers and teams that are highly motivated. We just had a big global sales force meeting a couple of weeks ago, and the team is energized by these new product launches, which have been born of multiple years of intense R&D and clinical trial efforts.

Yes. And then just on the sales and the SG&A productivity. G&A, unpacking that specifically, that's going to continue to be the largest driver of margin expansion for us over time. Doug, a lot of work has been done. There's more to do, and there's a lot more that we can and will do within G&A. On sales and marketing, we're really pleased with the leverage and productivity that we got out of 2024. As an example, revenue per rep in Cologuard continues to go up. We saw that go up in 2024. We'd expect that to continue to go up again in 2025. As you think about the unpacking investing in the product launches that we have in 2025, we feel good about the resources that we have to be able to support Cologuard Plus, dropping that into the infrastructure that we've got. Similar for Cancerguard, we're going to leverage the existing sales force that we have. And then MRD, it's a new product and a new space for us, and we're going to look to invest to make sure that, that launch is successful. On the comment of just how much do we have contemplated within the guide on both Cancerguard and MRD, we're really looking forward to launching both of those products in 2025 and we have a modest impact. We just submitted results recently to MolDx on MRD and we'll provide dates throughout the year as we launch.

Next, we'll hear from Tycho Peterson, Jefferies.

Hey, thanks. I want to maybe probe a little bit on the margin outlook because you are guiding a little bit below the Street on EBITDA. So can you -- is the spending on sales and marketing going to be a little bit higher than you previously telegraphed? And are you able to cut deeper on G&A? Is that kind of the takeaway here? And maybe, Aaron, can you talk about whether these are programs that are in flight at this point on G&A? And then a follow-up on blood. I just want to make sure the blood assay is locked down. It seems like there's still some debate on whether the assay is locked down. Thanks.

Tycho. Again, really pleased with the progress we've made on margin expansion in 2024. I think puts us in a really strong position, walking into our longer-term outlook of 20%-plus by 2027. If you look at the guidance in 2025, it is another 220 basis points of margin expansion, and that's 30% growth. We've outlined there's kind of four key drivers that we're going to look to deliver margin expansion over the long haul, starts with growth and fixed cost leverage across our labs, supply chain, G&A. We're also driving productivity now across each one of those organizations, along with a lot of our enabling functions. We'd expect to get a meaningful lift from Cologuard Plus on the margin line. We called out about 2 points this year, that's going to have an even more meaningful impact as we head into 2026 and 2027. And then lastly is on G&A optimization which is an area we've made a lot of progress. It was the biggest driver of margin expansion in '24. There is more work that we will do there. Specific then to a couple of the components of the P&L in ‘25, starting with gross margin. We'd expect modest gross margin expansion in 2025. That's going to come through volume leverage, Cologuard Plus pricing. If you think about the current products that we have on market, Oncotype DX, Cologuard, we see a path to 80% plus gross margins through both productivity initiatives as well as the Cologuard Plus pricing. G&A, as I mentioned, that's going to be a huge driver of margin expansion for us moving forward. There is more to be done, pleased with where we're at, more to come. Areas that we're going to invest in R&D. R&D, we're going to continue to invest in growth and innovation in R&D, largely in CRC and MRD and think about in 2025 at about a similar percent-to-sales investment is what we had in 2024. Rounding out then with sales and marketing, again, pleased with the leverage and productivity we had in '24. 2025 is a year of investment of note within supporting the launch of MRD. But we would expect to get leverage on that line of the P&L again over time. Kevin?

Yes. And Tycho, we're going to try to limit this to one question and piece. If nobody ask a similar question, we'll come back to that at the end. Thanks.

We'll go next to Matt Sykes, Goldman Sachs.

Hi, good afternoon. Thanks for taking my question. Maybe just along the lines of the commercial team for this year, given the number of new launches you've got and just given some of the challenges you had in Q3 of last year, can you maybe just talk a little bit about maybe some changes you made? Post that, what were some of the new focus for the sales team going to this year based on some of the lack of acceleration we saw from Q3 to Q4 last year?

Yes. Thanks for that. And yes, we're really happy that as of the end of last year, we have the appropriate sized field rep team and coverage heading into this year, those reps are armed with the data that they need to achieve the reach and frequency to make sure that we're calling on the right primary care health care providers. Also on the precision oncology side, the right oncologists, pathologists, surgical oncologists, and they're armed with the right data. So we're pleased with where the team is at the big sales meeting. They were extensively trained on new products, Cologuard Plus on the screening side, just having Cologuard Plus, which, a reminder as 95% sensitivity, 94% specificity there isn't really any other colon cancer screening test that is close to that. So you have colonoscopy as a procedure, of course, but that -- the power of those -- all of these kind of recharging of the field force, let that team incredibly excited heading into the new year. We believe this will have an impact. And it's going to take a couple of quarters to start to see the impact. But there are a couple of things that we really are pleased with. Number one, the total calls are up and the calls -- percentage of calls on the right health care providers are up. This is a leading -- these are both leading indicators of enhanced focused activity in the screening sector. This has proven to have worked historically. And just a reminder that there are 50 million to 60 million people left on screen. So we have an opportunity to do better this year in our core customer base and especially those customers who are new to Cologuard in the last three years. That's why we start the year with a high level of excitement and believe we can execute very well.

We'll go to Dan Brennan from TD Cowen.

Great. Thank you. Thanks for the questions. Congrats. Just on Cologuard Plus, Kevin, I am just wondering you're baking in a price benefit given the higher price, but I'm wondering if you're taking any volume lift. It is materially better test. So you guys are always surveying doctors. I'm just wondering kind of what you were hearing from the field and is there a chance that you could see conversion of some of the docs that have stayed on the sidelines for the Cologuard? And then just kind of related more broadly to Cologuard, if you would. I guess, we'll hear from [Gardner Marnie] (ph). I'm just wondering, it's obviously very early in the blood launch, but any color from the field that you're hearing on the profile of Cologuard as it compares to the shield test as it's early in this launch? Thanks.

Yes. Thanks, Dan. Well, I'll take the first question and again on Blood, will come back to that. I'm sure somebody will ask that question. Cologuard Plus, again, 95% sensitivity, 94% specificity, we are leading with Cologuard Plus. We expect that launch in Q2 and -- early in Q2. And because of the high level of performance, we're seeing a high level of health care provider engagement. It's new. It's powerful data and there's a high level of excitement both in the field force and in the customer base for a test with that level of performance. Will we see a volume, we believe we will. We're also leading with the message of Cologuard first. That means that we're driving people to think about Cologuard as the way to -- the first way to think about screen. And there have been experts who have looked at the question of this big, huge backlog in screening, 50 million to 60 million people not up-to-date, experts estimate that there are only about 6.3 -- there's a total U.S. capacity of screening colonoscopy at 6.3 million. And if you only screen those 6.3 million and didn't use Cologuard or test, you would miss 90% of the cancers in the population. And that unscreened population, you would find them symptomatically. And they also estimate that then if you implement Cologuard, Cologuard has a significant impact on that detection rate and reducing costs and improving output. So that's the power of Cologuard Plus is you find more, you send fewer to colonoscopy. It saves a ton of money to the health care system and more importantly, find cancers earlier. And we will come back on blood-based colon cancer screening.

The next question comes from Jack Meehan, Nephron Research.

Good afternoon. It will be my honor to follow up on Tycho's question. I'll just ask the status of getting the colon blood test lockdown and that leg of the BLUE-C study. Thanks.

Yes. So our CRC blood test, which we haven't named yet, is on track for middle of the summer in terms of when we expect to unlock the data of that test. The team is working really hard to ensure that we are prepared to bring our very best effort with multiple marker class test and no real new news to report there. The team continues to work on it. I'd like to say this, we are not seeing an impact on -- in terms of our volumes because of any competitive dynamic. I want to again reiterate that this problem of colon cancer is an enormous one in the U.S. with so many people not up to date with screening. And it's in order to squarely address the problem. There are some requirements to really be able to bring these tests up and we will comment on our test, not the competition. With respect to our test, we believe that to have an impact there, you need a minimum of Medicare coverage, FDA approval, USPSTF guideline inclusion, we think at the earliest now, that's going to be 2027 -- late 2027, 2028, could be delayed beyond that and then it usually takes about a year to get into the quality measures. Until you have that and a reasonably priced test, very hard to address that 50 million, 60 million patients with a blood-based mortality. But there's a lot of opportunity to get more people screened. We believe blood testing will have some impact, not like the impact that we've had with Cologuard and now, Cologuard Plus.

And next up from William Blair is Andrew Brackmann.

Him guys. Good afternoon. Thanks for taking the question and Derek, looking forward to working with you. And Erik, I'm sure you're listening. Congrats again. Maybe on Cologuard Plus, can you maybe just talk about some of the progress you've made on the reimbursement front with commercial payers? What's been their receptivity to sort of this higher price? And also, any change in tone from then just in light of the upcoming Braidwood case head into the Supreme Court? Thanks.

Yes, at the first question, I'm sure somebody will come back to in a second. Cologuard Plus reimbursement. As you know, we had a victory there with Medicare, which issued pricing of $592 that will apply initially to Medicare fee-for-service patients, which is about 15% of our volume today. We've also seen a handful of payers cover the task and contract with us at that same price. That's -- Medicare is the largest payer, and that should be a floor on pricing. We expect that over the course of the next 18 to 24 months, we will work through our deep relationships with payers. All together, we have about 800 payers. And over that period of time, we expect to be able to contract. There have been one major payer or that national payer that has already covered Cologuard from a policy standpoint and also acknowledged the code for Cologuard. And then there have been some smaller plans, including a fairly large state BLUE’s plan that has covered and contracted. So we'll provide more color in quarters to come, but we like where we're starting. And we think it's a pretty clear path going forward, mainly driven by the performance of 95% sensitivity and a much improved false positive. That drives real value for payers.

The next question is Patrick Donnelly, Citi.

Kevin, maybe another one on the pipeline side. I know you said maybe some of the tests aren't material this year. Can you just talk about, I guess, the pathway here on Oncodetect, the MRD side, Cancerguard, NSAID and then the unnamed blood CRC, which of those do you feel like become material first? What does that trajectory look like? Just curious how you think about the path for the three of them and just the contribution on the revenue side as we look out over the next few years?

Well, Cologuard Plus, of course, has the first and biggest impact. And I would say probably MRD followed by multi-cancer screening. If you look at nearest term -- long term, the multi-cancer screening opportunity is one of the biggest opportunities in all of cancer diagnostics. So we're in the position to have three tests in the largest areas of it. Cologuard Plus in colon cancer screening, a well-defined yet, vastly underpenetrated field, Oncodetect in a fast-growing, hugely impactful area of MRD testing and Cancerguard in multi-cancer screening. So I don't know which one is going to have the biggest impact long-term. That's why we firmly believe that for a decade and beyond, we can deliver double-digit growth, huge patient impact, growing profitability, allowing us to continue to reinvest in large part because we've made these huge structural technology investments and commercial investments to allow us now to do this in levered way.

And that's the beauty of it is we're going to be able to, with very attractive test economics, one of the best in the field, drop it into our existing commercial infrastructure and our ExactNexus platform and get huge leverage on that as these tests scale over time.

The next question today comes from Vijay Kumar, Evercore ISI.

Hi guys, thanks for taking my question. Kevin, maybe on that last question around MRD, your comments here on this being perhaps a more near-term opportunity. We had the data from Alpha-CORRECT. I think there was some confusion on the data, the algorithm which was used. Could you remind us on what algorithm is being used in Beta-CORRECT? Timing of when we can see the data for Beta-CORRECT? And based on those results, right, like how should we think about the revenue ramp? I think you submitted the more DX. How critical is that reimbursement? What percentage of population is that covered? And how do you compete against your largest competitor in that space?

I think there's one overarching question in there, Vijay, and that's all about MRD. So why don't I pass it over to Brian Baranick, our GM of Precision Oncology.

Thanks, Kevin. There was a lot in there. I'll start with the first question, which was really around the adjustment we made to the cut point in our Alpha-CORRECT study. What I'll say here is that the teams were kept blind. These were independently validated and we outlined all the methodology that we followed in the JSO publication that was referenced earlier in the call. We then took that algorithm into the Beta-CORRECT study. And if you reference the press release and the language we used within that study, which is under embargo, we'll do a couple of things. One, it will confirm the performance of the assay in Stage III colon. It will extend us into Stage II, IV colon cancer, as well as all of rectal cancer. And then, again, because the data is in embargo, what we're going to say here is that we have -- we believe the data looks very promising in the sub-study of the GALAXY study, and we look forward to sharing those results, which we will do at ASCO in the June time frame. With respect to the overall MRD program, I mean, there's a lot of excitement within our team. If we just step back and think about where we are, we have a large underpenetrated market. There's over 6 million patients just in the U.S. alone that are within five years of their original cancer diagnosis. You layer on top of that a very, very large clinical unmet need. We're excited about the program, Alpha- and Beta-CORRECT data. We also believe that we have some really strong unique competitive advantages. You've heard reference to the ExactNexus platform several times on this call already. We think that's going to create a unique and differentiated customer experience. We arguably have one of the strongest, if not the strongest brands. Prior to Genomic Health, there really wasn't a market for high-value centralized cancer diagnostics. We help build that playbook. We intend to utilize that playbook and those skills to propel Oncodetect forward. And then we have a deep tenured sales team that, quite frankly, is hungry to leverage those relationships, bring new products to the patients and customers that they serve. So we're looking forward to the launch. We're excited what we're going to do in Q2, and we look forward to driving forward.

The next question today is Subu Nambi, Guggenheim Securities.

Hey guys. Thank you for taking my questions. Can I ask a follow-up to Vijay's question? Is the test performance expected to be consistent with what you had presented at ASCO GR or can it be better a few percent points either on the sensitivity or specificity?

Yes. Thanks for the follow-up question. Unfortunately, the data is under embargo. Well, I'll go back to my previous statement and just say we're encouraged, the data looks promising, and we look forward to sharing the details. If you just look at the study that we published in the Journal of Surgical Oncology back in January, Kevin mentioned this earlier in the call, if you look at the performance of the assay, patients who were positive on Oncodetect were 56 times more likely than a patient who is negative to go on and have a cancer recurrence. We showed 10-month lead time to standard-of-care imaging and being able to stop that recurrence. And if you look at the longitudinal setting, the serial sensitivity and specificity was very competitive with other assays that are out there. The well-known GALAXY study, we were excited to get access to a subset of that parent study, and we look forward to sharing the data at ASCO. And we've also got a number of investments in prospective clinical studies across colorectal, breast and then the work that we announced with our partner, Flatiron, which will bring us into the multisolid tumor scenario as well.

Puneet Souda from Leerink Partners has the next question.

Great, thanks. So simple one for me on pricing. Why shouldn't we see more than 2 points of lift from Cologuard Plus pricing? And what are the levers and pieces that you think that can potentially drive that higher versus what you provided? And wondering if you can give a pricing assumption from Cancerguard? Thank you.

So the two points assumes a launch in Q2 within the Medicare fee-for-service population, which, as Kevin alluded to earlier, represents roughly 15% of Cologuard volume and that obviously has now an increased value to Medicare of about 16%. Implying the guide is essentially just that Medicare fee-for-service volume. Keep in mind, too, there's a typical lag between when we get an order in and when we recognize revenue when we get that test back in our lab. And so most of the contribution from Cologuard Plus pricing lift is going to be in the back half of the year. As Kevin alluded to earlier, we are beginning those conversations with payers to be able to re-renegotiate that price, and we'll give updates on that as we go on. Kevin?

Yes. It's -- there's potential upside as we update contracts. And right now, the assumption is that, that's going to occur more beginning of next year than this year. So there is upside, our team is hard at work, having those conversations. In terms of the Cancerguard price, we'll come back to that if somebody else ask that question. We're keeping the list.

And next up is Dan Leonard, UBS.

Thank you. I have a question on your Screening guidance for 2025, that 13% growth at the midpoint. I thought a few months ago, you were messaging that 15% would be a floor given Cologuard Plus pricing rescreens, et cetera. I was hoping you could comment on that variance. And I'd love to learn more about what's changed in your thinking over the past three months?

In what form do you recall that we signaled 15% growth?

I think it was that analyst after-party you have post the earnings call.

No. Well, if you heard some -- that is not something that we have ever messaged that -- but is there upside to our Screening guide? Yes, there is. If we see the commercial execution impact in the second half, if we have more contracts updated in the first half of this year on the commercial side, Medicare Advantage plans, commercial plans, et cetera. But it's February right now. And as Aaron mentioned, we're seeing some green shoots in terms of the metrics around the reenergized and enhanced sales force on the Screening side, and we have some new product launches this year. So our guide is our guide there on Screening. That's slightly higher, I think, than you saw last year. And we -- the team is raring and ready to go. So I will just point to, there are opportunities for us to continue to execute well on automating rescreens and getting more of those people who are due for their second, third or fourth Cologuard test screened is close to that three-year anniversary as possible. And there is an opportunity for us to expand our care gap. So we entered the year with a strong rescreen look, care gap program, Cologuard Plus and then commercial execution. Those are the 4 big levers. It's -- we believe we're going to be able to execute this year.

And what we said at JPMorgan was that we were comfortable with where consensus was. And if you look at the midpoint of our guide for Screening, it's right on where consensus was, which was 13% growth.

The next question is Bill Bonello, Craig Hallum.

Hey, guys. Thanks for taking the call and welcome, Derek. So just given your comments that you're seeing actually improvement in the rate of rescreen and we see a big uptick to the 2 million people eligible, I sort of back on the envelope math, it seems like the kind of implicit expectation on people screened for the first time is that, that population is maybe growing in the low to mid-single digits. Is that kind of consistent with how you're thinking about the numbers?

Hey Bill, directionally, your math isn't that far off with what we've included in our guidance. Important to keep in mind is care gaps are a channel for us to get more patients screened for the first time. With Cologuard, Kevin alluded to a number of changes we've made to the commercial organization, really targeting the newest ordering providers that have the highest propensity to order and drive growth for us moving forward. And that's a channel that we're going to look to continue to grow over time. And the last thing I'd call out is we continue to target the younger population. Care gap is a great way for us to get to that younger patient population, but you've also probably noticed some new ads and marketing experiences that we're trying to deliver that to the younger patient population as well.

Up next is Sung Ji Nam, Scotiabank.

Hi, thanks for taking the question. Just one on Cancerguard as well. Without having third-party reimbursement when you launch, just could you elaborate a little bit more in terms of your go-to-market strategy there? You mentioned leveraging your existing sales force, but I was curious kind of where you expect to see the biggest traction in terms of the different channels that you have there? Thank you.

Yes, you have huge leverage with the current existing field force. Health systems are more -- it's amazing. They're more interested in Cancerguard at this point in the product life cycle than they were cold. And the question is why? And the why is they see a pressing need to identify cancers earlier, to keep their patient population within their community cancer centers and to help those patients if they take care for other needs. And so as we talk with large health systems through our large health system sales team, we believe this is going to be a strong opportunity. Our field force and screening can't wait to get our Cancerguard and our Precision Oncology team, too, has the ability and there's a lot of excitement around the team delivering Cancerguard to those patients who've previously been diagnosed with cancer. And we tend to do it at a price point. I think somebody asked a question about a price point. A price point that's likely differentiated and more amenable to out-of-pocket pay.

Next up is Eve Burstein, Bernstein Research.

Hello there. Thanks so much for the question. I'd actually like to follow up on Andrew's question about Braidwood. So my interpretation here is that if the court case is upheld when it's heard by the Supreme Court, recommendations from the USPSTF after March of 2010, no longer need to be covered without any cost sharing. So that means both Cologuard and any future blood test would no longer need to be covered by private payers without that patient cost sharing. Is that correct? If so, how quickly could the no cost sharing be revoked by payers? Like I imagine there are regulatory filings that don't allow for this sort of change without some kind of warning. And then -- that's a pretty big hit to Exact's business. How are you preparing or planning if Supreme Court does pull that appeal?

We don't believe there's going to be a hit to the business because payers are highly motivated to get their patients screened in order to drive their quality measures. So as a result, the focus on prevention, both from a health plan standpoint and also from the health system standpoint and obviously, the patient standpoint remains high and we don't expect there to be any significant changes because let's take, for example, if a large payer decided to impose a co-pay, whereas their competitors didn't, they're almost certainly to see a decline across the board in their quality measures associated with prevention. And they just can't afford to do that because of the bonuses that are tied to the quality measure scores across the board. In terms of Braidwood, what is Braidwood? Braidwood is a lawsuit that challenges the Affordable Care Act requirement that ensures cover services with Grade A or B recommendations from USPSTF was zero out-of-pocket costs. As you may have seen, the incoming administration, the Trump administration is taking the same position as the Biden administration in opposing this lawsuit, that is obviously a positive sign for the whole field of prevention. And we know, again, that payers are highly motivated to keep their screening scores up. So we -- and also the plans for 2025 are already set. So even if anybody did want to change, they would have to wait until 2026.

The next question comes from Andrew Cooper, Raymond James.

Hey, everybody. Thanks for the question here. A lot already asked, so maybe a little bit on Precision Oncology. If you think about the guide and we strip out, assuming you did have, call it, that $10 million or so Nexus transition headwind to close the year, it's a little bit slower. You should have a little bit of -- at least a little bit of Oncodetect dropping in. So maybe talk us through what the assumptions are there and why that can't grow a little bit faster? And then related, I think Aaron in a previous answer, you called out sales and marketing, some investments behind Oncodetect. In the past, we've talked about that more as another area in the quiver for the Oncotype DX sales force. So maybe what's changed or where does that incremental spend need to go to support Oncodetect in terms of the commercial team?

Andrew, so just in terms of the full-year guide, yes, kind of mid-single-digit growth for PO. We would expect a tailwind from the ExactNexus change. One, the non-repeated that, but two, just that we know from putting things onto the ExactNexus platform that the cash collection rate will improve over time. If you think about like the core business, growth is again going to be led by international, anticipating strong double-digit growth from our oncology business internationally again. And then in the U.S., just continued growth and momentum with the U.S. Oncotype business as well. Specific to maybe piece of the Q1 piece of PO guide, I would just highlight the underlying growth is steady. If you back out and kind of look at this on a core revenue basis, we essentially have low single-digit growth in Q1. That's backing out the impact from FX where we're seeing some headwinds on the euro and the yen as well as the reference lab business that we have. With respect to the sales and marketing side of the Oncodetect, we're not going to comment on exact size of the sales force. But what I will say is we're being intelligent with the investments that we're making on the sales and marketing side to make investments, to make sure that we come out of the [gatefold] (ph) team and have a really successful product launch. In addition, we're making the needed investments we need to make on the clinical evidence side of the equation. We haven't talked a lot about the studies that we're investing in. But in colorectal, we have CORRECT-I and CORRECT-II which collectively have over 1,400 patients that we're going to be deploying Oncodetect on. We have what is probably the largest prospective clinical study in breast cancer that collectively will enroll 1,800 patients. And then on the multicancer side of the equation, in the press release related to [Flatiron] (ph) in multi-cancer, we have over 1,300 patients that we plan on enrolling. So making smart intelligent investments on sales and marketing to support the existing Oncotype team, but also investing aggressively on the development side of the equation to make sure that we can quickly move from colorectal into breast and ultimately, into multi-solid tumor.

Kyle Mikson from Canaccord has the next question.

Hey, guys. Thanks for the questions. Kevin and Aaron, just could you talk about the care gap revenue contribution '25 versus '24 in terms of dollars and the year growth rate implied? And relatedly, any update on any business shifting from standard primary care Cologuard ordering to care gap. Thanks.

Hey Kyle, so if you think about the full year guide, we did more than 250,000 patients through the care gap program in 2024. That was triple-digit growth last year and without exactly sizing what it will be this year, I would just say we expect to build on that momentum heading into 2025. We're seeing meaningful growth in that part of the business in Q1 as well. From a phasing perspective, about two-thirds of care gap revenue came in the back half of 2024. We're assuming similar phasing in 2025. And we've talked a lot about adherence in the past as well. We're doing a lot of things to continue to improve the adherence or the return rate in care gap programs. But from a guidance perspective, we're assuming similar adherence rates to what we saw in 2024.

Yes. And just the drivers of care gaps. I just want to remind people, it's this ExactNexus technology platform that allows us to do it our deep relationships with payers, brand awareness of Cologuard and that Cologuard is in the guidelines, in the quality measures and comes along with a three-year credit because that's the interval for testing. That's awfully powerful, and what we're seeing is a shift in the way that a lot of health systems and payers are starting to think about screening. And so a lot of the first-time screeners are going to come in through these programs in the future. And over time, we've said, "hey, look, this could be a $500 million-plus opportunity where we're screening 1 million-plus people per year." And it can grow from there.

The next question is Luke Sergott, Barclays.

This is Sam on for Luke. Thanks for squeezing me in here. Maybe picking off of Dan Leonard's question here. I appreciate the color on upside to Screening growth. You're guiding to a similar Screening growth this year to '24. You talked about the 2% pricing contribution already. And I'm wondering if regarding rescreening and care gap, you guys kind of talked about maybe 10% growth contribution maybe a quarter or so ago. So I'm wondering if that is still intact. And I'll just leave it there. Thanks.

Yes, that is still very much intact. And so what we've talked about is that collectively, between rescreens and care gap that, that gives you to something maybe slightly north of 10% growth. Rescreens continues to be the largest growth opportunity for us over time. It's growing more than 30% per year. And so we'll contribute kind of mid to high-single-digits, and then you can kind of do the math on what that means for care gap.