Exact Sciences - Earnings Call - Q4 2012
February 20, 2013
Transcript
Operator (participant)
Good day, ladies and gentlemen, and welcome to the Exact Sciences Corporation Fourth Quarter 2012 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 be given at that time. Should anyone require technical assistance during today's conference, please press star then zero on your touchtone telephone. As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to your host, Mr. Rod Hise. Please go ahead.
Rod Hise (Head of Investor Relations)
Thank you for joining us for Exact Sciences fourth 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 fourth 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 send it to you. Following the safe harbor statement, Maneesh will provide a summary of our fourth quarter financial results. Next, Kevin will provide a corporate update. Before we get underway, I'd like 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 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 my pleasure now to introduce our Chief Operating and Financial Officer, Maneesh Arora.
Maneesh Arora (COO and CFO)
Thank you, Rod, and good morning, everyone. As you know, patient enrollment for our DeeP-C clinical trial closed on November 15th of last year. Kevin will provide an update on the trial and on our FDA submission in just a moment. We're continuing to prepare for commercialization of the test once it's approved by the FDA. These efforts, including quality, manufacturing, and marketing readiness, are on track and will intensify as we approach FDA approval. We ended the year with $108 million of cash, meeting our 2012 cash utilization target. In 2013, expenses and cash utilization will be driven by the timing of the FDA's review of our PMA submission and its potential approval of our test. It's now my pleasure to introduce Exact's President and CEO, Kevin Conroy. Kevin?
Kevin Conroy (President and CEO)
Thanks, Maneesh. Let's start by reviewing our 2012 accomplishments. The DeeP-C clinical trial was our most important priority last year. As Maneesh said, we closed patient enrollment in November with more than 12,700 patients. We submitted the first of three PMA modules to the FDA in December and initiated the analytical studies needed to complete our second FDA module, which was submitted last week. On the operations side, we implemented a robust quality management system. With quality and other systems in place, we began manufacturing the reagents used to test patient samples in the clinical trial. We also continue to lay the foundation for both public and private coverage and reimbursement. Let's now turn to our 2013 priorities. In 2013, we have three priorities. One, launch readiness, namely preparing to make our test available to patients. Two, ensuring operational excellence. And three, continued innovation.
One of our top launch preparation priorities is to have the results of our DeeP-C study accepted for publication in a top peer-reviewed medical journal. This peer-reviewed publication will be a key part of our efforts to educate physicians in an important tool as we work with key medical societies to raise the profile of stool DNA testing in their screening guidelines. We'll also complete our Medicare coverage application and continue to engage with private payers to make sure we receive optimal reimbursement for our test. We'll also build and deploy our core market access team and put in place the infrastructure for both patient and provider education, service, and support. These activities are critical to our efforts to maximize market adoption at launch. Our operational activities will start with the completion of our FDA PMA submission.
We'll complete validation of our manufacturing process in preparation for our FDA inspection and scale up manufacturing capacity in anticipation of launch. We also are establishing a CLIA-certified clinical laboratory. The high-touch approach at our lab will, one, improve the patient experience and patient screening compliance, two, assume the burden of compliance tracking from the physician's office, and three, accelerate market penetration. We will establish our own CLIA lab of record and partner with an established lab to deliver test results. During the past six months, we have evaluated a number of established, experienced, high-complexity CLIA labs that we would potentially partner with. The key advantages for Exact entering into a partnership with an existing lab is the ability it gives us to leverage the existing infrastructure, systems, and know-how without having to build all of it on our own.
This is very attractive to potential lab partners because of the significant test volume potential. We have narrowed our partner discussions and will provide an update in the coming months. Finally, we will work to establish the feasibility of pancreatic and esophageal cancer tests. We'll complete the clinical trial for our IBD-related screening test and make an assessment of improvements that could be made to Cologuard. Let's now turn to an update on our clinical trial. Of the more than 12,700 patients who enrolled, approximately 10,800 were compliant with all three tests included in the trial: Cologuard, FIT, and colonoscopy. The largest driver of noncompliance among enrollees was failure to undergo a colonoscopy. There were 56 cancer patients identified in our study population. As a result, our study is very well-powered. The study also has identified more than 800 patients with precancerous polyps.
The trial also enrolled more than 9,000 patients with no cancer or precancerous polyps. Let's review the key milestones of our FDA submissions. Earlier this week, we were pleased to announce that we submitted our second PMA module to the FDA. This module included analytical studies that assess the analytical sensitivity and specificity, cross-reactivity, and other similar characteristics of our test and instrument platform. We put a great emphasis on these studies and passed all of them. We also are pleased to report that we remain on track with completing our PMA submission, and we will submit the third module in May. All three of our clinical trial testing sites have passed proficiency testing. FDA-required reproducibility testing has begun at each of the sites. Following reproducibility testing, we will begin testing clinical trial samples. When the testing of clinical specimens is complete, the data will be unblinded.
We won't have access to the data until it's unblinded. As soon as the data is unblinded, we will disclose the results in an 8-K and a news release. As we move towards our final FDA submission and the submission of our Medicare national coverage application, we are very appreciative of the FDA and CMS's engagement and responsiveness. As soon as we receive an FDA panel date from the agency, we will share that news with investors. We also continue to strive for publication of our clinical trial data in a peer-reviewed medical journal during the fourth quarter. Let's turn to how we anticipate presenting those top-line results. Let's review the performance targets we set for the test before starting the trial. These targets form the basis of a strong commercial product that will allow us to readily gain market penetration and significantly affect colorectal cancer screening rates.
Our target for cancer sensitivity is equal to or greater than 85%. While we would be pleased to achieve 98% cancer sensitivity in our clinical trial, we do not expect to do so. The target for detection of precancerous polyps is equal to or greater than 50%. Our target for the test specificity is equal to or greater than 90%. We will release the top-line cancer sensitivity, precancerous polyp sensitivity, and overall specificity in both an 8-K and news release. Our market research gives us confidence about the potential for widespread acceptance of our test once it's approved and launched. This research includes interviews with a significant number of physicians and patients. 96% of the physicians we interviewed said they are likely to order Cologuard for some or all of their patients. 92% of patients said they are likely to use our test.
The research indicates the significant potential for adoption among the 80 million Americans who need to be screened and to significantly increase screening compliance rates, which is our goal. Let's turn to another opportunity we're pursuing: a test that detects cancer and precancerous polyps in those with inflammatory bowel disease. Patients with IBD, both Crohn's disease and ulcerative colitis, have a significantly increased risk of colorectal cancer, and guidelines recommend annual screening for those patients. However, inflammation associated with IBD makes detecting colon cancer by optical colonoscopy very difficult. Approximately 40 random biopsies are taken during a colonoscopy and sent to a pathologist to determine if a patient has cancer or dysplasia. This approach, unfortunately, misses far too many instances of disease. We're on track to provide a new, better solution to IBD patients and the physicians who treat them.
Data that was presented last year at DDW by our collaborator, Dr. David Ahlquist, suggests that with a modified version of our current test, there is a potential for a very high level of sensitivity for both cancer and high-grade dysplasia. We are running our Oceana study this year with 300 patients, targeting 30 cancer patients and 20 with high-grade dysplasia. The primary endpoint of the trial is the sensitivity and specificity of the test in the detection of colon cancer, while the secondary endpoint includes the test sensitivity and specificity in the detection of dysplasia. This represents a significant market opportunity. There are one and a half million IBD patients in the U.S. alone who are supposed to be screened every year starting 10 years after initial diagnosis. In conclusion, Exact has a unique, patient-friendly test that will address a valuable market underserved currently.
The clinical trial and FDA submission for that test are on track and will be completed in the second quarter. Our lab strategy enables physicians to improve screening rates by helping to ensure patient compliance through an outstanding high-touch experience. Our commercialization efforts are focused on two segments: one, large healthcare providers that employ and set screening guidelines for a majority of primary care physicians; and two, the physicians who today are ordering the highest number of FIT and FOBT tests. Our work to secure optimal public and private reimbursement is on track. Before taking questions, I'd like to thank all of the employees and collaborators of Exact Sciences who have worked tirelessly to develop a great new product, and we look forward to the upcoming release of the results of our DeeP-C study. We're happy now to answer your questions. Thank you.
Operator (participant)
Ladies and gentlemen, if you have a question at this time, please press star then one on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question comes from Jeff Elliott of Robert W. Baird. Please go ahead.
Jeff Elliott (Senior Research Analyst)
Good morning, and thanks for all the comments. First, a question on the timing of the FDA submission. I think last update you had mentioned that that was possible in either April or May. Today, you're saying May. Did anything change there, or are you just getting a better read on when you'll have that available?
Kevin Conroy (President and CEO)
We're getting a better read. We really wanted to make sure that we invested sufficient amount of time and energy to get the PMA module two submitted, and that took a little bit more time than we anticipated. People really have been working weekends and nights to make sure that we get that right. We're really pleased with those results. That probably pushed back the schedule a couple of weeks. Both the data release is now—we're striving for March, but April is a possibility. That does not change, however, the May date. We're targeting May for the full complete PMA submission that will then trigger, of course, the FDA panel and potential FDA approval.
Jeff Elliott (Senior Research Analyst)
Got it. Okay. That's helpful. Just to be clear, the top-line data that you're going to release, there are three data points we're looking for. Is that correct? It's the sensitivity and specificity for cancer, for precancer. I mean, it's three data points we're going to get. Is that correct?
Kevin Conroy (President and CEO)
That is correct.
Jeff Elliott (Senior Research Analyst)
Got it. The data that you submitted within the analytical module, is that data that you will release separately?
Kevin Conroy (President and CEO)
That data typically is not released publicly. I do not think that data would be released. It is typical that with a PMA submission that data would not be released.
Jeff Elliott (Senior Research Analyst)
Okay. That is it. Thank you very much.
Operator (participant)
Our next question comes from John Wood of Jefferies. Please go ahead.
John Wood (Analyst)
Hey, thanks a lot. Good morning.
Kevin Conroy (President and CEO)
Good morning, John.
John Wood (Analyst)
Hey. Kevin, just referencing some of the market perception survey work you have done, obviously strong response rates there. Have you guys learned anything incremental, say, over the last three months on the resources needed and kind of the allocation of those resources to appropriately prepare the market for this launch? I guess what I'm looking for is anything that's kind of changed in your head or incremental information that you have that gives us a sense on how you'll kind of go to market to prepare both the physician and the patient community for the launch?
Kevin Conroy (President and CEO)
Nothing really material has changed in the last three months. We've learned a lot more as we have surveyed and engaged with and surveyed both patients and physicians. In terms of our approach, though, the approach is really clear, and it's two-pronged. Number one, we will target and focus on the large systems that today employ at least half of primary care physicians, and they set their own screening guidelines. So we are targeting about 400 large employers of primary care physicians all over the country. Secondly, we will target the high-prescribing FOBT, FIT prescribers, those primary care physicians.
There are about 1,000 of those primary care physicians who today order, on average, about 1,000 FIT and FOBT tests per year. These are the physicians who really strongly believe in and get engaged with colon cancer screening. We know who these physicians are. In our study, we're comparing directly against the FIT test. We believe that there will be a very powerful value proposition to both the physician and the patient that a better test that detects cancer at a higher rate, detects precancerous polyps at a significantly higher rate, we think that we will be able to get both the systems and those high-prescribing PCPs to adopt our test. That's really the focus. We will keep that focus, we think, for at least the first couple of years into launch before we expand in a broader way.
John Wood (Analyst)
Understood. Have you started formulating a plan around any money that will be spent going direct to patients? I guess what I'm looking for, obviously, the focus being the physician community, completely understand that. Any work you guys are doing to see the feasibility of more of a DTC type of campaign, whether it's over the web or media, is that something we should look for in the next, let's call it, six months or so?
Kevin Conroy (President and CEO)
It's not something that you should expect. What we have learned to date, and we've looked pretty closely at other diagnostic companies who have conducted DTC, that the effectiveness is limited really until you have educated physicians in a broad way. We don't want to—we want to be wise about how we utilize cash.
Our research indicates that there is a significant likelihood of uptake by large systems, and the education that would occur for patients would be in those regions where a large number of these systems have adopted our test as a primary means, basically as a way to replace the FIT or FOBT test. There would be more engagement with patients. A web strategy is clearly a part of our plan, and it is a lot less expensive than conventional DTC.
John Wood (Analyst)
Understood. Thanks for the comments. The follow-up for Maneesh—I mean, I understand there is a lot of moving parts on timing, but can you give us some parameters around operating expense targets for 2013? I guess the flex, depending on the approval or the submission approval timelines, what can most significantly change over the course of the year?
Maneesh Arora (COO and CFO)
Sure. So I mean, if you take a look at the three components, from an R&D perspective, we know that there's going to be a decline. Total R&D will decline at least $10 million from 2012, probably ramping down over time, returning in Q1 to more like Q1 2012 levels, and then declining from there. You'll see as we grow the commercial infrastructure, the G&A side, there will be modest increases, but not huge increases in G&A. So the big flex comes in the sales and marketing, and that's really where the dependency is around the FDA approval review and approval timeline. So if you think about it, we're going to be investing, as Kevin mentioned, modestly, but without a full-blown launch of huge headcount until we have more clarity around that.
The big flex is going to come in the S&M line, and we'll provide more clarity on that as the year progresses. Does that help, John?
John Wood (Analyst)
Yeah. It's great. Perfect. Thanks for the comments. Thank you.
Operator (participant)
Our next question comes from Brian Weinstein of William Blair. Please go ahead.
Hi, guys. This is actually Matt in for Brian. Thanks for taking my question.
Kevin Conroy (President and CEO)
Hey, Matt.
Obviously, you've been very clear about your expectations for the sensitivities and specificity of the test. As we think to the top-line data that we're going to see in a couple of months, which of those numbers do you think has the greatest risk of moving around a little bit relative to your expectations?
Sure. First, please let Brian know that I said congratulations on his college's victory over Michigan State last night.
Secondly, the number that is least powered, obviously, is the cancer detection number, which has 56 cancers. That has the greatest error bars. The specificity number has 9,000 patients, so the error bars around that are approximately 0.6%. That is going to be exceedingly tight. The precancerous polyp error bars are somewhere in between, but still pretty tight in the low single digits. Statistically speaking, the most room for flex would be in the cancer sensitivity number. That is one of the reasons that we are just trying to make sure that people understand that the cancer sensitivity here we have set in every presentation we have given over the last three and a half years has been 85% has been the target. We certainly hope to exceed that. We expect to exceed that.
The real value of this test and the reason people on this call would someday want to get this test is that it detects precancerous polyps. With repeat testing, the cumulative sensitivity is what's really important.
Okay. Great. Thanks, Kevin. Just a quick follow-up here. If you could share anything about the manufacturing analytical modules. I know they've gone to two different divisions of the agency, but if there's anything that you can share that's come out of that, positive, negative, surprises, real expectations, or any feedback on the manufacturing module so far?
The way the manufacturing submission works is that you submit to the agency, and then they take that submission, make sure that it has all of its components. I think they have 45 days to reject that. They send that. In our case, it goes to the field office in Minneapolis.
Later this year, we would expect they would schedule an inspection of our facility. They would come along with the manufacturing submission, review the entire manufacturing submission, review our quality system here. That is just kind of ordinary course as we go forward. We are really pleased with the manufacturing package that we put together and would not expect to have problems with that going forward.
Great. Thanks, Kevin.
Thank you.
Operator (participant)
Our next question comes from Peter Lawson of Mizuho Securities. Please go ahead.
Peter Lawson (Executive Director of Biotechnology and Senior Equity Analyst)
Kevin, sorry to get into the granular side of this, but what is the time gap between the data being unblinded and then being released?
Kevin Conroy (President and CEO)
Very, very short. There is a time gap in between the data being generated and the data being unblinded when biostatisticians review that data from a quality perspective and make sure that everything ties off. Then management and the investigators would not see that until it is unblinded. We would likely then immediately the following day or even at the end of that day issue the press release and file an 8-K. So 24-48 hours within.
Peter Lawson (Executive Director of Biotechnology and Senior Equity Analyst)
Great. Thank you. The survey, that was interesting. The 96% of physicians said that used the test. What kind of subset of patients was that?
Kevin Conroy (President and CEO)
It was actually statistically powered. There were 55 physicians and 161 patients. The data was also interesting because there were 67% of the physicians who said they were very likely to utilize this test, and 29% said moderately likely. Among patients, 73% said they were very likely, and 19% said moderately likely. It was obviously impressive, and it is statistically significant.
Another point there, Peter, was that on average, physicians would order this test for slightly over half of their average risk patients. In their mind, and this came out of the research, there are patients that they know that simply will not undergo colonoscopy. It is one of the big problems we have with colon cancer screening today, a lack of compliance. A patient who has certain comorbidities or a certain age or in the past has rejected colonoscopy as an idea, their primary care physicians know who these patients are, and it is pretty clear that they would utilize a test that detected precancerous polyps among that subsection of their patients.
Peter Lawson (Executive Director of Biotechnology and Senior Equity Analyst)
Right. The patients themselves were open for a colonoscopy. They were eligible for colonoscopy. Was that a subset like that?
Kevin Conroy (President and CEO)
Yeah. These were polled patients who were average risk, 50 and older. The same patients that were studied in our clinical trial and who will be the focus of our launch, obviously.
Peter Lawson (Executive Director of Biotechnology and Senior Equity Analyst)
Great. No, that helps a lot. And then just on sort of the new codes coming out from CMS, how does that change the outlook for you on pricing?
Kevin Conroy (President and CEO)
So far, positively. As you know, we have a KRAS component in our test and KRAS, which has been reimbursed anywhere from $200 to $1,200, depending on the technology used. Today, that seems to be coalescing around $230. And that's just there are seven KRAS mutations in our test, and there are a total of 11 biomarkers in our test. We think that things are playing out appropriately. Again, we're not one of those $2,000-$4,000 molecular diagnostic tests. We're going to provide a great value at, we think, a really good price point.
Peter Lawson (Executive Director of Biotechnology and Senior Equity Analyst)
Just one quick question from Maneesh, just around the G&A. Is that going to be flat for the rest of the year? Is that R&D ramp down, that happens after Q1?
Maneesh Arora (COO and CFO)
You are going to see from in Q1, probably a return to Q1 2012 levels, and then lower from there, ramp down. As far as G&A, you will see a modest increase over the course of the year. Not huge, but as we continue to build out the infrastructure and the systems to be able to launch this, there will be modest increases. It is not flat for G&A.
Peter Lawson (Executive Director of Biotechnology and Senior Equity Analyst)
Thanks so much.
Operator (participant)
Our next question comes from Jeff Frelick of Canaccord. Please go ahead.
Jeffrey Frelick (Analyst)
Yeah. Good morning, folks. Kevin, in the survey, the patients that you had collected info on, did you identify what they were currently doing for any type of screening, if at all?
Kevin Conroy (President and CEO)
I'd have to look deeper into the research. I think it was a—that data is probably there. I would have to take a look at it.
Jeffrey Frelick (Analyst)
Okay. Okay. Where do you stand now with progress on society endorsements?
Kevin Conroy (President and CEO)
First of all, as you know, the American Cancer Society and the Multi-Society Task Force in 2008 recommended that stool DNA testing be one of the recommended means in the guidelines. Presently, we are working very hard with the societies to engage with them so that they're ready to take a look at the DeeP-C data, understand that data. As their guideline committees form to further highlight or strengthen the position that stool DNA testing, or in particular, our test, has in those guidelines.
But then there's also developing the relationships with the guidelines because you then have reach into the physicians who are going to ultimately help make this test a successful test. That has been an ongoing effort over the last four years and is intensifying as we go forward. We're presenting at an AGA conference coming up in the next couple of months. There just seems to be a lot of interest among the medical societies for something so new and differentiated as this test.
Jeffrey Frelick (Analyst)
Okay. Lastly, which advisory panel will you likely appear on?
Maneesh Arora (COO and CFO)
It will likely be Immunology. That's what the agency has initially communicated, but that'll obviously be up to the agency.
Jeffrey Frelick (Analyst)
Okay. Thanks, Maneesh. Thanks, folks.
Kevin Conroy (President and CEO)
Thanks, Jeff.
Operator (participant)
Our next question comes from Raymond Myers of Benchmark Company. Please go ahead.
Raymond Myers (Analyst of Healthcare Technology)
Thank you. Kevin and Maneesh, curious if you could give us a little breakdown in your R&D spend. How much have you earmarked for applications other than colon cancer in 2013?
Maneesh Arora (COO and CFO)
What we've said publicly is that the Oceana trial is going to be $1 million-$2 million. That's really what we've said. There will be some additional modest monies that we use to achieve the goal that Kevin outlined of the prototypes for esophageal and pancreatic cancer, but the vast majority will be on Cologuard.
Raymond Myers (Analyst of Healthcare Technology)
Right. Is the Oceana trial still due to be complete by the end of this year?
Maneesh Arora (COO and CFO)
We're targeting completion by the end of this year.
Raymond Myers (Analyst of Healthcare Technology)
Excellent. Have you determined whether Exact may be able to charge patients a nominal amount similar to a copay type amount for the test kit themselves?
Maneesh Arora (COO and CFO)
That's something that we're working through.
Right now, we don't anticipate at launch doing that. As we explore that, we'll share more. Right now, we don't anticipate doing that.
Raymond Myers (Analyst of Healthcare Technology)
Okay. Good. And Maneesh, you talked about being the most flex in the sales and marketing line. That's the area of my question. How high do you expect that to flex upward this year?
Maneesh Arora (COO and CFO)
Ray, until we see the data and get feedback from the agency and look at that timeline, I'm just not comfortable commenting on that until we know more.
Raymond Myers (Analyst of Healthcare Technology)
Okay. Thank you very much. That's all my questions.
Maneesh Arora (COO and CFO)
Thanks, Ray.
Operator (participant)
Our next question comes from Yale Jen of Roth Capital. Please go ahead.
Yale Jen (Senior Equity Research Analyst)
Good morning, and thanks for taking the question. Kevin, just a quick question in terms of the sensitivity that you mentioned that you were comfortable targeting exceeds 85%, but not necessarily to the 98%.
Since the last two studies, it's in that ballpark. Would you just be more conservative, or there's more to it from that statement?
Kevin Conroy (President and CEO)
Let me emphasize one thing first, Yale, is that, again, we have not seen data. We will not see data until shortly before we issue the 8-K release. We'll be totally blinded to the data. This is a prospective study versus case control study. Typically, what you see in a prospective study is some falloff in sensitivity. I, again, don't have any reason to believe that the sensitivity will fall to 85% from 98%.
I want to make sure that we're setting expectations and driving home the point that the real value of this test is in the cumulative sensitivity, like the Pap smear, which detects on average about 47% of precancerous lesions for cervical cancer, that the real value is in repeat testing, and that increases the sensitivity over time.
Yale Jen (Senior Equity Research Analyst)
Okay. Great. Secondly, are you guys going to be presenting at ASCO this year, or the AGA will be the meeting to present?
Kevin Conroy (President and CEO)
We have not yet determined what scientific conference we would present this data at. That will be dependent upon the timing of the conference. Obviously, some of these are awfully tight between the submission of the abstracts and when those conferences are held relative to when our data is coming out. We will let you know as soon as we know.
Yale Jen (Senior Equity Research Analyst)
The third one is that for the CLIA lab, you will inform us which partner you may choose later. Was there any parameter or criteria that you have set for the prospect? Also, do you have any color in terms of this will be a first half or second half year decision?
Maneesh Arora (COO and CFO)
We do have well-established parameters for identifying labs that would be a good fit for us. Just to reiterate, Exact Sciences will be the lab of record. It will be our CLIA lab, and we will be working with a partner to implement and use existing facilities and infrastructure. That is something that we plan to do in the coming months. That is a first half event so that we can be adequately prepared for launch.
Yale Jen (Senior Equity Research Analyst)
Okay. Great. The last question, actually, Maneesh.
In terms of sales and marketing budget, I know that timeline may be a little bit difficult to decide right now. But overall, would you have a sense what, let's say, the first or second year budget might be for the launch?
Maneesh Arora (COO and CFO)
Again, Yale, until we see the data and understand timing and impact of that with discussions with FDA, we're not going to talk about that. What we can say is that in terms of size of Salesforce, we do expect that at the end of the first full year of launch, we expect to have a commercial organization of approximately 100. And that's consistent with what we've said in the past. That will help range find a right size for you at maturity or at first full year of launch. Given our lack of visibility on the review and the timeline, that's really why we can't share more at this time about when it's going to happen.
Yale Jen (Senior Equity Research Analyst)
Okay. Great. Thanks a lot. I appreciate it.
Operator (participant)
Our next question comes from Zarak Khurshid of Wedbush Securities. Please go ahead.
Zarak Khurshid (Senior VP)
Good morning, guys. Thanks for taking the questions.
Kevin Conroy (President and CEO)
Good morning, Zarak.
Maneesh Arora (COO and CFO)
Good morning.
Zarak Khurshid (Senior VP)
Just curious on the economics of the lab partnership, how would that work? If you could clarify a little bit what exactly the partner would be doing and if they would be educating physicians, that would be great.
Kevin Conroy (President and CEO)
I think it's a really important question. I want to make sure that we're crystal clear here. Again, Exact will be the lab of record, the partner lab. Think of it this way.
Exact would most likely do the upfront stool processing at our facility and take that down to extracted DNA. The lab partner would provide a facility and capability and infrastructure and robotics and automation to process that sample. We would leverage their IT system, but it would be on our patient report, and we would report out directly to the physician directly from the Exact Sciences lab. Think of them as a real partner in this. Their economics would reflect the role that they play. I mean, basically, we looked at the cost of us doing this ourselves and compared it to the cost with a partner and the ability to quickly scale up and really to focus on our core competency.
We're not comfortable sharing the breakdown there, but it has to be clear that we will be the lab of record, and we will be taking on a significant amount of the overall expenses.
Zarak Khurshid (Senior VP)
Got it. Should we think about someone like a Quest or LabCorp or some type of a smaller entity closer in proximity?
Kevin Conroy (President and CEO)
At this point in time, we're not comfortable talking about this. This company in the past has been down the road of partnering with large labs, and this isn't really their business model. They're focused on delivering test results themselves to their physician customers. We'll be able to provide more details in the coming quarters.
Zarak Khurshid (Senior VP)
Understood. Thanks. And then on the doctor survey, just curious, what types of docs were those? Have you done any more targeted surveys around the IBD specialists?
What are they saying about potential adoption and utility of the test?
Kevin Conroy (President and CEO)
Yeah. The 55 docs were a mix of primary care physicians and GIs weighted in proportion to how they're represented out there in the real world. I want to come back to one of Peter's earlier questions. He asked on the patient side, what was the breakdown in the testing that those patients did? There, it was about half of the 49% of the patients had never taken, had never undergone colon cancer screening, which is dead on to the data that we have seen reported. 51% had taken some type of a test. Of those that had taken some type of a test, 57% did both invasive and non-invasive. 23% did invasive only. 15% did non-invasive only, and 5% were other.
To your question in terms of, have we done work around IBD docs? The answer to that is yes, we've done a significant amount, more qualitative, but we have polled several dozen GIs about what they perceive to be the need for a test that would augment their screening programs for IBD patients, their colon cancer screening programs for IBD patients. It's really clear that the two most challenging issues that they face are non-compliance among the IBD population and the current tools' failure to identify dysplasia.
This is a test that several of these doctors qualitatively have said, "Well, this is a test that I would potentially use every other year in between colonoscopies." They also indicated that patients are increasingly taking a role in helping set these IBD patients are taking a role in basically negotiating what their screening program is going to look like. The GIs do not look at this test as something that is a threat. Rather, it would actually potentially bring more patients in to be screened than our IBD patients that need to be screened. Hopefully, that answers your question.
Zarak Khurshid (Senior VP)
Yeah. Very interesting. Thank you. A couple of follow-ups. I think I might have missed it in the commentary. When should we expect some of the data from the IBD study?
Kevin Conroy (President and CEO)
The study will complete in December, and then I suspect shortly thereafter, so the beginning of next year, we would present that data publicly.
Zarak Khurshid (Senior VP)
Got it. And then maybe one last one for Maneesh. With respect to the manufacturing scale-up and the clinical lab expansion, what sort of CapEx should one anticipate around that this year?
Maneesh Arora (COO and CFO)
For the manufacturing scale-up, we're anticipating about $4 million to make sure that the facility is scaled up and ready to handle launch. For the lab, it's anticipated to be right around $3 million. A total of $7 million from a CapEx perspective.
Zarak Khurshid (Senior VP)
Got it. Great. Thanks.
Operator (participant)
Our next question is a follow-up from Jeff Elliott of Robert W. Baird. Please go ahead.
Jeff Elliott (Senior Research Analyst)
Here. Just a question on the modeling.
I want to make sure that I have this right because I know I'm using $300 a test today split between Exact and the ordering doc. Under the CLIA lab model, my understanding is that you would keep the entire $300 or whatever the reimbursement would be. Could you just first verify that that's correct?
Kevin Conroy (President and CEO)
In terms of the number that you're using, I can't confirm that. What I can confirm is that with a direct lab approach, we will not obviously be sharing the economics with a partner lab. The partner lab that is doing some of the analytical testing for us will obviously share in a small portion of the overall economics. Overall, the economics will flow to Exact Sciences. In terms of the actual price for the test, obviously, that hasn't been set yet.
We're very confident in our approach to this, and we are not talking about what reimbursement level we would target. We do think that there is a strong rationale for private payers to pay more than Medicare for this test. Currently, private payers are paying nearly a 2.5x premium to perform colonoscopy relative to what Medicare pays. We think that private payers will see this test, and our conversations to date have indicated as much that they see this as valuable relative to the current cost that they're paying for other screening modalities.
Jeff Elliott (Senior Research Analyst)
Great. That's helpful. Then as a follow-up, on day one, what sort of capacity do you expect to have available both internally and through your lab partners? Digging in a little deeper, what sort of kind of fixed cost or fixed cost of goods sold would you expect to go along with that as far as running your own lab?
Kevin Conroy (President and CEO)
I think that we'll provide more of that color as time goes on here. If we could wait a quarter or two, I think that's what we would prefer to do. Maneesh, do you have any color to add there?
Maneesh Arora (COO and CFO)
The only overarching comment is from a gross margin perspective, the long-term gross margin is, with this model, still in line with our guidance of 65%. We'll provide more color, as Kevin said, as things roll out as to how long some of the questions you addressed. At steady state, this is still 65% gross margin or better.
Jeff Elliott (Senior Research Analyst)
Got it. Okay. Thank you very much.
Operator (participant)
With no further questions, I would now like to turn the conference over to Mr. Kevin Conroy for any closing remarks.
Kevin Conroy (President and CEO)
Thank you very much for your participation in the call, and we look forward to seeing you at conferences in the future and talking to you on our next earnings call. Thank you.
Operator (participant)
Ladies and gentlemen, this does conclude today's conference. You may all disconnect and have a wonderful day.