Exact Sciences Management Discusses Q2 2012 Results - Earnings Call Transcript

Exact Sciences (EXAS)

Q2 2012 Earnings Call

July 25, 2012 10:00 am ET

Executives

Rod Hise

Maneesh K. Arora - Chief Financial Officer, Chief Operating Officer, Principal Accounting Officer, Senior Vice President and Secretary

Kevin T. Conroy - Chief Executive Officer, President and Director

Analysts

Matthew M. Notarianni - Robert W. Baird & Co. Incorporated, Research Division

Brian Weinstein - William Blair & Company L.L.C., Research Division

Stephen S. Unger - Lazard Capital Markets LLC, Research Division

Charles C. Duncan - JMP Securities LLC, Research Division

Varun Dua - Jefferies & Company, Inc., Research Division

Jeffrey Frelick - Canaccord Genuity, Research Division

Zarak Khurshid - Wedbush Securities Inc., Research Division

John M. Putnam - Capstone Investments, Research Division

Bryan Brokmeier - Maxim Group LLC, Research Division

Raymond A. Myers - The Benchmark Company, LLC, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Exact Sciences Corporation Second Quarter 2012 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Rod Hise. Please go ahead.

Rod Hise

Thank you, and thank all of you for joining us for Exact Sciences' second quarter 2012 conference call. On the call today are Kevin Conroy, the company's President and Chief Executive Officer; and Maneesh Arora, our Chief Operating and Financial Officer.

Exact Sciences issued a news release earlier this morning, detailing our second quarter 2012 financial results. If you've not seen the release, please go to our website at exactsciences.com or call (608) 807-4607, and I'll provide it to you.

Following the Safe Harbor statement, Maneesh will provide a summary of our second quarter financial results. Next, Kevin will provide an update on our DeeP-C clinical study.

Before we get underway, I'd like to ask everyone to take note of the Safe Harbor paragraph that appears at the end of the news release issued this morning, covering the company's financial results. This paragraph states that any forward-looking statements that we make: one, speak only as of the date made; two, are subject to inherent risks and uncertainties, including those described in our most recently filed annual report on Form 10-K, and our subsequently filed quarterly reports on Form 10-Q; and three, should not be unduly relied upon. Except as otherwise required by the Federal Securities laws, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein or elsewhere to reflect any change in our expectations with regard thereto to any change in events, conditions or circumstances on which any such statement is based. It is now my pleasure to introduce our Chief Operating and Financial Officer, Maneesh Arora.

Maneesh K. Arora

Thanks, Rod, and good morning, everyone. Our DeeP-C clinical trial is on track. Expenses related to the clinical trial also remain in line with our expectations.

In the second quarter, we invested in expanding our Mayo collaboration. And in connection with this investment, the company took a noncash charge of $1 million in the second quarter. Kevin will provide a full update on both the trial and the Mayo collaboration in just a moment.

As we move towards completion of the trial, we're continuing to make investments in operations and in market development. These investments ensure that we will be ready to commercialize Cologuard after approval by the FDA.

We also remain on track to meet our full year cash utilization target of $41 million to $43 million. Our cash balance at the end of the second quarter was $70.9 million. It's now my pleasure to introduce Exact's President and CEO, Kevin Conroy.

Kevin T. Conroy

Thanks, Maneesh. We're very pleased to announce that we have enrolled 9,000 patients into the clinical trial. I want to complement the entire team in Exact for keeping enrollment on track. Enrolling 9,000 patients into a colorectal cancer study is no small undertaking.

Colonoscopy and pathology reports have been completed for approximately 6,000 patients. The pathology data for roughly 3,000 patients are in process. The final pathology report determines whether an enrolled patient has cancer.

Our goal is to enroll 49 to 56 patients with colon cancer. To date, our cancer accrual in the study is in line with expectations. We have already enrolled more than 400 patients with advanced adenomas or pre-cancers, which more than adequately powers the study for pre-cancer sensitivity. Assuming that our cancer incidence rate remains on par with the rate so far, we expect to complete the study and make our FDA submission per our guidance, the manufacturing module in the fourth quarter and the clinical analytical modules together in the first quarter of 2013 per FDA's request.

Let's turn to our recently completed cutoff study. The cutoff study or our final DeeP-C training sets involve more than 900 patients, including more than 80 cancer patients and 70 pre-cancer patients. We are very pleased with the results of the study. The results are in line with previously released data and we look forward to presenting this new data at a fall 2012 scientific meeting. These data are being used for final confirmation of the cutoff criteria for the assay.

Two important things to note about the cutoff study. First, the patient samples were processed on the automation system that will be part of the DeeP-C study and represents our commercial high-volume solution. The study validated the robust performance of our instruments. Second, this is the third set of data that meets or exceeds our expectations, which increases our confidence even further as we head towards testing the DeeP-C samples later this year.

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