Q4 2019 Earnings Call
As a reminder, todays conference call is being recorded.
I'd now like to turn the conference over to Kate Kennedy.
Outside Chief operating officer, and Chief Financial Officer.
May begin.
Good afternoon, everyone and thanks for joining us today for a discussion of our fourth quarter and full year 2019 financial results.
With me today are Bonnie Anderson parasites, Chairman and Chief Executive Officer.
Dr Giulia, Kennedy, our chief scientific and medical Officer, and John Hannah Our Chief commercial officer.
Before we begin light to remind you that various statements that we may make during this call will include forward looking statements as defined under applicable securities laws.
Forward looking statements include those regarding our future plans prospects and strategy financial goals in guidance product attributes and pipeline drivers of growth.
Expectations regarding reimbursement and other statements that are not historical fact.
Management's assumptions expectations and opinions reflected in these forward looking statements are subject to risks and uncertainties that may cause actual results and or performance to differ materially from any future results performance or achievements discussed and or implied by such forward looking.
Hey, that's when the company can give no assurance that they will prove to be correct and will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum.
Please refer to the company's February 20, Fab 2020 press release and the risk factors included in the company's filings with the Securities and Exchange Commission for discussion of important factors that may cause actual events or results to differ materially from those contained in our forward looking statements.
Prior to this call, we announced our fourth quarter and full year 2019 results, which are available on our web site at parasite Dot Com under press releases and the Investor Relations section.
We also published a financial presentation, which I will reference during my remarks. This presentation is also available on our website under events and presentation and the Investor Relations section.
Before turning the call over to Bonnie I would like to explain some changes in our new GAAP reporting structure with the expansion of our strategic partnerships and the acquisition of the encounter diagnostic platform rights and products from Nanostring, we expanded our revenue reporting to distinguish between testing.
Product.
Bio pharma and collaboration revenue.
Testing revenue includes our centralized CLIA testing services, which currently includes Afirma, percepta and Vizio and Cyto pathology.
Product revenue includes a sale of kits and instruments.
Which currently includes Prosigna and encounter flex systems sales.
Together testing and product represents our global diagnostics business.
Revenue, resulting from our strategic agreements for research and development and or commercialization services.
Is comprised of either biopharmaceutical revenue.
Including the sale of services or data and other services for fixed consideration.
Or collaboration revenue, including revenue recognized for the achievement of milestones and contingent or variable consideration earned during a period.
Together bio pharma and collaborations represents our biopharma strategic agreements.
I'll now turn the call over to Bonnie Anderson parasites, Chairman and CEO.
Thanks, Keith and thanks, everyone for joining us today as we discuss our 2019 fourth quarter and full year results and provide you with our outlook for 2020.
Eric Thank had an exceptional and transformational year in 2019, we drove impressive revenue and genomic test volume growth advanced our first of its calling noninvasive nasal swap test for early lung cancer detection and made a strategic acquisition that positions us for glow.
Boy expansion on our own World class distributed platform and has the added two new oncology indications to our portfolio, we have tremendous momentum entering 2020.
This afternoon, we reported total revenue in 2019 of $120.4 million, 831% increase over 2018.
Genomic test volume growth that grew to nearly 40000, an increase of 25% over the prior year. Our net cash used in operations was 3.2 million for 2019, and I am delighted to report that in the fourth quarter as predicted we achieved pause.
The cash flow from operations of $1.8 million, a milestone achieved by few companies in our space.
We are guiding 2020 total revenue in the range of $138 million to $142 million for the full year, excluding bio pharma and collaboration revenue, which we estimate that approximate $4 million plus or minus 1 million. That's represents approximately 20.
5% growth in our testing and product revenue at the midpoint of the range.
We believe this revenue growth will be fueled by the increased adoption of our for revenue generating products.
We're also guiding full year 2020, net cash used in operating activities of $8 million to $12 million. This reflects our intention to invest strategically as we position ourselves to offer multiple advanced genomic tests to physicians and their patients internationally on our district.
Platforms, starting in 2021.
Now to our 2019 highlights.
Our first metric for 2019 with revenue growth, we drilled delivered strong growth across our testing portfolio and biopharmaceutical collaborations in 2019 and are better benefiting from the layering effect of our multiple tests and sources of revenue.
We continue to be pleased with the success of her multi product sales strategy.
By the end of the fourth quarter more than 280 institutions or utilizing more than one of our genomic tests nearly tripled the number from the fourth quarter of 2018, we now have nearly 50 sites utilizing all three of our pharma percepta.
And Im vizier classifiers, and we expect that number to grow as we expand even busier classifier promotion to all of our sales professionals in the second half second quarter of 2020.
Including the build out of our international sales team, we expect to increase our field sales force by about 40 people in 2020.
We are thrilled by the momentum of our Pulmonology testing business, where we recognized over $2 million in revenue for the fourth quarter and over $5 million for the full year 2019 more than double the full year 2018 results.
We also doubled our reported on test volume from 2018, 2019 reporting over 3000, Percepta and 750 Envincio test results for the year. We believe the success was driven impart by the introduction in June of our second generation Percepta Jeanette.
Sequencing classifier and by final Medicare coverage for and busy a classifier for use in I.P.F. diagnosis, which we announced in March of 2019.
We grew Afirma test volumes by over 5500 tests for the full year 2019, and generated approximately $94 million in testing revenues for the product exceeding the mid teens growth targets for both metrics.
Session adoption continues to grow for Afirma GFC, an expression Atlas and we expect to continue to drive further penetration into the market.
We booked approximately $900000 of product revenue in the fourth quarter of 2019 for the Prosigna breast cancer Prognostic I'd say the newest addition to our genomic portfolio, which we obtained through our transaction with me on the strength in December of 2019.
We expect to deliver about $7 million to $8 million a product revenue in 2020.
And finally, we generated significant revenue in 2019 from our biopharmaceutical collaboration with Eli Lilly Loxo oncology in fiber in cancer, and with Johnson and Johnson in lung cancer.
These collaborations produced over $12 million in bio pharma in collaboration revenue in 2019 with 11 million of that we received from the Johnson and Johnson for achieving specific milestones in advancing our lung cancer pipeline.
Our second measure of success with evidence development here too we delivered excellent results in 2019 in April we publish strong data in the lancet respiratory medicine, demonstrating both the clinical validation and clinical utility of the Envisia classifier.
In helping patients with suspected idiopathic pulmonary fibrosis get a clear diagnosis sooner.
Since this publication the number of institutions utilizing and Vizio has increased more than five fold from approximately 35 to over 190 by the end of 2019.
Fifth published evidence is key to driving guideline inclusion and commercial payer reimbursement.
The body of clinical evidence supporting Afirma testing continued to grow as well with eight studies published in peer reviewed journals. These included five publications demonstrating the clinical utility and analytical validity of the Afirma genomic sequencing classifier and three studies.
Pardon me Afirma expression Atlas.
A pharma and our pulmonary partner products were also showcased in 11 poster and other presentations at leading medical conferences.
In addition, 11 abstracts were presented at the San Antonio Breast cancer Symposium in December 2019, including data showing a benefit of prosigna over other genomic tests in identifying patients long term risk of developing distant metastasis.
[noise] data were also presented showing the tests ability to identify patients with intrinsic breast cancer sub types that may potentially benefit from CDK foreign six inhibitors in place as standard chemotherapy.
These data offer exciting future expansion opportunities for the test positioning in global markets, where these sub types are reported in the test results.
We also made terrific progress in our third success metric pipeline advancement, which we believe will drive test menu expansion on the encounter platform a key tour international success.
In December 2019, we announced our acquisition of the exclusive global diagnostic rights to the Nanostring encounter Flex analysis system.
Along with the commercially available Prosigna breast cancer prognostic test and the in development once Mark lymphoma, Subtyping test, which are 10 are intended for use on the encounter system.
We are already making great progress in transitioning the business.
Or are in a whole transcriptome sequencing platforms and machine learning capabilities continue to fuel our product discovery and development efforts using our comprehensive buyer repository of patient consented clinical samples from across our indications.
At the chest annual meeting in October we unveiled preliminary data for our first ever noninvasive nasal swap classifier for early lung cancer detection and diagnosis.
We're finding showed that our novel genomic test can accurately classified lung cancer risk in patients with lung nodules found on C.T. scans with 95% sensitivity when it identifies the patient as low risk and with over 94% specificity.
When it deems that patient as high risk. So that these patients can be monitored noninvasively or can obtain a prompt diagnosis and potential treatment they need.
We estimate the remaining group of intermediate risk patients not classified to low or high risk can be reduced by 50% and then the Broncos can be workup could be the appropriate next step toward diagnosis for these patients.
We believe that use of our nasal swab classifier following the detection of a nodule by imaging has the potential to become a new standard.
For what today is a very AD hoc approach.
Our nasal classifier is based on the same novel field of injury technology as our Percepta test and we believe will compliment percepta through its placement earlier in the diagnostic pathway.
We look forward to advancing our machine learning algorithms and assay development of the test and 2020 and introducing the test commercially in the U.S. in early 2021, following the unveiling of clinical and analytical validation studies demonstrating its performance.
We also announced a strategic collaboration with a sort of pharma the hematology research and development arm of Astrazeneca that will support the company's development among all the GE therapeutics and lymphoma.
This collaboration Leverages, our recent expansion turn nanostring transaction into additional oncology indications, including lymphoma, where we are developing novel genomic tests that leverage the genomic underpinnings of disease with the long term potential a further expanding our menu.
You have diagnostic tests on me and counter platform globally.
And our final metric is financial discipline, we excelled here to reaching positive cash flow from operations in the fourth quarter of 2019, as we said we wouldn't do even with the costs of executing the acquisition.
This reflects our continued bottom line discipline as we invest for long term topline growth.
I'll now turn the call over to Keith for a more detailed reviews, the financials and our guidance for 2020.
Thank you Bonnie as I mentioned earlier, our fourth quarter and full year 2019 financial presentation is available under events and presentations in the Investor Relations section of our website.
This afternoon I plan to introduce our expanded revenue disclosures speak to our fourth quarter and full year 2019 results and conclude with remarks regarding our 2020 guidance.
As I mentioned at the outset of these prepared remarks, the table on footnotes on slide three along with the details in our SEC filings further explains how we recognize and report revenue under U.S. gap.
For a discussion purposes, we may combine testing and product revenue to describe our diagnostic testing business [noise].
And Biopharma and collaboration revenue to describe our strategic arrangements.
Turning to page four of the presentation, our performance against six key performance indicators or KBR size for each quarter and the full year 2019.
Compared to the prior year quarter and full year results are as follows.
For the fourth quarter 2019 total revenue.
29.7 million increased 4 million or 15%.
Gross margin remained flat at 66%.
Operating expenses, excluding cost of revenue increased 7.7 million.
Net loss of 7.5 million increased 4.4 million.
And cash flow from operations of 1.8 million improved 3 million.
And gentlemen volume increased 18%.
Cash at December 31st 2019 was 159 million.
For the full year 2019, total revenue of 120.4 million increased 28.4 million or 31%.
Gross margin increased to 70% from 64%.
Operating expenses, excluding cost of revenue increased 17.8 million.
Net loss of 12.6 million declined 10.4 million.
Cash used in operations of 3.2 million improved 10.3 million.
And genomic volume increased 25%.
The next page page five shows the revenue breakdown by quarter and for the full year 2019 against their respective prior year period.
We recognize 108 million and testing and product revenue.
Which includes approximately 8 million insightful pathology services.
And point 9 million and product revenue.
We also recognize 12 million and bio pharma and collaboration revenue.
We had another year of key events the positively impacted our quarterly results.
In Q1, 2019, we announced that Afirma GFC became a covered service for nearly 9.4 million Tri care members.
We also recognized 4.1 million in Biopharma and collaboration revenue.
In Q2, 2019, we launched the second generation Percepta classifier, and our final Medicare coverage policy from busy became effective.
Accelerating loan volume for the remainder of the year.
We also recognized three and a half million in Biopharma and collaboration revenue.
In Q3, 2019, we announced new data for nasal swap classifier for early lung cancer detection.
We believe will be pivotal to scaling our business and expanding to global markets.
We also recognized 4.3 million and bio pharma and collaboration revenue.
In Q4 2019.
We announced that we acquired the exclusive global diagnostic a license to the encounter flex system.
Which we believe enables global market access with our distributed platform, which we believe as a key to global success.
We recognize point 9 million in product revenue principally for test ship post closing and prior to year end.
We did not recognize a material amount of biopharm in collaboration revenue in this quarter.
And all four quarters in 2019.
We accrued on average between $2800 and $2900 for the Afirma genomic classifier to us including expression analysis that met our revenue recognition standard which was between 90 and 95% of their ported Afirma class fire test volume.
The next six pages outlined a sequential and year over year results underlying each of our KBR wise.
A few observations.
First turning to page six.
New product launches and strategic partnerships resulted in an acceleration in revenue.
Our full year 2019 revenue of 120 million grew by 28 million or 31% over the prior year.
As shown in the bottom right of slide six genomic volume for our testing business accelerated from 12% growth in 2017.
The 22% in 2018 and 25% in 2019.
Page seven highlights the year over year and sequential growth trends of our testing business.
Page eight highlights our improvement in gross margins with and without Biopharma and collaboration revenue.
We continue to benefit from scaling our operations offset by loan volume not at full scale reimbursement, which as a strategic focus of ours over the next 24 months.
Turning to page nine during the first three quarters of 2019.
We invested principally in revenue generating activities.
In the fourth quarter, we closed the Nanostring acquisition and incurred approximately 1.6 million and transaction expenses.
4 million and Prosigna operating expenses and point 3 million, an incremental intangible asset amortization.
Resulting in a point 2.3 million increase to our operating expenses in the quarter.
All of which we paid 1.9 million in cash.
Which lowered our cash flow from operations from 3.7 million to 1.8 million for the quarter.
We made approximately 40 sales hires in the fourth quarter, including product sales hires made as part of the acquisition.
Turning to page 12, and our 2020 guidance as Bonnie stated earlier in her remarks, we're guiding to total revenue of 138 to 142 million.
And net cash used in operating activities.
$8 million to $12 million.
This reflects our plan to make modest strategic investments over the next couple of years to sport to support the global launch of our loan products.
Some additional color on 2020.
We expect the following.
Testing revenue, excluding cytopathology to grow from approximately 102 120 million.
Cytopathology revenue of approximately 8 million plus or minus a half million.
Product revenue of approximately seven to 9 million.
Biopharma and collaboration revenue of 4 million plus or minus a million.
The quarterly pacing of Biopharma and collaboration revenue is not certain at this time, nor is the accounting classification for such revenue as either biopharma or collaboration revenue.
Consistent with historical experience and genomic volume for our testing business shown on slide seven we expect to continue to see seasonal trends across the business with a slower first quarter an increase in the second quarter relatively flat volumes from Q2 to Q3 and a step up in Q4.
We expect margins to be stable within the 64% to 66% range, excluding the impact of Biopharma and collaboration revenue.
We expect to increase our investment in sales and marketing to 17 to 19 million per quarter, and our combined R&D and DNA spend to stay within a million dollars band around the quarterly average spend of approximately $13 million.
I will now turn the call back over to Bonnie to discuss our strategic and milestones for 2020.
Thanks Keith.
Looking ahead, we believe we are forging an exciting pathway that will help redefine the genomic diagnostic industry, one in which using our own distributed platform. We can deliver an expansive menu of advanced genomic tests to positions and our patients worldwide via local hospitals in line.
Retirees.
Until now this capability has largely been the purview of specialty labs, putting novel genomic test like hours out of the reach of many patients in international markets.
Our strategic acquisition of the encounter global diagnostic business has positioned us to achieve this vision now we must invest wisely to turn our vision into reality first we plan to long term busy classifier on the encounter platform in international markets in 2021.
Marking the beginning of our menu expansion strategy. Following this in 2022, we will be.
We will be the international launch of our noninvasive nasal swab test for early lung cancer detection, which will help us further access the 40 billion dollar global market opportunity for our tests. These initiatives will be key to us delivering shareholder value from our desired.
25% compound annual growth rate over the next decade.
Against this backdrop.
And with our strong momentum as we move into 2020 I want to highlight the key catalysts that we believe will drive our momentum through 2021.
Turning to page 13 of Keith presentation. These catalysts fallen to four key areas of focus product and testing revenue growth collaboration revenue evidenced development and pipeline advancement and menu expansion.
First is product contesting revenue, which is reflected in our full year 2020 total revenue guidance of $138 million to $142 million. We aim to continue our steady volume growth for the Afirma GFC in expression Atlas and to double our Pulmonology genomic test volume in 2020.
Looking ahead to 2021, we will focus on guideline inclusion and commercial coverage decisions for our Pulmonology products.
Second is collaboration revenue as Keith mentioned, we expect to generate about $4 million in 2020 from Biopharma and collaborations.
This revenue will come primarily from our strategic agreement with Loxo Lilly in Taiwan cancer, and Acerta pharma Astrazeneca in lymphoma.
We expect to achieve milestone related revenue from Johnson and Johnson in 2021 tied to commercialization milestones for our nasal swab classifier.
Third is evidenced development, we plan to continue to adding to our extensive library of clinical evidence in 2020 with the presentation and publication of new data further demonstrating the performance in utility of RM, Vizio, Percepta and Prosigna test.
In 2021, we expect to unveil pivotal clinical validation data for noninvasive nasal swab classifier in lung cancer prior to launching the product to in the U.S.
Into share data for Envisia classifier on the encounter platform prior to its commercial introduction internationally.
And our fourth area of focus is pipeline advancement in test menu expansion.
In 2020, we expect to add enhancements to our Afirma XJ based on new genomic variance of importance and thyroid cancer, we plan to reveal data from the progress of our nasal swab test in lung cancer and to initiate our no bowl clinical trial through which we plan.
To build a comprehensive lung cancer bio repository that will help us use nasal blood and imaging data to potentially answer a range of clinical questions in lung cancer overtime.
We also look forward to advancing our landmark lymphoma Subtyping test.
These activities will all crescendo in 2021 with three product launches are nasal swab test in the U.S.
In vizier encounter international launch and the introduction of Percepta Atlas to informed treatment decisions in lung cancer at the time of diagnosis, a strategic move to streamline getting patients on treatments quicker to save lives.
We are certainly excited about 2020 and beyond.
Wrapping up I'd like to give a big shout out to all of various sites employees, including our new very high caliber global team members, our teams industry, leading expertise passion and focus on execution are the keys to our continued success and personally a source of inspiration for me.
Every day and finally I'd like to thank you our investors for your continued support of their site and our mission and now I'd like to ask Jeff to open the call up for questions.
Thank you.
In the US your question. Please press star one on your telephone keypad.
Again.
Yes, so telephone pause for just a moment the composite DNA rust.
We have one question from the line of foam lives that's one.
Sir Your line is now open.
Thanks, Thanks for taking my question congrats on the quarter guys.
Thanks.
Let me start at the back of the presentation. So for the nasal swab tests are you going to be able to provide us with maybe some more granular guidance on timing as earlier in the year second half of the year.
Yeah, I think as the year goes on will probably tightened that Dan but.
We've been targeting to hit a launch of the first nasal swab test in the U.S. market and what we've said early 2021. So maybe you can plan on that in the first half the year.
Great and then there was mention of the of the 40 hires on the commercial side, how many of those came from the Nanostring acquisition and could you comment on their distribution us versus a global.
We've we hired under 20 people in the Nanostring acquisition.
And can I do want to huge go ahead.
I'd say, there's 12 13 of those people are international.
And there is.
Three or three or four of those and non sales roles.
Of the of the 20 restaurant and bar.
Our revenue producing yes, Tom.
Part of the enthusiasm we have her readiness to launch new products into the European market is the strong team that came on board. It's a mix of five country manager level people, who sort of manage the overall business in the territory sales medical.
There's and marketing and so there are so great base and a foundation there as we think about moving envincio over to the encounter and doing the market development work that will want to do and 20.
20 and into 21 to prepare for that launch.
Of that product that year and.
We're really pleased said that they all were able to join us in the acquisition.
Okay, and then just one more quick question, if I might on the Prosigna.
The 900000 that you booked in the fourth quarter I think you mentioned that was all Prosigna test related.
And then if that's the case that annualizes the number substantially higher than the 78 million you've guided to could you provide some thoughts on that.
Yeah, I think you. So it will take some time, but you know the cadence of this business will certainly be a little bit different than what the cadence of our current businesses, where we basically have samples that are collected on the basis of patients being seen in doctors' offices and the predictability.
All of knowing the volume by accounting basically having you know hundreds and hundreds of dr., sending us samples every day.
This businesses more geared toward shipments that that go into laboratories that might by a month to month Stephen for six months worth of inventory until they place. Their next order. So I think as we were coming into December there were probably some prior to the.
End of the year shipment stockings that didnt take place and.
We were happy to take that 900 Kaye of revenue, but we don't think that that that means that that revenue is going to be consistent on a monthly basis going forward and I think for US you know where we're we've we've reduced the size of the team we've made some decisions on distribution.
In channels that were changing we're obviously new owners of the business and we want to be prudent and conservative on what we believe is realistic as as we carry that business forward and we'll learn more and be able to update you as year goes on.
That's great. Thanks, guys appreciate it.
Thanks, Tom Thank you.
Thank you next question from the line of.
Oh the key.
Sir Your line is now open.
Hi, Thanks for taking my questions I apologies for the background noise here. Congratulations first of all on a fantastic year. My first question absolutely on behalf of in Investor who is wondering when will you be in a position to submit for the nasal swap path. When you when will you be in a position to submit to the Medicare for real.
And when you when do you expect to generate revenue from the attack given that the data will be coming out would be pivotal data expected in 2021, if you could talk about that.
No I think the best way to guide People's thinking around US is to look at the timing that has its taken us on our historical products.
You know, we'd love to say that you can be lined up to do the pivotal validation launched the test on the back of that but we all know that to get to Medicare coverage, you've got to have some basis of clinical utility. That's proven once the test is available to patients. So what will be focused on areas.
You know manage hang a very strategic launch of the product into the right accounts.
Well you know good experienced users, perhaps those that have already been working with us with Percepta, a where we can continue to collect that utility data and packaged job to all of the clinical validation analytical validation and utility data that will need to be package submitted.
It and accepted for publication to get that Medicare coverage decision I think we've got a team that's pretty darn good at executing on that they've done it pretty fairly flawlessly. Several times now, but it's going to take you know 18 months to 24 months potentially to get to that.
Right.
And it will need to line up you know the timing of the year around the Medicare multi acts process as well, but you know it it will be a great starting 0.2 to do a launch and get into pilot sites, where we can start.
To to see the reality of how this test might be able to be used to to guide better care around treatment.
Patient diagnosis and treatment decisions.
[noise] great. Thank you for that.
Your question about Corona virus.
Right now.
I just core [laughter].
And you know, but could you maybe talk about your thoughts around given just a lot of that seems to be obviously, you know on everyone's mind right now maybe going back to.
When you had.
You know very severe flu season on it as you think about expanding internationally as well as you rightly Mike.
How are you.
I know, it's early I know, there's a lot of uncertainty, but could you talk about kind of what you're thinking on who we have some.
Lots from you.
Well I think was really kind of focusing in on what are the gaps and timing around making this strategic acquisition become the basis of a global growth story and and you know we're gonna take the tariff.
Full stops one at the time to make sure we focus first on broad menu expansion.
We think that the not platform because sometimes incredibly.
Sophisticated and simplistic design, a where you can run these tasks from a cartridge with about an hour of hands on time to day turnaround time, yet have a platform that has over 800 features that you can fill with genomic car.
Content. This platform is a I believe and I think we all believe a world class design product to do what we're trying to do so we're going to take the existing test prosigna limbs, Mark we're going to move ours over one at a time very strategically and vizio was chosen as the first step.
Test on purpose.
We have experienced with thought leaders that Todd Julien our R&D team have interacted with over the years that want to see and busy I made available in Europe and that made sense to start with that and then it's always nice to take a test that's already been developed and proof.
Of development on our sequencing platform and then move that to the and cannot platform fall I you know.
Yes, well probably run its course like many of these other things we've seen over the years. It will you know had a point and probably I'm not become the major threaded is today.
I think that are planning is going to spread over the next two three years to really execute wellness menu expansion and I don't in and expect that the issues of today in the current a virus and travel is really going to have and major impact on what we're trying.
Joe.
You know, we're not planning to be in China anytime soon we don't currently have distribution, there and while certainly there threats in other parts of the World. We have you know one to two people in each of these markets looking after the maintenance and and growth of per second now while we focus our investments some building out this menu so I think.
We have a very very targeted plan and you know it won't happen overnight, but that's a pretty exciting pathway forward to see where we're going to be in two three years.
Say for our testing bizarre existing testing business, we don't have as much visibility into what's happening in terms of patients visiting facilities, whether or not the fear is distributed among the population and people going to the doctor or less we generally see a slower first quarter and are you asking.
<unk> testing business, so that can be down you know three to 400 samples those sequentially over the fourth quarter. For example, but did you know it's not as we don't see a major impact from that currently but it is obviously possible. It is staying where the continue with the krona virus in the United States that people would react and not go see.
Either doctors, we have not forecasted that in our numbers at this point.
Okay, Great and then if I could squeeze one more question for key would you be able to breakout whereby Oklahoma collaboration revenue.
Usually when we talk about anything but.
Will there be a step up with the locks old Navy collaboration this year, where you the majority of that's coming from the Astrazeneca collaboration. Thank you so much.
Yeah. So bombing you can probably talk about what's that doing a continuation instead stability right now and walk so in the remainder of that is anticipated from our new collaboration.
Thank you so.
Thank you.
And I'd just reiterate what Bonnie said in her prepared remarks, JNJ that 9 million in remaining milestones that we have under our agreement we do not have any of that in our forecast for 2020, we have that lined up with the achievement of milestones or Bonnie laid out for 2021.
Thank you next questions on the line of Brian Weinstein from William Blair. Sir You line is now open.
Hey, guys. Thanks for taking the questions.
We reached 2020 can you help us out with a little bit of detail on your expectations on the molecular testing side, just more specifically on price versus volume that you expect there and it's a corollary to that you're you're heading.
Sounds like you just over 20 reps to the field decided in the business. So.
My comments this growth be higher than what we've seen in the past I know 20% to certainly.
Very solid, but with the had an reps there.
Can you just is it possible does that number could be a little bit better.
Sure. Yes. It is obviously possible we don't guide to the Street exactly what you know we're going to page on Hana for but we were definitely pressing our commercial organization and you know we hope to deliver all what we say we're going to do.
In terms of genomic volume you know, we'd expect to do implied in our.
Revenue guidance here of $120 million for testing excluding cytopathology.
About 48000 tasks and I'll be around $2500.
For that 48000, Tasigna gets you to $120 million, probably do an incremental 5000 in afirma again, I'm not giving guidance I'm just trying to help you sort of thing through the math on how you build your models. So it was 41 about 41000, Chason Afirma our long products.
Do private combined 7000.
From a 41000 genomic volume that's probably about 26 50, you know net of you know how much we occurs we accrued between 20 and 2900 and we accrue about 90% to 95% of those are the math or that is around 26, 50 and that rate has been consistent all throughout the whole year. So I'd say it's four.
The 1000, Tom's 26, 50 gets you to about 100 $809 million in revenue offer afirma or along the about 7000 test at about 1600.
That's up a couple of hundred dollars versus prior year and I get you about $11 million in revenue over $5 million. So do you take on calling a 109, plus a lot and you get to $120 million and revenue for the molecular side and in terms of the pacing.
I would expect a we do somewhere in the sort of 10300 test in the first quarter somewhere in that area and then we'd step up as we do in the second quarter and then a small step up maybe 500 test up from Q to Q3 over the Q2 number and then we have a step up in Q4 to get to the to 41000 task.
All right.
Thank you for all that.
Okay.
Yeah, and brining one for you just.
Like the strategic value of off the partnerships can can you just.
Refreshes that strategic value whats really happening for you today and.
In the future and then what's the likelihood of you guys doing additional strategic finding additional strategic partnerships. In 2020, you do you have a pretty full pipeline of things in a relatively close obviously you wouldn't put them in guidance, because they're not signed but but is that something that we should be expecting to hear more about from you in 2020.
So there are a couple of things I think first we never want to build the nucleus of our growth story and the foundational core of the business around pharmaceutical collaboration is because they can come and go right.
So what we focused on was really building out our engines, a especially our R&D engines with our clinical by repositories are very deep and broad.
Genomic content and our capabilities and machine learning and what we've learned over the course of the last couple of years is that when we have a leading position commercially in an indication and we have the foundational bio repositories.
The richest data you can collect and all of that data generated from thousands of patient samples that we're testing in our lab there are opportunities to leverage that position and create more value for various site out of what we're already doing one or what we've already done so I think what is.
Really cool about our collaborations to date is that we are getting paid for value that we have either already generated or that we would have been generating anyway, and we're just getting paid and building more value in various site because that.
Data and information is valuable to someone else.
I think with the move to take this and counter platform and think about globalizing the local distribution of testing.
What happens is we opened up a new avenue for collaborations with companies that want to be able to pick partners were testing for either clinical trial enrollment or for other purposes can be done in local markets around the world.
And I do think that we are set up quite nicely to be able to continue to expand these collaborations and our first focus will be on indications that were already and as a business. So we've done that with Cyren cancer, we've now done.
That in the area of lymphoma, we've done that in lung cancer and a big way would change I think we have the potential to expand those collaborations, but certainly has the potential to bring on more as well.
Great. Thank you guys.
Thank you.
Just wanted to go back and Brian one of the thanks.
Talked about in the past is our intangible we've always we did the allegro deal we at about $14 million intangible and when we did the deal now Nanostring. We got about 65 million I think is everybody's thinking about our amortization going forward that number is going to be about four or about 5 million a year. So we're going to have an incremental.
4 million of noncash charges associated with that so again, it's going from 1 million to 5 million per year.
Rounding intangibles.
Right.
Next question from the line.
Paul Knight Johnny.
Your line is now open.
Hi, Bonnie on the a 7000, if you're guiding to on going alone.
His can you give us any color on idea.
Versus percepta on.
Which kind of getting.
[noise] strength behind each.
Yeah, we think both her both doing really well I, John maybe you want to talk a little bit about how those two are working together commercially yes. Thanks, Bonnie I think we've we've really unlock the synergy between two pulmonary products, where we have really a common call point within the institution and.
Tweener are our territory specialists are pulmonary specialist, we're able to drive a significant amount of adoption.
Among those products within a single institution that are treating both patients with pulmonary knowledge rules and interstitial lung disease and as we talked about earlier, we've really ramped up here over the course of 2019, the number of sites submitting and IZEA samples to be five fold what it was at the.
Beginning of the year due to that synergy where we already had the installed base of the perceptive product being utilized in those institutions. We had approval through the value analysis committee to be offering our testing services as we're able to bring in disease Street in and provide immediate value in terms of the management of patients in those products.
So we see both of the products growing really nicely throughout 2020 in a doubling of the overall pulmonary volume.
Thanks, John.
Yes.
Just seem like there's less embedded doctor practices are you finding them market more.
Of the test and perhaps.
Lung cancer.
I had no no we think the the interest and adoption of of the product is consistent across both and I think I think we see in lung cancer is the diagnosis of the disease is relatively concentrated in few pulmonologists the do bronchoscopy per se.
Seizure, whereas with injured interstitial lung disease, a general Pulmonologists Pulmonologists don't do a advanced bronchoscopy procedures still treat and manage interstitial lung disease. So it's a broader number of clinicians within that practice that are treating the disease, but still the.
Commonality within a pulmonary practice of doing both lung cancer in aisle D is pretty calm and everywhere we go.
Okay. Thank you.
Thank you.
Thank you next question from the line of soda.
Oh SDB.
Thank you.
Your line is no.
Hi, This is actually with me on for Puneet. Thanks for taking my questions. Most of what I had has been us, but I wanted to follow back up on the genome.
Volume growth cadence throughout the year.
I know, it's only 19.
Still posted a solid but very good 25% growth for the year, but consequential.
Growth throughout the year.
I'm just wondering.
At the puts and takes.
Or that you experienced with year on how we can expect us to blue heading into 2020.
Hey was great question. We are 2018, you almost have to go back and you look at 19 and look at what averaged 18, because you're comparing you guys were ramping these kind of things.
Yeah, I recall, we only had essentially one test and the first quarter of 18, and so by the time, we get a sort of the second third quarter of 19 it became significant.
Comparative quarters, because we had lot of ramp in the second half of 18, and so even though it appears to be.
You know it looks like it's coming down in terms the percentage the numbers are going up dramatically and so weve. What we've seen is just around 5000 incremental tasks and afirma. So what I was trying to build to you for your earlier is we're probably go about 5200 test.
Up to about 41000 this year, probably start around 10, probably 9000 at first quarter Gulf 10, 10, 511, five kind of thing for Afirma throughout the year to get you to 41000, and our long old sort of started out at 13 honor go to 16, 19, 2200 kind of thing throughout the year sort of pace up.
And so you just those percentages she has worked out.
How they fall out, but what we're really trying to figure out is how do you build afirma 5000, plus a year you keep aerated 26, 50 or building long volume at 80% growth implied at 7000 long test incremental this year over last year as an 80% growth in volume and if we can take a rate up too.
Hundred and enjoy and the team are working on the publications and the coverage with John you know well happened as you all install a big base and as you get AD in the United signal, the lose our revenue or leaving half our revenue on the table on those products right. So there's I I understand from deals wanted.
You that they they feel like that's not maybe growing fast enough, but the volume you want to embed and see that in the market and the revenue tailwind all happened just like what we saw on Afirma.
So we're pretty happy with it yeah, I think I'm just looking at the numbers in key stack.
Well the first quarter genomic volume of 9100 gone to 90, 699, and 10 eight that's exactly the kind of layering effect and I in 2018 I was the year that we introduced the just the G.S.C. for Afirma and then a couple months half.
For the year start at the expression Atlas. So the beginning part of that here was you know pretty low performance to compared to in in early 19, and because of those new product introductions, we had an acceleration of that in 18 and them with the new lung products.
Being off so we're actually very pleased I think we've been talking about an afirma cadence of 5000 additional chassis year. We delivered 5500 a in in 19. So we've been very pleased with a product with its time on the market place having that level of continue growth is really really great.
Great. Thank you and then just one more quick ones on the the physician base can you just provide a little color on on whether you've been seeing more growth from existing positions or from new physicians and how do you expect to play with it so forth yeah. John Yeah. I think are you referring to a for.
Remote or to the pulmonary products.
So for Afirma Sir.
Yeah for from its its a mix of both you know as as a Julian R&D team and our clinical affairs team continue to publish evidence around afirma and demonstrate its efficacy in new areas like hurtful sell nodules the value of our expression Atlas assay to provide insight.
Lights on both surgical selection as well as targeted therapies, we see greater adoption within existing accounts of the product for additional patients that they previously for how to didn't test with the I'll say and then we have through the demonstration of the value of the extension of the product picked up new account.
It's along the way that you know for whatever reason brown to didn't use a firming in the past I'm used to local home grown solution and then decided to switch over to the Afirma assay and so we're having a lot of success in both areas in a in a very targeted way.
Great. Thank you very much.
Yes.
Thank you for the last question from Brian Weinstein of William Blair. Sir Your line is now open.
Already asked one.
Okay Yeah.
You were coming in for another tanked. Thank you [laughter].
[laughter].
And there are no.
We continue.
You can now conclude the call. Thank you everyone.
Ladies and gentlemen, this includes call today. Thank you for joining US you know this.
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