Exact Sciences Corporation (EXAS) Earnings Call Transcript & Summary

Good afternoon, everyone. I'm Matt Sykes, senior research analyst for life sciences tools and diagnostics at Goldman Sachs. I have the pleasure of welcoming Exact Sciences management to our conference today. Today, we have Jeff Elliott, Executive Vice President, Chief Financial and Operating Officer; and Jake Orville, the General Manager Pipeline. Jeff, Jake, thanks so much for joining us.

Thanks, Matt. Great to be here.

Great. Maybe we'll just start out, and I'll kind of let you set the stage initially and maybe talk about some of the recent trends you've seen, your performance in the first quarter and some of your key thoughts and drivers for the balance of this year.

Sure, Matt. Before we get into that, for those of you who don't know us as well as Matt does, Exact Sciences is a leading global advanced cancer diagnostics company. We have nearly 6,000 employees globally. Over 1,000 of those are in sales and marketing, over 400 in R&D. Last year, we generated revenue of about $1.5 billion. And we do business in 95 countries. Our flagship products are Cologuard, which is a noninvasive test for colorectal cancer; and Oncotype DX, which helps inform therapy for people diagnosed with early-stage cancer. Happy to get into the questions today, Matt. You asked on recent trends. The Exact team executed very well over the course of the pandemic and delivered double-digit growth in Q1. When I look at the backdrop, it has been a very challenging last year. In Q1, when I look at wellness visits alone, they were down 10% to 20%. Much of our testing starts with a wellness visit. Patients go in for a physical. And during that physical, a physician orders Cologuard. Well, with wellness visits down 10% to 20%, that gives us fewer chances to get those people screened. Also, access to physician offices has been severely impacted by the pandemic. Over the past year, our wellness -- our access to physicians is down well over 50%. Now that backdrop is improving. And despite that tough backdrop, we delivered double-digit growth in Q1. Over the rest of the year, what I expect to see is continued improvement in access to physicians. That is improving. And now our partner, Pfizer, is -- has recently returned to the field. I expect the number of face-to-face visits that our teams in the field have with physicians to continue to improve over the course of the year. Wellness visits are also improving. And there's a significant backlog today. There's over 45 million people who need to be screened for colon cancer alone. So there's a massive opportunity here for Exact Sciences to help get more people tested and grow our business in the process.

Great. Thanks for that, Jeff. That's really helpful introduction and mentioning some of the trends that you're seeing. Maybe a high-level question first. We talked about our initiations with the value of infrastructure and diagnostics, which is really the investment, the expertise that it takes to have a successful commercial organization, get test to the market. Could you talk about how Exact is competitively positioned from this standpoint?

Well, that foundation you described is incredibly important, not only for the current business but also the long term. When you think of our strategy at Exact Sciences is to be that partner for patients and physicians, all the way from screening and early detection through diagnosis; prognosis of prediction for chemotherapy benefit; MRD testing, a residual disease testing; recurrence testing; and late-stage cancer therapy selection. So we want to be that partner across all those tests and provide valuable information, again, to patients and physicians across that whole continuum of test. To do that, it requires a robust sales force. The teams in the field are so incredibly important here. They've allowed us to develop deep relationships with physicians. We have a team in primary care alone at Exact that's well over 600 people out in -- either out in the field or on the phones building those relationships. Our team also includes sales reps calling on GIs, OB/GYNs, urologists, oncologists. On top of that, we have a partnership with Pfizer, whose team in the field is even bigger than ours. That allows us to develop deep relationships to provide better access to information and really to help inform on all the different testing options we can offer to support patients. We have a robust lab capacity. Today, we can process over 7 million tests per year in the U.S. This strong foundation allows us to move quickly. As demonstrated, and maybe Jake can talk more about this, over the past year, we stood up a COVID test in the very early days of the pandemic. Again, we can move quickly because of that robust foundation and a very talented team. We've now generated over $250 million of revenue in the past year from COVID testing alone, and more importantly, help play a role in the fight against this pandemic. So that solid foundation is important. Longer term, as we continue to add more and more tests on top of this foundation, that will help us generate sustainable growth and cash flow to investors.

Perfect. And maybe just sticking kind of high level, just looking back at your history of M&A, you've bought a number of assets over the past couple of years. Can you maybe help us put together what these businesses have added to Exact and how they fit into your overall strategy at a high level?

Well, the strategy I talked to -- and again, that's to be that partner all the way from screening into late-stage cancer therapy selection. The first acquisition I would highlight that really helped power Exact into the oncology setting was the combination with Genomic Health. Genomic Health, obviously a leader in breast cancer prognostic and prediction testing, that business today -- this year will generate over $500 million of revenue. And it really serves as the foundation as we get into other tests like MRD, recurrence monitoring and therapy selection. It starts with the people on the team. From a sales standpoint, it's a team of, in the U.S., over 140 people. Those people, that team has developed deep relationships. Today, over 98% of oncologists in this country have ordered at least 1 test from us. So we have deep relationships. So down the road, as Jake and team bring up other new products, whether it's a therapy selection test or MRD test, we can leverage those relationships to get more people tested. And we also added a lab capacity, a lab in a MolDx state, which is really important for reimbursement, that we can launch new tests through like our recent liver test, which we've made available through the Genomic Health Redwood City, California lab. So the Genomic Health acquisition added -- it was really a foundational acquisition that we will build upon for many years to come. We can get into other acquisitions. More recently, one that I'm very excited about is the acquisition of PFS Genomics, which I think maybe Jake can add here. PFS fits right on top of the Genomic Health foundation.

Great. And maybe if we should drill down a little bit and shift to ASCO. Could you just tell us a little bit more about the data you presented at ASCO, maybe a 30,000-foot view for those that haven't had a chance to dig into the data?

Yes. I'll let Jake prefer -- cover that one.

Sure, Matt. And I think it's important to start at that 30,000-foot view, and it goes back to exactly what Jeff said. And the first point is that at a 30,000-foot view, we are so unique in the fact that we have a portfolio of high-impact tests that span that cancer care continuum. That in and of itself is quite unique and quite valuable. More importantly, this year, at ASCO, we demonstrated yet again that we will continue to invest in the evidence for those tests. We'll invest to demonstrate their utility, and obviously, the impact that they will have in the patient care. This year, at ASCO alone, we had 8 abstracts. Again, going back to Jeff's point, these abstracts were across screening, prognosis, recurrence and therapy selection. That again is unique, and at a high level, very compelling as we want to be partners to these providers. When I think about it, no other company has the breadth that I just described, the depth, the science and the experience, and that really at a high level is very important.

Great. And if you kind of look at the data that you had and you'd like investors kind of walk away with one or a few key points, what would it be from what you presented?

Yes. I think this is the chance to highlight that recent acquisition of PFS Genomics because I think it fits really nicely into that theme of breadth and depth. In this case, the abstracts ASCO -- PFS Genomics, for those that don't recall, when we made this announcement, it was founded by a bunch of leading oncologists that developed a signature similar to our Oncotype breast product for chemotherapy. Now we think we can be able to predict those women who could benefit or not from radiotherapy. And that's a very compelling part of the individualized and personalized medicine that we want to get to us, this partner that Jeff described. Here, in this case, PFS Genomics, we think that we can bring this test to market, representing about half of the patient population that we address for Oncotype. Our Oncotype breast product, we think there's about 150,000 women in the United States alone, probably twice that at least internationally that could benefit from our Oncotype product. And again, this product helps providers and helps patients determine whether they should proceed with chemotherapy. This PFS Genomics signature helps to determine whether they should also understand their benefit for radiation or radiotherapy. Now this test, Matt, will take time to bring to market. Certainly, we have to create more evidence. We have to refine the tests. We have to get Medicare coverage, and we have to seek guideline inclusion. What's exciting to me is that we have all the experience to do that. We've talked about the theme here of the infrastructure and the experience. That's exactly what we have here in this. PFS Genomics signature will be a great example of that. We have experience with tissue. We have the lab infrastructure in place. As Jeff mentioned, we have the deep relationships with the providers. We have the top sales team out already calling, and it's already trusted by these providers. And we have the experience and the reimbursement path for a test just like this. When this test comes to market, we will be the trusted source for early-stage breast cancer patients. As they make very difficult decisions, we will help them through that process.

Got it. That's really helpful, Jake. I appreciate that. Maybe just staying on data real quick. Last month at the Digestive Disease Week, you presented some modeling data showing Cologuard was superior to the fecal immunochemical test, the FIT test, on cost effectiveness and colorectal cancer incidence mortality. What were the key takeaways for investors with that data?

Yes. Matt, first, let's talk about modeling generally. Modeling is often used in colon cancer screening to understand test interval and test inclusion of the guidelines. The reason why you do that is because you want to evaluate ultimately, will testing help improve outcomes and save lives. So what the models often look at is the trade-off between benefits and harms. Benefits are defined as life years gained from screening. And you can evaluate different test intervals, different test ages to start and stop and different tests themselves. The harms are typically looked at as the number of total colonoscopies needed to achieve a given number of life years. So you look at the trade-off between these 2, that ultimately models will recommend different tests and different test intervals to be recommended for guideline inclusion or insurance coverage. And ultimately, what we looked at is when we evaluated the current models in the market, we realized that oftentimes, those models were very static, that they made assumptions that weren't representative of the real world. As an example, the models often assume 100% adherence, meaning that somebody when recommended to use a given test, they use it and they stick with it every year over the course of their lives. And for the FIT test specifically, what we know on real-world data, again, this is data from UnitedHealth, only 3 of 1,000 people will do the FIT test every year for 10 years. Yet the models often assumed 100% compliance. So what we did is we developed -- painstakingly developed a new model where we could vary the inputs and actually use real-world data to inform the models. So one of the models we ran was on adherence. When you use adherence that is representative of the real-world data, Cologuard performs much better than the FIT test. And no surprise. When you look at the data, when you look at DeeP-C, which was our pivotal study for Cologuard, Cologuard was compared to FIT and generated superior sensitivity to the FIT test. This is really important. If you want to improve outcomes, you've got to find early-stage cancer and precancer. The FIT test can only find 24% of precancers and about 74% of all cancers. Cologuard can find 42% of precancer and 92% of all cancers, specifically 94% of early-stage cancer. That's how you save lives, finding the precancer state or in the early-stage curable state. So what these models that we -- on the data that we published at ASCO and DDW shows that when you use real-world assumptions and things like adherence, an incidence of something called sessile serrated polyps, which are typically a flat polyp that don't bleed, Cologuard performs far better. The FIT test is more or less blind to sessile serrated polyps. Cologuard can find over 40%. So it performs very, very well when you use real-world assumptions.

Got it. That's really helpful, and thanks for going through that. I think you touched on it a little bit, but one thing that we've -- the questions that we've addressed regarding colorectal cancer, liquid biopsy screens versus Cologuard, is just levels of compliance. How do you think -- what kind of potential levers are there for you to improve compliance with Cologuard? And how do you think about what the level of compliance Cologuard could achieve if you activate some of these levers?

Cologuard compliance is already very strong. And that's important. That's one of the biggest differentiators between Cologuard and the other tests that are in the market today. For example, about 2 to 3 people who have received a Cologuard kit actually provide a sample and go through with testing. Now my goal is to get that number higher, and I know that we will. When you look at the FIT test, studies vary, but oftentimes they show only about 2 out of 10 people actually complete the FIT test as recommended. And when you think about how often you need to run that test every year, from a compounding standpoint or a repeat adherence standpoint, one of the biggest challenges with the FIT test is a low level of compliance. And then on a repeat basis, as I mentioned before, only 3 of the 1,000 people do it every year for 10 years. That is one of the big advantages of Cologuard, high compliance in a 3-year interval. Looking ahead, I'm confident we can get the overall compliance rate above 70%, likely even over 75%. How do we get there? One is education. We need to make sure that people understand Cologuard has performed extremely well and is covered by all major insurers. That's important because patients and physicians don't want to use a test that requires an out-of-pocket payment, especially preventative care. Cologuard is covered in full for 95% of the people that we test, a very strong number. And no surprise, Cologuard offers a very good value for the reimbursement rate. So over time, as we educate more and more people about that coverage, that will help drive compliance higher. There's still a perception gap. Many people out there think that Cologuard is not routinely covered when it in fact is. There's also actions the team has taken here to drive that rate higher. For example, the team has gotten very, very creative around using technology in that platform we've talked about to reach out to patients to make sure that they understand how to do the test and really the collection automatic. Over time, 3-year repeat testing, which is something I'm sure we'll talk more about, will help drive the rate higher also. What we see is that patients who come back every 3 years for Cologuard comply at an even higher rate, over 10 points higher than they do on the first time they do the test.

Got it. And as we look to other players entering the colorectal screening space, how do you think about where sensitivity and specificity could go with Cologuard 2.0?

Yes. Jake, do you want to take that one?

Yes. Sure. I mean we have a program, Cologuard 2.0, as we've been public about. We have a pivotal study that is enrolling now. The primary goal of that program, Matt, is to improve specificity to at least 90%. As Jeff already reiterated, at 94% early-stage sensitivity, that's pretty powerful. While we're certainly open and optimistic that there's an opportunity to improve sensitivity, it's the specificity that we're after. As others enter the market, as you've noted, most are coming to market in blood. The data that we've seen and even our own internal blood program, which is also part of our pivotal, we just don't believe that a blood test will be able to achieve the same performance as Cologuard is -- or is at. And then the fact that we can improve it even more, I think, creates a bigger moat, if you will, for these new technologies to come in the market. The last thing I want to reiterate because I think I mentioned the pivotal study, I just want to remind everyone that when you bring these tests to market, there are a lot of hurdles that you have to get over. You clearly have to have a pivotal study with successful results. You have to get FDA clearance. You have to get Medicare coverage, but you also have to get USPSTF guideline inclusion. Those are the critical factors. This is not easy. We are investing in this yet a second time for colorectal cancer screening, and we'll bring our blood program in with it. But that's a significant investment for any of the new entrants to be able to achieve.

Yes. Totally understand the difficulty and challenges and the level of investment that has to be achieved. In terms of just the physiology and the anatomy of the colon, do you think it's possible for blood to ever be as accurate as stool just given the access to the epithelial cells?

Matt, I think it's highly unlikely that a blood test can ever achieve even close to the same levels of performance as Cologuard. And as you mentioned, it comes down to the anatomy. If you think about the anatomy of a colon, it's really built for 2 purposes. One is to take the stool that's inside and get it out of the body; two is to keep what's inside from getting into the blood or coming in contact with the blood. And it does that because stool is full of bacteria. If the stool were to come in contact with blood, we would all get sepsis and die. None of us would be here. So the colon issue is very good at its job. No surprise. It's been evolved for many years. Now when you look down at the stage breakdown of colon cancer, in a screening setting, 75% of all the cancers you'd find -- again, this is an average-risk screening setting, 75% would be stage 1 or 2. Only 25% will be stage 3 and 4. And I mention that because it's very, very hard to find those early-stage cancers in the blood. And that comes down to the anatomy. It's typically not until later stage 2 that the colon outer wall starts to come in contact with cancer. And really, by definition, that's what stage IIb cancer means, that the cancer has extended out to the outer wall of the colon where the muscle is and the blood supply is. So at that point, you can start to originally find it. However, if you're not finding cancer reliably in stage 1 or early stage 2, then that's not a very accurate screening test. And what we saw in DeeP-C, which was our pivotal study for Cologuard 1, 45% of all the cancers you'd find are stage 1, 30% are stage 2. And so it's incredibly important to find stage 1 and 2, and it's very, very hard to find them. When you think about case-control study in the design, case-control studies typically don't include very many stage 1s, and that's because the way those samples are collected. Case-control studies typically collect blood or stool after that initial colonoscopy. Well, in a colonoscopy, you generally remove out your precancers in some of your early-stage cancers. And then if it can't be removed on colonoscopy, that person is referred to surgery. What was being colonoscopy in surgery, that's when you take your blood or stool sample. And remember, you've already gotten rid of your precancers in most of your early-stage 1s. So because those patients don't have that cancer anymore or that precancer, you can't take their sample at that point. So what that does is that biases your case-control studies towards more advanced cancers. And that's generally how these are done. We just have to be aware of that when you try to pivot from a case-control study to a prospective study. In the prospective study, you're going to get all these real-world subcategories, things like benign polyps, precancers, early-stage 1s that are very, very hard to ever include in a case-control study.

Got it. You mentioned -- I think you briefly mentioned sort of the rescreening opportunity. And I kind of heard you talk recently about improving that rescreening opportunity. The number of eligible patients for rescreening is going up. How are you looking to achieve the improvement in rescreening opportunities?

So Matt, thanks to Cologuard, we've screened over 6 million people in this country. Probably about half of them had never been tested before. And one of the most important features of Cologuard is that not only do we get more people screened that had never been tested before for this deadly disease. We also can keep them screened over the course of their lives at a high rate. We do that by providing -- again, leveraging the strong foundation we've built, IT infrastructure, customer service team and making sure that both patients and physicians know when somebody is eligible for screening again. We can send letters, e-mails, text messages, you name it. However that person wants to be communicated with, we're going to reach them. The ultimate goal here is to make it automatic. We want to make it inevitable that once somebody gets onto the Cologuard train, they stay on that train for 30 to 40 years. So over time, that success rate at getting that patient retested every 3 years continues to go higher. It's one of the most exciting things. But our business and our financial model is that more or less a recurring source of revenue, and it's a higher-margin source of revenue over time that is building. When I look at the pool of patients who'll become eligible this year alone, it's over 600,000 people who had done Cologuard 3 years ago become eligible this year. And next year, it's 1.1 million people become newly eligible for Cologuard. That's a tremendous opportunity for us to help those patients stay tested and while we're at it, drive some revenue for our shareholders.

Got it. And maybe just take a quick question from the audience here, just a confirmation. You talked about the wellness visits, the 50% reduction in access to physician offices. Was that during the past quarter or the past year? And then -- and how is the reception to early cancer screening been over the past few months? Or are you seeing an increase over baseline in patient screenings due to catch-ups or just steady state to pre-pandemic?

In Q1, access to physician offices was depleted by about 50%. That's a data point from IQVIA. For Exact Sciences, it was actually far worse. And I say that because our Pfizer partner, who's been a very good partner over time, have been 100% out of the field for about 15 months. They now recently started to go back into the field, but they've been out. So our total number of face-to-face visits with physicians for Cologuard was down well over 50% in Q1. And over much of the past year, it was down 100%. We and Pfizer had our reps out of the field for much of the past year.

Got it. And then the reception of early cancer screening over the past few months?

It is improving, Matt. I mean when you look at some of the driving factors like wellness visits are improving, face-to-face access improving. And so overall, I feel good about the momentum we have. In Q1, Cologuard grew 10% despite the backdrop, and the backdrop is improving over the course of this year.

Got it. Okay. I appreciate the clarification. We talked a lot about the commercial capabilities for Exact, and you've been investing in that area. You obviously have a relationship with Pfizer, which you mentioned. They're getting back into the field. I believe that's up for renewal next year. But how do you think the Exact commercial force strength being a competitive advantage in the years ahead with or without Pfizer just given the level of investment that you've put into it? And how do you see you versus sort of the competition just given the amount of focus you put on your commercial field force?

Matt, our sales and marketing team is incredibly strong. The team today is well over 1,000 people, and the Pfizer team in the field is even bigger than ours. So this is a tremendous resource. Most importantly here, it's a great way for us to get more people tested in the fight against this deadly disease. But when I think about what this team is capable of, they could carry multiple products. Most of our sales force only has one product today, and they've got deep relationships. On the Precision Oncology side of the business, we have a team out in the field of over 140 people in the U.S. and a significant team outside the U.S. Well, those relationships are important. Physicians want to hear more from Exact. They're asking for it. That's why Jake and team are so incredibly busy bringing new products to market. We know that we can go out and be successful in educating physicians once we have more products to bring to bear. On the Cologuard side of the business, this team is a tremendous team out there. We have over 200,000 primary care providers in total have ordered at least 1 test from us. There's a long ways to grow, and it's a very strong foundation to build upon.

Got it. And we talked about COVID and some of the negative aspects, and it's weighing on the wellness visits. But one thing I do like to ask management team is in terms of lessons learned and behavior that's changed because of COVID. And when I think about digital engagement and kind of other methods for your commercial team that they had to adapt to during COVID, what durable lessons can you take from that -- from this time period and kind of improve in the business?

Well, I think one of the biggest takeaways that I have is that it's important to be flexible and find whatever way that your customer wants to be engaged with. We need to be flexible and do that. At Exact Sciences, we've always had an inside sales team. Today, that team is over 150 people. That team allowed us to refine our go-to-market strategy over the telephone. And over the past year, we've really leveraged that capability because that was the primary way that we could reach physicians during much of the pandemic. So flexibility here is very important. On top of that, finding digital ways like a -- what we have now is a DTC ordering portal. The team accelerated the development of that portal last year in the early days of the pandemic. What this portal allows today for Cologuard in the future for other tests is that a patient can go on to our website, answer about 5 quick questions about his or her health. They have a physician behind the scenes ordered Cologuard for them, assuming that they're on label. That allows us to reach more and more patients than we couldn't otherwise. In fact, there's a significant number of people in this country who never go to the doctor. Only about 1 out of 4 people in a given year who are on Medicare complete a wellness visit. Cologuard, because it can be done from the convenience of your own home, can help reach those people and get them tested. Another data point that people often forget is that fewer than 40% of people give blood in a given year, give blood for any reason. Well, Cologuard, again, because it doesn't require the added step of a blood draw or actually see in a physician face-to-face, can succeed in an environment where people are -- whether they're quarantining or just too busy to go to a physician. Cologuard can appeal in that environment.

Got it. That's really helpful. Maybe let's shift towards Precision Oncology. Your recent quarter was strong despite some continued headwinds. Could you just talk about the trends you're seeing in Precision Oncology?

Yes. The primary source of revenue in that business is our breast cancer franchise. So the way this test -- this works, Matt, is for women recently diagnosed with early-stage breast cancer. They're often faced with the question, "Will I benefit from chemo? Am I a high risk of recurrence?" Well, that's where Exact comes in. That's where Oncotype is proven -- it's the only test that's proven to be able to help predict the benefit from chemo and predict a likely -- a risk of recurrence. So we cannot answer that question. That question, by the way, got even more important during the pandemic. Because chemo can actually suppress the immune system and leave you at even greater risk for infection from COVID. So that business is incredibly strong. It is the market leader. It comes down to the power of the evidence and the power of the team behind it. What we're seeing now is that mammography screening has largely recovered, which is a good thing, because cancer didn't stop. So if a woman was going to get breast cancer last year and put off her breast cancer screening, but unfortunately, she was going to get breast cancer last year. She's still going to get it this year. So again, that's where we can come in. Breast cancer diagnoses are close to being back to normal now. What we're seeing on the prostate side, that is a more competitive market. Prostate cancer diagnoses are still somewhat depressed. So that part of the business is softer. Internationally, we had an amazing Q1. That team grew the business 26% in Q1, and that's in the middle of a very tough environment. So I'm optimistic here. The long-term outlook for this business is very, very strong. Some of the acquisitions we've completed recently really build upon the strength of that business that will help us even continue the strong growth for years to come.

Got it. That's really helpful. And maybe if we shift towards, in the time we have left, just some of the financial-related questions. You guys have seen some tremendous growth. Lots of reinvestment in the business to drive that growth. When you think about improving margins in the long term, how should we think about your long-term gross margin, EBITDA margin goals and potential?

The long-term gross margin outlook is very, very strong for Exact. I think the right thing to do for shareholders and for patients is to continue to invest in this foundation that we've talked about that is so crucial to the long-term success of Exact Sciences and simultaneously invest in new growth drivers. And that's where Jake and team really come in. So we're doing both those things with the goal of generating long-term sustainable growth and cash flow for investors. Again, I think it's the right thing to do. It carries the best return on investment that I can calculate. So as far as the margin profile, I see a pathway for 80% or better gross margins for both Cologuard and Oncotype DX. Oncotype is already in the 80% range. Cologuard was well on its way there before the pandemic hit. We took a step back temporarily, but we'll get there. I'm confident we'll get to at least 80% gross margin on those 2 key products. From an EBITDA standpoint, I see a pathway for both of them to get to 40% or better also. That's going to require some work. That's going to require additional growth on the top line, but I'm confident we can get there. On a consolidated basis, right now, the biggest use of cash for us is the investment in R&D. This year, we expect that to be over $300 million. It's well worth that investment, again, because we spent a long time developing this strong foundation. And the new products we're adding fit very well into this robust platform that we've established.

Got it. And then looking on sort of the -- some of the levers that you could pull to improve the margins as you gain economies of scale, maybe some efficiencies that you can exact out of the business. Talk a little bit about that.

Well, probably the biggest one is, again, leveraging that foundation. Think about the sales force today carrying 1 product for the most part. Typically, reps carry multiple. And from an incremental investment standpoint, there's not a whole lot more you have to invest to give a rep 2, 3, 4 products. So that's probably the single biggest way. You think about our lab, too. We have built -- we have invested well over $300 million in our lab infrastructure. That infrastructure allowed us to move very quickly, whether it was through the early days of COVID and bring up a test or through our recent liver cancer test. We've made that test available through the existing lab infrastructure. So leveraging that foundation is probably the key way to drive margin improvement from here.

Got it. And then just on capital allocation. We've talked through a number of the acquisitions you have made. Post this M&A you've had, how are you thinking about the build-versus-buy equation? As you look at your balance sheet, you look at your opportunities internally, externally, how are you thinking about it?

Well, first and foremost, Matt, is that we know we have to execute on Cologuard, Oncotype, the existing products we have. That's first and foremost. I know that today, as a company, we're primarily valued based on the revenue we're generating. So we have to execute on those. The team takes that very seriously. To the extent that we're confident in the outlook there and we see something that would make sense to invest in, whether that's organic or inorganic growth, we'll evaluate that. And I think the team has got a good track record of finding things that fit into the strategy, fit into this foundation and paying a fair price. So we'll continue to look. Our philosophy has always been build a strong balance sheet, which we have today, about a $1.4 billion of cash, build that strong balance sheet, continue to invest in the infrastructure and then keep your eyes open on new sources of growth.

Got it. Well, we're just about out of time. Jeff, Jake, thanks so much. Really appreciate your time and telling you the Exact story. Thanks for joining us.

Thanks, Matt.

Thank you, Matt.

Thank you.