Kevin Conroy: Okay. So, the first question in terms of what are the things that are going to change to make a multi-cancer early detection, this whole category of testing more likely to be successful. Certainly, Congress creating Medicare benefit category is one that’s important. And we expect that legislation to be reintroduced in this Congress. Remember, last year, there were more than 50% of Congress were cosponsors, equal number of Democrats and Republicans. So, we are working hard right now to make sure that Medicare beneficiaries will have access to the incredible new category of testing. The evidence that is being built by Exact like others in this field shows great promise for the ability to shift the stage of cancer and detection across many, many different types of cancers, from later stage, more difficult-to-treat cancer to earlier cancers where the therapy frequently is surgery with an intent to cure.
That’s a big shift. And the more evidence that is generated that we €“ there is more excitement that is being built in this space. We believe that we have a significant advantage because of the strength of our Cologuard screening team, infrastructure, lab capability, etcetera, perfectly positions us for success. This is going to play out over a long period of time. We believe there are well north of 100 million people in the U.S. alone, many more outside the U.S. that are going to benefit from the test. And the key takeaway here is that there is no therapy as effective as earlier detection. Earlier detection means your therapy plan is going to be very different. And that’s the goal of program. We are excited about it. We are committed to making this happen.
And we are doing the work to €“ the rigorous scientific work to develop the best test.
Everett Cunningham: Mark, you had also asked on MRD. So, we plan to publish at an upcoming scientific conference in the tumor-informed version of tests. Recall, we are working on both tumor informed and tumor-naïve, by tumor-informed data to colon cancer puts us one step closer to bring that test to market, which we plan to do later this year versus an LDT. Next year, we will submit retrospective prospective data to MolDx, hoping to secure positive with that. Behind the scenes, we have been working on pivotal studies for both colon and breast, so that’s what helps that we think the standard for evidence in this space. We feel good. Same thing with multi-cancer and leveraging the foundation we built in primary care. MRD, given our positioning with oncologists, whatever the team has done there building deep, deep relationships.
As you know, 98% of oncologists have ordered Oncotype DX from us. So, we think we can leverage the same strength of the commercial foundation into MRD.
Operator: Your next question comes from the line of Dan Arias from Stifel. Your line is open.
Dan Arias: Good afternoon guys. Thanks. Kevin, back on the pipeline, just any update on the thoughts around commercialization for Cologuard 2.0, I think at one point, that was a potential €˜23 event. So, just curious if that’s still a possibility. And then how dependent on that, would commercialization be on just performance and data around the test versus other factors like sales training, reimbursement, etcetera? Thanks.
Kevin Conroy: Sure. We expect, Dan, to submit this year, and it’s at least six months with the FDA before approval. So, that puts us into next year with the launch. A lot of prelaunch activity will go on. Certainly, that launch will incorporate the new and different sensitivity and specifics specificity. And then some of the long mundane aspects of launch would include the billing code for the new version of Cologuard does it change, doesn’t it change payer relationships, Medicare, etcetera, you need to do a lot of work there before you switch over to a new test, lab automation changes, etcetera. So, that will be a very thoughtful transition from the great current version of Cologuard to an even better version of Cologuard. The nice thing is we have a great test in Cologuard today, and it’s all upside for patients, health systems and an exact science to shareholders when we bring the new innovation to patients.
Everett Cunningham: And just to add to that, recall that late last year, we pulled ahead. One of the key benefits of Cologuard 2.0, we pulled ahead internally what we call Cologuard 1.5. What Cologuard 1.5 did is it extended the stability of that patient sample by a third. That’s important because it helps to get more of those tests back to our lab with the sample we still used without expiring. So to-date, this new version of the kit, this new Cologuard 1.5 has helped over 45,000 samples that come back to our lab without expiring. Now, some of those we could have gone on to recollect before. But it creates an overall better patient experience, more revenue for us, better gross margins for us. So, the team is not standing by idly, by any means they are pulling ahead this big benefit. Overall this year, that will increase completed tests by at least a point.
Jeff Elliott: And then commercially, we are already there. We know our targets, obviously, as Kevin said, with Cologuard on the market now, it will be a seamless transition from a selling and marketing standpoint.
Operator: Your next question comes from the line of Puneet Souda from SVB Securities. Your line is open.
Puneet Souda: Yes. Hi Kevin and Jeff. Thanks for taking the questions. So, the first one is you mentioned the 8% penetration for 45-year-old to 49-year-old. What’s the ceiling for that penetration given the momentum you are seeing here? And then on the data, I mean should we be expecting that at AACR or ASCO or later in the year at ESMO? Thank you.
Kevin Conroy: I will take the first part. Jeff, can you take the second part. In terms of the ceiling, we think that the ceiling is higher than the 40% penetration that we have long guided to for Cologuard in that earlier age group because people who are 45-year-old to 49-year-old typically are busier than retirees, and it’s more of a challenge for them to schedule a screening colonoscopy, which can take 1.5 days of your life. Typically your, a portion of your week that you are normally working. So, we also have been able to educate and reach people digitally, our digital investments and social media marketing will increase over time. So, Cologuard is a test that fits within their license, do we get to 50% to 60% penetration that wouldn’t surprise me over time in that age group.
And what you are seeing is you are seeing the endoscopy suites are very, very busy today. Any notion that Cologuard was going to slowdown the business of gastroenterologists endoscopy suite is just not going to be accurate, in fact, to help them to focus. But the €“ and there is an opportunity for Cologuard, and is being ordered more frequently in that patient population because the risk of colon cancer is lower and GIs are €“ and health systems are focusing on getting those people screened, it goes into their colon cancer quality ratings through Cologarud, visiting last week with primary care physicians who have very busy practices €“ their focus on Cologuard. One office I met was switched 100% to Cologarud, why, because the GIs are so busy in that part of the country that they don’t want to see more average risk patients.
So, we see that Cologuard will continue to grow because it’s easy, it’s at home, it’s accurate. Jeff, I think there was a second part of that
Jeff Elliott: Hello, this is Jeff. The Exact team has done a really good job generating a wealth of evidence to help build out this new category. As Kevin talked about, there are two sets of data coming this year. The first one, I don’t think we will get AACR, I don’t know the conference for sure, but I would think midyear on the first set and then a full time being for the second set. When we do what conference though, we will let you know.
Operator: Your next question comes from the line of Patrick Donnelly from Citi. Your line is open.
Patrick Donnelly: Hey guys. Thank you for taking the question. Jeff, maybe one for you just on kind of the cadence of the year coming out of the strong 4Q, I know even going back to the conference in January, you were talking about 4Q had some benefits. I think you mentioned the billing enhancements on the call here. No surprise, 1Q down sequentially on Cologuard. Can you just talk about, are we getting back to that normal seasonality? Obviously, again, 4Q had that great inflection. You talked about all the factors there. So, how do we think about that going forward into €˜23? It’s been a weird couple of years, obviously, in terms of the impacts you guys have seen. So, how do you think about the cadence of this year both on the top line with Cologuard and then also maybe on the EBITDA side, if there is anything we should be looking out for there in terms of expense timing? Thank you.
Jeff Elliott: So Patrick, the typical cadence of Cologuard hasn’t changed. There €“ it’s really driven by primary care utilization trends. So, what those are is that we typically started the year if people are coming off the holidays, deductible just reset. So, primary care and use is to be lower in January. Things build until Memorial Day at the end of May. And then over the summer, that typically flatter as typical vacations and our focus is much on primary care. At about mid-August or Labor Day, things pick back up and typically climb pretty steeply until Thanksgiving timing and then slowdown over the holidays as people go on to again vacations. And what that means for Cologuard, there is about a 30-day lag between primary care visit, and we would recognize revenue.
That’s typically why you see a step down from Q4 to Q1. And I only expect that to change going forward. However, our business is becoming more predictable. More predictable, we get more stable growth drivers, as Exact team have done a really nice job building out a whole wealth of different drivers. It’s not just tied to one thing anymore. From Q1 this year standpoint, there is a couple of unique things that are happening. Everybody is seeing the flu data. The flu is really mild this year, relative to most years, and flu normally a headwind to us and others in early Q1. That headwind has really not existed this year. So, I think almost equal, Q1 a little stronger this year. Also some of the carryover benefits that I talked about earlier from enhancements to both our patient compliance engine and our billing systems, we are picking up a little bit of a catch-up revenue on both those things.
So all told, Q1 seasonally stronger this year as you think about phasing throughout the year, don’t expect that same sequential build Q1 and Q2 this year, as you would normally. From an adjusted EBITDA standpoint, Q1 typically has the lowest profitability of the year because of the top line being a little lighter seasonally, and expenses are a bit higher as you roll into a New Year, and we have got some unique sales and marketing events in Q1 also. So, lighter profitability in Q1, but overall strength to the year from a profit standpoint, again, significant pickup year-on-year in adjusted EBITDA.
Operator: Your next question comes from the line of Andrew Cooper from Raymond James. Your line is open.
Andrew Cooper: Hi everybody. Thanks for sneaking me in here towards the end. Maybe first, just Jeff, you mentioned some of the prior period collections and some of the improvements in compliance. Can you give us a sense for precising of that in the fourth quarter? And then I think it was about a year ago, maybe this call last year, you talked a little bit about a chance for pricing and ASP to continue to climb a little bit. So, can you just give us an update, have you been able to capture a little bit more on sort of apples-to-apples ASP and what that looks like and how that impacts to move to profitability as well as in a pretty steep drop down there?
Jeff Elliott: Andrew, in Q4, the base business exceeded expectations. This is the things that Kevin have ever talked about. It’s the strength of the relationships with health systems, the sales force productivity. Cologuard rescreens, 45 and all those things drove the upside. The reason I called out some of these other items is because we didn’t want to do to take in Q4 and then some that’s kind of the new base run rate going forward. I look at it as more sweetener in terms of a couple of things. The enhancements to our billing systems, enhancements to patients compliance what happened to, let’s say, you turn those on early October. Well, because of those enhancements, we were able to capture patients and revenue that otherwise would have hit in Q2 and Q3, we picked up in Q4.
So, it’s a good guide there on a go-forward basis now, our revenue per test or ASP is higher, and our patient compliance rate should improve on a go-forward basis. The €“ and you see it in other ways, you see that things like our DSO improvement improved by 15 days year-on-year. So, all that team has made done a really good job at enhancing our overall kind of billing systems in the processes. On a run-rate basis, ASP for Cologuard, the right way to think of this is around $480 of revenue per test. There are some puts and takes there. And obviously, you have got this newer age group 45 to 49. For a while, that was €“ it carried a lower revenue per test as we built up the insurance coverage. There are also some other classes like Medicaid that rightly so come in about 80% of the meta trade off at times.
But again, here the team has done a nice job. And longer term, I think we can work that rate towards…
