Q1 2020 Earnings Call

Good afternoon, ladies and gentlemen, and welcome to their sites first quarter 2020 financial results Conference call. As a reminder, today's conference call is being recorded I'd now like to turn the conference over to Tracy mortgage parasites, Vice President Corporate Communications and Investor Relations you may begin.

Thank you Sydney good afternoon, everyone and thanks for joining us today for a discussion of our first quarter 2020 financial results with me today are Bonnie Anderson parasites, Chairman and Chief Executive Officer Keys, Kennedy, Our Chief operating Officer on Chief Financial Officer, and John had our Chief commercial officer.

Before we begin I'd like to remind you the various statements that we 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.

Other statements that are not historical fact, it also includes statements regarding the potential impacts to our business, resulting from the koby 19 pandemic and the potential timing for recovery of our business.

Managements assumptions expectations and opinions reflected in these forward looking statements are subject to risks and uncertainties that may cause actual results and are performance to differ materially from any future results performance or achievements discussed in or implied by such forward looking statements and the company can give no assurance and they will provide 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 companies May six 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 first quarter 2020 results, which are available on our website at <unk> Dot Com under press releases in the Investor Relations section. We also published the business and financial presentation, which we will reference during our remarks. This presentation is also available on our website under events and presentations in the Investor Relations.

I'll now turn the call over to Bonnie Anderson parasites, Chairman and CEO [laughter], Thanks, Tracy and thanks, everyone for joining us today as we discussed our first quarter 2020 results and provide you with an update on our business during this challenging time.

I'd like to take a moment to welcome Tracy Morris to the various 18 as she joins US for her first financial results call as Verisign, Vice President of corporate Communications and Investor Relations.

Our call will be structured a bit differently from our typical quarterly financial results calls I will start with a brief overview of the corridor and the impact of the cobot 19 pandemic on our business along with our response.

Keith will follow with detailed financials for the quarter.

I will then discuss why we believe we are well positioned to emerge strong over the long term, we will both be referring to our first quarter business and financial presentation, which has Tracy mentioned is available under events and presentations in the Investor section of our website.

[laughter], we delivered solid results for the quarter. Despite the rapid onset of the cobot 19, pandemic and sheltered place orders, which began to negatively impact our business in mid March we grew our genomic testing and product revenue to $30.4 million in the quarter, a 20% increase compared to.

The first quarter of 2019.

Putting biopharmaceutical collaboration revenue our total revenue for the quarter was $31.5 million.

We increased genomic testing volume for Afirma, percepta and him because he had during the quarter by 15% to 10559 tests.

Despite the pandemic head wins, we have continued to make significant advances in our core diagnostics business as well as progress with our pipeline and strategic growth opportunities.

This includes forging new biopharmaceutical collaborations that provide us with strategic leveraging and enable us to extract additional value from our current clinical indications, where we are helping to inform diagnostic and treatment decisions.

In April we launched our expanded Afirma expression, Atlas, which detects significantly more genomic variants to informed treatment decisions for patients with suspected thyroid cancer.

Data, except in foreign oral presentation at Endo, the annual conference for the Endocrine Society demonstrated the tests ability to identifying novel or rare gene fusions that may potentially be targeted with specific kinase inhibitor drugs that are currently available or in development to treat sovereign cancer.

Patients the Afirma Exane utilizes our a nice sequencing on the same fine needle aspiration sample use for testing with the aforementioned now makes sequencing classifier.

Underscoring physicians interest entity Afirma expression Atlas, we have learned that a paper describing the test clinical utility and identifying therapy targets for metastatic cancer was among the top 10% of downloads in the past year in cancer Cytopathology, a leading journal.

Of the American Cancer Society.

Additionally, we launched more about you at web based campaign designed to educate patients about fibrek nodules and empower them to ask for Afirma testing by name. We believe both of these initiatives will help drive further afirma growth when physician ordering practices begin to ramp back.

Yup.

Further two important articles related to our Prosigna breast cancer tests were published in leading medical journals. These include new data published in N.P.J. breast cancer suggest that pro signal that the Prosigna test may be able to offer new levels of individualize treatment for.

For women with early stage breast cancer.

Then finally, enabling many to avoid more aggressive chemotherapy regimens based on their breast cancer some tight.

The findings suggests potential growth opportunities for the Prosigna testing global markets, where the test freeport's in print sake breast cancer sub types.

We also advanced integration of the Nanostring diagnostic business to prepare for global expansion of our tests.

This included instituting our order to cash process for our new Prosigna kit and instrument business and see hearing key distributor relationships and important international markets. We are also enhancing our regulatory function to execute execute upon our plans to secure ISO 13.

45 certification and regulatory approvals to sell our products in global markets. It is remarkable that all of this has been established in just a few months.

In addition, we progressed our pipeline and important strategic relationships that will help bring long term value to the business.

We recently signed a licensing agreement with Yale University, giving us exclusive access to the first genomic test that predicts fiberoptic disease progression in patients with interest such a lung disease, including idiopathic pulmonary fibrosis or IP up.

This noninvasive blood based test was developed in the lab of leading I.P.F. researcher Dr. enough Tali Kaminski and answers one of the key questions Inphi Broderick, one disease, which patients with pulmonary fibrosis, well progressed rapidly and which will have slow.

Oh are progressing disease, so that they can be treated accordingly.

The test will be an excellent compliment to our Envincio classifier, which is available today and the U.S. and remains on track to launch on the encounter system in international markets in 2021.

Further we signed an exclusive licensing agreement with Boston University for additional intellectual property that will help advance our development of the first ever noninvasive nasal swab tests for lung cancer early detection.

This novel Test is slated to launch in the United States and 2021, and then internationally on the encounter system in 2022.

We also extracted additional value from our collaboration with JNJ lung cancer initiative related to cohort expansion for the nasal swap program during the first quarter of 2020.

These agreements follower announcement in January of a multiyear collaboration with a certain pharma the hematology research and development arm of Astrazeneca to provide genomic information that will support their development of oncology therapeutics in lymphoma, we're pleased with the early progress.

Of this important program.

Despite these advances the pandemic has understandably impacted our business with most states, having it should shelter in place orders hospitals and institutions severely restricting non emergency procedures, and many smaller and smaller practices temporarily closing their doors to patients all together.

We began to see reported genomic test volume decline.

Half of March and this.

Some states have begun to loosen restrictions in the last week or so we have seen a slight near term rebound and afirma samples in the physician office market segment, although volumes remained.

Dramatically suppressed among hospital customers for Afirma and for other products.

Our guiding principle has the pandemic took hold whispered to protect the health and safety or of our employees and the broader community, while ensuring our ability to continue to deliver genomic test results to physicians and their patients.

We accomplished both.

We quickly home to the all non essential business travel from employees enabled most employees to work from home and establish social does something protocols, such as relocating workstation, it and staggering work schedules in our CLIA lab to protect employees who work required.

Them to be on site.

We have prohibited outside visitors to our facilities and have provided all onsite employees with face masks and other personal protection equipment.

Our lab is running smoothly and we continue to report test results.

With access to customers restricted we have digitally enabled our sales team to maintain engagement and sir.

So do not know when patients for.

See medical appointments, where for example, a favorite nodule may initially be detected.

Today, our strategic priorities some plant.

All of this uncertainty we have laid out a recovery framework on slide four in our business some financial presentation in which we are currently assuming a U shaped recovery.

This means we currently expect our business will return to normal operations in Q1 or Q2 of 2021.

We are using analytical tools to monitor each geography geographic region and market segment.

Worst, we'll be ready to pivot to alternative approaches if recovery.

Her or takes longer as we have also shown in our framework slide.

Assuming a U shaped recovery, we are prioritizing cash preservation and business flexibility.

To that end, we recently took immediate actions to reduce costs. These included reducing my own pay and target bonus by 25% until the company can resume normal normal operations.

Besides board of directors executive leaders and certain other employees, taking a reduction in pay.

Putting approximately 60 employees on temporary furlough with a current goal of bringing them back once our business rebounds, and terminating a small number of employees instituting a temporary hiring freeze.

And lastly, securing vendor discounts and halting all non essential outside spend.

By taking these temporary but necessary cost saving steps now we believe we will be better positioned to emerge strong from the current situation. We are closely tracking shelter in place orders at the state and local level as well as policies from institutions and practices and our position.

Redeployed to customers as they come back online.

Now I'll turn the call over the keys for a more detailed review of our first quarter 2020 financials.

Do you Bonnie also referred to our business and financial presentation as I discuss our first quarter 2020 results.

Turning to page five the table in footnote shown here along with the details in RCC filings further explain how we recognized a report revenue under us GAAP.

For discussion purposes, we made combined testing and product revenue to describe our diagnostic testing business and bio pharma and collaboration revenue to describe our strategic arrangements. As a reminder, net sales of data or other services to our customers are classified under.

Her biopharmaceutical revenue.

And all other non customer revenue such as milestones are classified under collaboration revenue and our consolidated statements of operations and comprehensive loss.

Turning to page six of the presentation, our performance against six key performance indicators for KBR wise for the first quarter of 2020 compared to the prior year quarter is as follows.

As Bobby mentioned, we grew our genomic testing and product revenue to 30.4 million.

5 million or 20% increase compared to the prior year quarter.

Total revenue of 31.1 million increased 1.6 million or 5%.

Biopharmaceutical and collaboration revenue <unk> point 7 million declined 3.4 million principally from the sale in the prior year quarter of data to Johnson and Johnson for 3.8 million, which contributed 4% to our gross margin in that quarter.

Gross margins were 61%.

In the first quarter of 2022 to the expected impacted the Cove at 19 global pandemic on our expected test volumes.

We recognized a 1.1 million write down of supplies that we recorded in cost of revenue.

This write down resulted in an approximate three are 50 basis points reduction and our gross margin.

As I, just mentioned that 3.8 million sale data to Johnson and Johnson and the first quarter of 2019 contributed approximately 4% to gross margin in that quarter.

Operating expenses.

Excluding cost of revenue increased 8 million.

Pre pandemic, we ramped our multi product sales team, increasing sales and marketing headcount by approximately 60% in the first quarter of 2020 compared to the prior year quarter.

Associated with the Nanostring acquisition in the fourth quarter of 2019.

We recorded an incremental 1 million and intangible asset amortization in the first quarter of 2020 compared to the prior year quarter, which is included in our operating expenses.

In response to the impact of the Cobot 19 global pandemic on our business and April this year, we announced a series of cost savings initiatives that Bonnie recapped in her prepared remarks.

In 2020, we helped to mitigate approximately 20 to 25 million and planned spend from taking these actions.

Net loss of 11.7 million increased 9.8 million.

And net cash used in operating activities was 5.3 million compared to 1 million in the prior year quarter.

We received 3 million an incremental cash from Biopharma partners in the prior year quarter relative to the current year quarter, principally from the sale of data to Johnson and Johnson.

Genomic volume increased 15% and cash at March 31, 2020 was 153 million.

Page seven provides a further breakdown of revenue into testing and product revenue.

No farm and collaboration revenue and total revenue.

As previously mentioned genomic testing volume grew 15% over the prior year quarter.

Our newly acquired product business was on pace on an annualized basis prior to the pandemic to outperform our previously announced expectations for this business and we announced a multiyear collaboration with assertive pharma Hematology research and development arm of Astra Zeneca, which resulted in a small amount of revenue in the first.

First quarter of 2020.

For the three months ended March 30, Onest 2020, we accrued on average between $2800 and $2900 for the Afirma genomic classifier test, including variants that met our revenue recognition standard which was between 90 and 95%.

Other reported Afirma classifier test volume.

No. The range has remained consistent we recognize that every percentage point may result in us not being paid for approximately 1% of test volume or approximately $250000.

We have taken steps to improve field training and other process changes to try to improve upon this metric.

The next six pages outlined the sequential and year over year results underlying each of our Cape size.

A few observations first turning to page eight the stacked in clustered column charts graphically depict revenue and year over year growth in our core genomic testing and product services as well as revenue from sales to biopharmaceutical customers or recognition of collaborative collaboration.

In revenue typically recognized upon satisfaction of performance obligations that are event or milestone driven.

Turning to page 11.

Operating expenses increased 3.3 million sequentially, and 8 million year over year as we ramped our multi product sales team, we increased average sales and marketing at Cal approximately 25% sequentially and 30 and 60% year over year.

Accounting for the majority of the increase in operating expenses.

As I stated earlier through the actions we took in April in response to the impact of the covert 19 global pandemic on our business, we hope to mitigate approximately 20 to 25 million and planned spend from taking such actions.

I will now turn the call back over to Bonnie.

Thanks Keith.

Looking ahead, we are confident in the fundamental strength of our business and our strategic positioning.

Let me explain why leaving you with these five points.

First our core genomic diagnostic business is strong we have high performing commercialize genomic tests that inform diagnosis and treatment decisions in for clinical indications major cancers in serious lung diseases, helping patients avoid risky.

Lastly, procedures and quickening time to appropriate treatment. We believe these qualities are more essential than ever to the needs of our healthcare system. All of our commercial tests are reimbursed by Medicare and private Payors and adopted by physicians.

Second we believe we are poised for robust global expansion.

With our exclusive global access to the encounter a best in class diagnostic instrument platform that we obtained from Nanostring. In December 2019, we believe we are well positioned to deliver a growing menu of advanced genomic tests to patients worldwide through laboratories and hospitals that.

Perform them locally we estimate the global market opportunity for our test to be over $40 billion.

Third we have a significant pipeline.

We currently remain on track to launch three novel products in 2021.

These comprise the first noninvasive nasal swab test for early lung cancer detection, which we believe will help patients with a high risk of cancer to get diagnosed and treated sooner wolanin, enabling low risk patients to avoid invasive diagnostic procedures.

Following the test launch in the United States in our CLIA lab in 2021, we planned to launch it internationally on our encounter platform in 2022.

Our Percepta Atlas, which will provide physicians with important genomic alteration data at the time of lung cancer diagnosis to informed treatment decisions remains on track for a 2021 launch.

With the enthusiasm we have seen with a novel extensive hold transcriptome variant data in our expression Atlas in fiber in cancer, a disease with minimal targeted treatment paradigms today for patients. We are very excited to begin the same journey in lung cancer, where physicians and payers.

Since rely on this data for timely treatment decisions.

And our Envincio classifier adapted to the encounter system and they neighbouring us to offer it to physicians for their patients with suspected IP F or other interstitial lung diseases in global markets before the end of 2021.

Fourth our growing biopharmaceutical collaborations provide strategic leverage to advance our pipeline and create new pathways for value creation.

We have already established a number of important biopharma relationships that leverage our focus on answering through the use of R&D sequencing clinical questions throughout the patient journey in a range of oncology and other indications.

Our collaborations to date include Eli Lilly Loxo oncology in connection with Afirma in fiber in cancer Johnson and Johnson in connection with Percepta and are in development nasal swab test in lung cancer, and Acerta astrazeneca with limbs Mark in lymphoma.

We believe we can continue to expand our biopharma partnerships as we further advance our genomic testing business.

I would like to remind you that the revenue from these partnerships will be difficult to predict and very lumpy by nature, but clearly provide leverage with our investment in commercial presence in a portfolio of oncology and other into clinical indications to drive additional value and.

Finally, we have a very strong cash position as of March 31st 2020, we have 153.1 million in cash, giving us a long runway and flexibility.

Note that we have also updated our business catalyst slide from our corporate debt and you can find it for your reference at the end of our business and financial presentation from today.

Before closing I would like to give a huge shout out to our employees, who have done a tremendous job of rising to this unprecedented occasion.

In the face of the pandemic they've adopted adapted to new work structure embrace new ways of collaborating sought creative solutions challenges and maintained their positive attitudes passion and focus I am truly honored until lead such a phenomenal.

Team and I look forward to weathering, the storm and continuing to work to build Verus site into a world class Global Diagnostics company.

I will now ask Sydney to open the call up for questions.

Thank you, ladies and gentlemen to ask a question you on these press star one on your telephone to withdraw your question. Please press the pound key once again star one asking question and our first question comes from the line of Tom's Glenn with Lake Street Capital. Your line is open.

Great Hi, guys. Thanks, so much for taking my questions.

Just going back to coal bid when you did your pre release in mid April you had also use the 50 plus percent reduction in.

Testing volumes deducts, the pretty steady in the in the second half of April was a further deterioration because I know 50, plus the means a lot of things I'm. Just curious if you if that was kind of a trough. If you saw further deterioration.

Thank you Tom for joining us today, I know that number pretty much continued through through the period of April.

Great.

And then one more with respect to your Rebounce your recovery framework, sorry, the temporary furloughed that you instituted earlier in April is that do you think the totality of we stay within your U shaped scenario, where do you think there'll be additional for Ludwig as long as we stay within that U shaped scenario that you're working from.

Yes, I think that's why we put out the framework I think that early on a lot of people were thinking this would be a movie reaction. We go down deep and then boom everything's going to pop back on the other end of the spectrum you know there's still questions about made maybe it's just a very very long recovery I think in looking at all last.

Specs of that and all the analytics and data that we have that we're kind of re running every day and have lots of people out there in the field, giving us data as well.

We're fairly comfortable that that preparing and planning for U shaped recovery gave us the benefit of getting the cost savings, but the flexibility to respond to either or more rapid recovery that might.

Might you know echo the shape of the v. curve or whether a longer recovery such as indicated in that longer term.

The chart.

So I think we're comfortable that the steps we've taken give us the the cash preservation, we need to whether it.

And we have the easy ability to flex and respond more quickly if we need and the Furloughing gives us the ability we hope to you know rebound and bring bring people back hopefully quicker them with a more planning for.

That's great and then just one final one could you give us maybe some insight in what we might expect to see over the balance of this year from nasal swappers or any data releases going to be different are going to be in 2021.

Yes, so we did put our catalyst slide in the deck and as anyone who has seen a slide before we'll note we've sort of pulled the implications around growth because pulling our guidance, we really don't know what that growth will look like but fortunately because.

So the stage of these products and where we have been at already having clinical cohorts built a lot of the pre investment that has been done over the last couple of years the collaborations with JNJ augmenting that.

We are not at the time expecting to have any significant impact to any of our pipeline products.

So you know the nasal swab test is predicted to launch in 2021 typically final validation data comes out close to that that launch timing. So I don't think we would expect to see finding kind of final validation and data yet this year, but we typically do have any.

From sets of data that as we come into some of the organizational meetings, which are all virtual this year.

We hopefully we'll have an opportunity to share some of the interim data as as that algorithm development moves forward, but we are very excited I'm very pleased that our pipeline is strong. It remains on track and 2021 is going to be a busy year of commercializing three products one.

That was going to the international markets for the first time.

That's great. Thanks, so much for taking the questions and congrats and everything.

Thanks, Tom appreciate you joining us today.

Thank you and our next question comes from sung Ji Nam with BTIG. Your line is open.

Hi, Thanks for taking the question body and key.

Obviously very strong quarter, despite cobot headwinds towards the end of a quarter I was wondering if you maybe able to parse out what the cobot impact may have been and if you were pacing ahead of expectations in terms of your core genomic testing volume was curious if there any surprises.

You might be able to highlight.

I think in our core Afirma business, we felt really good about that we've ramped our commercial team at the end of the year and we're really you know.

On a path to do great things on the testing side of the business. Our long business did very well, we had about $2 million in revenue just on long alone in the quarter and then our product business did you know $3.4 million on Mammo chuckling, but is 3.4 million I think has the best quarter.

Prosigna has ever had and I agree even the people that sold it to US right now as you all do that so we.

We believe the product business has done very well, we think our products.

I have.

No and network status there all Medicare covered we have a great sales team. They are really understands the products you know there leading.

Test in the market in each of their markets.

So just a lot of great things that were there are happening pretty pandemic and I think what John Hana is done on the commercial team.

Sort of get everybody in Asia, retraining and getting in front of doctors and writing notes to doctors and things that I just have a personal touch.

You know that that business will come back and we feel good about that business coming back and we feel good about the fact that our test essentially try to keep people from having invasive procedures that we think that people are more and more understanding what diagnostics are.

Then all the things we've been talking about where we then position in companies when we think Thats really great.

And our Biopharma and collaboration businesses, Bonnie said, that's probably not going to be impacted as much by this because we already have the cohorts and a lot of the investments made and we can continue to progress that.

Throughout all the so theres a lot of things we feel very hopeful for we obviously this is a struggle for a lot of people across the country in a lot of people that are out of work or physicians that aren't getting money and they can't pay nurses and things like that so were.

So we feel for people across that business and we feel for our employees that we've had a for low but we feel like there was a really good chance here that this thing gets back and B we recover.

I think just to close that out in the Biopharma collaboration area. We ended up a booking revenues from all three of the clinical collaborations this quarter, which wasn't anticipated. So anyway, I think case said it well.

Very strong quarter for us.

Great. That's very helpful. And then also thank you for the recovery framework thinking through that Ross I very helpful. I was curious, though you're expecting kind of the more normalized levels in the first second quarter of next year, what do you think or the implication for the target patient population in terms of patients.

Laying bear diagnosis or you know treatment options do you think there will be pent up demand or catching up demand heading into next year and are you prepared to you know.

Accommodate or just a potential.

Yeah, I mean, if there might be a spike or a a significant ramp in terms of demand early on and be recovery phase.

So I mean first of all I'll just start by saying quite frankly, we don't know.

I think anyone that thinks they know what's going to happen next sharing a personal second quarter I want to hire them as my advisor [laughter], especially if the right. So we don't know, but I think that we chose the level of furloughing to kind of hit that balance of not going.

Saying I mean, obviously as Keith pointed out we had a lot of commercial hiring and that very end of the year as we brought on the Nanostring team keep in mind part of that sales and marketing expense that that we carried into Q1 included both John's hiring here in.

The U.S. to ramp up for three products growing through the year, but in addition to that we did have the nanostring and the European.

Group that that we brought over I'm wanting to keep in place. So I think we went deep enough with the recovery plan to have a substantial cost savings from it but not too deep that we can't we believe turn on a dime too.

Get back in there to any site that our reps.

Have access to and you know maybe it's a good time to let John kind of walk through.

Some of the steps that they've taken you know to kind of change the organizational readiness in a few other things that he's done a not only to take advantage of this slow time, but also to be even more ready to do business and what we believe may be a low.

Little bit different paradigm when things return John why don't you just walk through that sure Im happy to and thanks for the question Bonnie and keep both touched on this in their prepared remarks and different places, but there are really three things we've been very focused on ever since the initial shelter in please policies were.

Well put out there they are organizational readiness.

Really emphasizing the value proposition behind our products in the third is digitizing customer engagement and so from a readiness perspective, we for sometime now as we've been ramping our multi products selling a structure in the us.

Invested in put in place a really strong virtual training platform for our field team members and we were able to leverage this to double down on a clinical knowledge product knowledge and selling skills across the country with our team members.

To really ensure that they are prepared as soon as the shelter in please policies lift ticket back out into the field and sell and move the business rapidly. The second is.

Focusing on our value proposition really emphasizing the value of our products in this call video era around helping patients avoid unnecessary procedures that are at low risk of cancer, a disease and then in forming upon those patients that are at higher risk that need to be prioritized for.

Our invasive procedures as Bonnie talked about such as the Afirma expression Atlas and thyroid cancer and then thirdly is digitizing engagement. So as Rodney said, we took a balanced approach year of Furloughing.

Well, we believe are the appropriate number of individuals to enable us to have a cash savings will we don't think this in any way inhibits our ability to service our customers given that like many other companies. We had put in place travel restrictions both for the safety of our employees, but also for that of the office staff in fuzzy.

Issuance that they service and so weve focused on enabling our employees to digitally engage with customers whether that be by email text phone video Web conference and we're seeing a really high level and engagement in peer to peer virtual programs in all of the specialties.

We service so we feel like we've taken the appropriate steps as an organization we have a high degree of engagement with customers today as they come back online and it really prepared the team to support those customers in the field in any way did they need to service their patients.

Great Super helpful. Thanks back into queue. Thank you, okay. Thanks, China as James said joining us today.

Thank you and our next question comes from Puneet Souda with of the VB Leerink. Your line is open.

Hi, guys. It though wesley on for two need today wanted to high last thing your investment.

We wanted to follow up on an earlier question about the product segment.

Let me any they came in above our expectations as well and I believe.

On the Fourq you call you guys had suggested seven to 9 million for the year. Obviously, that's been withdrawn at this point, but I mean, a strong start to the year.

For the segment and I guess, maybe just kind of.

Can you explain a little more on this I guess, what's worked well start the year and I guess the impact in the near term that we can expect.

Disruption.

Going forward through the rest of the year.

Yes, so I think that obviously with a $3.4 million corridor.

You know that 8 million that we in prediction is actually could be in line of sight right. We don't know for sure, but there isn't a huge leap of faith to be able to do that.

What I think we just got the year kicked off strong bring and tremendous focus and and it's really just the enthusiasm of getting everybody truly excited about not just that product, but what we're going to be able to do in that.

Diagnostic global marketplace with access to this new platform and beginning very early on as early as December at the breast cancer meeting in San Antonio as well as other meetings virtually with key opinion leaders in Europe being able to tell the vision.

None of this isn't just going to be a story of prosigna, but a story of a portfolio of oncology products and then I think also a lot of the momentum coming into the year was driven by a lot of the posters in prison take.

Once and data on that product that emerged at the San Antonio breast cancer Conference in December and I mentioned it briefly in my talking I in my prepared remarks, but in particular, what we are seeing just a lot of enthusiasm around with the product is its ability to repay.

For intrinsic some types for breast cancer and this is you know really a over and above reporting of information that can literally guide treatment decisions and choices beyond just a risk of recurrence score that is the per door.

In it answer given by other products on the market.

And so we've seen a whole emergence of thought leaders wanting to engage continue to do studies and really lean into some of this very exciting data coming out on intrinsic sub types and I think that had a lot to do with the momentum entering Q1 would have been great to be able to continue that.

But at the same time, when we think about and I think maybe sung ji assists them, we skipped skip to answering it specifically, we don't know exactly product by product. How this will unfold, but I think we believe.

Our early.

Got feel if you will is that the first market that is likely to begin to re emerge is probably in the U.S. the afirma.

Physician office segment for thyroid nodule evaluation.

These doctors aren't living under the auspices of rules of eye health care system or an institution that has more onerous.

Rolls around how they open up and the fact is these doctors can manage patient volume through their offices and probably do it with a fairly safe environment. So our team has seen early reengagement coming from that segment, specifically you might.

Recall that about 40% of our Afirma volume comes from the physician office market for that segment.

On the hospital business across all of our products. It has all been suppressed of the levels that we've mentioned so we don't really have early indication there and then as we think long term.

Outside of some of this work and enthusiasm on Prosigna for for answering other clinical questions.

Patients that that get tested with fees early breast cancer tests, you know ours as well as others on the market.

Our having that testing performed following the detection of of breast cancer that usually comes from mammograms and screening.

And you know I've made comments a few times that as we emerge from this was 22 million people, losing their jobs a lot of people being out of work people, losing healthcare I don't think any of US and this is why we kinda leaned into this slower or maybe you shape recur rather than a v., we don't believe that women.

Going to wake up one day and this will all be over in the first thing they're going to think about doing is going back to have their mammogram done. It just isn't the way the psychology of these kinds of things work. So we actually expect that that could you know impact with a longer recovery on the one example of Prosigna.

So I think each product will have its own nuances at the same time, if a patient with lung cancer gets detected you're probably going to want to get a diagnostic answer to that that cancer because waiting to hear my killed patient. So all these will play in different ways, we'll keep our eyes on it but we think that we have diversified.

Slide the business and now have.

New new.

Value coming from different segments of our own business products with different value propositions and different recovery, you know curves, perhaps and that along with our very strong pipeline and our ability to deliver on that pipeline through this pandemic, we believe positions us.

Quite strongly to emerge emerged well.

That's great. Thank you actually answer to number of my questions there as well, but if thats one quick follow up on on a dates that are starting to reopen already I know, it's still very early but any high level commentary you could provide on.

Thats trends have started to pick back up or we're still sitting in that kind of 50%.

For your reduction. Thanks overall, you don't see the rounding errors, but John does run data at every rep level, which is every state and every territory in Java price say, there's a few of those rural areas out there, where we are seeing some reemergence right I think Bonnie I think Bonnie stated it.

The best we can say, which is in the community endocrinology practice segment, we're seeing a slight rebound.

But in general the business remains down at that 50% reduction year over year, we're not prepared.

To to change that estimate at this time right.

Great. Thank you for joining us event was.

Thank you once again, ladies and gentlemen that star one to ask a question and our next question comes from Paul Knight with Janney. Your line is open.

Hi, Paul Advani can you hear me.

I can tell right for joining us.

On the east coast were draw oxygen.

We're all back like now so yes, we've heard that from a few I'm sorry to hear that.

Let's see the rain Harry.

I must say.

Regarding the volume on.

From a I know that that's.

Ben.

<unk>.

Put it this way they they were blown corporate average on volume growth could you give us a little color on lung cancer dog.

It is equally.

With Percept, you know what the continuing comment out of DOCSIS on Percepta.

I think percepta is being received very well and we kind of group those into our loan volume altogether as.

As Keith pointed out earlier, we actually booked over $2 million revenue in lung, which was about 138% growth over prior year.

And we're seeing both of those products really complement each other and the sales process because it's a very it's a common call point a common setting within the hospital that these two products are collected.

So we're pleased with where that that business came in in the first quarter and you know Afirma was was pretty much rate right on target with where we thought that would be as well even in light of the last couple weeks of the quarter declining yeah and then.

Aberrations or a target for you to increase your revenue when relationships in that market.

Can you talk about.

How that's going in you, though is it less.

Difficult then.

Clinical testing in this cold war anywhere.

Well I want to just it's certainly I just want to clarify like what we're doing with biopharma collaborations because.

We have not turned on you know and new channel into the company out searching for bio pharma business, we were not entering deals with someone dawn and pancreatic tests that they want us to do because we're not in that.

What we're doing is is very aligned with what we're doing in the clinical business and I believe gives us a tremendous amount of strategic leverage to help drive the success of the diagnostic or prognostic tests, while we're building the.

Value creation lever of the bio pharma partner, which was not only adding value through revenue and and you know revenue and milestones et cetera, but it's being done in a clinical indication, where we are driving our clinical assays and I think that is oh.

A little bit unique in the way that that we at various site have pull that off.

And as I said, we we don't have it in the investor deck, we put up today, but in our corporate and Jack we have a really nice illustration of this where you know just a year or so ago, we were a company with an and Afirma fibroid product a percepta product and then in busy a product all.

Answering diagnostic questions, we've extended our fiber in product now to inform on variance infusions across an entire ray of whole transcriptome data. We call. This platform expression Atlas and we are now extending collaboration that are bringing additional value too.

Yes in cyber in cancer on the back of expression. The Atlas and we're also seeing a lot of enthusiasm in the field as these new drugs come along and there is an attempt to find rare patients that could benefit that would not maybe respond to the typical radioactive treatments.

And we did the same thing in the in lung cancer, where we had you know percepta to aid in the improved diagnosis improved efficiency of bronchoscopy procedures. Knowing we wanted to use that same field of injury science to go early and bring an early detection tool to market in the in.

The knows that was the perfect segue to partner with chain, Jay and be able to leverage the relationship to bring a lot of value to bear in clinical cohorts in helping us get these products commercialized.

Setter et cetera, and that has panned out where we've been able to add a lot of value to the business at the topline, but all the time that we're doing that we are strategically getting leverage to advance our pipeline, which is going to bring new products to market.

In fact, the nasal swab launching next year in the U.S. and the year after that in international markets, So very strategic and purposeful and then with the acquisition of Nanostring. We brought on two new oncology indications that quite frankly were quite enthused about I think that I'm going to the breast cancer conference.

Hearing some of this new data emerging on sub types and how important this data might be in helping to guide treatment decisions for patients. We believe we're at a great place in breast cancer now to a play that same playbook leverage a diagnostic with informing treatment decisions.

And as well with will some a a product that is still in development not even commercialize jet and we've already secured a bio pharma relationship to build value in the lymphoma testing space. So I think what we have done is really build a strategy that is.

Lifting up everything we're doing clinically and doing it with a funding if you will from very important strategic collaborations that help both the diagnostic and the true treatment decisions side of the equation and we're really excited about it I think we.

You know, we entered that with that being the strategy, we talked on our call about the launch of Percepta outlets next year, which is gonna be kind of a play like fibroid expression Atlas, but here into a market where patients depend on getting this data to help informed treatment decisions.

And that we can potentially answer these questions right at the time of diagnosis. Instead of two months later after another sample has to be collected through a surgical procedure to be able to answer. It. So it's all coming together nicely. It's it's based around deep understanding and investment in the clinical indications.

We go into the broadest and deepest scientific and technology platform that exists and a focus around making sure we're not out chasing any collaboration but that we're bringing things on board that strategically are going to give us leverage to advance.

Pipeline.

Thank you Bonnie.

You bet, thanks for being on the call Paul.

Thank you, ladies and gentlemen, I'm not showing any further questions. At this time. This concludes today's conference call. Thank you for your participation. You may now disconnect everyone have a wonderful day.

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