EXAS

EXACT Sciences Corporation (EXAS)

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Exact Sciences (EXAS)

Q3 2012 Earnings Call

October 30, 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

Laura S. Stoltenberg - Chief Commercial Officer

Analysts

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

Jeffrey T. Elliott - Robert W. Baird & Co. Incorporated, Research Division

Jon Davis Wood - Jefferies & Company, Inc., Research Division

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

Zarak Khurshid - Wedbush Securities Inc., Research Division

Presentation

Operator

Great day, ladies and gentlemen, and welcome to the Exact Sciences Corporation Third Quarter Earnings Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I would now like to turn the conference over to your host, Rod Hise. Please begin.

Rod Hise

Thank you, and thank all of you for joining us for Exact Sciences' third 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 third quarter 2012 financial results. If you've not seen it, 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 third quarter financial results. Next, Kevin will provide an update on the DeeP-C clinical study.

Before we get underway, I'd ask everyone to take note of the Safe Harbor paragraph that appears at the end of the news release issued this morning, covering the company's financial results. This paragraph states that any forward-looking statements that we make are: 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 our change in our expectations with regard thereto to any change in events, conditions or circumstances on which any such statement is based. It is my pleasure now to introduce our Chief Operating and Financial Officer, Maneesh Arora.

Maneesh K. Arora

Thank you, Rod, and good morning, everyone. We are very pleased to report that patient enrollment for our DeeP-C clinical trial will close in 2 weeks on November 15. Kevin will provide a complete update on the trial and our FDA submissions in a moment.

As the clinical trial concludes, we're continuing our efforts to make the company ready for commercialization of the test once it's approved by FDA. These efforts are on track and will intensify as we approach FDA approval. We remain on track to meet our full year 2012 cash utilization target and narrow the guidance range for cash utilization to $42 million to $43 million. Our cash balance at the end of the third quarter was $118.6 million after we raised $57.8 million during the quarter. We now anticipate a 2012 yearend cash balance of between $108 million and $109 million.

Now, my pleasure to introduce Exact's President and CEO, Kevin Conroy. Kevin?

Kevin T. Conroy

Thanks, Maneesh. First, before we get underway here, I'd just like to express on behalf of the entire team at Exact Sciences how concerned we are for all of those friends and colleagues of ours affected by Hurricane Sandy, and we hope that you and your families are safe and recover quickly from this devastating storm.

Today, we would like to talk about 5 things. First of all, our recent cutoff study data. Secondly, an update on FDA and CMS. Third, an update on our clinical trial. Fourth, an update on how we plan to pursue our test commercial opportunity, and finally, a new opportunity that we see in screening in patients with inflammatory bowel disease.

We are very pleased to see the performance of the test in a large study showing 98% cancer detection in that study; 83% detection of high-grade dysplasia, we'll talk about high-grade dysplasia shortly; 57% detection of pre-cancers greater than or equal to 1 centimeter and 90% specificity.

This data is the third consecutive study over the last 3 years showing that this is a test with great performance. I would like to drive home the point that point-in-time sensitivity is not the most important part of this test clinically. The impact of this test will be felt from repeated screening and the cumulative sensitivity, like the pap smear, of detecting pre-cancers, which take a long time to develop and turn into cancer.

This study was conducted on 1,003 patients, a very large and statistically significant population. It exceeded our expectations. It's important to note that the data was generated from samples processed on the very automation system that we're using in the DeeP-C study. Again, it detected 83% of high-grade dysplasia. This is very important because the majority of these pre-cancers progress to cancer.

And finally, the cutoff method that was established in the study has been locked down, submitted to the FDA and will be used in the DeeP-C study. Another important aspect of this data is that we see a significant increase in the sensitivity of the test as the size of the polyp grows, from 1 centimeter to over 3 centimeters. This is important clinically because as a polyp grows in size, the risk of progression to cancer increases. So over time, as the polyp grows, our test is better at detecting. This is an important part of increasing the programmatic sensitivity of the test.

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