Q3 2021 Myriad Genetics Inc Earnings Call
Thank you for standing by your conference call will begin in approximately two minutes. We thank you for your patience and ask that you. Please stay on the lot.
[music].
Greetings and welcome to the myriad genetics third quarter 2021 financial earnings call. During the presentation. All participants will be in a listen only mode. Afterwards, we will conduct a question and answer session.
At that time, if you have a question. Please press the one followed by the four on your telephone if at any time during the conference you need to reach an operator, Please press star zero.
As a reminder, this conference is being recorded Tuesday November 2nd 2021.
I'd now like to turn the conference over to Nathan Smith Senior Vice President Investor Relations. Please go ahead.
Alright, Thank you, Kevin and good afternoon, and welcome to the myriad genetics third quarter 2021 earnings call. During the call. We will review the financial results. We released today after which we will host a question and answer session. Our quarterly earnings release was furnished this morning on form 8-K and can be found on our website at investor Dot Dot com.
I'm Nathan Smith, Senior Vice President of Investor Relations and Treasury on the call with me today are Paul <unk>, Our President and Chief Executive Officer, and Bryan Riggsbee, Chief Financial Officer.
This call can be heard live via webcast at Investor Dr. Mary Dot Com and a recording will be archived in the investor section of our website.
In addition to following call. In addition, following the call. The slide presentation will be available on the investors section of our website.
Please note that some of the information presented today may contain projections or other forward looking statements regarding future events or the future financial performance of the company. These statements are based upon management's current expectations and the actual events or results may differ materially and adversely from these expectations for a variety of reasons.
We refer you to the documents the company files from time to time with the Securities and Exchange Commission specifically the company's transition report on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on form 8-K.
These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward looking statements.
With that I will now turn the call over to Paul.
Thanks, Nathan and good afternoon, everyone. Thank you for joining us on today's call. We will discuss our Q2 results along with highlights from the quarter.
And our continued progress on our strategic transformation and growth plan.
Before we walk through our quarterly results and business highlights I want to thank our 2400 myriad genetics teammates who continue to advance our mission improving the health and wellbeing of all of our patients.
The answers inside each of us.
Because of their hard work and dedication we are expanding access to vital genetic insights for more patients every day.
At the same time, we are enabling healthcare providers to better detect treat and prevent disease.
Our work matters and all of us at myriad genetics are driven by this mission and vision.
Despite COVID-19 headwinds and typical seasonal softness our quarterly operating and financial results were strong.
In the quarter revenues of $167 3 million increased 15% year over year.
In diagnostic test volumes of 252000 were up 15% compared to last year.
Excluding the impact of our divested assets revenue increased 27% year over year, demonstrating strong growth in our core business.
Fourth quarter in a row average revenue per test remained stable year over year and quarter over quarter <unk>.
Excluding the positive impact of prior period collections, the $18 billion year to date and $8 million in the quarter.
Total operating expenses were $199 4 million and adjusted total operating expenses decreased $1 6 million sequentially to 121 5 billion.
Our GAAP operating loss in the quarter was $79 7 million with an adjusted operating loss of $1 four.
$4 million and an adjusted loss per share of <unk>.
At the end of this quarter, we had $413 6 million in cash cash equivalents and investments on our balance sheet.
And as noted last quarter, our progress towards long term profitability, we will not be linear.
But our transformation is progressing as planned and our business units are prime for growth going into 2022.
Our path to profitability is clear and we expect to deliver more consistent growth, while maintaining our focus on cost and our customers.
During the quarter, we closed on the divestitures of <unk> and vector and pay down our revolving credit facility.
With all three of these divestitures closed we can now intensify our efforts to drive growth in.
To begin to look for strategically aligned acquisitions and invest further in our commitment to becoming a more consumer centric technology enabled company.
Our goal is to make each interaction between myriad genetics that our patients partners and provider partners that seamless and hassle free as possible, while improving healthcare outcomes for the highest quality test genetic insights and services available.
As previously discussed we continue to execute on four strategic priorities.
First we are working hard to develop best in class quality products service.
And accessibility to accelerate growth and reach more patients of all backgrounds.
Second we continue to invest in enhancing our enterprise capabilities to both improve patient and physician experience Rev cycle management, our commercial capabilities and opportunities to innovate.
Third we are expanding access to our genetic insights to new digital tools and.
And beginning to look for better ways to leverage our data to elevate our products to their full potential.
And finally, we are committed to disciplined execution on the key set of initiatives to fulfill our mission and drive long term growth and profitability.
We continue to make progress on each of these priorities and are excited about the opportunities they will create in the future.
And our women's Health Division, we're seeing increasing market interest by unaffected women for our hereditary cancer test following the launch of our my risk hereditary cancer tests with risk score for all ancestors.
First and only test of its kind.
Melissa Gonzales with the first five months under our belt with leading our women's health business and we've already seen market improvement in our operating results.
Employee turnover in this unit has gone from 57%. This time last year to now just 8% and this most recent quarter.
Beginning this quarter, our new sales team is fully on boarded.
Serving current customers and actively pursuing new ones.
We expect to see continued stability growth and improved operating results under Melissa's leadership in our women's Health Division in 2022.
We are also progressing towards the launch of a novel product that will deliver the clinical value of both our prequel prenatal tests and foresight carrier screening.
To more expectant parents.
A combined offering will simplify noninvasive prenatal and carrier screening workflows, which currently involves several samples from different tests.
Today, only one out of three patients undergo carrier screening noninvasive prenatal screening during pregnancy.
This process is complex and time consuming requiring three samples from two parents.
Our new innovations deliver the key clinical content, a prequel enforce site with a single maternal sample.
The offering will provide a comprehensive assessment of the single prenatal tests that is simple accurate and allow more patients to get answers faster.
Yeah.
In oncology, we are pursuing a $5 billion market opportunity in tumor profiling as we prepare for our launch of our combined somatic Germline and companion diagnostic test for ovarian cancer patients with.
With this new solution myriad genetics is advancing precision oncology.
Teaming up with Illumina and inner mountain precision genomics to merge the power of companion diagnostics, Nextgen tumor sequencing and world class testing services.
We're also excited about developing risk or risk stratification capabilities.
With risk score conditions can gain critical insights to help them treat women with increased risk of breast cancer, but who do not have likely identifiable pathogen variance in one of their breast cancer genes.
Our customers are working and collaborating with us closely.
And providing valuable feedback to ensure we meet their needs both now and in the future.
They are also embracing our current portfolio and our field teams are gaining traction with a large number of institutional wins at major health systems.
In addition, we applaud the new NCC and genetic guidelines, which now apply to all individuals with a personal history of colorectal and endometrial cancer.
New guidelines applies specifically to those with the team mutation prediction score greater than two 5% regardless of age.
This was a significant step forward and a win for patients who can benefit from our oncology tests.
Spanning the patient population that qualify for the tests.
In urology, the new NCC and prostate guidelines are favorable for both our Polaris prostate cancer tests as well as the my risks <unk> cancer test.
<unk> is the only company that can offer both the tumor profiling and hereditary cancer test to urologists.
As well as companion diagnostic test for therapy selection.
We continue to lead the bio space for patients with prostate cancer with Polaris and look forward to continued growth there.
And mental health are gene site Psychotropic test is seeing accelerated demand. This is a result of the test the effectiveness in helping physicians better determined patient response to mental health medications with just a single sample from the patient.
In addition, our ongoing commercial transformation has been a key business catalysts as we right size our field sales force <unk>.
The expanded inside sales capabilities and executed on a robust digital marketing plan we.
We are now seeing and meeting patients and clinicians online where they are looking for mental health treatments more and more.
Volumes for gene side are growing a new provider segments, including general practice physicians and nurse practitioners.
Digital ordering is continuing to grow and evolve currently accounting for 10% to 15% of all gene site orders around.
Around 30% of our tests are now homebase kits.
<unk>.
Singly announced gene site tests, including ADHD is on track to exceed launch objectives in both projected and volume and revenue.
We have prioritized collaboration across our business units to determine how each of our segments can grow substantially together and individually and we will have more to speak to that in the future as.
As we move forward, we will establish a consumer centric and tech enabled approach as our foundation for future relationships customers physicians and to ensure long term growth and profitability.
We're also focusing on reimbursement and cost of goods sold to help generate margin expansion.
Our transformation plan is progressing as expected, although there remains to be a great deal of work to be done.
We are successfully reset our base of operations and refocus our organization to reduce complexity and cost and better serve our customers.
We're now turning our attention to accelerating growth by investing in innovation and technology.
Including more customer centric tech enabled commercial capabilities and strategically sound acquisition opportunity.
Once again.
We had.
A strong quarter as we continue to execute on the plan that we laid out for investors in may our.
Our commercial transformation is starting to take hold as you've seen in mental health and we are a trusted brand and strong product portfolio, both of which continued to grow and enable us to fulfill our mission and expand our leadership in genetic testing to precision medicine.
Like to now turn it over to Brian to discuss our Q3 financial results in more detail.
Thank you Paul I would like to start by giving you an update on our divested businesses.
During the quarter, we completed the sale of our RPM business to Q2 solutions for $197 million in cash and backdrop, our autoimmune business to labcorp for $150 million in cash our team has done an excellent job of executing on all three divestitures and we are now in a great position to invest the proceeds back into <unk>.
Key growth initiatives.
Our plan is to use the gross divestiture proceeds of $380 million to strengthen our balance sheet as well as to fund investments in technology, our new commercial operating model commercial model and potential acquisitions.
We had another solid quarter as we reported total revenue of $167 3 million up 15% year over year, our quarterly results benefited from strong test volumes, which increased 15% year over year. Additionally, we continue to see stable average selling price prices across our portfolio of products.
In the quarter, we did reported an adjusted loss per share of <unk>, but.
But remain on track to return to profitability and deliver more consistent growth going into 2022.
Adjusted gross margin was 71, 7% in total adjusted operating expenses were $121 5 million like many others. We are experiencing increased inflationary pressures, including increased material costs due to global supply chain disruptions as well as increased labor costs due to staffing constraints and increased competition.
And for talent across the organization.
Turning to revenue for our products hereditary cancer revenue in the quarter was 79 million versus $81 million in the third quarter of last year.
Our hereditary cancer test volumes were flat year over year and down 7% sequentially.
ASP was flat sequentially, excluding positive revenue adjustments related to better than expected cash collections on tests ordered in prior periods.
The sequential decrease in volumes is largely attributable to constraints and access to health care providers due to the COVID-19 pandemic the impact of the Delta variant strain and typical summer seasonality.
Mental health delivered revenue of $24 million, an increase of 103% year over year, and 7% sequentially, representing solid growth five quarters in a row.
We had approximately 2700, new physicians ordering gene side in the quarter and the total number of ordering physicians increased 6% sequentially.
In women's health revenue was $59 $1 million in the quarter, an increase of 6% year over year.
Prenatal test volumes increased 7% year over year, driven by our proprietary amplify technology, which enhances the performance of our prequel noninvasive prenatal screening test.
And oncology revenue in the quarter was $76 8 million, an increase of 32% year over year and a decrease of 2% sequentially tumor profiling revenue increased 94% compared to the same period in the prior year.
Sequentially revenue increased 13%, primarily due to a onetime milestone payment of $4 million related to my choice Pdx Global development work, excluding the onetime payment we saw a sequential decline in revenue consistent with typical summer seasonality.
During 2020, we received $30 million in advanced Medicare payments from the cares Act stimulus bill that addresses the economic fallout from the COVID-19 pandemic. These funds received as part of the cares Act are offsetting against payments that are due for Medicare services, the company offset approximately $8 million quarter to date and.
<unk> $14 million year to date for services performed during those periods against the prepaid Medicare balance at the end of the quarter. The remaining balance of the advanced Medicare payments were $16 million.
As mentioned earlier total test volumes and revenue both increased 15% year over year, and our ASP was stable year over year and sequentially, excluding the impact of our divested assets revenue increased 27% year over year, primarily driven by a 20% increase in volumes demonstrating exceptionally strong growth in the core <unk>.
<unk> <unk>.
Given the continued unpredictability surrounding the COVID-19 pandemic and its variant strains as well as the impact of continues to have on the health care environment customer behavior, and the ability to market test to physicians were not providing guidance for the quarter ending December 31, 2021 or for fiscal year 2021 at this time, we expect to resume providing.
Financial guidance in early 2022.
Looking at the fourth quarter, we do not expect approximately $4 million of my choice CTX revenue tile tied to milestone payments to reoccur. In addition, due to the divestiture of the vector test the $7 3 million in revenue in Q3 will not reoccur in Q4, we expect that those revenue comparison headwinds.
It will be offset by positive improvements in volumes from our typical Q4 performance. We also anticipate a portion of the positive out of period cash collections to be sustainable in Q4, but not at the levels, we have seen in previous quarters.
From an expense standpoint, we expect total operating expenses to decline modestly on a sequential basis due to the divestiture of the Vectra business.
We continue to be excited about the business going into Q4 and believe that Q4 will help set the stage for 2022.
As a reminder, we provided the following forward looking commentary at our Investor day in May which called for revenue growth of 8% to 10%.
Gross margin expansion of 100 to 150 basis points and inflation adjusted operating expenses in the range of $460 to $470 million going into 2022.
While we remain confident in these long term goals, we are feeling the effects of the macroeconomic environment, which has continued to limit access to certain health care providers and has exerted inflationary pressures on supply and labor costs, while the net effect of these will pressure our gross margin and Opex assumptions. We are focused on mitigating these cost impacts we built.
That over time, the market will favor the most efficient providers and that our focus on improving customer service levels, new commercial strategy and our plans for our automated lab of the future will position us to deliver on our on our long term goals I will now turn it back over to Paul for closing remarks.
Thanks, Brian we're pleased with the progress we have been able to make some part of this year and a very difficult operating environment.
Our primary focus is now accelerating growth going into 2022, and we continue to invest in our business and work to elevate our products to their full potential.
And introduce new offerings next year, while we are pursuing strategically sound acquisitions and new partnerships.
Now more than ever we are exploring new ways to eliminate the path to better health and wellness to genetic insights and look forward to a bright future ahead for myriad genetics to better serve our patients and customers.
And deliver sustainable and profitable results for all of our shareholders and.
And now I'll turn it back to Nathan for Q&A.
Thanks, Paul.
As a reminder, during today's call we use certain non-GAAP financial measures a reconciliation of the non of the GAAP financial results to non-GAAP financial results and a reconciliation of GAAP to non-GAAP financial guidance can be found under the Investor Relations section of our website.
Now we are ready to begin our Q&A session to ensure broad participation in today's Q&A session. We are asking participants to please ask only one question and one follow up operator, we're now ready for the Q&A portion of the call.
Thank you. So first question is from Dan Brennan with Cowen and that line is open.
Hi, Good afternoon. This is Kyle on for Dan today, Thank you for taking the questions.
So you mentioned during the call today on the focus.
For driving growth and included in that is potentially strategically aligned acquisitions.
Do you think you can maybe elaborate on that a little bit here, maybe any gaps in the portfolio do you think you'd like to fill or specific areas.
Well I think there are sort of three areas one is finding.
Really good products within our areas of expertise that we can add value to and we want to have a proprietary view about how we can help grow.
<unk> products in the marketplace and so we're I think we're now feeling confident that we can begin to look for those kinds of opportunities to expand our product portfolio and leverage the channels that we have in women's health and primary care and oncology.
I think we're looking for ways to accelerate accelerate our tech enablement.
And then as we've talked about has been an area of under investment historically, and where we've made up a lot of ground.
And lastly, how we can leverage data to better differentiate our product offerings.
And and deliver.
More than test right deliver the insights and.
And the expectations of our customers for more interpretive data that they can use as part of a holistic care plan and.
So those are sort of the areas that we're focusing on and as we've talked about with.
$413 million of cash on the balance sheet 230, or so undrawn on the revolver. It really gives us the financial flexibility to it.
Some more ambitious there and fund our internal investment activities as well.
Got it thank you and on another note so hereditary cancer volumes, specifically in the women's health portion of hereditary cancer testing can you provide any color on how both volume and pricing has trended year over year and sequentially.
Well I'll start with the operations part of it and Brian can add more color around the numbers as.
As we've talked about in previous quarters. This was an area of underperformance. We made a leadership change. We were we were not doing a particularly good job of selling prenatal test and <unk>.
And if Medicare cancer test out of our bag.
Products one of the opportunities we see longer term is doing a better job of lever.
Leveraging the channels and selling multiple products in the same channels.
Melissa Gonzales, who is an experienced healthcare executive in the women's health channel is really bringing the team together we stabilized the sales force we've got people on the ground now and a lot of open territories.
And just bringing a lot of much needed.
Energy enthusiasm and discipline to the business.
Really excited about the budget presentations, you made last week and the opportunities for 'twenty two so.
The women's health business has very much been a.
Turnaround story and.
There's a lot of opportunity there for us to participate in the underlying.
Eight or 9% growth of the marketplace and we think we can capture more than our fair share of that overtime.
But again, Melissa five months into it and we're feeling optimistic about the opportunities for that segment in 2002.
Yes, and <unk> I would just add on the ASP side, we've continued to see through the course of the year and Paul referenced in his remarks.
$18 million of positive out of period catch.
Cash collections, I mean really attributable to the great work of the Rev cycle team here at myriad and all their efforts over the course of the last year and what that's really led to its stability across the portfolio in terms of our pricing and hereditary cancer through the course of the year has been stable as well and we've talked about that through the course of the year. So I think to the extent that you can.
Can see a return of.
Preventive care visits.
And an inflection in volume with stable pricing I think thats a good a good combination.
Yes.
Just echo just from the operator's perspective cash matters. It really reassures me that our revenue recognition is tied to cash collections and should give investors confidence that some of the issues that we had a couple of years ago on ASP.
And volatility there and.
Challenges, we had in collecting prenatal.
The team has just done a great job KPMG has been helpful. We're really working to build a.
World Class payer markets in Rev cycle capability here, which we think will be really important as we look to scale and grow the company and bring on new products and luxury products.
Got it thank you.
Sure. Thank you.
Next question is from some <unk> with BTG. Please go ahead.
Hi, Thanks for taking the question.
Could you talk about it just a clarification for the combined test you're launching the hereditary cancer tumor profiling next year.
Talk about ovarian for ovarian cancer or do you plan to launch for the other indications throughout next year as well or how should we think about that from the timing standpoint.
Yes, so definitely hope to launch with Varian.
Early next year Q2, probably something like that and just want to we want to get it right. I mean, one of the things that we've committed to is we're not going to launch unless we can launch successfully in space and the team Patrik.
What we're getting from Kols and others were just doing a lot of more thoughtful groundwork before we come out in the marketplace to make sure. Our sales teams are prepared to do that and really appreciate the partnership with Illumina and inner mountain to bring really the best of all of the three companies together for a seamless customer experience.
In a single report with all the interpretations that big it's really.
85% of Oncologists, one report they don't want to have to figure out two or three different of course and thats differentiating in the marketplace.
We are absolutely.
<unk> work to expand that.
Yes.
To breast pancreatic.
Prostate that's going to take some more time those are bigger total addressable markets.
But that is clearly in the work stream too early to tell when we will be able to launch those offerings, but absolutely part of what we're working on in our R&D and Tech development group.
Got you Great and then my follow up is I would love to get more color around yeah, I realize that they're still.
Limited access to their health care providers are would you be able to kind of give us more color in terms of four.
For the oncology channel versus the women's health first day.
The psychiatrist.
As far as the level of access you currently have versus prior to the pandemic.
Yeah, I mean to some extent I think we're all recognizing that we're sort of in a new normal here and so I think the.
The Q3 to Q3 comparisons are the right ones you sort of had a stable <unk>.
Relatively stable Covid situation and then this quarter was a little tougher quite frankly, just because of the delta variance.
But look at some level. Some of these barriers are going to continue to exist.
I would point you to the great work, we've done in gene site and with the support of Bain of moving to a more <unk>.
Modern commercial model.
65, fewer external salespeople 30, internal salespeople that are really increasing the velocity and the turnaround time and customer satisfaction, 30% of the kids are home and we need to bring the science to people, where they can access it when they can't get into the office.
A lot done in the patient portal, there and so now we're extending those commercial and technological capabilities for our other product lines.
Next year, we should see more unified ordering platforms more backend platforms.
On billing and customer service a lot of work to improve the customer and the provider experience.
And so we generally feel.
As we've talked about that we can achieve our long term growth rate organically of 8% to 10% and then we've got a lot of different ways to get there.
But.
Anticipate bumps along the way I mean, it's a pretty volatile world and as Brian talked we've got probably a little increasing inflationary pressure then we talked about at our Investor day presentation.
We're good cost managers here.
Working on finding ways to lower sequencing costs, but.
But across all of our product lines. The total is a little different story as I said in women's health.
It's more of a reselling a lot of open territories.
Helping people learn how to sell my risk as well as our prenatal products in that same channel one of the challenges quite frankly is we have to send patients to two different ordering platform to do that so we're fixing that so they're they're just little things that create unnecessary friction points, but it will be solved here over the next.
Quarters that we think should support growth in ease of use for our customers.
Great. Thank you.
Thank you.
So again for questions into one four on your keypad next question is from Puneet <unk> with SBB Leerink. Please go ahead.
Yeah, Hi, Paul Thanks for taking the question so I'll try to ask both of mine too.
Together I could and just wanted to just following up on the somatic Germline test.
Just when you look at the overall competition in this space and given sort of the penetration levels.
Sort of just to help us understand how do you position but.
Multiple companies that are providing somatic testing in the marketplace and then on gene side. If you could maybe just elaborate a bit on the coverage there where do you stand in your ability to raise pricing there. Thank you.
So on the first we certainly have some competition out in the marketplace, we think our offering will be differentiated.
Some of those competitive offerings are really more marketing partnerships, where people are doing the germline tests in the tumor test and then.
I understand the report separately, but together.
And so we think this is <unk>.
Our highly differentiated again combining.
Illumina CSO 500 capabilities, along with the Great work and then our mountain and then our sales force our Rev cycle on the commercial side and this is the kind of partnerships that I think we all need to think about more so we can bring more products to market faster and more effectively.
And more cost efficiently. So we think it'll be differentiated both in terms of the accuracy and quality.
No one else has the my choice FDA approved.
Absolutely differentiating part of the.
The three piece puzzle here and as you've seen we've got great traction.
On my choice CTX, and so I think if you look at the combined offerings that we're bringing together under one roof and the ease of use that we're going to make this for oncologist.
We should be able to capture more than our fair share of the market place and as previously discussed hopefully extend this beyond ovarian.
In the not too distant future on gene side, we continue to work with payers.
Across the landscape Medicare advantage plans with the benefit of the LCD with more Medicaid plans, where we think theres a great opportunity in expanding coverage.
And quite frankly.
It's less about trying to get the highest price, but getting a price where we can expand coverage.
On a broader population that needs. This test, particularly given how efficient we are in a great work Mark's team has done I think our Cogs are $336 for this.
Those products or even the dogs are about 65 that are on products 65 for this product so.
We've got a lot of margin.
Jim site, and so quite frankly, I'm pushing the team for broader access.
This goes right to the social determinants of health into disparities mental health is basically an issue across all social economic.
And affecting young people.
And we need to be part of addressing that and what I'm excited about is the nurse practitioners, they're the ones who really.
See that secondary diagnosis of mental health issues.
And we see it for seniors I've been in that part of the world for many many years, it's a secondary diagnosis often the one that causes hospital re hospitalization and so we just see great runway for gene site and its adoption and.
Our focus on coverage broadly across all payer types.
Next question is from Matt <unk> with Goldman Sachs. Please go ahead.
Hey, Matt Hi, everybody. Thanks, Hey, Thanks for taking my questions I appreciate it maybe.
Maybe just following up on Peter's question on gene site maybe.
Maybe a bigger picture question, but.
Yes.
For mental health Telehealth has been a huge benefit and I think there's some thought that that might remain fairly sticky in terms of how people choose to get treated.
If it does what kind of impact do you think that would do to broaden the population. There are some pretty large under diagnosis that goes on within mental health, but if telehealth word it kind of remains sticky at high levels for mental health. What do you think that would do for Aegean site from a positive or negative impact.
Absolutely supportive of our investment thesis.
If you go to our website youll see some connectivity to connecting you to telehealth partners, we have a number of discussions that Eric Santa our.
Chief growth Officer, who did a lot of this at rally health at Optum on the telehealth side at Optum and he is leading that charge along with Mark and the mental health team.
So.
We think that's absolutely can help sustain the growth there and there are a number of potential partnerships.
With telehealth and with some of the payers that focus on mental health issues as well, where we think.
There is great opportunity. So we're in the early innings here, but it is the adoption by the nurse practitioners that to me is the most encouraging there are the ones really dealing on the frontline of this.
And.
So improving the ease of use and access to the cow calf hu, our portal through telehealth partnerships.
That's absolutely how we think we can sustain growth in this business unit and continue to expand.
Great. Thanks for that and then just.
You talked about the increase in inside sales for mental health in particular can you use that kind of same recipe for other.
Your other segments and other tests.
There are certain.
<unk>.
Specificities, but those markets where that might not be the right solution.
No I think Matt I think we've talked about this a little bit we are in the process of rolling out not exactly the same commercial model, but a more segmented approach using inside sales <unk> using a lot more digital.
And social media awareness to have people come into the office and ask for our test or be informed about our test. So we're in the early innings of extending that into oncology in women's health, particularly in women's health.
So many women.
That's where they do their primary care, we see opportunities there.
And ultimately obviously, we see the opportunity to cross sell gene site into the women's health channel as well. So we're a year away from being able to execute on that but thats certainly an opportunity that obgyns.
Our advanced practice nurses face every day as well so lots of fun stuff to do here.
Got it thank you.
Next question is from Derik de Bruin with Bank of America. Please go ahead.
Hey, this is more comfort derik, thanks for taking the question.
Another one follow up on those couple of June.
Two quick questions for those players that are not being person yet what data do they still need to see in the patients that are ordering tests with helm skewing more self pay or how is that working.
Yes, so thats an evolving picture for sure we are making progress with payers.
And getting through and showing the meta study and other things we have a VA study that should come out soon and it will be very supportive for veterans with PTSD. It was referenced in the congressional report.
Fitted about the possibilities of extending gene site into the VA.
And the team continues to validate the clinical efficacy.
The more powerful story here is that <unk>.
Clinicians need it want it and they're validating it and we've got programs with rush and a few other institutions, where we're doing some some collaborative work with them in some projects, where we think we will have some real time.
Data to support the clinical efficacy and the financial efficacy quite frankly getting people to the right medication sooner quite traumatic for people to have to go through three or four different medications to solve to their ADHD depression and anxiety.
<unk>.
There isn't any family in America doesn't have somebody in their family who is struggling with these things so.
So it's not holding us back, but we continue to build the clinical case and the validation points, there, but the need and the desire for this as part of a solution.
Helping management will help us.
Very clear and very pronounced and all the market forward et cetera.
Great and then just as a quick follow up on the combined carrier screening and ITT tests, how would you think about pricing. There I believe you said that was.
Colonel only and if so what are you doing for father in the carrier screen.
Yeah. Thanks for the question.
It is it is only one sample that's the unique net part of the uniqueness of the test is that you would only use youre able to run and get the result from from just from mother and with respect to pricing, we haven't really talked about that but I think that youll will share more details on that as we as we get closer to launch.
Okay.
Thank you.
Next question is from Tycho Peterson with Jpmorgan. Please go ahead.
Hey, Tycho and good afternoon.
Oh apologies it looks like that line disconnected that would make our next question Jack Meehan with Nephron Research. Please go ahead.
Thank you good afternoon.
Hello.
Just a couple of clarifications.
For the $8 million of out of period sales can you provide the breakdown by product and then was the $4 million milestone payment incremental to that.
Yes, no the 4 million.
Would have been incremental that stands alone and that's very different.
Because it was earned in the current period. So it was recorded in the appropriate period.
The $8 million I think about $4 $5 million of that was related to hereditary and the rest was sort of spread across the other products.
Namely forgotten, yes, mainly prenatal, but some across Europe.
Okay and then.
I appreciate the commentary around 2022 one.
One other data point I was hoping to provide is what portion of your hereditary cancer testing book renews with payers.
Or maybe put a different way do you think price declines will be in the 3% to 5% range you talked about at the analyst day.
Yes, we're still feeling pretty good about the 3% to 5% overall pricing.
And generally feel pretty good about kind of where we're positioned with hereditary cancer I know thats been a source within security and concern for folks, but as we've talked about.
The out of period collections, just bolster our confidence in our in our revenue recognition and the quality of that.
And we're seeing pretty good stability there.
And a question that you had.
And we think we can we can build on the.
The volumes and really start creating a lot more leverage there, particularly in women's health. So we see it.
Again.
Overall, 3% to 5% pricing pressure next year some of that is Pamela.
Unless it is extended and no particular contracts of any note.
Expiring and still signing contracts at pretty favorable rates.
In some places where.
People think we have a superior product and are willing to pay for it now.
Firstly as I've talked about before I wanted to make sure that our pricing is accessible and that we we have a lot more leverage in our P&L driving volume not just holding on the price a little philosophical change around here, but.
But right now, we're feeling pretty good about pricing and feeling really good about our Rev cycle capabilities.
Great.
And just as a final question I guess can you help us with some of the moving parts on the path to profitability next year I mean, I look at the quarter. There was a cash EBIT loss of around 1 million.
You had about 12 million that were one time, one nature or another and we're talking about.
Somewhere to the tune of $25 million in price reductions next year kind of at the midpoint.
And.
It is also hoping to get some color on the inflationary factors just what's the path to profitability.
Yes, so we're.
We're not giving guidance today, Jack as you know I think the path is consistent with what we've talked about.
We're in a position now to really start growing volumes there.
Clarity of mission with the divestitures behind us.
The stability that we're seeing in the sales force the improved go to market on our value proposition. The work on ease of use and transparency with patients at the point of care, which is the other thing that work on where we're eliminating a lot of the competitive barriers that we have had.
And I.
I think we've demonstrated ability to be disciplined cost managers.
And in terms of getting synergies and managing Opex and managing the industry, leading gross margins.
And so we just want to recognize which I know you and others do that.
We've got increasing in plate inflationary pressures.
Going into next year, but as Brian reiterated we lost <unk> <unk> in the most seasonally weak quarter.
We were profitable last quarter, which is more representative of sort of the year and so this quarter. We also had a bunch of legal expenses associated with the qui Tam there's always puts and takes in this thing.
As you well know so overall.
We believe we have a clear path on revenue Cogs opex to reach stable profitability next year Theres, just a lot of puts and takes in any given quarter.
Thank you Paul.
Thank you Jack.
Yeah.
We do have a question from Tycho Peterson with Jpmorgan. Your line is open.
Hi, This is Greg on for Tycho. Thanks for taking my question. So first on OTT.
We've had broad coverage of average risk for about a year now and then another player exited the market earlier. This spring. So can you just talk about how share has shifted in that market and where you stand now.
I'm not sure if I can give a specific answer to that question other than I think we're getting our fair share and we have the ability to execute better and those things take a while to play out Brian comment on that in the prior call.
The expansion of guidelines and things they don't just sort of materialize in a quarter. They may take a year or two to work themselves through the.
The ether of ordering physicians, but I was just going to add I think that relative to share. It's hard to tell based on the data that's available in the market, but what I would say and I would say just that.
With respect to the average risk most folks were already ordering the test anyway. So it's more of a reimbursement sort of playing you've seen nice recovery front in our prenatal ASP over the course of the year a lot of that is driven by the fact that we're now getting paid for tests that we werent previously so I think that's really where we've seen the benefit of that.
Over the course of the last year and as we've talked.
About one of our goals is to reduce no pays.
And so.
That's particularly important for gene site, but important in all of our it's one of those weird industry things that I've been trying to put my head around here is how many test we don't get paid for but it's something we're very focused on and continue to make progress on a number of different fronts, whether its coverage.
<unk>.
Patient portions and other things. So it's just an opportunity to make sure that our tests are both price and affordable and accessible that we can cover our costs and again, we've done a really good job of reducing cogs across and particularly sequencing costs across the enterprise. So just have the ability to set volume can.
To really drive a lot of value creation for shareholders here a lot of leverage in the P&L.
Great and then my follow up is on gene side, you guys have mentioned the inside sales team a few times on this call I believe during the analyst day, you mentioned that that was in a piloting phase. So can you just give us some color on the progress and any early trends that you're seeing.
And also just how much further would you expand that inside sales force for gene side. Thanks.
I think we've added another 17 people are selling.
I think we're up to 35% to 36, something like that and we're starting to do that in the other business units as well.
<unk>.
And these folks solve to the friction in the system, particularly while we're building more technology to solve to the friction and Thats. What we want we just want if a patient or doctor has a question or their nurse practitioner, we want to answer it on the spot we want to solve a problem we want to be the company that gets you your results as quickly as possible.
And that means you get the order next time and so those folks have just done an incredible job in Mason.
<unk>, if I could and we've just added a lot of capability, there and as I said, they've more than made up for the external 65 person.
Yes, more expensive external salespeople and then in that division.
It's something that people that couldn't be done but in other industries has been done and now we are doing.
Okay. Thank you.
Thank you.
Yeah.
Anybody else question desk phones.
No one else on deck.
Thank you Kevin This concludes our earnings call a replay a replay will be available via webcast on our website for one week. Thank you all again for joining us. This afternoon. Thank you for your support everyone.
And that does indeed conclude our call for today, we thank everyone for participating and you may now disconnect.
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