Q1 2021 Invitae Corp Earnings Call
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Ladies and gentlemen, thank you for standing by and welcome to the M. D. T first quarter 2021 and financial results Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
And I ask a question and during the session you will need people on the star one on your total and keep Marty.
Require any further assistance please press star zero.
Thank you I'll now turn the conference or the quinoa the Angelo.
Yeah.
Thank you operator, and good afternoon, everyone.
You for joining us for first quarter 2021 results call joining us today are Sean George our CEO, Shelly Guyer, our CFO and Katherine stool, and our Chief commercial officer.
And you listen to today's conference call and we encourage you to have our press release available, which includes our financial results as well as the metrics and commentary on the quarter.
Before we begin and like to remind you that various remarks that we make on this call that are not historical including those about our future financial and operating results, our plans and prospects and the focus of our business strategy and our plans to integrate and manage the businesses we acquire.
Market opportunities future products and services, our product pipeline and the timing thereof demand for and reimbursement of our services and our investment and our infrastructure and operations constitute forward looking statements within the meaning of the safe Harbor provisions of the private Securities Litigation Reform Act.
It is difficult to accurately predict the demand for our services and therefore, our actual results could differ materially all of our stated outlook.
Statements on future company performance assumes among other things that we don't conclude any additional business acquisitions and investments restructurings or legal settlements.
We refer you to our most recent 10-K in particular to the section titled Risk factors for additional information on factors that could cause actual results to differ materially from our current expectations.
These forward looking statements speak only as the date hereof.
To supplement our consolidated financial statements prepared in accordance with generally accepted accounting principles and the United States or GAAP, we monitor and consider several non-GAAP measures, we exclude from our non-GAAP operating results as applicable amortization of acquired intangible assets acquisition related.
Stock based compensation post combination expense related to the acceleration of equity grants or bonus payments in connection with the Companys business combination adjustments to the fair value of certain acquisition related assets and liabilities and acquisition related income tax benefit.
We exclude from our non-GAAP cash burn as applicable changes and market marketable securities and cash received from equity financing and cash received from the exercises of warrants.
And this period of our non-GAAP measures include cost of revenue gross profit operating expense, including research and development, selling and marketing and general and administrative and other income expense net as well as net loss and net loss per share and cash burn. We encourage you to review our GAAP to non.
GAAP reconciliations, which are available and the press release and and the earnings slide deck with that I will turn the call over to Sean.
Thanks, Laura and good afternoon, everyone. We've.
We've had a very active start to the year and our progress toward establishing genetic information as the standard of care for patients with key health care decisions throughout life continues and accelerates.
Each patient has an incredibly important and unique journey whether of families desperately seeking earlier and better answers for sick child of women, who deserves access the cutting edge of genetic information and she embarked on having a child or of cancer patients who will benefit from the molecular characterization of their cancer, regardless of the stage. So they can receive better more personal.
Therapy selection and post treatment monitoring.
And they find the most important of pipes.
It is the collection of these patients and total and our ability to help them. The drives our aggressive approach to improving health care by bringing genomic information front and center of medicines, new vital signs.
Mark of our progress toward that goal through the strong the results. We deliver Q1 was a great quarter for us and our key performance metrics indicate that we are steadily shaking out pandemic impacts and looking to rapid expansion in 2020, one and be on the Jake.
The strong measures to shore up our cash position, adding $1 6 billion of fewer ongoing mission wed.
We'd like to welcome on new investors and express continued gratitude to all of our shareholders for sharing the long term vision for how genetics can help transform health care for all.
Because we've had multiple announcements of opportunities to communicate with investors about financing and M&A activity. So far this year I want to keep today's prepared remarks focused on our progress and other clinical areas and highlight the continued buildout of our global genetic information platform.
Before I do that Chile will walk us through the Q1 quarter of results and outlook for 2020, one and Chile.
Thank you, Sean we generated revenue of $103 $6 million from the first quarter, representing a strong 61% growth from the first quarter of 2020 and part due to acquisition related activity.
This growth was achieved despite some lingering impacts of the pandemic.
And the first quarter of 59% of our revenue came from third party payers and 33% from Biopharma partners and other b to B customers, primarily hospitals and medical centers with the remainder coming directly from patients.
Our third party payer revenue remained strong largely due to continued improvement and commercial third party payer performance across all test types, but particularly with the hereditary cancer and on like P. F. Chang's.
So why the percentage decrease in revenue from third party payers as compared to the first quarter of 2020.
The decrease was primarily driven by the change in our oncology business customer mix, which now includes a greater proportion of Biopharma and other b to b partner customers.
Consistent with our discussion of ASP trends last quarter, we realized from ASP of $383 this quarter down from $408 and the fourth quarter.
The decline was primarily driven by a shift in payer mix from third party payers to patients.
Changes and product mix also impacted the ASP piece of this quarter as we saw a rise from the proportion of reproductive testing with lower asp's as compared to hereditary cancer and C N P or cardio and neuro Pete's cash.
Progress with third party payers represents a notable source of leverage as we look to the rest of the year on many investments on our platform and willingness to provide early access to patients ahead of the payer adoption curve continues to bear fruit.
However, changes in payer and CASM ex will cause our ASP piece, the bounce around a bit over the next several quarters.
Note that we expect a piece the benefit from the launch of our oncology therapy selection and disease monitoring products.
Both of his L D T services, and its regulated clinical products and the coming quarters and years.
And the business has developed billable volume has become our key volume metrics and an important benchmark given that we accrue the majority of our revenue based on the number of deliverable billable reports and a period. We are pleased to reported a 72% growth and billable volume from the previous year with approximately 259000 tests and the first.
Quarter.
We saw this growth despite the continued effects of the pandemic as well as some very tough weather across the states the.
Cause some disruptions.
We attribute this tremendous growth to some catch up on the testing backlog of system sales force now more able to visit with clients taking share from competitors and on.
Increasing acceptance of genetics due to the continued flow of research and publications.
Internationally, we saw volume growth that was slightly ahead of our U S business and represented nearly 18% of total billable volume for the quarter driven by the strength of our decentralized oncology business and our continued expansion on Europe, Japan, Australia, and Israel to name a few.
As we've noted in prior quarters, it's 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 of the detailed reconciliation of non-GAAP and 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 costs per unit now defined as the total non-GAAP cost of revenue divided by the number of billable units and the quarter was $242 and the first quarter. This is up from $227 and the fourth quarter largely due to lower expression conversion ratio since the large number of samples received and the quarter.
We're not billable on the quarter due of lesser extent due to some new assays, we ran which were not and sufficiently processed as more mature products.
Recall that we moved to looking at Cogs per billable units when we moved away from reporting assertion and do the addition of our somatic products many of which do not have expressions.
Historical comparisons and must be viewed with caution.
Non-GAAP gross profit was $45 million from the first quarter, which translates to a non-GAAP gross margin of 39%. The lower margin is partially due to the timing issue billable versus succession and increased our cogs and the period.
And our margins were impacted by our mix our reproductive volume grew faster than other parts of the business, but this comes at lower margins.
We expected increased collection rates on Nics and decrease Cogs over the next several quarters will positively impact our gross margin.
Recall, we continue to target, 50% gross margin and the long term.
Non-GAAP operating expense, which excludes the cost of revenue was $155 $4 million and the first quarter as compared to $145 9 million in the fourth quarter.
We continue to invest and our business and the following areas.
Search and development, which was up nearly $14 million, mostly due to head count increases, but also new external development projects, primarily the scale of business and modernize our platform build out content across all of <unk> improved Cogs and create a more patient centered experience benefiting patients and physicians.
In addition, selling and marketing was up nearly $4 million on.
And mostly due to head count increases to facilitate the volume expansion internationally.
General and administrative expenses decreased by $8 $5 million over the fourth quarter, mostly due to a decrease and acquisition transaction cost of $12 $6 million associated with the Archer acquisition.
Given the stabilization of the markets and the opportunities in front of us, including multiple M&A ideas worth of assessing we will continue to make prudent investments and projects programs and acquisitions.
Notably we closed one codec from February and generosity and April in.
In addition to acquisitions, we expect the Opex for the remainder of 2021, and we'll continue to increase as we invest primarily in R&D and marketing and as we build out our new facility and North Carolina.
Cash burn was $112 3 million and the first quarter, including cash paid the financing closed acquisitions and associated expenses excluding.
Acquisition cash paid primarily.
<unk>, two one codex or burn for the quarter would have been $94 $6 million.
Moving to our cash position cash cash equivalents restricted cash and marketable securities totaled $681 9 million at March 31st.
The $367 million at December 31, 2020.
And our January equity offering netted $434 $3 million and is included in these cash figures and <unk>.
Accordingly post the quarter close we raised an additional $1 1 billion net price.
But convert offering led by Softbank.
And on a pro forma basis. This puts our cash as of early April at over one $8 billion.
And to close our Q1 revenue and current trends have us increasingly confident that we will exceed the $450 million and revenue guidance for the year.
We'll reassess and make any necessary adjustments to that target when we reported Q2 results and August now.
Now I'll turn the call back over to Sean.
Thanks Kelly.
And I look of the results from this quarter I am encouraged to see how past investments and our platform menu and customer experience drive our ability to serve more and more patients year after year.
Many of you may recall years ago, when we were investing heavily to build out our women's health capabilities.
Throughout last year and continuing through this quarter, we're seeing those investments bear fruit.
Women's health now represents nearly 30% of our overall business as we create new markets and take share from competitors and drive strong growth and new customers. For example, we added over 2600, new accounts and the first quarter alone and we're seeing durability and our customer relationships once established.
So as we think about the investments we've made last year into the present the quarter, we're attempting to drive the same virtuous growth cycle.
All of this gives us increased confidence and driving strong annual growth into the coming years.
To support and enhance this rapid growth. We're moving ahead with both domestic and international expansion plans, we are expanding our commercial footprint local fulfillment and product infrastructure for our fast growing international business.
In addition, we announced in April that we have signed an agreement to open a new major production facility.
Triangle Park, and North Carolina and.
And went up and running this facility will double our capacity and strengthen our operations and help us offer industry, leading turnaround times, including for customers across the Atlantic and and South America.
And the opportunity to build on our platform and to bring more customers onto it remain attractive and numerous we anticipate maintaining our invest on stance through the remainder of the year and as we indicated last quarter of planning to increase the rate of investment above the baseline of Q4 2020, our strong cash position allows us to deploy resources thoughtfully to extend our reach and the new geographies and acts.
Celebrate commercial launch plans and full of exciting development programs forward.
I mentioned earlier. The example, we see of the investments we made years ago and women's health driving significant growth today.
And I'd like to take another moment to share of similar example, one and illustrates how our approach is transforming patient care.
Many of you know our behind the seizure program and some of you may have spot of the story and the Seattle times of our two fathers and the young daughters.
One family of face obstacles that are sadly still typical for sick children. They waited three years from a clinician suggest genetic testing and.
And we're told of the cost $25000.
After pleading with insurance companies. They were finally able to have the daughter tested.
She was diagnosed with batten disease, the genetic disorder affecting around three of every 100000 people and the U S.
Tragically of disease of continued to progress and ultimately took her life.
The other families experience shows what is possible and barriers are eliminated and the ways that spur clinicians to embrace genetics.
Early on and their daughters care and neurologist suggested genetic testing through and details behind the seizure program. She was tested quickly at no charge and was also diagnose of batten disease.
And Fortunately the intervention happened early and attention quickly turned to treatments and therapies that are slowing the progression of her condition.
I tell the story to point out the wide GAAP and the way the system currently works and the potential for our platform the transform care.
We began investing in programs like behind the seizure years ago to open access to testing and drive adoption by clinicians.
These programs are creating a virtuous cycle and which more patients are diagnosed and effective treatments are developed and directed to those patients sooner.
And this was one of our earliest programs and we've now created many more like it all have potential the push diagnosis and treatment earlier across clinical areas ranging from rare disease the common cancer.
The ecosystem, we are helping create will drive better outcomes for patients across a wide swath of health care.
That phone can bring together pharma biotech clinicians and researchers in the way the drive better more efficient and personalized care for.
And for a small cost comparative days trial and error of search for and accurate diagnosis and effective treatment.
The value to the health care system and benefits of society is immense.
What you see here shows how genetic information on locks better outcomes throughout the system and at all stages of the mine.
Early in life risk identification helps create a personalized approach to monitoring for health issues that may develop for example, undetected cardiovascular disease, and young athletes and breast cancer and nimble and as we move into the middle and later in life Biomarkers replace trial and error, giving patients' access to better therapies.
Throughout the combination of genetic and health information and the ability for patients to access it further fuels personalized care.
The patients benefit as do the drug discovery efforts through improved research and better faster clinical trial programs and finally for those who ultimately do end up facing of life altering health crisis like cancer targeted therapies guided by Universal companion diagnostics and personalized monitoring mean better outcomes and then circles back to where we begin with genetics.
And of the patient, providing and an understanding of the potential risk for the family members.
This is why we believe and ever more clinicians agree the genetic information is becoming a new vital sign one used to guide health care throughout life.
And that vision of health care translates roughly into the large addressable markets. We are targeting while a lot of attention gets focused on cancer. The reality is of genomic information is becoming increasingly crucial to help cure all throughout life.
We believe the majority of expecting parents will have ready access to genetic information and starting a family and young adults will receive it as they transition out of childhood and along with starting of College fund our investing of life insurance will become standard to invest and a baseline genetic profile that can inform medical decisions throughout that person's life.
The massive amount of genetic data will in turn drive faster and better drug discovery trials and outcome, increasing the quality of life.
We have before us and incredible opportunity to serve billions of people and develop the healthcare markets worldwide and helped drive a fundamental shift and the way of health care is delivered.
As we think about where we are today, we see the pace of adoption towards that future rapidly accelerating.
We see it and our business, we see it and clinician behavior, we see it and changing guidelines and payer decisions, we see it and drug development and clinical research we.
We are entering the steep slope of the genetics adoption curve and we intend to lead the industry true it.
We are playing to win our strategy is unique and our vision is ambitious the feature we've long discussed the CS genetic information and driving mainstream medicine is coming into view as the reality.
We are aggressively focused on establishing a global infrastructure and delivering the most comprehensive menu of technologies and services through that platform to every patient who can benefit.
We are committed to doing what it takes to compete across medical specialties and the drive access to billions of patients in need and.
And to an entire new generation, who will view of genetic information at the standard baseline for all of the health care decisions.
With that I will now turn the call over to the operator for Q&A.
At this time I would like to remind everyone in order to asking the question price star and the number one on the I told.
And it's on the keypad.
And your first question comes from Tycho Peterson with Jpmorgan.
Hey, good afternoon, and Sean I'll start with Geocities and just wondering just a couple of a bit more about the thought process. Why this is kind of the right time to do that deal I think.
And because at the time and this could actually expedite the <unk>.
Path to market and reduce the cost and the accelerated traction on the Archer.
The PCM.
So why do you feel like that's the case and then maybe you could also just touch on the 40% of you cannot see the revenues that are not tied to our children and opportunities kind of leverage that too.
Yeah no. Thanks the.
Short of it is.
While the Archer Tech and <unk>.
The abilities are great.
The PCM standing up PCM is of laboratory developed tests and getting it all validated approved built into our kind.
And of our infrastructure, our tech and structure was going to take some time and expense and with the team of <unk>, having already have that up and running.
And 60% of the revenue was very much and engage of running that for Biopharma partners and we know it works and we actually know the team there.
Long many years and the industry.
Great team.
And it proved to be of great opportunity to accelerate our broader commercial launch for PCM. So we hope to do that broadly to our commercial channel and LPT sometime sometime this year and.
And saved a bunch of time and cost development for it.
Kind of of the process and systems that are that were already existing there.
The remainder of the revenue.
I think it's kind of it's the kind of thing.
I think of lot of it is contractual and so it'll it'll much of it will remain and continue.
Some of it is indeed, the other players may or may not be themselves competitors.
And that kind of switches and the new situation for us it's a handful of our acquisitions of the past we've done there and we always just again you start with what's right what's the what's the best.
All of the patients continue that sort of just continue that care and then they'll make their own and decisions and they're on time and again I think we will we will continue to try to serve.
I suggest that those personal cancer mining services and those.
And those kind of therapy selection services they offer.
Best in class and we're only going to make them, even more scaled and available globally. So those are the that's the.
The way review of view that to your to your question.
Okay, and then a follow up on debt ought to be able to comment on all on the litigation with with the Terra is there kind of the timeline, we should be thinking about from the next steps.
No not really.
And that's not really able to comment on it actually zone to the active litigation and I think again we've.
We anticipated and took out of that.
Before the before the acquisition and the same on velocity.
Okay, and then on the balance sheet you highlighted one of 20 billion and net cash can you just talk a little bit about how youre thinking about.
And the M&A inorganic investments, obviously, you take the organic investments as well and how are you thinking about.
At this point.
Yes, I think we're on.
The M&A front.
The space is moving a lot and there is a lot of really interesting capabilities out there with that said, we're mostly thinking about.
Shoring up the balance sheet.
Making sure and always have a clear path the operating cash flow positive right, obviously with our level of investment now you need a little more of the cushion to to get there in the coming years.
Specific things that we know we are going to be investing and the.
The <unk> collaboration, which we announced earlier.
As I had mentioned theyre kind of different speeds you can imagine that going we can now we can now really put all we can and do that from our side of east.
The the.
The additional production facility on the East Coast. This allows us to better turnaround time lower Cogs.
Frankly, we're kind of burst and of the themes here on the West coast of this as you know that was of needed expansion and now this capital allows us to really get after that right away.
And then of course continued investment and ex U S outside the U S. We continue to see.
Really great the pent up demand our business now is moving north of 50, and I think it's almost almost 18% that's outside the U S.
As we've stated we.
We'd be surprised within three to five years, it's about 30% of more of Theres a lot of opportunity. There is no global player and genetics and that's an area. We want to we want to be able to keep investing and so not to mention of of course all of the exciting development programs debt.
Hugh.
We tend to meter for a reasonably early return on investment.
It allows us to look at some of the more exciting ones and try and accelerate them. So I think thats the bottom line of the use of capital.
Is are those kind of things that we want to and we wanted to make sure to just to keep keep after this year.
Great last one on gross margins.
And I understand the kind of the mix dynamics weighing on the margin of this quarter I think last quarter, you talked about potentially getting the 50% by the end of this year and how youre kind of saying 50% of longer term, but maybe Shelley can you just talk about when you think you'll actually hit that 50% margin target.
Yeah, I think by the end of the year or earlier next early the next year one thing to notice that we did have quite a difference between the exceptions and the billable and this quarter and if you actually did put through all of those succession and the available in the quarter that Cogs per unit would have dramatically changed so.
Something like 10% falloff between the expressions on the billable and so youre not getting those and the first quarter, you'll get those and the second quarter, but you had all of the costs of those expressions going through and the first quarter. So it's really.
Or and you buy several probably six 7%.
On your Cogs and on the gross margin. So I think it's important to remember that that we do have seasonality and the first quarter is always the worst of about 10% of the first quarter generally the second quarter is closer between the exceptions and the total.
Okay. That's helpful. Thank you.
Thanks.
Your next question comes from Doug Schenkel of Cowen.
Hey, good afternoon, and thank you for taking my questions.
So selling any anything you can give us I mean, ideally we'd have organic revenue growth for something on the Archer. Given this is just the second full quarter COVID-19 can you share anything with us that would help us track.
On how our tourist tracking from a growth perspective sequentially and relative to plan.
Yes. So I think your first comment was that we don't generally break these things out and we promise to do it only and the fourth quarter and then to integrate it with the rest of the business because the business is one platform. It is integrated and we've changed the priority is for what the former Archer is looking at in terms.
Of collaborations.
<unk> and things like that versus the priority of getting the Ltte is up and running and that sort of thing and so we're not really looking at it as the Standalone business I think it was a very solid quarter for them.
We had noted some COVID-19 issues in the fourth quarter of last year, we're seeing some of those things work themselves out so it's exactly where we would have expected it.
But I would say.
If you took a standalone company that was looking for an IPO and you look at what those revenues were expected to be and 2021 that is not the trajectory that we have them on because the priorities have dramatically changed as now they are part of our platform and working together so did fine don't break them out.
And integrating it nicely. So it is one platform one oncology offerings et cetera.
And Doug I might add debt.
Basically oncology is about 50% of our business now.
And so I think the best way is just gonna be mark and that and seeing the top line growth and.
It's that relative position within it which will which will underlie the comprehensive risk such and the monitoring.
Progress we're making.
Okay.
And I totally understand that and at the same kind of given how acquisitive and <unk>.
I think youre about sort of and I continue to push for some biomarkers that we can use the kind of measured with success of acquisition, they're obviously not all going to work hopefully more of a work than others, but yes.
That's the reason on pushing so it's the.
Yes is the metric you would like us to use to make sure that youre on the midst of all of these acquisitions, but the growth is board and Jess and organic efforts.
How do we how do we.
If youre not going to break this out and then how do you want us to define success or if that's successful.
Yes, I think I think if we're if we're looking at let's say Archer, specifically, what I would say as well that's now folded into our oncology business.
We'll certainly be talking about what percentage of the total of that is.
That should be growing.
That should be growing at a clip that.
And that satisfies the question of inorganic versus organic growth and layered in there of course will have regulatory submissions approvals of our product launch.
Milestones and I think we'll have discussions.
Very similar to I think as we look back to the reproductive health right.
We had a repeat of developed offering.
The modest one we purchased coming matrix. The good start we then started talking broadly about reproductive health.
And its growth year over year with the and then kind of as we've seen now of that growth.
Picking up now and becoming close to 30% of our business at this overall business at this point and I think thats given a really good view of to what what has what we what those acquisitions did for us by.
Giving us the broader menu to accelerate the top of line of that business.
And I think that's the that's the same I think thats. The same tracking I think we can provide for for the Archer acquisition and <unk> acquisition and our for our oncology effort.
Okay. That's super helpful and then.
I guess the one more on just the Archer transaction on itself.
Some of the Archer customers that were being supplied with Archer kits.
Our folks that I believe could be at least broadly defined on competitors to and be Terry has there been any is there anything you can share on just customer retention with that dynamic and mark.
Yes, I think the debt.
There are certainly.
Some players the both both the commercial partners and direct customers.
On that data is I'd say that we're continuing on and serving them.
As before.
And my General sense is the call point and the use cases, probably distinct enough, where theres, probably not a whole lot of whole lot of issue here and the early years.
Out years.
Year of two from now maybe maybe everybody will think differently, but right now it's.
It's not it's not a it's on a major point of contention at this point, let's say.
Okay.
Thank you guys and actually the last last one.
Sean This is probably more of a shallow question.
As we think about the North Carolina facility.
The logistical benefits of having a facility there.
Pretty clear and well articulated.
The other the other dynamic there is it does tend to be less expensive to run a lab and North Carolina. The Bay area over time should we expect some cogs and Cogs improvements associated with the opening of that facility.
Yeah, I think so but remember that the vast majority of from some of those costs are basically the units the reagents the equipment and that sort of thing it's less of the labor cost. So you will have a savings on that proportion which is labor cost.
And remember a lot of the labor cost is going to be the people, who are reading and the interpretation of and that can take place anywhere. So yes, you will have some benefit from those labor reductions I really look at it though not only from what Sean said before but also the diversification of our risk we are in the bay area and having another site that is <unk>.
Large and capable of.
Continuing to operate if anything should happen and.
On the Bay area is exceedingly important to US is the risk reduction method, so and the final thing would be from a cost perspective.
If you can ship quickly to the east coast and you can ship internationally from some of the European sites et cetera, you got the big cost savings also on some of your shipment cost depending on what zones of urine and so it's not just the cost of the labor that you should think about but also some of those ancillary costs that will be helped by having an east coast facility.
Got it okay. Thank you again.
Thank you.
And the next question comes from Puneet <unk> with SBB Leerink.
Yes, hi.
Sean and Charlie Thanks for the question so.
First one just wanted to ask you on in terms of the full year.
Guide and what you can provide on to the second quarter.
Wanted to get your view on what Youre hearing from the field recently and sort of what percentage of the reps are in person and versus the Stover mode.
And just asking that because youre, maintaining your full year guide here for <unk>, but.
Given the level of vaccination and sort of we're seeing out there and.
And.
In terms of comparison, you have a much better comparison of the second quarter.
I know Theres Archer contribution here as well and the NIH.
Volumes are growing and based on what Charlie said, the sum of those especially as theyre going to turn into billable. So just wanted to get your sense on the second quarter volume growth I wasn't clear if I heard that earlier and.
Any puts and takes to that.
Yeah, No I think the.
I think the informative.
On the quarter was obviously of the year sort of choppy not just for us of a lot of people and.
And what we're saying is obviously the back half of the quarter picked up really nicely and we pointed to more than 2600 new accounts.
And just in the quarter the.
And last year with debt.
That metric was kind of flow.
COVID-19 kind of.
Made that metric a little meaningless, but there was the year before the total for the entire year was something like 7000 accounts.
We're definitely pleased with.
The kind of what it looks like we're coming out of the pandemic impact.
And we're definitely pleased the new accounts formation.
We are seeing more and more reps getting active and their locales.
And now with that said, we're also seeing on on a case by case, sometimes the rep by Rep, certainly territory by territory basis at some places are going backward and some places are just changing access.
And then of course ex U S right.
And it's still it's still a little bit of the thing.
So thats what Thats why we as we sit today, we're we're optimistic I think.
And certainly feel good about the call that we're going to exceed 450 and as this quarter played out I think that was the right call we'll be making.
If we will see we will see how the next quarter goes and I think of.
And if everything kind of continues to play on the topline and we might reassess.
And the next quarter, but right now I'd say its a little early to get too far ahead of ourselves.
I'd say I think we called the.
Called the Youre right at this point and it's playing out about as we expected.
Okay.
And.
In terms of Archer, obviously thats an important question.
Given the contribution to the growth and given the importance of the the franchise to the overall the building outbound calls the franchise, maybe can you give us.
Any sense of and I know youre not breaking this out but anything and should we still assume the 50% to 60% of.
Growth profile that you had pointed out earlier I know Shirley mentioned debt.
They had some IPO of numbers, which are not not to be considered now you said, but maybe 50% to 60% of sort of if you can provide any.
The contribution of Archer and that or anything to help us get sort of engage for Archer and I know on somewhat asking and earlier around the earlier question, but just that's an important question for the growth of that business.
Yes.
And our final question and I understand that and so yes, I think the.
The way the way that we think about it is is if you take on oncology business now right that oncology business should grow and that 50% to 60%.
Profile and frankly, our whole business, that's what we're targeting 56%.
Loss of minus on oncology should really kind of keep up with that maybe exceed it certainly as we get the PCM and therapy selection of Mvpds launched.
But and that's the idea and then by tracking that oncology business versus the whole versus the overall growth.
Confident we're going to demonstrate that much like prior acquisitions, we can take the integrate them operationalize them and then plug them into our overall platform and commercialize on and really kind of contributed to ongoing and ongoing ongoing.
Hi, hydro of profile, so we'll definitely be checking in on that every quarter of the oncology business doing.
Again, the idea of where we're confident the idea of.
The deal understanding risk both out of both of the personnel and population level stratify the patients there and choosing the right therapy for all stages of the cancer.
And then monitoring those individuals.
Think of that is the that is the precision oncology offering that we were confident we will provide significant top line growth for the years to come.
Okay, Thanks, and if I could.
Sean in terms of the combined versus the <unk>.
The central versus the distributed model and now that you've had some time zone look closely at Archer and its customers and those of directions and I'm wondering if you of any additional thoughts in terms of.
The distributor model versus centralized because obviously the centralized of giving you a nice cost leverage and passed and so I'm just wondering with the new facility coming up how are you thinking about.
The decentralized where centralized and also was wondering if you can provide any updates on the timings of PCM, obviously, the new product launching and then Mardi market and.
And just wondering.
And when should we think about the assay being on the market or any performance or any updates on the performance metrics of those assets. Thank you.
Yes, so the.
On the pizza and the TCM I can answer firstly is the.
We're looking now to get that out as a full commercial offerings sometime this year.
It's hard to harvest of exactly where we were.
Before thinking about the full blown commercial offering kind of end of the year and the next and now we'd like to have that be sometime this year.
And and.
And the kind of really ramp up to about it off on all of that and we think that's really really important.
The the distributed.
And really are.
And on that Hasnt changed at all I think there.
The closer you get to it and you get a really good sense for the dynamics of what is going to drive.
Decision front accounts kind of run this themselves versus some of it out but it doesn't really change market on the market changed from our previous view of it certainly not on market changed from the kind of the playoffs of team and leadership view of it.
And again, we're actually.
Very certain debt certainly.
Large accounts and the U S and certainly many accounts outside the U S.
The ability of support from the running on top of its going to be critical and.
Like I said before and to be clear. This is not a priority right now.
The kitting capability of the.
And the regime around of the manufacturing capabilities and the data supported and.
He is also key for other disease areas that we'd like to be able the offer.
And so that's the health patio.
The pediatric disorders. So those are those are things and the future of that we're also going on that.
Decentralized model will be important.
And for larger governments that are interested and outstanding of capability locally.
Got it okay, great. Thank you.
Yes.
Your next question comes from teachers with the Morgan Stanley.
Hey, guys good.
Good evening.
Sean One one quick question for you on the.
The <unk> setting can you just.
And then some color on the momentum Youre seeing there and how youre thinking about the buy versus build debate and those markets.
And then similar question on pharma partner revenue trends as well I mean, what does that look like coming out of the pandemic here.
And if you can help us sort of break that out in terms of the guidance that would be super helpful.
Yes.
<unk> ex ex U S.
There aren't many.
The I would say that the market also of the USS.
Segment of pretty well along the country lines for the for the most part of it certainly regional line.
So on that sense, there arent that many frankly that many ball options that make a ton of sense right. It's all of the work of the board.
And with none of the scale.
I think that's the one way and that's kind of on the way we look at it is with the steady investment.
I truly believe and with kind of.
Experience around this table.
<unk>.
Only works in country for country.
And that's true that's going to take a lot of the in Boston. The good news is we've got a head start and we're rolling forward on it.
Again, a regional of opportunity may present itself and I might make a lot of sense. There just aren't many many options out there from a broad capability on the pump.
And then let's since all of the other the other question.
On from a revenue trend here.
Sitting in the pandemic.
So for sure some of the pharma saw that kind of was in fact of depending on what we see that picking up as well.
And I can get back and option again.
We do break out funnel.
And what pharma pays for.
On our on our filings that's the.
As a percentage of the fund the place where we'll continue to do that.
And the pharma business is important for us.
Very much beyond just the pharma paid on <unk> and frankly from a paid on the isn't really that great of an indicator of the health of the business. It's helpful from a cash perspective, but it doesn't sound like the long term value created there.
And the final programs are really importance of validation for getting the getting the all the data to support both the obstruction of the monitoring so those are the essential to keep those going and of course then.
The real action and the feature is matching patients to the targeted therapy doing research on new targets, new capabilities that our net worth of patients and our data can bring and we can bring to our pharma partners, which we're really excited about pulling forward the more patients we get the more <unk>.
Different datasets and we get on them.
It's a good potential for the future.
But right now you are a mix of patient identification programs and validation and research programs and clinical trials.
It seems sort of been picking up kind of.
So we're coming out of the pandemic and it will still be important part of the revenue going forward. Yes. We noted on it that was a 33% this quarter. So that was a nice uptick from prior quarters.
Got it and just a couple of quick housekeeping ones for you Shelly.
The are you assuming sort of around $10 million or so in terms of the non and BD sales revenue over the course of the remainder of the year is that fair or is that sort of is there a room for upside there.
Yes, I mean, we're actually encourage people, it's kind of de Minimis and it's in the.
And with any luck it'll be and the noise of it but.
Yes, and we don't know what the count on for the rest of the business that wasn't.
And if you remember at 60% of of the pass through anyway. So you don't really get the book of the additional and and the rest of it it's unknown, what how that's going to play out and we don't have a.
Hard opinion about it either so we're just kind of encouraging people to ignore that for now.
Got it got it and Sean can you help us think through the impact on the turnaround time once the RTP facility comes online here.
And then on one final follow up.
And this.
And where I.
And I actually I loved it because it was kind of shows where we are.
Literally talking 18 hours and I mean, it's not.
18 to 24 hours, which is huge and.
And then even more importantly, our.
Our shipping Bill.
Is getting is getting up there and so that.
And that shipping zone and to maintain those service levels and reduce the cost of it is really key so it's only a day difference that the.
The real important.
Differently of how much you pay for that day is days advantage and that's the key to having on.
On the East Coast and addition.
Like we mentioned across the Atlantic or to the South America, it's a little bit of more straightforward.
Faster and cheaper.
Got it and.
And then one final one from me.
The $1 8 billion on on the balance sheet, Sean and I know you mentioned the <unk>.
The TP investment and the O U S expansion, but how are you thinking about sort of the cancer screening opportunity here and I mean, that's the one sort of the elephant in the room. So to speak that you don't have today and the portfolio that would make sort of logical sense for you to look at.
Yes.
And we spend an awful lot of on development, we get a lot of samples from patients that we have the.
Who is at risk.
Now the performance therapy selection and monitoring of on them.
And we I'd say the short answer is yes, we've got at least three technologies in house that you could.
And you could imagine we're looking to develop data.
On the early screening.
And again, we're very likely going to be focusing on people. We know our risk of that just from our world view and the way we deal with our patients and customers that seem to make the most sense. The people that we already know of at risk very high likelihood of developing cancer earlier.
And then and then of course, there are many technologies out there that look pretty interesting and compelling as well and yet the.
The cash balance helps us.
It's kind of not worry too much about the bill by the decision there.
I'd say I think of it.
And it's something we're evaluating we truly.
Are focusing on and what we think the bulk of the action of at least this and next year will be as and who's at risk what therapy should they get and then what's the best way to monitor.
Monitor for the day for the.
It is easy to either coming back or to alter the course of therapy.
We think thats, where the bulk of the action is going to be and oncology. Nonetheless, yes, we are looking looking to the future and.
And pretty pretty happy about where we are vis vis the access to patients access the samples of the kind of data and the technology that at our fingertips.
Super helpful. Thank you.
And your next question comes from Brian Weinstein with William Blair.
Hey, guys. Good afternoon Griffin on for Brian Thanks for taking my question.
Just kind of a quick follow up on the measuring Archer milestones here can you give us the update on stratified.
So of course submitted the FDA late last year received breakthrough device designation. So are you hearing anything from FDA regarding the potential priority review and anything on timing there.
And yes, I mean.
<unk>.
And again.
The.
It's not it's not typically the best practice to discuss the the decision of the FDA. Obviously, because this was a part of the acquisition milestone and it obviously is an important question.
What I can say is yes. It was submitted in the last year.
At the time, we suggested look these things can take anywhere from nine to 18 months.
Theres nothing thats changed on that timeline.
There is there is.
Okay Fair of complex submission Neal we've got the <unk>.
On a infusions.
The.
Copy number variations and the RNA.
And I would expect that we're going to start to see the initial initial pool of initial indications.
On time.
And our general sense. There is nothing that is changing that view right now.
But we'll keep we'll keep people posted.
It's kind of thing you kind of you kind of know and.
And it happens and then we continue continue the dialogue with them for new indications new targets et cetera from that.
Understood and then just one more of just given how broad your product portfolio is now on.
And surety busy family planning oncology et cetera are there any areas within the business and youre, seeing and particularly faster and maybe slower recovery and if so.
How is that kind of informing where you're putting the time resources and investments.
Yes.
And.
I got to tell you it's hard to it's hard to measure is the.
Market growth against the recovery for example, reproductive health is growing very fast right now.
I think some of that.
To the extent there was an impact from COVID-19 recall that that area was impacted the least and the equivalent impact.
So theres a little bit of COVID-19 recovery and I also think there is just general there is a lot of market growth there going from the number of women who are getting the service today of the number one and he will get them and the future.
We do see the in terms of the fat has recovery.
Slope, yes, oncology, particularly on the risk of the early risk side of things and a lot of the the other pediatric and rare disorders.
Those are those of the most impacted and those of the lunch day and the steepest recovery at this point and time.
And then it's difficult.
Tease out exactly but I think thats, the whats market growth versus what the recovery and influence, but I think that's the best that's the best we can tell right now.
Great. Thank you.
And our next question comes from Katherine <unk> with Oppenheimer.
Okay, great. Thanks for taking my questions guys.
And so on one of your peer group companies with some portfolio overlap called out and R&D day to day, 8% to 10% kind of organic growth.
For their business Youre, calling out sent by 50% and it was near term.
Or for oncology and sense of it because of that.
The business overall, and I guess, maybe sort of two parts of this question.
Can you give us a perspective.
How you think of.
Kind of.
Organic growth for the business and the context of that 50% number and maybe maybe a little bit.
More contextual.
For some of the key end markets do you have a good kind of car and feel.
And as we do exit.
Pandemic weighted a little bit different dynamics and the market.
And how we should think about industry the lateral.
Gross metrics for oncology and and women's health.
Yes, yes.
I do want to clarify the when we point out and <unk> 60, I think 50 and 60% gross for the next two or three years, we don't distinguish organic inorganic obviously very large inorganic additions of that is a little bit cheating, we wouldn't count those but.
On the margin there is going to be some some acquisition and that I would assume over the next three years.
But if you kind of take that aside.
Our view is still very much rooted in the fact that the majority of patients who could use this information on getting it today and I think even and some of the more developed like you take carrier screening noninvasive testing on the carrier screening broad panel carrier screening is just now becoming kind of on widely accepted and reimbursed by payers and <unk>.
We we kind of cover that AD nauseum, but still there is only two two and a half.
And women and the U S $2 5 million pregnancies or so that are getting afforded those technologies and 6 million pregnancies just from the U S.
On oncology, it's even more of it is even more tilted the number of individuals' getting their cancer staged appropriately.
Perfect molecular characterization of the best and like the characterization.
It's still a very small amount of small percentage of the all of the all of the people getting diagnosed with cancer of the year.
And then of course on the on the.
Recurrence and the monitoring side.
Greenfield price that is essentially of greenfield kind of thing.
And so our view is that.
And I guess I should I'm, sorry, I should have started with the risk assessment and even with really strong market position. We have we're seeing guidelines and grew faster than people can keep up with and the <unk>.
Markets are.
The size of what they were two years ago by way of kind of recommended.
The screening for people for cancer and.
Not the mentioned and you just talked to.
About prostate and there's another there's another huge chunk out of debt. So thats really our viewers when youre looking at if you'll hear on oncology Youre looking at.
Risk assessment, and therefore, 30, such and monitoring.
The risk assessment is the.
Former markets are reasonably penetrated, but the new markets new market size of getting added all the time and then prepare for such and monitoring its essentially early days period.
And frankly, if you look out beyond that.
The thing I mentioned reproductive health and then if you look at pediatric disease.
I think we've done a pretty reasonable job with epilepsy.
Whereas almost zero percent of kids with the epilepsy, where getting getting appropriate diagnosis now it's not zero, but it's certainly not the 100.
Tom.
Team other of long tail of other genetic disorders for which there is really effective targeted therapies on.
So it's sort of a long way of saying the short of it is it's a it's a the.
The market is growing and.
And the need is materializing.
And it has to be at the right price point has to be at a level of utility that youre average clinician and your average patients and understand which of course of the hard part, but that's our view of the growth.
And the tailwind of growth look like.
Great and then as a follow up question.
Yes.
On the home one of the earlier questions talking about other.
Central.
And markets for growth.
And with the scale of the operation company has and cost structure and repay.
Can you just give a perspective on interest and population sequencing opportunities.
And there's a number of opportunities are out there of a bit back to us as well.
Yeah.
And I can I think.
I'd say two things, we often get approached by folks who have done population sequencing programs.
And then are having a hard time.
The figure out what's the end to do.
The research aspect of it is probably satisfies the than what to do that and take actually communicate.
What do you communicate and when and to whom and how do you manage the patients as a result that is that is where the top seek programs I think meet the real world of clinical utility of genomic sequencing.
And frankly I think we are in early days of that we will.
And we will see more and more of those coming in and we will kind of do our part there.
I think what's particularly interesting is what youre seeing around the globe.
Almost the skip to the I think the ministries of health around the globe are skipping away from Hey, let's just do a population sequencing program to how do we do of population wide genomic program, how do we actually and implement genomic medicine.
And for our population how does it work.
What do you need the sequence and when and what do you tell people and win and.
And essentially and again I point to the the <unk>.
And on the U K or the NHS report that came out and the last summer.
No.
And that I think is a pretty reasonable blueprint for what a lot of the ministries of health and the globe around the globe on evaluating and again it kind of reads like an RFP flow.
The business model.
So we're excited we're excited to kind of see those see the discussions spinning up and we're excited to see what we can what we can do by way of enabling.
From could you kind of crib the death.
Population genomics and see how can really bend the curve on outcomes and costs.
Thanks for taking my questions.
And then.
And your next question comes from and Sarah Dewitt with capital market Labor.
Hey, Sean and sorry, thanks for taking the questions just two quick ones.
I think 2021 was the year that can give of bio.
It's going to be getting into production for noninvasive prenatal screening and that would eventually impact something like.
40% of the entire and productive business, how is that tracking and can you comment on possible impact on Cogs.
Yes. So this is the year as you pointed out.
We are going to begin putting that into production and we won't immediately take all of the nics volume, but certainly by the end of this year, we expect to have a good chunk of it up running and saving clogs and then certainly by middle of next year and transition the majority of it.
And the extent that will impact call. It like you said, it's the if you take a little under 30% of our total business hours reproductive.
I think 35% to 40% of that is and IPL and <unk>.
Significant.
The significant impart and.
It certainly helps.
And when you look at we look at the margin profile on the overall basis, but if you consider reproductive health.
The separate it certainly has a really really it has a real impact on the gross profit contribution on a per sample of basis for those samples. So we're excited to see that come into play and like I said by the end of the sheer will have.
From some good proportion of our nics converted over.
Can you give any color to the impact of yet or do you have to wait.
No I think the ethylene.
Part of it is kind of when and what portion which is still it's still something that we don't have 100% visibility too.
Okay great.
And also the possibility that exome could become.
<unk> revenue and 2021, perhaps on the back half.
You had one eight instead of essentially instead of panels of do you of any update on that.
And we're excited to be moving into the kind of the genome powered era, where.
Exome the annual genomes are going to be a better way to go the natural way to go for a lot of differential diagnosis and difficult to diagnose diseases and in particular and this I think will be more of a next year story for autism development of <unk> and also visibility.
So we're very.
We're excited about that and again I think this is where this is just the just the beginning of kind of the power of genomic scale for some of these conditions.
And again, we do think we do.
The good news on that one and the reason we think it will be one of the growth accelerators is theres, a very well established market for micro arrays and lot of panels microwaves and ex.
Used to the diagnosis children and.
Our kind of nearest term version of that is a single test of that covers all of it.
Based on our based on the genomic analysis at the at the same quality of at the same and clinical quality for sensitivity and specificity of diagnostic yield et cetera.
And that yes, we definitely think that will be a growth driver.
Is this something we should be considering in the back half something to adjust our selling.
In terms of the adjusted I think Thats one of the things we pointed to when you talked about guidance, we pointed to as a potential upside for this year I would.
And I think the timing is still something that whether it is going to of a big impact or not is still out on them even even today.
Okay fair enough I'll take the rest of offline. Thank you.
Okay.
And your next question comes from Simon Barnett and best.
Hey, Thanks, So just one.
And one question here so last week at the <unk> rare disease contract I think several rare disease collaborators and then Tim that the the relative lack of.
Structural variant of information and share databases made.
The interpretation step a little bit more manual for a lot of these clinical cases, so staying on the topic of interpretation I'm. Just wondering while these databases are still growing over the coming quarters and years, how do you feel like the.
The function of modeling platform as sort of setup to automate the interpretation of a lot of the had been more novel.
Various types of that youre going to start picking up as you migrate to <unk>.
And going more to add the hifi sequencing.
Yes, and others.
And is really to the crux of the crux of the question here.
And actually the since two parts so the.
The S&P the.
The S&P.
Portion of it tells us the F&B module of our infrastructure.
Allows us to push more variance away from the bus bearing of the non significant state into either.
The suspected benign or likely pathogenic, which translation is its more of as a more certain results for for clinicians and patients.
And.
And it leads to higher diagnostic yield and so you get up and you get a better service you get more certain and answers. We also by the way to get more patients that we identified that could could benefit from targeted therapies from our Biopharma partners.
And so the SMP module allows us to do that and to the extent debt. We can do it on the automotive classified plug it into an interpretation of infrastructure.
It also reduces the Cogs associated with looking at.
All of those brands on the non significance and.
And and the work that goes there and.
Now that that wasn't the acquired.
And that was an acquired assets that we integrated into entrepreneur and and overall our interpretation of engine automates as much as possible.
And then leaving the the human and specialized work for only the the most exclusively difficult to answer the call.
And I think it's the kind of thing where what has been the key to us.
Both the kind of leading and quality and at the same time lowering lower on cost dramatically and that.
I think also I think going forward.
Fully understand and I can empathize with the sentiment of the trust for some of the clinicians of that confidence again, we would offer we've got a pretty pretty good cutting edge platform for doing most of this is why we can do it's on extensively and we're going on we're going to over the coming years, the opening that platform up to those individuals as of <unk>.
And we extend our global data infrastructure.
Taking a more and more patients and the data in.
And again at the behest and sharing that and the outcomes to push the science and each one of these rare disease forward even faster.
The other thing you mentioned on that was the highest of all these reveal.
Again, as we mentioned when we did the the pack bio announcement earlier in the year. There is another aspect of what the to kind of work in concert with each other if you are getting.
Higher fidelity reads across various debt otherwise we missed you.
By definition of increasing the diagnostic yield.
And which is again translates to better diagnosis more patients correctly diagnosed.
And youre going to be finding a lot of variance that are debt.
Arent in the canonical databases around the world. Unfortunately.
Again, the good news is our infrastructure is set up to deal with those things and to get them I think maybe a way to think of us.
Push them the economical as soon as possible as soon as humanly or actually human plus.
And now possible.
And thats the real benefit of things like the S&P module of our infrastructure amongst others and we also acquired deployed which was the kind of on again, we've kind of talked about it.
Gary on the bulker, the genomic and the brokers that were.
Help identify a lot of those really low allele frequency variance and that quickly a sign of it could be positive or not.
So yes, the two of the two work in conjunction and again, that's our view of our kind of constant investment and innovation on improving.
The interpretation and reporting at the same time scaling it to the global scale of lowering the cost of the process.
Great. Thank you so much.
Sure thing.
And there are no further questions I will now turn the conference back over to Rd, Angela for closing remarks.
Thank you for joining us today, we look forward to connecting with you soon at upcoming conferences.
This concludes today's conference call you may now disconnect.
Okay.
And.
[music] moving.