Q2 2020 Invitae Corp Earnings Call
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Ladies and shortly please continue to standby. Thank you for your patience.
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And then thank you for standing by and welcome to in P.J. second quarter 2020.
At this time all participants are in listen only mode. After the speakers presentation, there will be a question and answer session.
You ask a question during the session you will need to press stuff.
Please be advised that today's conference is being.
Further assistance. Please press star Zero I would like to hand, the conference over to your speaker today Lora Dangelo. Thank you. Please go ahead.
Hello, and good afternoon, everyone.
He for joining us first second grader.
Today, our show enjoyed our CEO.
No Shelly Guyer, Rcs, so leaving that he's our chief operating officer odd next summer.
Our chief Medical officer in Katherine Stueland actually its commercial on that.
You listen to today's press release available, which includes our <unk> financial results and that's what metrics in commentary on the quicker.
Products pipeline and the timing thereof of our services and our investment in our infrastructure and operations. These statements constitute forward looking statements within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act.
It is difficult to accurately predict demand for our service.
Could differ materially from our stated outlook statement on feature company performance assume among.
One other things that we don't include and adjustments restructuring or legal settled.
Recent 10-Q in particular to the section titled Risk factors for additional information on factors that could cause actual results may differ materially from current expectation.
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These forward looking statements speak only as the nature of.
Stated financial statements prepared in accordance with generally accepted.
Our GAAP, we monitor and control.
There are several non-GAAP measures in these include cost of revenue.
Including research and development.
Selling and marketing and Jeff.
From an expense net as well as net loss and net loss per share in Kashmir. We encourage you to review our GAAP to non-GAAP Rex Conciliations, which are available in the press release and in the earnings slide deck.
With that ill turn the call over to Sean.
Change in the past many years rubs, especially the last few months or.
Hang industry has not.
In order to drive genetics into mainstream medical care, we're changing the landscape from one of them with genetic information as you sparingly.
Okay.
Auto tests by Testament indication by indication basis served by high margin niche market business models to one where genetic information is used broadly as a medical utility to improve outcomes and lower the health care cost for billions of individuals around the globe.
Equation, we've also steadily invested in improving our customers workflows to increase access to this essential health information.
And Eric and early leader in doing so we continue to develop our front end capabilities more recently, enabling genetic telemedicine and at home solutions as well as enabling clinicians with further support and professional education wind transitioning to remote solutions for their patients RG, which I thought has played a key role in scaling these capabilities pushing the envelope of what can be it.
Publish it making genetic information here.
Settings.
This quarter, we also launched our direct channel services income.
See as well as cancer and cardiovascular disease testing.
Well, we're presently seeing our top and bottom lines recover from the Q2 cobot impact that recovery continues to be very regional and still somewhat sporadic.
It appears to us that even with further uncertainty and how code will impact hospitals and clinics around the globe.
Customers.
Through the challenge ahead, and with our online a remote capabilities. We can further support them to transition rather seamlessly to this new reality.
We closed the acquisitions of both general Exome, you script heading pharmacogenomics to they'd be to flat.
We've already seen the benefit of incorporating broad pharmacogenomics profiling and discussions with integrated integrated providers hospital networks and payers, having now already signed with a major health system.
We feel that the time is finally come for the broad adoption of this hugely impactful health information.
The personal level.
Whether voicing waste and spending on drugs that don't work years of office visits and dosing changes all the patients license agreement with a high for the high cost of adverse event in all health systems, we look.
Florida, providing solutions as we integrate pharmacogenomic information into all aspects of our screening and testing.
Head.
He has entered into a definitive agreement to combine forces with the team at Archer Dx during liquid biopsy tissue profiling.
And cancer screening capabilities to introduce platform.
The prospect of providing patients diagnosed.
Diagnosed with cancer, a full suite of genomic information is a long weighted reality for us and we're thrilled to have the opportunity to team up and accelerate our transmission democratizing precision oncology.
We see a day, perhaps earlier than most think we're all 43 and a half million people battling cancer in the markets. We serve can get the essential molecular information they need anywhere they need it.
Where they're trying to understand their risk getting diagnosed and choosing the best.
We're monitoring in a comprehensive chance for the best individualized outcome.
Over the.
Adding promising technologies and great talent as we push forward in our mission.
Bringing together the right teams with the right Keith.
Two flywheel as we work to realize our mission to certain billions of patients around the globe.
And technical capabilities and a determined pragmatic approach to fixing the hard things in health care. We look forward to executing this next transformational move with our new teammates at larger.
I'll now turn the call over to showing to highlight our quarterly financial results.
As Sean mentioned, we were hit early in the quarter on full impact of comment, but as the quarter progressed, we saw monthly improvements and our most important metrics. We took actions early in the corner in response to the crisis not to yield immediate side.
Managing our burn throughout the remainder of the year and into next season.
These moves were designed to ensure that we kept foremost in our minds. Our long term strategy to provide access to testing across numerous platforms. Our intent was and is to exit the year with a rapidly growing business that is positioned doesn't even stronger competitor in this growing genetics market.
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Eat smart acquisitions closing on two deals and announcing the Archer Dx deal.
Well I will touch on some of the financial implications of these acquisitions to gain a full appreciation of the complexities as they impact our financials, including various changes and onetime with that events I urge you to refer to the 10-Q, which we filed this afternoon.
[noise] volume remains a key metric we're pleased to have exception more than 120000 samples in the second quarter of 2020, despite the impacts from covet 19.
And we saw an 8% growth in volume over the previous year second quarter.
Previously we noted overall volumes were down approximately 50% Wanda pandemic first hit in mid March and April from these lows, we have seen volumes recover in each month of the corner and through July across all clinical areas I reproductive health offerings remained resilient throughout the year.
In areas, such as hereditary cancer in CMP or cardio neuro on piece have recovered nicely with cancer volume back about 40% of the mix in the second half of the quarter.
Overall, we are down just slightly from our pre coded levels by the end of the second quarter and July accessions Unbillable volumes continue to trend to recovery.
However, we express some caution is hot spots and regional shutdowns continue.
So little tasks are an important benchmark given that we accrue our revenue based on the number of billable reports in a period.
This quarter, we reported billable volume of more than 113000, which represented a 2% increase from the same quarter in 2019, 6% for the second quarter, which was higher than our historical trends the impacts from Cobot 19 were the primary driver of this change.
International volume remains steady at just under 10% of our billable volume.
And represented over 6% of our total revenue.
Volumes are volatile internationally, depending upon which regions are in recovery from coal that versus those still impacted.
Our diversified approach is helping to smooth the overall global volume trends.
We historically experienced seasonality in our volumes with the first and third quarters traditionally being our lowest the negative impacts of covered 19 on our volume will change how we looked at the rest of the year in terms of out.
Input moderate growth in volume in the third and fourth quarters and anticipate that arc session to billable volume spread will be tighter in the third quarters compared to the historical trends for the same period.
We generated $46.2 million of revenue this quarter compared to 53.5 million in the second quarter of 2019.
Decrease in revenue was primarily due to coded impact on billable volumes and a mixed shift.
In the second quarter over 67% of revenue came from third party payers and just over 32% from both institutions, including pharma.
Partners and patients the continued high percentage from third party payers is largely due to higher Medicare payments and steady improvement in commercial third party payer performance, particularly with our hereditary cancer tests.
Consistent with our discussion of ASP trends last quarter, we realized an ASP of $399 this quarter down from $418 in the first quarter of 2020.
This decrease is primarily driven by product mix changes, which were amplified during the early months of their pandemic as our reproductive offering remains strong but are more highly reimbursed cancer in CMP diagnostic tests drops more significantly.
Offsetting this product mix change, which moved our ASP down was a continued increase in asps in several areas, primarily our pharma ASP.
We anticipate increases in pharma asps as we expand our pharma partnerships this year.
We expect to see continued volume growth and an increase in asps across all payers as we head into the second half of the year as previously discussed we've seen the product mix shift back to our higher reimbursed tests during the latter half of the second quarter and this trend continuing into July and we expect this trend to hold throughout the third quarter.
Barring any cobot impact that exceeds our current assumptions.
Reproductive offerings will continue to grow rapidly and we expect to see uplift in our third party payer reimbursement for these tests.
Finally regarding income items in the second quarter, we receive $3.8 million onetime payments under the cares Act, which is included in other income.
We do not anticipate any additional funds under the cares act or future coded related payments.
Again as last quarter, it is easier to understand our business and the quarters financials by focusing on the non-GAAP numbers. Most line items on the TNL are affected by acquisition related charges.
Merrily acquisition related stock based comp and amortization of acquired intangible assets, but also this quarter. Some other charges related to post combination expenses fair value adjustments to acquisition related liabilities and income tax benefits to allow you to compare the two sets of numbers. We've provided a detailed reconciliation to non-GAAP.
And tables included both at the end of today's press release and in this slide that our GAAP financials for the second quarter provided in the table on this slide as well as in our press release and regulatory filings.
Throughout the remainder of the discussion of the quarterly results, we will refer to non-GAAP numbers, which we believe our a more relevant depiction of the business dynamics and the decisions, we're making moving forward. We also provide cash burn which is a non-GAAP measure.
Investors are encouraged to review the non-GAAP reconciliations.
Our cost of revenue per sample it was $318 this quarter, 29% increase from the second quarter of 2019. This increase was driven by volume lower volumes to spread our fixed and semi variable costs across higher cost due to mix changes and higher stock based comp charges. The direction was not unexpected and why.
As noted in our last earnings call.
First on our lower volumes, we maintained staffing levels to ensure we could meet customer needs at whatever volume levels resulted and to protect our on site workforce, we had significant excess capacity throughout most of the quarter approximately 70 $72 of costs per sample is the result of volume.
Decreases from club at 19, when compared to accession levels, we achieved in the first quarter.
Second on the mix changes, we had proportionately higher reproductive health tests and screens, which has a relatively new product area has higher cogs before we bring them up to full scale, whereas our cancer tests are significantly less costly to run after years of investment and reducing the cost of these tests.
And third as in years past annual stock based compensation grants were awarded to employees during the second quarter with a bolus of costs hitting the second quarter.
What changes do we see in the third quarter and beyond our capacity is more fully utilized as volumes are returning on an IP asked in July we transitioned to performing most of the and I P. S tests in house and we've again, we will begin to benefit from significant cost savings.
The recent increases in the proportion of more established tests like cancer with lower processing costs will lead to improved Cogs and finally as a result of our Reprioritization of development projects in response to code that we have folk and other projects that will yield cost.
Actions through yearend.
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If it was $8 million and gross margin was 17% in the second quarter of.
Theres discussed first revenue and ASP declines from product and payer mix shifts second an increase in succession to billable volume GAAP and third the increase in Cogs per sample due to product mix, which all impacted our gross margin.
We expect to trend back towards our target of 50% gross margin as we exit figure.
Moving to operating expenses, we continue to invest in our business with multiple acquisitions announced this quarter, but moderated.
<unk> expenses, excluding cost of revenue for the second quarter were $105.7 million as compared to $101.9 million.
Since first quarter.
As we have to navigate the new Kobin reality, we took actions to significantly.
Starting at the end of March and ended the second quarter by pulling back on investments in future projects focusing on cost reduction initiatives.
For us and other personnel expense reduction measures.
If went up eliminates the large stock based comp charge this quarter due to our annual stuff.
With our acquisitions totaling over.
Then last we actually saw an appreciable decrease in our Opex.
One other item to note, we had fair value adjustments to acquisition related liabilities of $25.4 million this quarter, which when netted against the there.
Yes. Other charges resulted in other income of $4 million closely monitored the impact of the pandemic on testing volumes and mix and we will calibrate our spend as appropriate.
We provide a reconciliation on this slide to show the adjustments to get from the cash flows in our financial statements to the non-GAAP numbers investors are accustomed to us presenting.
Cash burn.
Burn excluding acquisition related expenses $8 million compared to 60.
Moving to our cap.
Equivalents restricted cash and markets.
At quarter totaling $428.5 million at June Thirtyth compared to 300.
And $1 million at March 30 Onest.
Several important events occurred in the quarter, which affected our cash position first even the first quarter we felt it.
Funds see a secondary offering.
Closed in April and netted approximately as well as a 44.5 million dollar net raised through our ATM facility in June.
The cash outflows, we closed on the.
Which included the use of $25.4 million in cash.
None of the quarterly cash burn, we and a 428.5.
As Sean mentioned the Archer Dx.
Acquisition is expected to close in the fourth quarter and we have committed 300 to deal in connection with the act in debt financing package then.
The pipe and up to 200 million.
Billion dollars in a fully committed credit facility.
Both are expected to close concurrently with the proposed acquisition.
Does that.
Allowing our current cash to continue funding operations.
I mentioned earlier resulted in some short.
They will have more impact in the second half, including a modest reduction in third quarter burn and a more.
Significant reduction as we exit the year.
Changes we have made.
And are making will yield savings BT one.
We continue to.
Actively manage our quarterly burn, but as you would expect the realized cobot impacts and the stepped up acquisition activity over the past quarter.
We will bump up the total burn above million dollars for the year.
Yes.
Said, we still expect our cash to be approximately $425 million when the transaction closes depending upon final implies near term pro forma for.
Forward cash burn of approximately $80 million.
Cash flow.
On hand to close will more than covered our needs through expected cash flow breakeven expected in late twentytwenty too or early Twentytwenty three we will provide.
I'll now turn the call back over to Sean.
Thank you.
Kelly.
The approach to achieve our mission has been straightforward not a bit proving our customers experience as big as much genetic content as possible.
And delivering that to as many individuals as possible. We have created a flywheel effect that allows us to use our differential cost advantage to further serve our current customers and equally important individuals that can utilize genetic and.
A decade of investments in the NVCA platform.
Has enabled us to deliver genetic information.
Stuart broad set of test screens and services technologies channels customers in geographies.
We are uniquely positioned to support clinicians and their patients around the world to accelerate the adoption of genetics into routine care sure. We look forward to making the most.
During a routine reality for.
All.
The unmet need remains a mess and we continue to position Nvidia is it one way leader and genetics across I'll now turn the call over the operator unit.
As a reminder to ask a question you will need to press Star One question press, the pound or hash key.
Oh, the acuity roster.
Your first question.
Hey, good up there for taking my questions are nice to see the volume bounce back.
The way it did typically over the.
Fourth quarter.
Sean if we go back to I think your Q1 remarks before the pent up to do over 850000 tests for the year.
Or original target for over to 725000.
A session samples for the year.
I'm just wondering if you go for the run rate coming out of June those numbers on a on a run rate basis.
Yes, if I look at slide 10 it.
But but again I'm just kind of taken a line on our charted extrapolating so any commentary on their rate at whether on an annualized.
Back to those target level would be helpful.
Yeah.
Your was off to a we actually put what is the increase our 2020 over 19 growth rate compared to 19 or 18.
I think as we sit today, we're encouraged by.
A blind recovery.
I think we're also really cautioning against any kind of extrapolation for the rest of the year Theres.
Like we know the.
The volume recovery is sporadic.
It seems also be temporal depending on the right.
You can.
We don't have subsequently reshot down clinicians don't completely shut down. So there is there's a bit of learning and I think adoption.
Okay.
It's going on with a lot of our.
We closed.
So you I think there's there's probably.
<unk>.
What kind of.
I see it as it comes in and as the quarter plays out in the next quarter.
Ideally ideally, we would get back on path, which would.
Right now based on how are things come and.
Okay, maybe a quick follow up on that and I. Appreciate all that commentary I think Shelly. If your prepared remarks, you indicated that you expect to see continued moderate growth in volume in the third and fourth quarter, Bob I think discrete right now is looking for seemingly a little bit more the matter before costs.
Order, so so kind of building off of what Sean just said should we should we be tempering our expectations for modest.
Your your growth and book.
We get a little more clarity and continents and.
More of a robust and sustained recovery.
Yes, I wouldn't say, that's probably a very fair statement. So you know third quarter, we have more visibility on that given that we are in the third quarter right now and we've seen.
Sure there, but it's really hard to project out that far that will be winter. It depends on various international countries. It depends domestically and a as John indicated just a little spotty. So I would say temper and moderate would be the word I would use.
Okay.
Like the.
Good one more topic, you talked about the successor.
Tele health up or the complementary Chuck bought and then really driving ordering it.
Through through the direct channel over the course of the quarter is there anyway to frame how much of it impacts. These tools had on volume in the quarter augment and how are you thinking about the longer term benefits of these initiatives based on what you saw in Q2.
There are evidence to suggest that somebody's initiatives, but that's probably got pulled forward a little more quickly than originally anticipated aren't going to have a mortgage herbal and notable.
Sure, but then you would have expected have there been no pandemic.
Hey, I guess, it Catherine I'll take that slow and most certainly that the introduction.
And more broadly the software solutions that we offer Oh I'm not something that we've pulled forward in terms of really you now deploying a as John strategy to get an action.
AG fit that and I would say if there is an calibre aligning with the pandemic that IP, Ed that were able to engage with connection.
You know efficiently in that way said that indeed, one of the key ways that we see maintaining our customer base growing volume at existing customers, which enables our sales team to really get so based on new account growth.
So we think that says hey, how's that pull forward <unk>, a key aspect as the commercial strategy.
Kelly and develop.
The stronger commercial elaboration of future.
Okay. Thanks again.
Yeah.
Your next question comes from Tycho Peterson from JP Morgan.
Okay.
Hey, Thanks, maybe I'll start with D.A.S.P. outlook, you know you mentioned the mix dynamics.
Quarter I'm, just curious going forward he should.
We assume this just kind of the trough one is peas and can you just talked little bit about how you see that that dynamic evolving over the next couple of quarters.
I think he mentioned pharma in the prepared comments is an opportunity and I start and then Sean can jump in and so on a product mix really did change that and so we do think that there are some changes from the perspective of cancer is coming back stronger we get paid more for cancer. So we do expect that that will bring.
I want to the reproductive as we talked about we are.
Expecting that we will see increases in those you know by doing the testing in house, we anticipate that we will be paid more frequently and also on carrier screen. So across reproductive testing, we would expect that to go up.
Pharma partnerships as we've mentioned we signed numerous partners I think 16 this quarter and so we're up of over 105, we're seeing that.
Translate in to ask piece or stronger for the pharma partners. So those are all the types of things and Jeff blocking and tackling on the collection side of things, we're continuing to see third parties pay more as we have nearly 300 million under a contract at this point. So I think those are the key things Sean.
Forgot anything no those are all the that's that's how we see.
You are the mix is yeah, we think is going to improve or the the asps will improve throughout the year.
Again that all predicated on kind of.
So not not.
It would shift the mix, one where the other which is really.
Thanks for the state as it was a data that's exactly what we would expect for all the reason Shelly mentioned and understanding the reproductive health kind of reimbursement kind of a dynamic.
Seems odd it's just a reminder, we're in network with now over 300 million cover Latam and particularly when you're talking about expanding.
Here's screening well and I've, yes, we know the deal there send out multiple freight on that now we can so that.
That's a that's a great up lift we see the bricks and a carrier screening since we are very network was just about everybody. We can't play that kind of traditional cook.
That anybody else does it kind of get get through the system, we've had to do.
Forward payer by payer by payer, which is the middle East is a bit of a journey, but we are we are.
They're getting there so thats the other that's where the other source of that reproductive health dynamic changes just spoke about what is that were to come.
The changes happening.
Regardless of mix, that's what we see happening there and then like.
Well actually pointed out the because a big big effect.
Depending which way goes.
And then shown on the reimbursement front you know on pharmacogenomics is obviously.
You talked about the benefit of incorporate discussions with providers and networks and payers in the major houses can be side can you just talk a little bit about.
Alright, another milestones, we should be paying attention.
I'm sure.
In the leaves hearing you talk.
What is much closer to send to the excellent I cant about the where we think the pair dynamics.
And third party on on Pgx.
Hi, I'm HEICO, yeah that Oh, generally Medicare and the mall the.
Foreshadow were of trends.
And the private payer industry.
And.
You may have seen.
Our CD.
Oh that problem Palmetto came out with today, our this quarter off.
There were a number of super positive elements of that there's there's still a lot of work to do.
But it's starting any any inclination.
And who is prescribing a drug.
Where pharmacogenetics can have an expected impact is now considered an appropriate pgx test rather than limiting.
Yet to.
Mental health professionals Oh.
There are there there were a number of additional.
Factors and that including beginning to.
Deferred into a lot of professional a farm GK BDNA yep.
And so so we expect that this that this will continue to be a.
An important trends, particularly as the private payers are focusing.
Value based care models.
As as you will recall there there was work done by by our colleagues formerly of.
Black showing the real impact on Hum.
Let's see.
Uh huh.
Particularly older patients so.
So those kinds of.
And those kinds of arguments.
In terms of the impact we see beginning to happen.
Got traction, particularly.
Sean said about him in health systems, and the AC the relationship between the payer and the system and the patient visits as a little bit tighter going for Shelly on on the cash burn.
Estimates obviously in the current environment that makes sense, but how much of kind of a catch up should we think of gen and the third.
Fourth quarter, and then to Doug's question earlier, do you need to make additional investments and someone else, Iran. Iraq.
What you kind of need there. Thanks.
So while its cat and then I'll get to the larger.
Cash burn question.
Yeah capabilities are.
Hi, so.
I know, the and certainly with an eye for being able to provide.
And being able to have yeah, how identify that.
Right patient the right path.
Continue to expand access.
We see that upon all that's going on.
Oh the areas oncology refund.
So she she really well have Friday, you can't Lenny I'm in terms of functionality moving forward that that's already baked into our current status. So I'll, let Kelly from hearing from kids overall burn.
So in overall burn in and cash.
Burn no we don't see it transferring to remind folks have is that.
We took some of these actions that were intended later in the year. So for instance suites.
Change the priorities on where we would focus on some of these project development efforts and further and customer experience and all of that drives evolved the flipside as projects that would.
Help us to reduce the Cox acts immediately you will see those over time.
Force you know, we paid $3.3 million in the second quarter for those who will no longer be with us.
Moving forward, so you'll have those savings.
But you'll have those savings through the third in the fourth quarter. So the combination of driving up the.
Talked about driving that revenue driving down the Cogs those were the focus areas that we intended to take.
Down so we wouldn't have to do a lot.
As we finish these near term project as people go back and flow into those other.
[laughter] up at some point, we see it.
To be a continuing focus as we move forward. So the total number I think that it will be higher than the.
And for the year.
It would be you know over the 200.
Up like 10% above that lets say, but still exiting the year at a much reduced burn.
About 63.8, Thats comparable number exiting the year between sort of 30, and 40 million would be our anticipation at this point.
Yes, I have you got it okay that on that so that's why our outlook our outlook.
Yeah as you know as we talk to you know do we still see a fair amount of uncertainty out there.
It's why we position the company through the measure to show just pointed out.
All told especially when you consider what we anticipate to be Archer.
Hello puts us in a position to kind of look at it from a perspective of let's say assuming post deal.
425 million or so on the balance sheet.
And Youre managing both the pro forma burn to yield caught up 300.
And we'll continue to drop there that's that's the that's what we what we will try to accomplish here in this in this last quarter of uncertainty and I think you know we're feeling good about.
Where that puts us for the next you know for the next three years.
To be pushing that business for the with via the for 25 plus on again.
Great. Thanks for the color.
The question comes from Preneed SUTA from SBB Leerink.
Hi, Thanks, Sean So first question and ideas you mentioned your Brianna Pos in the house in July and would that imply that you are using single or technology here or is it still aluminium platform and what does that mean for the Cogs improvement that you're expecting.
Yes, I noticed a the plant as in the first versus get in house running with the Illumina core technology, that's what we're what Weve currently done.
And that's a pretty good cost improvement right that in there and perhaps equally importantly, we can get full freight on billing.
Right.
For those for those patients and that was the first major move lifting of the bio milestones R&D clicking through.
And we would expect sometime next year to be able in at least at least a majority cases enjoy the cost reduction from the deployment of that technology, but were still got well into double in the next year for that development efforts really to really take hold.
Okay, and then on and ideas as well you added that Kim.
Most of that line, we do is in research and collaborations.
At this point in time.
With the acquisition a deployed we had mentioned that we are hastening today, we can replace exxon's with genome once that pipelines current totally totally intertwined with the in vitro pipeline.
And that's that's kind of what we're looking forward to.
In the months months quarters to come.
But no right now are all any whole genome work that we do is mostly in collaboration R&D R&D collaboration validation.
Okay, and then last one I was oh on the Salesforce can you remind us after.
The recent changes where do you stand and how much.
What percent of that Salesforce is actually serving the and MPS market, an oral the reproductive market versus their Detroit.
Sure. Thanks, Toni so.
We have about 270 folks who are.
Outside sales reps that the majority of that team really focuses on the oncology and women's health.
On the with smaller segments supporting the idea and our NTT data that the majority of the assets are calling on heavy.
Okay, great. Thank you.
Your next question comes from Kevin Degeeter from Oppenheimer.
Hi, guys. Thanks for taking my question so.
Yes, I guess part of the thesis here over the intermediate term has been you consolidation with it.