J.P. Fielder - Senior Director, Corporate Communications Bill Megan - SVP, Finance Kevin Conroy - Chairman and CEO Maneesh Arora - COO.

Jeff Elliott - Robert W.

Baird Isaac Ro - Goldman Sachs Peter Lawson - Mizuho Securities Brian Weinstein - William Blair Mark Massaro - Canaccord Genuity Chris Lewis - Roth Capital Partners Zarak Khurshid - Wedbush Securities Brandon Couillard - Jefferies Jose Haresco - JMP Securities Bruce Jackson - Lake Street Capital Raymond Myers - Alere Financial Partners.

Good day ladies and gentlemen and welcome to the EXACT Sciences Corp.'s First Quarter 2015 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. As a reminder, the conference is being recorded.

I would like to introduce your host for today's conference, J.P. Fielder, Senior Director, Corporate Communications. You may begin..

Thank you, Treea, and thank you all for joining us for EXACT Sciences' first quarter 2015 conference call. On the call today are Kevin Conroy, the company's Chairman 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 first quarter 2015 financial results. If you've not seen it, please go to our web site, 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 first quarter financial results.

Then Kevin will provide an update on our corporate priorities. During today's call, we will make forward-looking statements based on current expectations. Our actual results may differ materially from such statements.

Description of the risks and uncertainties associated with EXACT Sciences are included in our SEC filings, which also can be accessed through our web site. It is now my pleasure to introduce the company's Senior Vice President of Finance, Bill Megan..

Thank you, J.P., and good morning everyone. We have reported a strong growth trajectory in the first quarter. Our financial results include revenue of $4.3 million on 11,000 completed tests.

Operating expense for the quarter was $36.1 million, an increase of approximately $5 million from the prior quarter, reflecting the commercialization of the business and investment across all of our functions. Cost of sales was $4.3 million or $383 per test.

We used $37.6 million in cash in the quarter, and ended the quarter with a cash balance of $245 million. It's now my pleasure to introduce the company's Chairman and CEO, Kevin Conroy.

Kevin?.

Thanks Bill. We are pleased with the Cologuard launch and the accelerating demand from physicians and people over 50. Both the number of ordering physicians and completed Cologuard tests increased significantly during the quarter. The number of physicians who are placing repeat orders is growing rapidly.

The reach and frequency of our sales team is expanding, and during the quarter, we signed a co-promotional agreement with Ironwood Pharmaceuticals. EXACT Sciences' laboratories and our customer care center are driving value for customers, both people over 50 and physicians. Finally, we continue to make progress with commercial payors.

Let's start by talking about the number of Cologuard tests completed. The strong launch of Cologuard remains on-track. We reported 11,000 Cologuard results during the first quarter, an increase of 175% over the fourth quarter. We expect more than 18,000 completed tests during the second quarter.

Our results demonstrate that our launch strategy is working and Cologuard's traction is increasing. Our launch strategy incorporates active outreach to both physicians and people over 50. The early feedback, is that there is great demand for Cologuard, an accurate, non-invasive colorectal cancer screening tool.

Let's take a look at the number of physicians who are ordering Cologuard for the first time. The number of ordering physicians continues to grow rapidly. After a strong fourth quarter, we added 4,200 new physicians during the first quarter, a 102% quarter-over-quarter increase.

As the number of ordering physicians has grown, so has our primary care physician market penetration. It has grown from less than 1% in the fourth quarter of 2014 to 3% in the first quarter of 2015, an indication of the growth we are driving, and the opportunity that remains. This performance was achieved by approximately 80 sales professionals.

Our marketing efforts are helping to increase physician awareness and Cologuard ordering behaviors as well. Our marketing activities are having a significant impact on Cologuard's growth.

These graphs illustrate the influence of Cologuard marketing on two key metrics, physicians who are ordering for the first time, and their proportion of Cologuard orders. About half of physicians who are ordering Cologuard for the first time, do so without first being contacted by our sales team.

They are responding to our marketing campaigns, which include direct-to-consumer programs, such as digital marketing and print advertising; direct-to-physician programs, like the medical education campaign that I will discuss in a minute; targeted public relations in national and local media, driving Cologuard awareness.

The total Cologuard test orders that have been made by new physicians, is about 22% of all orders to date. This represents a significant opportunity to convert these physicians new to Cologuard into high ordering physicians. Our web traffic, indicates that our digital marketing efforts are working.

We are seeing rapid growth in traffic to our three web sites, especially cologuardtest.com, with 1.6 million total views to date. This web traffic is having a positive effect on ordering as well. For example, 1,000 Cologuard Doctor Discussion Guides are being downloaded from cologuardtest.com every week.

People take this guide to their doctor's appointment to help educate their physicians about Cologuard. We are seeing significant growth in the number of physicians who have ordered Cologuard more than 20 times. The number of physicians who are placing the highest number of orders are growing the most rapidly, by nearly 3X.

We are pleased with absolute number of new physicians and the percentage of physicians who are becoming high volume orders. Typically, physicians wait to see their patients' experience with Cologuard, before they begin ordering with frequency. On average, it takes about two to three months before a physician becomes a high volume orderer.

We are pleased with these results, and it is still early in our launch of Cologuard. Let's turn now to how we will continue to drive growth. Our outstanding commercial team is focused on three priorities; one, increasing the reach and frequency of our sales team to primary care physicians.

Two, promoting physician-to-physician engagement; and three, securing coverage from commercial payors. We will discuss each of these priorities in greater detail. Let's review the expansion of our sales team; our sales professionals have an average of 10 years experience in healthcare.

We had 80 of these professionals at launch in October 2014, by our National Sales Meeting in March, there were 140 people on the team. We are adding 60 more sales professionals by June 1. In March, we announced a one year co-promotional agreement with Ironwood Pharmaceuticals.

Ironwood markets LINZESS, an FDA approved treatment for adults with certain GI disorders. This agreement became effective on April 20th, and Ironwood is promoting Cologuard as a second physician product to its 25,000 physicians, including both GIs and primary care physicians.

Our partnership with Ironwood also includes a joint medical education effort. Ironwood has a robust group of guest GI speakers in its program that will enable us to expand our efforts. Our Med-Ed program is one of the key drivers of continued growth.

Our program is aimed at driving awareness of Cologuard, it is focused on physician-to-physician engagement. These efforts include, lunch and dinner programs, online videos and webinars, presentations that highlight Cologuard at key scientific meetings, and online continuing medical education.

Our Med-Ed efforts are paying off, physicians who participate in one of our Med-Ed programs order 50% more than those who don't. Let's turn to the significant value we have in our lab; the biggest problem with colon cancer screening is the lack of compliance, when physicians order a screening test.

One frustration of GIs is, that of those who agree to schedule a colonoscopy, 20% simply don't show up for their scheduled procedure. The team at our customer care center, is at the heart of our effort to change this compliance challenge, by actively engaging physicians and their patients.

Its working, our compliance rate for Cologuard is currently 71%. As part of our effort to increase compliance, we make reminder calls and send letters to those people who haven't returned [0:05:02] (4) their Cologuard kit.

Physicians also benefit from our customer care center, because we take much of the colon cancer screening follow-up out of their office and into our customer care center. People benefit, because they have a resource to answer questions about colon cancer screening, and Cologuard. Let's turn to the progress we are making with commercial insurers.

We continue to make steady progress securing coverage with Cologuard by additional commercial payors. We added Anthem, one of BlueCross BlueShield's largest affiliate.

Tufts Health Plan, ranked the number one health plan for quality in the country; CareFirst in Maryland, DC and Northern Virginia; Excellus with members across western New York; and Dean in Central Wisconsin. We also are working with some insurers to secure an in-network contract.

As a result, we have more than 60% of people over 50 years of age covered for Cologuard, an impressive number, given how early we are in Cologuard's launch. As a reminder, there is a two step process for reimbursement from commercial payors.

The first is, securing a medical policy decision to cover Cologuard, the second is entering into a contract to make Cologuard an in-network test, at an agreed-upon price. Our managed care team is in active discussions on both fronts. We are encouraged that the payor community believes in the value, offering Cologuard to its customers.

We look forward to working with payors to bring Cologuard, to [indiscernible] they cover. Let's turn now to an upcoming event. I am pleased to announce, that our Investor and Analyst Day will be held on June 25th in Madison and Webcast live.

We look forward to discussing our strong foundation, including an in-depth tour of Exact Sciences laboratories and customer care centers, Cologuard launch dynamics, and our exciting pipeline. As you see, our first quarter was another period of success and growth for Cologuard, and exact sciences remains on a strong path.

We are now happy to answer your questions..

[Operator Instructions]. Our first question comes from Jeff Elliott of Robert W. Baird. Your line is now open..

Good morning guys, and great quarter. Kevin, you have talked before about the lack of broader coverage as being the biggest weight rate to broader adoption. But you had a really nice pickup in coverage during the quarter, some of which you highlighted in the press release.

Would you still say that coverage is the biggest rate limiter today, and is still -- when do you think we reach the tipping point in terms of coverage, and so that's no longer the case?.

It is the biggest limiting factor, and will probably continue to be, because there is a lot of work to do with the vast number of payors in the U.S. That dynamic is, I think, starting to change as you could see in the quarter, with the decision by Anthem to cover Cologuard.

You start to see that payors understand the value of Cologuard, both from a medical standpoint, a customer satisfaction standpoint, and a cost standpoint.

There is a lot of work that remains to be done, with payors, and I don't think that is a story that will change this quarter or next quarter, it will take time to educate payors and to enter into agreements with them..

Got it. During the quarter, the revenue per test was a lot higher than I modeled, at around $388.

How should we think about this figure, is that a good baseline number to use near term? And I guess, maybe this is a question for Bill, but how much of the revenue in the quarter was on a cash basis versus accrual?.

I think the way to think about this is, less about the recovery from the commercial side, more about a higher proportion of Medicare tests. So it is substantially accrual, but Medicare has been a very good payor so far.

So when you model out, I think you have to consider that we will seek more commercial patients, and that number, could trend down, as we get broader participation from commercial insured patients..

Okay, got it. That's helpful. And then one last one for me. I guess Kevin, is there any update on where the new insurance contracts are coming, in terms of reimbursement.

Is the weighted average -- is that still above CMS, I guess, the weighted average for commercial, is that above CMS?.

The weighted average of the commercial contracts that we have entered into, is above the CMS rate..

All right. Thanks guys. Nice job in the quarter..

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

Hey, good morning guys. Thank you.

Just curious about the -- tracking you have with the existing docs, can you give us a sense of what percentage, at this point that may repeat orders? I think you made some allusions, but I don't remember hearing a number?.

We have not discussed yet, Isaac, the percentage of physicians who we categorize as high orders. We group them into the -- we call the physician, a high ordering Cologuard physician, if they order 20 or more tests, we have just said that that number has increased 3X.

We will be able to provide more detail around that, at our June 25th Investor and Analyst Day. But at this time, we are not talking about that overall percentage..

Got it. Thanks. And then, on the payor coverage, you mentioned some of the highlights in the quarter. Curious, what the Blues -- in my experience at least, they tend to sort of -- I guess, follow-through together.

So would it be fair to say that, by end of year, you would expect at least another couple of regional Blues to follow-through and offer coverage as well?.

We have been in discussion with a number of the Blues as well as the tech assessment group.

If you take a look at the tech assessment decision, it seemed that the biggest challenge that that group had, was not knowing the appropriate interval for the use of Cologuard, and with more data on that coming from the pharmacoeconomic analysis that will become available this year. We think that dynamic will start to change.

We have also had many Blues tell us that their cost of screening, particularly the cost of screening colonoscopy, is quite high and Cologuard is an attractive option to see more people screened at an overall lower price. So we expect to see some of the Blues start to move, and I think Anthem is just an indication of that..

Got it. Thanks so much guys..

Thanks Isaac..

Thank you. Our next question comes from Peter Lawson of Mizuho Securities. Your line is now open..

Kevin, I wonder if you could give us some granularity over the guidance, just around the incremental in test volume, where do you think that comes from next quarter? Is that mostly from the higher prescribers, or are you factoring in new payors coming through? That'd be great, thank you..

Its actually not coming from the increase in commercial payors, its really being -- still today, most of the patients who undergo Cologuard are Medicare patients, be there conventional fee-for-service Medicare, or Medicare Advantage.

And the increase is coming both from new ordering physicians, who are trying Cologuard with one of their patients for the first time, and also physicians who are moving from ordering Cologuard once or twice to ordering Cologuard 10 or even 20 times. It’s a mix of both there, and we expect to see continued growth in both of those categories..

Thank you.

And just what's the biggest worry for you, for the next year, Kevin?.

Well, what we are focused on, we are really pleased with the trajectory of launch. What we are really focused on, is working with commercial payors to understand the value of Cologuard to their patients, to their overall cost structure.

And one thing that we have heard, time and time again from payors is that, their concern that with any new technology, you will see increased utilization that will overwhelm any individual cost savings they see.

And we believe that we can offer a value proposition with Cologuard to help them make sure that Cologuard is used by the appropriate patients. And let me give you an example; patients who are under 50, are not indicated for Cologuard, and we have the ability to let those payors know, which patients are under 50 and those patients that are over 50.

That's something that is very valuable, that only can be done because we have a single lab that offers Cologuard. We also can let payors know when patients have been screened more frequently than the indicated three year interval by guidelines and other groups.

So we have the ability to moderate overutilization, which today, is a significant problem with colon cancer screening, and people who are screened with colonoscopy for example, they tend to be screened every 5.7 years.

So there is a massive overutilization problem, and then there is a significant underutilization problem with those who refuse to be screened. Cologuard is able to answer both, and we think that value proposition addresses one of the concerns that these payors have. It just takes time, and that is something that we are really focused on..

Thank you. I will get back in the queue..

Thanks Peter..

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

Hey guys. Thanks for taking the questions. Kevin, can you talk a little bit about the difference between your IDN salesforce and the primary care guys? Can you talk about the funnel on that, kind of large contracting side of the business, and the difference between utilization dynamics between the two different groups, if there are any? Thanks..

Kevin Conroy:.

Sure Brian, its Maneesh. So one of the things that we have talked about all along, has been the success of getting these primary care physicians to order. We are also pleased with the progress that we are making on the system side. We have had a number of systems adopt and we have a number of systems in the funnel.

The one consistent theme we have heard from the systems is, one of the biggest barriers is inclusion in the quality guidelines. So all of them are looking to HEDIS quality measures, and unfortunately today, based on the timing, Cologuard is disruptive innovation and its not yet included in the HEDIS quality guideline.

So its odd, but today, for a [indiscernible] blood test, they get quality credit. But for Cologuard, they don't get credit. We are confident that this is going to get rectified in the near-term, and that will start to drive meaningful volume in the future.

But for right now, we have got a good pipeline of systems, that have adopted, and other 15 systems that are in process. But its going to be gated and triggered by USPSTF guidelines, which are expected -- hopefully draft guidance yet, this summer..

Okay, great. That was very-very helpful.

Can you talk a little bit about some of the dynamics that you guys have on the front end, when you receive an order from a physician, kind of a fall-off rate from contacting those guys and getting a kit out? Any progress that you have made, and any commentary that you can make about what that fall-off percentage is, outside of kind of how you define compliance, some more of the front-end compliance stuff? Thanks..

Sure. So we have seen an increase in compliance. So initially, there was this fall-off rate, and traditionally, that's driven by not getting an address right from a patient, or a patient not having commercial coverage, and not wanting to do the test.

As we have seen better education out there, we are seeing that percentage come down from initial order and patients' willingness to accept it. The other thing Kevin mentioned was, physicians are skewing towards ordering this more for their Medicare patients. So we are seeing an improvement, and we expect to see it more in the future..

Okay. And last one for me, Kevin, can you -- just hitting on the launch per se, but longer term, can you talk about thoughts on the competitive dynamics and how Cologuard is positioned against possible new entrants that are in the market? Curious on your thoughts there? Thanks..

You mean, blood test?.

Yeah exactly..

Brian, we hear consistently about new blood tests that are in development to try to address the need for increased colon cancer screening. We have probably seen, at least 10, maybe a dozen attempts at developing a blood test over the last six years, since we have been involved with Exact Sciences.

There are a number of challenges that a blood test faces. The first is, poor performance, we have yet to see a blood based test that performs, as well as even the FIT test, which is not a strong performer.

The biggest problem that they -- two performance problems that plague this blood test is, number one, low sensitivity for early stage cancers, especially stage-I cancers. And stage-I and stage-II cancers represent about 75% of all cancers found in a screening setting. So that poor performance is a challenge, sensitivity wise.

Also from a specificity standpoint, you see a very high, typically around a 20% false positive rate for an annual test. We believe that the poor performance of these tests makes it a challenge for FDA approval, makes it a serious challenge for commercial coverage, and makes it almost a non-starter with Medicare..

And so, we think that there is only one path forward with the new blood test. A, really high performance; so a test that works. We haven't seen that yet. B, FDA approval; and C, a national coverage decision. So we have our own blood-based screening program, and we continue to look at ways to increase performance.

But we don't believe there are any short-cuts to developing and launching a new screening test. So that's our view of how this works, I think investors have seen over time, all of the tremendous amount of work and investment that is required to achieve all three of those things, and we don't think that will change in the future..

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

Hey guys, congratulations on a great quarter..

Thank you..

So on your guidance for 18,000 tests for Q2, can you just kind of walk us through the dynamics to use in modeling for that? Obviously, it’s a nice step-up -- the meaningful step-up of this quarter.

Can you just help us conceptually, how you think about modeling the ramp, not just how you thought about it for the second quarter, but maybe for the back half of the year?.

Well we have only provided guidance for Q2, so I will start with that. We are able to look at the number of test orders that have occurred in March and April, which we have a pretty good idea of what percentage of those turn into completed tests in Q2.

So we have a sneak preview of that, and we know the number of completed tests that we had seen to-date. That gives us a fair amount -- although not perfect, but a fair amount of visibility into where we will end up in Q2, and we feel confident that we will be able to get to at least 18,000.

We haven't provided guidance for the full year, but we do a good job of tracking that and analyzing it. I think the things -- the factors that will allow us to see a strong year is, the increased reach and frequency of our field force and our efforts with Ironwood, and also the efforts around medical education, and then eventually, payors as well..

Great. And then the 71% compliance rate, I thought was quite good in the quarter. I know last quarter you commented on bulk orders, potentially serving as a drag to that number.

Can you maybe just comment on the 71% rate, and what you're thinking over maybe the next quarter or two?.

Sure. So this is not the result of any drag from any bulk orders, we think this is steady state, and think that this is consistent. So we are pleased with the compliance rate, we are going to continue to find ways to try and bring these numbers up, because that is meaningful.

We think its possible, but this is -- we think, a steady state and something we'd like to improve on..

Great.

And then maybe my final question if I can, I think the sales rep number will go to 360 with Ironwood, just want to confirm that, and then how should we think about the productivity of the Ironwood reps, relative to your direct salesforce? Obviously the Ironwood folks, I believe in their contract, have a principal obligation to the IBS drug, so any color on that would be helpful?.

I think that's right. The truth is we don't know yet, and we will be able to start to attract that -- we are starting to attract that right now.

Its very early in the co-promotion relationship that we have with Ironwood, it was just a couple of weeks ago, that they had their national sales meeting, and we know that it typically takes four to eight weeks for reps to start to become productive, and Cologuard is in a P2 position relative to LINZESS.

So we don't know what the efficiency is going to be. We expect that it will be less than the Cologuard or the Exact Sciences' reps, we will have a better idea of that, I think by June 25th..

Great. Thank you..

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

Hey guys, thanks for taking the questions. Kevin, you talked about 50% of the new customers generated by your marketing efforts, and not your salesforce early on, looks like maybe the initial utilization with that group is a bit lower.

So can you just walk us through the steps you're taking to convert those new customers, generated by your marketing campaign into high ordering physicians?.

Sure, this is Maneesh. Again, we are really pleased with the outreach that is pulling -- the marketing efforts that are pulling new orders in or new physicians in. One of the first things we do, is make sure that the salesforce in the territory is alerted to that new ordering physician.

We also have an internal sales team, and those inside sales reps, their specific role is, to follow-up with everyone that has come in without a sales touch, to make sure they get a sales touch, and begin the process of converting them into a regular orderer.

So those two steps, making sure that the rep in the territory is aware, but also from a central point, outreaching actively to make sure that that doctor doesn't become a single order, but rather a higher volume order..

Great.

And then I guess, given the success you are having with those marketing campaign efforts, do you have plans in place to expand those campaigns this year?.

Yeah. So one of the beauties of having a sole-source lab is an ability to test what's working and emphasize it and de-emphasize the things that aren't working. So we are actively right now, testing things in different metro areas, so that we can get smarter about what works and what doesn't.

So for example if you live in the Phoenix area or in the Tampa area, you might see billboards, you might see full page ads, but these are local targeted activities, so we don't come out -- we take measured and efficient investments, rather than broad scale, and that's what we have done to-date in launch, and we will continue to do, as we roll forward.

So don't know the answer to that, but we want to make sure, whatever we do, we do it efficiently..

Great. And then just one more for me, can you Kevin -- I think last quarter you gave an update on the number of additional physicians you had registered and those that were ordering, since the end of the prior quarter; can you provide a similar update in terms of number of additional physicians you've seen since the end of the first quarter? Thanks..

This is Maneesh again. At the beginning, we started talking about enrolled versus ordering physicians. We think that the metrics we have laid out are strong, and that's really what's most important, that by the end of the quarter, we had a doubling since the end of the year.

So on June 25th, we will provide a deeper look at what has happened in the interim. But you can see that rate of growth, week-over-week, new physicians being brought in. We think just so -- we haven't given the number, but that rate is continuing..

And its important to note, that these new physicians ordering Cologuard -- or the vast majority of physicians that are signing up with our lab are ordering Cologuard for the first time.

So that dynamic has changed from the real early days when we had FDA approval, but didn't have Medicare coverage, and we saw a lot of physicians who have signed up, but haven't ordered. So going forward, we will talk only about the number of new physicians.

Its important to note that over the last four to six weeks, we have seen a nice increase in acceleration of the number of new ordering physicians on a weekly basis..

Okay, that's great. Congrats on all the continued progress guys..

Thanks. Appreciate it..

Thank you. And our next question comes from Zarak Khurshid of Wedbush Securities. Your line is now open..

Hey Kevin, Maneesh, Bill, J.P., thanks for taking the questions guys.

What was the weekly run rate at the end of the quarter, and currently?.

The weekly run rate of what?.

Of tests..

We haven't disclosed that, but it continues to grow, both the test orders, completed tests and the number of physicians as expected. So all of the marketing programs and our salesforce are generating strong results here, gives us really good confidence going into the end of the year..

Understood.

Then if you look at the ordering doctors now, do you have a sense for the theoretical average number of tests for doc at, call it, full penetration?.

That's a really good question, and the truth is, we don't know at this point. What we do really like to keep track of, is the percent increase in brand new ordering docs, and then the percent increase in say, who docs have ordered over five times, ordered over 10 times, and who ordered over 20 times.

And one thing that we are happy about, is the percent increase in the larger ordering groups, say the over 10 and over 20, is increasing at a even greater rate than the new docs going in. So that's a good sign for now and the future.

The physicians, once they start ordering Cologuard, it takes two or three months before they start ordering it more frequently, but eventually they start to move over to the right, in terms of being high frequency orders.

They are not giving up their other screening methods at this point, and part of that, is that many physicians don't want to order one test per Medicare patient, and another test for a patient under the age of 65, because its just too much of them to keep track of.

So we expect to see, as we get broader commercial adoption, that that rate of ordering, even among our current physician customers will increase..

Understood. Thanks, that's very helpful.

Then last one, any new thoughts on how many PCPs can effectively be serviced by each rep?.

That maybe is the most important question of all, in terms of the commercial trajectory. With the number of sales professionals that we have calling on doctors right now, the goal is to have them move from their list o 75, once they have converted those physicians, to a new group of 75, to bring on new physician customers.

I think that, by the end of this year, we will have a much better idea of the ability to back off our sales efforts and touches with those physicians, as they become a high ordering physician.

One interesting data point, was that during the week of our national sales meeting, where everybody was out of the field, that we saw continued movement up into the right of -- in terms of test orders, new physicians added, and that was -- that's one positive data point.

We didn't have people in the field, physicians, kept ordering Cologuard at an increased rate, and new physicians we are signing up. So we feel good about that, business its going to take another quarter or two or more to really understand the dynamics of being able to stop calling them on physicians and to continue to see them ordering Cologuard..

That sounds good. Thanks..

Thank you, Zarak..

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

Thanks. Good morning.

Kevin, I wondered if you could just give us an update on the cycle times between tests ordered and completed test results, when you send it back?.

It takes a couple of months, from 30 days to 60 days, from the time a test is ordered until you have a completed result on average..

And a vast majority of the time Brandon, is with the patient. Some people are fast to get the kit and get it back right away. Others will take a bit more time, but that's really the key driver of that timeframe..

So is it fair to say it has been consistent, I guess, with the fourth quarter?.

I would say yeah, I think it has been consistent in terms of the cycle time..

Okay.

And then, in terms of the comment, Kevin, you made about adding the additional 60 reps by June 1st, is that a little earlier than you anticipated, and in the context of your second quarter guidance? Would it be fair to say, you've contemplated minimal contribution from the Ironwood reps?.

So there are two questions there; yes we have hold those reps. We were looking at between June and September, we made the decision to try to bring them on all at once and have one training session, which was really driving that from a cost efficiency standpoint.

Let's train those reps all at once, and the sooner we bring them on, the more of an impact that they can have next year.

And in terms of the impact of the Ironwood reps, we would see that they would have an impact in the back half of this year, and moving into next year, more than they would have -- we don't expect much of an impact in the current quarter..

Thanks. Appreciate it..

Thanks Brandon..

Thank you. Our next question comes from Jose Haresco of JMP Securities. Your line is now open..

Hi guys. Congratulations on a good quarter..

Thanks Jose..

Just one question for me, you guys added a lot of new accounts in the quarter, and at what point do we expect the rate of additions to level out, where more of your salesforce starts to focus on recurring revenue, as opposed to adding new accounts?.

Can you ask that question one more time?.

Yeah sure.

So you added about 4,000 new accounts in the quarter, should we expect like a similar rate of growth of new accounts next quarter and the September quarter, or will it start to moderate towards the end of the year, as your sales team starts to look at reorder rates, as opposed to adding new physicians?.

Well, the goal actually with the current field force, is to move them to new physicians, to target a new group of physicians before the end of the year. So that they are not focused on the same group of physicians all year. We don't know what that rate of growth will continue to be, we track it on a daily basis.

But we don't think that that rate of new physician ordering will grow. We said that, we were at under 1% in Q4 penetration of the 280,000 primary care docs, and 3% by Q1. We have a long way to go, and our goal is to drive penetration among primary care physicians throughout the country very broadly.

We really like the fact that we have been able to put together a meaningful salesforce. And our belief, is that unlike a pharmaceutical, Cologuard will eventually be adopted as a regular part of the screening program, one of the tools that primary care physicians use to screen their patients, for colon cancer.

And that will be able to less frequently, call on those high prescribing physicians, who have made it part of their practice. I think you have seen this occur in colon cancer screening with colonoscopy, and also with the FIT test. And so, we believe the same will be true. We need more data to convince ourselves of that though..

Okay.

Could you talk about the split between primary care and OB/GYN customers? Are you still seeing about 25% of your customer being OB/GYN?.

I think Jose, that datapoint, 25% of OB/GYN patients are over 50 years old. OB/GYNs represent less than 10% of the physicians who have ordered Cologuard, and since we have not called on them, most of them who are ordering Cologuard are doing so, because of our marketing efforts.

They are not ordering at the same rate and pace as those physicians that we have a sales professional to speak with. So that's one way of saying. Presently, OB/GYNs represent a very small percentage of the overall Cologuard test results.

That's a group that we are not focusing on today, although we may in the future, right now the focus in on primary care physicians..

Okay. Thank you very much..

Thanks Jose..

Thank you. Our next question comes from Bruce Jackson of Lake Street Capital. Your line is now open..

Good morning and thanks for taking my question.

With the sales force adds in the quarter, do they come on towards the end of the quarter, or was it earlier?.

Did what come on towards the end of the quarter?.

The new salespeople?.

The Ironwood relationship ticked off on April 20th. The new salespeople, the majority of them started in March at our national sales meeting, so really the end of the first quarter. And the impact, again it takes a number of weeks before they start to have any meaningful impact, four to six weeks..

Okay.

And then with the test mix, was there any change in the test mix during the quarter, between the Medicare and the commercial tests?.

So we saw consistently, the predominant ordering -- I mean, the physicians are predominantly ordering for Medicare patients, and we saw that continue to slightly tick up in the first quarter..

Okay.

Last question, did you experience any impacts from weather during the quarter?.

Because this is a new launch, I want to hope that we did, but we don't have any comps yet to know that. We are really pleased with the progress that we made. Its encouraging to think we could have done better, but we know in the first quarter, significant portions of the East Coast were shut down.

So I can only conjecture, would say yes, but will no more in the future..

Okay. Thank you very much..

Thank you..

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

Thank you.

Most of my questions have been answered, but maybe you could discuss the cash collection cycle, and whether you have enough experience yet to describe it?.

Ray, as we look into it just a moment ago on the mix, it is predominantly Medicare, and Medicare has been, with the traditional fee-for-service side, a really good payor. So that collection cycle has been very prompt and efficient.

On Medicare advantage, we talked about that being accrued at 50%, and we are advocating the heart [ph] on patients' behalf. That will take a little bit more time to recoup. And then we are actively working on commercial payors to advocate on behalf of patients. That cycle is going to be quite a big longer, and that's our experience.

We don't have enough history that we could give you a prediction or a forecast of how that recognition would go. Right now, we are on a cash basis for those..

That sounds great. Thank you..

Thanks Ray..

Thank you. And we have a follow-up question from the line of Mark Massaro of Canaccord Genuity. Your line is open..

Hey guys, thanks. Kevin, maybe could you speak to your confidence around the upcoming USPSTF decision. Obviously with the New England Journal of Medicine Study, clearly shows the value of Cologuard.

But maybe, can you speak to some of the other pieces of literature in the public domain that you think the taskforce will consider when they issue their decisions?.

Sure. We feel confident, that USPSTF will rate Cologuard as an A or B test.

The USPSTF looks at a balance of the benefits to the harms of screening, and they look at the quality of the evidence, its an evidence based group, and it’s a group of very well respected primary care physicians, public health people, and people who think pretty deploy about these issues.

Let me take a step back and say that, United States Preventive Services Task Force is not a group that you interact with directly. Rather, we have provided publications to AHRQ, which is a group within CMS, that helps provide evidence to the taskforce.

The evidence that they are -- we believe that they are probably looking at, include the New England Journal Study of Cologuard, probably as well, the earlier stool-DNA study that was published in 2004, in the New England Journal, as well as some of the other publications that were representative of the case control studies.

They then couple that with modeling, typically, that they commission to look at what the benefit is from using a screening test with known point-in-time sensitivity and specificity performance characteristics.

And so the modeling that they have used, and they have used in the past, it substitutes the long term 20-year government funded studies that are typically done to assess a particular screening mortality.

One of the things that gives us confidence about an ARB rating, is that the benefit of screening with Cologuard is at least equivalent to screening with a FIT test which is rated A.

The harms associated with screening or Cologuard, are clearly less than colonoscopy, which the harms have been detailed previously by USPSTF, in terms of the adverse events associated with screening colonoscopy.

So when you take a look at the performance characteristic, the modeled impact on the decrease in colon cancer incidents and mortality, coupled with the fact that the harms associated with Cologuard are less than colonoscopy, which is also A rated. We feel really comfortable with where Cologuard should be rated.

The important thing about USPSTF is not only that it is really probably considered the preeminent guideline for a screening modality, that also feeds into the HEDIS quality measures, and also the STARS ratings, the HEDIS is relied upon primarily by physicians and group practices and the STARS ratings by payors that participate in the Medicare program..

Great. And then timing wise, I know previously you have communicated expectations for the end of this year or early next year. In your prepared remarks, I think you mentioned draft guidance this summer.

Not sure if that's early summer and have your expectations for timing changed at all?.

No. And let me say, we don't know. USPSTF has not put out any type of explanation in terms of when they will have draft guidance out. We would expect that it would be sometime this summer, maybe early fall. But we don't know that, and that is the best guess on our part.

Based upon the schedule that is available on their web site and this public comment period, and then potentially, those -- that guidance would become final late this year, or early next year..

We do think that there is a real positive from a draft guidance, should Cologuard be rated A or B..

Thanks..

Thank you..

Thank you. And at this time, I am showing no further participants in the queue. I would like to turn the call back over to Kevin Conroy, Chairman and CEO for any closing remarks..

Thank you. In summary, the number of ordering physicians more than doubled and completed tests nearly tripled quarter-to-quarter. The reach in frequency of our sales team is growing, through expansion and our relationship with Ironwood. Our Med-Ed programs are engaging physicians in new ways that are directly affecting order volume.

We are making strong progress with commercial payors. We are looking forward to our Investor and Analyst Day in June 25th, in Madison. I am pleased to say that Cologuard recently won gold at the Edison awards in the Science-Dental-Medical category. Named in honor of Thomas Edison, these awards highlight the best innovation each year.

Its an award that everyone at Exact Sciences has earned. The work our team has done and continues to do is amazing. We are fortunate to have the team that we do, and it’s a privilege to work beside them every day. Thank you and we look forward to updating you on our progress, as we move forward..

Ladies and gentlemen. Thank you for your participation on today's conference. This concludes the program. You may now disconnect. Everyone, have a great day..