Q3 2021 Biodesix Inc Earnings Call

November 15, 2021

Good day and thank you for standing by welcome to the biotech third quarter 2021 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised today's conference maybe recorded.

It is.

If you require any further assistance. Please press Star then zero I would now like to hand, the conference over to your host today, Chris Frenzy with Investor Relations. Please go ahead.

Thank you operator and good afternoon.

Thank you for joining us today.

<unk> third quarter 2021 highlights financial results.

Leading the call today will be Scott Hutton, Chief Executive Officer.

I'll be joined by Robin Harper, Kelly Chief Financial Officer.

After the prepared remarks, we will open the call for Q&A.

An audio recording webcast replay for today's conference call will also be available online.

The press release.

Mark.

Today, we issued a press release announcing our business highlights and financial results for the third quarter 2021.

Copy of the release.

That's our relations page of the call.

Many web site.

Actual events or results may differ materially from those projected as a result of changing market trends.

Demand.

Additive nature of biotech.

<unk>.

Such forward looking statements and their implications involve known and unknown risks.

Certainties and other factors that may cause actual results or performance to differ materially from those projected.

The forward looking statements discussed on this call are subject to other risks and uncertainties, including those.

It's Scott.

Section and elsewhere in the Companys annual report on Form 10-K for the year ended.

31, 2020 filed with the Securities and Exchange Commission on March 16, 2021, as a result.

Subsequent quarterly reports on Form 10-Q filed during 2021.

Paul.

Additional information concerning factors that could cause results to differ materially from our forward looking statements are described in greater detail in the company's press release issued today and in the company's filings with the SEC.

I would now like to turn the call over to Scott Hutton, Chief Executive Officer Scott.

Thank you, Chris and welcome everyone to the biotech Inc. Third quarter 2021 earnings Conference call.

I am planning to kick off with the highlights then turn it to Robyn for financials. I'll, then come back with a deeper discussion of the business.

<unk> is our patient centric mission driven diagnostics company, our mission is to improve patient outcomes and lower healthcare costs by developing diagnostic solutions that reduce ineffective and unnecessary treatments.

We were pleased with the third quarter performance of our four blood based tests, making up our core lung diagnostic testing, which grew 51% year over year.

Despite traditional seasonality, including physician and patient vacations in the summer months as well as the major hurricanes and storms and most notably the rise in the Covid Delta variant, particularly across the south which shutdown hospitals and drastically reduced sales representative access in those areas most heavily.

Impacted.

We were also pleased with the third quarter performance and our Biopharma services business, which grew 133% year over year.

And the areas less impacted by Covid and since the Delta variant surge began to wane in late September we've seen encouraging trends in our sales access and performance demonstrating the efficacy and momentum of the sales strategy.

I would also like to highlight a few key milestones from the quarter that will support the growth trajectory of our lung diagnostic testing business and add to our enthusiasm and confidence as we end the year and began looking into 2022.

We had several much anticipated data announcements in the recent weeks.

We announced exciting new data on notify XL two in October from our prospective Oracle clinical utility study at the 2021 chest annual meeting.

The goal of the study was to demonstrate that incorporating this blood based testing into the management of patients with newly detected lung nodules can modify how physicians treat patients and improve outcomes.

The results were fantastic and showed that the use of notify XO too was able to reduce the number of invasive procedures carried out on benign nodules by up to 67%.

Fulfilling the promise of the test and reinforcing data seen in the pin optic study.

Presenting this data at chest the primary investigator Dr. Michael Pritchett director of thoracic oncology at the chest center of the Carolinas at first health and past President of the Society for advanced Bronchoscopy also acknowledged the importance of being able to provide a simple blood test that can rapidly reclassify.

Nodule is low risk for the patient providing confidence in waiting for the next <unk> scan and for the health system and how they notify test was able to help avoid an unnecessary invasive procedure.

We recently announced new data at the society for immunotherapy of cancer also known as <unk> on to test. The first was our proprietary primary immune response test, which was shown to predict overall survival in non small cell lung cancer in combination or mono immunotherapy.

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The second one is a test that was discovered for our Biopharma partner Genentech, using our proprietary diagnostic cortex AI platform.

The test, which is known in the research world as the anti PDL. One response test or art was predictive of outcomes following treatment with one of our pharma partners Immunotherapies.

In addition to the clinical validation data. We also presented the results of our unique AI methodology called exact shapley values, which identified the relative importance of the specific inputs to the test revealing different patterns and potentially different biology is that are responsible for subgroup responses to the drug.

This is a critical advancement in AI explain ability, providing much needed transparency and facilitating a deeper dive into the mechanisms of the disease.

We're utilizing this AI advancement with our own pipeline to further explore our greater than 150000 data and sample biobank and with our pharma partners as demonstrated by this work with Genentech.

Finally, we received approval of our 72 hour blood based <unk> test from the New York State Department of Health, a key regulatory milestone for commercialization of this new NGF test. We've made this test available to a targeted group of physicians as part of an early access program and expect full commercial launch and.

In the first quarter of next year.

The addition of the NGF test increases our core lung blood based diagnostic testing menu to five test and most importantly, it gives our sales team and even broader portfolio of blood based tests that provide multiple actionable insights for the same patient at various points in their continuum of care.

Now, let me turn it over to Robyn to review the third quarter financial performance Robin.

Thank you Scott.

Our third quarter core and lung diagnostic testing revenue was $4 5 million versus $3.0 million for the third quarter 2020, reflecting a 61% growth rate.

<unk> mentioned, the Delta variant of Covid negatively impacted the south and that geography also accounts for a disproportionate amount of the lung cancer cases in the United States.

In the most impacted areas electric procedures, such as biopsies.

Other non essential patient visits were significantly reduced or even halted.

Alright, this the delta surge impact across this out only resulted in a 5% decline in lung diagnostic revenue over the second quarter of 2021.

In areas with less severe COVID-19 impact, we saw excellent growth third quarter over second quarter, demonstrating the effectiveness of the sales strategy and approach.

Turning to Biopharma services third quarter, 2021 revenue was $1 5 million compared to <unk> 6 million in the year ago quarter. As we've said this business can fluctuate due to several factors, including contract timing, which can be long under normal circumstances, but in this particular instance, it reflects the continued impact of Panther.

<unk> had an overall clinical trial enrollment.

Covid testing revenue zero point $5 million in the third quarter versus $5 5 million in the year ago quarter represented a decline of 91% and was consistent with the declining trend, we anticipated and discussed in previous quarters, resulting from the increased rate of.

Penetration of vaccines in the U S and the shift away from lab based testing towards point of care rapid antigen and at home testing.

At this point, we are not forecasting COVID-19 testing services to represent a material component of our overall revenue going forward.

As a result total revenue for the quarter was $6 5 million compared to $9 2 million for the third quarter of 2020, representing a decrease driven entirely by the year over year change in Covid testing and partially offset by the increased revenue in our higher margin product areas.

Gross margin percentage in the third quarter, 2021 was 58%, which was flat to the same period in 2020, and a substantial improvement compared to the 40% gross margin in the second quarter of 2021.

The 1800 basis point improvement in gross margin over the second quarter was primarily a result from the mix in sales to our higher margin products of our core lung diagnostic testing and biopharmaceutical services offset by the sequential decline in COVID-19 revenue.

This mix shift to higher margin products is expected to continue.

We anticipate strong margin improvement for the remainder of 2021 and into 2022.

Overall operating expenses, excluding direct costs and expenses were $16 9 million in the third quarter 2021, compared to 11 5 million for the same period of 2020 and $15 4 million for the second quarter of 2021.

Year over year increase was primarily driven by noncash stock compensation increases as a result of becoming a publicly traded company and investments in the expansion of our sales force as well as research and development and clinical trials.

The net loss for the third quarter 2021 was $11 5 million compared to a net loss of $8 8 million for the third quarter of 2020, and $11 4 million for the second quarter 2021.

Net loss includes noncash expense related to contingent consideration and stock based compensation of $2 4 million recognized during the third quarter of 2021 compared to income of zero point $1 million and expense of $1 5 million in the third quarter 2020, and second quarter 2021, respectively.

In addition, during the third quarter of 2021, we recognized the gain of $3 1 million associated with the extinguishment of our Paycheck protection program loan, which was forgiven in full by the small business administration in August.

Finally, turning to our current liquidity we ended the quarter was $47 9 million in cash and cash equivalents a decrease of approximately $8 4 million from the second quarter of 2021, primarily as a result of ongoing operational activities.

As disclosed in our filing we are planning to raise additional capital to support our ongoing growth plans looking forward due to the rapidly evolving nature of the pandemic, including variants vaccinations and the resulting impact on health care in the U S. We are not providing revenue or earnings guidance. At this time, we do however expect year over year.

Growth in our core lung diagnostic testing with our gross margin percentage continuing to improve its lower margin COVID-19 testing service revenue is replaced with higher margin long diagnostic testing revenue.

While we expect to increase our overall operating cost during 2021 over 2020 due to the execution of our growth strategy and investments and bringing new products to market. We are maintaining a disciplined focus on cost and are continuing to evolve our offering with the near term full commercial launch of our new Mgs test.

Now I will turn the call back to Scott.

Thank you Robyn.

I want to reiterate that our mission is to improve patient outcomes and lower healthcare costs by developing diagnostic solutions that reduce ineffective and unnecessary treatments.

We achieved this mission by integrating Biodot six molecular tests into physician practices, providing all of the testing needs for our lung patient through their continuum of care.

One patient one trusted company multiple test personalized results.

We continue to build and grow our company for both near and long term sustainable growth by investing in our sales infrastructure as we remain on track to double the size of our direct and dedicated sales force in 2021.

We expect to continue to expand the sales team in 2022 as we've previously discussed the.

The expanded sales force will better allow us to reach more physicians to provide them with a five test portfolio in 2022, expanding to seven test in 2023 to manage their patients from pre diagnosis of lung cancer through treatment guidance and monitoring of their disease.

Our test results to aid the physician in making more informed decisions to direct the right patients onto biopsy or surgery.

Many more avoid unnecessary interventions and help guide treatment decisions once a diagnosis of cancer is made.

Selling during the pandemic has been complex with many starts and stops as various geographic areas are hit harder than others hospitals are shut down to anything, but COVID-19 and emergencies and physicians and staff themselves have come down with Covid.

In areas not as impacted by these headwinds our sales reps are experiencing success in spreading the word about bioethics, our test and the impact they can have on patients, resulting in adoption of our test.

Even with the overall headwinds the month of October showed the resiliency of our team and the impact of our test results as we experienced strong month over month growth and a nodule management test.

We are also very pleased with the progress being made by our 2021 new sales teammates.

They are on average demonstrating month over month growth and are paying for themselves and four to six months right on target.

Also helping our commercial team is the growing body of evidence demonstrating the utility and value of our commercial test.

I already mentioned the compelling data presented on the Oracle study announced that chest beyond Oracle with multiple studies ongoing including three additional prospective studies currently underway.

The insight study with over 4000 patients enrolled which continues to measure the impact and utility of the various stress test.

The altitude registry study evaluating the efficacy and utility of the noted by XL <unk> and notify CDT test.

And the Beacon lung study evaluating the efficacy and utility of our primary immune response test.

We expect to report results from these studies among others at major scientific meetings in 2022 and 2023.

These studies and results like the ones recently seen in the Oracle study represent a key component to our business and important milestones that we believe can drive both clinical adoption and reimbursement in our core loan diagnostic testing business.

Turning to our pipeline we are pleased with the recent targeted commercial launch of our new blood based liquid biopsy next generation sequencing test and look forward to the upcoming broad commercial launch in the first quarter.

The test was shown in a recent publication to have an unprecedented 72 hour turnaround time, which is significantly faster than the 7% to 14 days. It takes for other Ngls test on the market again time to treatment for patients with cancer is critical and we strive to provide reliable blood based test is quickly.

As possible to support physicians and their patients the.

<unk> test complement to 36 hour <unk> DD PCR genomic and various strap proteomics tests currently offered with the expanded coverage of broader molecular markers.

The tests are used at different points in the patient continuum of care and provides a more complete testing solution to the physician for the care of their lung cancer patients.

On the Biopharma services front, we increased our number of biopharma contracts and the dollars under contract, including near term retrospective studies that will be conducted over the coming quarters.

And long term prospective studies that we've conducted and recognized over the coming years as our partners enrolled patients in these studies.

Overall prospective trials and our biopharmaceutical activities in this area are robust and we remain confident that we'll continue to see further growth in the coming quarters.

Of note, we are seeing exciting interest in our AI and technology offerings, particularly as proteomics gained visibility as a highly valuable measure of a patient's biology.

Our recent advancements in making AI more transparent not only will provide clarity to physicians, but also has the ability to help identify key biologic mechanisms driving outcomes for patient subgroups that may require different treatments than before we.

We look forward to continuing this important work both internally with our sample biobank and externally with our Biopharma partners.

The takeaway I hope, it's clear we continue to develop our clinical data packages for our on market products pipeline products, Biopharma partners, and new AI and technological advancements.

As regions of the country recover and patients begin going back for follow up visits we expect our resilient and highly functioning sales team to be able to reach more and more physicians to help patients and drive both near term and long term growth for the company.

Lastly, I want to close with a thank you to all bioethics teammates, whose efforts commitment and daily contributions make it possible to achieve our ambitious mission to help improve the lives of patients while lowering health care costs.

With that I'll turn the call over for questions.

Thank you if you have a question at this time. Please press Star then one on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. Please press the pound key.

And our first question comes from the line of Tejas Savant with Morgan Stanley. Your line is open. Please go ahead.

Hi, This is Hugo on the call for Tito. Thank you for taking our questions could you elaborate on what Youre seeing on the Covid testing side on the court.

<unk> side of the business in the quarter with some COVID-19 testing providers seeing increases in testing volume in <unk> with Covid cases increased.

And then following up on that on the Pulmonology business, how have patient visits trended over the last quarter.

Addition to Jackson office access versus pre pandemic levels.

Yes, great.

Good questions Yugo nice to hear from you on the Covid front as we said earlier, we are continuing to project an overall decrease in COVID-19 testing through the year, while were not managing our business solely on Covid revenue, we do stand ready to help our partners when testing needs.

<unk>, we all know and are sitting back waiting for the osha requirements to kick in and so we feel confident that at the beginning of the year, we will be able to engage and support certain companies and businesses and universities need but again that is not our long term priority, we're going to continue to focus on.

On recovering from the pandemic coming out of its strong and focusing on who we are at our core.

Regarding pulmonologist.

Obviously access varies broadly across the country and site by site. Some practices are continued to be impacted by COVID-19, while others are in varying process of recovery.

Not many have gone back to operating at a 100% or what was pre year prior to pandemic levels local surges and associated restrictions definitely have reduced access to physicians, but we've seen strong performance in the second half of the year.

It gives us a sense of the confidence that we're getting more comfortable working through restrictions and exposures.

No from from our engagement with Pulmonologist Theyre focused on treating those patients, especially knowing that lung cancer is still the deadliest of all cancers.

Time matters. These physicians know that they've got to get to those patients sooner as we all know earlier detection and diagnosis of cancer gives us a higher likelihood of a positive outcome.

Great. Thank you for that color and then maybe following up with a question for Robyn how should we think about opex trends going forward and into 'twenty, two with upcoming new product launches and sales force expansion underway.

Yes.

Good morning, Hugo Nice to hear from you.

I would.

Our plans for the sales force expansion in 2022 are very similar to this year, so continuing to add about six a quarter as we go throughout the year. So I would expect to see increases in the sales and marketing side of the business.

Quite similar to what we did here in 2021.

We also have multiple ongoing clinical studies, so we would expect some additional.

Research and development dollars as well.

But the majority of the Opex increase will be driven by sales and marketing.

Alright, thank you so much.

Thank you and our next question comes from the line of Brian Weinstein with William Blair. Your line is open. Please go ahead.

Hey, good morning, guys. Thanks for taking the questions.

So I thought we could just start out with.

Months of forecast that you have just one just being launched here.

Can you just give us any idea I know you don't give specific numbers by tests. So just give us an idea about how each individual test is performing.

What kind of general trends look like.

Alright.

Pvt, and I've talked to are constantly being ordered together.

Yes, good morning, Brian Great to hear from you.

As you know, we categorize our test into lung nodule management and treatment guidance lung nodule management is comprised of the notify CDT and notify ACL to test those are the two most recent commercial launches that we've made and those really are as expected our growth drivers.

<unk> seen throughout the pandemic has tremendous interest.

As physicians work through some of the impacts of the pandemic. They really are adopting both test to your question Brian.

You know how they work in concert and so a physician will order. The CDT test first is that patient comes back likely malignant.

No need for us to run the <unk> test and so we are seeing a number of those scenarios and then the opposite would be a physician they would order both similarly.

CDT result comes back is not likely malignant then we would run the exel two tests.

We're really pleased.

Significant adoption of both at the same time really allowing us to give physicians the intelligence they need as to confidently pushed.

Pushing those that are not likely malignant to wait and watch approach that supported with <unk> surveillance.

And maybe more importantly, especially during the pandemic, where we know that cancer diagnoses have fallen behind.

A positive CDT result, really allows us to pull those patients forward, allowing physicians to know with the high level of confidence that they need to intervene.

So those are our two growth drivers, we really are excited about their performance throughout the year. We're pleased again with interest traction and adoption and we're really excited Brian to share the chest data I think when you boil it down and you say, we've got a real world study that shows that noted backfill too.

Is reducing the number of invasive procedures on benign nodules by 67% that's impactful.

On the treatment guidance front with gender strep and various threat, we will be adding obviously the NGF test to this category.

We've seen more challenges based upon the pandemic as we all know physicians early on told patients to stay away to keep themselves healthy they closed down clinic. The majority of the patients. They told to stay away and stay healthy would have been those that fit into the immuno compromised category, which also would have included those with a cancer diagnosis.

So not only are we seeing continued restrictions there and limitation. We have also seen that impact some of the clinical trials, especially on the Biopharma front, but we're really pleased in the recent weeks and months.

We've seen a rebound there and we think that adding the NGF test will only bolster that.

Great. Thank you for the color on that.

I'm curious when thinking about the sales force doubled the numbers here, Robert just talked about adding six a quarter into 2022.

I'm curious kind of.

What a typical sales call is starting to look like for the sales reps are.

Are we advancing beyond this is the offerings that are out there. Let me educate you on those two really going to the next level.

Being able to have deeper conversations or is there still a fair amount of more of a high level of education, that's going on so maybe you could spend a little time, just talking about kind of what the sales forces.

Most typically doing when calling on a clinician at this point and how that's changing.

Yes, Thanks, Brian.

Really good question and obviously given the challenges of the pandemic.

Insights change on a weekly basis, what we've seen is physicians are much more capable of staying open and treating patients and working through the pandemic, especially in comparison to how things were early.

In 2020 with the pandemic.

That resilience really has allowed physician offices to continue to engage with sales professionals. So our sales professionals for the most part have access.

To physicians and to your question and your point the dialogue has changed if you recall early in 2020 and then late in 2019, when we introduced both notify CDT and node backfill too there was a lot of education, bringing physicians up to speed on our new test that is coming out sharing all the clinical data we have.

Now when you look we're able to go back in and provide additional data. So we're growing on that and so the chest data really allowed us to do that where we can go back into physicians and state pay it look we've got a building body of evidence we have been able to show in a real world setting that we've reduced invasive procedures by 67%.

We're not resting on that we're going to continue to invest in clinical studies and we think data is the only way to support physicians as they go out and present to physicians. We've also seen physicians start to reach out to us. So when you think of that unsolicited outreach that starts to be an indicator of awareness.

And so for us coming out of the pandemic. We're pleased we have a number of physicians in the past few weeks and months that have reached out they become aware of the test. They are seeing some of the presentations and publications. So when it comes to access.

Can't state that physicians offices are open every single day, obviously, we have to work with them. We have to continue to be transparent, but when they are open we're conducting an in person meeting and when they're not open. We don't stop we have really adapted new sales methodology that supports us continuing.

To meet physician needs, even while working remotely.

Great. Thank you for that and then the last one I had was on the Biopharma side, you guys talked about some some improvements there.

I don't think you've ever quantified it but can you give us some idea.

Qualitatively or quantitatively about what's that backlog of business with pharma Biopharma looks like at this point and how that's growing thanks guys.

Yes. Thank you Brian as everybody May know, we provide a variety of services and our business development Biopharma services business that includes the retrospective studies prospective studies.

The question is a complex one as we know retrospective studies are back on track coming out of the pandemic, yes prospective.

Prospective studies have been a little bit slow to recover we've seen good recovery in the recent weeks and months and we're starting to see a higher enrollment rates.

So that's encouraging.

When we think broadly this is a business that relies on us providing a service to Biopharma partners. So we spend a lot of time focusing on are those clinical trials on the Biopharma front are they open or they enrolling are they have global nature of the U S base. So the answers to those give us the insights to better <unk>.

<unk>, what the future looks like what we're able to share is and we're excited to share this Brian.

We've seen broader interest so the number of contracts is increasing.

The number of dollars under contract are increasing and our ability to forecast over a two to three year period.

As we're gaining confidence there as you know it's going to be a lumpy business. So the more dollars we have under contract. The more samples were receiving the higher the likelihood that we're able to forecast with a high level of confidence.

So we're excited there I think on the Biopharma Biopharma front, we really are starting to see a significant recovery, which also gives us confidence on our commercial business knowing that if biopharmaceutical companies are able to enroll patients in studies, then our position should be able to see and treat patients face to face.

Great. Thank you guys. So much I appreciate it.

Yes, Thanks, Brian.

Thank you and our next question comes from the line of Carl Mixon with Canaccord Genuity. Your line is open. Please go ahead.

Thanks, Hi, Scott and Robin Thanks for the questions. So I appreciate that Covid has been.

Adverse impact on the core business recently and in the near term obviously.

It sounds like trends are improving as you said, which is encouraging.

Just wondering if you kind of anticipate any kind of a long term impact on the kind of end market here is the full analysis as it relates to ordering your test or just the overall behavior I guess I'm. Just curious if there is any reason you would maybe modify the way you were previously thinking about marketing and kind of selling your test going forward that would be interesting to hear thanks.

Yes, Thanks, Scott Great question for Us as we partner with physicians, what we hear is.

And it's not a surprise to anybody.

Worked along they've worked.

Significant number of hours days and weeks throughout the pandemic there on the front lines, they're tired they're fatigued.

But as we hear that and we see broader utility of our test. What we think is that physicians are more motive motivated to get back to treating those patients that they were pre COVID-19. They also know that time is of the essence. So we're not seeing anything Kyle that would have us concerned that physicians are going to treat.

Or see those patients differently, we still think that the broad clinical utility of our test and the insights we're providing supported with the data. We're developing we think it sends a really strong message about how these tests can be incorporated into their practice to make them more efficient make them more effective and ultimately highlight the patients that they need to pull for.

And see and treat as soon as possible.

Again, we all know when youre dealing with the deadliest of all cancers with lung cancer early detection in diagnosis definitely has an impact on long term outcomes. So the utilization of notify CDT and XL to to help identify those patients that they need to prioritize it really is resonating with those positions we own.

We think that that gets stronger as we continue to build data if and when there are changes in how physicians treat and see patients.

It is going to be ready.

Waiting to support them I think what we've demonstrated is the team at <unk> is not only that we're adaptable and flexible, but we're going to we're going to be resilient and creative and we're going to find a way to meet their needs as our patient centric mission driven company, we must do that.

Great Okay.

Great Scott. Thanks, so much and I guess, just turning to be and just panel great to see that kind of on track and everything in early access.

It sounds like you did launch in November.

Just given the challenges that you were just kind of justifying the last final question on the treatment guidance side of the business.

I guess, what are you doing to ensure that that test kind of hit the ground running doesn't come to any challenges in the environment.

Yes.

I think the key part there Kyle is what we can control obviously, we've all been reminded that we cannot control COVID-19, but what we can control is how we introduce these test and so.

It really when you think about what our teams have done we've accomplished much of the work that would be required to launch the test ahead of schedule.

When you look at what we've done over the last 18 months. We think we are sending a pretty strong message that we're not just going to blindly rule test out we.

Really are going to exceed expectations bring them out with the materials the data.

And the support that they need so our sales reps.

We'll begin training them here soon Robyn and I referenced that we've got a limited rollout and so for US what we're doing right now is we're going to.

Key users that utilized.

Our Genesis dress DD PCR test and were introducing this so that we've got a whole package that supported with various threat. We are the only company with three products focused on treatment guidance and so we really think that the one of the key Differentiators is obviously time our ability to return. These test results faster than anybody else is something we take great.

And not just because we want to be the fastest but we know how important time at <unk> and so ensuring that physicians have a patients unique personalized molecular test results in hand before that patient is seen and more importantly, before a patient is prescribed to treatment. We think that's critical and so for us prioritizing those.

Note that utilize our test that understand.

Our mission and our vision, we will roll it out to them, we'll learn as we go again. The one thing we can't do is really tried to change with the Curry behaviorally and Societally based upon the pandemic, but we're going to be there to support physicians and their broad testing needs.

Got it very helpful and on the natural management side safe to say that the competitive landscape could be changing.

Changing pretty soon I'm just wondering what your sales team is doing to secure some of the key customers and kind of emphasizing the value of your tests and overall how important do you think first mover advantage is going to be and also I mean really the established clinical evidence to kind of helping you maintain or increase market share.

Yes, great question Kyle.

So we not only take great pride in that but we also appreciate that we've got to do it the right way so for US the right way is utilizing data, it's not just pushing test out, let's push test out with data and so.

We fully expect that there will be competitive threats that will come our way, but knowing that we've got a two plus and maybe even a three year head start and advantage when those companies and technologies are presenting validation data, we're going to be showing two and three year plus real world performance and what we've seen with the Oracle data that.

We just recently shared at chest.

Not only is the test in a real world environment performing exactly as the validation that it would with panoptic, but we're starting to see broader utility and more of an impact and so the ability to measure that we've reduced.

Invasive procedures.

On benign nodules by 67%, we think that sets the bar pretty high and so for US we're not going to just stand there and say hey, we want to compete head to head we want the data.

To speak for itself, we want physicians to choose based on the test that performs the best and enables them to make the right decisions for each and every patient.

Okay, Great to hear let me just squeeze one last one in here before I hop off so on Biopharma nice to see the strong performance in the quarter.

And also I appreciate the color on the <unk>.

Backlog.

The pipeline going forward.

I was wondering if this $1 5 billion number so it could be like a run rate or could it step up in 'twenty two.

So.

Just in terms of the backlog like how does the competition really walk in terms of diversified sources of revenue on that business. So I noticed that one partner in particular had.

Pretty large portion of the revenue in this quarter. So I'm just curious what that looks like going forward.

Yes, Great question, Kyle as we build that book of business for Us the ideal Biopharma partners somebody who starts to really right. So if you start to think phase one phase III trials, they allow us to partner with them to provide critical insights on performance of the drug what you see there as those.

Those contracts and sample sizes are usually a little bit smaller and then as you move through the development process, that's where you start to see.

Deeper broader contracts and inclusion larger samples and so we don't we don't see it as a bad thing to have one or two partners.

That are inordinately, providing revenue opportunities and test samples for us we actually see that is assigned to show that we've worked with them for a long period of time, we've shown the utility and value and they're including US in the development process. We think that also then builds confidence in some of the newer biopharmaceutical partners that we're in.

Gauging and also shows them a roadmap for how we can contribute and provide value for them. So for us. It's a blend right. The ideal opportunity would be a companion diagnostic we know that everybody talks about that but we also see great value in partnering and biopharmaceutical companies to give them insights early.

We think that's what makes us a trusted partner and again it really all comes back to the data.

Okay really helpful. Scott. Thanks, so much for taking the questions.

Yes, Thanks Scott.

Thank you and again if you have a question at this time. Please press Star then one.

And our next question comes from the line of Sanjay <unk> with <unk>. Your line is open. Please go ahead.

Hi, Thanks for taking the questions and congrats on the quarter and the progress Youre, making.

Couple of clarification questions and then a follow up so for the pyoderma <unk> anti PDL one response.

Test.

Is that solely for genentech used or are there opportunities to further deploy that beyond kind of what can that take a point.

Yes, Great question, we're really proud of that work when we built off of Kyles question, when we partner with biopharmaceutical companies.

There may be varying abilities to offer test and insights the key thing for us as we gain access to those insights and we can build off of that so what we've done over the years is continue to build a body of evidence that supported with our introduction.

In 2023 of our primary immune response test and so you could see a scenario where.

And these would be hypotheticals, but a biopharmaceutical company would partner with us and pursue their own test.

And then at the same time, we have the ability not based upon that data, but different sample set to create.

A different test when it comes to immunotherapy insights I definitely feel that theres going to be a number of different companies and partners focused on providing those insights. So can't provide great color on exactly what genentech's interest is but again, we're going to be ready and in the wings to support them with any <unk>.

Interest they may have and we're going to continue to double down and focused on our primary immune response that we know that that test can positively impact patients' lives and their outcomes.

Got it okay, great and then just another question on Biopharma services.

For the fourth quarter or do you guys have visibility into what that could look like do you anticipate kind of a step up in terms of from a revenue recognition standpoint, we'd just love any color there that you might have.

Yes, Thanks sung <unk>.

We do believe that that business will continue to grow and scale. The big question Mark for US is really watching what's occurring with the pandemic globally, we know that much of our biopharmaceutical partners perform clinical trials on a global basis.

And so even seen some of the recent trends.

Some positive some negative we're going to monitor and watch that closely that would be what would would impact us most would just be access to enrolling patients in those studies. Similarly.

Similarly, a number of the biopharmaceutical companies obviously have.

Locations around the globe, what we've seen is when there are spikes and they shut down offices. It may limit access to retrospective samples. So you can see how the business can be impacted as the pandemic continues.

To really range. So we will watch closely but all the things that are in our control we've put ourselves in a position to continue to grow and scale. We just need to be mindful that we still are in a global pandemic.

Got it and then lastly from me congrats on launching the 72 hour engine test earlier than.

<unk>.

Just curious would love to hear any kind of early feedback Youre getting and then also are you selling this through your oncology can almost Lee.

And as we think about how you might roll. This out broadly next year, how should we how are you planning on kind of leveraging your existing sales force.

<unk> successful strategy kind of been the Pulmonology market.

And leveraging that and given that this is largely I'm, assuming it's likely going to be oncology channel. So how should we think about your.

Sure.

Sales and sales and marketing expenses.

Forward, if you will.

Yes, I think some good great question.

We'll plan on the next earnings call to really lay out how we're going to fully introduced and commercialize the NGF test in the beginning of next year as.

As I mentioned, we have slowly begun rolling it out.

Our receiving feedback and to your question what kind of feedback over receiving.

First and foremost is time, our ability to turn these test results in 72 hours is a real game changer, and we're receiving that feedback secondarily. Our test results form right, we're not turning to book back over to physicians and asking them to find out what matters, we really are handing them.

Kind of a personalized test results form that matters to them gives them. The insights that they are looking for to better enable them to consistently treat those patients and then from a sales perspective, yes, our entire sales force, we will have access to sell and support this test.

We think that it'll be a concerted effort across different medical specialties early on like I said, we're going to roll the test out to those that know us those that are comfortable ordering with us and receive in our test results will.

We will take those insights that we gain in the coming weeks and we will adapt based upon that but what we do know is that pulmonologist are ordering especially in fully integrated practices, they're ordering more and more on molecular test on a monthly and quarterly basis, when considering what they've done historically and a lot of that is so that the.

Just in that integrated practice has those test results in hand upon first oncology visit and so for us it's a balanced approach and strategy, but we're continuing to build out not only our sales force, but really our medical affairs team that'll be supported with tremendously talented and capable medical science.

Liaison.

Great. Thank you so much.

Thank you Sanjay.

Thank you.

This concludes today's question and answer session, ladies and gentlemen. This also does conclude today's conference call. Thank you for participating you may now disconnect everyone have a great day.

[music].

May be recorded if you require any further assistance. Please press Star then zero I would now like to hand, the conference over to your host today, Chris Frenzy with Investor Relations. Please go ahead.

Thank you operator, and good afternoon, everyone.

Thank you for joining us today for discussion of biotech.

Third quarter 2021 highlights financial results.

Leading the call today will be Scott Chief Executive Officer.

He will be joined by Robin Hartford, Howie Chief Financial Officer.

After the prepared remarks, well open the call for Q&A.

The audio recording webcast replay for today's conference call will also be available online.

Press release, no that is.

Talk.

Today, we issued a press release announcing our business highlights and financial results for the third quarter 2021.

A copy of the release can be found.

That's the relations page of the company website.

Actual events or results may differ materially from those projected as a result of changing market trends reduced demand.

Tentative nature of biotech.

St.

Such forward looking statements and their implications involve known and unknown risks uncertainties and other factors that may cause actual results or performance to differ materially from those projected.

The forward looking statements discussed on this call are subject to other risks and uncertainties, including those.

As discussed in the risk factors section elsewhere in the company's annual report on Form 10-K for the year ended.

Remember 31, 2020 filed with the Securities and Exchange Commission on March 16, 2021, as a result.

Subsequent quarterly reports on Form 10-Q filed during 2021.

I would now like to turn the call over to Scott.

<unk> Executive Officer Scott.

Thank you, Chris and welcome everyone to the Biogen, Inc. Third quarter 2021 earnings Conference call.

I'm planning to kick off with the highlights then turn it to Robyn for financials. I'll, then come back with a deeper discussion of the business.

Hi, good ethics as our patient centric mission driven diagnostics company, our mission is to improve patient outcomes and lower healthcare costs by developing diagnostic solutions that reduce ineffective and unnecessary treatments.

We were pleased with the third quarter performance of our four blood based tests, making up our core lung diagnostic testing, which grew 51% year over year.

Impacted.

We were also pleased with the third quarter performance and our Biopharma services business, which grew 133% year over year.

We had several much anticipated data announcements in the recent weeks.

We announced exciting new data on notify XL two in October from our prospective Oracle clinical utility study at the 2021 chest annual meeting.

The goal of the study was to demonstrate that incorporating this blood based testing into the management of patients with newly detected lung nodules could modify how physicians treat patients and improve outcomes.

The results were fantastic and showed that the use of notify <unk> was able to reduce the number of invasive procedures carried out on benign nodules by up to 67%.

Fulfilling the promise of the test and reinforcing data seen in the pin optic study.

A nodule as low risk for the patient providing confidence in waiting for the next <unk> scan and for the health system and how the notified test was able to help avoid an unnecessary invasive procedure.

We recently announced new data at the society for immunotherapy of cancer also known as city on to test. The first was our proprietary primary immune response test, which was shown to predict overall survival in non small cell lung cancer in combination or mono immunotherapy.

The second one is a test that was discovered for our Biopharma partner Genentech, using our proprietary diagnostic cortex AI platform.

The test, which is known in the research world as the anti PDL. One response test or art was predictive of outcomes following treatment with one of our pharma partners Immunotherapies.

Revealing different patterns and potentially different biology that are responsible for subgroup responses to the drug.

This is a critical advancement in AI explain ability, providing much needed transparency and facilitating a deeper dive into the mechanisms of the disease.

We are utilizing this AI advancement with our own pipeline to further explore our greater than 150000 data and sample biobank and with our pharma partners as demonstrated by this work with Genentech.

Finally, we received approval of our 72 hour blood based <unk> test from the New York State Department of Health, a key regulatory milestone for commercialization of this new NGF test.

We've made this test available to a targeted group of physicians as part of an early access program and expect full commercial launch in the first quarter of next year.

The addition of the <unk> test increases our core long blood based diagnostic testing menu to five test and most importantly gives our sales team and even broader portfolio of blood based tests that provide multiple actionable insights for the same patient at various points in their continuum of care.

Now, let me turn it over to Robyn to review the third quarter financial performance Robin.

Thank you Scott.

Third quarter core and log diagnostic testing revenue was $4 5 million versus $3 zero million for the third quarter 2020, reflecting a 51% growth rate.

Scott mentioned, the Delta variant of Covid negatively impacted the south and that geography also accounts for a disproportionate amount of the lung cancer cases in the United States.

In the most impacted areas electric procedures, such as biopsies and other non essential patient visits were significantly reduced or even halted.

Might this the delta search impact across the south only resulted in a 5% decline in loan guide gnostic revenue over the second quarter of 2021 in.

In areas with less severe COVID-19 impact, we saw excellent growth third quarter over second quarter, demonstrating the effectiveness of the sales strategy and approach.

<unk> had an overall clinical trial enrollment.

Penetration of vaccines in the U S and the shift away from lab based testing towards the point of care rapid antigen in at home testing.

At this point, we are not forecasting COVID-19 testing services to represent a material component of our overall revenue going forward.

Gross margin percentage in the third quarter of 2021 was 58%, which was flat to the same period in 2020, and a substantial improvement compared to the 40% gross margin in the second quarter of 2021.

This mix shift to higher margin products is expected to continue.

We anticipate strong margin improvement for the remainder of 2021 and into 2022.

Overall operating expenses, excluding direct costs and expenses were $16 9 million in the third quarter 2021, compared to $11 5 million for the same period of 2020 and $15 4 million for the second quarter of 2021 the.

The year over year increase was primarily driven by noncash stock compensation increases as a result of becoming a publicly traded company and investments in the expansion of our sales force as well as research and development and clinical trials.

The net loss for the third quarter 2021 was $11 5 million compared to a net loss of $8 8 million for the third quarter of 2020, and $11 4 million for the second quarter 2021.

Net loss includes noncash expense related to contingent consideration and stock based compensation of $2 4 million recognized during the third quarter of 2021 compared to income of <unk> 1 million in expense of $1 5 million in the third quarter 2020, and second quarter 2021, respectively.

In addition, during the third quarter 2021, we recognized the gain of $3 1 million associated with the extinguishment of our Paycheck protection program loan, which was forgiven in full by the small business administration in August.

<unk> growth in our core long diagnostic testing with our gross margin percentage continuing to improve that's lower margin COVID-19 testing service revenue is replaced with higher margin lung diagnostic testing revenue.

Now I will turn the call back to Scott.

Thank you Robyn.

I want to reiterate that our mission is to improve patient outcomes and lower healthcare costs by developing diagnostic solutions that reduce ineffective and unnecessary treatments.

We achieved this mission by integrating bioethics molecular tests into physician practices, providing all of the testing needs for our lung patient through their continuum of care.

One patient one trusted company multiple test personalized results.

We expect to continue to expand the sales team in 2022 as we've previously discussed the.

Our test results to aid the physician in making more informed decisions to direct the right patients onto biopsy or surgery.

Many more avoid unnecessary interventions and help guide treatment decisions once a diagnosis of cancer is made.

Even with the overall headwinds the month of October showed the resiliency of our team and the impact of our test results as we experienced strong month over month growth and our nodule management test.

We are also very pleased with the progress being made by our 2021 new sales teammates.

Our on average demonstrating month over month growth and are paying for themselves and four to six months right on target.

Also helping our commercial team is the growing body of evidence demonstrating the utility and value of our commercial test.

I already mentioned the compelling data presented on the Oracle study announced that chest beyond Oracle, we have multiple studies ongoing including three additional prospective studies currently underway.

The insight study with over 4000 patients enrolled which continues to measure the impact and utility of the various stress tests.

The altitude registry study evaluating the efficacy and utility of the notify XL <unk> and notify CDT test.

And the Beacon lung study evaluating the efficacy and utility of our primary immune response test.

We expect to report results from these studies among others at major scientific meetings in 2022 and 2023.

Turning to our pipeline, we're pleased with the recent targeted commercial launch of our new blood based liquid biopsy next generation sequencing test and look forward to the upcoming broad commercial launch in the first quarter.

The test was shown in a recent publication to have an unprecedented 72 hour turnaround time, which is significantly faster than the 7% to 14 days. It takes for other Ngls test on the market.

Again time to treatment for patients with cancer is critical and we strive to provide reliable blood based test as quickly as possible to support physicians and their patients.

<unk> test complements to 36 hour <unk> DD PCR genomic and various strap proteomics tests currently offered with the expanded coverage of broader molecular markers.

The tests are used at different points in the patient continuum of care and provides a more complete testing solution to the physician for the care of their lung cancer patients.

And long term prospective studies that will be conducted and recognized over the coming years as our partners enroll patients in these studies.

Overall prospective trials and our biopharmaceutical activities in this area are robust and we remain confident that we'll continue to see further growth in the coming quarters.

Of note, we are seeing exciting interest in our AI and technology offerings, particularly as proteomics gained visibility as a highly valuable measure of a patient's biology.

We look forward to continuing this important work both internally with our sample biobank and externally with our Biopharma partners.

The takeaway I hope, it's clear we continue to develop our clinical data packages for our on market products pipeline products, Biopharma partners, and new AI and technological advancements.

With that I'll turn the call over for questions.

Thank you if you have a question at this time. Please press Star then one on your Touchtone telephone answer. Your question has been answered or you wish to remove yourself from the queue. Please press the pound key.

And our first question comes from the line of Tejas bought with Morgan Stanley. Your line is open. Please go ahead.

Hi, This is Hugo on the call for Tito. Thank you for taking our questions could you elaborate on what Youre seeing on the Covid testing side on the court.

Testing side of the business in the quarter with some COVID-19 testing providers seeing increases in testing volume in <unk> as Covid cases increased.

And then following up on that on the Pulmonology business, how have patient visits trended over the last quarter. In addition to Richardson office access versus pre pandemic levels.

Yes, great questions Yugo nice to hear from you on the Covid front as we said earlier, we are continuing to project an overall decrease in COVID-19 testing through the year, while were not managing our business solely on Covid revenue, we do stand ready to help our partners when testing needs.

On recovering from the pandemic coming out of its strong and focusing on who we are at our core.

Regarding pulmonologist.

Obviously access various broadly across the country and site by site. Some practices are continued to be impacted by COVID-19, while others are in varying process of recovery.

Not many have gone back to operating at 100% or what was per year prior to pandemic levels local searches and associated restrictions definitely have reduced access to physicians, but we've seen strong performance in the second half of the year definitely gives us a sense of the confidence that we're getting.

We're comfortable working through restrictions and exposures, we know from our engagement with Pulmonologists.

We're focused on treating those patients, especially knowing that lung cancer is still the deadliest of all cancers.

Time matters. These physicians know that they've got to get to those patients sooner as we all know earlier detection and diagnosis of cancer gives us a higher likelihood of a positive outcome.

Good morning, Hugo Nice to hear from you.

I would.

One.

We also have multiple ongoing clinical studies. So we would expect some additional research and development dollars as well.

But the majority of the Opex increase will be driven by sales and marketing.

Great. Thank you so much.

Thank you and our next question comes from the line of Brian Weinstein with William Blair. Your line is open. Please go ahead.

Hey, good morning, guys. Thanks for taking the questions.

So I thought we could just start out with amongst the forecast that you have.

One just being launched here.

Can you just give us any idea I know you don't give specific numbers by tests. So just give us an idea about.

Each individual test is performing.

What kind of general trends look like.

Right.

<unk> XL to our account that will be ordered together.

Yes, good morning, Brian Great to hear from you.

As you know, we categorize our test into kind of lung nodule management and treatment guidance lung nodule management is comprised of the notify CDP and notify ACL to test those are the two most recent commercial launches that we've made and those really are as expected our growth drivers.

What we've seen throughout the pandemic is tremendous interest.

And as physicians work through some of the impacts of the pandemic. They really are adopting both test to your question Brian.

How they work in concert and so a physician will order. The CDT test first is that patient comes back likely malignant.

There is no need for us to run the <unk> test and so we are seeing a number of those scenarios and then the opposite would be a physician they would order both similarly.

CVT result comes back is not likely malignant then we would run the exel two tests.

We're really pleased.

<unk> seen significant adoption of both at the same time really allowing us to give physicians the intelligence they need as to confidently.

<unk> those that are not likely malignant to wait and watch approach that supported with <unk> surveillance.

And maybe more importantly, especially during the pandemic, where we know that cancer diagnoses have fallen behind.

A positive CDT result, really allows us to pull those patients forward, allowing physicians to know with the high level of confidence that they need to intervene.

When you boil it down and you say, we've got a real world study that shows that notify XL too.

Is reducing the number of invasive procedures on benign nodules by 67% that's impactful.

The treatment guidance front with <unk> and <unk>, we will be adding obviously the NGF test to this category.

So not only are we seeing continued restrictions there and limitations. We have also seen that impact some of the clinical trials, especially on the Biopharma front, but we're really pleased in the recent weeks and months.

We've seen a rebound there and we think that adding the NGF test will only bolster that.

Great. Thank you for the color on that.

I'm curious when you're thinking about the sales force.

All the numbers here, Robert just talked about adding six a quarter into 2022.

I'm curious kind of what a typical sales call is starting to look like for the sales reps are.

Are we advancing beyond Hey, this is the offerings that are out there. Let me educate you on those two are really going to the next level.

Yeah. Thanks, Bryan it's a really really good question and obviously given the challenges of the pandemic the.

The insights change on a weekly basis.

What we've seen is physicians are much more capable of staying open and treating patients and working through the pandemic, especially in comparison to how things were early.

In 2020 with the pandemic.

That resilience really has allowed physician offices to <unk>.

Continue to engage with sales professionals. So our sales professionals for the most part have access to physicians and to your question and your point. The dialogue has changed if you recall early in 2020 and then late in 2019, when we introduced both notify CDT and noted backfill too there was.

A lot of education, bringing physicians up to speed on our new test that is coming out sharing all the clinical data. We have now when you look we're able to go back in and provide additional data. So we're growing on that and so the chest data really allowed us to do that where we can go back into physicians and state.

We've got a building body of evidence we have been able to show in a real world setting that we've reduced invasive procedures by 67%, we're not resting on that we're going to continue to invest in clinical studies and we think data is the only way to support physicians as they go out and present to physicians. We've also seen <unk>.

<unk> start to reach out to us. So when you think of that unsolicited outreach that starts to be an indicator of awareness and so for cost coming out of the pandemic. We're pleased we have a number of physicians in the past few weeks and months that have reached out they become aware of the test they are seeing some of the <unk>.

<unk> and publication so when it comes to access.

Can't state the physician's offices are open every single day, obviously, we have to work with them. We have to continue to be transparent, but when they are open we're conducting in person meetings and when they're not open we don't stop we've really.

<unk>, new sales methodology that supports us continuing to meet physician needs, even while working remotely.

Great. Thank you for that and then the last one I had was on the Biopharma side, you guys talked about some some improvements there.

I don't think you've ever quantified that but can you give us some idea.

Qualitatively or quantitatively about what's that backlog of business with Biopharma looks like at this point and how that's growing thanks guys yeah.

Yes, Thank you Brian.

As everybody May know, we provide a variety of services and our business development Biopharma services business that includes the retrospective studies prospective studies.

The question is a complex one as we know retrospective studies are back on track coming out of the pandemic, yes prospective studies have been a little bit slow to recover we've seen good recovery in the recent weeks and months and we're starting to see higher enrollment rates.

So that's encouraging.

<unk>, what the future looks like what we are able to share is and we're excited to share this Brian.

We've seen broader interest so the number of contracts is increasing.

The number of dollars under contract are increasing and our ability to forecast over a two to three year period.

We're gaining confidence there as you know it's going to be a lumpy business. So the more dollars we have under contract. The more samples were receiving the higher the likelihood that we're able to forecast with a high level of confidence.

So we're excited there I think on the Biopharma Biopharma front, we really are starting to see a significant recovery, which also gives us confidence on our commercial business knowing that as biopharmaceutical companies are able to enroll patients. In studies, then our position should be able to see and treat patients face to face.

Great. Thank you guys. So much I appreciate it.

Yes, Thanks, Brian.

Thank you and our next question comes from the line of Carl Mixon with Canaccord Genuity. Your line is open. Please go ahead.

Thanks, Hi, Scott and Robin Thanks for the questions. So I appreciate that Covid has been.

Adverse impact on the kind of the core business recently and in the near term obviously, just it sounds like trends are improving as you said which is encouraging.

Wondering if you kind of anticipate any kind of a long term impact on the kind of end market here is the full analysis as it relates to ordering or tests or just the overall behavior I guess I'm just curious if theres any reason you would maybe modify the way you were previously thinking about marketing and kind of selling your test going forward that would be interesting to hear thanks.

Yes, Thanks, Scott Great question.

For us as we partner with physicians, what we hear is.

And it's not a surprise to anybody.

Worked along they worked.

Significant number of hours days and weeks throughout the pandemic there on the front lines, they're tired they're fatigued.

And see and treat as soon as possible.

We think that that gets stronger as we continue to build data if and when there are changes in how physicians treat and see patients.

It is going to be ready.

Great. Okay that was great Scott. Thanks, so much and I guess, just turning to be Mds panel, great to see that kind of working on track and everything in early access.

It sounds like you did launch in November.

Given the challenges that you were just kind of justifying the last final question on the treatment guidance side of the business.

I guess, what are you doing to ensure that that test kind of hit the ground running doesn't come to any challenges in the environment.

Yes.

I think the key part there Kyle is what we can control obviously, we've all been reminded that we cannot control COVID-19, but what we can control is how we introduce these tests and so.

Really when you think about what our teams have done we've accomplished much of the work that would be required to launch. The test ahead of schedule again, when you look at what we've done over the last 18 months. We think were spent in a pretty strong message that we're not just going to blindly rule test out we really are going to exceed expectations bring them out with the materials the data.

And the support that they need so our sales reps will.

We will begin training them here soon Robyn and I referenced that we've got a limited rollout and so for US what we're doing right now is we're going to do.

Key users that utilized.

Sure <unk> DD PCR tests and we're introducing this so that we've got a whole package. That's supported with various threat. We are the only company with three products focused on treatment guidance and so we really think that one of the key Differentiators is obviously time our ability to return. These test results faster than anybody else is something we take great pride.

And not just because we want to be the fastest but we know how important time is and so ensuring that physicians have a patients unique personalized molecular test results in hand before that patient is seen and more importantly, before a patient is prescribed to treatment. We think that's critical and so for us prioritizing those that.

That utilize our test that understand.

Our mission and our vision, we will roll it out to them, we'll learn as we go.

Again, the one thing we can't do is really tried to change what's occurring behaviorally and societally based upon the pandemic, but we're going to be there to support physicians and their broad testing needs.

Got it very helpful and on the natural management side safe to say that the competitive landscape could be.

<unk> pretty soon I'm just wondering what your sales team is doing to secure some of the key customers and kind of emphasizing the value of your test and overall how important do you think first mover advantage is going to be and and also I mean really the established kind of clinical evidence to kind of helping you maintain or increase market share.

Yes, great question Kyle.

We pride ourselves on moving fast and so having a first mover status in advantage is something that we're really eager and excited about but at the same time. We also know that we're creating and building a market and so we not only take great pride in that but we also appreciate that we've got to do it the right way so for US the right way is utilizing <unk>.

Data, it's not just pushing test out, let's push tests out with data and so.

Data that we just recently shared at chest is not only is the test in a real world environment performing exactly as the validation that it would with panoptic, but we're starting to see broader utility.

And more of an impact and so the ability to measure that we have reduced.

Invasive procedures.

On benign nodules by 67%, we think that sets the bar pretty high and so for US we're not going to just stand there in terms of hey, we want to compete head to head we want the data.

To speak for itself, we want physicians to choose based on the test that performs the best and enables them to make the right decisions for each and every patient.

Okay, Great to hear let me just squeeze one last one in here before have OXXO on Biopharma nice to see the strong performance in the quarter.

And also I appreciate the color on the.

Backlog at the pipeline going forward.

I was wondering if this $1 5 billion number so it could be like a run rate or could it step up in 'twenty two.

Also.

Just in terms of the backlog like how does the competition really walk in terms of diversified sources of revenue on that business. So I noticed that one partner in particular had pretty large portion of the revenue in this quarter. So I'm just curious what that looks like going forward.

Yes, Great question, Kyle as we build that book of business for Us the ideal Biopharma partners somebody who starts are really right. So if you start to think phase I phase II trials, they allow us to partner with them to provide critical insights on performance of the drug and what you see there as those.

Those contracts and sample sizes are usually a little bit smaller and then as you move through the development process, that's where you start to see.

<unk> broader contracts and inclusion larger samples and so we don't we don't see it as a bad thing to have one or two partners that are.

Inordinately, providing revenue opportunities and test samples for us we actually see that is assigned to show that we've worked with them for a long period of time, we've shown the utility and value and they're including US in the development process. We think that also then builds confidence in some of the newer biopharmaceutical partners that we're engaging and all.

Also shows them a roadmap for how we can contribute and provide value for them. So for us. It's a blend right. The ideal opportunity would be a companion diagnostic we know that everybody talks about that but we also see great value in partnering and biopharmaceutical companies to give them insights early.

That's what makes us a trusted partner and again it really all comes back to the data.

Okay really helpful. Scott. Thanks, so much for taking the questions.

Thanks Kyle.

Thank you and again if you have a question at this time. Please press Star then one.

And our next question comes from the line.

<unk> Nam with <unk>. Your line is open. Please go ahead.

Hi, Thanks for taking the questions and congrats on the quarter and the progress Youre, making.

Just a couple of clarification questions and then a follow up so for the pyoderma <unk> anti PDL one response.

Test the AARP is that solely for genentech used or are there opportunities to further deploy that beyond kind of what's in that type of thing.

Yes, Great question, we're really proud of that work when we built off of Kyles question. When we partner with biopharmaceutical companies there may be varying abilities to offer tests and insights the key thing for us as we gain access to those insights and we can build off of that so what we've done over the years.

We continue to build a body of evidence that supported with our introduction.

In 2023 of our primary immune response test and so you could see a scenario where.

And these would be hypotheticals, but a biopharmaceutical company would partner with us and pursue their own test.

And then at the same time, we have the ability not based upon that data, but different sample set to create.

Different tests when it comes to immunotherapy insights I definitely feel that theres going to be a number of different companies and partners focused on providing those insights. So can't provide great color on exactly what genentech interest is but again, we're going to be ready and in the wings to support them with any <unk>.

Interest they may have and we're going to continue to double down and focus on our primary immune response that we know that that test can positively impact patients' lives and their outcomes.

Got it okay, great and then just another question on Biopharma services.

Yes, Thanks sung <unk>.

And so even seen some of the recent trends.

Some positive some negative we're going to monitor and watch that closely that would be what would would impact us most would just be access to enrolling patients in those studies. Similarly.

Similarly, a number of the biopharmaceutical companies obviously have.

Locations around the globe, what we've seen is when there are spikes and they shutdown offices. It may limit access to retrospective samples. So you can see how the business can be impacted as the pandemic continues.

To really rage, So we'll watch closely but all the things that are in our control we've put ourselves in a position to continue to grow and scale. We just need to be mindful that we still are in a global pandemic.

Got it and then lastly from me congrats on launching to 72 hour engine test earlier than expected.

Just curious would love to hear any kind of early feedback Youre getting and then also are you selling that through your oncology channel mostly.

And as we think about how you might roll. This out broadly next year, how should we how are you planning on kind of leveraging your existing sales force.

<unk> success and strategy kind of in the Pulmonology market.

And leveraging that and given that this is largely I'm, assuming it's likely going to be oncology channel. So how should we think about your.

Sales and marketing expenses.

Is that going forward, if you will.

Thanks, <unk> great question.

Plan on the next earnings call to really lay out how we're going to fully introduce and commercialize the NGF test.

At the beginning of next year.

As I mentioned, we have slowly begun rolling it out we are receiving feedback.

And to your question, what kind of feedback over receiving.

First and foremost is time, our ability to turn these test results in 72 hours.

A real game changer, and we're receiving that feedback.

<unk> our test results form right, we're not turning to book back over to physicians and asking them to find out what matters, we really are handing them.

Kind of a personalized test results form that matters to them gives them the insights that theyre looking for to better enable them to consistently treat those patients and then from a sales perspective, yes, our entire sales force, we will have access to sell and support this test.

But what we do know is that pulmonologist are ordering especially in fully integrated practices, they're ordering more and more molecular test on a monthly and quarterly basis, when considering what they've done historically and a lot of that is so that the oncologists and that integrated practice has those test results in hand upon first oncology visit.

And so for us, it's a balanced approach and strategy, but we're continuing to build out not only our sales force, but really our medical affairs team that will be supported with tremendously talented and capable medical science liaison.

Great. Thank you so much.

Thank you Sanjay.

Thank you. This does conclude today's question and answer session, Ladies and gentlemen. This also does conclude today's conference call. Thank you for participating you may now disconnect everyone have a great day.

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