Exact Sciences : 2023 Investor Day Transcript

Megan Jones: VP, Investor Relations

Good morning everyone. For those of you who don't know me, I'm Megan Jones, Vice President of Investor Relations, and on behalf of the entire Exact Sciences team, it's my pleasure to welcome you all to our headquarters for the presentation portion of our 2023 Investor Day, welcome. We trust you all enjoyed the lab tours this morning. I hope you learned a lot from Ana and her team. Before we get started, here's a look at our safe harbor. We will be making forward-looking statements today. Discussions of non-GAAP figures and reconciliations to GAAP figures are available in the appendix to this presentation, which we 8Ked a few moments ago. Additional descriptions of the risk and uncertainties associated with Exact Sciences can be found in our SEC filings on our website. We also hope you all saw the top line BLUE-C results that we press released last night as well as a new partnership announcement with the Broad Institute and Bailey Scott and White health this morning. Here's a look at today's agenda. You're going to hear from many members of our leadership team, and we left plenty of time for Q&A afterwards, so we look forward to answering your questions then. We then have the privilege to hear from expert key opinion leaders across primary care, gastroenterology, oncology, before we hear from Christi Andringa, who is going to share her experience with cancer, and how it impacted her family. With that I'd like to now welcome Kevin Conroy, our Chairman and CEO to this age.

Kevin Conroy: Chairman and CEO

Thank you, Megan, and a big round of applause to the IR team that pulled this off. As I mentioned last night, on the four-person team, there are 2 people who have big events this week, a wedding and the birth of a first child, so to Casey and Erik, Congratulations and thanks for all of your hard work. And to all of you, welcome to Madison, Wisconsin. It's wonderful to have you here. This is our home, our headquarters. We're very proud of what we have built here in Madison. We're equally proud of what we've now done around the globe. Jorge Garces is going to talk about our different areas of scientific research in San Diego, in Cambridge, Massachusetts, in Baltimore, and Madison has been our birthplace in our home, and hopefully, one of the things that you took away from the tour today, and also the event last night is that Madison is a special place. We think of this as a competitive advantage. Half of our employees are based here in Madison, and what you find is a difference in culture. You find people who bring a culture of total ownership, of scientific inquiry and of sticking with really hard problems for a long period of time. The University of Wisconsin, which you had a chance to glimpse there in the distance from the rooftop last night, has been a top 10 scientific research institution for decades and decades. This year they'll do about a billion 6 in research, 500 million in medical and health care research and team members from Exact, countless team members with Ph.D.'s and Masters and Bachelor of Science, and business school, they form a significant core to who we are. And it has allowed us to grow. People tend to come to Exact Sciences and not leave. And we take that attitude, then, to all of our sites all over the world, and we're very, we're very proud to have you here, and to show that off a little bit.

Our mission at exact sciences fuels us. Our mission is simply to help eradicate cancer with tests that help prevent it, detect it earlier when it's more treatable and also to guide therapy. It's a broad mission. When, when we do research among our own employees, we poll them, we know that this mission is something that engages team members on a daily basis, because cancer is the number one killer of people under age 85. I think everybody in this room is under age 85. Your number one risk of mortality is cancer. And our mission is to help play a role in eradicating it.

When we first started at Exact there were 2 of us, and we wrote down 5 words on a piece of paper that said, If you know someday we sell hot dogs at a hot dog stand, how are we going to do this? And it was like, well, we're going to be innovative, that's going to be core to who we are. Hopefully, you saw some of that this morning. You saw some of that, with the result from the BLUE-C study last night. We'll get into that a little bit more. Quality. You saw that with Ana Hooker and her team. Always the highest level of quality. There's a reason we've never had to get on an earnings call and say we screwed up the quarter because we couldn't meet demand. And we've never had to cut a single corner to be able to deliver on that. Teamwork. I'd say that's one of the things about building a company in the Midwest. That is the essence of who we are. People enjoy working together as a team for years, and in some cases Marilyn Olson, who runs the Cologuard 2.0 program. Marilyn led the team at a prior company with me, with others at Exact developing Sir Vista an HPV test. This has been a consistency of teamwork over a long period of time. Integrity. Megan, Jeff Elliott, the entire team takes serious the numbers we put in front of you, the things that we say we are going to do. A good friend and investor once said to me, Kevin. The secret to being a good leader with respect to investors is just do what you say you're going to do. If you do that, you're in the top 10%. And hopefully we do what we say we're going to do, and we always try to do the right thing as if we're invincible. We just don't. We don't spend time thinking about it. What's the right thing to do? Just do that, even if it hurts us in the short term in the long term. You can never get hurt by doing the right thing. And accountability. I know we don't always get it right. We strive to deliver, and that accountability is something that is built into our leadership. We hope that this culture is a different culture. Since we participated in the Great Places to Work survey, we have been deemed a great place to work. It's a hard level to achieve. We poll our employees, and this year 91% of our employees responded to the survey. You can't treat your employees poorly and become a Great Places to Work, and that, too, is a competitive advantage. It starts with leadership, leadership expectations. We spend a lot of time with Jim Collins going deep into really understanding what separates good companies from great companies. And these are 4 attributes, that his research of thousands of companies, that this is the difference, and the thing that struck us in those conversations was, this, reflects, I believe, the leadership team that we have today and the 400 directors and above it, at Exact Sciences. It starts with humility which really is about the willingness to take input, to get critical feedback, and be humble enough to accept it and to modify the way that you lead. That's kind of the essence of it. A fierce will to succeed, which sometimes requires years and years and years of work. Next -generation Cologuard. We started working on that before we completed the clinical trial on the original version of Cologuard. This isn't accidental, that performance. There were no shortcuts. It took an enormous amount of insight, trial and error, trial and error, trial and error. That was just fierce will. And I think you see that throughout the company it's something that I am deeply proud of. Best team. This is the hard one. Every stage of growth at Exact Sciences, you have seen an evolution in leadership. And that's because a hundred-person company requires a different type of leader in leaderships frequently than a 6,000 team member, and you'll get a chance to meet some of the spectacular leaders that have joined Exact over the years, some of them in the past 3 to 4 years that are making a difference. And it starts with, them building the best team and their team members having the best team. We are rigorous about this. It's core to who we are. Vision. Energizing people with the vision that gets people excited to wake up every morning and come into work and have an impact. That's who we are. This is how we measure people. It's, it's part of how we compensate people. It's how we promote people. And it's really how we improve as a company.

A few years ago, we said, "okay" we're becoming a grown up company. How do we create this engine that just keeps churning out innovation and growth? And it was clear to us that it starts with people. Cologuard wasn't an accident. It was the brainchild of Dr. David Alquist from the Mayo Clinic, and Dr. Graham Lidgard, our Chief Science Officer, Emeritus. They were the ones who did the hard work. It started with world-class people. Exact Sciences: Graham Lidgard had 80 FDA-approved tests, including the screening, blood screening platform that Gen-Probe developed with 300 people that is still used 80% market share globally today, unbelievably high-quality people. And so we said, "that's our secret sauce." And the concept of a flywheel is, you know, the first turns are really hard. Maybe the first 1,000 turns are really hard. But eventually you achieve breakthrough momentum. And the next, if you have really great people who know diagnostics and we're a cancer Diagnostics company, that's what we do. The next thing that they do is develop great tests and not just any tests but tests that impact clinical decision making. We were talking about a test last night that another company has developed. It has a 70% positivity rate. We looked at that test. One of the team members said, No, that's not a test that impacts clinical decision making, because it's positive 70% of the time clinicians are never going to rely on a test that is positive that that percentage of the time we have to develop tests that doctors, nurses will rely on in making a decision, yes or no for the patient. And then you have to develop the rock solid evidence. You saw that with the BLUE-C study. We had to enroll 25,000 plus patients to have 20,000 people who completed all of the various things that we needed them to do in that study. Thank you, to those patients to the nurses, to the physicians who enrolled all of those patients to our clinical affairs team. Rock-solid evidence, Exact Sciences, has 6 New England Journal of Medicine publications. 5 with Oncotype Dx. That team developed a test that answers a question definitively for breast cancer patients. Cologuard answers a question definitively about whether to move to a colonoscopy or not. That rock- solid evidence frequently takes years, and in some cases over 100 million dollars per study to get. Is it worth doing it. Yes, it's worth doing it. Why? Because the next turn, it inevitably leads to that reimbursement. You see, a lot of tests struggle to get reimbursement access. You see a lot of tests that you can't convince physicians to use. Well, there's not enough evidence. A lot of the companies that we look at and products that we look at. Gosh, if they just ran the right clinical trial. Yeah, it would have been hard. It would have been expensive. You would have had greater access and greater ability to convince physicians to use it. That is really important. But the next step, if you have a test that is that widely used, you have the ability then, and a need to. What does it lead to? Next? Making that test really easy to order electronically. Automatically. Boom. Hit the easy button. Electronic resulting so that the customer experience is ridiculously good. What's the next turn? And you're seeing that now. You're starting to see a profit engine. What does that profit engine allow you to do? Go back and invest in great people. So this is our flywheel, and you'll you'll hear us talk about it today. Every part of our presentation ties back to this. And it makes life very simple for us as we think through things. Are we going to run a clinical trial? Yes. This can be a great clinical trial. Don't bring it. Don't bring up the idea, if you're going to run half a clinical trial. You saw that with DeeP-C or BLUE-C we'll get into that also. Brian is going to talk about the the Broad Institute in our partnership with them, and then Jake Orville is going to talk about Baylor Scott & White, largest health system in Texas in our partnership with them exciting new news. Now for the BLUE-C readout, this is top-level data. We're thrilled. You know, we've been working on developing the test, designing the clinical trial for over a decade. And when the results came in I got a call from Jorge Garces, our Chief Science Officer. I was at dinner. I had had a glass of wine. I knew why he was calling. And he kept a pretty straight face, and when he told me the results I was outside the restaurant, and nobody knew why I was so happy. But I was thrilled, and I thought there was

probably less than a 1% chance that we would see 94% cancer detection and a 91% specificity. Let's just start there and put all the other data side which we hit every primary endpoint, every secondary endpoint. That changes everything to be able to market a test that is over 90% specific and over 90% sensitive. We saw improvement across all of our sensitivity measures. And I honestly thought we would get to 89% specificity getting the 91% change is everything, because 30% fewer people go to colonoscopy unnecessarily. That means they stay our customers. And 3 years later those customers become customers again, and 3 years after that again and again and again. And you're seeing that fuel our results today, with 20% of all the people getting tested are repeat customers. You don't want to lose any of them unnecessarily. You want to keep them in a non-invasive screening modality. So 91% specificity, 93% in patients who had nothing removed from their colon. No tissue, no polyps, no small non-adenoma polyps what we would call a clean colon, and people that claim colon. The specificity is even higher. Cancer sensitivity, 94%. When the publication comes out, or as we presented scientific conferences, we'll do a deeper dive here into stage distribution. Bottom line, the test improved performance. One of the things I'm really happy about high-grade dysplasia. It it takes one to 3 years to go from the most advanced pre-cancer,high-grade dysplasia to stage one cancer. The ability to detect 3 out of 4 of those is is impactful. So we believe, as we go to the GI societies go to GI Customers that we are going to see greater receptivity, especially now that wait times for colonoscopy have permanently grown longer. These data are a big deal. Pre-cancer sensitivity, improvement. I was worried that this might actually drop at some point, because I think what we're seeing. And where I think you're seeing this across multiple studies in our field is that pre-cancerous polyp sizes seem to be getting smaller out there in the general population, which is probably the result of 25 years of screening people for colon cancer. That is, so so you remove the polyps. They grow back in the end up being smaller. And so we ran this study a decade after DeeP-C, I think the pops were bigger still. Our pre-cancer detection rate was high. We're excited about this data. It fuels us now, though, to, and I want to make sure we're really grounded, it being the company that takes care of patients across the whole journey. Think about, understand, everybody in this room should know their baseline risk for cancer. Go get a test today. Our test the Riskguard test. Get the Invitae, I don't care what tests. Know your baseline risk of cancer. I didn't get tested until 3 years ago. It gave me great comfort to know that my parents gave me genes without a lot of inheritable risk of cancer. That's good to know. My wife got tested, and she and she there were 7 daughters in her family, and 3 of them had a gene that conferred a really high risk for ovarian cancer. She had elective surgery post. Having children. She eliminated the risk of ovarian cancer which her mother died from, or she allows me to tell, she wants me to tell this story. There is a reason that we have to know. Treatment is different, if you know. And so this is the starting point screening test to move cancer detection earlier, where, as Burt Vogelstein says, there is no therapy as effective as earlier detection. Not necessarily early detection, but earlier detection than if you find a cancer symptomatically. Our multi-cancer test, of course, colon cancer blood test. Individual tests for you don't hear a lot about our esophageal cancer test our liver cancer test. We have a women's health cancer test we haven't talked about. I can't wait till Megan allows me to talk about this test. It's going to be practice changing. And it's that same technology base. And you're going to hear Jorge talk about it. A 14 year partnership, June of 2009, we enter into a partnership with Mayo Clinic. We have aggregated know-how IP around biomarkers that has just been a huge slog to identify these markers. Proof point is Cologuard

2.0 or next generation Cologuard. We can apply this across the 16 deadliest cancers, and we can't wait to bring more of those tests. Oncotype Dx. It has been a home run of a combination of bringing that oncology team into Exact Sciences and part of our family because it's a launching pad. Not only is an

amazing test with incredible evidence. You're going to hear from Dr. Rick Boehner today. Also, our molecular residual disease test, our therapy selection tests the ability to change the way that people diagnosed with cancer are treated. You're going to hear some personal stories about how MRD testing is going to change the way that people go on to therapy and potentially come off of therapy. It is so exciting what the future holds our OncoExtra test which we just launched. And these tests impact people's lives. When I first started at Exact Sciences, I grew up in Flit, Michigan, and 4 of my friends, well 3 friends and a cousin, were diagnosed with colon cancer in their forties. Now this was before the screening age was dropped. And only one of those people close to me is still alive today. They were all diagnosed stage 3. They were all diagnosed late stage. About 6 years ago I became friends with Rob Andringa, and it's really hard to describe how fucking awesome of a guy Rob was. He, excused my language, just really a great dad, a great friend, a great husband. You'll meet his wife, Christi. He was a national champion at hockey at University of Wisconsin. He grew up in Madison, his father, parents, incredible people. And I just got to know him after he had been diagnosed. You'll well, let's just watch his story.

VIDEO

You're going to hear from Christi later today. And what you see here on the screen is Jerry Kelly, who has won 14 times on the PGA Tour and the champions toward 2 major championships. He and Rob grew up together playing hockey and Jerry, who I didn't really know very well, 7 or 8 years ago, I was on a plane. I saw Jerry said Hello. And he asked, he said, You know where you headed to, and I said, I'm headed to Michigan because my cousin passed away from colon cancer, and Jerry said, "Hey, Kevin, send me that cologuard logo." And so I did, and I didn't really know why, but he put it on his shirt, and he wore it on a shirt for the for the rest of the year. And so at the end of the year I said, "Hey, would you just get rid of Cleveland golf and put Cologuard on your hat", and Jerry has worn that Cologuard on his hat. At the time he didn't know that Rob, his lifelong friend, would be diagnosed. And so, tying this back to the mission. Jerry, Christi, these are people who have, you know, had their lives dramatically changed because of this disease cancer. And our mission, is to help eradicate it. We know we can make a huge difference. So it fuels everything we do. And it starts with our people. The mission fuels them. If you have the best people you can build a great company. Sarah Condella, our SVP of HR. Joined us when we were under 100 people at age 31, and she is most spectacular. She was 31. She's the most spectacular HR leader in our field. Sarah.

Sarah Condella: EVP, Human Resources

Thank you. I'm Sarah and I leave the teams that are focused on our people, and I'm grateful to be here today to talk with you about our approach to attracting and retaining the best. Kevin's right, when I joined Exact Sciences it was a fifty-person company, with a contagious passion to eradicate colon cancer. Now fast forward, we're 6,300 people addressing a much, many more challenges across the cancer continuum. And while a lot has changed. One thing that has been a constant is that purpose-driven mindset that connects all of us. Now Kevin shared with you our flywheel and our people are at the top for a reason. Our world-class talent is the single source of fuel that will continue to unlimitedly power that flywheel for more success, and our growth trajectory. Now let's take a look at what happens when you combine great people dedicated to a great mission.