Q2 2021 Invitae Corp Earnings Call
And then.
[music].
Good day, Thank you for standing by and welcome to and the change second quarter 2021 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.
I ask a question during the session you will need to price tier 1 on your telephone keypad.
And further assistance please press star zero.
You are.
I'd now like to hand, the conference over to your speaker today and its Laura D'angelo no floor is yours.
Thank you operator, and good afternoon, everyone. Thank you for joining us for our second quarter, 2020, 1 financial results call. Joining us today are Sean George our CEO Roxy Wang our CFO, Ken Night, our C O L and Shelly Guyer, our sustainability and E. S. T V.
Before we begin I'd 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 Q2 preliminary financial results, our plans and prospects and the focus of our business strategy, our plans to integrate and manage businesses and we acquire mark.
Opportunities future products and services, our product pipeline and the timing thereof demand for it 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 demand for our services and therefore, our actual results could differ materially from our state and outlook.
Statements on future company performance assume among other things that we don't conclude any additional business acquisition and investment restructurings or legal and settlement. We refer you to our most recent 10-Q and particular to the section titled risk factors for additional information on factors that could cause actual results to differ.
Materially from them from our current expectations. These forward looking statements speak only as the date hereof.
And you listen to today's conference call and we encourage you to have our press release available, which includes the preliminary financial results as well as key growth metrics and commentary on the quarter.
We are currently finalizing the accounting treatment for certain acquisition related liabilities and stock based compensation amounts reserved against the acquisition of Archer Dx last year.
Assuming adjustments are necessary, we would expect a decrease and I recorded liability, while also resulting in an increased gain and our adjustments to the fair value of contingent consideration.
The primary growth metrics. We are reporting include revenue volume ASP and cash and any non-GAAP results are not expected to be affected by any adjusted.
But we want to direct your attention to the preliminary nature of cost of revenue operating expenses and net loss as they are not definitive as of today.
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 asset.
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 and.
Adjustments to the fair value of certain acquisition related assets and liabilities, including contingent consideration and acquisition related income tax benefit.
From our non-GAAP cash burn as applicable changes and marketable securities cash received from equity financing and debt and cash received from exercises of warrants.
And this period our non-GAAP measures include cost of revenue gross profit operating expenses, including research and development, selling and marketing and general and administrative 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 in the press release and in the appendix of the earnings slide deck with that I will turn the call over to Sean.
Thank you Laura good afternoon, everyone.
And we're pleased to report another strong quarter and topline growth across the box and demonstrating our continued progress toward meeting the unmet demand for the use of genetic information and adventure.
Gross all stages of life for our patients.
And important milestone for us and it would be things cross with now over 2 million people receiving genetic information.
Many of whom would never have done so.
Not been pursuing our mission so aggressively.
With an ever growing number of people seeking genetic information to inform health risks.
We are committed to delivering the most comprehensive and affordable genetic information accessible to all patients at the standard of care.
The rate of adoption of genetics and nature medicine is on the rise as demonstrated by new data and BJ presented from multiple cancer types and 2021ask Amit.
And that's 1 example landmark intercept study conducted Mayo clinic showed that nearly 1 and 6 patients pancreatic cancer genomic alterations and importantly, genetic testing was associated with improved survival.
Outcome is consistent with almost every study that we adopt Missouri, and we believe and and pizza is uniquely positioned to meet the growing need and market for combined somatic and germline genetic information.
All cancer types.
Go ahead on the quarter, we continued to execute well on all of our growth measures both revenue and billable volume showed a triple digit growth over last year's Q2, which was impacted significantly by the COVID-19 shutdown.
Demonstrating our continued exit of the Covid impact period, and increasing momentum, we drove double digit sequential growth and both revenue and billable from Q1.
And so our guidance for the year, our Q2 gross and the macro trends, we see have us confident that we will exceed the high and about 50% to 60%.
Other claims from revenue growth this year.
In January we give guidance and more than $450 million revenue for the year given the strong growth we've seen and the first half a day you were confident and I believe he's delivered revenues of between 475 and $500 million and thats, including uncertainty from the recent increase and Covid cases resulted from adult to bear and spread.
With that I'm excited to introduce the newest member of our executive team.
Well actually windows and Bj's newly appointed Chief Financial Officer, and she is here with US this afternoon.
Thrilled to have rejoined the team to help scale. This business globally. She brings a new perspective on financial management and modeling as well as capital deployments and of course supporting all of you.
Rockies decades, and successes financial executive and global Tech and Med Tech companies allows great insights into how the enormous opportunity at the convergence of these sectors can be capitalized.
But maybe you could say a few words about the Fisher first few weeks before you provide some detail on the Q2 connections.
Thank you Sean well. This is my first quarterly conference call I've had almost a month to engage with the team and speak with some of you and it is a real pleasure to join and DTA as we tried to do the important things necessary to improve the health of the population.
I would like to thank challis, who can further help supporting my transition. It is a rare benefit to have the predecessor CFO available for counsel and it's making the transition that that much more effective.
Also like to thank those of you who have reached out to wish me well and to offer your perspective on how we can continue to serve the needs of investors.
We take their input and guidance seriously and look forward to a collaborative relationship going forward.
Before I recap the results and preliminary results of the quarter I'll say, a few words about the topic Nora touched on and that was explained in today's press conference.
And we conducted our customary close of quarter analysis, we determined that we may need to reserve and convert some of the liability associated with Archer Dx transaction milestone.
Practically speaking.
Accounting adjustment should it happen would have no impact on our key performance metrics, such as volume revenue S T cash and all non-GAAP financial results.
<unk> implemented this accounting adjustment would significantly reduce GAAP net loss in our adjustments to the existing fair value of contingent consideration and acquisition related stock based compensation.
We expect to complete the process over the next coming days and we look forward to filing our form 10-Q and.
Now onto the second quarter performance.
As Sean mentioned, we continue to see strong growth across the board revenue of $116.3 million was generated in the second quarter and 152% increase from the second quarter of 2020, which was of course heavily impacted by the COVID-19 and <unk>.
Cut down.
More relevant was the 12% sequential increase from this years first quarter.
Great result, and indications of continued momentum into the second half.
And performance against the ongoing go up 50% to 60% annual growth rate.
Billable volume of approximately 287000 and in the second quarter of 2021 were up 154% from the second quarter of 2020, but also grew a strong 11% sequentially from the first quarter of this year.
Internationally, we saw volume growth that was slightly ahead of our U S business.
And represented nearly 19% of total available volume for the quarter.
Overall, ASP trended up slightly to $388 and the second quarter up from $383 and the first quarter of 2021.
Steady progress with third party payer relationships and policies are benefiting both pricing and collections.
We also continued to see rapid growth and sales of our women's health product.
Average price per test is generally lower than the current oncology products and.
And where we also expect to see price improvement over the coming quarters.
Looking ahead to 2022, we expect CSP to benefit as we stand up and continue our launch of the browser L. D T and regulated oncology testing for therapy selection and I'm already testing for monitoring and $4 million.
Both of which garner higher reimbursement rates.
Preliminary cost of goods sold in the second quarter was impacted by approximately $5.3 million of inventory impairment charges due to our decision to discontinue offering COVID-19 testing and the write down of inventory associated with our oncology business.
We do not anticipate significant ongoing financial impact from these issues.
For the remainder of the year, we expect progress in Cogs and gross margin in both Q3, and Q4 and are targeting a non-GAAP gross margin between 45% and 50% as we exit the year.
Tracking towards our long term, 50% target margin.
As we projected non-GAAP operating expenses were sequentially up coming in at $198.2 million and the second quarter as compared to $155.4 million from the first quarter of 2021, driven primarily by head count growth and.
The increase and stock based compensation.
We continue to invest in our business with a focus on long term value creation opportunities, including scaling the business and modernizing the platform.
Building on our content across all are improving.
Improving efficiencies and therefore on margin and operating leverage.
And creating a more patient centered experience benefiting all constituents of health care system.
We also note that we expect spending growth rate to decline for the rest of 2021 at this year should mark the highest annual non-GAAP operating expense as a percentage of revenue as investment levels stabilize or even slow in key areas.
Moving to our cash position cash.
Cash cash equivalents.
The cash and marketable securities totaled $1.5 4 billion at June 30th compared to $681.9 million at March 31, and.
Increased.
Approximately $858 million.
Cash burn was $256.8 million and the second quarter, including cash paid to finance and close acquisitions.
Excluding acquisition and related expenses for burn for the quarter would have been $136.7 million.
Now back to you Sean.
Thank you Roxanne and great to have you on board.
Before I hand, it off to Ken for an operations update we thought it would.
Would be helpful to provide a snapshot of how the platform and business are evolving and how that ties into our long range vision for the industry.
There are a couple of big picture takeaways worth notional debt.
It does and Vod revenue and business mix grows across all types and categories.
Our approach has always been and will continue to be to build a platform that can serve up all genetic and genomic information needed to identify those at risk pretty neat protect and diagnose the onset of those diseases earlier.
Use that information to guide preventive measures are targeted treatments and monitor the success of that treatment.
And as our view and if we can accomplish this genetic and genomic information will be used across all of these areas and all stages of life to improve the lives of billions of people on the planet.
The second is the size of the opportunity and the importance of our gross interest.
Even though because of difficulties and setback last year, we are on.
And average growth rate and more than 50% demonstrating resilience of the business execution and therapy and validation of both the opportunity out there and our ability to choose entry points to grow the market as well as picture.
And when considering the sizes of the addressable markets. We are pursuing combined with the accelerating pace and would shake information is being utilized 1 can get a sense of the scale and which we believe this platform pizza operator.
Our perspective on the size of the addressable market and our view of how to aggregate and transform genetic testing with a broad mandate for all stages of life and.
Forms our view on how to lead the transformation of our industry.
We have long shown this ramped view of our business model and an effort to describe how we see the evolution of global genomic medicine.
Our progress and addressing patients' needs throughout their lifespan and the emergence of our platform and data services demonstrate progress up the curve into the genomic network era, where genetic information can be shared on a global scale to diagnose more patients correctly earlier and bring therapies to market faster.
We continue to believe that these new connected capabilities are best developed delivered and supported from an integrated platform.
The more of the landscape and covered by way of genetic test content and more patients. We can add to our network and are more patients and our network combined with more information we can provide our interests on their behalf.
More that we and our partners across the health care system can do for them.
Our business is expanding exactly along these lines and we believe the time is right to attempt to provide more visibility into the key drivers of that growth.
In addition to our sizable and rapidly growing rapidly from oncology reproductive and women's health and rare disease or other genetic and genomic testing services, we will be including a newly defined category and the mix, we're calling platform and data services.
This category includes data management, and analytics and interpretation and data as a service certain biopharma programs and patient identification efforts among others.
Anticipate this part of the business will be 1 of the fastest growing elements of our business over the next 5 years fueled by our continued building across these areas and acquiring new capabilities combined with access to the rapidly growing number of new patients entering our ecosystem and all stages of life.
Revenues derived from those services were about 2% of total 3 years ago that had been growing rapidly and this past quarter move past 8 percentage of total revenue.
While it's still early and again the impact of this set of business activities on our model is hard to overstate.
As we begin to public and track progress on this important part of the business, it's worth restating, our basic tenants since the company's inception.
First patients own and control their data and.
And second that data is more valuable when shared.
And then the day, we worked very hard to build and maintain a foundation of trust when it comes to security and privacy portability and consent. We believe these intangible assets will be essential for leading the ongoing transformation and did genomic and form personalized medicine benefit patients clinicians and payers researchers and Biopharma partners alike.
The next step and building out our platform include continuing investment and the development and with our data analytics and real world evidence capabilities.
Over many years, we've built and extensive technical stack of processing pipeline and interpretations reporting and cost.
From a service capabilities and we continue to acquire and integrated portfolio of digital products and services and enhanced customer experience to personalize and sites improve workflow and other tech enabled services.
So that and we've been especially active in the first half of 2021 and I'm thrilled to announce our acquisition of Med D. On the latest edition to elite is data and digital solutions platform.
With me on combines guidelines real world evidence and personal and family history and to rapidly identify individual short term and lifetime cancer risk once determined and clinicians are informative patients eligibility for genetic testing and supplemental image.
Preventive action maybe tick.
As you move and the second half of 2021 and beyond and you can expect to see additions and all of our testing areas with a growing emphasis on tying them altogether data collection analytics applications delivery and improve customer experiences with.
And with those introductions I'll turn the call over to Kevin to go through and update on our operations.
Thanks, Sean.
Through 2021, and we felt this was the right time, we'll provide an update regarding operational scale and innovation.
And how they are being leveraged to bring our long term business model to life.
COVID-19 has kept us on our toes with suppliers and transportation partners struggling periodically to keep up with our growth and our increasing demand.
And stay nimble over the last 6 months, we have brought on new supply and transportation partners, even when additional validation steps, where we're required to deliver.
Cost and some cases have been negatively impacted as a result of intimate and short shortages and.
And we have not yet fully returned to normal flows however.
We were still able to lower material cost for our noninvasive prenatal screening test by 14% year to date.
Innovation and supply chain modifications.
This work has also brought along a 300 basis point improvement and percent on time delivery for patients and.
There are further improvements and our pipeline.
And lastly, you highlighted earlier Q2 non-GAAP cost of goods. So was impacted by pull ahead investments and labor and inventory and preparation for second half 2021 gross.
Still non-GAAP Cogs and the second quarter improved year over year by 23%.
And Q3, and Q4 should deliver further improvements along with expected volume growth.
The acquisition of <unk> and Q2 has been 1 of our best moves from a strategic and integration execution standpoint.
And a short timeframe. The team has accelerated access to personalized oncology testing and monitoring playing a key role and standing up the LDP for MRV testing that Sean mentioned.
This success has a super excited about delivering a level and range of precision care to patients that we believe is unparalleled.
And more to come on this later this year.
We also recently welcomed 1 codecs and veterinary onto the <unk> team as we build out our strategy.
To support our overall growth we have active expansion plans underway at 75% of our existing lab operations.
And our plan to deliver on new North Carolina facility is on track for a mid 2022 go lives.
Reflecting our scaling efforts, we collected record cash and Q2 and.
And increase which was closely aligned with the Q2 increase in revenue.
Commercial leverage improved by 100 basis points quarter over quarter and.
And 45% year over year.
The focus on improving Leverages continue within across all functional areas is a key component to generating cash for reinvestment into our growth.
And we are growing.
Thanks to our patients our customers and our people.
Our operating mechanisms that providing clarity for decision, making and the focus on our ambition is clear.
I'll now turn the call back over to Sean.
Thanks, Ken.
I hope that a major impression for anyone listening to this call is that we are playing to win.
Our strategy is unique and our vision is ambitious and future disease genetic information driving mainstream medicine is coming into view as a reality.
Time for ambitious and decisive actions as now.
Net cash position allows us to deploy resources thoughtfully to extend our reach and in new geographies, except on the commercial launch plans and pull exciting development programs forward onto our platform.
The growing opportunity and platform and data services as highly relevant the diversity and growth and that part of the business should become a significant driver of value for patients providers and all stakeholders and the modern health care ecosystem.
And of course, our long term shareholders are uniquely positioned to benefit as we continue to execute against our plan.
Before we move to Q&A I'd like to take a minute and think Shelly guyer with this year to day, who for many years and right up until a few weeks ago service and <unk> CFO.
And a massive transformation of the company during her tenure and I.
Wanted to express my and the whole team's appreciation for her tireless commitment to excellence to our mission.
Should now be leading our ESG programs going forward I'm excited to have and working with you on as we push forward on these essential efforts and the future.
With that we'll now turn the call over to the operator for Q&A.
As a reminder to ask a question on the room to cash star 1 on your telephone keypad again on file 1 on your telephone keypad.
You have your first question coming from the line of Dan Leonard from Wells Fargo. Your line is now open.
Thank you and thanks for all that detail. My first question could you elaborate on your early efforts commercializing PCM is an ODT and what type of organizational resources are you committing to that effort.
Sure Dan So the initial.
But in the acquisition of velocity as Ken had mentioned Youre able to kind of.
Great that quickly and get the the.
The Archer PCM technology up and running on.
And the OTT.
I'll be honest most of the most of the organization and he was spent on doing that.
Commercializing of it and we wanted to get it as early as possible, but given the hands of few key clients.
On the <unk> pieces as it were.
And get ready to scale it up between now and the end of the year. We've got some more scaling of that process will be.
Put in some more cost containment and really get it ready for full force.
Full blown and commercial launch at.
And at least by early next year. So that's kind of where we are and much of it is spent on the operating and development side of it and.
More and more commercial.
Our sales execution.
And as the year wears on.
Understood. Thank you and just a quick follow up on the women's health business.
Specifically on average risk and IMTT reimbursement when do you expect to improve reimbursement that flows through to asps at the corporate level.
The short answer that is asps have been improving for an EPS for.
Many many many months now it's been a slow and steady climb and payers.
Payers have been picking up reimbursement and not just for high risk, but for average risk.
And the Pascal at the past year or so that is also on top of us being relatively new to the game of the Bayer So kind of both.
Process oriented kind of increase and collections and reimbursement combined with more tears, taking on average risk average risk reimbursement, which more of doing that.
Piece of the payers picking that up has and has indeed increased but it wasn't a binary and inflection point with the eco gallons coming out and I would expect that to continue throughout the end of this year and probably.
It will probably be some some from payers that refuse to cover this for many months to come and possibly even into the end of next year.
Slow and steady trend there and then again, we do think that that's.
Overall positive on the reproductive health business.
Okay. Thanks for the color.
Okay.
Next question is from the line of Sounder from Leerink. Your line is now open.
Yeah, Hi, Sean Thanks for the progression and so.
Wanted to.
And just understand a little bit on in terms of the guidance, maybe if I can ask it this way.
Where do you stand in terms of.
In person and sales details by reps versus online I mean, obviously, we're hearing but.
There is.
The issues and challenges and the space.
And we are still emerging out of Covid.
So maybe could you talk to us.
On that and.
And and.
And minus and lines of the guidance that you have.
Absolutely right do you feel confident that those assets will sort of continue.
Continued improve and where does it stand today.
Yes.
I appreciate the question.
To be clear the guidance.
Isn't a signal of any kind of mix and demand Gen and demand generation.
We still are testing and we are still playing our direct channel. It still continues to improve over time, it's also still a pretty minor point of it.
Total total demand generation.
This is a.
Our kind of sales and marketing team.
Checking and seeing how the year first half of the year current momentum and accounts.
All of this informs our view between now and the end of the year.
And there definitely is a is a <unk>.
Shift and access kind of pre Covid, and then whatever covers and kind of post Covid era.
Recycling and hits.
This is not as high as it as it was pre COVID-19.
But nonetheless, a combination of our kind of sales marketing and customer service capabilities. We're confident we can continue driving volume and that's all that's all baked into that outlook.
The range is.
And it reflects a little uncertainty there and not not theres still COVID-19.
Total debt and whatnot, that's the range, but otherwise.
And it reflects current momentum and our.
And our outlook on on that continuing.
Got it and then on.
And so.
After on stratified and DCM, most sort of ASP lift are you expecting there and could you just elaborate on the timing or.
For TTM and PCM.
Potentially as an FDA approved product.
And also stratify, those and FDA approved product and I'm wondering if you're on along those lines. If you can also elaborate a bit on could PCM pursue the ABL to year round.
Sin.
Here on this space.
On that and I'm, just wondering if you need to go.
That route and you do it with an LDC or do you need and FDA approval for that.
Thank you, yes so.
Yes. So good question and I think it's and this is where it's really and this is where it's essential to separate it out a bunch of concepts that are admittedly.
Admittedly from any companies intertwined, but for actually for us or.
Not so much so first I would say the pricing for the PCM or MLD kind of monitoring services.
And pricing for therapy selection.
Stratified.
Et cetera, and our and our <unk>.
Research and development the pricing is already set.
Debt.
And the 3000 plus range.
And for certain indications.
Certain stages of cancer and certain types of cancer.
And we have no doubt, we'll get the same pricing there, but the other players on the market too.
As far its impact on ESP, that's where there's a little bit more of a dynamic question here. So first we have a broad menu at many different prices everything ranging from.
Low 1 hundreds.
For patient day prices of various tests to 4 to $5000 for 4.
And what currently offered by way of Exome testing, sometimes and.
And we will see and kind of what what the reimbursement is coming down for MRV services right. So.
And that's going to be a range of test across a lot of different areas. So the.
No.
The overall combined ASP impact because of those 2 products and the higher pricing.
Frankly, it is difficult for us to forecast.
Okay.
And Thats and Thats a lot of that is baked in a lot of that is baked into that is the fact that while we will take the same price that everybody else gets on.
Tests that are approved and.
And reimbursement guidelines.
And we're more interested and the 40 million cancer patients and the markets we serve that debt.
I'll call it 38 million cancer patients and the markets, we serve that won't have access to those.
And we will be testing all different price points of course always always targeting our 50% gross margins were on the platform.
So by way of saying the price is 1 thing and it will be kind of standard whatever else is getting the ASP impact, but I think we'll have to see together over the next couple 2.3 years when those kind of volume, but for sure. It is going to drive more volume.
For sure it's going to be upward.
And on ESP, where exactly it ends up we're not absolutely certain and then the regulatory component of it is assured and also distinct.
Except from the sense of it's tied in with the with the dual track reimbursement and approval, but yes. The APLP approach is available to us.
Haven't.
And what kind of publicly talking or committed 1 way or the other.
FDA Sidoti <unk> as a laboratory developed test the market and the customers and the market demand.
Different different things.
And sometimes what type of pricing more often than not they are not and so we'll keep all those options options available in general, yes, we're pursuing regulatory approval.
For both on therapy selection and catch and modern and then the exact form of it and you've got timing is something that it's going to be we're going to kind of see here quarter to quarter.
And at least on 1 vertical given given all of the all the factors involved but nonetheless will be driving the topline and the oncology business, we expect asps to be upward pool.
And certainly.
Contribute to 2 or kind of what we think is a really high growth right now and for the year Scott.
Got it okay, that's very helpful and.
On Rocky Mountain on board.
Thanks.
Again to ask a question on your room each of the star 1 on your telephone keypad again that inspire 1 on your telephone keypad net.
Next question is from to have from bond from Morgan Stanley. Your line is now open.
Hey, guys. Thanks for the time this is Edmund on for <unk>, just a few questions from me Tonight.
And the first 1 and loaded on the announcement on <unk>.
How do you guys see that influencing your collaboration with them and I guess on a longer term what are your views with opportunities for a single box combining.
Both long and short read sequencing.
Sure No I appreciate the question.
On.
First and foremost and I think this is kind of what can touch upon overall we spend.
And the Nord amount of time looking at cost of goods input costs, and how we can better and more efficiently run and run off on our services and support our products around around the globe.
Our collaboration with <unk> as it is.
Is it good specific example of an investment with a partner doing so.
And we kind of talked earlier and the year, but the benefit to patients and that 1 way of genomes, particularly and pediatric and rare disease cases.
Obviously, having short reduction as well.
And even even more.
Even more excited and in terms of the different options for different.
And our tests that use sequencing.
And to the extent that we can use.
The 2 efforts together too.
Either improve the quality of the cyclically.
Low cost.
And we of course are looking into that to your question on whether they go and 1 box or not I'll leave that to.
And you are talking to you and 1 of their customers that is not particularly concerned with the form factor, which is part of the allure of the of the development arrangement as it were.
We're focusing on pushing forward the core technology.
Faster than ever.
For the all in 1 box.
And honestly.
That's better left to the teams our partners and Pac bio.
Nonetheless, the capabilities combined are absolutely.
It's interesting to us how do we get more more genome from fewer dollars. We're convinced there is essentially.
No and to the demand for raw sequence data and the applied markets and so we're really excited for.
And just see that trend continue in the year.
And just to come.
Got it and then just 1 question on your guidance and I know you guys and not breaking out the other business, specifically, but how should we think about the argue and reaction volume in terms of your guidance for force somebody to $500 million in terms of.
What we're assuming from a full year, if we assume about 225 K.
220, K reaction and volume would that be somewhere in the ballpark range to high to low or on.
Any color on sort of guardrails would be super helpful.
Sure.
Yes, I think I think.
The best answer to that is we we certainly don't include that kind of level of estimate into our guidance.
And then whether it's are you a reaction and <unk> audio reaction.
Inventory approved reaction.
FDA or other or otherwise or MLB test again, we are completely indifferent.
And for chemistry, dragging, our PCM and <unk> services and products as well as our.
Therapy selection.
We're indifferent as to where it comes out and I think it's probably best to be oncology revenue.
<unk> oncology revenues to which there will be a mix of.
And different different levels of rate regulated kits as well as different services and.
Everything from soup to nuts.
Sample to answer our services all the way too simple.
And interpretation and reporting services on.
Total oncology revenue and that's that's what we think is most important moving forward.
Understood. Thank you from the time today.
Yeah.
Next question is from from Doug Schenkel from Cowen and company. Your line is now open.
Hey, Good afternoon, let me let me just get my 3 questions out of the way and then I'll Oh, what's on the.
The first is regarding pacing and the quarter.
Can you just talk about how things went from the beginning to the end and then as we move into the second half the year or if youre seeing any impact on as it relates to physician.
Physician access or overall demand due to the delta better and so that's the first question.
On the second on the accounting adjustment admittedly Havent had a chance to spend a lot of time on that and you guys were very helpful and your prepared remarks.
This does relate to Archer, so I just want to make sure that stuff and tell us anything regarding whether or not archer's tracking to plan clearly you'd rather be making milestone payments and milestone payments. So I just want to make sure there's nothing to read into there and on the third relates to a comment Roxy and welcome Roxie.
And I'll comment Roxy made on operating spend decreasing as a percentage of sales as we look beyond <unk>.
2021.
Does that tell us anything about how you're thinking about M&A is.
Is there increased focus on leveraging infrastructure investment that you have and are making as we try and move towards profitability over the coming years and if so does that does that kind of change how we should.
Think about M&A strategy. Thank you.
Alright, Thanks, Doug and I'll tell you what I'll do I'll do 1 and then I'll do a quick treatment of 2 and 3 will actually take 2 and and Akshay and Ken can take 3 so I'll go first on the on the pacing of the quarter I would say there was nothing unusual about the pacing of this quarter. We had noted Q1 was particularly soft and the beginning of the quarter and then kind of had a strong.
On <unk>.
Toward and pacing this quarter and I would just characterize this standard.
No real story there throughout the throughout the quarter.
Which is frankly and I see.
It does.
It looks to us overall debt.
Summer vacation.
A lot of folks may have come out a week or 2 earlier this year.
But other than that there's no.
There's really nothing no story there.
On the access side I think that's where there there definitely is a story and the long term there are still.
Accounts and the whole system that I think are going to.
Maybe maybe.
Ill refrain from I think there is.
Without getting into it or voicing.
Hoisting and opinion, 1 way or the other.
Clearly some of our accounts some of our clients.
A year or fewer people walking around are going to keep it that way.
And thats, probably a permanent a permanent fixture for the industry.
Nonetheless, we don't.
I think sales the way, we're set up to to generate demand and serve customers.
We don't.
We certainly don't see the role of the boots on the ground rep going away and we certainly.
And believe we can continue to drive drive volume and support customers.
Even with a.
Kind of a permanent Monmouth modestly reduced access.
On a figure on that is unfortunately, it's Sarah.
And we couldn't really do just yet I think maybe a few quarters go by we might have a better general sense, but thats generally yes.
And if it reduced access but.
And I think we're overly concerned about.
On the accounting adjustment and I'll, let you actually go into details by topline as debt.
And whatever it is it most definitely does not affect our outlook for oncology business and doesn't materially impact what we think our growth revenues going forward and I'll, let the Roxy and can tackle.
The accounting adjustment and then the other Opex question.
Alright, so on the accounting adjustment.
And now there is a set of pretty complex accounting rules as well.
As to acquisition related liabilities, especially contingent liabilities and stock based compensation.
The ongoing on longer.
Perfect and so every quarter, we actually havent quarter, we need to do this assessment and.
Based on the information, we have and this happens to be a pretty complex clutter and allowing information coming in and.
As we move through the quarter close process.
Just really a timing and.
<unk> and other applications 14 days and we'll have a lot of disclosure and if necessary in our 10-K filing.
And as Sean mentioned.
Jenny and accounting and doesn't really reflect and and.
And at the last day will look like.
Yes, this is Ken and relative to the comment about opex as a percentage of sales and.
Is that signaling any change and focus on and then.
Absolutely not.
What we see the point, we were making is that we've made quite a bit of investment into the future growth of our of our company and serving our patients and.
We expect that debt investment is going to generate.
Sufficient amount of revenue into the future and so the way we're looking at our investment portfolio.
Portfolio.
Think debt.
As a percentage of sales, we probably hit the high point, but we have on aggressive revenue expectation.
And then 50% to 60% growth on an annual basis and so.
And we expect that the company will continue to grow we will continue to invest and the business just not in a day.
Percentage of sales and we have done over the last couple of years.
Again to ask a question from will need to fast firewall on the on your telephone keypad.
Next question is from <unk> Yang from capital markets and Laboratory. Your line is now open.
Hey, guys.
On the quarter. Thanks for taking my question.
And first I want to talk about the new platform and data services category.
First how are these by the patient how they're sold and is it a recurring revenue product and then I have a follow up if I could please.
Sure.
First it varies.
More often than not that as either a services connecting patients already identified that certain variance with.
Pharma companies that have a therapy or a trial.
<unk> debt.
And interaction directly with that patient through their portal, sometimes it's a part of a testing program that they are involved and the.
And the other portion of that comes from.
Services.
But we.
Or are receiving revenue for.
Either for day data.
Data analysis and exploration producer was part of a research collaboration.
For example, or <unk>.
Services that are part of our customer facing tech stack that we are.
We.
Leasing or selling to other players other health care providers.
And the space, who would like to use debt.
Debt stack for their customer support their patient and take.
Workflow management and what have you so and those cases the patients experience with it is as part of their health care journey with debt with that particular client.
As for as for recurring.
Yes, some of its recurring by way of.
Total Corp.
Subscription access or recurring contracts databases.
Some of it is recurring by way of the licensing of debt.
And that licensee per se, but they're signing up for the services and paying paying for continued access to them. We don't yet have a significant portion of that debt is a patient and signing up for a subscription per se directly.
We are certainly.
Planning on that and and more and more of that to come.
High level commentary on what that metric.
What are those and there and what it looks like on behalf of a patient or other customers.
Okay Super helpful and then as.
As a follow up.
And.
And then subject what are if you if you can describe it what are the margins on this piece it feels like it would be substantially higher than our core testing business.
And also can you share any kind of growth rates that don't go back to 2018, and I don't have their relevant yet the percentage of revenue starting to be pretty material or just switch is not the same.
Yeah, Yeah, I think we won't.
Promo on Delta and the margin of this this category per se.
And I would say it's variable for a lot of this we're testing out some of it is new new offering.
Some of it is.
A fair amount of development Thats still being kind of the charge on Cogs and going forward.
I would say the needless to say as you look forward, it's going to be relatively high margin revenue I think that's maybe.
The way the way that I could put it.
As we sit today.
And I apologize the second part of your question was.
Oh, yes can you share any kind of growth rates that don't go quite a bit and.
2018, and like I don't know your vision.
Alright.
Yes.
That's right and I think the.
For this particular sector.
We don't we don't have a specific or we're not going to guide to a specific outlook for it.
We have noted.
The embodiment of this in past conversations is largely focused around the pharma sponsored testing programs on the pharma patient identification programs.
And as we've noted that pharma paid line has been growing.
And give many points above our overall growth.
So again and this is all just spin off a couple of not COVID-19.
Well, certainly we'll be able to see the growth was together going forward, but yes. It's.
And that data services each 1 of those is growing north of 60%.
Year over year and.
Yes.
And we're excited about excited about continuing our best and very excited about what it means for patients and.
And is it your point is getting big enough, where we feel it's time to kind of break out that category and look at it.
Now on its own versus the straightforward testing testing revenue.
Great. Thank you.
Next question is from Bruce Jackson from the Benchmark Company you May ask your question.
Hi, Thank you for taking my question. So the international sales mix has been building nicely here.
Do you have a rough idea of where that could be by the end of 2022, and this is being driven by any particular geography or any particular product offering.
Yes.
I think Lee.
And like our data services at different cut other businesses by geography, and yes, the ex U S.
Volume and revenue has been growing.
Typically.
Every quarter grows a little bit and advance of the whole.
The geographies and we serve.
Just by reason of history and also our targeting of the of the customers there and the price bump there they tend to be the strongest ones are Latin America Northern Europe.
And this basically middle East.
And APAC APAC.
APAC volume is China.
And that's driven primarily by.
And reproductive health testing and cancer screening and cancer testing business. So those are the basically the largest and fastest growing geographies for us and those other product lines that are that are there.
The highest sellers there.
And we're really excited now.
Now that we've got a lot more business now for example, Japan is a good example, with.
Direct.
Direct selling and kits into the into the into the National Health laboratories, running that kind of debt.
The therapy selection and testing there.
And we're excited to push.
Start pushing more of that and we suspect that the geographical mix will change along with the product mix, but for right now it's primarily.
Sure and a piece of those those test that's been driving it.
Okay, great. Thank you.
Okay.
And the last question is from Brian Weinstein from William Blair. Your line is now open.
Hey, guys. Thanks for taking.
Taking the question and I decided to jump on late here just to clarify a couple of things just on the <unk>.
Excuse me on the guidance.
Guidance raised here I don't think you talked specifically about kind of.
What areas. If there was 1 or 2 that were specific debt was sort of driving this are you seeing better performance and.
Oncology and reproductive rare disease and anything like that also as it relates to that.
The guidance takes into consideration and the potential takeaways from a player on this space Thats exiting on the reproductive side and there were some internationally revenues I think that you felt were going to go away, but is there anything from <unk> that sort of built into the guidance now that was not built and 1 that was announced.
Yeah. So I'll go and I'll go backwards on that debt methane and not trying to say anything and there's probably nothing to read into a badge and ICT revenue.
Again, I think as.
And.
And as is our practice.
And Jonathan revenue now is hard to say is it should obviously revenue and beat their revenue or Archer revenue because right now we think over the next couple of years the debt.
The bulk of the.
The revenue and revenue gross is going to come from there are our version of them are details and PCM products now that we certainly expect to be a major contributor next year, but this year.
Probably probably not on the margin.
Outside of that and.
And then suggest specifically about that and that's the answer there.
There is there definitely is.
No.
Clear view on any 1 product area and 1 disease area.
Performing differently.
Either either this quarter or our outlook therein.
And it looks looks to us like all of them are kind of growing roughly at pace.
And we don't we don't really see a story there.
Reproductive health continues as it has and will pass to at least 2 or 3 quarters. If you can talk to reproductive health is growing faster than.
Some of the others.
Do think to your question about and eggs.
And the space that definitely is.
Definitely I think and it continue to.
And to provide opportunity for us to take share.
On.
Theres no doubt others will also take share there and again and reproductive I continue to point to the.
The total market penetration to all 6 million pregnancies per year and the U S alone, it's probably probably going to be the major driver of that story anyway over the next 2 to 3 years.
So, yes or no.
And during a product areas specific thing that interested and geocities and just.
Kind of a true kind of exit the Covid period, and you know, we're not going to not going on.
And claim that business does is back to normal back to usual, but it is momentum.
And just pick it up and we wanted to point that out correctly.
Got it. Thank you and then last 1 on <unk>.
Inflationary pressures that you guys had talked about and kind of outlined those but were you able to quantify kind of day impact that those are are having on your business and your confidence that youre going to have and ability to offset that day here in the short term and.
And if there's any other kind of detail that you wanted to provide on on any of the inflationary pressures on the cost or on the product or even on.
Wage inflation that we've been hearing a little bit about debt as well. So just anything else on inflation that you guys and thanks.
Sure, Ken or Rob do you want to Kevin and staying on our input costs, probably closer than anybody else any and any commentary on that.
Yes, I mean, I think we've seen what everybody else is being is that it's getting harder.
Hard to hire where certain roles and so theres been some adjustments in terms of wages, but in the aggregate from.
We have a business plan landed at.
We don't see any abnormalities associated with inflation debt.
With the concerned too and VK.
And so we're monitoring it and thats on.
Lastly, while we have such a clear focus on operating mechanisms and.
And clear line of sight about how revenue and cost of moving.
So that we can be proactive in that space.
And answer your question, Yes, we're seeing some of the same pressures that everyone else is seeing in terms of the inflationary piece I think the bigger impact.
And that we see happening with Watson and the day that the auto industry, moving shutting down facilities because of chip shortages and things like that and I think those are having.
And as much of a material impact as anything and so that's why I talked about earlier, we are really focusing on our supply base on transportation partners and trying to stay ahead of.
A little bit of the on.
Certainty, that's going on and the marketplace relative to supply and demand flow.
And that's probably and I see it.
Okay. Thank you guys.
Alright and welcome thank you.
That ends on a question and answer session and I will turn the call back over to Laura Franklin losing remarks.
Thank you all for joining us today, and we look forward to connecting with you soon at upcoming contract day.
That concludes today's conference call. Thank you all for participating you may now disconnect.
Okay.
[music].
Yes.
And.
And then.
Right.
Okay.
And.