Q4 2020 Progenity Inc Earnings Call
Welcome to the progenitor esports quarter 'twenty 'twenty earnings call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.
Ask a question during this session you will need to press star one on your telephone if you require any further assistance. Please press star Zero I will now turn the call over to Robert on managing director with Westlake I see on progenitors Investor relations for them.
Thank you operator, good afternoon, and welcome to <unk> fourth quarter 2020 financial results Conference call. Joining me on the call our Doctor Harry Skylight, Chairman and Chief Executive Officer, and Eric <unk>, Chief Chief Financial Officer.
Before I turn the call over to Doctor Stylate I would like to remind you that today's call will include forward looking statements within the meaning of the federal securities laws, including but not limited to the types of statements identified as forward looking in our annual report on form 10-K that we will file later today.
And our subsequent periodic reports filed with the SEC, which will all be available on our website in the investors section.
These forward looking statements represent our views only as of the date of this call and involve substantial risks and uncertainties, including many that are beyond our control.
Please note that the actual results could differ materially from those projected in any forward looking statement.
For a further description of the risks and uncertainties that could cause actual results to differ materially from those expressed in the forward looking statements as well as risks related to our businesses. Please see.
Our periodic reports filed with the SEC.
Slide deck with some supplemental fourth quarter financial information is also now on the website, but it will not be directly referenced by the speakers on the call today with that I will now turn the call over to Dr. Harry Stylee, Chairman and CEO of progenitor.
Thank you Robert and thank you all for joining US. This afternoon, we made significant progress during the fourth quarter, both with a revenue generating business and especially with our innovation pipeline programs.
In Q4 2020, we made progress in stabilizing our core revenue business. In addition to revenue cycle improvements that are beginning to strengthen asp's. We continue to witness strong new customer acquisition and in network expansion by adding national and regional contracts.
Further we advanced our discussions for in network status with our remaining large commercial payers and so additional commercial and government payers covering average risk <unk>.
T D.
These factors, which will continue to grow in contribution helping lay the foundation for sustained growth in 2021 and beyond.
We maintained a disciplined approach to managing our operating expenses during the quarter through a combination of reduction in force and cost controls, whilst maintaining appropriate resourcing of our key R&D programs, Eric our CFO will provide more details later.
And the cool.
During the quarter, we raised 180 million gross proceeds in December 2020 from a concurrent secondary equity offering and issuance of convertible notes and.
In addition in Q1, we raised $25 million on gross proceeds from a private placement with two leading health care focused investment funds that were drawn especially to our innovation pipeline.
We view this increasing investor engagement positively and it allows us to extend investor focus beyond our core molecular testing business into our innovation pipeline, which is now progressing at an accelerated pace.
We were able to see evidence that our core business in the fourth quarter of 2020 was stabilizing and reported 82000 tests, including 56000 core molecular tests and 26000, COVID-19 tests in the quarter, we continued to witness customer turnover, primarily due to changes.
We implemented during 2020 to strengthen our revenue cycle management and billing process.
As we approach the end of the first quarter of 'twenty, one the headwind of account attrition due to the aforementioned changes continues to significantly weaken.
By contrast, we've continued to secure new business with significant success.
These new accounts on the increasing productivity and beginning to help offset losses due to account attrition.
I'm also pleased to share that during the fourth quarter virginity further increases in network covered lives with an additional 1 million lives for new contracts with regional payers.
Separately, we're advancing in our efforts to achieve in network status with remaining large commercial payers and we're hopeful we can add a significant number of covered lives with access to a protocol folio in 2021, which should lead to a further expansion of our commercial presence.
We further expect that on <unk> revenue and ASP will gradually improve as more payers begin to reimburse for average risk in RPT several key commercial payers, including more recently for Telus, Centene and Humana as well as multiple state Medicaid programs have begun offering coverage for average risk.
And as a result, many of our payers currently cover average risk of most have indicated that it's a permanent shift in their medical policies. We expect that a rising ASP for average risk on IP team will make an important contribution to our revenue as it represents a significant and growing asps.
All of our product mix.
As a reminder, in September we expanded our carrier testing screening menu to better align with pay up medical policy coverage, which we believe will also result in improved revenue MSP in the coming quarters, we have already converted approximately 80% of our carrier screening.
Book of business to this payout line menu in January we implemented a patient cost estimates on nationally that provides transparency to the patient's responsibility early in the testing process and this program has further helped drive revenue and expand our business, we expect to begin realizing.
<unk> from these changes in 'twenty, one with significant volume and revenue contribution from our <unk> carrier testing prototypes.
We did experience a transient impact from the recent winter storms in Texas, a major market for us on across the eastern United States. We remain confident that Q1 2021, ISP will show growth over Q4, as we continued to stabilize the business and establish a growth trajectory.
Over the coming quarters.
To serve our patients and physicians, we launched a COVID-19 testing nationally within our channel in January well.
While our core women's health for molecular testing business remains by far our priority COVID-19 testing is helpful to both margins and volumes for.
Planning purposes, we continue to view COVID-19 testing as a transient opportunity and will adjust so efforts accordingly to respond to the rapidly changing testing demand dynamics.
Aiming to maximize the opportunity.
We are working diligently to demonstrate that a revenue generating business is a strong on positive contributor to our success and expect this to become more explicit as we progress in 'twenty one.
A quick note with respect to our ongoing litigation matters, while we continue to believe it to be unfounded and expect to vigorously defend our position we're not going to go into detail on this call and refer you to our disclosures in our 10-K for.
<unk> is innovation driven and in this regard throughout Q4, we have achieved development and critical critical risk reducing milestones across our pipeline programs.
During the fourth quarter of 2020, we made significant progress in our development efforts in the field of Preeclampsia, a complex syndrome by achieving a key milestone.
In analytical and clinical verification for OTT rule out test now branded preclude you.
The test multi biomarker tests with algorithmic analysis is primarily intended for use by the obgyn and MSM physicians to rule out preeclampsia and symptomatic patients.
We are pleased with how our same platform are performing.
And on abstract with data from our clinical verification study proved once in line was recently accepted as a late breaking abstract at the 2021 virtue, a coke annual clinical and scientific meeting in May.
We have also initiated clinical sample testing for program for a very.
<unk> study, which is expected to read out midyear.
During the fourth quarter, we held a virtual preeclampsia R&D day event. During this event, we shared analytical and clinical verification data as well as perspectives and insights from physicians and patient advocacy groups.
The event provided additional understanding about the current unmet needs in managing credit clients here.
Also provided color on how our tests will help add clinical value by identifying pregnancies that can safely be prolonged reducing unnecessary preterm deliveries in other words that preclude your test has the potential to improve outcomes and enhance the quality of pregnancy.
<unk>.
We are currently processing and analyzing samples from a pre validation cohort a subset of randomly selected samples from the probe on a force study the pre validation subset on the pro on a full study will further challenge the operational readiness of our production systems further define our Todd.
Population and expand upon our understanding of the heterogeneity of the broader patient population.
Assuming successful clinical validation preclude here would be the first and only preeclampsia a rule out test in the U S for symptomatic patients in their third trimester of pregnancy.
As a reminder, preclude here is a global opportunity and we also intend to realize that potential in the future.
We recently completed research with payers using a third party to better understand how they would characterize the value of preclude you at testing and we were very encouraged by the findings, indicating their understanding of the economic burden of disease and our value proposition.
More to come on the commercial impact in the future.
Our commercial team is diligently preparing for the launch of <unk> in the second half of 2021, including plans for our targeted physician experience program sales force training marketing campaigns. These activities will increase and accelerate as we move into 'twenty two.
Moving to a single molecule detection platform, we continue to make progress with the development of the platform and its first assay on next generation and ITT Tech enabled for.
As a reminder, we announced in the fourth quarter, we had achieved high target specificity.
Tens of thousands of multiplex single molecule detection probes, resulting in a miserable dose response to fetal fraction.
This achievement enabled assay integration on the initial performance benchmarking. This capability is critical, especially given <unk> recent opinion, highlighting the essential need to quantify fetal fraction.
T test, we believe that in April for has the potential to reduce.
<unk> direct Cogs by up to 50% allow for a faster turnaround time and achieve equivalent performance to sequencing.
With these features in there for <unk>.
<unk> is expected to usher in a new new opportunities for us to fuel growth in ICT market.
In addition to genomic solutions, such as <unk>, a single molecule detection platform has the potential to detect known RNA epigenomics and protein biomarkers with high sensitivity and low cost.
On the platform will be suitable for additional pipeline projects, including several oncology opportunities in the near future.
Moving to GI precision medicine, we continue to advance programs into key preclinical and clinical studies now using fully autonomous devices where available.
And targeted therapeutics, we recently announced the initiation of an important clinical study for a drug delivery system DDS.
Which in combination with a drug on proprietary formulation will be used to initially.
Treat ulcerative colitis, and other Gi related diseases the.
The company started its first clinical study with the fully autonomous DDS evaluating.
Capsules safety and Tolerability in the gastrointestinal tract of normal healthy volunteers.
The study will looser collect the first clinical data on the ability of the DDS, two ultra locate and accurately deliver a payload to the helio secret junction while colon.
A key delivery site for the treatment of ulcerative colitis and Crohn's disease.
This study will investigate the in vivo behavior of the GDS using the well established method of scintigraphy characterization.
Gamma scintigraphy will be used to validate the DDS Gi localization as well as the drug delivery mechanism using a saline solution payload that includes radioisotopes.
For DDS capsule will be evaluated on a single dose application and three separate dosing cohorts.
Results of this study are expected in the second quarter of this year.
If successful this study will represent a significant milestone and build upon the promising preclinical testing done to date.
This will enable us to advance our pipeline for both of our lead candidates that JAK inhibitor tofacitinib.
The 505 B two pathway in the monoclonal Biotherapeutic Lee.
The Mab, which we have manufactured under contract.
The <unk> therapeutic program <unk> for the systemic distribution of bio molecules orally has also advance and we expect to update you on our next key milestone shortly showing for the first time the performance of a fully autonomous device in a canine model.
We believe that the <unk> platform has the potential to transform.
<unk> biotherapeutics are delivered orally.
And on appeal Dx see boat program, we continue to advance the technology with ongoing assay validation and we are on track to initiate a clinical pilot study with fully autonomous devices in the second half of the year.
As a reminder, <unk> can perform a range of fluorescent based assays for a variety of Gi related credit apologies without the need for capsule recovery.
For the first indication being small intestinal bacterial overgrowth for CEVA.
There are over 100 million annual patient visits with signs and symptoms resembling those of CFO.
In a recent interview Seabolt ex dot to cities well communicated that the pill Dx has the potential to be the new gold standard for evaluating suspected seabolt patients.
Our assay for quantifying bacteria compared favorably to the scoping aspiration, followed by microbiology and received a smoothed out section award at the ACG Conference last October.
Our sampling program based on the Rss capsule is designed for both discovery and diagnostics and continues to progress well initiation of the first clinical study with fully autonomous devices is on track for the second quarter. This year, the Rss will enable us to recover preserved.
Microbial cell omics samples from predetermined non locations in the GI track once the Rss has recovered from the stool sample straw two samples drawn from the same location can be ex strategy for analysis by a range of debt bench top systems.
We continue to be actively engaged with additional potential pharma partners as we advance precision medicine pipeline and expect developments on that front, especially as we generate data without economist devices.
With that I'll now turn the call over to Eric <unk> for a discussion of our financial results for the fourth quarter of 2020.
Thank you Harry and good afternoon, everyone.
I'll provide a brief overview of our financial results and also invite you to review our fourth quarter financial release, and our 10-K for a more detailed description of <unk>.
During today's call and in line with our third quarter call I'll describe our sequential quarterly performance focusing on our third and fourth quarters of 2020. We also include year over year performance on our disclosures, but we believe the sequential can provision is more meaningful is progenitor transitions to a largely and network operation and reflects the <unk>.
In fact, with the Covid pandemic, which was not a factor in 2019.
We reported $14 3 million in revenues in the fourth quarter of 2020 net of a $10 7 million reserve for potential payers settlements.
As shown on page 12 of our earnings day Q for 2020 revenues before accruals were relatively flat compared to Q3, which is consistent with our prior guidance.
While our Q4 volume was slightly lower than in Q3, we started to see some ASP improvements in December before payers on settlement provisions, which gives us confidence our revenue cycle management efforts can generate increased asp's.
We believe the vast majority of the operational improvements we have implemented last year combined with the benefits of our increasing in network position and favorable average risk on IPD coverage by government and commercial payers will all converge to deliver a strong financial performance in 2021.
As a result, we maintain our 2021 overall revenue guidance range.
While uncertainties remain around COVID-19 testing demand dynamics, we believe the transition to growth of our core molecular testing business will continue to progress through 2021, and we expect to see the benefits of gradually growing volume demand and rising asp's.
We expect Q1, 2021 core and overall revenues to be largely flat compared to Q4 2020 before payer reserves, but we anticipate.
To face continued strengthening of Isps as we.
<unk> stabilization of our business trajectory, that's consistent with our internal forecast.
While asp's based on our reported revenues appear lower than the fourth quarter on.
Our Q4 total ESB, excluding payers settlement provisions effectively increased by 3% in spite of an increase in Covid test in our volume mix during the quarter.
This was the result of a 10% increase in our core molecular testing ASP during the fourth quarter as we are gradually seeing the benefits of our revenue cycle management programs. This positive trend is continuing so far in Q1.
Our fourth quarter Cogs on Cogs per test decreased slightly compared to the third quarter due to lower volume overall and a shift in volume mix during the period.
SG&A expenses were $33 million during the fourth quarter of 2020, a slight decrease compared to the third quarter largely the result of cost control measures put in place during the quarter combined with a 9% risk we had announced back in November R&D.
R&D expenses were $11 $12 million during the fourth quarter, a 14% decrease during the fourth quarter, mainly the result of stage gated investment strategies, where we allocate incremental R&D spend based on programs achieving various derisking milestones or key R&D projects remain well funded.
Fourth quarter 2020, net loss was $75 $5 million, which includes a $10 7 million reserve for payers settlements and $18 $4 million charge for change in fair value of the derivative liability associated with the 2025 convertible notes we issued in December.
Fourth quarter 2020, operating cash flows were negative $17 1 million compared to negative $51 $3 million on the third quarter. The main difference between the two quarters relates to $29 6 million in scheduled government and payer settlement payments made in December as a ring.
Minder, we now have $24 4 million remaining in settlement payments, which are payable over the next three years.
During the fourth quarter, we raised $118 million on gross proceeds through a concurrent equity and convertible notes issuance and had a cash balance of $92 million at the end of 2020.
We believe we have a cash runway that will allow us to deliver improves operate operating performance and achieve critical R&D pipeline catalyst events into the second half of 2021.
While we remain receptive to additional funding a fortunate Ts we intend to maintain a disciplined approach to securing additional capital with that I will now turn the call back over to Henry.
Thank you Eric as we look through 'twenty, one and beyond we have many drivers of value creation on revenue generation at <unk>.
We believe we will return to sequential quarterly growth given by the differentiation driven by the differentiation of our products and services and by recognizing the benefits of increasing network coverage and improving reimbursement outlook for average risk <unk>.
We are especially excited about the progress on transformational potential of our R&D pipeline as we prepare to launch <unk> and enable for in our channel.
In 'twenty, one we anticipate meeting development and launch milestones for <unk> and <unk> for test. These products will help further differentiate our core business.
We believe that a precision medicine platform will continue to gain momentum as we generate more preclinical and clinical data initially fueling partnerships as a source of non dilutive capital and ultimately products or services that address high.
Unmet need on vast markets for.
<unk> is well positioned for compelling value progression in the coming months and years with that operator, we are now ready for questions.
Thank you Mike.
Ask a question you will need to press star.
One on your telephone.
Jay Your question for Pankey, please standby will be compile the Q&A roster.
Our first question comes from Steven Mah with Piper Sandler Your line is now open.
Oh, great. Thank you inherent erica thanks for taking the questions today.
Okay. Thanks Steven.
Okay.
A couple on the payers could you give us a little bit more color on your current in network transitioned billing revenue cycle management effort.
The account attrition is a weakening but when should we expect these issues to be behind you.
And are you expecting more customer turnover. This year and then finally can you give us an update on the anthem and United in network discussions.
Okay. So Steve this is Harry.
Couple of things one.
They'll always be attrition and one's business, okay and that goes for anybody. Okay. However, the attrition due to our efforts last year, we expense it's.
For the wind down to zero or close to zero by the end of this quarter.
So on a go forward basis, we should really start seeing and getting visibility on the underlying volume growth and that's based on the.
Significant new customer acquisition, we've made in the last cut.
A couple of quarters.
So I'll stop there <unk> any more questions about that.
The other part of the question was revenue we've made.
You transitioned from out of network to in network.
Our business model changes and what was working for us in the past is no longer sufficient in the prison as we are now predominantly network.
We've got the opportunity to actually implement a whole range of initiatives, which we have been and will continue to do so that will just drive liquidation, which will appear as ASP and ultimately rising revenues.
I believe we're just beginning to harvest the fruits of our investments today and Theres a lot more to come.
Okay.
That gives you a sense and you've highlighted.
Delighted a couple but there are numerous efforts.
That are being directed to achieve enhanced liquidation.
Full advantage of the network opportunity.
And that's that part of your question and then.
We are advancing our discussions with both anthem and have recently re engaged with United and I would say things are moving as expected.
And on.
We've said in the past that.
So quite lightly debt.
Reach.
Resolution and in network status with anthem hopefully in the next couple of quarters.
But that's never absolutely predictable when net.
As we see that happening you.
You should expect us to increase investment in sales to take full advantage of the 44 million lives.
That will be available to us.
Okay.
Of course, this is predicated on things continuing to go well.
And we reengage with United and hopefully if not this year next year.
Can build on our relationship with them also and Thats really the last two major commercial payers.
That we have in front of us in terms of completing the network transition.
Okay, great. Thanks for the color and maybe one more on <unk> and maybe this is for for Eric.
You mentioned there is some tailwind following the <unk> guidance change in either observed that and do you expect to continue.
To observe observe that on.
On the revenue recognition for average risk.
Are you going to be booking those revenues on on accrual basis or do you need to build up a payment history with those that are our newly covering average risk.
Yeah. It's the latter you need to build a liquidation pattern before you start recognizing that higher ASP on an all new volumes, that's basically that the rules.
Good news is that we're seeing that improvement already in December the core.
And.
The trend continues in Q1. So we're already ahead. If you one of our original plan. If you look at our guidance average ESP that we had guided to so we're very happy with that trend.
Okay, and you think that's going to be six to nine months to kind of buildup that payment as Jerry yes. It will.
We need to build over time absolutely.
When you combine this with new payers gradually adding coverage and as Henry talked about if you add additional and network coverage and all of this leads to less friction in the process to basically get reimbursed for the test. So we see this very positively.
Okay, Great I'll hop back in the queue. Thank you.
Thank you.
Thanks Steven.
Thank you. Our next question comes from Katherine <unk> with <unk>. Your line is now open.
Hey, guys. Thanks for the questions I guess first.
On your comments on that.
On a terminal question line of Alan can you just talk about any monthly volume trends for an ops on carrier screening on the fourth quarter on so far on the first quarter.
You.
Eric Yes so.
We saw positive signs at the end of the year in terms of volume demand profile.
And that trend.
Seem to be also very positive in in January.
As Harry mentioned, a little bit earlier, we did have some weather disruptions that did affect a little bit.
Patient behavior, if you will but also the ability to operate labs. When you have a few state for fluid power basically it just you just affected if you want the trend. So that's why we kind of updated our guidance for Q1, but the overall message there is debt we're seeing really good good.
<unk> starting to build up especially in terms of the new accounts that we've been winning gradually adding demand.
In terms of volume.
So all of this is basic key gradually coming together.
Okay. So for the hotel.
Yes.
Helpful.
On the $7 million accrual you talk on the call.
On a quarter.
Michelle.
I talked about was around $27 million.
You can settle does for western.
But how comfortable are you with that 10 seven memory.
Okay.
So I would say we are very confident that this is a reasonable.
Cruel.
We use our best judgment based on the status of the negotiation and the discussion so far so we have a high comfort level that this is a good base to.
To use as a reference.
Okay, and then maybe my last one.
I'll spend some time on the precision medicine side.
Any update on how the final collaboration for <unk>.
EPS last August progressing so far.
Yes.
Advancing to the preclinical stage, which.
We expect to engage in towards the end of the second quarter on.
Okay. So its moving very nicely great interaction.
With both the strategic oversight group as well as for.
For project team.
And we're making great progress on.
That's basically it so hopefully soon.
We will gain more visibility because we were vs hopefully.
Sure more in a public context.
Okay, great. Thank you.
Thank you. Our next question comes from sung <unk> Nam with Beecher Angie Your line is now open.
Hi, Thanks for taking my question.
Harry on Eric when you guys talk about take gaining new accounts could you maybe talk about what's driving that are you displacing competitors.
Dan.
Kind of what kind of efforts are you, making in order to drive that yes.
So in every case were displacing competitors.
On.
And so these are accounts were winning in direct.
Competition.
If you recall when we talked about account attrition. These are accounts that were literally losing.
They are ending up with competitors, but we're losing them, we're not losing them to the competitors in the direct space and in this case, we are securing business.
Directly from competitors.
At a pretty high rate for us Okay, and the reason why we're doing this.
Is probably multi tiered reasons, but obviously, we believe our products are differentiated our services are differentiated.
And increasingly we're using sophisticated.
Tools that help us target the needs of accounts on physicians and a much more much more if you like rifle.
A rifle shot kind of a way than we've been able to do in the past.
Okay got it and then I don't know if youre able to talk to your customer customers about for yet, but would love to hear any feedback you might be cattle.
On potential customers in terms of income.
We've had we've had preliminary discussions.
Discussions with Kols and.
The focus is always on the top line quality of the data.
But theyre very excited about the idea of a much faster turnaround.
Because there's a there's a demand for that theres a need amongst.
Consumers for <unk>.
Every record sooner on so if I can get that data.
As quickly as one.
As possible. So we would say that's where things are resonating.
Our initial discussions.
In terms of the advantages of this particular platform will offer and of course, another advantage, which is which is could also be coming platform for the customer, but certainly will help us as we anticipate a direct cogs reduction of around 50% and that would be one of the.
One of the key drivers to help you on our business become breakeven.
Ex R&D by the end of 'twenty, two or early 'twenty audience for the first half of 'twenty three.
So we're excited about that on that also gives us.
More pricing flexibility in the marketplace should we take should we choose to take advantage of it so we could access more customers.
Through partnerships on other relationships.
On a cost effective win win kind of a way.
Got you that's very helpful. And then lastly for me in terms of the reduction in scores.
Obviously, youre looking to manage their cost but at the same time you have for new products that youre about to commercialize so how should we think about easy for right by working on.
Yes.
Commercial infrastructure that you currently have or would there be plans.
Or potentially further add.
Go ahead please.
Moving forward.
The exciting thing is both precluded NIH for and our existing channel.
And we've got a relatively mature distribution and support capability in that channel.
There will be an opportunity to expand that invest both with additional skill sets.
To support sales for example.
As well as.
As we get access to more accounts, because we are a network and the other thing is <unk> is anticipated to open more physician daus and gives us access to low doses.
Office has because of its uniqueness of novelty.
And that will that in addition to growth in network.
Necessitate investment in the field force to achieve to achieve a broader reach.
Okay, but these would be relatively incremental investments given given the scale of our footprint.
Good day.
Gotcha. Thank you very much.
Youre welcome. Thank you.
Thank you. Our next question comes from Andrew Cooper with Raymond James Your line is now open.
Thanks for the questions guys I'll ask been covered maybe.
Maybe just one.
We've heard from on a lot of the players at this point on.
Covid side of things that things have really slowed down.
You sort of stuck with your numbers there.
When we think about what that looks like for the year is there something you can give us in terms of visibility of contracting and so what that looks like to be direct for the year have you won screening contracts or anything like that debt that.
Net you can chat a little bit of light on.
We've secured contracts and I won't go into the details of where we're finding opportunity.
For obvious reasons.
So we have secured a significant number of contracts.
Like you said, we for US. This has been this is really an incremental opportunity.
And our focus is the core business.
Both now and in the long run on it we've been consistent about debt that we are taking advantage of this opportunity.
As you know the dynamics have changed recently.
But it's very hard to forecast, where we're going to end up.
Through this year.
We believe in.
Additional waves that will drive demand and you're going to be in position to exploit those waves as and when they arrive and then of course as the winter.
Comes in it kicks in towards the end of the year.
The view is there'll be additional spikes.
So that's what I would tell you so but recall this is really an optional opportunity for us.
It provides.
It provides additional margin.
And so on volume and I'm going to invite Eric because he is bursting to add to my points.
Well, so what I wanted to add Andrew is and Thats why we specify the overall revenue range because right now we're already ahead compared to the guidance on the Asps. So far so what we view is that we're going to have a few pluses and minus as you as you move throughout the year and as a result, we feel pretty comfortable.
With the guidance range that we that we have currently will give some updates later during the year is as things progress.
No thats, great certainly appreciate that it's a <unk>.
Hard to predict.
I'd much rather see you outperform on the core and some shortfall on Covid, if that's what it is but maybe.
Maybe on some of the core just real quick for a follow up.
When you're out there and you're talking about winning more new accounts.
The excitement around create plants, yet and given that there is some unmet need out there.
When your sales folks are out there.
What level do you feel like there's been any changes that you've gotten in.
Award on some of the data and things like that as well as the demand on the expense.
And then on <unk> really really ramped up as launches approaching or any changes in sort of how you feel ex the market for assuming this buyback over the last several months.
I think it's premature because we've not really promoted it in.
In the channel.
Rates on.
On any excitement or interest is based on wherever we've shared with the public today.
But as you I don't know if you picked up on mix.
We have an abstract accepted a late breaking abstract accepted by a cog.
For for presentation in May.
And we look at that as a great sign that the clinical community is.
He is paying attention on obviously interested in learning more about the apparel precluded tests.
So that's a good sign we're going to really ramp up.
<unk>.
Post validation study.
On use use of findings both.
From a price studies as well as validation to drive market education and market reach.
The other the other dimension of that is to drive clinical utility studies.
And that will also result in a broad education and receptivity of the market.
Now we've engaged payers and that will go into this a bit more detailed on the future. Once we once we turn to commercialization opportunities.
On an initiative and this is a second occasion, we've gone back for me to payers.
And we're really excited that we've also got to see.
Super strong.
Representatives of the of the payer opportunity set in the form of Jeffrey Wilks SME knows about them on our board and they've been quite helpful.
Look the payers seem to really get the economic benefit of a rule out test.
Require a lot of explanation and there's great receptivity.
On this the other important thing okay. It's not just education of the physician and the patient is other payers getting what youre doing and how they are winning are they seeing sufficient value in.
In order to accommodate payment.
For the test.
The answer is yes.
It's going to be evidenced space on arguably the most critical piece of data. In addition to the validation study is going to be on clinical utility program.
On that.
We're going to launch.
Essentially push validation. So all these events are going to conspire to build both awareness educate the channel educate the market and ultimately achieve reimbursement.
Okay.
Great I appreciate it.
Thank you.
Our next question comes from Dan Leonard with Wells Fargo. Your line is now open.
Thank you. So first a question on on the guidance for your core molecular business in 2021.
You're run rating at about 225000 tests in core, but you're guiding for about 300000 in 'twenty. One can you bridge to the other for me what provides the lift from the 225 to 300 and bucket if you will.
I think it's pretty straightforward one is the attrition that we've experienced.
Experienced due to billing.
Billing process efforts is expiring.
And that's a very large headwinds that will be in the rearview mirror.
Essentially as we speak.
Secondarily, if we look at the account acquisition that has occurred.
The team has delivered very significant.
A number of new accounts in the last few quarters those are going to begin to kick in and that's that's just about reflecting early on in on numbers. Okay.
Really those two are the biggest drivers the third.
Expansion of the sales force.
Okay.
Of which we anticipate in the next quarter or so.
So those are really the drivers that will give us.
On the top line that we've seen and I think it would be.
It's not correct to judge the performance based on.
Our recent trends because they were unusual.
On transient trends, however, significantly to our business.
That are basically playing out.
<unk> done.
Okay. So so I think all of these reasons.
Going to help fuel and drive the business.
On a go forward basis, and then on the on the top on the other end as we've already seen.
Actually we are ahead.
If you look at where we saw our annual ASP would end up for the for 'twenty one.
We are already materially ahead of that.
Now of course, we need to sustain that ESP, but as we have hinted and as we've pointed to thereof.
Great many irons in the fire yet.
Play a role and we expect it.
Anything ASP.
Too hard on on a go forward basis.
So those are the reasons and net debt of course is <unk>.
It doesn't factor in preclude here.
Which is in our channel and we will start or ex.
Towards the end of the year, but it will enable us to build up.
Presence build up the channel education.
And I believe thats going to open doors.
And then and potentially result in pull through menu, but I see that more as a 22.
Is that.
The module 21 effect.
Those are the and then.
And then Eric I think you provided some comments on Q1, given weather and all that but I missed on but what were the comments on Q1.
Yes, so what I said the reason why we are guiding to a relatively flat quarter is because in February there were.
We're storms and power outage outages in Texas, and the Midwest and this is a pretty substantial market for us. So that has a little bit of an impact on kind of delays and postpone certain things. So you don't get the full benefit of the trends.
For example.
For a virus.
For a narrow business in Texas.
<unk> was adversely impacted for Billy I believe between seven and 10 days and Fedex and EPS did not resume services into Texas for at least that period.
Okay, So, yes, you're going to.
Scramble and recover.
Quite a bit of that volume, okay, but youre not going to get all of it.
Okay. Okay.
And then just finally, given the importance of average risk on IPG can you remind us of your core molecular what proportion of that in 2020 was on ITT, what proportion of that was average risk maybe.
Finally, what proportion you werent getting paid on so we could think about the potential lift here has.
So that's pretty straightforward.
Approximately two thirds of our volume is in it.
PT.
About two thirds, 62% on wholesale.
All of our <unk> volume as average risk and.
And we were being paid on a tiny fraction of our average risk.
Okay. So I think I've said in the past and I'll say it again that if we take a volume run rates.
That we were averaging last year.
Okay and I assume.
About a 100% payment which is not likely.
To occur it might be more like 85%, but then you got to factor in volume growth, we could expect $14 million.
Awesome on a <unk> 5 million to drop to the bottom line and therefore be recognized as revenue that's not being recognized today in the coming quarters.
Okay. Okay. It's a material is a material benefit.
If you'd like.
And that again goes to your first question is how do you expect to grow volume and therefore revenues and <unk>.
So on and so for us the other thing we're seeing and we're hearing is that the.
The demand for average risk in the channel is increasing and that suggests that there was demand that there was a latent demand that was probably being set up by serum testing.
That now because of the AG guidance those physicians are feeling more comfortable about prescribing average risk for their patients. So we're seeing evidence of that too.
And in the last few months.
Okay. Thank you.
Youre welcome.
Thank you I'm not showing any further questions at this time I would now like to turn the call back over to Harry Stanley for closing remarks.
Thank you all once again for participating on the call and thank you for your interest in <unk>.
If you have any additional questions. Please feel free to contact us have a good evening or good afternoon, everyone. Thank you.
Ladies and.
Gentlemen, This concludes today's conference call. Thank you for participating you may now disconnect.
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