Q4 2021 Personalis Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the price dynamics fourth quarter and full year 2021 earnings conference call.
At this time all participants are in a listen only mode.
Later, we will conduct a question and answer session and instructions will follow at that time.
If anyone should require operator assistance. Please press Star then zero.
On you touched on California.
As a reminder, this call may be recorded I would now like to turn the conference over to your first speaker today Satish <unk> line coronary Investor Relations. Please go ahead.
Thank you operator welcome to personnel for fourth quarter 2021 earnings call. Joining me on today's call are John West President and Chief Executive Officer, and Aaron Tachibana Chief Financial Officer.
All statements made on this call that do not relate to matters of historical facts should be considered forward looking statements within the meaning of U S. Securities laws. For example, any statements regarding trends and expectations for our financial performance New orders product services and technology. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our.
Our current expectations. We encourage you to review our most recent filings with the SEC, particularly the risk factors described in our 10-K for fiscal year 2021 to be filed today.
Personnel with undertakes no obligation to update these statements except as required by applicable law.
Our press release with our fourth quarter and full year 2021 result is available on our website www dot personnel dot com under the investors section and includes additional details about our financial results.
Site also has our latest SEC filings, which you're encouraged to review.
A recording of today's call will be available on our website by five PM Pacific time today, now I would like to turn the call over to John for his comments on our fourth quarter business highlights.
Thank you Carolyn personnel continues to grow in particular, our oncology business in Q4 revenue from our oncology business was $15 4 million and grew 102% over the same period of the prior year.
New orders from customers in Q4, once again higher than the amount of revenue recorded for the quarter, which gives us confidence that we can grow our oncology revenue by more than 50% in 2022 over 2021.
Our pharmaceutical customers are increasingly seeing the value of our platform and incorporating it in their clinical trial designs right from the start.
Our customer base has broadened substantially over the last year and we're doing business with most of the top 10 global pharmaceutical companies, which we defined by their annual revenue level.
Additionally, we have more than 60 customers that have ordered services for our next platform.
We recently also received our first customer order for next personal.
Top global pharmaceutical customer and have started to receive samples as part of that pilot.
Our partnership with Natera also continued to grow in Q4 and allowed us to process approximately $5 million of clinical samples in the quarter.
We have continued to make progress in Asia.
Hi, China.
We've now hired about 10 employees and we are working on our internal laboratory qualification protocols.
To date, we have received a significant dollar value of orders from pharmaceutical customers, who are pursuing local regulatory approvals.
We expect to begin working with these customers within a few months.
Being positioned to potentially recognize revenue from some of these customers by the second half of 2022.
In Japan, we also have several large international pharmaceutical companies that are now ordering mixed further validating our opportunities in Asia.
Yes.
We believe our next platform provides biopharmaceutical customers with the most comprehensive analysis of tumor burden and biomarker identification available today.
And a better understanding of each cancer patients' genetic profile.
We believe that both tissue and liquid biopsy is together and provide a more complete view leading to optimal therapy and treatment decisions.
Both our tissue and liquid biopsy based offerings provide data on all of the approximately 20000 human genes.
Tissue samples give us access to RNA and to the immune cells, which have infiltrated a patients tumor.
By analyzing liquid biopsy samples were able to provide information about a patient's tumor.
Ross multiple time points from small blood samples.
The personnel is designed to liquid biopsy products for two different applications.
Next personal has been optimized for maximum sensitivity, particularly for when the amount of tumor DNA in blood plasma is very low such as an early stage cancer after surgical resection or.
Four in patients with complete response to therapy.
The largest segments of this population are those who have or have survived breast and prostate cancer.
To detect potential cancer recurrence, we look at a patient's blood plasma or the mutational signature of their tumor.
But these two cancer types have such low mutational burdens that they can be difficult to detect.
We realized early on that we may be able to overcome this liquid biopsy sensitivity problem by leveraging our considerable high volume whole genome sequencing experience.
Using tissue whole genome sequencing, we can identify 20 times more somatic variance to serve as the basis for personalized cancer assays.
We're looking for tumors known mutations at up to 1800 positions spread over the genome and being able to select cancer variants that have a low level of background sequencing errors, we gained tremendous sensitivity.
Our internal data now confirms this approach can result in analytical sensitivity down to approximately a few parts per million.
This sensitivity advantage may translate into much earlier detection.
Patients cancer recurrence.
Residual disease recurrence is detected.
<unk> may arise about how best to treat a patient.
Next personal also provides DNA sequencing coverage of <unk>.
<unk>, which may indicate drug therapy options.
Response to therapy or emergent resistance to therapy.
We consider this approach not just tumor informed but comprehensively tumor informed.
Our ultimate goal is not just to detect cancer, but to provide key information over the entire course of the patient's disease.
We believe this can be better for patients more informative for pharmaceutical customers and bigger larger business opportunity.
We believe next personal can be a leading technology for some very large market opportunities and expect to have more to say about this is that customer wins in this area in a few months.
Next liquid biopsy or whole exome liquid biopsy product is optimized for late stage cancers, when the amount of tumor DNA in blood plasma is higher.
In tumors may be increasingly complex.
So that application, we believe rich information from an exome can provide deeper insights.
We believe that our liquid biopsy based products will contribute increasingly to revenue in 2022 and beyond.
Personnel is technological and scientific leadership has led to strong adoption by pharmaceutical companies, who use our services to analyze the response of cancer patients in their clinical trials.
We believe that these same advantages can be important for all cancer patients not just those in clinical trials as a result, we're taking steps to build the clinical diagnostic business for therapy selection and monitoring we believe that the combined market potential of these opportunities is approximately $30 billion and the.
United States.
I would now like to comment on our recent progress in some of our planned milestones regarding our clinical diagnostic efforts.
First we are continuing to build our regulatory clinical and reimbursement capabilities.
We have been hiring employees with clinical and medical experience within a diagnostic setting and we will continue to hire and invest in this area.
Also in support of our new diagnostic business, we will be incorporating FDA compliant protocols within our new facility, which we are targeting to move into during Q3 of this year.
Second we are completing a validation study for our next Dx test.
As our tissue based diagnostic offering based on our next platform to apply for New York State regulatory approval.
We also plan to submit data to the multi ex tech assessment process and hope to receive a favorable reimbursement ruling from <unk> during the second half of 2022.
Third we believe it's essential to work with World class medical institutions to that end, we announced a collaboration with the Mayo clinic in Q4, and recently announced one with the Moores cancer Center at UC, San Diego Health.
And these collaborations we provide clinical diagnostic testing and research sequencing and analysis services using our tissue base next Dx test.
We have begun to test clinical patient samples and are excited about the opportunity to work with these were now in cancer centers.
<unk> favorable reimbursement.
A favorable reimbursement decision for our next Dx test from multi acts as discussed earlier, we may also recognize revenue in the future from some of these collaborations.
Given the advanced nature of our next Dx test we believe it is a good fit for high end cancer centers, which have a dual mandate for both clinical care and research.
If these key opinion leaders have a positive experience using our tests. We are optimistic that this will also support broader use of our platform by other clinicians in the future.
Although we still have work to do we believe that we will be well positioned for entry into the clinical diagnostic market using our comprehensive tissue base next Dx test by Q2 to Q3 of this year.
In addition, we're also planning an LDC version of our liquid biopsy based next personal tests.
We expect clinicians who began using our next Dx test May later also use our next personal test since the two can provide complementary information.
We expect that the path to reimbursement for our next personal LDC will also be begin via assessments by the Palmetto <unk> program.
We will continue to provide updates about our clinical diagnostic progress as we go forward.
Next I would like to comment on our population sequencing business.
In September 2021.
We received a task order from the VA MVP of approximately $10 million, which was significantly less than in prior years.
At that time, we expected the reduced order amount was to be followed by a formal RFP process.
<unk> new contract to be awarded sometime late in Q3 of 2022.
However, recent discussions with our contacts at the VA MVP indicated that they will not be an RFP process in 2022.
Accordingly, we are not planning to receive any new orders from the VA MVP this year.
Expect to recognize any revenue beyond the current order and contract.
Given the strong growth, we have already experienced in our oncology business, though.
And the large opportunity we see there we plan to focus almost entirely on cancer as we go forward.
We continue to add to our board of directors to comment about our strategic direction and priorities.
Olivia Bloom will join our board of directors effective March one.
She currently serves as <unk> Corporation's executive Vice President and Chief Financial Officer.
Sharon is a clinical stage biopharmaceutical company focused on hematologic myeloid malignancies welcome Olivia.
In summary in Q4, and all of 2021, we continued to execute extremely well and growing our oncology business. Despite the ongoing pandemic, which has made things more challenging.
Our team has done a terrific job.
We are coming to these challenges.
Customer adoption of next has been excellent and our pipeline of compelling new products is rich for both the biopharma and the clinical diagnostic test markets.
We have a strong balance sheet with capital to invest in our growth initiatives and believe this puts us in a strong position for both near and long term growth.
With that I will now hand, it over to Aaron for our financial results.
Thank you John and good afternoon, everyone.
Had another great quarter and continued to accelerate oncology revenue growth.
During my prepared remarks, I will provide details about our financial results for the fourth quarter and guidance for the full year of 2022.
Total company revenue for the fourth quarter of 2021 was $20 7 million.
Up 3% from $22 million for the same period of the prior year.
For oncology Biopharma and all other customers accounted for revenue of $15 4 million in the fourth quarter, representing a 79% sequential increase from the prior quarter and a 102% increase over the same period of the prior year.
The increase in oncology revenue was driven by strong adoption of our next platform, which accounted for approximately 85% of the oncology revenue in the quarter.
Customer orders remained strong in the fourth quarter and exceeded reported revenue levels, which gives us confidence that our biopharma revenue will continue to increase in the future.
Also as we ramp our MLD liquid biopsy offering for both biopharma customers and as a clinical diagnostic test in the future.
We expect revenue growth to further accelerate due to the multiple time points or in other words.
<unk> tests per patient.
For the fourth quarter, the VA MVP revenue of $5 $3 million with 58% lower compared with $12 6 million for the same period of the prior year.
The VA MVP unfulfilled orders were $7 6 million at the end of the fourth quarter and based upon current estimates we expect the unfulfilled orders to convert to revenue during Q1 through Q3 of 2022.
For the full year of 2021 total company revenue was $85 5 million up 9% from $78 6 million in 2020.
For oncology Biopharma and all other customers, excluding the VA MVP accounted for revenue of $39 8 million for the full year of 2021.
Representing a 77% increase from $22 5 million in 2020.
The oncology revenue growth was driven by strong adoption of our next platform.
And for the VA MVP revenue was $45 $7 million for the full year of 2021, which was 19% lower than in 2021.
Gross margin was 38, 7% for the fourth quarter compared with 31% for the same period of the prior year.
The year over year increase of 860 basis points was primarily due to operating leverage from the 102% increase in oncology test volume.
Customer mix and lab efficiency improvement.
Over the next couple of years, we do expect some gross margin variability due to headwinds from investments in new capabilities, such as dedicated production lines for FDA approved offerings, providing diagnostic tests, while we work to increasingly secured reimbursement.
Adding more capacity in our new facility.
Spanning in China and others.
And longer term, we expect our gross margins to increase as we achieve scale.
<unk> revenue becomes a larger portion of total revenue.
Operating expenses were $28 2 million in the fourth quarter compared with $19 4 million for the same period of the prior year.
R&D expense was $14 5 million in the fourth quarter compared with $8 5 million split between period last year and SG&A expense with <unk>.
$10 7 million in the fourth quarter compared with $10 9 million the same period last year.
The increase in R&D expense was for new product development hiring employees to build our clinical and medical infrastructure and.
And sample test extensive preclinical validation work.
Our R&D expense level will continue to increase over the next year as we expand collaboration work for clinical validation to secured reimbursement for our next Dx and <unk> personal care.
The increase in SG&A was due to commercial expansion and continuing to enhance our infrastructure.
Net loss for the fourth quarter was $22 million compared with a net loss of $13 3 million for the same period of the prior year.
Net loss per share for the fourth quarter was 45.
And the weighted average basic and diluted share count was $44 8 million compared with a net loss per share of 34.
And the weighted average basic and diluted share count of $39 million with the same period of the prior year.
Now onto the balance sheet.
<unk> finished the fourth quarter with strong balance sheet with cash and short term investments of $287 1 million.
In the fourth quarter, we used $18 2 million of cash due to the net loss working capital needs and capital equipment purchases.
With the full year of 2021, our cash usage was approximately $78 million an increase from the $42 million in the prior year due to investments made for growth initiatives, such as new products building, our diagnostic test business, establishing our lab in China and others.
We expect our 2022 cash usage to increase to approximately $140 million, which includes a one time investment of approximately $45 million to $50 million for construction and pick up a brand new facility and this amount is net of $15 million for tenant improvements from the <unk>.
Land Lord.
We believe that we are in a healthy position with more than two years of cash on the balance sheet, which will allow us to invest in our growth initiatives that will enable long term revenue growth.
Now I'd like to turn to guidance.
With our revenue shift in focus weighted towards oncology and development of our clinical diagnostic test business. We believe it's time to focus on the longer term revenue opportunity and therefore plan to move to annual guidance.
However, I will provide some color into what we are seeing thus far in Q1.
Similar to Q3 of 2021, when the Delta variant created some headwinds we are experiencing some delays with sample receipt from customers that we believe is related to <unk>.
These headwinds may create some delays for the timing of revenue this quarter.
However, we do not expect the revenue to be lost.
In addition to sample delays, we have continued to experience supply chain tightening for some consumables.
Mitigation plans, including adding buffer stock and multi vendor sourcing when possible.
Although the pandemic continues to make things a bit more challenging.
We are extremely optimistic about our longer term opportunities to drive oncology revenue growth.
For the full year of 2022, we expect total company revenue to be approximately $67 million.
And we expect oncology revenue from Biopharma and other customers could be approximately $60 million.
Year over year increase of 51%.
Net loss is expected to be in the range of $110 million to $115 million.
Now I will turn the call back over to the operator to begin the Q&A session.
Thank you ladies and gentlemen, if you have a question at this time. Please press. The Star then the one key on your attach tone telephone.
<unk> has been answered.
Or you wish to remove yourself from the queue. Please press the pound key.
Ask that you please limit yourself to one question and one follow up one.
One moment for our questions.
Our first question comes from Derik de Bruin of Bank of America.
Hi.
Hi, there. Thank you for the question Hey, this is John on for Derek.
Yes.
The Biopharma side.
The long term growth drivers, obviously your proprietary products, but in the shorter term the partnerships like the one with Intel have proven incremental to say the least.
Could you speak to the durability of the relationship.
<unk> commented on the quality of your work, but curious of the ramp.
Did your ability of volume from the <unk> given that the company's comments on it in house capability.
After that I haven't heard their comments on their in house capability I expect them in the sequence of lots of things.
Tara had.
Come to personnel some years ago and look to.
Leverage the capabilities not just in our abilities to sequencing, but the advantages of our next Exxon, which are substantially broader then.
Our standard exome, our expectation is that this could be a pretty long term.
<unk> with Nomura and we look forward to continue.
Continue working with them.
In time, I think investors should be looking at personnel as growth in our own products, including in particular, our next personal product, which we've talked about some on the call today.
Got you and then just one more from me could you.
It's great to hear that you've hired 10 employees.
Youre, making progress.
Could you comment I think you've commented in the past that the 5% of non customers.
Some of the samples we have processed in Shanghai.
Versus the rest of California.
Could you comment on that volume mix there.
I'm not sure I quite understood the question, but in general we feel.
And that the advantage of us having initiated a lab in inside China.
Is not only the volume that we have have inside China and the orders that we get there, but they are often part of international clinical trials, where actually the majority of the samples are from outside China and so we already see this in the orders we have received that.
The dollar value.
The samples that will actually be processed in Shanghai.
Is significantly smaller than the dollar value of all the other samples that will be processed on the rest of the world.
The same clinical trials.
Kind of a halo effect with the Halo is actually.
Pretty substantial.
Gotcha.
Gotcha.
We've seen some issues arrive right.
With the CMO and the CR I was in China.
Are there any political risks that you see with your business at all.
Yes, I mean, certainly the United States.
And between our relationship with China frankly.
Optimistic there are a lot of smart people in China wanted to do a lot of good things and Thats important for China to continue to advance with advanced pharmaceuticals, and many of which have been developed in the <unk>.
West, but they are sensibly running clinical trials inside China to make sure that the.
Those drugs.
Are well suited to people with a different.
Genetic background for example, so I think that there is an underlying motivation that makes sense for there to be continued adoption of.
Western Pharmaceuticals in China for their.
Trials to confirm that those are appropriate and pharma companies will continue to need services like ours to.
To support those clinical trials, so I think it is.
That's sort of a macro level separate from this there can be issues I think.
There is a pretty substantial reason for the pharmaceutical business to continue to work there and frankly in the past I've had great relationships with people.
Laboratories in China, Great scientists there and.
The pharmaceutical people we've met there have also been superb.
Got you. Thank you.
Our next question comes from Tejas Savant of Morgan Stanley .
Thanks.
Hey, John Thanks for taking my question.
Tejas.
Just to start off.
On the MVP RFP process and not having one in 2022 I was wondering if you guys were able to get to the point of the conversation that some visibility on 23.
Yes, I'd say it's.
Your standing is that.
MVP is unclear how they're going to go forward they have a lot of samples and it would be.
Suddenly there is an opportunity for them to sequence those samples, but I think they are doing some.
Were you thinking of things I think in terms of personnel us investors should be focused primarily on our oncology business. If there. If there are opportunities with large scale sequencing, we've certainly probably done more whole genome sequencing than almost anyone in the United States and so if those opportunities come up they may incrementally help us from a sort of essentially a financing standpoint.
I think our focus will be on the oncology business and particularly with the excitement we're seeing around the next personal platform.
That's where we're going to be putting a lot of our energy here and I think thats, what investors should focus on.
Understood.
And I guess.
Turning to a.
Kind of a regional perspective.
Covid impacts and.
I guess.
What are you seeing in China. Some of your peers have mentioned pockets of weakness in Asia and given your expansion efforts in Asia, and particularly China is a zero tolerance policy I was wondering if you can provide some color on.
What you're seeing on the ground in terms of more recent impacts.
Yes, that's a good question I'd say, we're just beginning to get going with those folks.
We're doing internal validation efforts at this point.
We're working towards.
Being able to begin processing samples from customers, but there.
Not yet.
Full set of.
Regulatory authority approvals for the trials.
Personality isn't one of the places our customers have to apply to the Chinese regulatory authority <unk> and so.
They get through that process I expect that then we will start to see sample flow and maybe get a better feeling for whether they are the some of the issues that you brought up where our sense is that we will probably be starting.
Mostly with retrospective samples can retrospective clinical.
Clinical trials. So those samples would already exists that still have to be shipped to us, but it's a little different from having to have enrollment.
A live clinical trials, usually this was kind of business starts on the retrospective side and then as you kind of build up some working relationship can transition into more and more of the.
Involvement in prospective clinical trials I would think.
Retrospective trials would be less affected by.
Covid related issues, then prospective ones.
Understood. Thank you very much for the time.
Great. Thank you.
Our next question comes from Kevin <unk> of Oppenheimer.
Okay.
Hey, Thanks for taking my questions.
Following up on population sequencing more generally.
John is there are you still interested in opportunities outside the U S beyond var.
To reiterate points.
Sure.
The company behind.
From our standpoint, primarily in Pakistan.
Building new relationships on the oncology area.
On population sequencing.
Yes, I think it's a good question today, it's certainly been interested in that up to this point I think what we've been hearing is that the population sequencing projects that have been most advanced in let's say if you looked at the UK for example.
The applications that they found tended to divide into people, who had rare inherited diseases and people who had cancer and what we've found is that the I think.
In cases, where there are rare inherited diseases, there certainly will be ongoing.
Testing for that kind of thing it's less of a population sequencing issue becomes more for people who are severely affected by those diseases that it becomes more of a diagnostic test for them I think the big opportunity that's been coming out of those we hear this out of the UK and other countries as well.
Is the interest in cancer and as people look at cancer. When when people started working on population sequencing, which is now almost a decade ago.
Part of it was.
Germline sequence, saying and then began to be.
Tumor sequencing, but generally.
Just one time point with a cancer patient. So if you had a.
Hey.
The tissue sample from a.
Biopsy.
Cancer patients that might be the sequence what we're seeing is with the capability to leverage cell free DNA and now in particular with the ability to use tumor informed assays that are so much more sensitive we.
We're seeing a lot of interest in.
Expanding the.
The efforts, which maybe they came out of a population sequencing to start with but a lot of the same people.
Actually transitioning their efforts into.
Cancer related efforts and so we've had people that we've spoken to initially on the <unk>.
Pop secret.
Well actually maybe we're not going to do so much for a population sequencing standpoint, but could we talk about.
And so actually some of those conversations that started on the pop safe dimension actually have ended up migrating into actually what looked like they could be pretty nice opportunities more in the.
Oncology space, and particularly with the breakthrough kind of capability of.
Next personnel the ability to look down to sort of.
Part per million sort of a sensitivity is.
Citing to a lot of people and some of those people and those programs have a lot of samples and we'd like to move forward with some of those things. So I think there's we'll have to see how that goes but I don't think thats a loss of that area. What we're saying is that the people who are in the public programs themselves are often looking for the most clinical relevance.
And for many of them that clinical relevance is turning out to be in cancer.
Which ends up being pretty well aligned with <unk>.
What we're ending up focusing on so long winded answer to your question, but hopefully it gives you an idea of.
That's correct.
Very helpful and then just maybe for <unk>.
Question.
Yes, how do you think about.
Exploiting.
Menu expansion.
Is that your question.
Two.
The clinical market.
Sure.
More into 2023.
Where there is.
Okay.
It seems like you're having a center with a broader menu and.
Kind of more product in the bag for our sales reps in the south.
So it says.
Sound on your phone is a little challenging, but if I understand that you are asking about.
Potential for menu expansion of our offerings, particularly including the clinical side.
Through this year and also into 2023.
That's correct.
Okay. So, yes, I would say.
We see there being quite a bit of menu expansion.
<unk>.
Pretty much in cancer, but what we were what personnel has been doing in cancer up to this point.
It has been mostly.
Sequencing tumor tissue samples and.
For the majority of customers. Those are one one time quite per patient. We do have some customers who are doing multiple time point tissue samples per.
Per patient, that's probably not the most common thing and we introduced the whole exome liquid biopsy.
All ago, but again, where we're seeing the excitement is on the <unk>.
<unk> personal side, particularly looking at very early stage cancers.
I'd say in the past, we have very little of our business in an early stage, but.
It is as a sort of menu expansion expanding from metastatic cancer into early stage cancer.
Is it really substantial increase for us in expanding from one time point for a patient to something or do we have data that we're working with people on that where we've got 10 time points for patients and I think those numbers will go up.
It becomes a pretty substantial.
Expansion and it's not just about therapy selection at the beginning but before that if theres been a surgical resection.
That recurrence, but also.
Once you see recurrence very few MRV tests are actually in a position to be able to guide.
Once they see a recurrence of the cancer to say what to do about it and so I think part of our expansion is not only to have an MRI capability in our next personnel test.
To complement that also with something where out of the same tests Youre also getting information that would guide what drug to choose.
If you are choosing a particular drug do you see resistance mutations coming out ultimately if that happens then what.
What would be the appropriate second line therapy and to be simultaneously quantifying the ups and downs of the tumor. So the physician has full information so I think.
Our.
Footprint in cancer is broadening out a lot and.
Earlier stage cancers, and many more time points per patient.
Maybe a little different from what you might call a menu expansion, but it's a very big expansion of the potential market that we're seeing.
Okay.
Our next question comes from Matt.
Donnelley of CD.
Okay Alright.
Hey, guys. Thanks for taking the question.
John maybe on next personal.
Nice to see that launch out there getting your first order can you just talk about I guess, the initial reception and then expectation as we get into 'twenty two.
We should be looking for in terms of the ramp there.
Curious in terms of what the construct with the guide is with that included.
Yeah. So we're obviously not guiding.
Guiding separately for that product.
I think that the with the initial reaction we're seeing from people, including people that I think we would consider as key opinion leaders I think you'd see.
Some pretty exciting involvement in programs there.
These are things where.
The first thing people will do as a pilot.
They may have samples are in fact, the first order we received from a large pharmaceutical company that can actually quite rapidly. After we talked to them about the product and it turned out they had samples that were available that they wanted to use for our pilots. So that those are already arrived and we are already doing the pilot. So that part is is getting going and I think we'll see that from other customers.
I think in general.
We are we don't have a lot of data on the mix of retrospective versus prospective.
It uses here I would say that five years ago, our sense was that not that many pharmaceutical companies had been routinely collecting.
Cell free DNA samples in their clinical trials, but I think thats changed pretty substantially now theres been a lot of recognition of the potential there and so I think there probably are a lot more bank samples and so we may be able to see.
I would expect that after the pilots.
It's kind of the same situation.
Situations as I described in China. The first business I would expect to see would tend to be retrospective orders where people say why I have this project clarity around that.
I need more sensitivity could we do this with <unk> personal.
Once they get past the pilot that those could be retrospective orders.
And then I think as people become more and more confident in the technology and <unk>.
Come to appreciate what it can do I think youll see just like our next platform has ended up being increasingly order those.
In prospective use in clinical trials, where it gets written into the trial from the beginning I think we will see that kind of thing as the follow on in the <unk>.
The next personal sense, so certainly as we gain more experience over the quarters, we'll try to keep you filled in on that but.
The sequence I would expect as sort of pilots first pilots leading into retrospective.
Trials and then the prospective side, that's sort of the pharma part of it and then as we develop the.
The LDC version of next personal then that broadens out into the the potential for diagnostic revenue and we will have to talk about reimbursement is getting a multi X decision there as well.
That's probably more into the by the time, we look at reimbursement for next personnel that's probably.
Well out into 2023 somewhere.
Okay. That's helpful and then Erin.
Talked a little bit about sample receipts, maybe from customers being a little delayed.
Supply chain tightening it seems like it could impact <unk> encouraging to see you guys maintain that 50% plus.
Pharma growth can you just talk about I guess, a little bit of a cadence as we go through the year. It feels like anything lost in <unk> will be recaptured throughout the year, obviously by the full year guide, but just any cadence would be helpful. In terms of how we think about modeling out the year.
Sure. So similar to what we saw in Q3 of last year, we are seeing mccahon slowing things down its harder for.
Our customers to get a hold of the samples from the Crows and then.
Shipped because of.
Employees are.
Subcontractor employees, having some issues from an illness standpoint, and so we're seeing that type of slowness and.
No.
<unk> that we've received over the last.
12 to 15 months have been phenomenal and so we have the backlog and the.
The orders or the revenue will not be loss, it's just going to be delayed a.
A few months or so here everything it's going to get pushed out to the right.
In terms of the cadence or the split here through the year I would say.
More of the revenue is going to be in the second half of the year than the first half of the year and so.
I'm not going to give numbers specific numbers, but in terms of range. It here, we probably.
Could've done 15, maybe 20% more revenue here in Q1.
Had we had the sample and so.
The type of delay we are seeing and so things are just going to get pushed out to the right.
Helpful. Thank you guys.
Okay. Thanks, Patrick.
Yes.
Our next question comes from Mark Smith of Cowen.
Sure.
Hi, This is Stephanie on for Matt Thanks for taking the question.
Just wanted to follow up on some of the comments you made for next personnel. So that's great to hear the traction that you've been getting.
Do you expect next personnel to be used more to guide therapy decisions in the adjuvant setting or for cancer recurrence monitoring in patients that are one to two years out from surgery.
Quite a clinical version of the test.
Yes, so I think our goal.
With next personal has been a little different from some of the other MRV products were.
We'll talk about trying to detect recurrence earlier than radiology.
It's good to do that but it's not it's not when you want it when you want to answer it right away.
So ideally you wouldn't be talking two years out.
Ideally you would know if you do that.
Test.
A few weeks after the surgery.
You have a sensitivity down in the sort of good part per million range for most patients. We expect that we'll have a pretty definitive answer it doesn't matter. If you got a negative maybe it's worth checking again in the future, but it should be more.
Definitive we've seen.
Data from some of the earlier technologies, that's been published where you see time point after time point, where the test result is that nothing is found and then.
Year, and a half two years, two and a half years out.
<unk> is detected and it turns out it is detected earlier than radiology, but it means the patient had cancer for maybe two years and the test just wasn't sensitive enough to pick it up and so when we started working on there is some time ago, you said thats really not where you want to be we want to be in a position or even a sensitive enough.
Ideally you would have the answer really almost right after after surgery and so.
That actually changes the what the business looks like as well because if you have to test time point. After time point after time point until you detect something thats a lot of time point, so a lot of testing.
And that might sound better from a business point of view, it's not great for the patients, which really wanted something if you can detect recurrence very early.
Because you have the sensitivity there.
Then there's still a lot of time points to it that they have much more to do with.
Managing the patient now that you know that once we know that there is recurrent so if there is or.
If theres residual disease that is a question of how do you manage that and down at the part per million range, we estimate that in some cases.
It may be because the surgeon has taken out the primary tumor and.
The surrounding Sentinel lymph nodes.
There is a hesitancy by surgeons to go too far and take.
Too many lymph nodes because that has other problems for the patient later on because of the <unk> system as opposed to drain the tissue.
I got all of the lymph nodes. The drainage is it doesn't work very well anymore. So this is the sort of trade off where the surgeons want to get all of the cancer.
But they don't want to go too far further than necessary.
So what the residual disease, we're talking about.
In some cases can be just.
Maybe they should about one month down further and.
If you can detect that early than if you do a <unk> may be able to see that.
Residual disease, you may be able to have a second.
Surgery and take that patient maybe have you finished so that could be very positive. If the cancer is more you can't be localized that way or if it's spread further.
Then it's likely finish of drug therapy and for that then youre going to want to have all the information of Natalie.
Classic therapy selection looking at driver mutations that could be addressed by a particular drug but we now understand more of that.
Many many targeted therapies that also immunotherapies.
Suffer from escape mechanisms, where the the tumor mutates in a way that lets it essentially go around the therapy and you can wait for.
To see that on radiology, where the patient has progressed.
But actually what you'd like to see it from a molecular standpoint.
So you can detect it earlier and that's been our strategy with next personal is to build in the capability to see not only the driver mutations you might want to target, but also to be able to see a fairly comprehensively.
Escape mutations, so youre, not giving somebody a targeted drug.
When the tumor is already started to move on from from that so I think our view is that the the market.
It is likely to shift to being much more about managing these patients because we actually hope to.
Be able to make decisions much earlier than the patients trajectory.
Whether they have recurrence or not.
And if they do to get on with managing it rather than just continuing to do what time point after time point, where you're just not sensitive enough, so sorry, but long winded answer but hopefully.
Our perspective is that the sensitivity will make so much difference that it will actually change to the market.
Got it. Thank you that's really helpful.
And as a follow up just wanted to touch on your partnership with the Mayo clinic. So could you provide us some color on how that partnership has been progressing specifically in terms of generating clinical utility data did you experience any impact from the weight of a micron cases.
I think it's probably too early for us to talk about results from that we do expect that to exit its Ben.
We're very happy with the relationship.
Mayo clinic is a fairly large institution and they have a lot of people involved very actively on many aspects of.
Oncology, so that takes a degree of <unk>.
Coordination and planning.
I think the scale of what we're going to see it might be that would be pretty encouraging. So I think thats, taking some time.
But we may want to defer the commentary until I think later this year, we may have a lot more to say about the Mayo clinic. It is we are thrilled with the relationship.
Got it understood thanks for taking the questions.
Yes, great. Thank you I appreciate your questions.
Sure.
Our next question comes from Joseph Conway that need them.
Hi, guys.
On for Mike.
I guess quick question around nits here.
Has the company, sending you intend to sample of certain types of cancer certain types of patients as you highlighted earlier, maybe maybe certain type with very low mutation frequency or is it more or less just general overflow.
In terms of the samples that are being sent to you.
And just to be careful I mean.
As an important customer for us.
Generally if you want information about what the terrorists doing you'd probably have to ask material we are.
Generally our policy not to comment on.
What our customers are doing with out there.
Authorization, so certainly if that <unk> to speak about that that'd be great. It's up to the product, but that I think we have to be.
We can't really disclose things they haven't authorized us to disclose.
Sure Okay, absolutely no worries and then maybe just a general line just looking ahead towards the rest of the year.
As you know personality tries to.
Increased awareness of the.
<unk> platform next personal SPX.
I guess, what do you guys have planned to.
Drive awareness among key.
<unk>.
Some of the conferences coming up here in the next six months or any publications plan.
We actually expect to be pretty active on that front.
We are hopeful.
We began to transition out of Covid period of time that certainly set with fingers crossed but we have there are conferences coming up that are currently scheduled to be hybrid where their heart in person in part.
Online and we haven't seen with people who are they're gung Ho.
The person be there and say Doug on that two years, we haven't been able to have a booth, we're going to get out there and made some customers can talk with clinicians.
So we are we are definitely out to engage on that front one of the things thats different from the past is that during this period of time. We've also been beginning to build up a medical affairs team.
So, whereas in the past, we would've had a commercial team staffing those kinds of things that we certainly saw wood, but the medical Affairs group and Medical Affairs is also now.
Increasingly active in that and looking ahead to the engagement with clinicians and key opinion leaders. In addition to our commercial team, which is probably more focused on the.
The folks in pharma that would be current customers. So I think it'll be a dual outreach to the people who need to work with in pharma, but also kind of an advanced group to getting to work on.
Engagement with clinicians and Kols.
More out of our medical affairs team.
Okay, Great that's helpful.
Thanks for taking our questions.
Yes, I mean, I think on the actually just maybe one more thing on the clinical outreach side.
I think we've commented on this the that.
Our commercial strategy there was a lot to do with focusing on high end cancer centers.
This is groups like the Mayo clinic, and we talked about UCSD work and so forth. These are these kinds of leaders and Kols are a really good fit for our technology because often they have this dual mandate of.
Yes.
Clinical and patient care, but also have a second mandate for research and our product is right at the intersection of those two things and you can do a terrific job of fault and so that's very appealing to them and they also typically have they can have cases that are quite a bit harder because many of them are what would be called tertiary referral centers. So.
If you're a physician working on a community practice and you kind of a patient where this is just not going away kind of expect it to and it's getting more Duffy said just getting out of out of my League here you may refer them to one of the top.
Larger cancer centers, and so those cancer centers often have they not only have a lot of patients.
They also have a lot more complicated patients and so many of the things were kind of I'll call them. The corner cases of the oncology world tends to be a lot more of those specialized cases and again the comprehensiveness of our platform.
You may have an unusual James Peterson that isn't one of the standard ones.
We will pick it up with next next personnel or we have a much better capability to do that because of our transcriptome capability and so forth. So I think the when we think about how we commercialize.
Working with these large centers is important because our product is such a good match there. But also we are looking for the KOL relationships I think we're trying to create a new standard of cancer care.
Having really dramatically more informations and.
That's actually what these kols off and are excited about working with us as it is to go beyond sort of the classic small cancer panels and have this broader information. So I think that'll be a good fit and it will feed right into where we want to go from a commercial standpoint.
Okay, great Yeah that makes it makes a lot of sense. Thank you.
Thank you.
Again, if you have a question. Please press star and then one key on your Touchtone telephone.
Our next question comes from Arthur he of each.
Okay.
Okay.
Hey, good afternoon, John and Aaron.
Arthur in for RK. Thanks for taking my question, So basically I have two questions.
So first congratulations.
Congratulations on the launch for the next personnel.
So I just want to pick up your brains.
Regarding how is your strategy to push for the Paris node for the diagnostic.
Revenue on that on that front.
Yes.
So.
I understand youre asking about next personal and diagnostic revenue I was wondering if you can repeat what what's the core question about that.
So I just wanted to understand it.
What's your strategy to try to.
Push on that front.
Increased.
Yes sure.
The approach, we're taking is that.
The product will be brought up to start with is targeted at pharmaceutical companies. So it gets us up and running with scale, we will be working on validation of that and.
Ultimately looking for.
That would be run as an LDC.
I think when we're prepared to describe that it'll be a little bit later, but.
That's the goal is for it to be a lab developed test.
And we would look for then.
Reimbursement I think as I mentioned.
You mentioned in the prepared remarks were.
We're expecting that our reimbursement path there, but there is a pretty good foundation of there have been a reasonable number of other MRV tests that have been.
Proved and given the performance we have we think that we would fit in with those kinds of things. So the expectation is we would work with again, probably the Palmetto <unk> program, because where we're located in.
California, we're covered by the fact that the Medicare Cracker.
Cracker in iridium, but they typically differ.
Significantly in their decisions to input from the Palmetto multi X program. So.
Our plan would be to March down the road with developing the.
The analytical validation data and the clinical dossier, so that we can.
Take the test to multi <unk>.
A positive reimbursement decision.
So I think those are those.
Those are probably the that's the path to reimbursement and then again the.
The kinds of groups that are likely to be.
Early adopters will be the high end cancer centers that we're talking about because again they tend to have.
Interest in combination of clinical care and research and they often have very.
Challenging patient.
Cases, so I think the next personal just like our next Dx test will sort of paved the way in doing that but then we expect that many of the same clinicians will be interested in next personal as it becomes a <unk>.
So they can also use that because the two tests are complementary it would make sense for a physician to useful.
Okay, great. Thanks, Thanks for that additional color.
<unk>.
My second question is regarding.
Tara could you remind us.
Whats the current just go between the collaboration between you guys and the terror.
Is there any possibility too.
Expand those scope to the two.
Next.
Our next platform and other products.
Future product you guys are working on.
Yeah.
We enjoy working with Natera and I think there has been I think we find that the things we're doing are quite complementary and so.
We certainly are interested in exploring.
Whether they can be.
<unk> set of products that got brought under that.
Right now the business is going well with the two companies working together I think most of these kinds of things people want to get started with one product and see that it works well on both sides and make sure that the.
The interaction between the company and Scott as well and they know the connection between select from our limb systems are there limits system a lot of the practical laboratory connections.
I feel like Thats going quite well and.
I think there certainly is potential for a broader relationship because of the kinds of technologies that we're developing are somewhat different from what natera is developing.
Some of them may be useful to <unk>.
But right now I'd say the <unk>.
There is we.
We provide front and the sequencing.
For the Cigna Taro test and.
Right now thats, what the what the business looks like today.
Okay, great. Thanks, Thanks for answering my question.
Great. Thank you.
Alright.
Not showing any further questions ladies and gentlemen, thank you for participating in today's conference. This concludes today's program you may all disconnect everyone have a great team.
Thank you.
Sure.
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