Q2 2020 Veracyte Inc Earnings Call
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And 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.
Year to this call we announced our second quarter 2020 financial results were which are available on our website at parasite Dot com under press releases in the Investor Relations section.
We also published a business and financial presentation, which we will reference during my remarks. This presentation is also available on our website under events and presentations in the Investor Relations section.
I will now turn the call over to Bonnie Anderson parasites, Chairman and CEO.
Thanks, Tracy and thanks, everyone for joining us today as we discuss our second quarter 2020 results and share an update on the business.
We're pleased with her second quarter results given the significant challenges from the Cobot 19 pandemic. Our total revenue was $20.7 million. This included in testing and product revenue of $16.9 million, which is better than the 50% decline we had anticipated given the pandemic.
Our bio pharmaceutical and other partnership revenue, which was less susceptible to the co. The 19 impacts was strong at $3.8 million, marking and 10% increase over the same quarter last year.
We began to see an uptick in test volume during the quarter regionally as some hospitals began conducting more non emergency procedures and positions began to open.
In fact, we doubled our genomic testing volume in June compared to April.
We are closely tracking our customer status and ordering practices to determine whether this trend will continue we still believe a U shaped recovery will unfold and with that expect drug test volumes to return to prior year levels in early 2021, given the fluid state of the pandemic we are not.
Updating our guidance at this time.
I would like to nail turn into our second quarter 2020 results and highlights beginning with our core business, which includes testing and product volume and revenue evidenced development and pipeline advancement I will then provide a progress on our strategic partnerships.
Our testing in product revenue was slightly higher than our expectations from the pandemic. Our testing revenue was $15.2 million a 43% decline from the second quarter of last year. This reflects the reduced number of patients entering the funnel for our tests the a routine doctor visit.
Imaging scans before elective surgeries screening and other procedures through which potential cancer wouldn't be fund, we saw and noted rebound in June however, where our total genomic volume was double that of April.
We had anticipated correctly that afirma would be the first portfolio to rebound and continue to believe our pulmonology franchise, maybe slower given the nature of the procedures performed to obtain patient samples.
On the product side of the business, which encompasses prosigna testing and kind of related revenue, our revenue was $1.7 million, which exceeded our internal expectations. We believe the growing interest tempur cigna stems from increased recognition of the clinical utility of Brett.
Cancers subtype information in treatment decision, making and a growing understanding that provide the prosigna test was built around these biological intrinsic disease sub types. We also believe this key information, we'll guide future growth of the product globally.
Additionally to support our growing global business, we have signed distributor agreements through which we will offer the encounter system for diagnostic purposes and to our growing menu of tests on the system to hospitals and laboratories throughout Asia Pacific as well as in Australia, and New Zealand.
We continue to expand the library of clinical evidence across our portfolio, which is key to driving commercial reimbursement for our tests.
Just this morning, we announced the publication of new data showing that the vizio genomic classifier improve suppositions ability to diagnose idiopathic pulmonary fibrosis and other interstitial lung diseases without the need for surgery.
The findings appear in the American journal of respiratory in critical care Medicine, and confirmed and expand on our previously reported clinical validation results, which were derived from the multicenter prospective brave trials.
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Yes.
Our continued generation.
Nation of data in this space is core to building an industry, leading pulmonology franchise that is built upon providing important diagnostic and treatment information early in the patient journey.
Further review article published in cancer Cytopathology, a journal of the American Cancer Society showcase the ability of the Afirma expression Atlas to informed treatment decisions and vibrant cancer. This test is becoming increasingly important as the number of approved and in development.
Targeted therapies for fiber in cancer continues to grow such as bears therapy targeting the end truck gene fusions, and Eli Lilly Loxo oncology ret targeted drugs.
We believe we touch more endocrinologists and more patients being evaluated for thyroid cancer than any other laboratory in the nation and that this positions us perfectly to help advance precision medicine in this indication and drive growth for the Afirma expression Atlas.
Last as it relates to the strength of our core business our pipeline development plans remain on track for the launch of for novel genomic tests that are expected to reach the market in 2021 further accelerating our growth.
We aim to advance our leading position in lung cancer with a portfolio of genomic tests that will provide faster more efficient and more comprehensive information to guide patient care decisions through out the clinical care continuum.
We expect in fact to launched two new tests in lung cancer during the second half of next year.
First our noninvasive nasal swab test promises tremendous clinical value by Stratifying patients with lung nodules as benign we're likely cancerous very early in the process that today is inefficient and often harmful to patients.
In earlier cancer diagnosis can advance early treatment that saves lives and of course and accurate cancer rollout test can spare patients costly unnecessary and risky invasive procedures.
Both factors will be important here and we will provide both based on a simple nasal swap.
We estimate that current Tam for nasal swap classifier to be approximately $4 billion, which far exceeds the tams of the died of the diagnostic products, we've launched to date.
The Tim could also increased significantly given recent recommendations from the U.S. preventive services task force that would nearly double the number of people who are eligible for annual low dose CTG lung cancer screening.
Second is the Percepta Atlas a comprehensive gene alteration profiling tests for patients with one cancer that is based on our whole transcriptome sequencing assay, making it far more comprehensive than other genomic profiling panels offered in the marketplace today.
We believe this test will help inform on the right treatment decisions. The first time and at the time of diagnosis using a small biopsy sample.
Our intent is to dramatically improve the genomic information available for every stage and type of lung cancer diagnosed as part of the diagnostic workup not as an afterthought 30 to 60 days later.
We also believe the Percepta Atlas will enable us to build perhaps the first bio repository of lung cancer information that captures the whole transcriptome of all cancer stages, one through four with data for over 200000 transcripts for every sale.
Ample.
This could potentially help fuel development precision medicine therapies based on biological insights for early stage cancer, whereas today, such information is primarily focused on stream on late stage and recurrent cancers.
We're also excited about the launch next year of our Envisia classifier for improved diagnosis of idiopathic pulmonary fibrosis and other interested to lung diseases or I oldies on me and counter platform for the test international expansion.
We are already engaging key I'll de thought leaders across Europe, who are interested in becoming part of our early access program for infants via and expect to have over a dozen sites onboard at the time of commercial launch which is expected very late in 2021.
We are also hiring key marketing in country management positions in Europe to advance our market penetrate markets preparation work there.
Our fourth test for launch next year is our limbs Mark lymphoma Subtyping test.
In June we submitted the Nova classification request to the FDA for use of the chest to support disease management for patients newly diagnosed with diffuse large b cell lymphoma.
We are already receiving inbound requests from specialty laboratories, who would like access to landmark in their service businesses using the encounter platform. This product is targeted for introduction in the first half of 2021.
Before moving to the strategic collaborations side of the business I'd like to share. Some steps, we are taking to seize new opportunities to engage with our customers virtually in the last quarter with our customers less accessible due to the pandemic, we ramped our use of digital technology, which included holding.
Over two dozen virtual speaker programs that garnered significant interest among customers nationwide email campaigns and other tactics.
We are also piloting additional ways to bring timely relevant information to our customers and personalized format, we see a significant opportunity to utilize digital strategies to increase our sales efficiencies.
Further strengthen our customer relationships and deepen physician understanding of our tests and their value in the evolving precision medicine landscape.
In tandem we've eliminated approximately 30 sales positions, which we believe one shore that we are operating within appropriately scaled organization as our business continues to rebound and as we advance more efficient models for digital engagement.
We believe we are positioned to drive growth through 2021 with these decisions.
Let's turn to our Biopharma and diagnostic testing partnerships, a profitable lever of value creation for the company.
We generated $3.8 million in revenue here during Q2, making the second quarter in a row this year in which we recognize revenue from each of our Biopharma partners and our first diagnostic testing partner.
This includes milestone payments from Loxo oncology, Eli Lilly in fiber in cancer, JNJ innovation related to our progress with our nasal swab test.
Assertive pharma Astra zeneca for achievements with Orlando, Mark lymphoma, Subtyping test and upfront fees for rights granted to care Dx under our commercial development and supply agreement.
It is important to note that our biopharmaceutical partnerships rely not only on our proprietary tests, but also on the clinical and genomic information that we have been collecting and leveraging over the years to provide highly differentiated biological insights which would be challenging.
Two on Earth otherwise.
Additionally, when we secured the exclusive global global rights to the encounters system, we determined that one avenue for growth was partnering with other diagnostic companies to develop their tests on the platform. This will enhance the attractiveness of the entire menu, while providing a dish.
Total revenue generating opportunities for us.
We are excited now to see our acquisition thesis playing out with two great partners charity acts in transplantation, and Mavi Dx for Cobot 19, and other infectious diseases.
We announced our partnership with care Dx in May through which we granted care Dx the exclusive right to develop solid organ transplantation tests for use on the encounter system.
This partnership delivered a million dollars in Q2, and we'll continue to generate revenues through test kits sales encounter cells and additional milestone payments.
Earlier this week, we announced an exciting agreement with Mavi Dx through which Mavi Dx plans to develop ultra high throughput testing for that coven 19 virus influenza and other infectious diseases on the encounter system.
Mavi Dx is led by Dr. Crossan, Dimitris, who was the founder of Nanostring and an inventor of the single molecule Bar code technology that powers the encounters system.
We believe Mavi Dxls novel Technology, which allows patient results to be assess through a highly multiplex assay configuration has the potential to enable over 40000 samples to be processed in one day on an end counter system.
This would address the significant need for simplicity and scale in the global effort to track and contain cobot 19, and would potentially enable widely available testing beyond the clinical setting to include workplaces schools and other venues that require masses and free cash.
Testing.
We have secured an equity stake in the company and we will supply test kits and encountering instruments for any test at Mavi Dx develops and Commercializes.
Before Keith picks up with the financial results I also wanted to highlight our recent addition of key talent to the various site team, which will help us achieve our vision for global expansion.
Jens Holstein will join our board of Directors August one, bringing a wealth of global financial and management expertise to the company.
He is a chief financial officer of Morphosis, a clinical stage biopharmaceutical company based in Germany.
And Jim Erlinger has.
Has joined Verus site as an executive Vice President General Counsel and Secretary, bringing a wide range of legal experience for life Science in health care companies in the U.S. and global markets. We are thrilled to welcome them both to the various site family.
I will now turn the call over the keys for a more detailed review of our second quarter 2020 financials.
Thank you Bonnie I will also referred to our business and financial presentation, which Bonnie mentioned earlier and which is available on our website.
Turning to page six the table and footnotes shown here along with the details in our SEC filings further explain how we recognize and report revenue under Us GAAP.
For discussion purposes, we made combined testing and product revenue to describe our diagnostic testing business.
And Biopharma and collaboration revenue to describe our strategic arrangements.
As a reminder, net sales of data or other services through our customers are classified under biopharmaceutical revenue.
In all other non customer revenue or class five under collaboration revenue in our consolidated statements of operations comprehensive loss.
Turning to page seven of the presentation, our performance against six key performance indicators or Cape size for the second quarter of 2020 compared to the prior year quarter was as follows.
Total revenue of 20.7 million declined 9.4 million or 31% principally from a 44% decline and genomic test volume offset by an increase in product and bio pharma revenue.
As Bonnie mentioned genomic test volume recovered month over month in the quarter would June volumes twice the April low.
Those cost of revenue declined 1.1 million compared to the prior year gross margin of 63% declined 800 basis points.
As testing and product volumes declined faster than we could adjust our cost structure.
Operating expenses, excluding cost of revenue declined point 4 million.
Net loss of 11 million increased 8.5 million.
Net cash used in operating activities was 8.4 million compared to 2.5 million in the prior year quarter.
And genomic volume.
5379.
Declined 44% and included.
4795 Afirma.
385 Percepta.
And 199 Vizio reported to us.
To complete the year to date picture for genomic volume.
For the first quarter 2020, and a three month period ended March 30, Onest of 2020.
Total genomic volume.
Of 10559.
Included.
9185 Afirma.
1016 Percepta.
And 350 in vizier reported test.
Cash at June 32020 was 147 million.
Page eight provides a further breakdown of revenue into testing and product.
So far on collaboration and total revenue.
As previously mentioned.
This would decline this quarter in testing revenue was offset by the favorable impact of adding product revenue to our portfolio and the increase in biopharma revenue over the prior year period.
Pages, nine and 10 illustrate our pacing and performance year to date against these same CPI metrics.
As well as breakdown, our revenue into testing and product Biopharma and collaboration and total revenue.
Year to date revenues down, 13% and genomic volume is down 15%.
For the three months in six months ended June Thirtyth 2020.
We accrued on average between 2800 2900 for both Afirma classifier, an expression Atlas, which met our revenue recognition standard which was between 90% to 95% of the route reported afirma costs fire test volume.
The next six pages outlined the sequential and year over year results underline each of our Cape yards.
As shown on slides 10, and 11, we continue to see benefits from diversifying our revenue base.
As Bonnie mentioned on inter quarter basis in the second quarter, we saw a growing recovery and our genomic testing revenue led by Afirma.
Using internal reported genomic volumes through July 2028, 2020, and our forecast for the remaining three days in the month.
We expect July 2020 reported genomic volume.
To meet were slightly exceed July 2019 reported genomic volume led principally by the acceleration in a from a volume.
July is not necessarily predictive of the quarter, but we are pleased to see the pace of the recovery today.
In June and July reported Kobin cases accelerated and stays began taking restrictive measures to attempt to contain the spread of the virus.
We are uncertain, the inter quarter or seasonal trends, we typically see in the business will hold in light of coated.
As a result, we remain calm we remain cautious about predicting the slope of the recovery.
As Bonnie mentioned, we still believe you shape recovery will unfold.
And with that expect our test volumes to return to prior year levels in early 2021.
In light of the uncertainty in the market, we're not currently returning to giving guidance.
In addition, the early actions we took to control costs in the second quarter result in lower operating expenses this quarter than the prior year quarter.
Through digital and virtual selling given our strong cash position of 147 million at quarter end, we believe we're well positioned to support the business through the recovery I.
Ill now turn the call back over to Bonnie.
Thanks, Keith to wrap up I'll refer you to the Q2 key takeaways slide on page four of our business and financial presentation.
And we'll reiterate that we had a solid Q2 results in face of the pandemic headwinds.
Our comprehensive menu of advanced genomic tests provides real value the patients physicians and payers, reducing invasive procedures and follow up visits at a time when this reduction is desperately needed.
We are also advancing new models of engagement to bring increased efficiency to our sales and marketing efforts.
We are progressing and exciting pipeline of products and are on track to commercialize for genomic tests in 2021 further accelerating our growth.
And lastly, our growing roster of strategic partners is helping to fuel our efforts and maximize value as we expand to address a more than 40 billion dollar global market for our products.
I'll also point into the next slide slide five which lays out the catalysts that will drive our momentum through 2021 as you can see we are making solid progress on a number of them.
In closing I would like to thank our employees for their continued commitment focus and passion as we advance the business I am truly great great fall for all that they do and now I would like task Robert to open the call up for questions.
Thank you.
Just a reminder, if you'd like to us two questions.
Sorry.
Again to ask your question.
All right.
Three questions will be coming from the line is brilliant pony.
William Blair Your line is now.
Hey burden.
Thanks for joining.
Joining the call Brian of course.
Good morning, this kind of.
Sure terminal one question.
Broader.
So on the near term I mean, it looks like if we would have kind of just since.
Trajectory and we weren't dealing with this pandemic.
It looks like you were about 6000 test that you guys I'm just curious how you think about whether those patients come back when they come back why wouldnt, they come back to sort of how whose ross.
Pieces kind of come back.
And over what period.
Yeah, I mean, we were very pleased on one of the reasons. We went ahead and gave the extra color on July is too.
Really share the the the fact that we are pleased to see see the recovery coming back.
I think though that we still given the pandemic is still looming and the fact that we don't know whether people will really be taken vacations in August and things like that that typically has happened.
We still see us step by step process of getting back up to where we were last year and with our own.
Probably cautious projections given the backdrop of that.
We still believe it will be early 2021 around Q1, when we see things sort of back neck and neck with prior year.
Keith any any additional notes moment, we believe the products are standard of care when doctors go back and C. Patients were excited to see their ordering or tested yep.
Just.
Continuing to provide further and further evidenced beyond these products and more and more information of physicians and away that's non invasive and keeps people out of having surgical procedures. This clearly taking root and the market. So we were encouraged by that yes decisions are seeing fewer patients in their offices than they were prior to the pandemic enough.
Yes that has created the.
The slowdowns.
No I guess.
Just from a high level.
So we kind of.
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Silver lining.
Non.
Yeah.
Zero.
Hello.
Yes.
We think we're extremely well positioned to be an emerging success story in the back of that.
When we began this journey with our very first test and Tigard testing. It was solely aimed at delivering value of keeping patients had a surgeries that didn't need them.
We've probably kept over 60000 patients out of a $20000 surgery and lifelong hormone replacement therapy that that wasn't needs within the first place and now we've expanded that to include less invasive testing in lung cancer. The portfolio, we're bringing to market next year is going to expand.
That reach in lung cancer critical disease, where not only is as important to get the diagnosis done early but get it done early with accurate tests that combos rule in rollout and with Percepta Atlas combining the samples that our collective for diagnosis with a.
Hence of way of informing treatment decisions and again, if that patient is an early detected likely cancer from a nasal swab and has a very small non tool with a stage when cancer likely they could go to surgery and have the cancer removed for a cure.
So I think bringing all these decisions upstream earlier detection less invasive.
Testing is exactly what we're all about and with our Envincio classifier. The new data that came out there was the same thing showing that doctors can actually use of busier and being confident diagnosis without ever having to take the patient to surgery. So we're at a great place with that and.
And our positioned well with new data that supports that coming out, allowing us to lean into moving forward with getting broader reimbursement for these tests and we think the backdrop that cobot has created should be very attractive for that.
Great. Thank you guys know months, Thank you, Brian it's Brian.
Next question will be coming from the line.
As you are hearing your line is now.
Great. Thanks so.
First question on the return of volumes.
I appreciate the comments on non.
June and doubling the recovery from April and than July, but just trying to understand.
There what's unique in Percepta here among the Pulmonologists is there anything thats.
No.
You know stopping you from recovering.
At a little bit faster rate.
And in that if you can also help me explain innovative if that 30 sales reps.
What are the tied more closely to Percepta working Afirma just help us understand how does percepta recover.
From the current levels.
Yeah.
So I'll turn it over to John in a minute to talk about the sales and the and the perceptive question.
But we do believe just naturally I mean first of all we call on Pulmonologists with our loan portfolio.
Many of them are still tied up taking care of cosan patients.
So there are probably fewer of them focused on working lung cancer patients up and there is also Ben in the interest of these invasive where comps there has been.
A shift to maybe being more conservative and working nodule patients up.
Might mean patients with a little higher risk go through that work up the sad thing with that is that three years from now we can see an emergence of people with later stage lung cancer because they weren't worked up early enough. So I think it's yet to be hold all of that but let me turn to John and have them walk you through how.
The structure of the team has unfolded and what he is doing and why we're still very well position with the loan portfolio. Thanks, Bonnie things and thanks for the question for you and I wholeheartedly agree with volumes comment you know the broad cosco this that.
Diagnose the lung cancer also critical care met medicine physicians in so many of them are on the front line of caring for in treating patients that come into the IAR for Covance. So naturally we just see a shift there where theyre doing less braun cost could be for lung cancer detection. Some of the interim guidelines recommended being.
We're conservative about the procedure as Bonnie mentioned and so we don't see any kind of fundamental shift in thinking or use of the product just to hear a depression because of their focus right now given the surge in cases and capacity any are but as we explained in the last call. We acted really quickly as the panel.
Manic began to focus on organizational readiness of our team virtualizing, our customer engagement and emphasizing the value proposition behind our testing.
Around avoiding unnecessary procedures, which we do think is really becoming even more relevant in this pandemic era clinicians believe in the science behind our products in the benefit they're bringing to patient outcomes and so we expect them to continue to use the products.
As a re emerge from the pandemic and start to see more patients in their practice, we did eliminate the 30 positions into us and we did so to take advantage of the opportunity really that the pandemic has presented where the new normal for clinicians is virtual engagement, both with sales professionals and with patients quite.
Frankly, and so we now have approximately 110 field sales professionals across the U.S., which we believe as appropriate to support the growth of the business as we re emerge from the pandemic, we're investing in training tools in programming to enable those sales professionals to engage.
Page with clinicians and while we never like to lose a field team member.
Here, we as a management team are very excited about these decisive moves that we took as is our field sales team because we think that they believe it enables them to more effectively engage with their customers. So we're looking forward to reporting on the impact of these changes in future quarters, and we believe we structured the organization.
Appropriately to continue to grow as we re emerge from the pandemic.
Thank you John.
Okay, that's great thanks for that clarification.
I have a.
Three board question on on overall testing.
This is obviously given the sheer magnitude and significance of Clovis testing to the entire country.
The solution.
Naveed Dx looks very appealing, but can you walk us through what is the potential of product offerings here what is it going to look like in terms of automation capabilities.
And what is the timing of launch.
And lastly, if you could elaborate a little bit on I think the question we're getting is.
Thing of the test could this be given that the high ultra high volume could be.
That is in the range of one to $2 per test sort of benefited to various side or is that likely to be more if you can elaborate on those three points of do very hopeful.
Okay, Let me try to get all those first of all.
When we acquired the diagnostic exclusive rights from Nanostring for the encounter system.
We said at that time, we believed it was a bold best in class technology, and I think the what has unfolded with the attractiveness that both we have seen and others have seen in the platform has really unfolded over the last a you know it hasn't even been a year yet.
Seven months actually.
Census has been in our hands and we also are strategically as you know very focused on our vision of becoming the first advanced genomic testing company to build a global footprint on our own distributed platform, which we believe is essential to driving really great advanced genomic testing process.
Next into clinical care and so for us our strategy isn't to pivot and go after you know coveted type opportunity, but we were very excited about the opportunity when approached about it.
To team up with Mavi Dx given the brilliance quite frankly of the founder of the company and has long standing expertise and working with this technology to probably get it to do things that nobody else may be able to do.
He will be working to put a front end a highly sophisticated automation and a backend reporting mechanism using the base and counter technology in system to create a a almost real time ongoing processing.
Solution.
That will be able to highly multiplex. These patient samples as opposed to today. We were excited about the technology to how the multiplex genes in a given test and he's going to use that capability maybe in the other way to highly complex multiplex patient samples. So I don't want to speak.
Too much on that companies be half on exactly how they're going to approach. It because I think that would be treading on on territory that belongs to them that I will say that are initiation of taking an equity stake in teaming up to them with some pretty quickly and getting this done is because we think they.
Really exciting idea and that is a way for us to play in a market that we would not go after directly but be able to do it.
In support them in achieving that success. These tests typically have to be reimbursed somewhere between 100 $200 end user so labs have to be able to those source source the testing and run them to be able to make their margins and obviously as a partner we're in this.
Supply chain as well I can tell you with the type of volume we're talking about here, there's plenty of financial opportunity for all the stakeholders in the supply chain and we're going to be really excited to.
Taking our position as patients can start to get access to this we think that market will grow to new opportunities outside of.
Clinical medicine, where I think many of the products today can serve that need quite well, but when you think about areas, where there may need to be or desire to do massive numbers of testing and do it quickly. So that populations that people are large numbers of people trying to attend and event or or.
Employees of large organizations. These are all areas that really need different paradigm of testing than what's available today and.
We're we're rooting for Mavi dx to be able to pull this often have a great success and enjoy that with them.
That's great.
Just following up on that.
In terms of.
Appreciate it's hard to define precise timing as of the launches and thing and I think you highlighted and you a submission by the year end.
Can you maybe just elaborate sort of the level of confidence you have in reaching that timeline and those targets.
Obviously given.
The scale of that Youd still that you can deliver here.
Opportunities fairly large so.
Just wanted to clarify.
Those two points.
Yeah, I think what we send the press releases assets movies goal is to file file and get that authorization and.
I don't have you know opinion on our confidence or not they appear to be confident in putting that out there and obviously, if they're able to do that then they will be looking to make testing available pretty quickly after that I don't think as a company, they're going to gear up and go to global markets in the first year.
So that probably would not be out what to expect but I think instead, they will take a step by step approach at building up access possibly through a single service lab initially and then reaching out to other partners that have the capability and capacity to initiate the same kind of testing in there.
Our environment, whatever that would be and.
This is a pretty recent.
We turned is still pretty quickly we thought the opportunity required us to move quickly and so as things move forward, we'll keep everybody abreast of the progress and.
This could be of a 2021.
Commercial effort for all of us.
Great. Thanks, Mike.
Thank you.
Next question will be coming from the line of SUNS you know with.
Your line is now open.
Thanks for taking the question.
Maybe starting out with min.
Very exciting about.
So there could you remind us again on the what's the value proposition there is.
Is that hi, Ben.
Certain therapeutic or.
Utility right away from from a diagnostic standpoint.
Yes, so very good question, so limbs mark by itself has the potential to improve the sub type thing and diagnosis of the.
Certain subset as I mentioned in the scrap of B cell lymphomas and this is an area of hike lamichael unmet need in fact, the world Health organization had come out earlier.
On making a recommendation that a genomic test with the ability to do this sub classification be used because it's critical that these patients get on the right treatments based on their subtype.
So with that knowledge and information there is a method of doing some of this by age see today. So it's not like a brand new indication that's never been answered, but the results tend to be very poor quality and very difficult to reproduce as we know is often the case with with these kinds of.
Yes by by the microscope. So we're excited to bring this forward long term there could be other avenues of increasing the value in the positioning of the utility of the task. This first step is strictly in that diagnostic subtyping to break those.
Those are lymphoma cases into the proper sub types and.
With that we filed our de Novo a request with FDA and that is moving through their review and we anticipate assuming that they accept and we get through that review process that this could be a commercial product made available to our specialty laboratory customers that are.
Working with us with Prosigna today in the U.S. as an FDA cleared product that would obviously allow us to immediately allow them access to switch there.
Subtyping over two and genomic test that should improve patient outcomes.
Okay, Great and then if I could just a quick follow up on that.
From a pricing standpoint.
Obviously very sizeable market in terms of from a volume standpoint, so curious.
You are able to comment right now but.
Yes. Thanks.
I think we'll wait and provide a little more color on that and guidance when we get close to knowing that the product through FDA am what we have near site. We can give you that information, but this will be a it will be clearly higher value than what you would expect.
From an H.C. test or we wouldn't have invested in moving in the long and invested in the clinical studies to do it.
But we don't have a specific answer on that just yet.
Okay great.
And then you know I was just wondering.
I am hearing about.
As we resulting in certain patients in pulmonary fibrosis.
Was wondering if theories that correlation there and.
This is special opportunity for in the future I Didnt, it's too early to stare at.
Absolutely and thank you so much for joining in for the questions. Yes. There is a lot of focus right now certainly a lot of the thought leaders that we work with.
A lot of you know Twitter noise and other work to get some data pulled together on these early cases to see what can be learned about the impact of the damage in the lung from coven infections, what's interesting about him vizio, which is sort of a a rinse and repeat from afar.
Mine and a rinse and repeat on what we're doing in the late in the lung cancer space is that in busier, even though the signature that provides a diagnostic Q IP call is made with a couple hundred genes that formed at classifier the test us run on our Holt.
Transcriptome unified Assai. So we will have the potential to inform on all of this biological content that we're collecting just like we're doing in fiber in cancer and just as we were talking about expression analysis and the value that is having now not just on informing on.
Nine patients keeping them as surgery, but having to informed treatment decisions and the discussion I had around how well we are positioned to deliver a percepta atlas to market that will answer this very very large scale comprehensive biology, and genomic content in lung cancer, the poster child for targeted therapy.
We could find that that that back backbone of RM busy at classifier could very well be the most comprehensive information to start looking and mining that data as we get in busy a patients through our lab and enroll them. So that we can get follow up data and work with our thought leaders out there too.
You see what we can uncover with the test. These things are exactly what creates the next pipeline product because you are already collecting all the comprehensive data you need to develop the classifier and we have done that are seven classifiers that we've developed using the concept would have never happened if we could have gone back.
To that comprehensive data and generated the next test so we're very.
Sadness that were at this point of knowing that patients that get infected even if they recover they may have this underlying damage.
But we're hopeful that if anyone can figure out a way to inform on that it should be parasites.
Great and then just lastly from me great to see the versatility of the encounter platform.
Especially with the partnership.
Maggie The act as well as cardiac.
Weve curious kind of looking forward are there a lot of opportunities outside of oncology in your view with the encounter platform. How we should think about where the green value generation in the future do you think from the platform standpoint.
I think the platform has phenomenal capability.
One of the things that really really attracted to US you know in addition to the ultimate us simplicity.
Elegant simplicity to be honest is the fact that you can measure proteins DNA and are in a and the level of.
Comprehensive nature update under genes in each of those so we we try to be very focused on advancing our strategy around our own vision and where we're headed we have a lot to get done a lot of exciting pipeline products coming to market and as you see we're very open to consider.
During partnerships, where it makes sense some markets that we may not.
Want to compete indirectly and so I think that there could be opportunities to expand this beyond you know the partners. We have today, but we're not like out out pounding the pavement to look for these most of these actually comic con our incoming requests and then when we take a look at them we can evaluate.
Great weather. Each is is the right opportunity to take advantage of we believe that to the two that we've done to date.
Cardiac span a real later in transplantation testing their investment in the space there global presence in the space is going to be just a great complement to what we're trying to do and of course, the more encounters we can install base on the menu that's available the more men.
You will be pulled through so thats a win for our customers who can run a lot more tests after making an investment in a platform. It's a win for us because we are at the the base of all of the revenue that will be generating over time here and then thirdly.
Our partners when because if if they have a large installed base of encounters in clinical laboratories and medical centers all over the world that gives them a ready made market to drive growth and so we're pretty excited about the strategy the approach and the incredible value.
You have the technology, we acquired.
Great. Thank you so much thank you.
Next question will be coming from the lump sums line of Psalms flatten from Lake Street Capital. Your line is open.
Hey, Brian in key thanks, so much for taking the questions.
Just one quick one back in April when when the co cobot really hit you guys had made significant changes or I guess taken some taking some steps, including Furloughing I think 60 people.
So from that can can we make the assumption that the 30 sales sales positions that were eliminated were out of that 60 that were for load and given I guess some of the signs of positivity. We're seeing in the recovery have you made any decisions about what to do with the remainder of those for load.
Employees.
Yes, Tom Thanks for joining the call and thanks for the question.
Yes, so first of all as Keith pointed out and as you reiterated we made.
Very early decisions and we're glad we did because we think that really positioned us and preserved a lot of cash that that would have been spent it had we not moved quickly and we were also this quarter I think readily able to move quickly at making another final decision and that was to bring.
Bring 30 positions back they were not all exactly the same people necessarily because we looked at how we could restructure the team and so.
Some of that had to moves moves some different decisions around which was fine but ultimately we did final terminations of about 30 individuals. So 30 positions came back 30 got terminated and you know, it's always said and always hard as everyone knows as a CEO specialty.
I have to make those kinds of decisions, but I think our employees really appreciated that we did something quickly to be right for the business. We then evaluated very quickly I mean, John really as the leadership person looking at exactly what do we think is going to come out of the what is the environment that we're going to come out.
Out of Us look like and how do we really position ourselves as leaders in leading in a new wave with with customers in a way that quite frankly, they love working in a different digital engage manner. Because then they don't have to worry about putting roles in place for reps to come in and out of their doors. So this is also when.
And when and so from that we moved very quickly to evaluate what we wanted to look like going through 2021, anticipating the growth we want to drive in 2021 as well and then we made final decisions. So that everyone could settle down get back to work and know that were done and that that's the three step approach, we took and now.
Well I think we have everybody back engaged everybody's getting up to speed on the new tools and things like that and we feel really good that we're positioned and have the REIT structure and right number of people not only to emerge from this but to get us through the growth we want to see in 2021 as well.
That's great. Thanks, Thanks for that but thank you.
With respect to.
The nasal swap data do you still anticipate that coming out.
One of the fall.
Pulmonology oriented conferences or will that be do you think that will be distributed in some other vehicle or via some other vehicle.
Well I mean as a company, we always look for either having it come out and have acorn, creating a vehicle one of the other we'd like to get the data out there when its available so.
Oh, we have said and have expected to starwood being additional data emerge obviously the product doesn't targeted launch until we said today on the last half of 2021, so any kind of final pivotal validation data will yet be pending into 2021.
But we're excited that that is moving along our continued generation of revenue from our partnership with Jane Jay supports the fact that things are moving along well there and.
And so I think that as per our catalyst slide weve point into additional data not only coming out on the national Swab, but also percepta in lung cancer. We believe we're on track for all this new data is still emerge between now and the ended the year.
Great. Thanks, so much I appreciate it thank you income.
Next question will be coming from the line of Steve with Needham.
Okay.
Great. Thanks.
Hi, everybody.
It's for.
The I appreciate the color on the volume breakdown and.
Just curious if you could provide.
Revenue from the pulmonary franchise.
And then I noticed the revenue per test increase this quarter and I was wondering Keith maybe you Bonnie done most of those not even I wondering if you could maybe provide some.
Some color on revenue per test, what a great idea Keith.
Don't include mood, you've done a good job.
Revenue for doesn't mean, we continue to occur and have good rates there.
We we got our no result rate.
Back online and we're doing a great job on cash collections. Our Dsos are we're almost at a record for the company in the last 12 months' our cash collections exceed our revenue.
As you guys know since I've joined here four years ago is.
Our real focus was to.
Cash and there's gap and we feel really good job of ensure pushing on on make sure. We get paid for everything. So that's just been a really good story on Vizio has been a great story on a rate we've been able to collect on out as a real clinical need there we've done a really good job paid.
Percepta does as well.
So just across all of our products event, we just had another really great quarter in light of Tov. It.
Just a lot of uncertainty what was going to have with payers.
Going into Covidien.
So it's been a really great story.
Yes.
Yeah, we didn't get a lot of requests and certainly you were one of them of.
Desiring a little more granularity on the of the lung franchise since we have multiple tests there.
I think that Keith ability the lean into that and give you the volumes for each of those will give you a good idea our rates haven't changed on those.
So that will give you a good idea of where where revenue landed even though we didn't call that all adds specifically generally we've we've historically always.
Talked about it being around 15 honored on a blended basis for both test on the alongside a bank thats not the exact number but we've always talked about down around number around there we're going to move we're moving hard to get our commercial payers on outside we're still good pace from commercial payers by good commercial contracts employees.
As a big push internally. So we'll continue to move managed care effort forward as well.
And then my last question just on you you've done some cost cutting and it doesn't appear to have impacted R&D.
A lot of what you're doing is.
Yes.
To that spend is sort of off your.
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Well, so to speak and I'm just curious what what's your plan through the R&D function in the back half of the year and should we expect to see you soon.
Ramping that out.
No you got several products launching in 2021.
Yeah, I mean, the way to think about R&D I mean quite frankly, the pipeline that we talk about launching next year.
You know the R&D, maybe with the exception of.
The Lim from our test, which was close to being finished when we acquired the of that from Nanostring I mean, the other three products our major major R&D undertakings to get those products to market our nasal swab.
First ever development of a test it's going to be a combination rollout enroll in for diagnosing lung cancer early and getting patients on treatment decisions with Percepta Atlas.
Major major undertakings and then the Invisio development, taking a classifier that's on the market with expected performance today and recapitulate Ing that performance on a brand new platform and we're already pointing to that still being on track for launch next year and that's not easy I mean, others have really stay.
Our goal to move technology platforms and maintain the performance of their classifiers and we have done at multiple times and have done at with adjust out or other flawless excellence and I don't say that as bragging about me, but bragging about our R&D team, which I think is one of the if not the most high.
Quality R&D team in in this industry.
The number of tests. The fact that we have never missed endpoints. We every test achieves its endpoint and comes out and is able to deliver very high quality patient care decisions and we are changing clinical practice with every one of our test. So the fact that we have been able to do that.
And have three tests the largest investment isn't the stage photos tests are now in R&D. So no we will likely won't need to increase spend beyond that when we get these test to market, but think about how incredibly productive R&D team is to be able to.
Advanced three new test a market and we're spending very little more of them. We have in the last couple of years. So it's not always about the number of people and the spend in R&D. It. It also has a lot to do with how you set up those discovery and development engine.
Sounds to be very efficient and of course that covers the cost of our clinical trials as well and then I will just mentioned that we've been very successful at bringing partnerships to bear with the company that do help us cover the cost of some of those pipelines that strategically one of the levers of value that were working toward a.
Certainly thats the case with JNJ, so thats kind of how that all threads together, but I think we've been.
Incredibly productive with R&D spend just to put numbers beyond that as you noted on slide 14, we we drop is numbers in here and I Love All the bar chart sort of do you can draw a line we put R&D engine at the bottom right, we separate out what sales and marketing and you can see how we pivot the business.
To run it.
You know so we drive value for our investors and so since I've been here that number's been anywhere from call. It three to four and $5 million a quarter. So called 16 17 million run rate right now and I think since the last two years, we've had over something in that 5 million in Biopharma.
Collaboration revenue. So you put that in perspective of what you typically see in this industry for companies that are building task that have 20 year futures you know that just sort of underlies.
Supports bombings point here there were were trying to be very very thoughtful about how we invest across our platform with four products coming out.
You know in 2021, it's it's a pretty impressive results joining tentative agreement deserve a lot of credit for for years and years of building a you know a great R&D.
Business.
Sure.
Great. Thank you say I appreciate the color. Thank you bet.
And again.
Asking question leads right.
I think we're ready to close the call.
Thank you.
Ladies and gentlemen, this concludes our call today. Thank you for joining you may now disconnect.
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