Exact Sciences - Earnings Call - Q3 2013

Transcript

Operator (participant)

Good day, ladies and gentlemen, and welcome to the Exact Sciences Corporation third quarter 2013 earnings conference call. At this time, all participants are in listen-only mode. Later, we will conduct the question-and-answer session, and instructions will be given at that time. If anyone should require operator assistance, please press star and then zero on your touchstone telephone. As a reminder, this call may be recorded. I'll now introduce your host for today's conference, Rod Hise. You may begin.

Rod Hise (Head of Investor Relations)

Thank you for joining us for Exact Sciences Third Quarter 2013 Conference call. On the call today are Kevin Conroy, the company's President and Chief Executive Officer; Maneesh Arora, our Chief Operating Officer; and Bill Meagan, Senior Vice President of Finance. Exact Sciences issued a news release earlier this morning detailing our third quarter 2013 financial results. If you haven't seen it, please go to our website at exactsciences.com or call 608-807-4607, and I will send it to you. Following the safe harbor statement, Bill will provide a summary of our third quarter financial results. Next, Kevin will provide an update on our corporate priorities. 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, 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 law, we disclaim any obligation or undertaking to publicly release any updates or revisions to any forward-looking statements 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 my pleasure now to introduce our Senior Vice President of Finance, Bill Meagan.

Bill Megan (SVP of Finance)

Thank you, Rod, and good morning, everyone. The company remains on track with its milestones and is continuing to focus on FDA approval, reimbursement, and commercial readiness. Kevin will address each of these in a moment. We used $10 million in cash during the quarter and ended with a cash balance of $148 million. Our cash utilization is on track. We anticipate that fourth quarter costs will increase as work intensifies on our clinical lab, operating systems, and commercial activities. We still expect to end 2013 with approximately $130 million in cash. It is now my pleasure to introduce Exact Sciences' President and CEO, Kevin Conroy. Kevin.

Kevin Conroy (President and CEO)

Thank you, Bill, and thank you all for joining us. First, I want to welcome Bill as our Senior Vice President of Finance. With a deep background in finance and operations, Bill is an outstanding addition to the team. We continue to make strong progress on all of the elements of a successful Cologuard launch, the FDA's review of our PMA application, the process for securing a national coverage decision from Medicare, and our commercial preparation. Let's take a look at all of our key milestones in more detail. As you can see, the team at Exact Sciences achieved significant milestones during the year. These milestones include the submission of all three of our PMA modules to the FDA and the announcement of the top-line results of our clinical trial. We're continuing to build from that foundation.

We're happy to report that the paper detailing the results of our DeeP-C clinical trial has been provisionally accepted by a preeminent peer-reviewed journal. We anticipate publication during the first quarter. This publication highlights the strength of Cologuard as a colon cancer screening test. It will play a key role in the launch of Cologuard, including commercial reimbursement, guideline inclusion, and physician adoption of the test. We expect to make a national coverage decision submission to the Centers for Medicare and Medicaid Services, or CMS, during the first quarter, shortly before an FDA advisory committee meeting. We now anticipate that the advisory committee meeting will occur in the first quarter, a date which we expect FDA to finalize in the near term. A preliminary Medicare coverage decision is anticipated at about the same time as FDA approval.

About 90 days later, we would expect a final coverage decision and a final reimbursement rate. We expect to launch Cologuard on receipt of our final Medicare coverage decision. Now, let's discuss an update on the FDA's review of our submission. We have made strong progress on the FDA submission and review. The company has responded to the questions posed by the FDA through its interactive review process. We appreciate the agency's active engagement. Last week, we hosted the FDA for the first of two inspections required for approval. We are pleased to report that the inspection went well. We expect to meet with the agency in early November on our submission. Let's talk now in more detail about Medicare reimbursement. As you know, the company is participating in the joint FDA-Medicare parallel review program. As part of that program, Medicare will address coverage, coding, and payment for Cologuard.

The coverage decision is made by the coverage and analysis group. A positive coverage decision means that Cologuard testing will be reimbursed by Medicare in its patient population, roughly half of our intended population. We expect that CMS will also issue a billing code as part of its coverage decision to ensure Cologuard is reimbursed properly by both Medicare and commercial payers. The hospital and ambulatory policy group, or HAPG, determines the payment level for Cologuard. We expect it will be based on a crosswalk analysis of the billing codes for the components of our test. Let's take a closer look at a crosswalk analysis for Cologuard. At the end of September, CMS released 2014 national limitation amounts, or NLAs, for tier one molecular pathology codes. It has yet to issue final payment rates for tier two codes. Cologuard contains components in both tiers.

CMS issued a rate for KRAS testing at $199. It had previously issued its rate for FIT testing at $22. Together, these two codes amount to $221. In addition, we believe that the agency will eventually issue rates for the detection of methylated DNA. Presently, Cahaba, a regional Medicare administrative contractor, has priced single methylated variant detection at $140. Cologuard has two methylation markers, NDRG4 and BMP3. Assuming CMS sets the national limitation amount for a single methylated variant at $140, the total reimbursed value of Cologuard would be $501. The final payment level will be determined by HAPG. Let's turn now to a commercial update. We continue to systematically execute on our Cologuard launch plan. The build-out of our clinical lab is on track for completion in December. The lab will be capable of processing one million tests per year.

We anticipate that the lab will receive CLIA certification during the first quarter of next year. CLIA certification is a CMS program that ensures quality lab testing. We are pleased with the growing strength of our commercial team. Doug Ikeda joined us as our Vice President of Sales. Doug helped grow the commercially successful ThinPrep Pap test business for SciTech as Head of U.S. sales. Doug has begun to build a first-class sales team here at Exact. Our Vice President of Laboratory Operations is Ana Hooker, who joined us from ARUP, where she was Vice President of Integrated Oncology and Genetics. As we prepare for Cologuard's launch, Ana and her team are driven by their shared passion for providing the highest quality lab testing and improving screening rates. We are also pleased that Dr. Robert Honigberg has joined us as VP of Medical Affairs.

Bob has extensive experience in new product launches during his time at J&J and GE Healthcare. He will be responsible for our key medical and scientific leaders program and outreach to physicians and medical organizations. We are building a dedicated, highly capable team to convert systems, physicians, and payers to the adoption of Cologuard. Let's talk in more detail about our market opportunity and commercial strategy. The market for Cologuard is large. Today, there are roughly 80 million Americans at average risk for colon cancer who should be screened. It's widely recognized that colon cancer screening saves lives, but approximately half of the average risk population isn't current with colon cancer screening guidelines. As a result, 60% of colon cancer cases are diagnosed in late stages when outcomes are poor and costs are high.

We believe that Cologuard and our testing and compliance service can play a major role in increasing screening rates within this large population. Most importantly, we believe the evidence indicates that Cologuard has the potential to save many lives. Now, let's highlight the strength of Cologuard's performance in the DeeP-C study. As a reminder, the results of the 10,000-patient DeeP-C clinical trial were impressive. In this large study, Cologuard detected 92% of all cancers and two-thirds of large precancers with a specificity of 87%. Cologuard demonstrated superior sensitivity for both cancer and precancer to the comparator fecal blood test, which is utilized 10 million times per year in the United States. Now, let's talk about how colon cancer screening rates can be improved by providing options.

A study published last year in the Archives of Internal Medicine explored colon cancer screening compliance, which remained significantly lower than other cancer screening rates like those for cervical and breast cancer. Study participants were randomized to receive a recommendation for screening colonoscopy or their choice of FOBT or colonoscopy. Only 38% of those who received a recommendation for a colonoscopy followed through and received the procedure within 12 months. On the other hand, 69% of those who were given a choice of FOBT or colonoscopy were screened within a year. This study shows that by offering patients a choice, we can nearly double the compliance rate. The study drives home a point that we've been making. By offering patients a choice of colonoscopy or a non-invasive test, overall compliance can increase dramatically. Now, let's talk about our market preparation strategy.

We have a two-pronged strategy for the early adoption of Cologuard. First, our strategy is focused on large healthcare systems and groups. These networks employ a majority of the physicians in the United States and set screening standards for their primary care physicians. This concentration of physicians and strong centrally controlled testing programs presents a great opportunity for us to drive the adoption of Cologuard. The other prong of our strategy is aimed at the highest prescribing fecal blood physicians. The top 2,000 physicians in the country account for 1.2 million fecal blood tests per year. The top 5,000 account for more than 2 million tests per year. Our sales force will focus on those 5,000 physicians as early adopters of Cologuard. Let's turn now to some interesting market research. This research included interviews with a significant number of physicians and patients.

96% of the physicians we interviewed said that they are likely to prescribe Cologuard for some or all of their patients. More than two-thirds said they are very likely to order Cologuard. 92% of patients said they are likely to use our test, including three-quarters who said they are very likely to use Cologuard. This research indicates a significant potential for adoption among the 80 million Americans who need to be screened. In conclusion, it's important to remember that Cologuard is more than a test. It also is a service that will make it easy for physicians to prescribe and patients to take the test. The service will include what we call a Compliance Engine, or the IT and call center infrastructure that will actively support patient compliance through automated patient reminders and patient compliance reporting to physicians.

We believe that this combination presents the opportunity to do something truly unique and valuable, and we believe we can address a very significant health problem with this combined product and service offering. We now look forward to your questions.

Operator (participant)

Thank you. Ladies and gentlemen, if you have a question at this time, please hit star and then one on your touch-tone telephone. If your question has been answered or you wish to move yourself from the queue, please hit the pound key. Our first question is from Jeff Elliott of Robert W. Baird. Your line is open.

Jeff Elliott (Senior Equity Research Analyst)

Good morning, guys, and thanks for all the color. Yeah, just a question on the timing here. Understandably, with the government shutdown, perhaps the FDA panel may have changed, but is there anything else going on that would have caused an impact on the timing there?

On the scientific publication, I guess I think we were under the understanding that that was going to come in the fourth quarter. Now, it sounds like first quarter. What happened with the timing there?

Kevin Conroy (President and CEO)

Yep. First of all, with the government shutdown, it did not really have a significant impact on the review. We were really pleased that the principal reviewer continued to work on the review during the shutdown. Originally, we believed that the panel would occur in December and provided guidance to Q4. Based on our current conversations with the agency, though, we expect the panel to now occur in Q1.

We underestimated the amount of time required on the agency's part to organize the panel meeting, but the agency continues to work extremely hard on its review of the submission, and we're very appreciative of this high level of interactive dialogue between the FDA and our clinical affairs team. We'll be meeting with the agency in the near term, and we'll discuss the panel date at that meeting. With respect to the publication, there is still some chance that there could be a publication in December. However, we think that it's more likely to be in the early part of Q1. We obviously don't control that, and it's not set in stone at this point, but we do feel pretty comfortable that that is coming soon.

The importance, and I can't really overstate the importance of a publication in a premier journal, is that it triggers very important decisions down the road, including commercial coverage, physician adoption. We think it will also play a role in the review by the regulators in terms of approving this test, both the FDA and CMS. We are really pleased with the quality of the publication, and we think long-term that publication will create a lot of value.

Jeff Elliott (Senior Equity Research Analyst)

Got it. Okay. Outside of your control as far as the timing, shifting over to the compliance engine, because again, I talk to investors a lot, and I do think the commercialization activities you have underway perhaps are a bit underappreciated. I want to dig in into the compliance engine.

Can you talk about what are the big milestones that we should be tracking towards over the next year as you prepare for launch in terms of the compliance engine?

Bill Megan (SVP of Finance)

I mean, the real goal for us is to drive awareness. First off, it is really understanding screening rates. What Kevin talked about in our two-pronged strategy was really engaging and understanding the systems and their current screening rates. What we know across the board is that those screening rates are below the rates of cervical cancer screening, well below the rates of breast cancer screening. That is really the opportunity, working and partnering with these systems. If you think about it, Jeff, it is not us just selling another test, but us selling a strategy to increase those colon cancer screening rates.

The real goal for us in the background is to really understand the gaps and the reasons for those gaps. One of the biggest reasons is just the low compliance. Working with these systems to partner with, let's say, a lead group of early adopters once we have FDA approval. That is really the next big milestone, us, after FDA approval, being able to announce some of these agreements with premier systems that we will partner with to drive up colon cancer screening rates. Over the course of that first year of launch, it is working with them to actively report and engage not just with their physicians, but also a lot of these systems have integrated payers. Working to both establish increased screening rates, which we will be able to show with our sole-source lab, but also increased cost-effectiveness over time. Great.

Jeff Elliott (Senior Equity Research Analyst)

I'll jump back in the queue. Thanks.

Operator (participant)

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

Brian Weinstein (Managing Director)

Good morning. Thanks for taking the questions, guys. Kevin, you talked a little bit about the reimbursement and kind of adding up the codes there, but why are you confident that a crosswalk is the way we're going to go here and not a gap-fill process? If we do use a gap-fill process, how comfortable are you that you can get to the same kind of a number? Thanks.

Kevin Conroy (President and CEO)

First of all, because we've had extensive discussions with the agency, and what has gone on in the background, as you're probably aware, is that there's been a lot of effort to create a system by which molecular tests can be reimbursed.

This crosswalk process to these new molecular pathology codes is the way that will occur. Our test is, fortunately, a very straightforward test with a limited number of biomarkers in it. We, unlike other new molecular tests, are not looking to be reimbursed based upon the value of an algorithm. Rather, we are looking to be reimbursed for these specific codes, which have been, fortunately, listed in these tier-one and tier-two codes that have been created. I think that is part of the thought process on the part of CMS. That's not to say that gap-filling isn't possible. However, if gap-filling occurs, understand that the gap-filling would likely occur just for the methylation markers that have not been reimbursed or a payment level hasn't been set to date. The process for gap-filling a methylation code should not be very complicated.

There are many similar codes out there with similar processes for detection that could be used as a data point. Again, Cahaba has already gone through a gap-filling process for methylation detection. We also believe that other Medicare contractors will be going through that process.

Brian Weinstein (Managing Director)

Okay. Thanks for the answer on that. Turning to the economic study we had heard about previously, I'm curious about the timing of getting that out, kind of the model that you guys are using for that, and what the key endpoints are that we should be thinking about. Thanks.

Kevin Conroy (President and CEO)

Sure. The goal of the first economic paper, and I think there will be a number over time, but the first economic paper is really aimed at showing what is the appropriate interval for the test based upon modeling.

That paper will look at the cost-effectiveness based on dollars per quality-adjusted life years saved at a range of intervals, one, three, and five years, and at a range of prices or cost for the test. What that will show is that we believe that three years is a rational interval for the test based upon that cost-effective analysis. It will also show that compared to other cancer screening modalities, for example, breast cancer screening and cervical cancer screening, Cologuard presents a much less expensive or a much more cost-effective way to screen for colon cancer.

Other economic studies down the road will show the impact of differential compliance, namely the fact that we believe Cologuard will have a higher compliance rate associated with it as a test that is taken every three years compared to, for example, fecal blood test, which is supposed to be taken every year, but fewer than 10% of the people who are recommended to be screened every year with the FIT test actually get screened every year. Showing differential compliance increases the relative cost-effectiveness of Cologuard compared to a fecal blood test.

Brian Weinstein (Managing Director)

Okay. Thanks. I'll jump in the queue. Thanks.

Kevin Conroy (President and CEO)

Thanks, Brian.

Operator (participant)

Thank you. Our next question is from Jeff Frillick of Concord. Your line is open.

Jeff Frillick (Analyst)

Thanks. Good morning, folks. Kevin, you've done a pretty good job here beefing up the team in preparation for Cologuard commercialization.

As we've seen in some of the survey work, the primary care awareness is pretty strong. When do you start really beginning some serious discussions with the healthcare systems you've pointed out about Cologuard, the data so far we've seen in the headline data, and the compliance service?

Kevin Conroy (President and CEO)

Right. Certainly as part of developing this test and developing a clinical trial, which engaged 80-some-odd, 85 clinical trial sites around the country, we've had lots of conversations about the need for screening, the role of a stool-based DNA test. We have just a wealth of information and contacts with large systems who have a real deep need for a new test that will help them increase their colon cancer screening rates. That has begun.

It will certainly accelerate after FDA approval when we can start to more actively discuss the data behind the test and how the test would be specifically implemented. At this point, we feel really confident based upon the extensive amount of awareness of the company and Cologuard as we have had a number of publications, and we've been active in, again, discussing what their colon cancer screening needs are.

Jeff Frillick (Analyst)

Anything you can share on early feedback with respect to logistics and the compliance service component?

Kevin Conroy (President and CEO)

It's a good question.

One of the things that we've asked them is, "How important would this service be?" This isn't a scientific response, but I would say about 70% of systems say they have a significant need to offload some of what we call mundane work of colon cancer screening, and that is following up and reminding patients that they need to return a test. There are some groups who say, "Look, we already do a really good job at that, and our system will be flexible enough to account for those systems that don't want our patient engagement engine." I do think that over time, those systems that don't initially opt for the compliance engine will opt for it when they see the impact that it has on screening compliance rates. That's an important data point.

The majority of physicians will tell you, primary care physicians say, "The thing that they least like about their practice is all of the paperwork and following up with patients. They really want to practice medicine and solve health problems." If we're willing to take on this nagging that is required to get people screened and cajoling, then they're more than happy to ask us to do that.

Jeff Frillick (Analyst)

You guys are still thinking a monthly report or something like that of folks that were non-compliant?

Kevin Conroy (President and CEO)

That's correct. Another thing that systems like is the ability to see what the respective rates of compliance are on a physician-by-physician basis, which they'll be able to see so that they can help further train the physicians with lower compliance rates.

Jeff Frillick (Analyst)

That's interesting. Good point.

Just last question, Kevin, the November meeting with the FDA, remind us anything you can share with us, kind of the purpose of that meeting, what will be the takeaways from that?

Kevin Conroy (President and CEO)

Sure. As you know, we've submitted three modules to the FDA. The FDA then comes back with comments on each of those modules. This is that final meeting to get together face-to-face and review all of our responses to their comments to our submission. From this point forward, things will start to accelerate in terms of the FDA preparing a panel pack, putting together a panel, and having any final requests for more information or any final data from the company. We don't expect that there will be anything major that comes out of that meeting in terms of anything new because, again, this has been an interactive dialogue, which isn't typical.

There's been an interactive process of us providing them information and the agency responding to it. We're really appreciative of how active the FDA has engaged on this submission.

Jeff Frillick (Analyst)

Okay. Great. Thank you.

Kevin Conroy (President and CEO)

Thank you, Jeff.

Operator (participant)

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

Hi. Good morning. This is Eric filling in for Peter. I just wanted to make sure I got the timing correct. You said that you expect preliminary Medicare coverage decision around the time of FDA approval, and that is first quarter of next year?

Kevin Conroy (President and CEO)

We haven't guided to when we expect FDA approval, nor will we. We have said that based on our current understanding of the parallel review program, we expect the preliminary coverage decision to be roughly in parallel with the FDA decision.

In order for Medicare to make a binding national coverage decision, they have to provide roughly a 90-day notice and comment public review period of that preliminary decision. That is the reason for the 90-day difference between FDA approval and the preliminary coverage decision and the final national coverage decision.

Okay. Great. Thank you for clearing that up. Then relatedly, on the private payers, so the Aetna's and the U.S. Healthcare's, when do you, has there been any progress with talks with them, or when do you expect that they start to fall in line, assuming the Medicare coverage comes in as expected?

Right. That Medicare coverage decision is really important for commercial payers because many commercial payers will peg off of the Medicare coverage decision.

Also, in many states, when a test is included in the American Cancer Society guidelines, it's mandatory that commercial payers in those states cover the test. Those are things that will occur, and our activity around the commercial payers will increase significantly once the peer-reviewed article is published. We have already begun those discussions and have been having those discussions over a period of time to understand the timing and the process and the key factors that the commercial payers will be looking for. Suffice it to say, we're very confident that commercial payers look at this test as a new way of doing colon cancer screening that is a cost-effective way of doing colon cancer screening.

Got it. Just last question.

On the timing of the publication or as best you can expect, is that publication going to be, is that coming out before the preliminary Medicare coverage decision?

We don't know for sure yet. It will depend upon what we would expect that it would, yes. The one thing that we don't know today is the exact date of when that publication will occur or the exact date of the FDA panel. Of course, we don't know how long the FDA will take after the advisory panel vote to make a determination on approval. That could be a range of time, and we don't want to publicly comment on what is the FDA's purview.

Got it. Thanks.

Thank you.

Operator (participant)

Thank you. Our next question is from Zarak Khurshid of Wedbush Securities. Your line is open.

Zarak Khurshid (SVP)

Good morning, guys. Thanks for taking the questions.

Hey, Kevin, do you have a sense for timing on when we'll get final clarity on the tier two codes? And then after that, are there any other key meetings or events prior to the preliminary coverage decision that we should be kind of thinking about?

Kevin Conroy (President and CEO)

I'm sorry. Key meetings or events?

Zarak Khurshid (SVP)

Yeah. Meetings or events related to reimbursement issues.

Kevin Conroy (President and CEO)

Oh, yeah. In terms of that question, in terms of the timing, we don't expect that the CMS process is not as public of a process until that preliminary coverage decision is made. I'm sorry. The first question related to what the oh, whether this would be just on the tier two codes. Just on the timing of the tier two codes? We don't know yet.

We have heard that there are a couple of other MACs out there that are planning to ascribe values to these tier two codes because, remember, these tier two codes are tests that are being run today. There needs to be clarity. They can't just not price these at any point in time. There's a lot of pressure that ACWA and others are putting on the system to get clarity on molecular testing, and tier two codes are a big part of molecular testing. We do expect that that will occur. For us, we don't mind if that is part of the process for the review and payment level for Cologuard because, again, it's just two methylation marker codes. Even for CMS to get filled, those particular codes is not a complicated process.

We can lay out the cost associated with those markers in a pretty easy, straightforward way. We think it will either occur before our test is approved or as part of the reimbursement decision for Cologuard under CMS.

Zarak Khurshid (SVP)

Got it. Makes sense. In terms of the new products or programs, can you just give us an update on how things are shaping up there? Thanks.

Kevin Conroy (President and CEO)

Sure. In terms of the pipeline, what we've tried to do, Zarak, is divide up the company so that the bulk of the company is focused on launch, and there's a small team that is focused on pipeline development. As you know, we have this deep relationship with the Mayo Clinic, and that relationship is bearing fruit in terms of both pancreatic cancer biomarker development and esophageal cancer biomarker development.

The goal here is the long-term goal is to develop a test with one collection you can screen for pancreatic cancer, esophageal cancer. And those markers that we're developing, we believe, will also provide really important value in applied diagnostics for both pancreatic and esophageal cancer. The focus is going to be on Cologuard in the near term, but there is a team that's working really hard to develop these other very valuable pipeline products.

Zarak Khurshid (SVP)

Thank you.

Operator (participant)

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

Brandon Couillard (SVP)

Hey, good morning. Kevin, MDxHealth recently secured a tier one reimbursement code for one of its methylation markers and inclusion in the NCCN guidelines. How does that inform your view of how CMS is likely to proceed with respect to setting a reimbursement level for Cologuard? Is that an appropriate proxy to look at?

Kevin Conroy (President and CEO)

We do not know yet what the reimbursement rate is for the MDxHealth methylation test. Yes, I think what it speaks to is the fact that there are all these new valuable molecular tests that are being developed, and CMS is very cognizant of the fact that there needs to be a way to pay for these valuable tests. We think that that could be a proxy for methylation detection. It just really depends on the timing of the process to review that. We do not know if that will occur before or after our test. The good news is, look, these codes are being issued. They are being validated by CMS by putting them as a tier one code. We think that that will occur with NDRG4 and BMP3 for us. Thanks.

Brandon Couillard (SVP)

Can you give us a sense of how the commercial organization scales over the coming periods going into the FDA review in terms of headcount, Salesforce build-out? Where do you expect to be in terms of the Salesforce size, let's say, mid-year in front of the launch and then by the end of next year?

Maneesh Arora (CFO)

Sure, Brandon. This is Maneesh. We want to be prudent and careful. As Doug Ikeda has come aboard and we've started to build out the team, we're bringing aboard the leadership for the team. I think we've said in the past, and we'll reiterate, we plan to go to market, as many folks do with commercial launches, with a contract sales organization.

We would plan to bring that contract sales organization up right around the time of FDA approval so that by the time we get to launch, we would be able to actively call on those accounts. That would be for folks calling on physicians. We will plan to be scaling over the next two quarters to bring in key account executives. That is about 10 folk to call on the systems. You could expect to see a total Salesforce between the 45-50 field reps through a contract sales organization coming in at about the time of FDA approval and between now and then a ramp-up of the key account executives, which is a force of about 10 by the time we launch at FDA.

When all is said and done, we expect a system Salesforce, a field Salesforce, as well as marketing folks between 70-75 heads at the end of next year while we're in launch.

Brandon Couillard (SVP)

Great. Thank you.

Maneesh Arora (CFO)

You're welcome.

Operator (participant)

Thank you. Our next question is from Raymond Myers of Leerink Financial. Your line is open.

Raymond Myers (Analyst)

Yes. Thank you. Kevin, I wanted to drill down a little bit more on the pancreatic clinical work that's being done. Can you give us an update as to where that study is and what the regulatory pathway is in terms of milestones as well as timing?

Kevin Conroy (President and CEO)

Ray, at this point in time, we don't want to disclose what all of our tactics and plans for developing the pancreatic cancer test. Or actually, there could be a number of tests because we want to protect that program from a competitive standpoint.

We think that this is a highly valuable test in part, Ray, because today there is no screening modality for pancreatic cancer. The modalities for screening esophageal cancer involve a scope, so they are very expensive. Look for more updates down the road. Again, we want to make sure that the focus as we move into launching Cologuard is on Cologuard and not on the pipeline. We will provide timely updates on both of those future products at the appropriate time. Right now, we are just not ready to do that.

Raymond Myers (Analyst)

If I could follow up, I just want to understand. I can understand for competitive reasons you do not want to do this. You have given detail in prior calls about the product. What is the reason that you are not giving continued updates?

Is it truly that there's some new competitive difference, or has there been a change in those programs?

Kevin Conroy (President and CEO)

No, there hasn't been a change in those programs. There's, again, active work that has been done. As you're probably aware at DDW, there was data disclosed in a presentation by a researcher at the Mayo Clinic in collaboration with us around the detection of a potential diagnostic application that we're working on. Ray, I'm sincere when I'm telling you that the reason that I don't want to talk about this at this stage in any greater detail than I have right now is because we want the focus to be on Cologuard, and we want the we haven't provided any guidance at all around these programs. Although I've touched upon them, we want the focus to be on Cologuard.

We want the freedom to be able to develop the pancreatic and esophageal cancer programs in a way that will create the most value for shareholders. I will say that it's something that we're really excited about and is progressing nicely. At the appropriate time, we'll probably do some type of investor day where we can share a lot more information, but I just don't want it to eke out.

Raymond Myers (Analyst)

Thanks very much. Sounds promising.

Kevin Conroy (President and CEO)

Thanks, Ray.

Operator (participant)

Thank you. Looks like we have time for one more question Chris Lewis of Roth Capital Partners.. Your line is open.

Chris Lewis (Equity Research Analyst)

Hi, guys. Thanks for taking the questions. Just first, just on the IBD study, I was hoping you could provide an update there on the enrollment for that study. Yep.

Kevin Conroy (President and CEO)

We have slowed down our focus on the IBD study in part because we need to explore with the agency the regulatory pathway for that. There may be an opportunity yet to bring that study into the fold of a potential FDA submission. We're not sure at this point. There are a lot of things that we need to consider. First, we want to get through the review of Cologuard and the FDA submission around the Cologuard test. That enrollment continues. We're unlikely to release data in Q1. At this time, I'm not prepared to say which quarter we would release the data. Enrollment does continue to progress. It is not as significant of a focus for us at this juncture, though. Okay.

Chris Lewis (Equity Research Analyst)

And then just on the CLIA lab, can you remind us how much that build-out is expected to cost, and what are your expectations for building that team to support operations in that lab?

Kevin Conroy (President and CEO)

I'll hand that to Bill.

Bill Megan (SVP of Finance)

Yeah. Hi. So we had said back in the beginning of this year that we expected to spend about $4 million-$5 million. And that included the cost of the lab. It included the associated equipment as well as the operating support systems. And we're basically on track for that. Part of that cost has been recognized in Q3. As we mentioned, we'll see a slight uptick in expenses and in cash costs in Q4 from $10 million-$17 million. And part of that will be recognition of costs associated with that lab. There'll be some span of those costs recognized into 2014 as well.

We are on track for, as Kevin mentioned, completion of that lab for Q4 of this year.

Chris Lewis (Equity Research Analyst)

Okay. Great. Thank you.

Operator (participant)

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

Peter Lawson (U.S Biotech Equity Analyst)

Kevin, just really quickly, the delay in the panel, does that change your commercialization plan in any way or the ramp?

Kevin Conroy (President and CEO)

No, it really does not. We were expecting that the panel would be late in Q4. Again, we do not know quite the timing of when in Q1. We had some cushion. Certainly, we have a little less cushion than we did before, but we had some cushion in our launch planning. We are still roughly in line with what I think the street expects in terms of when the test will be launched.

In our planning, there's not a delay in the launch as a result of a small pushback in when the panel will occur.

Peter Lawson (U.S Biotech Equity Analyst)

Great. Thank you. And then just on the methylation code, the fact there isn't a code for methylation, could that delay the decision from CMS in any way?

Kevin Conroy (President and CEO)

It's important to note that there is a code for methylation. It's code 81401. The language is detecting one methylated variant of DNA. That's important. That has been in process since 2012 that they have developed these molecular pathology codes. In terms of pricing that, no, we don't think that there will be a delay at all. We think that the pricing of that particular code would occur as part of the CMS review of the Cologuard test and the crosswalk to those molecular pathology codes.

It is a pretty straightforward process for them to ascribe a payment level relative to detecting one DNA methylated variant. That is not a complicated process whatsoever.

Peter Lawson (U.S Biotech Equity Analyst)

Great. Thank you so much. Just finally, around the publication, that is not accepted yet, or it is accepted with revisions or further data?

Kevin Conroy (President and CEO)

No. Okay. I want to be very clear about that. We have provisional acceptance. The publication came back to us and asked us to shorten it, move some tables around, make a few other not material changes, nothing substantive that I believe is being submitted back to the publication today. We think it is about 30 days for them in editorial review and then about 90 days ballpark from that point forward to go into publication. It could be sooner than that 90 days, though. That is where we come up with our Q1 estimate.

If that changes, we'll let you know. Right now, that feels pretty solid.

Peter Lawson (U.S Biotech Equity Analyst)

Great. Thank you so much for this encouragement. Take care.

Operator (participant)

Thank you. I'm not showing any further questions in the queue. I'd like to turn the call back over to Kevin Conroy for any further remarks.

Kevin Conroy (President and CEO)

First of all, I'd like to thank the team that has been working here at Exact Sciences so diligently to take the company through FDA approval, work on our commercialization plan, secure reimbursement for Medicare. We remain focused on these three areas, and we really look forward to updating you, our investors, in the near term. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. Email disconnect. Everyone, have a great day. Thank you.