Q4 2020 Personalis Inc Earnings Call
Okay.
Yeah.
Ladies and gentlemen, and thank you for standing by and welcome to the key for 'twenty 'twenty personally earnings conference call. At this time all participants are you know that simple.
After the speaker's presentation, there will be a question and answer session to ask the question. During the session you will need the press star one on your telephone keypad. Please be advised that the this conference call is being recorded if you require any further assistance. Please press star of the hero I would now like to hand, the conference well break even.
Speaker today Caroline corner. Thank you. Please go ahead.
Thank you operator welcomed the personnel since fourth quarter and full year 2020 earnings call. Joining me on today's call of John West President, The Chief Executive Officer, and Aaron Tachibana Chief Financial Officer. This call will include forward looking statements, including statements regarding the markets in which we operate including potential market sizes trends and expectations.
Patients from product services and technology trends of demand for our products personnel of as expected financial performance expenses and position in the market and the impact of COVID-19 pandemic on our operations and our customers' operations.
These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. We encourage you to review of our most recent filings with the SEC, particularly the risk factors described in our 10-K for fiscal year 2020 to be filed today a registration statement on form S. Three filed on December 32020, and the pushback.
The supplement filed on January 27, 2021 of the forward looking statements. We provide during this call including expectations for future performance are based on our reasonable beliefs and expectations as of today personnel of undertakes no obligation to update these statements except as required by applicable law.
Our press release for the fourth quarter and full year 2020 results is available on our website www dot personnel of Dot com under the investors section and includes additional details about our financial results.
Our website also has our latest SEC filings, which we encourage you to review a recording of today's call will be available on our website by five P. M Pacific time today.
Now I would like to turn the call over to John for his comments, our fourth quarter and full year 2020 business highlights.
Thank you Carolyn.
In spite of the pandemic personnel of this has continued to grow.
First of all also achieved record revenue during Q4, our 18th consecutive quarter of revenue growth.
For the full year 2020, we also achieved record revenue and grew 21 per cent.
Our performance over the last several months highlights our ability to execute also of the resilience of our business.
This represents.
It's the this results from her ability so far to shift our focus and capacity between our biopharma in population sequencing customers.
Focusing on our revenue from Biopharma and all other non VA customers. During Q4, we grew 33% sequentially and 73 per cent from the same period of the prior year.
In the fourth quarter, we had a few projects where customers required completion before the end of the year.
They could use the day to quickly.
This customer of Bush helped us achieve a new record level kind of highlights our abilities of turnaround test results quickly.
Part of our customer as well.
But we may not achieve quite that level of revenue in Q1, we do feel that our Q4 record reflects the longer term growth trajectory evidenced by the orders we have received from these customers.
In every quarter since mid 2019, the aggregate value of orders. We have received has exceeded the revenue reported.
For the full year, 'twenty, 'twenty orders, where approximately 80% higher than 2019.
Because of this order of strength entering 'twenty 'twenty, one our backlog was approximately double the amount at the start of 2020.
In Q4 orders continued above our revenue level.
And so far in Q1, the dollar value of orders, we have already received exceeds the revenue we expected in the quarter.
We believe we are winning pharma business based on the value proposition of our next platforms technology and capability.
And also our ability to service customers well.
This underscores our confidence in the future revenue growth.
We expect our oncology business to become a larger part of our revenue mix in the future.
Leveraging our combined ability to analyze both tissue and liquid biopsy samples.
Tissue samples in particular give us access to RNA enter the immune cells, which have infiltrated the tumor.
Liquid biopsy samples give us much easier access to multiple time points.
We believe that the combination provides us system, which is better than either alone.
From tissue, we can deliver results using our exome scale immuno I do next.
And next Dx platforms and also offer whole genome sequencing.
For liquid biopsies, we now offer three options.
First our next liquid biopsy assay the whole exome at multiple time points.
Currently for discovery of new tumor escape mechanisms under therapeutic crusher.
Second next personal which we plan to introduce in 'twenty or 'twenty. One is expected to add up to several thousand low side, combining the power of the tumor informed approach with fixed content to look for new mutations, which may emerge as the tumor progresses.
Third.
Partnership with the Taro.
We provide them with advanced exome sequencing and diagnostic testing based on tumor tissue samples.
The tariff plans to use this data to identify somatic variance for their signature of liquid biopsy test.
We believe these three liquid biopsy offerings work together to accelerate personnel as growth in the monitoring of cancer progression I will now provide more detail on our progress and plans for each.
First our exome scale of liquid biopsy product for Biopharma customers compliments, our tissue based offering.
With our existing and potential new customers are going well.
We have received orders from several customers now and expect to fulfill these orders as we received customer samples.
You may recall that both of our tissue and liquid biopsy based products have been designed specifically to meet the needs of our pharmaceutical customers and provide data on all 20000 human genes.
Monitoring is rapidly becoming a.
The key facets of long term cancer care.
Our first liquid biopsy product attracts the evolution of what can be of hundreds or even thousands of cancer mutations in a single tumor and importantly can detect new mutations as they emerge under therapeutic pressure.
We expect to come today.
We continue to expect the initial sales of our liquid biopsy product to predominantly be each of customers using our tissue based testing, who also want to monitor patients overtime and indeed that is recurrent conversation sort of focus.
Seconds later this year, we plan to launch next personal our mrna offering that will be designed for each patient specific tumor.
We believe this offering will enhance tumor tracking for patients due to its high sensitivity and its ability to identify thousands of mutations compared with competitor panels that can identify and track well in the hundreds or less.
Our biopharma customers will be able to use next personal for multiple time point monitoring and we believe that it will also be applicable for the diagnostic market in the future.
Although we have not provided revenue estimates for our liquid biopsy offerings, we believe that with multiple time points per patient, we have a tremendous opportunity to grow revenues in this area.
Third we announced the commercial partnership with Natera earlier this month and.
And it's a great opportunity for us to showcase the strength of our technology and capabilities.
And I also will provide front end tissue exome sequencing services for Natera.
Who will identify variance they will use to design their signal of terra of personalized liquid biopsy test for cancer patients in both the clinical setting and or for their biopharma customers.
Let me describe some of the benefits of this mature partnership ship from.
Personnel.
The first working with Natera further validates our next platform.
As a best in class tissue sequencing programs.
Capable of detecting mutations in cancer, the conventional exxon's off of Mrs.
Second it provides us with an incremental revenue opportunity from clinical diagnostic tests without any reimbursement risk.
Third this partnership allows our highly differentiated next exome to be featured in a clinical setting earlier than if we only pursued this method market ourselves.
This partnership also complements the traction of adoption, we have achieved thus far with our biopharma customers.
Now I would like to give you an update about other elements of our progress and how we have been executing on our plan.
In January we raised approximately $162 million net.
Net of underwriter discounts and fees and expenses from our follow on equity offering.
It further strengthens our balance sheet. So we can invest in initiatives to continue our growth.
In December we launched out of Sherpa.
Antigen characterization of capability, which is of module incorporated within our next platform and enhances the features.
We believe the neo antigens are the crucial centerpiece of a new generation of companion diagnostic Biomarkers.
We expect our biopharma customers will apply this capability to mainstream cancer drugs, such as checkpoint inhibitors and also to experimental personalized cancer therapies, which explicitly target the Atlanta shows.
This project has required multiple proprietary technologies.
Including genetic engineering of <unk>.
Proprietary human cell lines.
Mass spectrometry to identify and quantify peptides binding to HLA.
And the training of novel machine learning algorithms.
Our customer base has broadened substantially over the last year.
We have now received orders from a majority of the top 10 oncology focused pharma companies.
Since we introduced the next platform in 2019 as of the end of Q4. We have received next orders from 45 different customers up from 39 at the end of Q3.
We believe that this growing adoption of next further highlights the power of our platform and the comprehensiveness is important to our customers.
Over the past couple of quarters, we highlighted some of our initial plans to establish a lab and commercial operations in the People's Republic of China and partner with Berry genomics.
Our team is currently working to.
To build out our laboratory in Shanghai.
We are also hiring additional employees.
Customer engagement is very good.
We are just beginning to understand how to use our exome scale day, how the use of our exome scale data will be viewed under the China's regulations on the human genetic resources, which went into effect in 2019.
We continue to expect that our operations in China will begin in 2021 with moderate revenues and began ramping in 2020 true.
While this project will take some time to meaningfully contribute to our top line. We believe this is an important investment.
Look forward to updating you on our progress in the future.
Earlier this month, we announced the hiring of Susan Morricone, as VP of people and shape of human resources Officer.
In her prior experience at Omnicell. The company grew from 800 to over 2700 employees. The expanded office locations from up five to 919 locations in nine countries.
While the company revenues grew from approximately $250 million to almost $900 million.
Believe her experience will be extremely valuable to per sales and we as we expand our employee base and continue to scale our company.
I'd now like to update you on the population sequencing part of our business, which is sometimes referred to in the field is population genomics.
We are of the process of building a funnel of opportunities.
And we are in early discussions with several of these prospects initial discussions are going well and are encouraging we.
We expect that we will have additional customers and revenue in 2020 true.
Our work with the VA MVP represents the largest population sequencing effort within the United States.
The VA now targets enrollments of 2 million veterans at over 825000 veterans have enrolled so far.
First analysis has been contracted so far to sequence over 147000, VA MVP samples with approximately 42000 remaining to be sequenced.
We have been a good partner and the sole provider for the VA Mvp's whole genome sequencing project over the.
The last eight plus years and over multiple contracts.
During more normal times, the VA MVP, whether initiated RFP process during the summer months, and then award of contract and task order by late September.
I'm English correlates with their fiscal year end.
Just wondering if 21 is not the normal year.
The VA has been focusing a lot of time and funds towards COVID-19.
Testing treatment and now vaccinations. It is not entirely clear what the VA MVP of process for contract renewals will be in 2021.
We believe that our scale quality and service levels over the years puts us in a good position to win new business going forward.
We will share additional information with you when their process becomes more definitive.
In December we announced that we have become the first for profit company to sequence more than 100000 whole human genomes in the United States, which was an important milestone for us we.
We expect that total to grow to more than 150000, the whole human genomes.
The end of 2021.
Some will be per population sequencing, such as the VA MVP and others will be cancer genomes.
We expect our unparalleled experience and scale with the VA MVP program to position us well for new opportunities in population sequencing.
Given our clinical experience in working with pharma. We also see an opportunity to help transition population research the population health and to involve pharma in the future.
I would now like to expand on the synergy between the population sequencing.
And oncology parts of our business in particular, those that go beyond the more obvious operational and cost synergies.
Our extensive experience with the whole genome sequencing combined with our deep expertise in cancer has allowed us to launch whole genome sequencing from cancer samples.
We believe that this will be increasingly important to the future.
Particularly in cancers, such as breast and prostate which have relatively low mutational burdens.
Using our cancer whole genome technology can identify of up to 20 times more somatic variance to serve as the basis for personalized cancer assays.
We believe this will let us achieve high sensitivity, even in cancers, which have low mutational rates, which had been surgically resected.
Sure the relatively low amounts of cell free DNA into the blood.
We believe this can be of leading technology and some very large market opportunities and we will have more to say about this is these product developments progress.
In summary, I'm very proud that our business has continued to show the strong resilience throughout the pandemic so far at across our multiple revenue streams.
Customer interest and adoption of next has been excellent, but our pipeline of compelling new products is rich.
And we have the capital required to invest in our growth initiatives.
This puts us in a strong position for both near and long term growth.
With that I will now hand, it over to Aaron for our financial results.
Thank you John and good afternoon, everyone.
2020 was a challenging period for us.
Our customers and suppliers.
Despite the pandemic, we achieved record revenue levels once again.
Which highlights our focus on strong execution.
During my prepared remarks, I will provide detail about our financial results for the fourth quarter and full year 2020 and guidance for the first quarter of 2021.
Revenues for the fourth quarter of 2020 were $22 million up 2% from $19 8 million from the prior quarter and up 11% from $18 2 million from the same period of the prior year.
The $22 million with the new record high per quarterly revenues in both the sequential and year over year growth was driven by an increase in genomic testing services provided to biopharma customers.
Aside from the VA MVP.
<unk> pharma and all of their customers accounted for revenues of $7 6 million for the fourth quarter of new record high for Biopharma revenue, representing an increase of 33% from last quarter and of 73% increase for the same period of the prior year.
During the fourth quarter sample flow from our Biopharma customers was fairly linear throughout the period, allowing us to process samples efficiently and also helping to maximize revenue.
For the fourth quarter, the VA MVP revenue of $12 $6 million was lower by 11% from last quarter and was 9% lower compared with $13 8 million from the same period of the prior year.
If you recall, we do not have specific testing turnaround times from the VA MVP. Therefore, we have the ability to modulate volume up or down to complement the biopharma sample testing volume, which can have some variability from time to time.
In the fourth quarter, we had a large quantity of biopharma samples on hand, and therefore, we processed fewer VA MVP samples than in the prior quarter.
The VA MVP unfulfilled orders were $43 $5 million at the end of the fourth quarter and based upon current estimates we expect the unfulfilled orders to convert to revenue over approximately the next three quarters.
For the full year 2020 revenues were $78 $6 million an increase.
<unk> of 21% from $65 2 million in 2019.
The VA MVP revenues were $56 1 million, an increase of 29% compared with $43 5 million in 2019, and Biopharma and all of their customers were $22 5 million, an increase of 4% compared with $21 7 million in 2019.
Gross margin was 31% from the fourth quarter compared with 26, 9% from the prior quarter and 36, 2% from the same period of the prior year.
The sequential increase in gross margin was primarily due to favorable mix as biopharma revenue increased 33% sequentially and the year over year decrease was primarily due to a onetime 550 basis point cost reduction realized in the fourth quarter of the prior year.
The VA MVP gross margins continue to be solid due to high volume and the single service offering which has been automated and has a very efficient sample test process.
For the full year 2020 gross margin was 25, 6% compared with 33, 9% for 2019.
The decline of 830 basis points for 2020 was due to customer and product mix higher expenses from the pandemic of onetime cost reduction of the prior in the prior year and also under absorbed labor and overhead.
Operating expenses were $19 4 million in the fourth quarter compared with $13 8 million from the same period of the prior year.
R&D expense was $8 5 million in the fourth quarter compared with $7 4 million from the same period last year and SG&A expense was $10 9 million in the fourth quarter compared with $6 4 million from the same period last year.
The increase in R&D expense was for new product development and the increase in SG&A was due to commercial expansion public company costs and continuing to enhance our infrastructure.
For the full year of 2020 operating expenses were $62 $3 million compared with $44 5 million for 2019, R&D expense was $28 6 million per the full year of 2020, and the SG&A expense was $33 7 million.
Going forward, we expect both R&D and SG&A expense to increase significantly as we pursue the many growth initiatives in front of us.
Net loss for the fourth quarter was $13 $3 million compared with the net loss of $6 6 million for the same period of the prior year the.
The net loss per share for the fourth quarter was 34.
And the weighted average basic and diluted share count was $39 million compared with the net loss per share of 21.
And of weighted average basic and diluted share count of $31 2 million for the same period of the prior year.
For the full year 2020, net loss was $41 $3 million compared with the net loss of $25 1 million in 2019.
The net loss per share for the full year of 2020 was $1 20, and the weighted average basic and diluted share count was $34 4 million compared with the net loss per share of $1 39.
The weighted average basic and diluted share count at the $18 million for 2019.
Now onto the balance sheet.
We exited the fourth quarter with the strong balance sheet with cash and short term investments of $203 $3 million.
Fourth quarter cash flow from operations was a usage of approximately $2 5 million due to the net loss, partially offset by non cash and working capital items.
And for the full year of 2020, we used approximately $43 million of cash from operations and approximately $3 million per capital equipment additions.
As a side note.
In January 2021, we added approximately $162 million of cash net of underwriter discounts and fees and expenses to our balance sheet from our follow on equity offering.
This additional capital puts us in a great position to invest in the growth initiatives that are in front of us such as our liquid biopsy next personal offering continuing to invest in clinical and regulatory capability.
The build out of our China lab additional.
Facility footprint and capacity expansion and others.
Given the number of initiatives that we're pursuing we expect R&D and other expenses to increase significantly going forward, we expect our cash usage to increase from the mid $40 million range in 2020 up to a level between 80 and $90 million in 2021.
Now I'd like to turn to guidance.
Although we had another solid quarter of execution.
Can you still remains about whether or not we're conditions for us are.
Our customers and suppliers will remain the same as today or change in the near future.
Over the last couple of quarters, we have noticed some supply chain tightening for consumable products, which are also used by many labs <unk>.
Losing those focused on COVID-19 testing.
In addition, we still need clarity around decisions of the VA MVP will make later this year regarding a new contract and purchase order.
Due to the uncertainty mentioned, we believe it is prudent to provide guidance for only Q1 2021 at this time.
Total company revenues are expected to be approximately $23 million.
We expect Biopharma and all other customer revenues, excluding the VA MVP to be in the range of $5 $6 million to $7 million.
Net loss is expected to be in the range of $14 million to $15 million due to the increase in expenses and the weighted average basic and diluted share count is expected to be approximately $42 million.
We plan to provide an update to this information during our next earnings call.
Now I will turn the call back over to the operator to begin the Q&A session.
Operator.
Ladies and gentlemen, if you have the question at this time. Please press Star then the number one on your telephone keypad.
Thats Star one on your telephone keypad as a reminder, please limit yourself to one question and one follow up to allow other participants to queue up for questions.
Your first question comes from the line of <unk> from Morgan Stanley. Your line is now open.
Hi, This is Hugo on the call for Ts of Thank you for taking our questions from a high level could you describe the economics for the new Terra partnership how should we think about the ramp there.
Yes. So the this is John I'd be happy to describe that the.
The personnel is provides the upfront exome sequencing of the tissue samples those are the sales are all handled by.
Zero, we provide that upfront sequencing that data goes to the Taro day, then identify which variance they want to use for their signal of Terra test and then they sell that so our involvement is on is being paid for the upfront exome sequencing. The revenue from secretary of it goes to.
Sure.
That was very helpful and how should we think about the ramp.
So that the that'll be guided by the ramp and the Cigna.
The <unk> product and I think we probably would want to speak with natera of about that but I think we're all optimistic about it.
Okay, Great and then I have a follow up how should we think about cadence of the opex through the year with recent new launches expansion of global footprint. In addition to expectation of additional new launches in 2021, what are the key investments you're focused on for this year.
So the key investments that we just talked about new product.
The next person was very critical and key for us.
And to invest in clinical and regulatory capability.
In terms of the Opex ramp and so we expect opex to grow.
No.
40% to 50% year over year compared to 2020.
And so our opex can be in the $90 million to $100 million range in 2021, and I would expect it to ramp throughout the year, so quarter by quarter, its going to increase and step up. In addition, if you look at 2019 and 2020, we really didn't spend much money on capacity or footprint or anything like that.
We've been hiring a lot of people since we've been working from home.
And once things free up and we can get back to the office, we're going to need additional footprint as well as the next batch of capacity as we see a large amount of growth in front of us over the next few years.
Thank you.
Sure. Thank you Hugo.
Your next question comes from the line of Derik de Bruin from Bank of America. Your line is now open.
Hi, good afternoon.
Hi.
So a couple of questions. So first you increase your number of.
<unk> customers. Thank you said 45 at the end of the year.
Can you give us a little flavor on.
The order.
That youre doing what services they are doing and what are they purchasing sort of beyond whole exome and whole genome transcriptome services and just basically.
Of the size of the orders in recurring I would really likes the some flavor on.
And what those customers are doing and buying and how many are you expanding your book of services the PERC.
<unk> from you.
Yes. So this is John I would say that the when we start working with our primary customer of they'll often start with us in a single clinical trial that over time with the most successful accounts will actually be in many of our clinical trials in parallel I'd say, we also tend to start on retrospective analysis of clinical trials from the samples already exists and.
As our customers gain more confidence in our platform the law from the start baking us into the trials really right upfront. So we will be involved prospectively as theyre collecting the samples of the the relationship and begin with the level of just one trial.
And then ramp up quite a ways from there I would say that in the past and I think we've come out of this on prior quarters, we used to see pilot orders that might be you know 40 or $50000 that kind of thing and that still happens, sometimes but we've seen big pharma customers now started on the platform at the level of between 500000 of 1 million.
As the first purchase order so certainly the scale of its gone up from that standpoint.
The number of customers increasing as the good thing, but the the total dollar volume of value of orders, which we commented went up by approximately 80% last year.
Really the key metric because some of that is increased numbers of customers that we're working with with quite a bit of it is expansion at the customers. We've already been working with as they became more and more confident.
Our platform.
Great.
That's really helpful can we talk a little bit about the VA in population genomics and limits the room lump those two together.
I guess.
A couple of questions on the VA I guess the first one is.
Understand obviously things are hectic, but is there any reason why the VA.
Wouldn't we up and this is more of a competition question.
That sounds I mean, obviously.
With some of the new technologies that have been introduced at the high end of the sequencing.
The new no because they are out there.
A lot more genomic services labs are there are there any potential competition for there that they would go elsewhere and I guess is there anything that can sort of accelerate.
The.
The amount of sequencing of getting through I mean, as you pointed out there is.
800, 300000 enrolled you've done the 147 contracted over the last eight years, what are you sort of what would be sort of really get that going even more does the cost of sequencing need to come down too.
We are using the the alumina of $600 genome that is from they're doing in that area right now.
Curious if I could you talk about net overall dynamics in the market and walking through the accelerate net program.
Sure Yeah, So I'd say I don't see any reason that the EBITDA would not re up I think the only question is.
What's the what's the pace in terms of their budget and the ability to focus on this just given that they've had to be really all hands on deck to do with Covid and so I think that it's a great relationship with like working with them and it seems that it's mutual.
You know I think the question for them is do they really want to go through a whole RFP process given the they have some of the other things to do they do have the ability to give us the additional task order on the existing contract and so that.
That could be of possibility as well I think we'll have to see in terms of the.
Competition, we haven't gotten any sense that there's an issue is that I think we've worked with them well over time, and we've really ramped up a lot you mentioned, we've sequenced over 100000 channel. It was over the last eight years, but it certainly has not been of uniform right. It's really been growing and so of the 100000 genomes that we know we got to in December half of them were.
Sequence last year. So we are in the 55 per year kind of rate its been pretty substantial wisdom with them.
That's that's already a ramp up I think if they were to go up to that level, obviously, they're interested in the cost coming down but from the time that they first started working with us the cost of come down over the eight years and we've always worked yes. That's true I think generally it's the question of budget and just being able to pay attention.
At the VA given the.
A.
The COVID-19 situation.
Great. Thank you very much.
Great. Thank you.
Your next question comes from the line of Doug Schenkel from Cowen. Your line is now open.
Hey, good afternoon everybody.
Hey, just starting.
Starting on the next personal.
You talked about how the assay may not require a lot of plasma and.
You can position that is the competitive advantage and obviously smaller sample size as always.
Better than than the reverse but I'm just wondering competitively.
Is that something that you think is an issue for others or is the point, you're making that you can provide more information what the similar amount of sample and then.
I guess get some while I am on on this topic.
The things you're seeing in the near term that.
And I guess as I say near term I should say over the next several quarters that are either being brought to you by your suppliers.
Or being developed internally that could further.
Reduced sequencing costs for things like next personal but obviously the broader portfolio as well.
Sure. So the several questions. Thank you for that I'll try to walk through them.
So certainly the as we've designed next personal you'll not be surprised the personnel is taking probably of perhaps the most comprehensive approach of any of the.
In the space looking at thousands of genetic variance.
We feel that this is something that both allows us to.
The the tumor in great detail.
By having both fixed and variable content. It also lets us look for the emergence of new mutations that were not in the original the tumor. So you really understand the evolution of the tumor and not just tracking what was there.
To start with.
When you look at so many variance the number of molecules that you have available EBIT when there's a relatively low amount of plasma which might lead to not.
Many of the whole genome equivalents in the plasma sample the more places across the genome you can sample of the more molecules of ought to look at them. So that lets us be more sensitive for the amount of plasma. So you can either use the same amount of plasma as as others would if that's available.
And the way more sensitive.
You have the other possibility, which is students of sort of maintain sensitivity, but do it with a lot less plasma and then we work with customers. We do find that the amount of plasma is just really a limiting factor in many cases, it's just not that easy and they often don't want to use all of the sample. They have on just one thing.
So we think it will be an advantage to be.
So sensitive in that regard.
In terms of over the coming quarters in reducing the cost of sequencing. We continue to work how we work as you know primarily with the Illumina on the sequencing platforms. We're open to other alternatives to that but the.
I think of you know alumina has indicated a number of ways in which they.
They may improve things it was now over four years ago that they introduced the <unk> system and personnel. She's one of the first the step up in height quite of few of those but you know that technology is now over four years old.
We are optimistic that the people of Illumina had been hard at work for the last four years and that there will be new things and I think there's certainly a lot of headroom in that technology, whether it's incremental just in terms of incrementally longer reads or bigger flow cells or other things. So our sense is of the cost of sequencing, we will continue to come down over time.
<unk>.
And we've been designing assays, so that a few years from now when those assays of already ramped up the volume.
By then.
We have the right sequencing costs, often it's easy to design for the cost of your face today and what happens is a few years down the road when the when the product actually makes it for example for the FDA.
Have a product that is actually kind of smaller than what you would've wanted and the costs are in search of limitation anymore, but it's hard to go back and adjust that so we've generally tried to skate to where the puck is going.
Anticipate that the sequencing park is heading towards lower cost sequencing certainly of our costs are lower than the kind of numbers that you stated that those are sort of standard cost for somebody who buys one no mistake personnel of this hasn't been in that category for a long time, so the we.
We I think have some of the lowest sequencing costs of the companies in our space.
But we certainly are looking to continue to lower that let's say the the other elements of our cost though are areas that we can work on with automation so personal houses invested.
Really quite substantially in robotic automation for our laboratory and.
And other steps of also including automation on the informatics side, because we're handling many many petabytes of data. So the all of the labor and overhead expenses are also brought down and.
And that's really been a help to us during the pandemic.
Look at the other laboratories, particularly if you look at the other population sequencing efforts worldwide almost all of them have been shut down during the pandemic. The personnel of kept producing we sequence of 50000 of human genomes last year, So I think that.
That really is kudos to our group that has developed a lot of the automation. So that we were able to keep running.
Even during a period of time when we wanted to have a relatively small number of people in our laboratory.
Thanks for all of that John maybe just one quick actually unrelated follow up.
As you know as well as anybody because I think you've shared and thats a lot of the enthusiasm.
In personality has been.
The outlook for deploying the platform that you and your colleagues have belt.
For Biopharma and this is not to take anything away from MVP or.
On your broader efforts in pop Gen, but I think of lot of the excitement and where a lot of the value of its been assigned the standard of the prospects for Biopharma.
Yes.
For good or for bad that has traditionally been a much smaller part of the revenue mix.
It still is not the majority of your revenue, but Q4 is I think the first time I can remember where you materially beat versus our Biopharma expectations. You gave a lot of encouraging detail in your prepared remarks, I mean simply put.
This is the new base and do you think things of inflected in a way where that mix is going to start to become a lot more balanced over the course of 2022 or 2021 and 2022.
Yeah, I would say that the we've put a lot of effort into the development of our platform and our customer relationships with Biopharma and.
We are seeing great results from that as I commented, we've seen a large ramp up in terms of orders from Biopharma I think were winning in that category. It takes time for that to show up.
As samples, but do you mean, you did say Q4. It was a it was the highest revenue we've ever had in that in that category and I'm not hopeful that we'll do that every quarter.
But I do think it's part of the longer term growth trajectory, we do expect that the of the oncology.
Oncology based Biopharma business.
We will grow to be of larger and larger portion of our revenue.
Overtime. So so yes, I think of the enthusiasm is well placed because I think it's I think we're winning and it's beginning of that happened.
Thanks again.
Thank you.
Okay.
Your next question comes from the line of Patrick Donnelly from Citi. Your line is now open.
Great. Thanks for taking the questions guys.
Maybe just one of them yeah sure maybe just one on the on the funnel for the pop seek programs. I know you guys have kind of a small team engaging directly there I know you're talking to John a little more about 'twenty two but can you just talk about the funnel and then I guess, what it will take for a few of those the flip your way as we go into maybe later this year and into 'twenty two.
What has to happen from those conversations to kind of materialize.
Yes, that's of Great question, I would say, we've been talking with people all over the world. We have a pretty substantial list of of the programs. One of the things. That's interesting is that although we initially some of the challenge would be what.
The programs would get funded what we've actually found is theres a fair number of programs that have funding commitments, but they almost don't know how to go about it entirely I mean, it's not that they don't have some ideas, but they don't have in their country any group that has ever done. This at scale and so there is of concern that they could waste a lot of money by sort of trying to do it.
The only what they are doing and making mistakes and so forth and so I think in the past the opportunity would have been well maybe we can have the sequencing done by one of the companies in.
In America, or perhaps in England.
That isn't doesn't necessarily meet the some of the other goals of those of those programs and so one of the things that we are saying is that once we decided to go ahead and set up a a full laboratory in.
Shanghai, China, and we've been putting a lot of resources into doing that we realized that if we could do this in the Shanghai, China, we could probably do this in a lot of other countries as well and the kind of people and processes. We've put in place to be able to go from being of California only company to one that was also operating.
State of the Art Laboratory in China was one where we could duplicate that and do that in other countries. So then when we talk to these customers and we say.
If you want you can set of the samples and we'll run them in California to start with is the way of getting some data quickly, but what a lot of these groups want is for genomics to be of part of the future economy of the country and so the idea that we could set up a subsidiary of another country hire people locally setup of lab, which is in some ways a cough.
The year of what we've built in California.
In China with all the same sop and quality systems and data systems, and so forth and that they can get up and running and that this could be something being done locally.
In the countries is something that people are clearly pretty interested in and the thing. That's interesting is the number of these groups actually do have funding.
The other connection that we're seeing and.
We have to see if this really can can happen but.
Quite a bit of the interest is also and how pharma can be involved because not only the pharma could help pay for some of these things.
Firm is another interest rate a lot of countries would like to attract to the to be part of their economy and so it's the one running the clinical trials in the country that kind of thing that's also attractive and so our ability to perhaps set up some of those relationships and expand them.
Akshay can other countries or other programs.
Has been of interest to a number of so these are some of them are fairly large programs and many of them are government run programs and frankly those governments are spending a lot of time on Covid. These days, but it is clear. There's there's interest is the desire for this to be more clinical not just to be of.
Our research project sequencing of large numbers of of genomes.
And I think we bring a lot of those skills. So no I don't want a price.
Two near term of the picture because there is the timescale of here, but the.
We do think there's actually a fairly substantial opportunity in the overlaps a lot with what we're doing on the cancer side.
That's really helpful. John I appreciate that and then maybe just to follow up just on the next personal side can you just talk through specific as you can in terms of what the timing we should expect for this year and just the key hurdles I guess to get this out there and start generating revenue that we should be watching for.
Yes. So the what we said is that were released the product. This year. It is one of our highest priorities inside the company and I think people are pretty excited about the opportunity.
I think what Youll see is that when we.
Our ready to wear will talk about bringing the product out it's likely to be an already low product to start with something we can work on.
For the analysis for our perhaps with our pharmaceutical customers first but theres a lot of motivation of about that being a diagnostic product as well we.
We see the frankly, the possibility to have the most sensitive test possible and.
So we're excited about bringing that to market so it's likely to be.
On through the year that Youll see that of all probably first isn't already offering perhaps later as an <unk> have to.
See when they all day, he can happen, but ultimately I could imagine that this would be something we might even want to take through the FDA. Although obviously that process is much more extended.
Understood. Thanks, John.
Thanks.
Your next question comes from the line of Mark Massaro from.
Your line is now open.
Thank you gentlemen from Mike Thanks for taking the question.
Alright.
Hi.
So any day.
Bob.
Exactly.
On the recent acquisition of the comprehensive exam sequencing test.
The Cheyenne.
<unk> believes that the next platform is differentiated relative.
To the acquisition.
Oh sure be happy to answer that I mean, the Cheyenne, it's not a company, we know all of that well, but the.
Our understanding is that theres nothing that differentiated about the exome their personnel all started working on the Exxon was 10 years ago realize the fundamental problems that led to their being caps and the sequencing that many genes have regions that are not well covered and we realize this would require a different biochemist.
To solve.
All of that we call that our Ace technology, we have patents on that now in the U S. Europe net in China.
And the resolving that I think in addition to the sequencing of the let's call. It the the leverage from required in cancer of the question is can you interpret what you are seeing and for US the share. Many people can look at the classic cancer genes the <unk>.
<unk> and K, Ras and so forth that people have looked at from 30 years.
Since around 2014, when immuno oncology really started too.
The win with the FDA and now has been becomes such a large category. We think it's really important to understand neo antigens because thats the underlying.
The mechanism of action of the immuno oncology.
Drugs and and in order to be able to do that it's not just the sequencing problem, but it's the data interpretation problem. So this was the reason we spent over four years developing our sherpa.
<unk> technology that I described and this involved genetically engineering human cell lines grew.
Growing them up.
At the peptides with high end mass spectrometer machine learning algorithms. So we're so nothing to do with just the sequencing part.
Now that we have that kind of the capability.
We can look at the genetic variance that we would see out of the out of of tumor it might be that an individual tumor maybe only 1% of the mutations actually kind of elicit an immune response and unless you can really say well, which ones do you think are the 1%.
The sequencing itself is perhaps not nearly as useful as it could be and so the the effort that we've put in over a period of time to have this proprietary capability to rank. The neo antigens. We think is a huge differentiator and it goes way beyond the the sequencing. So exact sciences of there's a good company.
And I understand they are in the number of other areas that really don't directly compete with what we do.
But I think that the the technology. They have there I think is really quite different from the.
The next platform.
Thank you for that.
And just a quick follow up on share price.
We have previously mentioned that mean Brittany alright.
Alright, no antigen based biomarkers.
With Macquarie from proof of clinical you Kenny.
So if you could just provide an update on what progress has been made on that front I know it just launched but any.
Potential data readouts that we should be expecting day.
Sure so the the.
The use of the the sherpa algorithms and capability to start with will be with our pharmaceutical customers. So they pay their own bills of reimbursement is not an issue for us growing revenue based on sharp in the early period of time.
We have been working on clinical utility studies, we've shown data for example from our collaboration with the of Novo Medical Center in the Washington D. C area on the milk.
Melanoma patients we've been able to show that we have substantially better statistical significance in predicting response to checkpoint inhibitors by being able to use.
Our new items shown ranking system and so we think over time.
If this is paired up with the appropriate drugs and take them through the FDA. This would be a terrific next generation companion diagnostic.
And once the is that kind of FDA approval that would be of good lead into.
Insurance reimbursement I think in the near term, we see our abilities to grow with that as being largely working with our pharmaceutical customers and many of them are really focused on these immuno oncology drugs and so making progress on the Atlanta assurances is quite important in that arena.
Okay got it thanks for taking the questions guys.
Great. Thank you.
Your next question comes from the line of Mike Matson from Needham. Your line is now open.
Hi, guys. This is the Joseph on for Mike.
A lot of great questions already asked so just try and keep it quick I guess first of all.
How many of the VA MVP samples were specifically processed in this quarter.
In the fourth quarter.
So we didn't have the number of samples Joseph but what you can do the selling prices of little over $1000 per sample and we did $12 6 million.
So somewhere around okay.
Thank you that's helpful.
And then I guess, continuing with the VA MVP looking at the first quarter guidance.
The low end of the Biopharma revenue.
You'd be guiding to <unk>.
<unk>.
Near flatter or a decline in VA MVP revenues.
Could you just maybe comment on on how personnel coming back into the the lab building out infrastructure and as you discussed earlier implementing these automation processes.
We're going to aid in that extra capacity.
And I guess Additionally is the year view that any additional capacity will always be steered towards biopharma.
Biopharma customers given the excess order flow you guys are receiving.
Yes, so in terms of our capacity and our ability to use capacity one thing thats really really great about our business as we're able to modulate and move capacity to biopharma, when we need to and over the VA MVP or population sequencing when we need to.
Sitting here today, we're probably running at 65% utilization of full theoretical capacity at any point in time, but a lot of that depends upon when the biopharma samples arrive. They do arrive in large batches at times and so we have to focus on the processing of them when they come in because of the turn.
The round times that are required if we look out here in 2021.
John had mentioned in the prepared remarks, we have received.
A large amount of customer orders over the last year.
Year, or so and so it's been building up in.
To that point, we do see revenue growth for Biopharma as we go through 'twenty, one and beyond right.
In terms of the capacity, we're going to need to stay in front and have more capacity. That's built up primarily because we don't want to leave any revenue on the table revenue growth is the number one priority.
In terms of.
The cost of that capacity, we haven't said anything publicly in terms of sequencing equipment or anything like that and as John had mentioned in one of the or to answer one of the questions.
The other technologies and sequencing capability to reduce cost we are still waiting for some of that to hit the market and so before we go and spend a lot of money on capacity, we will make sure we do diligence on whats the right technology and platform to would be.
Great. Thank you.
Sure Okay, great. Thank you.
Your last question comes from the line of Arthur <unk> from H C. Wainwright. Your line is now open.
Hi, everyone Hi, everyone. These off the floor RK. Thanks for taking my question.
Just had a one quick one.
Regarding the customer base for the Biopharma clients.
You guys had the 45.
Some of these quarter.
Wonder is that including the cost declines of using the pilot program.
Or if.
If not could you guys give us some color on that path.
I'm, sorry, so you're right in saying that the 45 customers does that include people involved and in pilot programs.
Yes.
Yes, so if we have people who are where their first order for the next platform.
That is what we would consider to be of pilot order they would still be counted in that.
Some of the the customers we've had coming on board now.
The first orders for the next have been we've had some that are in certainly in the hundreds of thousands of dollars in some between half a million of millions of dollars. So there's.
Not really sure I called him of pilot.
Those people just beginning to use the the the technology, but yes, they would be.
Included and I would say many of our customers are in a position, where we still have substantial room to grow in terms of the <unk>.
Fraction of their clinical trials that we are winning and so forth. So we look forward to that area.
Being a real source of growth for us in the years to come.
Awesome. Thank you. Thank you very much.
Thank you.
I am showing no further questions at this time, ladies and gentlemen that does conclude today's conference call. Thank you all for your participation in Hollywood Wonderful day, you may all disconnect.
Thank you.
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Okay.