Kevin Conroy - Chairman, Chief Executive Officer William Megan - Senior Vice President, Finance Maneesh Arora - Chief Operating Officer J.P. Fielder - Senior Director, Corporate Communications.

Brian Weinstein - William Blair Mark Massaro - Canaccord Genuity Isaac Ro - Goldman Sachs Catherine Ramsey - Robert W. Baird Peter Lawson - Mizuho Securities Jose Haresco - JMP Securities Zarak Khurshid - Wedbush Securities Chris Lewis - Roth Capital Partners Bruce Jackson - Lake Street Capital Jan Wald - Benchmark.

Good morning ladies and gentlemen, and welcome to the Exact Sciences Second 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. If anyone should require assistance, please press star then zero on your touchtone telephone.

As a reminder, this conference is being recorded. I will now turn the call over to your host, J.P. Fielder, Senior Director of Corporate Communications. Please go ahead..

Thank you, Operator, and thank you all for joining us for Exact Sciences’ second quarter 2015 conference call. On the call today are Kevin Conroy, the company’s Chairman and CEO; 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 2015 financial results. If you have not seen it, please go to our website at exactsciences.com, or call 608-807-4607 and it will be sent to you. Following the Safe Harbor statement, Kevin will provide an overview of today’s call.

Next, Bill will provide a summary of our second 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.

Descriptions of the risks and uncertainties associated with Exact Sciences are included in our SEC filings, which also can be accessed through our website. It’s my pleasure to now introduce the company’s Chairman and CEO, Kevin Conroy..

Thank you, J.P., and good morning everyone. On this morning’s call, we will cover the continued strength of the company’s financial performance. I will review how the trajectory of Cologuard’s launch continues to be robust.

I’ll also provide details about a presentation we recently made to CMS about reimbursement coding for Cologuard that will streamline the processing of claims. I’ll provide an overview of the valuable pipeline that builds on the success of Cologuard.

Let’s begin with our Senior Vice President of Finance, Bill Megan, who will review our second quarter financial performance..

Thank you, and good morning. We continued our strong growth path in the second quarter. Revenue was $8.1 million for the quarter with completed Cologuard test volume of 21,000. Both revenue and test volume grew 90% over the prior quarter.

Average recognized revenue per test was $386, in line with the average for Q1 and reflecting our revenue recognition policy with regards to Medicare and commercial payors. Cost of sales was $5.1 million. Gross margin improved to 37%. Operating expense was $42.4 million, an increase of 18% from Q1.

The primary driver of the increase was investment in our sales and marketing program.

As we announced previously, we pulled forward the expansion of our field sales force into the second quarter, increasing the team to 200, and our co-promote agreement with Ironwood Pharmaceuticals became effective in April and their 160 person sales team began promoting Cologuard at the beginning of May.

The quarter end cash balance was $210.8 million, with cash utilization of $34.3 million for the quarter. I’ll now turn the call back to Kevin..

Thank you, Bill. The second quarter was another quarter of strong performance for Cologuard. We are very pleased with the rate of growth. As Bill said, the number of completed Cologuard tests during the quarter increased to over 21,000. We expect that number to grow to more than 32,000 during the third quarter.

The number of ordering physicians increased 77% to approximately 15,000. The total number of orders we have received since launch increased to approximately 80,000 in the second quarter. We ended the second quarter with a compliance rate of 73%, up from 71% in the first quarter.

As a reminder, the patient compliance rate is derived from the number of valid test results generated from collection kits shipped to patients 60 or more days prior to June 30, 2015.

This strong performance is being driven by a number of factors, including our experienced team of 200 Exact Sciences sales professionals combined with 160 professionals selling Cologuard as part of our co-promotional relationship with Ironwood Pharmaceuticals.

Also, the broad public relations campaign is having a significant impact, and finally our digital marketing campaign has generated 27,000 doctor discussion guide downloads, which continues to drive Cologuard growth. Let’s turn now to an update on the reimbursement coding for Cologuard.

The American Medical Association maintains a permanent uniform set of billing codes called CPT codes, which are used to process claims by both Medicare and commercial payors. Payors are accustomed to using CPT codes, and those codes enable the smooth processing of claims.

At the request of CMS last Thursday, Exact Sciences presented a proposal at CMS’ clinical laboratory public meeting to crosswalk Cologuard to a new universal CPT code created by the AMA specifically for our test. We expect a decision from CMS in the fall with a potential effective date of January 1, 2016.

This code would replace the G-code assigned to Cologuard as part of the national coverage decision last October. CPT codes are difficult to obtain and represent a recognition by the AMA of the growing prevalence of Cologuard in medical practice.

The CPT code for Cologuard will help facilitate more efficient claims processing by both Medicare Advantage plans and commercial payors. Let’s turn now to our promising product pipeline. At our investor day last month, we described the company’s pipeline and how we are aiming to make Exact Sciences synonymous with the early detection of cancer.

We are focused on four areas that combine to account for nearly half of the cancer deaths in the U.S. The first is expanding the indication for Cologuard. There are 40 million Americans between the ages of 40 and 49, and 15% of all colon cancer cases involve patients who are under 50.

In addition, there are 20 million Americans who are at higher risk for colon cancer and are recommended for surveillance with colonoscopy. We intend to explore expanding the indication of Cologuard to address both of these patient populations.

Lung cancer - in June, we announced a landmark partnership with the MD Anderson Cancer Center to develop a simple blood test for the diagnosis and screening of lung cancer, the number one cancer killer in the U.S. It affects 220,000 people in the U.S. every year, killing 160,000 people. Again, early detection is key.

Three out of four people diagnosed with Stage 1 lung cancer survive five years, but only two out of 100 diagnosed at Stage 4 survive five years. Our goal with MD Anderson is to pair novel biomarkers and our technology with the low dose CT scan, the current screening method to accelerate and detect lung cancer in its most curable form.

We believe this approach has the potential to overcome some of the limitation of low dose CT scans alone and offer a more reliable way of detecting lung cancer early. Pancreatic cancer - there are almost 50,000 people diagnosed with pancreatic cancer in the U.S. every year, and 40,000 people will die from the disease.

Early detection of pancreatic cancer is critical as less than 5 out of 100 patients survive five years if they are diagnosed at Stage 2, 3 or 4. As part of our ongoing partnership with the Mayo Clinic, we are developing a test to improve the diagnosis of pancreatic cancer and differentiate between malignant and benign cysts and masses.

Current methods are not very accurate, leading to both over and under-treatment of patients. Esophageal cancer - esophageal cancer represents 17,000 new cases of cancer and 15,000 cancer deaths each year in the United States. Like pancreatic cancer, its prevalence is also on the rise.

This is a deadly disease for which early detection can improve survival rates. Together with Mayo Clinic, we are developing a test for the early detection of esophageal cancer through the monitoring of patients with premalignant changes in the lining of the esophagus, called Barrett’s esophagus.

Together, these tests would provide more than 18 million testing opportunities each year with a multi-billion dollar U.S. market opportunity. We’re now happy to answer your questions..

[Operator instructions] Our first question comes from Brian Weinstein with William Blair. Your line is open..

Hi, thanks for taking the question.

Can you hear me okay, Kevin?.

Yes, Brian. Thank you..

Perfect. So my first question is on spending.

Can you talk a little bit about the operating expenses going forward? They’ve obviously ramped up into the launch, but how should we think about your spending levels on a go-forward basis, and what mechanisms are you guys looking at to ensure that the way that you’re spending your sales marketing dollars in particular are efficient?.

Brian, this is Bill. We’re a rapidly growing business, and we really feel that we’re managing our expenses well and that we’re spending the money in the right places. So let me take it in order - for sales and marketing, as we said, there were a couple of things that drove the expense higher in the quarter.

We pulled forward hiring of additional field sales force. We had said in February that we intended to go to 200 but that was deep into the third quarter. We determined it was better to pull those additions forward into Q2, so that’s one piece.

The other piece is we started our co-promote agreement with Ironwood, and that cost is recorded to sales and marketing. So looking ahead into Q3, we will feel a full cost impact of the expanded field sales force with corresponding additions in sales, support, and marketing staff.

The total sales and marketing staff, Brian, will go to about 300, and as you know we’ve used $200,000 as the compensation analog for each of those people, so that works out to about $15 million per quarter in comp costs. Marketing content and campaigns will add roughly $8 million per quarter, Brian, so that’s sales and marketing.

On the R&D side, again, a really effective--as Kevin has just outlined in detail, a really effective use of funds. So R&D expense was $8.1 million in the quarter. We laid out in detail at investor day how we’re allocating those resources.

We have an extended relationship with Mayo, we have our new partner with MD Anderson, so in the quarter you see the modest impact of these new agreements as well as our own commitment to the pipeline in terms of our own resources.

Looking ahead for R&D, we expect R&D investment to increase about $1 million per quarter for the second half of this year, Brian. Lastly on G&A, it was $13.7 million, and remember this reflects the cost of our customer care center, which we think is essential to our service.

It also includes our sophisticated IT environment, our systems and staff, HR and leadership team, and so forth. Looking ahead in G&A, we will continue to expand at about $1 million per quarter for the remainder of 2015. So we think it’s very targeted and will support our growth in the back half of this year..

All right, and then on Ironwood--oh, go ahead?.

Brian, just for clarity, let me drive home one point. The number of sales and marketing people, that’s different than the 200 PCP reps. The PCP reps are included in the number that Bill provided there of 300, looking out into the future.

The others in that group would include marketing people, system sales reps, managed care reps, inside sales people, but we do not presently expect an increase of the 200 primary care reps throughout the rest of this year..

Okay, that’s fair. On the Ironwood arrangement, a couple months in now, can you give any kind of commentary on how those reps performed relative to a direct Exact Sciences rep? You talked about efficiency, I believe, an expected efficiency of around half of what the direct reps would have been.

What are you hearing out of your partners at Ironwood at how they are perceiving the launch and what their efficiency is? Thank you..

Brian, this is Maneesh. The thing that we have been--we said last month was that we’re pleased. That’s essentially what we have heard from our partners as well. It is still early days, but if we think back to the rationale for entering into the co-promotion agreement, it was to expand our reach into a really, really large market.

What we have discovered early is that the reps, that they have high quality reps. Adding Cologuard in P2 has done, early days, what we expected it to in that we are reaching more physicians and early returns are positive. So we have heard that from their team. It is P2 in their bag, and so the efficiency is not as high as with our direct reps.

One of the reasons we decided to pull forward the expansion was because obviously our sales efforts are working. But in response to your question, the Ironwood early returns are positive - we think it’s a terrific organization, and that is consistent with what we’ve heard from them. .

All right, thanks for taking the questions, guys..

Our next question comes from Mark Massaro with Canaccord Genuity. Your line is open..

Hey guys. Thanks for taking the question.

Kevin, can you maybe describe your conversations with commercial payors, and given an interest from a number of prospective payors, could you maybe talk about how many folks, how many payors might be waiting on the task force decision?.

Sure. Well, let’s first characterize the conversations that we’re having with payors. The conversations with payors revolve around three key points.

Number one is the effectiveness of Cologuard, going right back to the New England Journal of Medicine paper detailing the deep sea study, the pivotal study on Cologuard, back to 92% overall cancer detection, 94% durable stage cancer. That’s the first element of conversation that we have.

The second element of conversation we have is around patient satisfaction. They care about the satisfaction level of their patients, and what you see with Cologuard is a 73% compliance rate, which is remarkable.

The third piece is around cost, so clearly Cologuard is something that can save payors money over time, and Cologuard is a very cost-efficient way to screen people with a highly effective screening approach. That’s the real breakthrough part about Cologuard. Those conversations are going very well. We see momentum building with payors.

We expect to be able to announce additional payors that we have contracted with in the upcoming months, and the larger payors we continue to have very productive conversations with. As you know, typically the largest payors are not the first to move.

With that said, they are the ones that can benefit the most from the rapid adoption of Cologuard, and as you know, that will accelerate our business even faster than the currently rapid growth rate of Cologuard.

So we’re excited to be able to announce new wins with commercial payors, and we believe that it is good for everybody in the ecosystem of colon cancer screening..

Great.

With respect to the new CPT code, can you maybe discuss how you think the new CPT code might facilitate greater efficiency with both the Medicare Advantage and commercial payors relative to the G-code?.

Yes, so a G-code typically, or a miscellaneous code typically triggers a manual review, which slows down the process of reimbursement and also it becomes a series of one-off discussions, appeals, et cetera working with those payors.

A CPT code is a seal of approval in many respects in working with the commercial payors, that now you have AMA firmly behind Cologuard and it is no longer--it will slowly not be considered something to be experimental or unusual.

So having a CPT code over time represents a real positive to the business, and again it’s a sign of momentum with Cologuard in all respects - with payors, with providers, and most importantly with patients..

Great, thank you..

Our next question comes from Isaac Ro with Goldman Sachs. Your line is open..

Hey, good morning guys. Thank you. I had just two questions this morning, one on the 3Q volume guidance and then the second one on just sort of the operational execution side. On the first one, I know you guys reiterated the volume guidance you gave us at the analyst meeting.

Hoping you could maybe talk a little bit more about the assumptions you’re making. If you look at the sequential trend there, it’s pretty big total volume number, but if you look at a percentage increase, it does imply a little bit of a deceleration.

So I appreciate that you guys want to be conservative, but just want to get a sense of the assumption that you’re making, what are some of the swing factors that could lead to upside or downside to that volume..

You know, other than the guidance that we’ve provided, in terms of adding more clarity there, I think that’s something that we can do on our call next quarter. We don’t want to provide too much clarity into all of the assumptions that go into our internal modeling.

It represents a significant amount of growth quarter over quarter, and it also reflects our optimism based upon the productivity that we see every day.

As you know, Isaac, with our IT infrastructure, we’re able to see the results on a sales rep by sales rep and territory by territory basis, and physician by physician basis, because all of those orders flow through our system.

It gives us confidence that we’re able to deploy resources as needed in a very efficient way and to modulate where we and how we apply those resources. So we’re confident in that growth. We’re happy to provide more clarity in the future. .

Great, thanks. Just a follow-up on the operational side, if I look back at the facility tour that you guys hosted for us at the analyst meeting, it certainly seemed like the facility is up and running pretty much exactly as you planned. That said, obviously it’s early in the product life cycle.

Can you talk a little bit about some of the processes you have in place to deal with, whether it’s a surge in claims or maybe some hiccups with your supply, either your suppliers and vendors? What are some of the controls you have in place to sort of ensure that from an execution perspective, you can generate all the volume that you guys have building up on the demand side?.

Isaac, it’s Maneesh. So the biggest thing we do is make sure that we are ready for that explosive growth.

Hopefully for many of you that were able to see on the webcast our lab operation, we have expanded to three full shifts, so we’ve got someone on staff at all times, and we have continued to efficiently and modestly scale, and we’re ready to very, very quickly.

So the biggest area that we would need to scale quickly would be our lab preprocessing, which we’re able to do very, very quickly, so we’re comfortable that with dramatic growth in the business, which we’re seeing - please remember, this is a rapidly growing business.

We have the capital needs and we also have safety stocks of reagents built to make sure we can meet any demand that comes. So we feel good about that, Isaac, and are planning appropriately..

Got it. Appreciate it, guys. Thanks very much..

Our next question comes from Catherine Ramsey with Robert W. Baird. Your line is open..

Hi guys. Thanks for taking the questions. I had a question on Europe. Saw the U.K. and Italy sites are up and running. Just wondering if you could quantify what you’re collecting over there and what the timeline would be for other countries. .

Sure. So let me first start by addressing our goals with our introduction of Cologuard into Europe and then eventually Asia. Our goal in Europe this year is to get Cologuard implemented and available through partnerships with multiple labs in Europe.

The testing, the ultimate testing will be done back in the U.S., so operationally make Cologuard available - one. Two is to run the right studies, for example we’re starting a study in Italy to show the performance of Cologuard in the Italian population. We will likely run one or two additional studies and then over time probably more than that.

The goal is to build a consensus of evidence in the European population. Cologuard is a test that will likely be targeted in the European population among people at higher risk for colon cancer who need to be followed on a regular basis, and as you’re probably aware, colonoscopy is not as frequently used in Europe as it is in the U.S.

and as a result, it is not used as much as it should be in the patient population that’s at the highest risk. Cologuard there represents a significant opportunity to have an impact on this disease among people who are at the highest risk.

In Asia, our goal is to design and begin a clinical trial that will get Cologuard included in the Pan-Asian guidelines and make it available in China. So the work that we’re doing this year outside of the U.S. is preparatory, but the market opportunity is massive..

Okay, so as far as ordering physicians goes, I see you have some; but are they performing orders now?.

They are. We do not expect that they will have a material impact on our results for this year..

Okay. One follow-up question - I saw recently Medicare proposed to cut colonoscopy reimbursement. We were just wondering if that has had any impact on your discussions with payors..

That does not directly impact. As you know, commercial payors pay significantly more than Medicare does for colonoscopy and ancillary procedures.

One of the great things that is valuable about Cologuard is where it is priced, both from a Medicare perspective and commercial payors, so that is not having any impact on our discussion with commercial payors at the present time..

Okay, perfect. Thank you..

Thank you..

Our next question comes from Peter Lawson from Mizuho Securities. Your line is open..

Hi Kevin. Just wondered if you had any more thoughts around the task force decision, how business would change if you get an A or B or lower rating. That’d be great, thank you..

We believe that should Cologuard receive an A or B rating, it’s a real opportunity for Cologuard utilization to accelerate because USPSTF A or B rating drives HEDIS guideline inclusion and Stars guideline inclusions, which are quality measures, and those quality measures are measures that primary care physicians and large systems and Medicare Advantage payors care about.

So it will provide a real economic incentive for the adoption of Cologuard, which has been shown to increase compliance. That’s one of the critical things about an A or B decision.

It also helps drive commercial coverage because commercial payors care about USPSTF guidelines, and it also will have an impact on large systems because, again, the payors that pay the large systems track the large systems’ colon cancer screening rates and make bonus payments based upon increased or achieving certain goals in those or metrics in those screening rates.

If there is less than an A or B rating, that would make it more challenging to secure the large systems and commercial coverage, but we think that there is obviously a significant opportunity because Cologuard has such strong patient friendliness and that so many patients prefer and are willing to get screened with Cologuard that have never been screened before..

What’s the likelihood of a price change as you move from a G-code onto a CPT code, Kevin?.

So I don’t think that the implementation of a CPT code will have a material effect on value. I think it will have more of an impact on the efficiency of collecting. The value of Cologuard stands on its own and is not likely to be impacted by the CPT code per se..

Perfect, thank you so much. Take care..

Our next question comes from Jose Haresco with JMP Securities. Your line is open..

Hi guys, good morning..

Good morning..

First, just a logistical matter. Of the 200 reps that you now have, how many of those are what you’d call fully active--.

Jose, we cannot hear you..

Can you hear me okay? Is that better?.

Yes..

All right, thanks.

Of the 200 reps that you now have, about how many of those are active, and when would we expect all 200 to be active?.

They are active right now. They were trained a month, two months ago, the last group of about 60, and they are already starting to have an impact. We expect that impact to grow. That’s something that we track very closely, and we are seeing an increase of the effectiveness.

Still, the most effective group of reps are the reps that started late last year. The second most effective group is the group that started earlier this year, and then the last group that started in June is starting to have a significant impact..

Okay, thanks. With regard to the impact of web traffic, I know that a substantial number of the orders that you get in the quarter come unsolicited.

Will you expect that percentage to change going forward, or is that a fairly good number to work with as we think about the business?.

Well, I think it will change. Right now, we are investing less than we were a quarter ago in direct to consumer digital advertising.

We are still investing, just at a slower rate as we have invested more in the direct sales force because as the data indicates, the most impactful use of dollars is in training and bringing highly capable sales professionals on board and having them have discussions with primary care physicians.

That’s by far and away the most effective use of dollars, so we continue to invest. I think as time goes on and you see broader commercial coverage, that you might see an increase again in the marketing spend that we’re making; but right now, the majority of the spend is with primary care reps and the training of those reps in the field..

Okay, thank you very much..

Thank you..

Our next question comes from Zarak Khurshid with Wedbush Securities. Your line is open..

Good morning, guys. Thanks for taking the questions. First one on gross margins - they look like they’re tracking pretty solidly.

Do you have a sense for where they are headed over the next couple of quarters and year?.

Hi Zarak, it’s Bill. So gross margin improved to 37%, and we had reported $384 in terms of cost per test last quarter and it moved down smartly this quarter, and it’s a function of capacity utilization. Maneesh outlined earlier that we’re building up our capacity. We are prepared for higher volumes.

That number gets rolled in to cost of goods sold, so as we move through the year, we expect that number to continue to move down as we get higher volumes..

Glad to hear it. A bit of a follow up question, just on the ordering patterns. Kevin, any new color on how many ordering customers are regular customers and how many are fully penetrated at this point? Thanks..

Zarak, it’s Maneesh. So you know from looking at our information, we actually do know exactly how many are regular, how many order more than one, more than two, more than three, so what I would just point out is something Kevin said, is there are a whole host of people, 80%-plus of the orders are Medicare because it goes back to coverage.

The first question they are asking is, is this covered, and then, do I get my HEDIS credit for it? We know those are headwinds for us today, but we are confident that they are not going to be headwinds, and as we continue to get commercial coverage wins, there is a direct correlation between increased penetration and higher ordering with coverage.

So that’s what we have to look forward to - it’s growing really rapidly despite those headwinds today, which we’re working to get addressed..

Okay, thanks..

Zarak, one of the exciting things about the business is that--and makes us excited not only about our performance this year but as you look into 2016 and 2017, is we know that primary care physicians, the number one thing that they care about in terms of ordering Cologuard is commercial insurance coverage. They love the fact that Medicare covers it.

We expect to see a bump in the use of Cologuard by primary care physicians among patients insured by commercial insurers once we get stronger commercial coverage, but we also expect to see a bump in Medicare utilization because there are many primary care physicians who won’t order Cologuard until it’s covered by both, or who will only order Cologuard in a more frequent way once it’s covered by both.

So what you’ll see is as we start to get payors in particular states, large payors in particular states, we’ll be able to devote more marketing efforts in those states to educate primary care physicians, drive utilization, and at the end of the day hopefully have an impact on the people that benefit from Cologuard..

Thank you..

Our next question comes from Chris Lewis with Roth Capital Partners. Your line is open..

Hey guys, thanks for taking the questions. .

Thanks Chris..

I wanted to start on ASPs, relatively flat over the previous quarter.

Can you just talk about how we should think about ASPs trending going forward?.

Chris, this is Bill. So I think in light of Kevin’s response, that you look at the prescribers’ behavior, it has been in the majority Medicare-related, so there is a piece of Medicare that’s traditional fee for service and a piece of Medicare as Medicare Advantage. We said at investor day that Medicare represents 80% of the order volume.

If you look at the split between those two, it’s probably a little bit lighter than the traditional 70-30 split between traditional fee for service and Medicare Advantage. But for the near term, I think that’s the kind of the calculation you’re going to be looking at.

I think it is going to be sort of in line with what you’ve seen for the first six months of this year..

Great, and then for the Cologuard market expansion opportunities, both the 40 to 49-year-old and the high-risk populations, can you talk about the types of clinical trials you expect you need to perform there and potential timing expectations on those two fronts? Thanks..

As we discussed at our investor day, Chris, these are big, huge market opportunities but they require a couple of things.

They require FDA to help us or to work with us on the design of the clinical trial - for example, in the 40 to 49-year-old group, the incidence rate is much lower, so to repeat the deep sea study, you would need a much, much larger study than the deep sea study, unless you were able to have maybe a partial prospective study with a case control study, and those are discussions that we need to have with FDA.

The second thing is to work with the key guideline groups to get the support for a non-invasive way to screen both the 40 to 49-year-old group and the high-risk group.

We won’t know what those clinical trial timelines and costs would be until we get through those two sets of discussions, so that’s something that I think will probably take the better part of a year, and I don’t think we’ll be in a position to provide a great deal more of clarity.

But just standing alone, this opportunity is the largest opportunity in addition to the use of Cologuard in the average risk population for Cologuard to impact a broader array of people, and we think it’s well suited for people in the 40 to 49-year-old category.

We also think it could be well suited for people who are in the high risk category, but of course we will not market Cologuard to those groups until and unless we achieve FDA approval. .

Got it, thank you..

Thank you, Chris..

Our next question comes from Bruce Jackson with Lake Street Capital. Your line is open..

Hi guys. Just a couple questions on the doctors. So we had 14,700 ordering.

How many are currently enrolled?.

Bruce, this is Maneesh. We have more than that enrolled, and we’d started tracking enrolled back before we had even the Medicare coverage decision. It was the best measure for us in the absence of any coverage to gauge interest.

What we have done since then is we really haven’t emphasized it, tracked it because it’s not meaningful to have someone enrolled but not ordering, so that’s why we think the most valuable measure is how many people are ordering and using versus enrolled..

Okay, and then with the completed tests, I think Bill said that the Medicare mix was lighter than the traditional 70-30.

Is it closer to 50-50 on the traditional Medicare Advantage? What’s the mix over there?.

Yeah Bruce, let me be more precise - this is Bill. So if you look at the sort of generalized breakdown, it would be 70% traditional fee for service. We’re less than that, so--I’m sorry, we’re the other way around. Our fee for service is higher than that and Medicare Advantage is lower than that. Is that helpful? I’m sorry I confused things..

Yeah, that’s clear now. Okay, thank you.

Last question - on the lung cancer test that you’re working on, I think you said something about pairing up the biomarkers with the CT test? Is that right?.

Yes. So there would be two utilizations of lung cancer, of a blood-based lung cancer test. One is a broad screening test. The world needs a simple, accurate way to detect lung cancer at Stage 1.

Low dose CT has a number of challenges, mainly it’s high false positive rate leading to expensive procedures that lead to patient complications, so having an upfront test that would only the positives from a blood-based test would go to--would be reflex to a CT examination looking for a nodule is something that is beneficial, but also there are about 30 million patients a year that are screened with a chest CT or a chest X-ray, and there’s a significant number of nodules found every year that have to be--today, the typical approach is to go in and do a biopsy of those nodules and then to take a look at that nodule, leading to a very high rate of collapsed lungs.

With a simple blood test, you’d be able to rule out the presence of lung cancer in patients with a nodule found incidentally through an imaging modality, and we think that’s the second application of a blood-based test that could have a real impact on finding the people with cancer early so they can be treated, and ruling out patients.

As you can imagine, most likely with a blood-based test following an incidentally found nodule, you probably wouldn’t rely on just one negative test. You might have that test repeated over a period of time and only stop testing after it has been negative for a period of time. Those are things that will evolve in guidelines.

It is clear that the medical community wants a simple blood-based test to help in both of those situations. We’ve done an immense amount of market research, and it is very clear. Key opinion leaders are calling out for a biomarker, a blood-based approach, and so are physicians in the community setting..

Okay, got it. Thank you very much..

Thank you, Bruce..

Our next question comes from Jan Wald with Benchmark. Your line is open..

Hi, good morning, and congratulations on the quarter. I guess we kind of knew it was coming, but it’s still good to see. I guess I have one question to ask, because a lot of mine have been answered, and it goes back to your OUS strategy.

It sounds good that you’re going after high risk patients in Europe, for example, but one of the things about Europe is it’s sort of cost-sensitive, so are you going after high risk patients, or are you going after high risk patients with private insurance? What kind of focus are you putting on the European market effort?.

Yes, so long term, that will evolve of course work to get payors to cover very broadly speaking, both the national providers and also the commercial insurers throughout Europe, and addressing first and foremost that category of high risk patients. That will occur over time.

Again, we’re in an evidentiary gathering phase so that we’re in a position to influence both payors and providers in Europe..

And pricing, you don’t believe will be an issue?.

We don’t. We think Cologuard provides a tremendous value proposition relative to colonoscopy, in part because you get higher compliance, which drives cost effectiveness..

Okay, thank you very much..

Thank you..

Thank you. I’m showing no further questions. I will now turn the call back over to Kevin Conroy, Chairman and CEO for closing remarks..

Thank you again for participating in this morning’s call. In closing, the second quarter was one of strong financial performance with revenues of $8.1 million.

We saw an increased demand of Cologuard during the quarter, including a 77% quarter-over-quarter increase in the number of ordering physicians and a 90% quarter-over-quarter increase in the number of completed Cologuard tests.

Drivers of continued growth include the increased size of the sales force and the sales force effectiveness, also the increase in commercial coverage, and the large system adoption. One thing that we didn’t mention is there have been 30 large systems that have adopted Cologuard, and there are about 15 that are in the process of being implemented.

We are very pleased with the increase in the compliance rate from 71 to 73%. We also have a very valuable product pipeline that we are advancing with world-leading partners in the Mayo Clinic and MD Anderson. Finally, we ended the quarter with $210 million in cash.

I want to thank everybody on the Exact Sciences team who have been so helpful in driving the rapid growth of Cologuard. Thank you all for joining us today, and we look forward to updating you at our annual meeting on Thursday and as we move forward. .

Thank you. Ladies and gentlemen, that does conclude today’s conference. You may all disconnect, and everyone have a great day..