Q4 2020 Invitae Corp Earnings Call
And the or B to B customer revenue, both of which used to be bucket in one category called institutions. We.
We will also be breaking out our revenues by where they are generated either through a centralized lab, we're decentralized through the shipment of reactions to Biopharma partners and other <unk> customers.
In 2020, 66% of our revenue came from third party payers and 25% from Biopharma partners and other b to B customers, primarily hospitals and medical centers with the remainder coming from patients.
The percentage decrease in revenue from third party payers is driven by the customer mix of our true Dx, consisting almost entirely of Biopharma and other <unk> partner revenue.
Excluding Archer our third party payer revenue remained strong largely due the higher Medicare payments and steady improvement in commercial third party payer performance, particularly with our hereditary cancer and IPF test.
Our ASP decreased to $413 in 2020, primarily driven by a shift in payer mix from third party payers to Biopharma partners from patients and by an increase in our <unk> testing with lower associated Asps the.
Of the archery products.
Absent Archer, we experienced another increase on a quarter over quarter ASP to $440, a healthy increase from the third quarter of $429. This increase was primarily driven by stronger reimbursement from our third party payers for our hereditary cancer in Nics offerings.
Note that we expect asps to benefit from the launch of stratified in PCM as regulated clinical products in the coming quarters and years.
The rising asps over time due to progress with payers represents a notable source of leverage our many investments in our platform and willingness to provide early access to patients ahead of the payer adoption curve is bearing fruit.
As mentioned last quarter as the business develops billable test volume has become a more relevant metric and an important benchmark given that we accrue our revenue based on the number of billable reports in the periods. We're pleased to report of 41% growth in billable volume from the previous year with approximately 659000.
First in 2020, including about 238000 billable tests in the fourth quarter International volume increased to about 13% of total billable volume in 2020, which was driven by the strength of our true Dx internationally and by growth in our base business during the fourth quarter, the fourth quarter International volume.
Top 17% of all volume.
Slide nine breaks out our volume for the year and includes our definition of billable units defined the individual test reports released an individual reactions shift historically archer measured the volume of reactions defined as the set of reagents customized to perform an MTF tapped by clinical customers in the.
<unk>, we plan to use units interchangeably with the term reagents as used by Archer.
This slide also breaks down the legacy and VPN Archer Dx billable volume in 2020, we no longer report accession volume going forward since they no longer reflect our current business and we will not break out archer associated volume moving forward.
Overall, our volume continued to trend back and exceeded our pre COVID-19 levels across legacy and VK product offerings, while our test mix remained consistent as compared to the third quarter that day.
Ed we continue to urge some caution regarding expected growth over the next couple of quarters as we still face impacts of the COVID-19 pandemic that could affect our business in the near term.
As we've noted in prior quarters, the pace of M&A activity and other factors make it easier to understand our business and financials by providing non-GAAP metrics. Most line items on the P&L are affected by acquisition related charges to allow for the comparison of the two sets of numbers, we urge investors to review the detailed reconciliations of non.
Non-GAAP in tables included in today's press release and at the back of the slide deck for the remainder of the call. We will discuss non-GAAP numbers, including cash burn, which we believe provide a more relevant depiction of the operating business dynamics.
Our non-GAAP cost per unit now defined as the total cost of revenue divided by the number of billable units in the quarter was $261 in 2020 and $227 in the fourth quarter.
The per unit cost was impacted by mix changes and we expect debt with our reproductive health tests now run in house, our Cogs will continue to benefit.
Excluding archer the non-GAAP cost per unit would have been $250 during the fourth quarter, the Archer Cogs of beneficial impact on our average Cogs per test.
Our non-GAAP gross profit was $106 $8 million in 2020, and $45 5 million from the fourth quarter, which translates to a gross margin of 38% in 2020 and 45% in the fourth quarter. Our mix continues to impact our gross margin with the increased collection rate on nics and the.
The decrease Cogs over the next several quarters, our gross margin should again approach of 50% gross margin target in 2021.
Recall that our mid term stated goal is margins of between 50 and 60% of goal set in mid 2020, when we announced the acquisition of Archer.
Moving to operating expense, we noted in the spring debt in response to Covid, we would reduce our burn by the time, we exited the year. We did so in our base business non-GAAP operating expense, which excludes the cost of revenue was $456 $1 million from 2020, and $145 9 million in the fourth quarter.
The fourth quarter contained the full period of Archer activity, which contributed $31 3 million to operating expense.
Excluding this activity operating expense would have been of $114 6 million in the fourth quarter compared to $102 6 million from the third quarter included in the fourth quarter, Opex, where acquisition transaction cost of $14 7 million, but if one takes out the archer Dx spend on the acquisition costs are op.
<unk> was down from the fourth quarter versus third quarter.
We succeeded in reducing our spend by year end from the base business. A goal we set in the early days of the pandemic given the stabilization of the markets and opportunities in front of us debt continue to grow including multiple M&A ideas worth of assessing we will continue to make prudent investments in projects programs and acquisitions such.
Those are one codecs transaction just last week.
Sean and Ken will comment on that in more detail and.
In addition, the acquisitions, we expect the Opex in 2021, we will continue to increase as we invest primarily in R&D and marketing.
Cash burn was $441 $1 million from the fourth quarter, including all of the cash paid the financing closed acquisitions and from the associated expenses without these acquisition costs are burn for the quarter would have been $74 8 million the.
This amount includes $29 1 million for our true Dx and $45 7 million for the base business recall that the comparable base business burn in the first quarter was $66 2 million. So we dropped the burn by over $20 million by the fourth quarter. This again shows our ability to titrate operating spend as market.
Conditions required.
Moving to our cash position cash cash equivalents restricted cash and marketable securities totaled $367 million at December 31, compared to $368 million at September 30th Importantly, we raised additional equity and debt to finance the acquisition of Archer during the fourth quarter and took down cash via our ATM.
In January of this year, we raised additional net proceeds of more than $434 million in an equity offering the best on a pro forma basis, we have nearly $800 million.
And the closed in January we issued our 2021 guidance of over $450 million in revenue, we maintained that guidance.
Now I will turn the call back over to Sean.
Thanks Shelly.
Global demand for the information we provide continues to expand and we fully expect to maintain a high growth trajectory for many years to come.
Year, we executed on the day to day business, which obviously you didn't include the tackling challenges few of us could have anticipated.
We also undertook a series of transformational investments to continue to propel our growth.
The integrated new menu services and platform technologies that increase our addressable markets and will allow us to grow into the more quickly.
Of our most recent investment from the acquisition of one codecs.
Our leading technology and service provider and the growing field of microbial genomics.
The advanced algorithms and carry the databases provide the most accurate picture of the complex managing of examples.
The customers include top academic labs, biotechnology companies, developing why biotherapeutics and clinical laboratories performing of infectious disease diagnostics.
We've been watching the lack of bond space with growing interest for several years now as it is yet another genomic tool of patients and clinicians can use to assess the health and take action.
We've been working with the loan codecs team on the research projects and develop the great appreciation for how their talent.
<unk> knowledge and technology can augment our own work in this area to add another important element to our growth engine.
It's been years in the making of and we're delighted to welcome one codecs and to immediately get the work on the corporate in the industry, leading technology into the D day.
As the notes become something akin to a new level side, our technology backbone infrastructure and delivery platform of scale as well, allowing us to capture more of than our fair share of that growing ecosystem.
We've internalized the lessons of hundreds of the first move of companies, which tell us need to do more to capitalize on over the web and then shift to play defense the rock.
We recognize the challenges that come with operational complexity and the tradeoffs required for continued strategic investments, including scaling our operations and the pace of M&A activity.
That's why last year, we made an important hire to help us continue to scale the pace required for industry.
Premium 10 night onboard of CLO with an organization of milestones of the company and its contribution is and will be as important as any other higher in the couple of years.
Ken comes in the day, most recently from Amazon, where he led various operations, including Amazon's Transportation services global delivery of the services global fulfillment and human resources.
She brings with her deep experience in global manufacturing engineering technology development and operating regions.
As we move into other larger and more consumer directed markets kind of expertise will be invaluable.
I will now turn it over to Ken to take a few minutes to share of first impressions and an outlook on how we continue the scale, while delivering consistent growth and financial returns.
Thank you Sean it's great to be here with all of you on the call today as a former leader of Amazon and <unk> flywheel model and philosophy of both relevant and familiar to me.
Our strategy to reach billions of incentives on creating a self propelling flywheel effect to drive growth.
During my time at Amazon It was the job of everyone from the CEO for the last mile delivery associate to innovate the scale and to find new ways to serve customers.
It was the unwavering commitment to the customer and our mission at.
Net attractively to in VK that the hosted I could have an impact in health care quality and delivery.
My first seven months of been exciting as you can imagine and I've been pleased to see the focus on our customers the sharp and getting sharper.
The mission of delivering genetic testing as part of routine health care at every age is an enormous task.
The scale necessary to do so we will have acquired many new capabilities and a new way of doing business that differ significantly from the traditional model of past decades.
The building out the services as a platform differentiates our ability to serve our customers.
And I have experienced firsthand the value of getting that right.
When I came onboard Sean made it clear to me that we needed the rollout the standard playbook because our goal was unique and technology enabled health information is still of its formative period.
In other words, you need to have bold of historic aspiration, and then execute against them over and over again to succeed the way we have of vision.
As I think of a scaling our operations to support growth and how the strategy of apply.
Some notable strength for us to build on.
We have industry, leading science and technology.
We provide accurate access to our patients quickly and at low cost.
The outlet space is formidable.
Okay.
The people of the V to believe in our mission and have a purpose that is bigger than ourselves.
And finally, we have big our basis and historic aspiration.
There are also several areas of focus that have our immediate attention.
The flexibility cost effectiveness and technology are core attributes of the scale that will improve operating leverage now is the time to define our path the scale of the business to support ongoing and impressive growth.
The finding how we win by providing the answer for patients providers and clients that others are not able or willing to provide the central to refining our three to five year plan.
And operating metrics provide clarity for decision, making and urgency for action.
Cash flow leverage volume growth and customer satisfaction, our output and.
And are the result of managing key inputs.
We are now in landing those key inputs.
Speeding up the process of delivering cost of revenue value is essential to driving cash generation.
We are investing and dedicated teams to drive operational effectiveness, which we see pay off in Cogs reduction and thats the delivery of product enhancements.
All of our objectives are time found to recognize we have a finite amount of time energy and money. So we would need to use them well.
Focusing on cost does not mean, we avoid placing big bet, we have to the right more often than we're wrong, but never being wrong means we are either moving too slowly or Amy too low.
Our goal is the generate large sustainable operating cash flow.
We'll buy a platform that is sticky and is working for both of our customers and for all of us.
I'm not prepared today to predict precisely when that will happen, but it's tommy and will not be by accident.
I'm excited for our president and for our future.
Came here it can be a part of transforming healthcare and an energized by our ability to do just debt.
I'll now turn the call back over to Sean.
Thank you Ken.
The future we've long discussed the see the genetic information driving mainstream medicine is coming into the use of reality.
Our strategy is unique as we build the single platform to deliver genetic information in the right place at the right time across all stages of life.
Essentially reorganizing the customer's experience in health care.
We're lining up the right moves began small to extend our leadership the constant innovation.
And it is ongoing investments in menu of services and platform than the VCA will continue its march to utilize genetic information to improve health care for billions of people around the world.
I will now turn the call over to the operator for Q&A.
Ladies and gentlemen to ask a question you will need to press the star and then one on your telephone keypad.
To withdraw your question press, the pound or Ashton.
Please standby, we will be combined will be Q&A roster.
Our first question is from Doug Schenkel with Cowen Your line is open.
Hey, good afternoon, everybody and thank you for taking my questions.
The first topic is really on of PCM for MLD and monitoring.
One of the could you just provide any updates on the timing of the planned launch.
What plans are there for actually bringing the kit in two of the central lab and running it there.
To the extent that that is part of the plan do you believe existing codes that are in place for MRV.
Such as those of you spine the tariff of signature or it can be piggy backed by you and then finally MRI monitoring at the big opportunity and products are just getting launched now but.
A number of companies are in the midst of launching products. So you could make a sense an argument that on one hand at the huge underpenetrated Tam on the other hand.
This is getting the getting to be a little bit more crowded at least within liquid biopsies. So I'm just wondering over the next few years, how you would anticipate differentiate it.
Yes sure.
So.
So, let's see I think the the.
The details on the launches and so the key.
They are actually they are.
Pharma customers now.
Customers of <unk>.
Translational studies.
Some of them today so the.
Kind of going but the clinical launch will happen right. We've got the PCM submission, which we are FDA submission, which we are on kind of on the previous previous timelines. We're still on track for that submission sometime this year early next.
The standing PCM up other than <unk>.
For offering direct with the oncologist to our current customers that were looking to looking to accomplish the sooner the better.
Finally, the concern, but there's a handful of into the house, but I would call that certainly sometime this year, but that up and running.
The so those of the timelines for again the kits in and of kits as our euro of product kits as regulated products timeline and then of course, the OTT service standup.
Four.
Let's see the next one on the on the question of the size of the market versus the other players in it.
Yes.
$44 million at least in the the <unk>.
Countries, we serve around the globe, there's $44 million odd patients.
Battling cancer.
So the huge huge opportunity all of them ever increasingly are going to get treated with targeted therapies and people don't want to monitor the how that's working for our current changes earlier than ever.
So while I think it's fair to say, it's more proud of and it was.
I think there is an awful lot of room, that's kind of one thing I would say.
Frankly of the more players that are at it with really great test kind of of better for all of them in the market in general I think this is anywhere in it.
We are anticipating.
The healthy adoption here coming up by virtue of all of the energy going into the space, which again I think it's good for everybody.
Most importantly, the people battling cancer.
And then ultimately what differentiates us I think.
And the long held the view.
Obviously, the sensitivity specificity the accuracy all of these things are going to come into play.
Sure.
The average general sense much like non invasive prenatal screening.
The a handful of players that have the goods the past Buster.
With oncologists with the treating patients and then the rest is going to be determined by.
Ease of use speed service levels.
The nature of the rest of the offering to make it easier and easier and easier for oncologists to use this very precise information to guide patient care and our view is that's going to ultimately when you're talking about the entire addressable market, that's going to that's going to be what ultimately differentiate it not to say the aren't going to be specific use cases, where.
The ability of the stratify our patients.
Versus trying to actually select therapy might be useful or in many parts of the majority of you'll have to add.
Actually really be able to strength kind of determined.
Early as possible can't just coming back to what the next best therapies.
So I think it's also by the way our views of that can be won.
Uniform homogenous Pam deposits.
To put it on the lately so.
I think thats kind of Thats pretty consistent with the way we've thought about.
And then decide I skipped the coding and billing ones yes.
Again, I think the gates.
<unk>.
I think most people are kind of seeing and turnaround of the view that the way that the NCD as had been written the way to see muscles of approaching the thing is that yes. Indeed the codes are now.
The company Slash testing.
Agnostic and more more described the methodologies the number.
<unk> the size of the penalty income.
Okay.
The approach and yes. Many many companies, we think will be likely billing under the the exact same codes and receiving the same.
Yes.
Okay, that's great and one of one quick one of the Archer acquisition was motivated in part by the desire to decentralize diagnostics with the kits. The pack bio partnership seem to be a sign that you remain very committed to optimizing of the central lab I know im over simplifying a bit but to the extent you will bite on this can you reconcile all of these observations.
And more importantly, how should we think about these events in the context of your long term vision from the market. Thank you.
Yes, absolutely and I think what I would say is kind of low.
Well, let's keep in mind, the only difference between.
The the.
The the lab running at Sloan Kettering being of specific tests.
The production engine within the visa is is just the matter of scale of cost and whatnot. So the technology. The technology, we purchased in the team and the the.
Of the domain knowledge.
It is applicable.
Arthur is applicable to both that decentralized ability of the plant of kits and the pipeline down low.
I'm kind of ends of the world.
As well as breaking that up and standing that up in a very high throughput highly scaled production machine.
Then we can take them and offer the service to places that.
The customers clinicians that don't have a local.
Clearinghouse for these kind of testing so so I kind of want to.
Just draw a distinction there is the technology is what's important the people that know how.
Now, where the where the patient need the net is something that we think in oncology is still got from time of workout.
I think you've probably seen there's anywhere from estimates from 20% of the market as the centralized to 80% of the market of centralized in the kind of everything in between.
I think we've been pretty consistent saying, let's just assume for kind of a good three three to five years will be 50 50 either way.
For certain in the long run they're going to be places around the globe national cancer centers.
We'll do the cancer institutes that are going to want to continue to run their own the samples of on their own data locally.
And that will always constitute some important portion of the market.
Even as of.
Again, just the raw and share economies of scale and having your content of whatnot kind of push push the market the market for the.
The send out of approach of the centralized parts of the even though that develops more.
So it'll be a healthy mix for some period of time, which is why again, our view of it it's really important debt.
These 44 million cancer patients get access to information sort of later.
Whether they are at a place that is going to run it in house or where the pairing of places kind of some of it out.
That informs our thinking on that end.
We think in that period of time the call it three to five year timeframe.
On the.
Operating profit.
Per unit basis that kind of view, we're willing to be indifferent as to the kind of the exact market structure in five years.
Again, I think we could we could talk about the ins and outs of why it would go one way of the other but in the end we are.
<unk> has to be different.
Health net patient wherever they might need to be served.
Alright, thats great job. Thank you very much.
Sure Okay.
Our next question is from Tycho Peterson with Jpmorgan. Your line is open.
Hey, Thanks, a couple of follow ups there on Archer.
As we think about kind of PCM and the potential debt could you have breakthrough device designation could that accelerate Medicare coverage through the NTIC role.
Yes, we do you think.
Ken.
<unk>.
It's kind of the new new ish for a lot of people. So it's really hard to say exactly what that means the tyco and kind.
With the.
With the reimbursement will look like but nonetheless that is definitely in the.
The.
It's an important pathway and what sort.
And the working with the FDA.
Exactly of that.
And I'm curious what you need to do on the market development from just.
On the kitchen side as we think about whether the hospitals are actually ready to kind of bringing this in house I mean, what we constantly hear in the field. The setup model is efficient it's quick.
Easy to interpret results. So like what do you think beyond reimbursement really needs to happen to drive the.
<unk> adoption once you do like the kit.
Yes, I think.
It's pretty clear they are going to be places that one of the run it locally regardless of any of the other factors that might push that decision, making one way or the other and our view is and look this is.
Pretty much the the Archer team's view has been and we subscribe to.
As for those players to have it.
One single box room temperature easy to use of the order you had inventory ease of use.
And then to have that.
Be FDA approved as opposed to have to stand up every iteration, there and on your own.
It makes it dramatically easier to use the.
The price matters, ultimately if you're going to.
The plaque of reimbursement and then it's the ease of use of the of.
Of the box itself.
And really the ability to have price do you think about stratified.
The product that answers everything that one of those places we need to know to put a patient on a different therapy than otherwise would be indicated by that by the rest of the natural history of that patient and that all in one plus an easy way to us.
The improvement, it's much easier standup and validate the very different type of validation shorter of much easier sanford's involved samples of involved.
And then of course, the economics work because you can turnaround the apply for these.
I think kind of relatively very high pricing that has been established for these for the therapy selection approach and then Thats, where again the price the economics of the kit come in to help those centralized players do it the streamlined as much as they can and do it easiest assets where they can.
And of course, you know we have we of designs for the future to also include all of the requisite very interpretation of the reporting all of the data infrastructure that then comes along with by virtue of working with the mid day can also be put as of.
It is available is the value add for those four of those places.
That really do want to run it themselves, but those are kind of the.
The kind of again the Kid has to work has to be as the accurate has to be comprehensive as the cost effect of the economics at the work.
Yeah.
And then like I said, I think in our hands and adding more somewhat data infrastructure it will be.
It will be the.
The best experience as possible for the patients as well.
And then a follow up on Pac Bio you, obviously announced the deal at our conference. We never really talk about how that deal came together and Im kind of curious as you looked at the secret to the landscape. The technology's changing quickly there a dozen plus kind of third Gen company's incubating.
What got you comfort that they had the right technology, what got you comfort that it was the right decision to kind of subsidize the instrument development with them as opposed to.
The range of players of the market that are can be the look forward.
And then a couple of follow up on that yes sure thing so real.
The real quick there definitely are.
The burgeoning landscape of newer players with interesting kind of of technology out in the market.
I think there is a distinction with Pacbio couple of things one of the the proven long reads as very important price. It does lead to and particularly some of these pediatric indications of 30 30 plus percent increase of diagnostic yield.
But also I think maybe one other thing to keep in mind as type of has been around a long time.
In fact of lot of horror of.
A lot of our assay on the leadership of the company without back by one of the artist was developed.
No it very well familiar with it it's been around a long time, it's been put through its paces.
And so it presents it presented to us an opportunity to where we had that we asked ourselves. The question is.
Is this the technology for which simply the.
The very very focused specification and some energy and capital after.
Share engineering effort is what it will take as opposed to kind of real technology risks.
And that's where it kind of by by virtue of them being around the long time and that's also over those many years staying pretty close to them give some comfort with that was the right thing to do we're not kind of venture firm, we're not of venture capital investment did tool space kind of kind of play here that it was important that it was purely in our view of managing pumps.
Function of timing of engineering.
And then of course.
From Christian about the other thing that was again someone who is kind of seen what the what happens when there is a price curve as written.
Certain direction and kind of of Likeminded approach to what could be possible. If we teamed up together to really enable those long re genomes.
The kind of basically takeover as much sample volume as possible.
Very high quality, along the genome of the staple of medical genetics.
It's pretty exciting.
Pretty exciting idea.
We got going once we've got a full head of steam line until we decided to go ahead and get going on it.
And I guess the other side of it is what does it take the open up the market for our clinical grade whole genome sequencing I mean, how are you kind of get payers over over the hurdle there.
I'd say, we're actually doing better on that than perhaps even the season I would've thought.
The reimbursement for <unk> in the pediatric picking the NICU space is.
The kind of in the three to $5000 per per test range.
Very healthy.
So that's happening now that the reimbursement criteria still.
Other than.
I think when people see the data that will be coming out of the next two to three years, we're going to see is obvious.
But that's a very familiar path that we've been on it with a lot of other disease areas.
We also do have a fair amount of pharmaceutical Biopharma partners, who for whom those that outcome is super important for targeted developmental therapies and that is certainly going to be of part of the reimbursement picture going forward as.
As well as frankly and this is again. This is our this is our model at play there.
While not $250 like our typical panels of having a patient day price.
The affordable and accessible for families who have no other word.
The other place to go for answers.
Another piece of it as well.
And I think thats.
That's kind of of the best way I could explain it and we do think kind of a probably a healthier mix of involve three going forward, but that line.
As I said, it's positive on all fronts.
From from that perspective.
Okay. Thank you.
Our next question is from sort of growth SVP Leerink. Your line is open.
Hey, guys. Good afternoon. This is the westley on for Q&A today.
At the start of the guide.
<unk> been out there for a couple of weeks now but.
So of $450 million from our side, given the high 30% of pro forma growth rate.
It seems like a relatively achievable level of given the long term of 50% to 60% target in the backdrop of the pandemic last year. So I'm just curious what's baked in there where you can see upside in.
Are we can bridge the gap the 50%.
60% CAGR longer term.
Yeah, no. It's a good question I think in the kind of fully acknowledge that we have.
We've given the guide on this year and I think there is some question around it.
But also.
Pointed to and I do think this is the more relevant the more importantly over the next three years, we think of substantial growth.
So if it means we only come in.
Just above our guidance share. It means we've got some work to do for the next two years.
But I'll be honest I think that's kind of the.
Our confidence in the overall.
Picture is exactly that.
This year obviously.
We're still pointing to and still see some uncertainty cropping up.
Whether it would be reasonable a region or country by country from from Covid in the ever evolving Covid saga and so that uncertainty is still top of minus the <unk>.
Impactful in our guide.
In the few weeks since we've been kind of a partially because of the after talking with whether it be at the.
At the.
Of the opening of the year or with the recent range.
We have the last few weeks of have only solidified our position.
Position and that we feel confident that we can.
The 450 revenue.
Also feel.
No.
I would say.
Adequately.
Appropriately circumspect around kind of the choppy.
Potential uncertainty from Covid. So the single biggest thing if you are asking in terms of upside is.
The World Cup.
Clears up and Covid impact goes away sooner than later.
Then there is some uncertainty the evaporates.
Happy to sort of the later I will tell you right now it does not look like that is happening.
Now I'll turn of that of course, our traction.
Kind of the direct market efforts, our traction with new clinicians the whole new clinical areas, particularly thinking looking at and talking about urology for an example of an example of that.
All of our traction outside of the USA again, now where we're picking up of ever increasing part of our business is outside the U S. It creates growing very rapidly.
The particularly strong into the 2020.
We think there's a lot there's even more.
The demand there.
And I think Thats, where.
We could we could really see some potential upside.
And then of course, we point to.
I think the last it's not that it's obvious but it's just that the reproductive market, it's still even with all of the.
Great companies.
Tough competitors in it.
It's still at very shocking.
<unk> the low percentage of women, who are having children that are getting afforded the insights of advance medical genetics. So I think thats those are the areas, where we could see some upside to swing things and those of the areas that we count on over the next.
Two to three years to provide that debt.
The aggressive growth.
Of course.
Not really affect of this year, but in the coming two or then when the when we start adding in therapy selection of cancer monitoring we think those of obviously will be a big part of the story for two.
Two years following.
That's very helpful. And then just one follow up on the mix of the business currently I know legacy with the pre Archer and pre pandemic.
It was around 70, 30, I think mccain hereditary and reproductive.
And I know the inflicted a little bit with the dependent making of the resiliency of each of the markets, but just curious where we can expect that the shakeout.
Sure.
We can expect the the archer portion of the combined mix to kind of longer term.
Yes.
It's a great question and I'm, just going to admit I'm going to start right in front of us. So we can kind of I don't know.
<unk>.
It also in a way of really doesn't matter.
With that said and I think it's worth pointing out we are investing across all of those fronts. So so we are looking to grow of reproductive any of our.
Pharmacy business, which tends to be more kind of non cancer inherited genetics.
We certainly kind of fee and we will continue to expand the market for hereditary he didn't even our oldest line of hereditary oncology.
Plenty of room growth by way of reimbursement guidelines of expanding like I mentioned urology.
And then certainly of the liquidity.
Already pointed out of it.
Huge Tam for therapy selection cancer monitoring the oncology pipelines there are 90% full of targeted therapeutics of many of which are coming to market in the next two to three years.
We would expect in three years' time frame that that kind of combination of risk assessment therapy selection and monitoring in cancer could be <unk>.
Very substantial.
Portion of the business.
With that said there is no slowdown the only acceleration in the Biopharma pipelines.
Kind of building and running clinical trials looking for patients for rare diseases across all states in mice, and then of course like I kind of kind of keep pointing out the reproductive health is a very very large.
30 million pregnancies the year in the markets, we serve and again around the globe.
In the very very very small portion of those are being certain day. So.
It's not a matter of flip the answer is we don't know we don't care, it's that look.
There.
It's going to be very dynamic. The next two to three years. It could go a lot of different directions, but we are expecting healthy growth in all of those areas.
So I think if you look forward I think roughly.
Roughly similar mix would be.
It wouldn't be out of the out of the question.
But you can also see a lot of factors that can move one of these areas much much faster than others.
And we'll just have to see what the C, where we're kind of market development and selling and marketing efforts yield the most in the near term of that that will ultimately determine that question in the short term.
The other thing.
That I would mention it's Sean the one other thing I would mention of the reason why it's tough as Sean indicated to be able to disaggregate the business in the old way that we did diagnostic test 70% of reproductive 30% as debt. When you do have these products coming across in very different ways.
When you look at the fourth quarter, obviously, if something like 15% to 20% of the fourth quarter was the Archer business, we won't give that moving forward, but that's sort of <unk> as we begin this journey together that piece and whether you put that in the oncology piece of the diagnostic piece of our piece of its own.
We consider all of them as the platform and then the final thing I would say is in the fourth quarter we did.
The rebound.
In the oncology side of the business as I indicated on some of the collection from some of those asps and such and so whereas earlier in the year. We found that the reproductive was more durable we did see by year end that we are getting more back to sort of of the old historical rates that we have been out before other reproductive is still growing very.
Fast.
Great.
With all of us.
I'll just add one more thing there because I think kind of really relevant is.
In the long run we've recently in the last couple of of Covid.
The patients.
On the call today.
In the long run the answer to the question is kind of take take the population at kind of the buckets. The phases of life that we've laid out there and that ultimately is what our mix will look like ultimately our mix will be the number of individuals that are having genomics genetics use of daily care at each age group at each stage of life and I think that's kind of.
It is important I think it doesn't really answer your question for the next two to the three years, but I think in the five to 10 year period, ultimately, that's where we think our mix.
Very much an entry point into the platform based on the stage of life.
Yeah.
Great very helpful.
Thank you very much.
Yes.
Ladies and gentlemen, as a reminder, Q for your question. It is star then one on your telephone keypad.
Our next question is from Vishal Shah with Morgan Stanley. Your line is open.
Hi, This is edmund on for <unk>. Thanks for taking the question.
Circling back to.
The collaboration all of them.
The advantages of being an early access to new long read sequencing platform is pretty clear, especially when the optimized <unk>. When do you guys expect to have access to the first version of the system running the test volumes.
And how long of a preferred price and structure stay in place and this might be a little.
Early but.
Looking into the future of how do you expect the utilization of short read versus long lead to evolve once the platform is completed.
So I can tell already I'm afraid I'm not going to have very satisfactory answers because.
But I'll do the best I can so I think the short of it is we.
The deal with the joint steering committees Committee has met and we are moving forward.
When that's available it's still it's still hard to see right. There is a few decision points coming up here that the that our teams will be making other iterations.
Of the long lead technology at different kind.
The price points and I think we will probably be together deciding do we have.
III deliverables are to deliver all of the one deliverable in the ultimate deliverable.
So unfortunately.
We're not quite sure.
At a point, where we can we can kind of we.
We don't we don't know short answer.
The duration of the cost benefited all of its something that its the detail of the deal that we're not going to be disclosing I think what we can say is.
It's either or it's the duration of time of <unk> number of samples.
So hopefully I think the duration with any luck of duration is relatively short because there are so many samples millions of samples we're running on it but it makes it as such.
And I think that.
That would be the best for everyone involved.
But nonetheless, it works something like that but the.
The details won't.
Not the not at Liberty to discuss.
Suffice to say, it's something that both gets into the day, what we need by way of kind of a compelling reason to build the market out and drive the application of using long read sequencing for as much as possible and medicine.
And of course, the ability for a pipeline of other than take those pick those learning to take the platform and kind of get other other very high volume luxury companies that the running so.
I think thats.
The rest of the lot of how that will play out.
And then the aspiration again.
Like I mentioned there is.
There is a significant increase in diagnostic yield when you look at long rates.
And how much of the sample volume at the displaced is simply a matter of cost.
We're going to we're going to find out together just how much that can be.
Got it. Thank you that's very helpful and then switching over.
Reproductive health side in terms of cost reduction.
I think you guys mentioned earlier in your prepared remarks that you guys have reproductive health kind of spell in the house and I'm wondering going forward how much more of a cost reduction can we expect I think you guys said this quarter was about $2 50.
Four X ultra versus how much more than the expected.
Yes.
In terms of the the Cogs reduction in that so it kind of already productive there is carrier screening noninvasive prenatal screening.
Miscarriage analysis.
Although the handful of other specialty kind of health of <unk>, which are kind of really key test for assisted reproduction.
All of those we continue to work on lowering the cost certainly the nics one of the fastest growing products.
It was one that we were running we were outsourcing of mentally and brought in house and now we have a further step function reduction of costs will be switchover. The bulk of the volume maybe not all of it.
The difference the technology.
We would expect in general on us to continue attacking Cogs quarter by quarter on the real benefit of line.
But there's no there's no one specific kind of thing that I think.
Make a demonstrable single quarter jumped single quarter declined.
In Cogs it again.
If overall, you kind of consider 30% of our business of which.
Maybe 40% or so within Ips, that's the biggest Cogs savings, but we're also working on the Cogs the cost of goods for all of the rest of the offering.
So I think thats.
In general there is room to go and again, we will.
We'll just continue to target, 50% gross margin across the entire platform.
At the full confidence that we can get there.
Okay. Thank you and then just one last quick housekeeping question, maybe for Sean I think you guys said in the prepared remarks that you will no longer be breaking out.
The volumes I'm, assuming that's the same for of.
The other metrics.
The metrics, such as ASP and Cogs as well.
Yes, exactly so what we wanted to do was to give you all of the fourth quarter since the first second and third quarters for our true we're already published.
Within our S four and our acquisition documents as well as their prior S ones.
And so without complete the year give you a starting point so the economic model whatever you want moving forward, but that this would be the last time in part because as we've been talking we're integrating all of these programs into our other programs and so it's not a discrete separate business and we'll make our decisions based on what's best for the platform of the company.
And for the patients as opposed to trying to accelerate their particular business because that's what people are expecting so I think it's the same as we've done for every other business, which is rapidly integrate them and of the whole end of the platform and be sure that we're keeping our eye on what is best for the patients and.
Rapidly we can get the test that as Sean was saying to those 44 million patients who need this test in an acceptable and affordable price.
Yes.
Great got it. Thank you guys very much for the answers.
Sort of thing and the next.
Next question is from over a year ago.
One of the capital market Laboratory your line is open.
Hey, Thanks, guys. Thanks for taking the question.
Last year.
With the Q4 preliminary four and the full year guide you shared a few new metrics one was.
The new accounts and there was something like 71% year over year growth and then there is this other metric with the reorder rate for new accounts because of something like 80%.
Can you share those organic metrics for 2020, so excluding archer.
Thanks.
Yes.
We haven't.
Tell you what it's one of those things where with everything Covid It Scott.
Thats enough, where it didn't really make a lot of sense.
That is something that we.
We will discuss going forward and we'll continue to kind of included the key important thing to share commercial traction, particularly traction with their current accounts current accounts, but.
All of kind of put debt on the author of like with all things Covid. We had most of the field out of the out of the <unk>.
Reps out of the field.
For good if not all of it depending on the region.
It didn't make a lot of sense the to look at it and discuss the broadly it wasn't a real wasn't the real.
Wasn't the real comparison, but I would offer that is something that we will continue to look at it and I think the kind of once we get out of the Covid era.
And the important thing to talk about publicly.
Okay. So does that mean that the vast majority of the growth even at those hampered.
The hampered growth in 2020 was have been from existing accounts.
I think that the fair assessment.
And I think more importantly is the.
The we're doing a ton of experimentation with.
Kind of our newly acquired Chatbot, a bunch of front end development from telemedicine.
We were able to acquire some new accounts in which was interesting but also.
The rationale and the reasoning behind the sporadic enough of it.
We just want to.
The.
The circumspect about what that actually mean vs.
Is that durable.
Kind of are those accounts sticky or do they just kind of goes because we were the only one that was nearby with an offer that could do by telemedicine.
Those are.
That's generally right of your time.
Sort of same accounts stuff.
With some.
New account action taken of toward the end of the year and now kind of.
Once we can get out there, but it's like I said at the.
It's a little murkier than.
It's Murphy and assets that we don't think it's from.
The point out or highlight of this of course about at this point.
Okay. Thank you.
And ladies and gentlemen, this concludes the Q&A session I'll now turn the call back over to Laura the Angela.
Thank you for joining us today, we look forward to connecting with you soon at upcoming conferences.
Thank you ladies and gentlemen, this does conclude today's conference call you may now disconnect.
Alright.
Yes.
Yes.
Yes.
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