Q4 2019 Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to stand by I think you patients.
[music].
Welcome to not there's 2019 fourth quarter financial results conference call. At this time, all participants I not listen only mode. Following management's prepared remarks, we will hold acumen day session ask a question at that time. Please press star followed by one on your Touchtone phone.
Anyone has difficulty hearing the conference. Please press star zero phosphate assistance as a reminder, this conference call is being recorded today February 26 2020.
I'd now like to turn the conference call over to Michael Bofi, Chief Financial Officer. Please go ahead.
Thanks, operator, good afternoon. Thank you for joining our conference call to discuss the results of our fourth quarter and full year Tween I'd also in line to see Chapman, our CEO Bob sure in.
Operating officer soundly Boskovich General manager ecology implied billings Chief Medical Officer.
Today's conference call is being broadcast live via webcast, we will be referring to a slide presentation has been posted two investor Donna Terra Dot com a replay of the coal will also be available.
Sure Donna Terra Dot com.
During the course of this conference call, we will make forward looking statements regarding future events in our anticipated future performance, such as our operational and financial guidance for the full year 2020.
Our assumptions for that guidance market size partnerships clinical studies opportunities and strategies and expectations for various current and future products, including product capabilities.
Spec did release dates reimbursement coverage and related effects on our financial and operating results.
We caution you that such statements reflect our best judgments based on factors currently known to US and then actual events or results could differ materially. Please refer to the documents we file from time to time with the FCC, including our most recent form 10-K, the form 8-K filed with today's press release.
Those documents identify important risks and other factors that may cause our actual results to differ materially from does contain indoor suggested by the forward looking statements forward looking statements made during the call are being made out of them. Today. This call is replayed are reviewed after today the information presented during the call may not.
The current are accurate information, it's her disclaims any obligation to update or revise any forward looking statements. We will provide guidance on todays call, but we're not providing further guidance or updates on our performance during the quarter unless we do so in public Forum.
We will quote a number of new Miracle Gro changes as we discuss our financial performance and unless otherwise noted each such reference represents a year on your comparison and now I'd like to turn the call over to Steve.
Thanks, Mike Good afternoon, everyone and thank you for joining us.
I want to give a brief recap between 19, just got sort of strong annual and fourth quarter results and lay out the key goals. We expect to achieving 2020 I will then have Mike walk you through our financials in 2020 guidance.
The next slide is a snapshot of the most visible achievements in 2019, which was clearly a transformational year for us across all focus areas.
We delivered financial results above or above the top of our previous guidance.
Reproductive health, we expanded are leading market share with strong volume growth new features a new peer reviewed data.
We grew average selling prices in each quarter sequentially from Q1 through Q4, we significantly reduced cost of goods sold per unit in organ transplant.
Achieved eat your worst data milestones, we published compelling peer review data successfully executed are clear validation and received a positive final coverage decision for Medicare all of which lays the foundation for a commercial launch in 2020.
You know Koji.
We publish groundbreaking clinical validity data in multiple cancer types signed significant commercial partnerships with foundation medicine in Beijing Genomics Institute exceeded our ambitious goal for total cumulative contracted value with pharma partners. It security draft coverage decision for Medicare in colorectal cancer.
It took us years of work to get to this point and I know many of you have been with us for that journey. We appreciate your support and continued input.
On the next slide you can see how our momentum coming out of 2019 forms the backdrop for a 2020 goals in reproductive health or 2020 goal is to drive the business towards cash flow breakeven, while extending our leadership position, we intend to do that by continuing to drive volume growth, while improving or unit.
Economics in transplant, we're very excited about receiving final Medicare coverage for prosperity in our goal is to have a successful commercial launch in 2020.
Colleague, we have an opportunity to make signature of the standard of care for minimal residual disease recurrence munchery undergoing 2020 is to execute the first major product launch colorectal cancer, while continuing to be to partner of choice for major clinical trials that can define the space in the coming years.
Now, let me jump into the Q4 and 29 team results. The first slide shows are long term track record of driving volume growth in a reproductive health business. We had another very strong year in 2019.
Before in particular was a great sequential growth quarter versus Q3 at 29 team. We are again seeing strong growth. So far in Q1, we believe we are well positioned to have another solid growth you're in 2020.
I'm very pleased to announce that we've exceeded the top end of EUR 2019 annual guidance with 302 million in revenues any 42% gross margin that was guidance that we had already raised twice during 2019.
In addition, we crossed over 300 million revenues for the first time as a company as a reminder, we sold our ever port business in the middle of the year, So pro forma for that sale or revenues would have been even higher.
Q4 also exceeded our expectations financially as we posted strong revenue and gross margin growth versus last year revenues were up 24% year on year in the fourth quarter from 67 million to 83 million gross margins were up 1100 basis points from 36% to 47%.
A key driver for this performance was volume growth combined with improving unit economics.
On the next slide you can see a snapshot of our average selling price and cost of goods sold per unit on a per unit basis overtime.
We were pleased to see continued momentum in our is Pete.
Called into Q4 2018 in Q1 at 29 team, we took a significant ASP hit in response to several factors, including the expansion of prior authorization policies and we described a series of efforts that we were pursuing to proved a fraction of time, we are reimbursed for test.
This was a very substantial in focused effort to identify and fixed gaps and it was a major investment by our team. So we're pleased to see or is p. improving on this slide I'd also note that the record business contributed about $10 and he is piece to that in the previous quarters. So on an apples to apples basis, we're now in a better please.
Sort of crude revenue per test than we were before we have a number of initiatives under way that could further improve as piece this year.
No. This is Pete chart does not give us the benefit of any partner revenue recognition or revenue true ups from prior periods in order to give a sustainable sense over insurance reimbursed revenue per test.
On the right side of the slide you can see our cards trajectory overtime, we significantly reduced cost of goods sold and we're pleased to reach a new low in Q4 of about $224 per unit.
It's a step down from the mid 230 range. We saw for most of 2019 back when the Cogs were the 270 range, we set a target to be below $200 per unit and we think we can achieved that goal based on funded funded active R&D projects. We are currently pursuing and we expect those projects to complete throughout 2020.
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We said on the Q4 call last year that we need to generate roughly 180 million in gross profit to cover operating expenses. The reproductive health business, one way to do that would be to get $200 margin per test with 900000 units a number of variables make it harder to predict precisely when we will cross that threshold, but we moved significantly.
Closer in 29 team and have a path to get there in the relative near term overall and reproductive health, we're executing very well on volume SP and Cogs, we feel very positive about our ability to extend our leadership position and drive the business towards cash flow breakeven in the near term.
Okay shifting gears to transplant just as a reminder, there roughly 20000 kidney transplants per year in about 180000 patients living with the transplanted kidneys.
Within the first five years about 30% of recipients, we'll lose their kidney and within the first 10 years, roughly 50% looser kidney.
Our test Prospera uses our proprietary technology to detect donor derived cell free DNA into plasma as a biomarker organ rejection and significantly improves on the performance of the currently available Biomarkers.
We think that this market can be very significant overtime and we estimate that the market today is less than 5% penetrated the chart on the right gives you sense of the revenue potential overtime. If you assume 20000, new transplants per year in the United States seven tests per year in the first year and then quarterly for the next two years you can see.
A range of estimated annual revenues it could be achieved in a reasonable market penetration rate.
Even at these conservative penetration levels, the revenue has potential to make a meaningful impact on interiors business.
We had the chance to meet with several transplant centers recently and one key takeaway from those meetings is that the vast majority of centers or in the very beginning stages of using donor derived cell free DNA as a tool in their patient care, we plan to grow our share by tapping into this greenfield opportunity in by winning market share in clinics that are already using donor derived cell free DNA.
Testing.
The next slide is just the same short we've shown since we announced the presentation of her validation data we've hit every milestone towards a commercial launch on time. So far we've now made the necessary preparations for our full launch and are just awaiting the noridian local coverage decision and final pricing before we execute the full commercial launch as it.
Minder Noridian follows the guidance of the mold Dx program, where we've already received a final positive coverage decision and we expect iridiums funnel coverage decision to issue very soon.
We believe were to good position to be successful given the outstanding performance of our test versus the first generation donor derived cell free DNA test as a reminder, our clinical validation data compete compared favourably against the first generation test across many aspects of performance, including the detection of T cell media.
Rejection, the ability to detect subclinical rejection, where there are no other clinical signs and the overall area under the curve. Our study was approximately two times larger than the competition and has now been evaluated by independent experts at Medicare who rated our strength of evidence more favorably than the first generation test.
In our conversations we find the transplant physicians are responding positively to this data.
We previously announced or plan proactive registry study, which to our knowledge is the largest perspective donor derived cell free DNA study ever performed led by Dr., Jonathan Bromberg from the University of Maryland in a second study led by Dr., Phil how around from the University of Alberta.
We're excited to be working with these key opinion leaders and we're actively recruiting for these studies, we're really pleased with the interest thus far and we look forward to providing updates in the future.
Okay, I will now turn it over to supplement to discuss our significant progress in oncology Solomon.
Thanks, Steve I'd like to start with a review of our pharma business then our clinical testing business focused on colorectal cancer, and then touch on our key commercial partnerships.
We made excellent progress and 29 seen with our pharma business, we outperformed our goal with over $55 million and cumulative signed contracts, we see that business accelerating now because we were able to clear number rigorous technical operational and intellectual property reviews with our largest biopharma partners.
Location of significant clinical data across multiple disease types also played a role.
And finally because of the growing consensus on the utility of our personalized MRG approach for enriching accelerator clinical trials.
Technology is changing drug development, enabling pharma companies to bring novel treatments out of the metastatic setting straight into the argument neoadjuvant setting for patients with early stage disease.
Because most early stage patients are already cured by surgery alone and therefore would not to Rob any benefit from a novel treatment drug trials in this setting our historically very large risky as expensive as one would have to trade. So many patients benefit just one.
In fact, there are multiple examples of immunotherapy trials in the argument setting where the trial failed and where we believe those trials may have been successful had they been enriched with Cigna Tara.
With cigarettes or a drug developers can focus the trials on the patients who have residual disease after surgery or early signs of molecular relapse and they can read out the trial faster are using cigarettes or as an early endpoint to evaluate therapy effectiveness.
Adjusting for clearance of that residual disease upon treatment.
This concept is gaining traction now as we have signed and recently announced several prospective phase two trials. In addition to multiple projects involving the analysis of specimens collected and stored from previous clinical trials.
In addition to our growing pipeline of pharma trials. We're also focused on extending our leadership in data and clinical development in early stage colorectal cancer.
One of our key wins, there was our deal with Astrazeneca, which was previously described.
Another was our deal with the National Cancer Center, Japan.
Turning to Japanese arm of the circulate idea trial in over 100 sites across Japan.
This was designed to be a practice changing study. This objective is to show that stage three colorectal cancer patients.
If they test MRT negative with Cigna Terra after surgery may completely forego adjuvant chemotherapy.
Today, the guidelines are clear the Allstate revisions in colorectal should received chemotherapy. After surgery no treatment duration has been an area of hot debate.
It requires a randomized trial like this to change those guidelines. This is the type of trial that can establish a new standard of care in Japan, which we feel very positive about.
We also launched the bespoke CRC registry study aiming to collect data on a thousand patients tested with cigarettes era as part of clinical practice under the criteria established for Medicare in its draft coverage policy.
This study is important because we worked with our principal investigators who are leaving GR oncologists in the field to establish a recommended testing protocol with six tests in year, one after surgery and four tests.
Two.
As a reminder, medicare's draft LCD proposals coverage for the cereal use of cigarettes era into setting.
After surgery to evaluate the need for argument chemotherapy and in the surveillance center to be used with the same frequency as CEO through your park to detect recurrence and help resolve those positives from both Sia NCT imaging.
We received the draft coverage decision last year, we expect to have the final coverage and pricing in mid 2020, and we're planning a full launch commercially later this year.
Early feedback from GE oncologist has been very positive as the unmet need in stage two and three colorectal cancer is strong. We believe this clinical indication has the opportunity to translate to about a million test per year, which gives you a sense of the size of these oncology markets that were just beginning to unlock.
Those for on a reimbursement pathway, we have met all of our major milestones and we're navigating the process.
As expected.
Public comment period for this draft LCD was completed in Q4, and we think there went smoothly. So we remain on track to get the final LCD likely in the second half of 2020 based on standard times and our experience between draft and final LCD is.
Which then would be followed by pricing decision.
In the Meanwhile, we're also preparing additional submissions for coverage of new indications.
Finally in addition to our direct pharma and clinical businesses. We're also making significant progress on the co development efforts with foundation medicine and to be GR.
We have received positive feedback on the partnership with Foundation medicine as it will enable both physicians and pharmaceutical customers to access personalized monitoring technology patients, whose tissue specimens have already been analyzed by foundation one cdx.
And the program is on track.
Our efforts with BG are also moving forward with the objective to make signets are available in China. This year.
I will handle the sales and marketing effort and pay the terra royalty on sales and in some cases were also collaborating together with them. So when global drug trials. In fact, the first deal. This nature has already been sign we believe China represents a large market with roughly 4.3 million new cancer cases annually and the BG.
As the ideal partner with its significant scale regulatory experience.
Now, let me hand, the call over to Mike to talk about the guidance for 2020 and the investments, we're making that open up these new opportunities Mike.
Thanks element just a few housekeeping items on the next slide that summarizes the quarter.
Some of you will notice that we've tightened up some of the disclosure. This time, so instead of breaking out horizon and panorama into financials, we are giving overall product revenues licensing and other revenues and then something that the total revenues, we talked about making that changed on the huge recall and we had originally planned to make that change in Q1, however, because we're the only laboratory disclosing says grand.
And performance data given the competitive environment. We're in we brought that change forward one quarter purely for competitive reasons I can tell you that the ASV and volume trends, Steve outlined at the beginning of the call we're consistent across both products and clearly very strong.
We booked about 3.8 million in development revenue from our strategic partners. In Q4 also in Q4, we benefited from about 3.4 million in revenue true ups.
From cash collections from prior period accruals.
The majority of which is also stripped out of that ASP slide that Steve presented and that's because the goal about ASP slide is to give you a view of ongoing insured reimbursement is fees for our products.
Some of you will recall back in 2018, when we started to book revenues on an accrual basis that we've tried to accrue with some conservatism and I think the revenue true ups now and in the last couple of quarters demonstrate that we followed through on that approach.
The rest of the PNM do you see here I think is largely in line with our other disclosures, yes. Una line did grow meaningfully versus Q4 2018 as we've invested in the initial commercialization steps in our new business, which we talked about on the Q3 call.
Okay now onto the 2020 guidance, we are expecting total revenues of 335 million to 350 million gross margins to be 43% to 49% asks you need to be 240 million to 260 million R&D to be 80 to 90 million and cash burn to be 125 to one.
Hundred $50 million.
Let me give you a couple assumptions embedded in that got.
First on the reproductive health business, we're seeing strong volume momentum in Q4 in Q1, as Steve mentioned and we expect that to continue you also saw on slides that we have shown good sequential progress on his piece, we have a number of initiatives underway that could drive ASP is higher for the guide. However, we are erring on the side of caution in modeling some very.
Modest erosion in 2020, this isn't due to price competition or really any factors. We're currently experiencing but rather accounts for the chance that variables like prior off become more intense during the year and we need to take a few quarters again to meet new payer requirements as we did between 19.
This approach may prove to be conservative and we look forward to updating this in future quarters.
Finally, we're not modeling any positive impact from increased average risk and IBT reimbursement or future revenue true ups and we'll just leave that as upside.
Because we don't have the history of actuals to use in the forecast, we're taking a cautious approach to guiding revenue contributions from the new clinical product launches in transplant and colorectal cancer. We have time is launches to start really at the same time as when we get final pricing in coverage from Iridian for transplant, we expect that in Q1 or early Q2 two.
2020, and for colorectal cancer, we expect that in the second half of the year.
Pass experienced generally indicates that it takes us sales rep time in the field to really get productive. So we factored that productivity ramp into our model.
This is another variable that could prove conservative and we look forward to giving updates through the course of the year.
Finally on the partner channels, we book 16.4 million in licensing development revenues in 2019. So we do expect a modest amount of revenue recognition from that effort this year, but less than what we saw in 2019, just because a meaningful portion of the revenue to be recognized in the development phase of these deals was booked upfront.
As licensing revenue when we signed a deal.
Okay. Let me go onto the next slide and walk through the planned investments for the year on the reproductive health side. We've completed a number of projects last year that drove down our cost of goods sold per test from the $270 range down to $224 that we see now in Q4 and now the those resources are rolling over to a new set of.
Initiatives that are designed to drive us to our Cogs goal of $200 per test.
Because we are using the same core technology across all of our businesses. These advances generally also drive future benefits for oncology and transplant as well.
On the sales and marketing side, we're maintaining our level of investment to ensure we continue to expand our market leadership position and grow volume.
Steve summarize the path to cash flow breakeven in his section. So I won't reiterate that you can see we made real strides towards that target in 2019, and we remain on track.
College in transplant, we're making planned investments for two major product launches the unit economics in these areas are compelling in the markets are large we think the potential for creating shareholder value. In these areas is significant and we raise capital in October specifically to make sure that commercial launches are fully resourced.
The R&D effort in these areas are focused on clinical trials spend designed to establish these tests as the standard of care and to scale the products effectively.
So to summarize we're pleased to have had a strong Q4, and we feel like we're in a strong position to execute our 2020 goals across the business.
Now I'd like to open the line for questions operator.
Thank you.
Minded to ask a question you'll need to press star one on your telephone to withdraw your question press. The pound key please standby will become part of the Kendavis staff.
Next question comes from Maximises Jain with Canaccord Genuity. Your line is now open.
Hi, good afternoon at Apollo Srini Airport noise in the background. So first on the guide can you just give us some additional color on your guidance philosophy for 2020 with the sales of Evercore signatory transplant ramping up and can you comment on the key assumptions and the pacing included in the guide.
Yes, Thanks, Max So as we noted on the call overall, we're taking a cautious approach to revenue contributions in the model from the new.
Products in terms of B, the pacing of that revenue really you won't see revenue coming into the model until we get final pricing.
And final coverage decisions from Iridian I, we gave out timing in the prepared remarks, we expect for prosperity. We expect that first half Q1 in early Q2 and second half the year for signature colorectal cancer. So obviously that will drive also the pacing.
Volumes on the.
Casey revenues so the revenues are.
Volumes for prosperity.
We are modeling a cautious ramp as we kind of get actuals and we start that process.
Same prosigna Tara and then the revenues.
Translate once we have pricing kind of Q2 for prosperity and second half the year for signature.
Great and then so earlier this week one of your competitors and liquid biopsy monitoring spoke about their intention to invest heavily in monitoring data trials additional capabilities you just speak to how you're balancing the right level of investment in monitoring with reasonable cash management.
Yes. So this is Steve thanks for the question to me if you look at.
Some of the increases in investment we made.
Going into 2020, a lot of it is in expanding our R&D capabilities, specifically around investments in clinical trials of course for the new businesses. We have this.
Investment in commercialization as well, but a lot of the other increase we've seen is in.
In the space for clinical trials, so specifically.
And colorectal cancer, we've now announced this Colombia to trial with Astrazeneca circulate idea trial with Japan, and this very large bespoke colorectal trial. So we feel like we're putting our focus.
In a REIT areas that can deliver significant revenue growth and guideline changes in the future.
Great and then one more effects and gross margins beat us in Q4 2020 guide that ahead of where we were thinking just highlight any specific factors that are helping to drive gross margin expansion and then expectations for the timing and the impact of automation.
Yes, so I think the number one driver for gross margin guidance through the trajectory on Cogs and so we laid that out on the five we're pretty pleased to have a very strong cost of goods sold quarter in Q4, and we've got projects launching through the course of 2020 that we think and get us.
To our target now whether the target actually shows up in a quarter. In 2020 is really a function of just the timing of when we can get projects launched.
That's the number one variable I would just also I'd just keep in mind.
Partner revenue recognition and things like that that did.
Gross margins somewhat ahead of schedule and my team.
Thanks, guys congrats on a great Tony I think.
Yes, thanks much.
Our next question comes from Doug Schenkel with Cowen Your line is how much.
Hey, good afternoon, guys. Thanks for taking the questions.
Maybe again, just starting on Cigna Tara.
I know you mentioned this in answering the last question.
Hopefully I got it right I think you've talked about mid year.
Early second half LCD finalization for signature.
Given you already have the draft LCD and hand, it is the timing of that a little longer than you might have expected originally on it and if so why.
And then how long do you expect it to take from Finalization to actually getting paid and I guess, a third part to this one any thoughts on the need for a registry study there.
Yes. This is Steve I'll make a couple of comments so.
The timeline that sort of second half 2020 is absolutely within that the expected timeframe and I think that that's what we've indicated before.
There is there's a window in which Medicare has the opportunity to take the draft to final and we're still well within that window. So we feel we feel confident about that.
With respect to the.
Registry trial.
We have we are doing a registry study that's the bespoke trial, Yeah, Let me just want to make.
Additional comments on bespoke.
Yes, Doug if you're asking about the bespoke CRC trial, so we outlined that.
Yes, thats going to be that's a big investment for us over 1000 patients, where we're going to be tracking all the clinical data and the outcomes data.
For patients who are using cigarettes are under the criteria spelled out by Medicare in stage, two and three colorectal cancer. So.
I think thats going to be important.
For a lot of reasons and it's going to help US established this as a key indication for MRV testing going forward.
Okay.
Super helpful. I guess, the one other part of that which.
Maybe we got it just in terms of what's implied in guidance, but I guess, Mike are you expecting.
Shortly after the Finalization of the LCD that you're going to get paid right away or are you expecting some delay.
Steve you want to yes, I'll take that so so once noridian issues the final LCD.
You can effectively start billing.
Patients that are that are drawn after that date. So theres, a 60 day waiting period, where there is sort of an administrative process, where theyre loading that the test in the code, but but you can backfill for all those patients so.
As soon as we get the Noridian ill LCD, we should be able to monetize the the test going forward.
And then presumably you're not assuming any catch up payments, but it's possible that you could get those down the line.
No there is theres only catch up payments back to the date to which noridian issues. The LCD theres no catch up payments for periods prior to the issuance of the LCD and.
Okay.
The real commercialization.
Efforts start after we get that final LCD.
Okay.
And BG.
Modeling question.
Given some of the associated revenue is tied to work that's being done over Fiji and milestones and working with with them given what's going on in China with Covidien I team does it make sense to assume that anything that's coming in from BG high. This year at least for now is going to be a little bit more back end loaded.
Well I, it's going to be more muted than it was in 29 teams got enough to do with current viruses just has everything to do with the fraction of the.
The cash that we booked as revenue by virtue of aside.
Deal versus the fraction of the castle books revenue.
Via doing the on joint work, it's really it's not a current of buyers deal.
Well, yes understood I heard you said in your prepared remarks about it being lower this year than last year, because a lot the upfront, but I also thought the some of the additional funding that what's going to come in the revenue was tied to that actually doing work. So it does so does that comment might mean that you're not assuming any that right. Now there's no reason to assume there's any disruption related to anything.
But you're right.
We don't expect gains instructions on working as they've been great. So okay, and then last one.
So the foundation and BG I were nice developments and 29 team doesn't sound like you're assuming in your guidance that any more types of deals like that come in but it is their bandwidth and potential for more of those types of deals in 2020 that that would potentially drive upside so what you're targeting for revenue this year.
Yes, so you over the years if you if you look at certain niche areas history, I mean, we havent very novel technology that.
Is proprietary and can be used in many different ways and of course, we're always involved in various business development discussions whether that be with we partners or.
Now with pharma, where we've done extremely well in driving our total contract value and now we're seeing that accelerate and some of those are sort of more unique projects.
So yes, there is nothing necessarily that you should bake into the guidance, but this is always an aspect of the business that we're we're working on and we keep a keen island.
Okay Super helpful. Thanks, guys.
Thank you next question comes from oil Quirk with Piper Sam that your line is now open.
Hi, Good afternoon. This is Rachel on for Phil and first question can you give us an update on the second oncology testing your conversations that you've been having with CMS.
Yes. So we said previously that we had had a second pre submission meeting I mean, if you look at the total available market for Signet Terra it's enormous so colorectal cancer, we project to have potential of over a million tests per year, which would make.
But one of the largest specialty diagnostic tests ever approved by Medicare on its own and that's just colorectal cancer. So when you look at the data that we generated in breast lung muscle invasive bladder and now recent data that was presented at ASCO and ESMO last year.
On therapy effectiveness monitoring and there's there's lots of different opportunities for us to expand using the same tool with very limited additional research and development work to open up a lot of new markets now with respect to our pre submission meeting we had very positive discussions with Medicare we haven't released specific.
Really what our second indication is going to be.
But there will be many indications insignia Tara and the future.
Great and then next question can you just give us the latest on cognitive having conversations.
Our thing average risk I know, we've been waiting on a month on a wild that.
You have any update that would be great. Thanks.
Yes so.
We said previously that we have heard that theres a guideline coming.
We haven't heard anything contrary to that but we really don't control the timeline and we don't have a lot of insight into the timeline. When we look at some of the factors that are happening in the background Theres a lot of positive momentum. So a year ago. There was really no state Medicaid plans that were covering average risk in IP.
Today, there is roughly 15 or so on the cover a significant portion of the births in the United States and we're now starting to see national payers.
Covering average risk and I PT through their managed.
Medicaid program. So one of the two national payers, who doesn't cover the test commercially has now issued a coverage policy.
For one particular managed state Medicaid so all of these things start to add up overtime and are sort of pointing in the right direction.
Again, we feel positive about it but we really just don't control the timeline now the great news for Terra because we've done such an awesome job, reducing our cost of goods sold and.
Managing some of these prior authorization policies, we do not need average risk and IP key to come in to get the women's health business.
Profitable and we have not included in our guideline or excuse me in our guidance in 2020.
Great. That's it for me thank you.
Thank you. Our next question comes from Catherine Chelsea with Baird. Your line is now open.
Hey, guys. Thanks for the questions. Yes, first you talked about seeing some of your signature pharma discussions accelerating you guys haven't updated goal in terms of where total contract value could be by the end of this year.
Hi, guys and thanks for the question, yes. So we're not we're going to we're going to sunset that call discussion, we put that out there last year, because the business really nascent and we're just responding to investor questions about just trying to frame what the opportunity can be so we'd be back goal and we're no longer going to going to focus on that as a metric.
You can see from where we landed though that the demand is is really.
It is really meaningful and can be a serious contributor.
To our business.
What we saw over the course of 19 is that that business accelerated through the course of the year. We're we're seeing continued momentum here 20.
Okay, Great. That's helpful. And then I guess also with some of these new products launching later this year and I think you've also historically.
And all the impacts in the first quarter can you just help us frame how to think about first quarter revenue.
Yes, So I think there's a couple puts and takes there on balance, though because you've got new products coming in kind of in the second half of the year I.
I think that is as I think about kind of seasonality of the revenues I think that's that's going to be.
Yes, let me do add to keep in mind doesn't keep in mind is related to Q1 is just the puts and takes around.
Revenue true ups, which we've had a couple of quarters here. When we we've we've got some true ups. We have some in Q4 I don't think that's not included the guide I wouldnt necessarily being added to quarters into 20.
And then as I mentioned with Doug I don't expect the the partner revenue recognition to be a substantial and 20. So I think would that sense of war is.
Modest back and waiting to the the revenues through the quarters of year.
Okay, and then last one from me on on foundation any updated thoughts clever vacancies that clinical version of that test come to market and how should we think about the checkmarks along that path to commercialization in front of the investment perspective.
Yes Katherine.
Just one last comment on the previous question as well I mean that as Mike said in his prepared remarks. The volumes are looking very strong in Q1 as we've seen in historical years and you can see just looking at the quarter over quarter growth between Q3, and four that theres, an acceleration going into the beginning of the year like we've seen in previous years. So.
Element you want to just comment on the foundation partnership which is going really well.
No.
So as we announced.
Deal. The initial focus of the partnership is to enable personalized ctdna monitoring in biopharmaceutical trials and we just we expect that to be enabled this year, we're on track for that.
That's great companies or stay focused as the first step as we've got new information, we're going to show that.
Okay, great. Thank you.
Thank you.
Next question comes from Alex Nowak with Craig How your line is open.
Great. Good afternoon, everyone, a steeper Mike your competitor here had a bit of a blow up due to prior authorizations, but can you just confirm you're not seeing any sort of change in this and payer environment. So far in the February year, just being printed here, but in some sort of conservatism into 2020 assumption.
Yes, so all comment just briefly on sort of some of the billing operation stuff and then Mike can talk about what's in the assumptions. If you go back and look at.
Our ASP is sort of as we turned the corner into 2019, you saw a pretty significant drop off.
Both some reductions in Q4.
2018, and then a pretty significant reduction.
In Q1 of 2019, and so we dealt with a lot of these prior authorization on coating change issues at that point and we were super hard over the course of the year with daily standout meetings and lot of initiatives to try to put ourselves in a better position and we're pleased to see the.
The fruits of that effort now.
As as we shown on the slide might you want to talk about the Conservativeness in the guidance, yes just.
Alex you did hear that correctly, that's not a reflection everything we're seeing currently.
It's been pretty stable environment.
Over the last few quarters.
And as you said, we're just hearing outside of caution as it relates to forecast for the full year.
Okay got it and then like getting Iranian has an issued the final decision here for prospera, but shouldn't there be a price out by Palmetto given the LCD is effective February threerd and again I understand that noridian needs to have their policy out there and file for you to get paid but I've got to imagine Palmetto must have mentioned something around pricing here.
Yeah the.
There are discussions are sort of in the later stages I mean, there they're very positive.
Well, we'll be announcing something in the near future.
We were feeling good.
Okay understood and then Mike can you just say what the the mix of the incremental 120 million in Opex spend is for 2020 on one of the mix for prenatal transplant cancer roughly.
So.
Overall, the contribution of Opex in women's health business is remarkably stable and thats consistent with what we said previously we feel like we can continue to deliver volume growth for a relatively stable level investment and then the incremental total op expenses really dedicated oncology.
And transplant.
Okay understood well congrats on a great ended the year.
The cost.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
Good bye.
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