Q3 2021 Sema4 Holdings Corp Earnings Call

November 15, 2021

[music].

Good day, and thank you for standing by to the sandbox.

Third quarter 2021 earnings conference call.

This time all participants on the list.

After the Speakers' presentation, there will be a question answer session to ask a question. During the session is going to press star one on your telephone.

Require any further assistance please press star zero.

And the conference or just forget today, Joe Hoffman. Please go ahead.

Good afternoon, everyone. Thank you all for participating in today's conference call participating for the company today will be Eric shot founder and Chief Executive Officer, and Isaac Ro Chief Financial Officer.

Earlier today <unk> released financial results for the third quarter ending September 30th 2021, a copy of the press release is available on the company's website.

Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities Law, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095 any statements contained in this call that relate to expectations or predictions of future events.

<unk> or performance are forward looking statements.

Actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors. Additionally, these forward looking statements, particularly our 2021 financial guidance involve a number of risks uncertainties and assumptions for a list and description of risks and uncertainties associated with <unk> business.

Please refer to the risk factors section of our S. One filed with the Securities and Exchange Commission on August 4th 2021, we urge you to consider these factors and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. During the call. We may discuss certain non-GAAP financial measures for reconciliations of <unk>.

Non-GAAP measures to GAAP financial measures as well as other information regarding these measures. Please refer to our earnings release and other materials in the Investor Relations section of our website.

This conference call contains time sensitive information and is accurate only as the live broadcast today November 15th 2021, semaphore disclaims any intention or obligation except as required by law to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise and with that.

That I will turn the call over to Eric.

Great. Thanks, Joel and thanks, everyone for joining us. This afternoon. We are pleased to be here with you today to discuss our third quarter results and progress against our long term strategic goals.

I will start today's call with an overview of our operating results, including our growth our growing health intelligence information platform health system partnerships and new product offerings before I pass the call over to Isaac for a financial update.

We will then open the call for questions overall, I'm very excited by our organizational progress in the third quarter, which was largely a quarter of investment in our operational foundation for growth across all facets of our organization.

As you can see from slide eight of our earnings presentation exiting the quarter. We are starting to see these investments translate to a notable acceleration in volumes and patient and provider engagement with our platform accelerating our momentum as we progress into 2022.

We are building a unique company focused on delivering clinically actionable insights based on individual longitudinal data analyses that will help inform clinical decision making across a broad.

Backroom of diseases and health conditions.

Since we became a public company in July we have ramped up our investment in technology infrastructure and people the strategic roadmap firsthand before is anchored in high dimensional large scale patient data active clinical engagement with patients and their physicians and collaboration with our clinical and research partners and patient we fundamentally believe that.

Genomic data combined.

Combined with clinical patient records and other multi omics and lifestyle data.

Can't deliver differentiated insights that drive clinical decisions to help ensure the best outcomes for patients.

Our success is underpinned by our access to expansive data and by time of course proprietary health intelligence platform Centrella, among the largest and most comprehensive and passive fastest growing integrated health information platforms in existence.

At the end of the third quarter, our platform with managing 39 Petabytes of data, that's 39 million gigabytes gathered from approximately 20 million patients of these patients roughly $12 million give us access to high quality high dimensional longitudinal electronic medical record information.

Meanwhile, our testing capacity continues to ramp to support our data platform and our health system partners. Our current capacity for Nexgen sequencing can now support more than 50% growth of our genomic data set in the coming year.

In addition, we continue to invest in the infrastructure required to derive clinically relevant insights from the data.

We continue to believe that our strategy to build a platform of algorithms is resonating in the marketplace. As an example patient consent remains very high with greater than 80% of patients that engage with our semi port portal consenting to allow us to help acquire and manage their personal health information and to leverage those data too.

Improve health outcomes for all.

And the majority of cases.

This partnership with patients provides us access to any and all medical record information ever generated for that patient.

This includes advanced genomic testing results longitudinal patient electronic medical records position those hospital records population health data and many other large scale sets of data.

The unrivaled level of access to information in partnership with patients and health system allows them afford to develop deep and information based relationships that continuously drive improved knowledge and understanding within the semaphore platform.

It is this patient inform knowledge that we believe is a competitive differentiator for time before it will drive our business and long term value proposition to patients providers and pharmaceutical partners.

Most importantly, we continue to engage with all of the health system partners and the feedback is very encouraging as the breadth and scale of our data advances our value proposition to health system also becomes increasingly attractive.

During the third quarter.

We added a fourth health system partnership a Vera health.

As an example of the traction we're getting with our health system partners. Let me provide an overview of our Northshore partnership.

Sure as a large health system in the greater Chicago land area.

Where we have had tremendous success to date.

Earlier this year, we launched our system wide data driven precision medicine program to help nor Schwartz clinicians and patients prevent detect and treat diseases at earlier stages.

In just six months Northshore has increasingly leveraged our platform and their patients many an underserved culturally diverse community to deliver an improved genomic medicine standard of care.

As summarized on slide seven of our earnings presentation more than 90% of primary care physicians at Northshore have had patients complete testing through the genetic wellness and assessment process, which starts with a question are covering a personal and family history of select medical condition.

42000, Northshore patients have completed the guideline based questionnaire and I have been advised whether to take a general genomic health screening test or a more comprehensive hereditary cancer genomic test.

From this 42000 patient group over 6400, <unk> have had the genomic health screening test ordered.

Through the first six months after launch nearly 1000 patients were identified as meeting end CCN guidelines for being at high risk of heritable cancer and successfully tested.

This represents a 54% increase from the prior six month period before our launch and an 88% increase versus the same six month period in 2020, a remarkable increase in improvement in the standard of care in the north shore system.

In summary, we believe our early success with Northshore as evidenced that our platform and go to market strategy can quickly and significantly improve the standard of care.

Our deep partnership with Northshore has also enabled us to take a non traditional and innovative approach to providing an evidence based program expanding the heritable cancer screening program beyond primary care.

This concept is exemplified by the introduction of a heritable cancer screening pilot program in a sample of north Shore's mammography clinics. The program targeted female scheduled for their annual mammography screening starting.

With an August pilot performed at newer stores innovative mammography facility located at the clothing retailer Nordstrom and Skokie, Illinois.

<unk> was quickly extended to three additional mammography screening facilities in the north shore network.

The results, thus far are very encouraging with more than 90% of women, having genetic screening orders placed in these facilities.

Then following through with returning their saliva samples for testing we are greatly encouraged by the differential success, we have seen in the setting.

The heritable cancer testing increased and therefore has achieved in partnership with Northshore is substantial when compared to other heritable cancer testing partners.

Both the affected patients and their families are receiving levels of medical support and counseling that generally exceed all guidelines.

Earlier assessment of cancer risk of detection and care all have a significant positive impact on treatment and survival.

Thus in the process of growing the centrella Finjan semaphore can help provide an enhanced standard of care to patients in their communities.

Lastly, as part of a separate research project called the genomic health initiatives semaphore has already sequenced greater than more than 9000 samples and a six month span of time and we are now embarking on the process of data structuring and curation to pair these genomic profile.

With deep longitudinal electronic medical record data at Northshore.

All in all we.

We are pleased with the growing adoption at north shore as well as with the rest of our partnerships which include launching several somatic tumor profiling protocols with our Beryl health to ultimately profile all cancer patients in the <unk> system as the standard of care integrating the expansive molecular profiling data with longitudinal electronic medical.

Data collected on patients through the <unk> system to provide more personalized actionable clinical guidance.

We believe these many types of engagements will be mutually beneficial for our health system partners and for center for it is the combined level of dedication from both organizations that is leading to improved access and treatment and the geography spanned by our partners.

Yes.

As we continue to gain traction with existing partners. When we look to establish a limited number of new learning based health system partnerships to expand our patient and clinician engagement strategy.

And then longer term new health system partnerships will focus on scaling the types of solutions solutions developed with the FERC learning based partnerships.

Although it takes time to develop these relationships, we believe that our distinguishing feature of integrating ourselves within health systems to provide state of the art care as a collaborative partner will ultimately position us as the preferred partner of choice.

To an increasing number of systems, who are driving precision medicine as a standard of care.

In addition to the health systems are sophisticated platform draws upon information from many sources that provide unique advantages to pharmaceutical companies looking to leverage big data insight.

To support more progressive research from drug development to clinical trials and real World evidence studies, we have a growing level of engagement with pharmaceutical companies that span the spectrum of drug discovery to post marketing surveillance.

We expect pharma contributions to grow significantly in 2022, similar to our health system partners, we look to partner with pharmaceutical innovators as they seek to improve.

Efficiency and accuracy of drug development and the delivery of the right therapeutics to the right patient at the right time.

Our goal is to understand what our biopharma partner needs in order to provide the insights from data to help them make better informed decisions.

The connectivity of certain look forward to the hospital systems and patients and that's what we believe can bring highly accurate and clinically actionable data to pharmaceutical partners.

On the new product front, we are working diligently to broaden our offering.

In September we launched <unk> element.

This is our portfolio of data science, driven products and services to support reproductive and generational health.

<unk> solutions digital tools for patients and providers and services enable providers to treat patients holistically during their reproductive cancer and generational health journeys.

The portfolio encompasses solutions for the diagnosis prevention treatment and management of reproductive inheritable disease conditions for more holistic family care to include a newly enhanced version of semi for us expanded carrier screening for pregnancy planning.

Which includes the molecular ancestry component to more accurately assess high risk capital types derived from specific population groups, even at that look at specific level to provide superior risk prediction.

Alongside our noninvasive prenatal testing metallic newborn screening and inheritable cancer testing for those of you who don't know the IVF market. It is a highly concentrated market comprised of sophisticated and science driven prescribing physicians.

We are proud that the upgraded version of our ECS product is resonating well and has allowed us to take market share in key national IVF accounts, while the volumes associated with these account wins are not part of our third quarter results due to timing. We are encouraged by the ordering trends. We are seeing out of these accounts in the fourth quarter, thus far.

As highlighted in our earnings call deck.

Shifting back to our longer term mission and vision of developing and monetizing our platform of health.

Insights and algorithm I'd like to highlight a pair of published studies conducted in collaboration with our founding a health system partner and Mount Sinai Health system.

Demonstrating the utility of our health intelligence platform to predict more accurately clinically meaningful outcomes. In this case for improving the prediction of risk of postpartum hemorrhage over current standard care assessment.

Studies were featured in a special informatics for sex and gender related health issue of the general of the American Medical Informatics Society Postpartum hemorrhage is the leading cause of maternal mortality globally accounting for roughly 35% of maternal death and often occurs in patients with no known risk factors for hemorrhage.

U S health system are not immune to this high mortality rates, especially in underserved communities.

These two new papers are among the first to use large scale comprehensive real world data to both accurately digitally phenotype patients and then predict clinically meaningful outcomes and pregnant women by.

By implementing our predictive model into the clinical standard of care health care providers may be able to improve postpartum hemorrhage risk assessment and medical management for their pregnant patients, resulting in better health outcomes.

To support our partnerships and increase adoption of our growing database, we have expanded our <unk> to 1150 employees as of the end of the third quarter. This includes commercial head count growth of 32% during the third quarter.

<unk>, 47% since the beginning of the second quarter.

We believe we are adequately staffed for our growth objective and as we March through the third quarter, we began to see improvements in sales cycle and sales force productivity as our new reps were ramping towards full productivity turning to the lab. We have made a number of key hires and are working toward improving operating efficiency and our overall margin pro.

While we have outlined a number of initiatives, including portfolio optimization, new limbs implementation and automation initiatives.

These internal initiatives combined with an improving reimbursement dynamic in oncology, our fastest growing segment will help will help us pace toward more normalized margins as we pay through 2022.

Additionally in September we hired a world renowned expert in computational biology, Dr. <unk> Levitsky as Chief Scientific Officer.

Also lead the translation of our top notch research into future some of our products and further solidify our collaborative partnerships with health systems in the biopharmaceutical industry.

In summary, we have made substantial progress on core business objectives, as we grow our proprietary health intelligence platform.

Coupled with our software machine learning and other advanced artificial intelligence learning capabilities are.

Our team is building one of the most sophisticated platforms in the world and setting the bar for high value patient engagement, we continue to be incredibly confident in our ability to drive differentiated insights and real time that can dramatically improve the standard of care for all.

If we scale up our commercial activities investments strategic collaborations.

And actively explore opportunities for inorganic growth the future of summer for remains very bright and now I'll turn it over to Isaac for the financial financials and guidance. Thanks, Eric.

Turning to our third quarter 2021 financial results.

Total revenue for the third quarter of 2021 was $43 2 million representing growth of 12% compared with 38, 6% million in the third quarter of 2020.

Diagnostic test revenue was 41 4 million in the third quarter of 2021 up 9% as compared to $37 9 million in the same period prior year.

Covid testing revenue in Q3 was $4 2 million down 21% year over year and down 8% sequentially from the second quarter of 2021 <unk>.

Excluding COVID-19 total revenue for the third quarter was up 17% year on year.

Turning to volumes, we have resulted in approximately 70000 diagnostic tests during the third quarter of 2021, excluding COVID-19 that was up 36% compared to the same period in 2020.

We recorded 166% volume growth in oncology and this category now accounts for 6% of our total volume excluding COVID-19.

Women's health volumes grew 33% compared to the same period in 2020.

Other revenue totaled $1 8 million in the third quarter of 2021 compared to zero point $7 million in the third quarter of 2020.

The increase was mainly attributable to growth in collaboration service activities related to new partnerships with pharma.

Cost of services was $58 8 million in the third quarter of 2021, an increase of 61% when compared to $36 5 million in the same period of 2020.

Adjusted cost of service, which excludes stock based compensation expense was $55 1 million in the third quarter of 2021 compared to $33 million in the same period of 2020.

Cost of services were impacted by the rapid scale up of lab infrastructure to support continued growth in our testing volumes and the launch of our latest expanded carrier screening product. We are excited about the growth prospects of the business and believe these upfront investments are critical to realizing that opportunity.

Operating expenses for the third quarter of 2021 were $74 million up 27% from $58 1 million in the same period prior year.

Adjusted operating expenses, which exclude stock based compensation and nonrecurring transaction costs associated with our go public process for the third quarter of 2021 were $53 $59 3 million compared to $32 1 million in the same period of 2020.

Overall, the increase in total operating expenses for the quarter were mainly attributable to higher personnel related costs, coupled with professional services related to the merger transaction.

The components of GAAP operating expenses are as follows research and development expenses for the quarter were $17 8 million down 7% when compared to $19 1 million for the third quarter of 2020, driven by an overall increase in depreciation costs of $1 8 million for fixed lab fixed asset asset purchased offset by a <unk>.

$3 $4 million decrease in stock based compensation costs.

Sales and marketing expense were $22 1 million up 74% from $12 7 million from the same period in 2020, due primarily to a $5 7 million increase in personnel related expenses from increased head count.

Since the start of Q3, we have increased our sales force and field organization by 32% and we began to see a notable uptick in volume as a result of our year to date investments here at the end of the third quarter.

General and administrative expenses were $32 8 million, an increase of 35% as compared to $24 3 million in the third quarter of 2020, driven by a $5 6 million related to increased head count and $8 7 million for expenses related to the go public transaction transition.

Moving down the P&L, we reported Q3 2021 net income of $31 4 million compared to a net loss of $56 6 million in Q3 2020.

Net income was aided by $122 $2 million of other income attributable to the change in fair market value of warrants and earn out contingent liabilities turning.

Turning to the balance sheet total cash and cash equivalents was $461 3 million as of September 32021. In addition, we secured a $125 million revolver earlier in the fourth quarter that is currently undrawn and now available to help support our growth strategy.

Now, let me spend a few minutes, providing some context on the business environment, we observed during the third quarter.

First the IVF market continues to expand which we think bodes well for the long term outlook and our business against this backdrop, we expect our recent investments in Salesforce expansion will translate to celebrating growth as we turn the page to 2022.

In oncology our strategy is primarily focused on driving uptake of our platform with our health system partners as well as cross selling into our women's health channel, we're making a number of investments to enable that strategy and expect adoption and reimbursement for our oncology portfolio to inflect in 2022 2022.

More specifically in hereditary cancer, we have identified and are pursuing key opportunities and revenue cycle management, improving contracting terms to expand coverage and driving institutional relationships with our health system partners to accelerate growth into 2022.

On the thematic side, we're moving ahead with plans to utilize multi X with a goal to leverage this favorable reimbursement pathway by the middle of 2022.

In summary, we believe the key drivers of growth in our business remain intact and are excited about the outlook as we enter 2022.

In the meantime, there are a number of factors that are unique to the third quarter that muted our reported volume and margins. We wanted to address these items directly to provide clarity and explain why we are confident that the fourth quarter will represent a meaningful positive inflection point for our financial performance I would like to provide three points regarding the trend in the third quarter.

First we are still early in the days of reaping the benefits of our expanded sales force and the Covid Delta we've made it challenging to capitalize on these investments.

I'm happy to report that volumes have begun to ramp at the end of the third quarter and have continued to progress into the fourth quarter as evidenced again on slide eight of the earnings presentation, where you can see our four week rolling average of a session volumes accelerated late in the quarter and that volume has continued quarter to date.

These numbers translated into the highest monthly assertion volume in September only to be exceeded again in the month of October.

Second it's important to highlight that there is a long tail of testing products outside of our core diagnostic testing menu that account for a large percentage of our volumes, but a very small percentage of our revenues. We provide these tests as part of our complete solution in women's health.

During the quarter the volumes of these noncore test fell short of our expectations and this resulted in a sequential headwind of 400 basis points to our reported volumes.

Meanwhile, our core portfolio of tests, which include next generation expanded carrier screening and <unk> hereditary cancer and somatic oncology was flat sequentially.

Volume trend in the core business has improved markedly through the months of September and October.

The transition from <unk> to <unk> took longer than expected and we exited the quarter with a material backlog of work in progress that was not recognized as revenue in the third quarter.

To meet this dynamic reduced sequential volume growth, excluding COVID-19 by roughly 200 basis points. This product transition is behind us and we are continuing to make significant investments in talent and infrastructure to improve our product launch capabilities in the future.

Now turning to guidance.

We estimate revenue for the full year 2021 will be in the range of 201 and $204 million. We expect fourth quarter resulted volume excluding COVID-19 will be in the range of 73000 to 79000 tests, which implies 20% to 30% growth versus the fourth quarter of 2020, and 9% growth at the midpoint.

Versus the third quarter of 2021.

We anticipate fourth quarter non-GAAP operating expenses to be roughly in line with the third quarter of this year.

As we think about the longer term, we continue to believe the underlying market growth rates in the key markets. We serve are healthy and will grow double digits for the foreseeable future. We are encouraged by our continued success executing our market share gaining initiatives in oncology women's health rare disease in pharma that should help us drive organic growth well above the double digit market.

Growth rates in the markets we serve.

Additionally, our robust pipeline of M&A opportunities and our current balance sheet provides us with the financial flexibility and growth opportunities to achieve our goal of $500 million of revenue in 2023, now I will turn it back to our founder and CEO Erik shop.

Great. Thanks, Isaac we're making substantial progress as we work to build and leverage digital universe of data to make precision medicine as standard of care for health systems, as well as patients and providers.

With our future investment plans, we are confident we are on the path to long term sustainable revenue growth.

I would now like to open the call to any questions.

Operator.

Thank you.

At this time to ask a question. Please press Star then one on your Touchtone phone and to remove yourself from the queue just Keith once again, everyone for questions.

Our first question comes from the line of Brandon Couillard from Jefferies. You may begin.

Hey, thanks.

Good afternoon.

Let me start with Isaac.

A couple of questions could you just elaborate on what exactly the non core tests are that you perform that were that came in below expectations in the third quarter.

Were a negative 400 basis point drag to volume just curious exactly what those are and how big that pool loans.

Volume is in aggregate.

And then as we look at the fourth quarter, what's embedded in terms of Covid revenue.

The outlook and should we expect asps to step down again.

Sequentially for the core portfolio in the fourth quarter.

Hey, Brandon Thanks, a lot sure thing so it's important to remember that bigger context, which is.

The franchise, we started primarily to serve IVF clinics and those clinics are as Eric pointed out very sophisticated customers has all sorts of testing and the noncore portfolio that we offer essentially are non Ngls test things outside of genomics that are things that get us all the time by those physician users, but are not really part of our long term focus.

On driving advancements through genomics and data and so we offer them. They are typically high volume low ASP and therefore lower margin.

The offerings that matter for the customer, but maybe are less strategic so that's sort of what they are and I wouldn't say there was any one handful of categories that were soft relative to expectations in the quarter. It was really the entire basket and lots of.

Reasons, why that might be the case, but as we looked at sort of the exit rate again.

Out of the quarter and into Q4 things really started to pick up across the entire portfolio. So we really did feel like.

Where our team where we ask the commercial team to focus in the core portfolio. They did a great job and in these other areas. They come along for the ride and so thats kind of where we are with mixing portfolio in terms of Covid, we're assuming about $3 million of revenue in Q4, which obviously, it's a pretty dynamic environment for Covid testing, that's our current expectation.

As we said in the past, we're very proud of the position, we have serving our local communities and broader customer base in that business, but it is not a long term area of strategic focus for us.

Just at a high level could you just sort of level set us on where we stand in terms of the reimbursements.

Process.

How discussions have progressed on that front and we kind of be your expectation that perhaps we begin to see the ASP trends bottom out kind of by mid next year that you alluded to in terms of some milestones on oncology.

Yes, that's exactly right Brandon so in general on reimbursement I would say there are puts and takes there.

Their debt together lead us to our expectation that 2022 will be far more stable reimbursement year than this year has been where most of the way through the contract conversations that we touched on last quarter and.

That's something where we feel very good about the path to driving upside over the long term right. So you may recall that we still do not have proper reimbursement for our oncology portfolio and those tests are actually gross margin negative until that gets sorted so theres a huge opportunity for the oncology business to be a tailwind both the ASP and the gross margin as we get that reimburse.

<unk> put in place in 2022, which is why we called it out in the script.

And in the meantime, I think if we just get reimbursement in line with the market rate on ECS will be just fine.

That's exactly the path that we're on so no change there, but it is not something that happens overnight it'll be a 2022 dynamic and that's the core focus.

Got you and then last one maybe for Eric you kind of alluded to.

The pharma business kind of growing substantially next year, just curious how that side of the business has developed relative to your expectations and perhaps kind of what the current pipeline looks like in terms of the nature of conversations with new Biopharma partners.

So we have a number of very exciting engagements with the bio pharmaceutical industry. Today. So we for this past year have been really focused on engaging pharma around the expansive data that we have on patients. In addition to more research based drug discovery.

Collaborations I would say that a lot of the collaborations that we were.

We're sort of being test driven I would say biopharma around like real World evidence study clinical trial matching could we deliver and the success coming out of those is delivering a very strong pipeline.

Potential follow up deals that will be more substantial so we're very confident.

In the coming year that we're going to be able to close on way more substantial deeper relationships with pharma and I would say that our strategy becomes one similar to the health system partnerships, where we're seeking deeper more holistic engagements. The same is true on the pharma side I've read.

<unk>.

Being attracted to those pharma companies, who are able to leverage all the different aspects of our patient engagement the data models the testing.

Kind of being able to deliver a very holistic set of packages across their drug discovery spectrum.

Very good thank you.

Our next question comes from the line of Max Masucci from Cowen.

May begin.

Hi, Thanks for taking the questions.

Starting on on health systems.

Seven months.

Launched.

The system wide genomics program with Northshore about six months since you broke ground with advent helps Orlando network.

You see the updates around north shore.

It would be great to hear how north shore progressed versus expectations and whether you think some of these positive data points.

On slide seven of the presentation can be harnessed as a tool for new wins and then just separately. If you could just touch on the state of the of the organization and team that are targeting those opportunities just given some of the recent changes. Thanks.

Yes. Thanks for that question. So I would say on the health system engagements. There is there is a.

A lot that goes on in those and they what.

What we found.

Easy to get more rapid traction on <unk>.

Sure. It's a great example of that the protocols, we've launched with the <unk>.

The genomic.

Re analysis of genomic data for clinical interpretation that we're doing with that until kind of the uptake of those genomic testing solutions the more comprehensive.

Interpretations and the engagement of the system through the physicians and integrating that with.

Clinical data to make more informed decisions has all gone.

Really well so those are ones that are maybe a little more natural for the health systems easier to uptake.

Into.

Our system wide.

And just with North shore again, highlighting we started six seven months ago.

With that genomic health solution.

Ohmic health screening program.

<unk> launched in one site comprised of about 10% of the primary care physicians and the success, they're rapidly expanded to over 90% across all the all the hospitals in the system.

The heavier lift has really come on the on the data side. So these systems are are sophisticated they have lots of <unk>.

Complex data, but they have systems that are geared towards kind of the transactional.

Dynamics in the system to log patient care received and so theyre not really structured are designed for the type of modeling and querying and integration that we would like to do so we found that too.

Move a little slower as we've had to provide more support on the.

<unk> infra.

Infrastructure side and kind of overcome.

The natural concerns out of system has with.

With with sharing their data broadly with us as a partner.

On the.

So we think those kinds of learning so the ability to go in and expand on the genomic testing solution side.

Work in a different kind of workflows, whether it's a population health setting an ob.

Typesetting or oncology setting, we think those will very naturally scale to many other.

Other types of systems, and I would say on the data front, we're still.

A big learning mode of how replicable like how transferable.

Those.

Those engagements are going to be a cross sell assessing some parts will be very generalizable, others are going to require more custom development and design and on the I would say on the health system team.

Again, a very active area.

<unk>.

Growth for us.

The teams that are needed to kind of support throughout the system.

The uptake of these kinds of solutions all the coordination and so on is significant and I will note. It's not just significant on the <unk> side is significant on that health system side too, there's very significant investment that goes on.

On those systems from the it infrastructure to clinical care coordination and so on.

That.

It's a big investment on their side as well.

Yes makes sense.

Just curious.

How does the final LCD for MRV monitoring published last week and inform how you think about your entry into the testing application, whether it be organically or through acquisition and also just balancing test performance and capabilities with time to market.

Yeah. So great question, and we think a lot about that again the whole aim for burning entities health systems is again, providing holistic genomic testing platform.

And the data sophistication integration to deliver the most differentiated insights truly personalized precision medicine.

What I would say is.

There are definitely gaps that we have on in the genomic platform <unk> would be one of them.

So we've been clear that M&A.

As a key part of our strategy to fill those gaps and we have a very healthy pipeline.

Pipeline of explorations going that spanned spanned many of the gaps we think that if we could provide services like Mardi in conjunction with our state of the art whole exome whole transcriptome test the heritable cancer test the drug safety tests and so on will will make for a very competitive.

Precision oncology solution.

So I would just add that.

As we look at M&A and deploying capital, we're very cognizant that we have to strike a balance between serving the growth strategy and filling out the portfolio and creating value for shareholders and so as you probably know asset prices are what they are in this space. They are high and so we're really trying to be smart about finding deals that we think serve our purpose of enabling data.

And genomics, while also creating value and so as you think about what we're likely to do first versus what we're likely to do overtime and I think it's really important that we walk before we run on the M&A front. So I think I think absolutely we believe that MLD theres a lot of exciting stuff happening there, we're very aware of some of the favorable things happening on the regulatory front.

And we will aim to be participants in a way that makes sense, but that's sort of the framework that we want to make sure. We articulate to you and if I can maybe make one more point.

The M&A is one aspect to fill that gap, but strategic partnership is also another way and we've been pretty clear that we don't have to be able to spin up every single possible task to put into play for a holistic solution like we're happy to partner on that and be the ones, who are wiring together that solution for them.

Health system to really deliver that more integrated holistic kind of care. So so strategic partnership will be another avenue.

Great. Thanks for taking the questions.

Okay.

And our next question line of Mark Massaro from <unk> you may begin.

Hey, guys. Thanks for taking the questions I guess.

I had my first question is on the <unk> elements.

Youre rolling out the molecular ancestry genome wide.

Risk assessment.

It's not something that I'm super familiar with looking at.

Carrier screening panels and other.

Women's health companies can you just speak to what type of impact do you think this will have as you look to kind of maybe win adopt.

Adoption, perhaps competitively from other providers or do you think this is maybe just a nice bolt on feature.

That certain conditions are asking for but maybe it just serves to strengthen your offering I guess I'm trying to better understand the differentiation and maybe the clinical action ability of this feature.

Yes, great Great Mark first I would say that the.

The current version of our expanded carrier screening test covering over 500 diseases and conditions is among the if not the most comprehensive carrier screening test on the market and where that matters is in the percentage the action ability like what kind of action ability to does this provide patients.

And their reproductive health decisions and roughly 5% with our current test roughly 5% of individuals tested and remember most of Thats in the IVF setting.

Get identified as carrier couples.

We're looking at like a Cogs guideline based test that number would be sub 1%. So we're delivering a product that by.

Five fold increases the action ability enhanced decision making for more.

Productive health partners. The molecular ancestry component was one drove with the head of our clinical lab as a.

Leveraging genome wide genomic information to improve.

The residual risk calculations for this expanded carrier screening product. So for example, if you.

Our test takes cystic fibrosis. If you are tested and are not a carrier.

Bad.

Patients that can lead to cystic fibrosis and your offspring. There's there's still a risk that you have a passing on something to your offering that could get.

Cystic fibrosis, it's what's called a residual risk that residual risk is a function.

The population group you inherited that piece of DNA from and the way that gets assessed today by all others is through self.

Self reported ancestry, so youre asking the patient.

What's your ancestry and of course, if we know anything, especially in the U S is that the ancestry. The composition. The makeup of one's ancestry is quite complicated and not only is it complicated at the sort of the.

The high level, but even if you knew with protection. What's your what's your ancestry compensation. Once you Wouldnt know what population groups that I inherited that cystic fibrosis gene from so today, what's being systematically misreported, our residual risk based on that self reported ancestry and thats why the guidelines like <unk>.

And say you should not.

Diagnostic company be reporting residual risk unless you have this kind of information. So we're the first to be able to systematically integrate genome wide level information to provide just a more accurate standard of care.

And so what we will increasingly see as we engage that kind of information across all of those diseases and conditions and not just expanded carrier screening heritable cancer polygenic risk, scoring for cardiovascular disease depression anxiety drug safety every single one of those depends on again the population groups you are inheriting that info.

<unk> from systematically integrating that is going to lead to superior outcomes in patients that we think will be highly attractive across across the spectrum.

Got it sorry, if that was all along.

No no worries no sweat.

Recognizing you guys are still pretty early as you think about the next five to 10 years as a company and how you can address unmet need in precision oncology. There has been a rise in sort of the medical imaging big data AI type companies that are raising money and perhaps planning ipos in the future.

I guess, Eric what are your thoughts as to whether or not you think medical imaging can be complementary to some of the diagnostic portfolio that youre looking to build out.

Yes, yes.

Again love that question, because it's we think about data and a more agnostic way, while we're generating a lot of genomic data right because it's a special technology moving up Super Moore's law speed, we think about all aspects of data from genomic to the clinical record data to imaging data proteomics metabolomics and so on so.

We view all of those as kind of central dimensions, and clearly in cancer of the imaging data is critically important in fact back to some of the pharma collaborations I mentioned some of those directly involved imaging based data abstracting features from those data and integrating them with the clinical medical record data for <unk>.

<unk> diagnosis of patients for example, with lung cancer. So we have a paper about coming out on that exactly. So we so we definitely see integration of imaging.

Data into the interpretation of combining that with the genomic and clinical record data to make superior predictions. We view is.

As a core.

Component that we continue to grow out.

That's great last question for me.

Obviously <unk> was born out of Mount Sinai, which is now a strategic partner I guess, what does Mt. Sinai its collaboration half that maybe you haven't yet implemented at Northshore advent and avera.

At such that you think that you can increase the standard of care and maybe the other three health systems.

Yes, I would say again, it's back to my earlier comment on the easy in the heart with the health systems that we're seeing today like with Northshore and it's that.

The engagement around the data the magnitude that those data the distraction from the unstructured data integration with pathology nodes and the imaging data that you mentioned like I would say we're much further ahead more advanced.

With the Mount Sinai Health system, and so able to provide across a broader range of areas from autoimmune cardiovascular to obgyn to oncology.

Utility back to the system across those different areas and we think what we're learning is that takes a little more time than we thought it with these systems, but we think that's all going to come and we will drive even more enthusiasm across our systems as we enable them to master that.

Information in this more integrated way. So we think again, it's the the mastery of the data I would say that.

We're further at Sinai than the others, but we expect there's nothing that holds us back from achieving that same mastery of any other systems.

Great. Thanks for all the color that's it for me.

Thank you once again Thats star one for any quantification star one.

Question comes from the line of Matt.

Thanks from Goldman Sachs you may begin.

Hey, everybody. Thanks for taking my questions I appreciate it.

I think maybe just one for you to start out one of the things you mentioned on the third quarter trends. The first thing you mentioned was that it's still early to reap the benefits of the sales force, but you noted that volumes have recovered a lot at the end of September and in October I'm, just wondering how much of that is <unk>.

Ramping of new salespeople as effectiveness versus COVID-19 related restrictions or is it a mix of both and did that ramp at the end of the quarter and into October represent an easing of restrictions or a more effective sales force as they spend more time in the field.

Yeah, Hey, Matt Good question and thanks for asking.

I would say both played into the dynamic we saw this quarter with just the newness of the routes being the bigger factor I don't have precise science to tell you.

The number of exactly how much more but we really get onboard a number of people in the summer months, who are just now getting their feet underneath them. So I really do think that's the bigger factor now having said that we obviously need physician offices to be open and available and all of that and we are in a bit of uncharted waters here as we.

We enter this next phase the endemic phase if you will so we're very optimistic about.

What's possible with our rats.

The year, but but again I think both factors played into the to the dynamic in Q3.

Got it thanks for that and then Eric maybe just one for you I know you've addressed a couple of questions from Mark and Max on this but I kind of wanted to get at the health systems and maybe an increased level of heterogeneity in these systems. When you talked about your ability to scale investments and you've had to make a little bit more it investments shop with integration, but I'm just.

During as Youre looking at each new health system, and maybe there's a higher level of heterogeneity and different challenges. Each one poses does that inform your selection going forward of new health systems, you might approach I know you're only doing that.

Few but I'm just wondering.

Is this kind of changed how you're approaching and maybe looking for a more homogeneous health systems in order to take better advantage that scale of investments.

Yes.

Yes, it's a really great question, because I think we.

Maybe had underestimated initially the generalized ability on the engagement of the information over all aspects of diseases and conditions and what we're finding is while the approaches we use R&D in general the focus of the systems and where they want a champion.

What is it that theyre looking to impact patients where are they losing a lot of the systems. We're working with like community based hospitals hospital systems that want to compete with academic medical institutions and not lose patients. So they wanted so they are very targeted wants and those ones are.

No surprise.

In the precision oncology and our population health genomic.

Health.

Arena is in addition to rare disorders and.

Reproductive health, where again, we have strong expertise and so I would say in the new systems.

Will.

That are kind of in process.

That we think will be.

Able to share things in coming months.

They definitely are.

More homogeneous with respect to the systems, we have today and it was because we did <unk>.

Understand all of the issues in those different areas in the kind of champions, who the key players worse I think oncology in particular, where it's.

There is a bigger appetite for these sophisticated solutions no matter what system you are at.

So on the.

This system is taking on more management of the populations and so having incentive on the population health side.

So I do see.

Those potentially repeating but we are also going to drive hard with those systems expanding into other areas like cardiovascular where we're starting to get some uptake as well as autoimmune.

But yes, I would say the oncology precision oncology population health genomic health and rare rare disorder, where I think of it more on the reproductive health side, where it's definitely a rare disorder play are kind of we're seeing core focal points.

Great. Thanks, very much for the color very helpful.

Yeah.

Thank you and I'm not showing any further questions in the queue. At this moment I would like to turn the call back over to Eric <unk> for any closing remarks.

Alright, well thanks, thanks, everybody.

Thanks, everybody for your interest in <unk>, I think great round of questions.

We're pleased to be able to have presented to you today, our update on our third quarter progress.

We're super excited for what the future holds and look forward to keeping everyone up to date along the way. Thank you.

Okay.

This will conclude our program for today. Thank you for participating you may.

Now disconnect.

[music].

Okay.

Yes.

Okay.

[music].

Good day and thank you for standing by for the fourth third quarter 2021 earnings Conference call.

At this time all participants are in a listen only mode.

After the Speakers' presentation, there will be a question answer session to ask a question Dennis fashion, you need to press star one on your telephone.

You require any further assistance please press star zero.

And I can accomplish over to your speaker today, Joe Hoffman. Please go ahead.

Earlier today <unk> released financial results for the third quarter ending September 30th 2021, a copy of the press release is available on the company's website.

Before we begin I'd like to remind you that management will make statements. During this call that include forward looking statements within the meaning of federal Securities Law, which are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 any statements contained in this call that relate to expectations or predictions of future events.

It's our performance are forward looking statements.

Please refer to the risk factors section of our S. One filed with the Securities and Exchange Commission on August four 2021, we urge you to consider these factors and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. During the call. We may discuss certain non-GAAP financial measures for reconciliations of <unk>.

I will turn the call over to Eric.

We will then open the call for questions overall, I'm very excited by our organizational progress on the third quarter, which was largely a quarter of investment in our operational foundation for growth across all facets of our organization.

As you can see from slide eight of our earnings presentation Academia quarter. We are starting to see these investments translate to a notable acceleration in volumes and patient and provider engagement with our platform accelerating our momentum as we progress into 2022.

We are building a unique company focused on delivering clinically actionable insights based on individual longitudinal data analyses that will help inform clinical decision, making across a broad spectrum of diseases and health conditions.

That genomic data.

And bind with clinical patient records and another multiyear almac in lifestyle data.

Can deliver differentiated insights that drive clinical decisions to help ensure the best outcomes for patients.

It takes us is underpinned by our access to expansive data and <unk> proprietary health intelligence platform Centrella, among the largest most comprehensive and passive fastest growing integrated health information platforms in existence.

In addition, we continue to invest in the infrastructure required to derive clinically relevant insights from the data.

We continue to believe that our strategy to build a platform of algorithms is resonating in the marketplace.

As an example patient consent remains very high with greater than 80% of patients that engage with our semi port portal consenting to allow us to help acquire and manage their personal health information and to leverage those data to improve health outcomes for all.

And the majority of cases.

This partnership with patients provides us access to any and all medical record information ever generated for that patient.

This includes advanced genomic testing results longitudinal patient electronic medical record physician knows Hospital records population health data and many other large scale sets of data.

The unrivaled level of access to information in partnership with patients and health systems allow us and look forward to develop deep and information based relationships that continuously drive improved knowledge and understanding within the <unk> platform.

We added a fourth health system partnership Avera health.

As an example of the traction we're getting with our health system partners. Let me provide an overview of our Northshore partnership Northshore has a large health system in the greater Chicago land area.

Where we have had tremendous success to date.

Earlier this year, we launched our system wide data driven precision medicine program to help northshore of clinicians and patients prevent detect and treat diseases at earlier stages.

Six months Northshore has increasingly leveraged our platform and their patients many an underserved culturally diverse communities to deliver an improved genomic medicine standard of care.

As summarized on slide seven of our earnings presentation more than 90% of primary care physicians at Northshore have had patients complete testing through the genetic wellness and assessment process, where it starts with a question are covering a personal and family history of select medical condition.

<unk> 42000, Northshore patients have completed the guideline based questionnaire had been advised whether they take a general genomic health screening task or a more comprehensive hereditary cancer genomic test.

From this 42000 patient group over 6400 have had the genomic health screen test ordered and through the first six months. After launch nearly 1000 patients were identified as meeting end CCN guidelines for being at high risk of heritable cancer and successfully tested.

In summary, we believe our early success with Northshore as evidenced that our platform and go to market strategy can quickly and significantly improve the standard of care.

This concept is exemplified by the introduction of our heritable cancer screening pilot program in a sample of Northshore as mammography clinics. The program targeted female scheduled for their annual mammography screening starting.

With an August pilot performed at Northshore as innovative mammography facility located at the clothing retailer Nordstrom and Skokie, Illinois. The pilot was quickly extended to three additional mammography screening facilities in the north shore network.

The results, thus far are very encouraging with more than 90% of women, having genetic screening orders placed in these facilities.

Then following through with returning their saliva samples for testing we are greatly encouraged by the differential success, we have seen in the setting.

The heritable cancer testing increased <unk> achieved in partnership with Northshore is substantial when compared to other heritable cancer testing partners.

Both the affected patients and their families are receiving levels of medical support and counseling that generally exceed all guidelines.

Earlier assessment of cancer risk of detection and care all have a significant positive impact on treatment and survival.

Thus in the process of growing the centrella engine semaphore can help provide an enhanced standard of care to patients in their communities.

Lastly, as part of a separate research.

<unk> called the genomic health initiatives <unk> has already sequence greater than more than 9000 samples and a six month span of time and we are now embarking on the process of data structuring and curation to pair these genomic profile.

With deep longitudinal electronic medical record data at Northshore.

All in all we.

We are pleased with the growing adoption at north shore as well as with the rest of our partnerships which include launching several somatic tumor profiling protocols with avera health to ultimately profile all cancer patients in the <unk> system as the standard of care integrating the expansive molecular profiling data with longitudinal electronic medical.

Data collected on patients through the <unk> system to provide more personalized actionable clinical guidance.

We believe these many types of engagements will be mutually beneficial for our health system partners and for center for it as a combined level of dedication from both organizations that is leading to improved access and treatment and the geography spanned by our partners.

Yes.

As we continue to gain traction with existing partners and we'd like to establish a limited number of new learning based health system partnerships to expand our patient and clinician engagement strategy.

Then longer term new health system partnerships will focus on scaling the types of solutions solutions developed with the FERC learning based partnerships.

To an increasing number of systems, who are driving precision medicine as a standard of care.

In addition to the health systems are sophisticated platform draws upon information from many sources that provide unique advantages to pharmaceutical companies looking to leverage big data insight.

We expect pharma contributions to grow significantly in 2022, similar to our health system partners, we look to partner with pharmaceutical innovators as they seek to improve.

CNC and accuracy of drug development and the delivery of the right therapeutics to the right patient at the right time.

Our goal is to understand what our biopharma partner needs in order to provide the insights from data to help them make better informed decisions.

Connectivity of semi forward to the hospital systems and patients and that's what we believe can bring highly accurate and clinically actionable data to pharmaceutical partners.

On the new product front, we are working diligently to broaden our offering and.

In September we launched <unk> element.

This is our portfolio of data science, driven products and services to support reproductive and generational health. These genomic solutions digital tools for patients and providers and services enable providers to treat patients holistically during their reproductive cancer and generational health journeys.

The portfolio encompasses solutions for the diagnosis prevention treatment and management of reproductive inheritable disease conditions for more holistic family care to include a newly enhanced version of Samba floor has expanded carrier screening for pregnancy planning.

Which includes the molecular ancestor component to more accurately assess high risk capital types derived from specific population groups, even at that look at specific level to provide superior risk prediction.

Alongside our noninvasive prenatal testing <unk> newborn screening and inheritable cancer testing for those of you who don't know the IVF market. It is a highly concentrated market comprised of sophisticated and science driven prescribing physicians.

As highlighted in our earnings call deck.

Shifting back to our longer term mission and vision of developing and monetizing our platform of health.

Insights and algorithms I'd like to highlight a pair of published studies conducted in collaboration with our founding a health system partner Mount Sinai Health system <unk>.

U S health system are not immune to this high mortality rates, especially in underserved communities.

To support our partnerships and increased adoption of our growing database, we have expanded our <unk> to 1150 employees as of the end of the third quarter. This includes commercial head count growth of 32% during the third quarter.

<unk>, 47% since the beginning of the second quarter.

Turning to the lab, we have made a number of key hires and are working toward improving operating efficiency and our overall margin profile, we've outlined a number of initiatives, including portfolio optimization, new limbs implementation and automation initiatives.

These internal initiatives combined with an improving reimbursement dynamic in oncology, our fastest growing segment will help will help us pace toward more normalized margins as we pace through 2022.

Additionally in September we hired a world renowned expert in computational biology, Dr. <unk> as Chief Scientific Officer.

His expertise is key to accelerating the development of our platform of algorithms to help researchers health systems providers and patients translate the information contained in health data into actionable knowledge. We also lead the translation of our top notch research into future some of our product and further solidify our collaborative partnerships with health systems and the biopharmaceutical.

Industry.

In summary, we have made substantial progress on core business objectives, as we grow our proprietary health intelligence platform.

With our software machine learning and other advanced artificial intelligence learning capabilities are.

As we scale up our commercial activities and invest in strategic collaborations.

And actively explore opportunities for inorganic growth the future of semaphore remains very bright and now I will turn it over to Isaac for the financial financials and guidance. Thanks, Eric.

Turning to our third quarter 2021 financial results.

Total revenue for the third quarter of 2021 was $43 2 million representing growth of 12% compared with 38, 6% million in the third quarter of 2020.

Diagnostic test revenue was $41 4 million in the third quarter of 2021.

9% as compared to $37 9 million in the same period prior year Covid.

Covid testing revenue in Q3 was $4 2 million down 21% year over year and down 8% sequentially from the second quarter of 2021.

Excluding COVID-19 total revenue for the third quarter was up 17% year on year.

Turning to volumes, we have resulted in approximately 70000 diagnostic tests during the third quarter of 2021, excluding COVID-19 that was up 36% compared to the same period in 2020, we.

We recorded 166% volume growth in oncology and this category now accounts for 6% of our total volume excluding COVID-19.

Women's health volumes grew 33% compared to the same period in 2020.

Other revenue totaled $1 8 million in the third quarter of 2021 compared to zero point $7 million in the third quarter of 2020.

The increase was mainly attributable to growth in collaboration service activities related to new partnerships with pharma.

Cost of services was $58 8 million in the third quarter of 2021, an increase of 61% when compared to $36 5 million in the same period 2020.

Adjusted cost of service, which excludes stock based compensation expense was $55 1 million in the third quarter of 2021 compared to $33 million in the same period of 2020 constant.

Operating expenses for the third quarter of 2021 were $74 million up 27% from $58 1 million in the same period prior year.

Adjusted operating expenses, which excludes stock based compensation and nonrecurring transaction costs associated with our go public process for the third quarter of 2021 were $53 $59 3 million compared to $32 1 million in the same period of 2020.

Overall, the increase in total operating expenses for the quarter were mainly attributable to higher personnel related costs, coupled with professional services related to the merger transaction.

$3 $4 million decrease in stock based compensation costs.

Sales and marketing expense were $22 1 million up 74% from $12 7 million from the same period in 2020, due primarily to a $5 $7 million increase in personnel related expenses from increased head count.

Moving down the P&L, we reported Q3 2021 net income of $31 4 million compared to a net loss of $56 6 million in Q3 2020.

Net income was aided by $122 $2 million of other income attributable to the change in fair market value of warrant an earn out contingent liabilities.

Now, let me spend a few minutes, providing some context on the business environment, we observed during the third quarter.

On the thematic side, we're moving ahead with plans to utilize multi X with a goal to leverages favorable reimbursement berkman pathway by the middle of 2022.

In summary, we believe the key drivers of growth in our business remain intact and are excited about the outlook as we enter 2022.

I would like to provide three points regarding the trend in the third quarter.

First we are still early in the days of reaping the benefits of our expanded sales force and the Covid Delta we've made it challenging to capitalize on these investments I am happy to report that volumes have begun to ramp at the end of the third quarter and have continued to progress into the fourth quarter as evidenced again on slide eight of the earnings presentation, where you can see our.

Four week Rolling average of the session volumes accelerated late in the quarter and that volume has continued quarter to date.

These numbers translated into the highest monthly assertion volume in September only to be exceeded again in the month of October.

<unk> and this resulted in a sequential headwind of 400 basis points to our reported volumes.

Meanwhile, our core portfolio of tests, which include next generation expanded carrier screening and IPD hereditary cancer and somatic oncology was flat sequentially volume trend in the core business has improved markedly through the months of September and October.

Third as Eric mentioned earlier in the call, we launched <unk> elements in the third quarter with the launch of elements, we shifted our expanded carrier screening <unk> from smaller private pilot programs to be coming broadly commercially available the transition from <unk> took longer than expected and we exited the quarter with a material backlog of work in <unk>.

Yes that was not recognized as revenue in the third quarter.

We estimate this dynamic reduce sequential volume growth, excluding COVID-19 by roughly 200 basis points. This product transition is behind us and we are continuing to make significant investments in talent and infrastructure to improve our product launch capabilities in the future.

Now turning to guidance, we estimate revenue for the full year 2021 will be in the range of 201 in $204 million. We expect fourth quarter resulted volume excluding COVID-19 will be in the range of 73070, 9000 tests, which implies 20% to 30% growth versus the fourth quarter of 2020.

And 9% growth at the midpoint versus the third quarter of 2021.

We anticipate fourth quarter non-GAAP operating expenses to be roughly in line with the third quarter of this year.

Both rates and the markets we serve additionally, our robust pipeline of M&A opportunities and our current balance sheet provide us with the financial flexibility and growth opportunities to achieve our goal of $500 million of revenue in 2023, now I will turn it back to our founder and CEO Erik shop.

Great. Thanks, Isaac we are making substantial progress as we work to build and leverage the digital universe of data to make precision medicine as standard of care for health systems, as well as patients and providers.

With our future investment plans, we are confident we are on the path to long term sustainable revenue growth.

I would now like to open the call to any questions.

Operator.

Thank you at this time to ask a question. Please press Star then one on your Touchtone phone.

And to remove yourself from the queue.

Once again star one for questions.

Our first question comes from the line of Brandon Couillard from Jefferies. You may begin.

Okay. Thanks.

Good afternoon.

Eddie starting with Isaac.

A couple of questions could you just elaborate on what exactly the non core tests are that you perform that were that came in below expectations in the third quarter.

Were a negative 400 basis point drag to volumes just curious exactly what those are how big that pool loads of testing volume is in aggregate.

And then as we look at the fourth quarter, what's embedded in terms of Covid revenue.

The outlook and should we expect asps to step down again.

Sequentially for the core portfolio in the fourth quarter.

Hey, Brandon Thanks, a lot sure thing so it's important to remember that bigger context, which is.

The franchise, we started primarily to serve IVF clinics and those clinics are as Eric pointed out very sophisticated customers has all sorts of testing and the noncore portfolio that we offer essentially are non mgs test things I cited genomics that are things that get us all the time by those physician users, but are not really part of our long term focus.

On driving advancements through genomics and data and so we offer them. They are typically high volume low ASP and therefore lower margin.

Our offerings that matter for the customer, but maybe are less strategic so that's sort of what they are and I wouldn't say there was any one handful of categories that were soft relative to expectations in the quarter. It was really the entire basket and lots of.

Reasons, why that might be the case, but as we looked at sort of the exit rate again out.

Out of the quarter and into Q4 things really started to pick up across the entire portfolio. So we really did feel like.

Where our team where we ask the commercial team to focus in the core portfolio. They did a great job and in these other areas. They come along for the ride and so thats kind of where we are with our mix in portfolio in terms of Covid, we're assuming about $3 million of revenue in Q4, which obviously, it's a pretty dynamic environment for Covid testing, that's our current expectation.

As we said in the past, we're very proud of the position, we have serving our local communities and broader customer base in that business, but it is not a long term area of strategic focus for us.

And then just as a highlight would you just sort of level set us on where we stand in terms of the reimbursements.

Process.

Yes, that's exactly right Brandon so in general on reimbursement I would say there are puts and takes there that together lead us to our expectation that 2022 will be far more stable reimbursement year than this year has been where most of the way through the contract conversations that we touched on last quarter and.

<unk> put in place in 2022, which is why we called it out in the script.

In the meantime, I think if we just.

Reimbursement in line with the market rate on ECS will be just fine and that's exactly the path that we're on so no change there, but it is not something that happens overnight it'll be a 2022 dynamic and that's the core focus.

Got you and then last one maybe for Eric you kind of alluded to.

So we for the for this past year have been really focused on engaging pharma around the expansive data that we have on patients. In addition to more research based drug discovery collaborations I would say that a lot of the collaborations that we.

Potential follow up deals that will be more substantial so we're very confident.

That in the in the coming year that we're going to be able to close on way more substantial deeper relationships with pharma and I would say that our the strategy becomes one similar to the health system kind of partnerships, where we're seeking deeper more holistic engagements. The same is true on the pharma side of <unk>.

<unk>.

Being attracted to those pharma companies, who are able to leverage all the different aspects of our patient engagement the data models the testing.

Kind of being able to deliver a very holistic set of packages.

<unk> their drug discovery spectrum.

Very good thank you.

Our next question comes from the line of Max Masucci from Cowen you may begin.

Hi, Thanks for taking the questions.

Starting on on health systems.

Seven months.

<unk> launched.

System wide genomics program with Northshore about six months since you broke ground with advent helps Orlando network.

You see the updates around north shore.

It would be great to hear how north shore progressed versus expectations and whether you think some of these positive data points.

Yes. Thanks for that question, so I would say on the health system engagements there is theirs.

A lot that goes on in those and they what.

What we found.

Z to get more rapid traction on.

<unk> is a great example of that the protocols, we've launched with the <unk>.

The genomic.

Re analysis of genomic data for clinical interpretation that we're doing with that then kind of the uptake of those genomic testing solutions the more comprehensive.

Interpretations and the engagement of the system.

Through the physicians and integrating that with <unk>.

Clinical data to make more informed decisions has all gone really well. So those are ones that are maybe a little more natural for the health systems easier to uptake.

<unk>.

Systemwide weigh in just with North shore again, highlighting we started six seven months ago.

With that genomic health solution genomic health screening program.

Being launched in one site comprised of about 10% of the primary care physicians and the success, they're rapidly expanded to over 90% across all of the all the hospitals in the system.

The heavier lift has really come on the on the data side. So these systems are are sophisticated they have lots of comp.

Complex data, but they have systems that are geared towards kind of the transactional die.

Dynamics in the system to log patient care received and so on they are not really structured are designed for the type of modeling in inquiries and integration that we would like to do so we've found that too.

Move a little slower as we've had to provide more support on the.

Infrastructure side and kind of overcome.

The natural concerns out of system has with.

With with sharing their data broadly with with us as a partner.

The.

So we think those kinds of learning so the ability to go in and expand.

On the genomic testing solution side work in a different kind of workflows, whether it's a population health setting an ob.

Typesetting or.

<unk> setting.

We think those will very naturally scale to many other.

Other types of systems, and I would say on the data front, we're still in a big learning mode of how replicable like how transferable.

Those engagements are going to be a cross sell assessing some parts will be very generalizable, others are going to require more custom.

Development and design and on the I would say on the health system team.

A very active.

Area of growth for us.

The teams that are needed to kind of support throughout the system.

The uptake of these kinds of solutions all the coordination and so on is significant and I'll note. It's not just significant on the <unk> side is significant on that health system side too, there's very significant investment that goes on.

Those systems from the it infrastructure to clinical care coordination and so on.

That.

The big investment on their side as well.

Yes makes sense and just curious.

How does the final LCD for MRV monitoring published last week and inform how you think about your entry into this testing application, whether it be organically or through acquisition and also just balancing test performance and capabilities, which time to market.

Yes, so great question, and we think a lot about that again the whole aim for burning into health systems is again, providing holistic genomic testing platform.

And the data sophistication integration to deliver the most differentiated insights truly personalized precision medicine.

What I would say is.

There are definitely gaps that we have on in the genomic platform <unk> would be one of them and of course, we've been clear that M&A.

As a key part of our strategy to fill those gaps and we have a very healthy.

Pipeline of explorations going that spanned spanned many of the gaps we think that if we could provide services like <unk> in conjunction with our state of the art whole exome whole transcriptome test the heritable cancer test the drug safety and so on will will make for a very competitive holes.

Precision oncology solution.

So I would just add that.

And genomics, while also creating value and so when you think about what we're likely to do first versus what we're likely to do overtime and I think it's really important that we walk before we run on the M&A front. So I think I think absolutely we believe that MLD theres a lot of exciting stuff happening there, we're very aware of some of the favorable things happening on the regulatory front.

And we will aim to be participants in a way that makes sense, but that's sort of the framework that we want to make sure. We articulate to you and if I can maybe make one more point.

The M&A is one aspect to fill that gap that strategic partnership is also another way and we've been pretty clear that we don't have to be able to spin up every single possible task to put into play for a holistic solution like we're happy to partner on that and be the ones, who are wiring together that solution for that.

Health system to really deliver that more integrated holistic kind of care. So strategic partnership will be another avenue.

Great. Thanks for taking the questions.

Okay.

And our next question line of Mark Massaro from <unk> you may begin.

Hey, guys. Thanks for taking the questions I guess.

I had my first question is on the semi four elements.

Youre rolling out the molecular ancestry genome wide.

Risk assessment.

It's not something that I'm super familiar with looking at.

Carrier screening panels and other.

Women's health companies can you just speak to what type of impact do you think this will have as you look at kind of maybe win adopt.

Adoption, perhaps competitively from other providers or do you think this is maybe just a nice bolt on feature.

Yes, great Great Mark first I would say that the.

And their reproductive health decisions and roughly 5% with our current test roughly 5% of individuals' tested and remember most of Thats in the IVF setting.

Get identified as carrier couples if you were looking at like a Cogs guideline based test that number would be sub 1%. So we're delivering a product that by.

Fivefold increase as the action ability enhanced decision making for four.

Productive whole partners. The molecular ancestry component was one drove with the head of our clinical lab as a.

Leveraging genome wide genomic information to improve.

The residual risk calculations for this expanded carrier screening product. So for example, if you.

Our test takes cystic fibrosis. If you are tested and are not a carrier.

Bad mutations that can lead to cystic fibrosis and your offspring, there's there's still a risk that you have a passing.

On something to your offering that could get.

Cystic fibrosis, it's what's called a residual risk that residual risk is a function of.

The population group you inherited that piece of DNA from and the way that gets assessed today by all others is through <unk>.

Self reported ancestry, so youre asking a patient.

Whats your ancestors and of course, if we know anything, especially in the U S is that the ancestry. The composition that makeup of one's ancestry is quite complicated and not only is it complicated at the sort of the.

The high level, but even if you knew with perfection. What's your what's your ancestry compensation. Once you Wouldnt know what population groups that I inherited that cystic fibrosis gene from so today, what's being systematically misreported, our residual risk based on that self reported ancestry and thats why the guidelines like <unk>.

And say you should not.

Diagnostic company being reporting residual risk unless you have this kind of information. So we're the first to be able to systematically integrate genome wide level information to provide just a more accurate standard of care.

Nation from systematically integrating that is going to lead to superior outcomes in patients that we think will be highly attractive across across the spectrum.

Got it sorry, if that was all along.

No no worries no sweat.

I guess, Eric what are your thoughts as to whether or not you think medical imaging can be complementary to some of the diagnostic portfolio that you are looking to build out.

Yes, yes.

Yes, again love that question, because as we think about data and a more agnostic way, while we are generating a lot of genomic data right because it's a special technology moving out Super Moore's law speed, we think about all aspects of data from genomic to the clinical record data to imaging data proteomics metabolomics and so on.

So we view all of those as kind of central dimensions, and clearly in cancer of the imaging data.

Critically important impact back to some of the pharma collaborations as I mentioned some of those directly involved imaging based data Abstractive features from those data and integrating them with the clinical medical record data for better diagnosis of patients for example, with lung cancer. So we have a paper about coming out on.

That exactly so we so we definitely see integration of imaging.

Data into the interpretation combining that with the genomic and clinical record data to make superior predictions. We view is.

As a core.

Component that we continue to grow out.

That's great last question for me.

Obviously <unk> was born out of Mount Sinai, which is now a strategic partner I guess, what does Mt. Sinai collaboration half that maybe you haven't yet implemented at Northshore advent in the Vera.

At such that you think that you can increase the standard of care and maybe the other three health systems.

Yes, I would say again, it's back to my earlier comment on the easy in the heart with the health systems that we're seeing today like with Northshore and it's that.

The engagement around the data the magnitude that those data extraction from the unstructured data the integration with pathology nodes and the imaging data that you mentioned like I would say we're much further ahead more advanced.

With the Mount Sinai Health system, and so able to provide across a broader range of areas from autoimmune cardiovascular to obgyn to oncology.

Utility back to the system across those different areas and we think what we're learning is that takes a little more time than we thought it would with these systems, but we think that's all going to come in will drive even more enthusiasm across our systems as we enable them to master that.

Information in this more integrated way. So we think again, it's the the mastery of the data I would say.

We're further ahead at Sinai than the others, but we expect there's nothing that holds us back from achieving that same mastery than the other systems.

Great. Thanks for all the color that's it for me.

Thank you once again for any quantification star one.

Question comes from the line of.

<unk> from Goldman Sachs you may begin.

Hey, everybody. Thanks for taking my questions I appreciate it.

I think maybe just one for you to start out one of the things you mentioned on the third quarter trends. The first thing you mentioned was it is still early to reap the benefits of the sales force, but you noted that volumes have recovered a lot at the end of September and into October I'm, just wondering how much of that is <unk>.

Ramping of new salespeople to effectiveness versus COVID-19 related restrictions or is it a mix of both and did that ramp at the end of the quarter and into October representing an easing of restrictions or a more effective sales force as they spent more time in the field.

Yeah, Hey, Matt Good question and thanks for asking.

I would say both played into the dynamic we saw this quarter with just the newness of the reps being the bigger factor I don't have precise science to tell you.

To the number of exactly how much more but we really get onboard a number of people in the summer months, who were just now getting their feet underneath them. So I really do you think that's the bigger factor now having said that we obviously need physician offices to be open and available and all of that and we are in a bit of uncharted waters here as we are.

Enter this next phase the endemic phase if you will so we're very optimistic about.

What's possible with our rats.

The year, but but again I think both factors played into the to the dynamic in Q3.

Got it thanks for that and then Eric maybe just one for you I know you've addressed a couple of questions from Mark and Max on this but I kind of wanted to get at the health systems and maybe an increased level of heterogeneity. In these systems you talked about your ability to scale investments and you've had to make a little bit more it investments.

Investments up with integration, but I'm just wondering as you are looking at each new health system, and maybe there's a higher level of heterogeneity and different challenges. Each one poses does that inform your selection going forward of new health systems, you might approach I know youre only doing.

A few but I'm just wondering.

It has this kind of changed how you're approaching and maybe looking for a more homogeneous health systems in order to take better advantage that scale of investments.

Yes, it's a really great question, because I think we.

Maybe had underestimated initially the generalized ability on the engagement of the information over all aspects of diseases and conditions.

And what we're finding is while the approaches we use R&D in general.

Focus of the systems and where they want a champion.

What is it that theyre looking to impact patients where are they losing a lot of the systems that we're working with like community based hospitals hospital systems that want to compete with academic medical institutions and not lose patients. So they wanted so they are very targeted wants and those ones are.

No surprise.

In the precision oncology and population health genomic.

Health.

Ah Reed Arena is in addition to rare disorders and.

Reproductive health, where again, we have strong expertise and so I would say in the new systems.

Will.

<unk> kind of in process that.

We think we will be.

Able to share things in coming months.

They definitely are.

More homogeneous with respect to the systems, we have today and it was because we did better understand all of the issues in those different areas in the kind of champions, who the key players worse I think oncology in particular, where it's.

Theres a bigger appetite for these sophisticated solutions no matter what system you are at.

So on the.

The system is taking on more management of the populations and so having incentive on the population health side.

So I do see.

Those potentially repeating but we are also going to drive hard with those systems expanding into other areas like cardiovascular where we're starting to get some uptake as well as autoimmune.

Great. Thanks, very much for the color very helpful.

Yes.

Thank you and im not showing any further questions in the queue. At this moment I would like to turn the call back over to Eric <unk> for any closing remarks.

Alright, well thanks, Thanks Debra.

Yes.

Thanks, everybody for your interest in <unk>, I think great round of questions.

Pleased to be able to have presented to you today, our update on our third quarter progress.

We're super excited for what the future holds and look forward to keeping everyone up to date along the way. Thank you.

Okay.

Thank you.

Our program for today. Thank you for participating you may now disconnect.

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