Rod Hise – IR William Megan – SVP, Finance Kevin Conroy – Chairman and CEO Maneesh Arora – COO.

Jeff Elliott – Robert W. Baird & Co., Inc. Brian Weinstein – William Blair & Company, LLC Isaac Ro – Goldman Sachs Brandon Couillard – Jefferies & Company Peter Lawson – Mizuho Securities USA, Inc. Mark Massaro – Canaccord Genuity, Inc. Zarak Khurshid – Wedbush Securities, Inc.

Raymond Myers – Alere Financial Partners, LLC Jan Wald – The Benchmark Company Chris Lewis – Roth Capital Partners, LLC Andrew Jones – Stephens, Inc. .

Good day, ladies and gentlemen, welcome to the Exact Sciences Second Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we’ll conduct a question-and-answer session and instructions will follow at that time. (Operator instructions) And as a reminder, this conference is being recorded.

Now I’d like to turn the call over to Rod Hise. Mr. Hise, you may begin..

Thank you for joining us for Exact Science’s second quarter 2014 conference call. On the call today are Kevin Conroy, the company’s Chairman, President and Chief Executive Officer; Maneesh Arora, our Chief Operating Officer; and Bill Megan, Senior Vice President of Finance.

Exact Sciences issued a news release earlier this morning detailing our second quarter 2014 financial results. If you’ve not seen it, please go to our website at exactsciences.com or call (608) 807-4607 and I’ll send it to you. Following the Safe Harbor statement, Bill will provide a summary of our second quarter financial results.

Next, Kevin will provide an update on our corporate priorities. Before we get underway, I’d ask everyone to take note of the Safe Harbor paragraph that appears at the end of the news release issued this morning covering the company’s financial results.

This paragraph states that any forward-looking statements that we make – one, speak only as of the date made; two, are subject to inherent risks and uncertainties, including those described in our most recently filed annual report on Form 10-K and our subsequently filed quarterly reports on Form 10-Q; and three, should not be unduly relied upon.

Except as otherwise required by the federal securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein or elsewhere to reflect any change in our expectations with regard thereto or to any change in events, conditions or circumstances on which any such statement is based.

It is now my pleasure to introduce our Senior Vice President of Finance, Bill Megan..

Thank you, Rod, and good morning everyone. I will provide just a brief update on our cash utilization and then Kevin will describe the progress we have made in our regulatory and commercialization efforts.

For the quarter, we used $18.9 million in cash, up from $17.2 million in the first quarter with increased expansion in sales and marketing as well as G&A, reflecting our intensifying preparation for launch. In April, we raised $138 million in cash from a fall [ph] on equity offering. And so we ended the quarter with $234.8 million in cash.

Capital expenditures were $2.4 million for the quarter, about half of the investment we made in the first quarter, reflecting the progress we’ve made in equipping our lab and our IT systems. At quarter end, our staff count was 199. And last week, we brought in our direct sales force, adding 80 more staff to our headcount.

And now Kevin will elaborate on our launch preparation..

Thanks, Bill, and good morning everyone. Thanks for joining the call. I’m pleased to report this morning that we have taken critical additional steps towards FDA approval. We made our reimbursement proposal to CMS and hired and trained our field sales force. I’d like to give a brief update on our FDA progress.

I’m pleased to report that our FDA facility inspection was completed on July 11th. The inspection was successful. The inspectors spent a week on site and found no deficiencies and no observations. Preparing for and working through this important step in the update process was another example of the outstanding team we have here at Exact.

I want to congratulate everyone involved. We also are working with the agency on the final decision of the post-approval study. We expect final approval within 30 to 45 days. I want to thank the FDA staff for their work on our application. Let’s turn now to CMS and reimbursement.

Last Monday, we presented our crosswalk analysis and proposed reimbursement level at CMS’ Annual Clinical Laboratory Public Meeting. We’ll review the analysis we presented in that meeting in a moment. Outside of the policy [ph] meeting, we continued to work with CMS through the parallel review process on the National coverage decision.

We expect a preliminary National coverage decision to be issued upon or shortly after FDA approval. There is a 30-day public comment period after which CMS has 60 days to issue a National coverage decision. As a result, we expect a final Medicare coverage decision in the fourth quarter.

We also are continuing to build the resources we need to adequately pursue reimbursements on private areas [ph] after FDA approval. Now let’s just review our crosswalk analysis. Most diagnostic tests have a code that corresponds to a reimbursement play [ph].

When a code doesn’t exist for a new test like Cologuard, a new code can be crosswalked or linked to existing codes to establish payment for a new test. Through extensive consultation with CMS, we decided to use the crosswalk approach.

We were invited to present our crosswalk reimbursement proposal to CMS’ Hospital and Ambulatory Policy Group or HAPG at annual reimbursement review last week. Our crosswalk proposal is based on codes in the 2014 clinical laboratory fee schedule. Showing here are the three tier one codes that we presented in our crosswalk analysis.

These include a code that corresponds directly to our [indiscernible] markers and another that corresponds directly to our fecal hemoglobin tests. Our DNA methylation markers are crosswalked to an assay where the work flows similar to us. These codes total to a proposed reimbursement for Cologuard of $502.

CMS does not provide feedback on these proposals at these meetings. The next is a preliminary pricing decision by HAPG which will be publicly announced in either late August or September, followed by a public comment period and our final decision in November. Let’s now turn to Cologuard launch readiness.

Let me first describe the makeup of our sales force. We have three regions; west, central and east, each headed by a director. In the last few weeks, we have completed the hiring of our approximately 120-member sales force including 10 reps who call on large systems and group practices.

We’ve also added 80 reps who call directly on primary care physicians and 10 area managers who will receive these reps. We have six hospital [ph] liaisons who are responsible for medical education. Last week, we held our national sales meeting.

At the meeting, we conducted intensive training on Cologuard and I have had the opportunity to meet our new sales force. I can say without reservation after meeting the sales force, that this is an outstanding, driven group that’s passionate upon our mission of eradicating colorectal cancers. Our team was chosen from nearly 10,000 applicants.

They had deep experience in pharma, device and diagnostics in the hospital system, primary care and specialty settings; an average of approximately 10 years of experience in selling healthcare. Let’s discuss other components of our launch readiness.

We also are ready to create brand awareness for Cologuard among our indicated patient population through a marketing program that includes public relations, print ads and targeted digital efforts.

Our mission is to motivate patients who are not getting screened today to have a conversation with their doctor while we spread the work that Cologuard is a new non-invasive screening option. We have a 20-member marketing and managed care team to do just that.

Just as our sales marketing teams are ready, we know that our lab and customer support center are ready too. We are nearing completion of an observational study whose aim is to assess our readiness through the entire order test and result delivery process, both internally and externally with providers and patients who participated.

All the participants including our position ordering and lab information management systems ran smoothly and our customer support center took calls from patients and made reminder calls to encourage compliance, a key component of our long-term mission to increase screening for medical risk [ph]. Let’s turn now to our private pipeline.

We have developed a technology platform that is applicable to the screening and diagnosis of other cancers. We intend to develop novel, clinically important diagnostic screening tests for GI tract cancers. We have a broad, exclusive collaboration with Mayo Clinic on GI tract cancers.

The collaboration is unique and together, we’re developing two new kinds of tests. As a reminder, GI cancers comprise 25% of all cancer deaths in the United States. First, we’re working together on test that can screen general asymptomatic populations for pre-cancers and cancer across the entire GI tract.

Second, we’re developing new applied diagnostic tests for specific GI cancers that would potentially be used with high risk and symptomatic patients. Within those two general kinds of tests, we’re focusing on colorectal and pancreatic, esophageal and stomach cancers.

At DDW or Digestive Disease Week in May, some very interesting data was presented that resulted from our collaboration with the Mayo Clinic. Our technology platform demonstrated 88% sensitivity for pancreatic cancer by testing pancreatic juice for certain DNA mutations and medical issues.

The technology also demonstrated 100% sensitivity for detecting Barrett’s esophagus, a precursor to the vast majority of esophageal cancers. We are continuing to make progress with our pipeline and look forward to updating you on the pipeline by early next year. In conclusion, we are in a strong financial position to launch Cologuard.

After FDA’s inspection of our facility, we expect an approval decision within 30 to 45 days. We recently presented our reimbursement proposal to CMS and remain on track with our reimbursement timelines. Our sales team is in place, we strengthened [ph] our recent national sales meeting that is ready for launch.

In addition, our lab and customer support center are ready for launch. We are pleased with the progress we’re making with our product pipeline, particularly with pancreatic and esophageal cancers. We are now happy to take your questions..

(Operator instructions) And our first question comes from Jeff Elliott of William Baird [ph]. Your line is now open..

Good morning. Thanks for the question and congrats on the progress.

Now, can you give us a little clarity on what steps do you have on [indiscernible] to get FDA approval in CMS coverage? Is everything in those agencies handled [ph] or do you need to do anything else?.

Sure. Well, the first thing that has to occur is the inspector, as we understand it, has completed the report that he prepares and his supervisors have to sign off on that report. Afterwards, that goes from the Minneapolis district to the Office of In Vitro Diagnostics that will take the final steps to issue a approval.

During that time, we are working to finalize the post-approval study with the Office of In Vitro Diagnostics. And as a result, that whole time period is about 30 to 45 days from today we would estimate to FDA approval.

We have a general agreement on the post – of the design of the post-approval study and we really just have a few details to work through, including the final language of the intended use of the tests. So the passage insert is also being finalized. That will all come together again in about 30 to 45 days, Jeff..

Yes, the post-approval study, is that similar to what you presented back at the panel or has there been major changes to it?.

There are no major changes to it, so it’s very similar to what we proposed at the panel. The goal of the post-approval study is to shed light on the efficacy of Cologuard with a three-year interval. And so we expect the study to be a three and a five-year study from start to completion and publication.

And that data will again shed some like on the efficacy of Cologuard being used in patients every three years..

Got it. And then, I think this is a timeframe where a lot of the sell-side will update their model for the next few quarters.

And so I don’t know if you want to give guidance now, but I think it would be helpful given the timeframe that we know, if you could provide some color on when you expect revenue to actually start, both from CMS and from the commercial payers because I think there’s a lot of logistics around getting the product into the market in order to get in samples back as [indiscernible] and policies.

And I just want to make sure that we have all that into consideration in our models.

So is there any commentary you can give on when we should start thinking about initial revenue coming in?.

Sure. And first of all, let me say, as we’ve said before, we don’t intend to provide guidance until we have more visibility into the launch trajectory. As we’ve said, we don’t expect the national coverage decision to occur until the fourth quarter.

And that will be pegged off the timing of the preliminary cover decision which we expect to occur around the time of FDA approval and then there’s a 60 to 90-day period following the preliminary coverage decision until that it becomes final..

Okay. Well, then you –.

And the Medicare population cannot be processed until the final national coverage decision occurs. That’s in the fourth quarter. The time period between FDA approval and the national coverage decision, the focus will be on the seconds of the marketing, including commercial-paying patients and also tax-paying patients.

And so the first part of the launch will really be focused there. In terms of revenue expectations, I think your model is a model others should probably look to.

Again, I don’t want to provide guidance but this year, the revenue trajectory should be considered to be modest and the focus on Medicare patients will occur very late and towards the end of this year.

Does that answer your question, Jeff?.

It does, that’s very helpful. I think I made about $1 million worth of revenue this year, so you’re pretty modest there. It’s just because on the commercial payer side, correct me if I’m wrong but that will be on a cash-pay basis, correct? So there could be some delay in terms of rev rack [ph].

And then the CMS side, will that be on accrue or a cash basis?.

I’ll let Bill answer that question..

Okay. You’re actually right, Jeff, on the private pay side, the commercial pay side, it will be cash rack [ph], cash [indiscernible] we recognize the revenue. For CMS, we’ll be working with our audit team to determine what the communication is from CMS as to when we can recognize that revenue. So that’s still to be determined..

Okay. At this point, do you think you will be able to recognize CMS revenue this year or if I’m not mistaken, I think that the reimbursement rate won’t go into effect until January 1 of ‘15.

So can you recognize, same as [ph] revenue this year, we have to wait until next year?.

Well, and I think that’s the opposite question is, is it retroactive to the final coverage decision and can we use that as the basis for accrual. And that’s still being determined..

Got it. Okay. All right, thanks much..

Jeff, and I think your question there deserves a little bit of an explanation so it’s pretty clear.

Under the CMS pricing process, there’s a huge [indiscernible] of this open meeting that occurred last week followed by preliminary pricing in late August or September followed by a 30-day public comment period and November, a final price being listed on the CMS website. It’s not until January 1st that payments would be made.

Under CMS rules, those payments would be retroactive up to the date of the national coverage decision, as we understand it.

And so the question becomes from an accounting standpoint, would that revenue for tests that are performed between – let’s say in November was – that’s the date of the national coverage decision, would the revenue be recognized in November and December for the test run or not until the first quarter once the cash is received.

That is the accounting question that would have to be answered at a later point in time and then that would be clarified in the future..

Okay, thank you..

Thank you. Our next question comes from Brian Weinstein of William Blair. Your line is now open..

The question, perhaps we can dig a little bit deeper into the initial uptake.

Can you guys talk at all about productivity for rev [ph] expectations at launch for the study state? I know you’ve given some numbers in public meetings about kind of what type of productivity you expect at the study state, but how does that sort of ramp up? And then also, how should we think about the primary care physician versus the group practice, health systems approach, I mean, where do you expect to see kind of initial volume coming from between those two? Thanks..

So, Brian, as I said earlier, we don’t want to provide guidelines until we have greater visibility and we also don’t want to provide our expected productivity by rep in any clear fashion than we already have until we have greater visibility.

So your second question relating to where we expect to see more uptake with the large systems or the primary care physician. And I think time will tell that answer. Initially, we think that primary care physicians will be the initial greatest drivers of Cologuard utilization.

However, we do have a number of large primary care physicians that have expressed interest in Cologuard. Obviously, this test has been publicized and we have had conversations with large systems in response to their questions about it.

So we think that there’s going to be demand there, but that will typically take more time to get those systems up and running and the vast majority of their physicians educated. Let me make note of the fact that about 50% of primary care physicians in the U.S. work for a group practice – the small, medium or large.

And more and more primary care physicians, their groups are being acquired by larger groups and those groups typically provide incentives to primary care physicians for quality scores.

They also set guidelines from the top-down, not formally but many of them are really focused on quality and they – and have guidelines for how they expect primary care physicians to screen patients, not only for colon cancer but for other types.

So we think there is a huge opportunity to convert the market away from the FIT and FOBT test and away from doing nothing at all, to Cologuard that we’ve been putting a little bit more time than going after the primary care physicians who we know today use non-invasive approaches to screen for colon cancer..

Great, thanks for that. And then another question on expenses specifically related to sales and marketing. We see kind of broad set of people you’ve brought on in the efforts around brand awareness. How should we be thinking about earning levels as we look towards the initial parts of the launch? Thanks..

Brian, this is Bill. So if you look at sales and marketing expense, we ramped up in the quarter from $4.5 million in Q1 to a little more than $6 million in Q2. And we expect that standing to continue throughout as we head into commercial launch.

So consistent with the comments we made following Q1 and repeated today, we talk about a sales force of 120 at launch and that includes the 80 sales reps calling on the high prescribing FIT, FOBT primary care physicians. It includes the key account executives, the sales support, sales management team.

Plus if you add the 20 staff in marketing, at launch, we will have 140 staff – we have 140 staff in sales marketing, so we are ready with that. We also said that we would hire 20 additional direct sales force by the end of the year. So if you take that number and average it out across the back half of the year, you’re looking at 150 people.

If we use an average compensation, all up of 200,000, that would give us a quarterly expense of about $7.5 million. That’s a pretty clean way to think about this.

On the non-comp side in marketing, the content development executing the advertising campaign, building awareness, if you use the one-to-one ratio, that is probably a fair way to think about all up sales and marketing expense.

Does that help?.

Yes, so you’re thinking $15 million a quarter is your run rate and should get us a $15 million [ph]?.

That’s a good estimate. And if I may, just because it’s round out the expense side, on DNA, we increased spending to just go over $6 million in Q2 and at first, it’s about $4.5 in the first quarter. Again, reflecting a ramp as we build towards commercialization.

And remember in DNA, we have all the expenses that are foundational to the commercialization including the IT, the customer support for the compliance engine we talked about. We are doing our own billing, so we’re building a billing team as we expand our overall team. We’re expanding HR, and of course we have leadership teams.

So a way to think about DNA is we expect to continue to ramp at about the same pace for the rest of the year and as we ramp from Q1 to Q2. With R&D, a good way to think about that is we invested about $20 million in all of last year. And we have every intention of continuing to invest in R&D. We don’t intend to cut it back.

So in fact, we might increase just modestly in 2014. So we’re investing to support Cologuard, we’re incurring [indiscernible] as we in the first half of the year as we’re preparing the analyses, contributing to our FDA review of Cologuard. And as Kevin went through in the prepared remarks, we’re supporting all of our pipeline activities.

So R&D, roughly in line with – we’re a little bit trend up with where we were in 2013.

Does that help?.

Yes, great. That’s very helpful, thank you..

Thank you. Our next question comes from Isaac Ro of Goldman Sachs. Your line is now open..

Good morning, guys. Thanks for taking the question.

Kevin first, I was wondering if you could talk a little bit about when we might see in publication cost benefit analysis for the purposes of driving commercial adoption?.

Did you say cost benefits that will help economics?.

Yes, yes, exactly..

Right, so we would expect that publications will occur sometime in the next six to nine months so following CMS decisions and as we get into a process of talking with commercial payers that full-blown analysis would be published. And there are really two components of that.

The first component is looking at Cologuard on a venerable between every year to every five years and at over a range of prices. And then the second component is looking at a comparison using a differential analysis comparing Cologuard and the FIT test and other types of screening tests. So there will be multiple publications that ensue over time.

But we don’t expect that to happen within the next six months..

Okay, that’s helpful. And then maybe just a general question on commercialization.

Please walk us through conceptually your biggest area of focus here going forward over the next three to four months where you see the most potential risk in how you’re managing for that?.

Yes. Well, clearly the most potential risk today, it’s been around FDA, CMS, the test performance itself and moving forward the risk profile is up around execution and commercial execution. So I’d actually like to refer this to Maneesh who’ll be running the wholesales and marketing organization in the U.S. to provide a little bit more color..

physicians, payers, systems, patients. The risk is going to be the fact that this is disruptive technology.

So the promise is terrific, but the real focus and emphasis needs to be on successfully getting out and educating physicians; making sure patients are aware that there is another option; educating physicians that is an easy test for them to order and easy test for patients to perform; and educating the payers that this is something that makes a lot of sense because we’ve clearly known – and this is one of the key reasons we believe that Medicare has been so supportive.

We know that Medicare represent somewhere between 40% and 45% of all patients for this product. And Medicare, also the taxpayer pay $14 billion going to $17 billion for colon cancer in this country. So the best expense that anyone could invest in is early screening and diagnostics.

We think that’s why Medicare has been supportive and that we will get coverage. But the real risk guys, it gets around us getting that message out because this is a change to the way people practice medicine and doing that is not the easiest, it’s going to be challenging. And we think we’re making the right investments and are continuing to focus.

And we’ll focus continuously on what’s working. Will additional sales rep make sense and that’s why we have to plan for adding to that sales force later this year. So hopefully that’s more color for you [ph]..

Yes, that’s great. Thanks so much, guys..

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

Thanks, good morning.

Kevin, with respect to your comment on that you expected a preliminary price from CMS in the August-September timeframe, under what circumstances would that change between the initial pricing indication and the final coverage decision?.

At the public meeting last week, the HAPG Group said they would expect to announce the pricing decisions in late August. This is a process that they follow in an annual basis.

I don’t think that there is immense risk to the August-September timeframe because there were a lot of other tests, I think around a 100 test that pricing was requested for it at that meeting. We’re pretty confident in that timeline. It’s not just about Cologuard, but a lot of other tests as well..

Okay, would you perceive any risk in that change between then and the final coverage decision actually following?.

Well, I think there are always changes that can occur and that is entirely up to HAPG Group.

Our involvement today has been – they have multiple meetings with the HAPG Group face-to-face, so we’ve been able to educate HAPG overtime about the value of the test, the clinical function of the test and purpose of the test as well as the conversations around our approach to the crosswalk analysis. And we have a lot of feedback from the HAPG Group.

So we’re pretty confident that the approach we’re taking is correct. I think one of the interesting things that came off at the meeting is that other groups requesting a crosswalk for codes kind of meandered often to the gap-fill territory asking for certain amounts that weren’t directly crosswalked to another code.

We make sure that we didn’t do that – take that approach. Instead we did what HAPG asked us to do which is a simple crosswalk analysis. So we’re pretty confident in the approach that we’re taking, but HAPG gets the final say..

But then I just want to make sure I’m clear if I understand your commentaries right.

Will the sales reps begin calling on primary care in the large networks upon FDA approval or will you potentially hold off that efforts until the final NCD is in place?.

No, Brandon, we brought the sales team onboard and have them trained to go out into – begin that effort calling on primary care doctors at the approval..

Okay, super.

And then last one, has there any incremental progress with your international efforts that you’re willing to share today?.

Yes, and first let me address just a follow up to Maneesh’s comment. The early focus is going to be on patients who either pay out of the pocket or are covered by commercial insurance. And initially those payers will not have a coverage decision in place. So we will be billing those payers out of network.

We will be collecting a modest amount from the patients upfront. And that process – it will take time to get those payers to issue coverage decisions and to bring those into the networks. So you can expect that it will take some time to actually collect on the tests that are initially run.

Our group that is focused on those commercial payers will be focused on getting those coverage decisions. And we’re focusing on the largest payers and regional payers first with the very experienced capable team with an awfully powerful message that here is a relatively inexpensive way to screen for colon cancer with a highly sensitive test.

But make sure that as you think about this that there is going to a time period between running the test for commercial pay patient and actually collecting revenue from that patient. So in terms of international expansion, we have hired a very experienced head of Europe who’s been onboard now for a couple quarters.

We have a plan in place, we are working on CE marking and most importantly our strategy for entering in Europe. We would start in a modest way, focus on cash pay patients in Germany, Switzerland, Austria, potentially the UK as well and we would expect to begin to offer those tests in the first quarter of 2015.

We’re really pleased with the quality of the team that is being developed in Europe. We’re a little bit further behind in Asia and the regulatory hurdles will be higher in Asia. But we’re focused too on addressing that market. Both of those markets are very large markets where together, the potential to equal the U.S. markets..

Super, thank you..

Thank you..

Okay. Okay, your next question comes from Peter Lawson of Mizuho Securities. Your line is now open..

Is the modest delay in the FDA approval, is that driven by kind of a backlog from the FDA or then requiring more details from you?.

Well, let me first address [ph] by saying the FDA has done a great job all along. And the inspection took a little bit longer to get scheduled than we originally anticipated. But the FDA is awfully busy with a lot on their plate and resources that aren’t as expensive and maybe they should be.

So that’s probably why we are looking at FDA approval within 30 to 45 days. We still think that there’s a lot that can be done this year to make up for that..

Thank you.

And then the post-approval study, has that led to any delays for the FDA or CMS decisions?.

No, we’ve had very good discussions with the Office in In Vitro Diagnostics regarding the post-approval study. And we think we’ve done enough in a good place in a timely way..

Got you.

And then private pay, could that potentially come before final CMS pricing? Would you think that really requires that healthcare economic study?.

Well, no. We don’t think it requires the published healthcare economic study. Payers are very sophisticated groups. They are already reading the New England Journal of Medicine paper, so the first question they ask is a clinical question. They do ask the question of how would the adoption or the coverage of Cologuard affect their budgets.

So they do a budget impact modeling first and foremost. They secondarily look at the cost-effectiveness. You have to understand these payers, by and large, don’t pay for the cost of treating colon cancer, although it is a factor in their consideration. There are 3,000 payers in the world.

A very small percentage of them account for about 80% of all patients in the U.S. And that’s the group that we’ll be focused on. And that will take some time.

Now, remember, Peter, that under the Affordable Care Act, we would expect that with a positive coverage decision by the United States Preventative Services Task Force that Cologuard would be mandatorily covered by all payers of the U.S. And we would expect U.S. PSTF to rule on – or to come up with their revised colon cancer screening guidelines.

And we would also expect Cologuard to be included in that as either an A or B rated by the end of 2015. So after the next six quarters, we would expect that all payers would, under the Affordable Care Act, be obligated to cover Cologuard..

All right.

And then just finally, around the moving [ph] pricing decision from CMS, would that just be a yes or a no for payment coverage? We won’t get a price point at all?.

The pricing group actually will issue a proposed price and we would expect that to occur in August or September. The coverage and analysis groups, CAG, we would expect would issue their preliminary coverage decision around the time of that day approval..

Got you. Thanks much..

Which is around the same time expected [ph]..

Thank you. The next question comes from Mark Massaro of Canaccord. Your line is now open..

Hi, good morning. Thanks for taking the question.

First question, not to split hairs, the 30 to 45 days, is that after the date the FDA completed its inspection or is that from today?.

That’s from today..

Okay, great.

And second question, if you could just, Kevin, maybe elaborate a little bit on the progress in your dialog with commercial payers, how are those conversations progressing? And one thing that you mentioned about cost-effectiveness, do you anticipate commercial payers looking at potentially the cost of a colonoscopy in their cost analysis?.

So let me first start by saying the work that we’ve done today with commercial payers to do a lot of research, interviews, focus groups, quantitative and qualitative research to help us understand their willingness to adopt Cologuard and the thought process and business processes that they undergo to adopting the screening test.

In terms of the factors that they consider, they will consider all of their current screening cost including colonoscopy as they look at Cologuard. As they have medical people, their Chief Medical Officer look at that. They have their cost-effectiveness people and their budget people looking, their tech personnel.

Everybody does it a little bit differently. So we are prepared now and expect to do have meetings with these payers upon FDA approval. We are not doing the face-to-face meetings until we have FDA approval. We continue to do some research but face-to-face meetings with those payers would occur after FDA approval.

And again, we’ll start with a very small list and we have a team partially that we’ve contracted with and partially internally to get out there and intensively meet with the larger payers first..

Great, thanks.

And maybe just final question; of the 90 sites enrolled in the pivotal trial, can you walk me through your expectations for initial adoptions from the enrollment sites and kind of help us understand adoptions from these sites versus PCPs?.

We don’t want to provide that level of color, Mark. Surprising to say, those 90 sites really know Cologuard; the GIs there know Cologuard and there are a lot of champions within those sites. They feel that they did something of import and they want to see Cologuard adopted within their system.

So I think I’ve provided a fair amount of color on the PCP versus system approach and where you’re going to see more uptake. So we’ll see as time goes on with how that plays out. Let me say that may change.

We may see some systems really drive Cologuard because systematically – and this is an important point, Cologuard now provides systems the opportunity to go up and screen an entire population quickly. That’s harder to do with any other screening test. PUTF [ph] delivers a kit to people who today haven’t been screened.

You can find those patients and get them screened. So we’ll see whether it’s the systems that generate more Cologuard demand or it’s the primary care docs or a combination of the two. And we look forward to having those conversations as time goes on..

Great, thank you..

Thanks, Mark..

Thank you. Your next question comes from Zarak Khurshid. Your line is now open..

Good morning, thanks for taking the questions.

In terms of the fair conversations, are you aggressively looking to ink in network contract right out of the gate or would you maybe give up a little bit on price? Or how are you thinking about kind of just operating your entire network for awhile and healing things up before going in network?.

So, there’s as many – at the end of the day, our goal is to have everybody in network eventually over time and we know and Kevin eluded to this earlier that our expectation is with a positive A or B rating at the United States Preventive Services Task Force that will mandate coverage.

So from launch to getting to those contracts, we think it is going to be out of network initially and it’s going to take time. The one thing we don’t want to do is we’ve invested and we think developed something that’s innovative. We want to make sure that whatever we do, Cologuard gets priced fairly. And we expect to hold to that.

So our expectation today is not to go in to try to get secure massive discounts or trying – we do have an effective plan in place to go drive to these contracts but not at any price..

Great, thanks for that. And then, I have a question on the compliance engine, it sound like most of that will be sort of a calling approach initially.

When do you plan to implement some of the other bells and whistlers like the text messaging reminders and other features?.

So Zarak, I mean, we built all of that into the system now and those are things that we had been touching.

So if you are a patient when you enroll after that first interaction where you verify your shipping address, our first interaction with you, you can tell us how you want us to communicate whether it’s email, whether it’s text, whether it’s phone and we can do that right now. That’s what we’ve been testing..

Understood, thanks..

Thank you. And our next question comes from Raymond Myers of Alere. Your line now is open..

Thank you for taking my questions. Kevin, I mean through on the call earlier bit, you’re working on – on a cancer test and it’s something we can probably talk [indiscernible].

Can you describe what could be doing at cancer?.

Well, you were cutting in and out in terms of stomach cancer, is that your question?.

Yes, I’m asking, can you elaborate more on what your research projects are involving stomach cancer?.

Let me say that our order of priority is most likely going to be pancreatic and esophageal cancers. With stomach cancer being a tremendous opportunity at limited part of the world, initially, and Korea is a huge stomach cancer screening program – national screening program that already use this. China, stomach cancer is a big problem.

Japan, stomach cancer is a big program. In fact, number one cancer killer in some of those regions. So our current platform technology and markers that we’ve identified in our collaboration at a Mayo Clinic would potentially be utilized and readily adopted to the platform. In terms of the real – the greater opportunity both in the U.S.

and globally, pancreatic cancer screening and diagnostic is a high priority. And esophageal screening and Barrett’s esophagus screening and diagnostics is a second high priority.

We’ll talk a lot more about that as we go forward but remember that we invested millions of dollars into a automated platform and millions altogether, tens of millions of dollars in the technology platform, the chemistry platform, the DNA extraction platform, the marker development, we haven’t talked about that much over the last five and a half years.

It’s there. It’s real. That it’s applicable to other disease states and we think we’re way ahead of where other people are. We will start to talk about our plan a little bit more as time goes on. We have a dedicated team that is focused on this from marketing project management and most importantly, R&D and clinical beyond the Mayo Clinic.

So we think we have some exciting things to talk about just not right now..

That’s great. If I could I ask one following question? That would be around the pancreatic cancer. You mentioned getting the 88% pancreatic cancer sensitivity from pancreatic juice.

Will you need to be sampling pancreatic juice in a pancreatic diagnostic? Would you believe that the same Cologuard testing kit could be used in that?.

When we think – look at the pancreatic market by itself, we see about a dozen potential applications for our technology and our markers. One of them happens to be in pancreatic juice and that can help identify pancreatic cancer patients early.

Today, it’s very difficult to diagnose early pancreatic cancer because imaging doesn’t do a very good job and doing biopsies frequently misses – pancreas is a big organ – and frequently misses the site of a cancer.

Pancreatic juice is the good representative sample of the entire pancreas and even with that really early crude test we’ve been able to show nearly 90% sensitivity. We think that that is higher than doing a needle biopsy today which has risk-associated with it. It’s higher than ultrasound, it’s higher than MRI, it’s higher than CT scans.

So that is just one example of many potential tests and we’re excited about that. So I’d rather not get into too many details, but you’ll see more information over time about what our strategy is and how we intend to pursue those opportunities..

Okay, thank you very much..

We only have one follow-up question from Jeff Elliott of Robert Baird..

Thanks for letting me back in.

Kevin, how certain are you that you’ll get an NCD for Cologuard? And the reason I’m asking is that, there’s not a tracking sheet on the CMS website and also Medtronic recently made a comment about their parallel overview that CMS may not even given NCD instead CMS might just signal that the data is good enough for coverage..

Jeff, we’ve very confident that this parallel review process will lead to a preliminary coverage decision and we would expect that to lead to a national coverage decision. There are no certainties in life but the current group has spoken very positively about Cologuard publicly.

There’s a strong rationale for Cologuard put there to be a national coverage decision. Unlike the Medtronic product, a colon cancer screening test cannot be paid for by the max without a national coverage decision..

Okay, okay..

So there has to be a national coverage decision for Cologuard to be paid for and I would believe based on interactions today that Cologuard will be covered by Medicare..

Okay, thank you..

Our next question comes from Jan Wald of Benchmark Company. Your line is now open..

Good morning. Congratulations. And I think you’re making some good progress. I just have one question. Most of my questions have really been answered, but in terms of commercialization of the product, it sounds like you have to spawn message to take to prospective buyers of the screening test.

But how recessive do you think people are to do it? I mean what kind of market are we working into in the sense of whether or not you’re really going to [indiscernible] the marketing conditions to accept the test and then, what are you – what tools are you going in to really make the sale – applications, presentations, things like that, how are you approaching the market?.

Yes, let me answer the first part of the question and Maneesh will answer the second part of the question. Yesterday, I visited my primary care physician to get an annual checkup and was talking to the nurse on the way in.

I was asking a bunch of questions about how their healthcare IT system flag colon cancer screening? She asked why I wanted to know. And I told her what we were up to and she said, oh my mother heard about that test from CBS News and is waiting – is putting off her colon cancer screening until your test gets FDA approved.

We hear those stories all the time. The fact that Mayo Clinic has been behind the development of this test has got in fact impactful and the news coverage around the test today over the last several years has been pretty broad. So a lot of people know about this test but our job is to drive that further.

And when you talk to a primary care physician, they say a lot of patients are aware of Cologuard and are asking for it. So basically our message to those patients will be, come out from hiding and get screened. You’ve been avoiding screening for the long time, there’s a new way to get screened. I’ll let Maneesh answer the second part of the question..

Yes, so as Kevin said, we think that there is a fertile market. We’ve been preparing for a long time and we’ve talked in lots and lots of physicians and the one message that really resonates is the fact the test has 94% cancer detection of stage 1 and stage 2 cancers, the ones that are the most likely to progress.

So while it has a lot great features and statistics people have read about in the journal, the one thing that we know is we need to keep the message very simple. And the message that has resonated most with primary care physicians have been the extremely the high sensitivity for early stage cancer.

So what we have done is transform that message into very, very specific and simple training materials that we shared with the sales team last week, a core visual aid that states clearly the messages around early cancer detection, manifestation in digital media, social media plans to be able to communicate that to physicians, systems and patients.

So it’s going to be a robust and broad communication digitally as well as within office materials and medical education. So just think about it as a very coordinated approach around a very simple message that was really, really impactful with our sales team and has been in our market research..

And I guess just a follow up to the question, in terms of your going out and doing a lot of focus groups and market analysis, are you finding a certain segment of the – is the population more receptive like younger folks versus older folks? Are you finding anything like that in your analysis?.

That’s a terrific asking, yes. And the answer is yes, there are characteristics or attributes of physicians that make them more or less likely to order Cologuard. Specialty, we know that OBGYNs are more likely. Why? Because they’re very, very used to screen. With what? And so there are whole list of things. I don’t want to go through all the list.

But yes, demographics do matter; age does matter. And so what we have done is plugged that into our algorithm to make sure we are targeting the right physician. So, yes, we have looked at that and we’ve spent a long time doing the analytic network..

Thank you very much..

Thank you. Our next question comes from Chris Lewis of Roth Capital Partners. Your line is now open..

Hi, guys, thanks for taking the questions. I had two quick ones on a follow up for the task force discussion earlier. First, I may have missed but when do you expect those guidelines to be finalized? And then second, assuming an A or B rating for Cologuard, understood there would be a coverage mandate.

Can the task force also require or recommend a minimum pricing level for the test?.

We would expect the USPSTF guidelines to come out in the back half of 2015. We would expect an A or B rating. And no, USPSTF does not recommend a price..

And is there a difference in your eyes between a A or B rating or are they basically the same?.

Under the Affordable Care Act, no. Colonoscopy and the fecal hemoglobin tests are both rated A..

All right, thanks..

Thank you..

Thank you. Our next question comes from Drew Jones of Stephens, Inc. Your line is now open..

Good morning, guys. Just one quick one.

You touched on interval of the test, can you give us some color around your conversations with CMS and whether or not you have any visibility as to how they’re taking that into account in their decision making process?.

Sure. Both in private meetings and public meetings, the conversation has focused on an interval of every three years, which based on the cost-effectiveness data that they have. So the coverage in analysis group has the research done by an outside party that we funded.

And that, in the case that three years is probably the most reasonable screening interval. And that was also discussed at the panel meeting by world-renowned colon cancer screening experts who said they thought that initially three years probably made the most sense but the guideline committees will ultimately make that decision.

But CMS was in the audience for that FDA panel meeting and so that is very public that they also heard the testimony of those experts..

Thanks, guys..

Thank you. And we have a follow-up question from Zarak Khurshid, Wedbush Securities. Your line is now open..

Hey, thanks, guys. I just had a quick one on the accounting around USPSTF.

Would that predominantly shift a lot of the business to accrual? How should we think about that?.

Eventually, so if their ruling comes out at the end of 2015 and there’s mandatory coverage, then over time we would expect the accounting to go to accrual. But that wouldn’t be until 2016..

Got it, thanks..

I’m not showing further questions. Now I’d like to turn the call to Kevin Conroy for any further remarks..

Well, again, everybody thanks. Things are really coming together obviously with FDA approval hopefully right around the corner, CMS coverage, pricing. We’re really excited about launching Cologuard. I’d first like to thank all those investors who had been supporters of the company over the last five and half years.

I thank the analysts who have done a lot of hard work and digging and critical analysis around our plans. And last but not least, the team here at Exact that have devoted nights and weekends and the better part of their last five years to this mission. We can’t wait to get started and we look forward to talking to you again one quarter from now.

Thank you..

Ladies and gentlemen, thanks for participating in today’s conference. This does conclude the program. You may now disconnect. Everyone have a great day..