Q1 2022 Natera Inc Earnings Call
[music].
Welcome to the terrorists 2022 first quarter financial results conference call. At this time all participants are in a listen only mode. Following management's prepared remarks, we will hold a Q&A session to ask a question at that time. Please press star followed by one on your Touchtone.
Phone.
If anyone has difficulty hearing the conference. Please press star zero for operator assistance.
As a reminder, this conference call is being recorded today may five 2022, I would now like to turn the conference call over to Michael Brophy Chief Financial Officer. Please go ahead.
Thanks, operator, good afternoon. Thank you for joining our conference call to discuss the results of our first quarter of 2022 on the line I'm joined by Steve Chapman, Our CEO and solid Boskovich General manager of oncology today's call.
This call is being broadcast live via webcast, we will be referring to a slide presentation that has been posted to investor Natera Com a replay of the call will also be available at Investor Natera Dot com.
Starting on slide two during the course of this conference call. We will make forward looking statements regarding future events and our anticipated future performance, such as our operational and financial outlook and projections, our assumptions for that outlook market size partnerships clinical studies opportunities and strategies and expectations for various current and future products, including product came.
Abilities expected release dates reimbursement coverage and related effects on our financial and operating results. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to the documents we file from time to time with the SEC, including our most recent Form 10-K or Q and the form 8-K filed with.
Today's press release, those talking about documents identify important risks and other factors that may cause our actual results to differ materially from those contained in or suggested by the forward looking statements.
Forward looking statements made during the call are being made as of today may five 2022. If this call is replayed or reviewed after today. The information presented during this call may not contain current or accurate information that Terry disclaims any obligation to update or revise any forward looking statements. We will provide guidance on today's call, but will not provide any further.
The guidance or updates on our performance during the quarter unless we do so in a public forum, we will quote a number of numeric or growth changes as we discuss our financial performance and unless otherwise noted each such reference represents a year on year comparison, and now I'd like to turn the call over to Steve Steve.
Great. Thanks, Mike, let's get into the highlights on slide three as you can all see from the press release, we had another stellar growth quarter in Q1.
Total revenue came in at $194 million, driven by strong volume and Asps.
Year on year product revenues increased by roughly 58% and 14% sequentially from Q4 pro forma for the onetime $28 million Qiagen benefit in Q1 of last year total revenues were also up 57%.
Test process grew north of 40% year on year and more than 10% sequentially versus Q4 of last year.
Keep in mind this should be tough comparisons 2021 was a breakout year for new furniture up and yet the business continues to accelerate.
We will get into the drivers shortly but we are seeing excellent growth across the business, especially in oncology with our Cigna Tara clinical volumes.
Given the traction we are seeing in late Q1, and so far in Q2, we are able to raise our revenue guidance for the year. We started the year at $770 million to $790 million. We are now forecasting total revenue of 792 $810 million for the year, we are rapidly getting operating leverage.
Average on the investments, we've been making in R&D and commercial channels, which has given us more clarity on when we can get to cash flow breakeven, Mike will spend more time on this later in the call.
As a reflection of our confidence in the company and the substantial upside value creation. We've achieved we believe is achievable the board executive leadership and I opted to take our compensation in stock for the balance of the year.
Our lead independent director also bought $5 billion in shares on the open market.
On the heels of a strong 2021, our first quarter results show, we are firing on all cylinders and our increased guidance shows we are confident in our ability to maintain the momentum.
Turning to a few notable highlights from the quarter, we've had a slew of exciting milestones in our transplant business, which has seen record volume levels on the back of 10 peer reviewed papers published in the past roughly six months, we've recently announced the publication of a valid study a prospective clinical validation of prospera long we.
A 1000 patient real World study with Rina site.
And we announced a multi site clinical validation of Prosper heart was published in the journal of heart and lung transplantation, a leading journal in this space.
A few weeks ago. We were also very pleased to announce that doctors sangeeta abroad joined us as Vice President of Oregon Health Medical Affairs.
Dr. Broad is a leading academic physician in the lung transplant space, having founded the lung transplant program at the University of Chicago and separately at northwestern Dr. Broad joins the terrorists. The latest edition among other recent notable medical leadership hires including Dr. Michael alone Bios Medical director.
Heart transplantation and Dr. David Ross Medical director of lung transplantation, Dr. Roland bias was previously a member of the heart transplant program at Cedars Sinai.
And the author of many peer reviewed publications in heart transplant Dr.
Dr. David Roth as an academic transplant pulmonologist credited with starting one of the first lung transplant program at Cedars Sinai $19 89, and has served as the medical director of the lung transplant program at Professor of Medicine at UCLA.
We also continue to make excellent progress in oncology, we were very pleased to see an update in a landmark circulate data in an oral presentation at the society of surgical oncology 2022.
The key update there with Cigna Terra is now showing a 75% detection of recurrence and stage two and three patients with a single time point MRV blood draw at four weeks post surgery versus the previous analysis from <unk> Gi in January which showed a single time point detection of 68%.
Also the circulate papers now and submission to a top tier medical journal, which is incredibly exciting as we said before getting the paper published was a key step on the path to an <unk> in guidelines.
Really proud of our collaborators in the tiara team for moving so quickly to get the paper submitted.
In addition, we've had some good breast cancer data presented recently at ACR further validating signature performance in triple negative in each of our positive diseases in collaboration with Genentech in the I spy two consortium.
And we also have an exciting lineup coming to ask this Jim.
The signature of reimbursement front, we completed the first pricing measurement period for our ADL Tee rates. That's a price was initially established at $3500 last year as of April one 2022, the ADL Chi rate for Cigna Tara has now been revised upward to 39, 'twenty, obviously that gives you an immediate.
Boost to Medicare reimburse volumes, but I think it also strengthens our position with commercial payers over time.
Moving to slide four let's get into some of the trends. The next slide is a longer run view of our quarterly volume progression. I think this view is helpful context to the rapid progress. We've made for example, you can see the volumes are more than twice of what they were as recently as Q1 of 2020 of course, a big reason why we have been.
Outperforming as the product launches in oncology and organ health are progressing well above our expectations for signature we've seen tremendous growth, particularly in the clinical volumes, we've gotten a significant boost from the <unk> Gi circulate presentation colorectal cancer, and we are still seeing significant organic uptake across a broad.
A range of cancer types as word of mouth spreads.
Political Asps are also ahead of plan.
We had a hypothesis that our Medicare mix might increase as we got further into our launch and receive more community based units that appears to be happening. We are rapidly getting scale on the investment that we've made in our oncology commercial channel and Mike will spend more time on this later in the call.
We had a great quarter for the Oregon health products as well, particularly in kidney transplant. We are just starting to see the benefit from our efforts in the other organ types as well.
That strength has continued and we are currently seeing record Prospero volume levels over the past several weeks. These results clearly demonstrate that we're on track and more broadly I think the concept of cell free DNA as a tool for monitoring graft health is taking hold.
On the next slide you can see on the revenue trajectory has outpaced the volume trends as we benefited from positive overall ASP trends over the past few years.
Candidly, hence side of the slide shows the year on year revenue growth, we've seen in Q1 versus prior years and clearly Q1 of 2022 was very strong.
The right hand side puts into perspective, the revenue trajectory of the business has been on just the last four quarters. As these new products is starting to ramp we are very encouraged to see that we are quickly getting leverage on the channels, we build a transplant and oncology and Mike will talk more about that later in the call.
Okay. Let me cover a few slides on our recent progress in Oregon Health. We are now seeing the fruits of our labor with data generation in Oregon Health, having published 10 peer reviewed papers in roughly the past six months.
On the next slide or did you study in heart transplant was published in the journal of heart and lung transplant patients a premier high impact journal in this space. This multi site clinical validation study of cross borough heart demonstrated the test's ability to identify acute rejection in heart transplant patients, where the AUC of <unk> 87 in the perspectives arm.
The study, which included more than 700 samples.
We are continuing to build robust medical evidence with our ongoing NIH supported <unk> study and the Terra sponsored detect randomized controlled trial.
I want to spend a bit more time on rina side, which is a test we havent spent a lot of time on in the past.
<unk> is a hereditary gene panel that addresses the large market opportunity.
Kidney disease, there are approximately 37 million patients in the United States living with chronic kidney disease and about 750000 patients are newly diagnosed per year in.
In 2019, a large scale validation study of multi gene testing was published in the New England Journal Medicine, and showed that about 10% of chronic kidney disease patients have a genetic etiology.
Of those 89% would have had a change in clinical care as a result of their genetic test. This is exceptionally high clinical utility and a very large area of health care to date testing has been mostly offered on a limited basis with an academic centers, we introduce marina sites, the nephrology and transplant community.
Community, because we thought we could make a big impact on patient care by making genetic testing accessible at scale. Our first study for <unk> was published in the American Journal of Nephrology analyzing the commercial experience of the first thousand tests with positive findings founded 21% of patients tested.
We also had previously invested into a large scale definitive multistate prospective trial called Rina care and are excited to say that we're almost finished with enrollment really care, we'll assess the clinical utility of Rina site and we actually expect to submit the results of the study for publication in late 2022, I want to make one.
Your comment about our financials before I turn the call over the renal care study is a good example of a larger trend in our overall business where in many cases, we pre invested into a big future opportunity. While this impacts our near term operating expenses. Many of these are one time expenses like really care, where the trial cost goes away once.
The study is over the longer term upside opportunity remains.
Other example of this is the randomized controlled trials, we're doing in heart and lung transplant. Once those are done you don't have to do them again. We're similarly, we've invested in a very talented nationwide oncology sales force despite them being very underpenetrated in their geographies. This creates leverage because now operating expenses can stay relative.
Stable as volumes grow we can chart a path to cash flow breakeven, Mike will give more details on this in his section later in the call.
With that let me now hand, the call over to Solomon to provide an update on oncology Solomon.
Thanks, Steve.
We have made significant commercial progress so far this year in oncology there's more.
Physicians adopt cigna, Tara and as each physician gains experience and then starts to apply the test across more and more of their patients.
We've laid the groundwork over the past five years to be in the position that we're in now where we are also presenting high quality clinical data at nearly every major academic oncology conference on the calendar and expect them to publish over 20 peer reviewed publications this year.
One case in point is the circulate Japan trial that Steve mentioned earlier.
The latest presentation at the conference this year update the analysis to show recurrence detection in stage, two and three CRC.
Good time, 0.4 weeks post op of 75% compared to the 68% that was presented earlier in January .
This was in addition to the groundbreaking predictive data, where MRV positive patients clearly benefit from adjuvant chemotherapy, while MRV negative patients saw no significant benefit getting this data submitted for publication is an important milestone because we think it's a publication will improve the odds of an CCM guideline inclusion which in turn.
<unk> to drive another inflection point and test adoption and coverage.
We were also pleased to announce the launch of the prospective randomized circulate U S trial, which is now open for enrollment across the country.
Accessible study will add further evidence on top of the Japanese trial to definitively prove that stage three CRC patients, who test signature or negative will not benefit from additional treatment.
In Q1, we also announced a key milestone in our bespoke CRC registry trial, which now has more than 1000 patients enrolled at over 100 sites.
The pace of enrollment in this study has been strong which reflects the excitement in the field from both physicians and patients incorporating sigma curtains for a cure.
The study will enroll roughly 2000 patients who have undergone surgery from stage one all the way up to the stage for CRC.
The study designed to measure real world clinical impact how the test results impact clinical treatment decisions as well as clinical outcomes. We believe this study will help drive positive secretary coverage, among private payers and we plan to be in position to start analyzing its firm data in the fall of this year with a potential readout expected in the first half of 'twenty three.
Many of you will recall that we initiated these efforts back in 2020. So this is a great example of how our first mover advantage can yield prospective clinical data that will be difficult for others to replicate upon entering the field.
Moving on.
This past April we had two presentations for signature in breast cancer.
The studies again demonstrated the strong prognostic value of Cte DNA in triple negative and HR positive breast cancer.
And the Beatrice study of 186 patients conducted in partnership with Genentech, We showed that secretary can detect recurrence in triple negative breast cancer.
As time with lead times up to 330 months ahead of imaging.
And the report from the I Spy two consortium, we analyzed over 700 time points from over 200 patients showing early clearance of Cte DNA. After just three weeks of near Adjuvant therapy is a significant predictor of pathologic complete response is.
So the utility of signature in the neo adjuvant setting in breast cancer in conjunction with imaging to help identify patients who are not responding to treatment and they benefit from an earlier change in strategy.
We're also looking forward to a productive Astro conference. This June where we will have seven posters presented.
More information to come once the data embargo once the data embargo was lifted but right now I can highlight that we will present data in lung cancer breast cancer Merkel cell carcinoma soft tissue sarcoma and renal cell.
In the context of the strong clinical pipeline I want to touch on a new industry draft guidance statement issued by FDA earlier. This week on the use of Cte DNA for early stage solid tumor drug development.
The F D. A draft guidance document is a positive step for the industry and for <unk>, because it lays out a pathway for drug developers to incorporate <unk> into their clinical trials for early stage solid tumors, both to enrich the intent to treat populations and to accelerate the trial Readouts using C. T D N a.
The document specifically references the potential for using multiple C. T. D. N. A time points are serial testing to establish patient eligibility.
And the potential for C. T DNA to be used as an early endpoint to support drug approval.
Written statement is in line with guidance that the FDA has previously communicated to mature and to our drug development partners.
Which really helps solidify our vision of a world where signature will be use regularly across all phases of drug development to accelerate the approval of lifesaving therapies. We are still just the beginning of that adoption curve, but I'm pleased to say that our pharma pipeline continues to gain strength and diversity. In addition to the phase III trials.
Oh, and one and zest that are currently enrolling.
We have been engaged with the FDA on multiple fronts, including pre submission meetings associated with our breakthrough device designation. The investigational device exemption that we just received two enable to circulate your restaurant and active participation and regulatory and industry consortia, including blood pack and the friends of cancer research.
Finally, let's take a look at the coverage roadmap for Cigna Terra nothing significant has changed on this slide since our last update we have multiple submissions into Medicare for additional indications to be covered under the LCD and we're on track for our plan to get additional tumor types covered this year and next year.
Meanwhile, we are making good progress towards gaining initial private payer coverage.
Private payers are evaluating their own population and starting to realize the benefits of covering signature both to improve clinical outcomes and to improve the health economics again, we believe that the publication of the circulate Japan data and potential inclusion into the NCC and guidelines can really help move the needle on that front.
Now I'm going to hand, the call over to Mike to review the financials.
Rick.
Thanks Aman the first slide here just the financial detail also contained in the press release, Steve covered the major growth in revenues, we've seen over the last year as we stood up the commercial teams for the transplant and oncology call points the drop in licensing and other revenue just reflects the onetime qiagen in Q1 last year, so pro forma for that result.
The licensing and other line also grew meaningfully year over year.
It's the same story for gross margins. This comparison is pro forma for Qiagen. So you can see gross margins on a repeatable basis improved year on year.
I think that's important to note because the gross margins are temporarily weighed down by all the signet Terra volumes were running which implies continued strong gross margin leverage in the products and the transplant and women's health call points.
Lot of patients are getting their first Sydney Terra test compared to where we will be as the launch matures. This means currently a relatively high mix of people are getting that expensive upfront exome, we should level out over time.
One positive note is that we are already ahead of schedule. This year on our forecast for <unk> last year, you'll recall Sydney Terra Asp's were in the low five hundreds we've seen a jump up into roughly the mid six hundreds so far this year driven by expanded reimbursement and our Medicare mix and colorectal cancer continues to expand.
As we reach further into the community setting.
As we've talked about in the past that is still an extremely immature asps for this product, particularly in light of our eight new ADL T rate that Steve described.
The future evolution of Signet Tara, it's clear to us we see volume mix moving toward repeat plasma test the upfront setup costs going down and of course, we think there's a lot of progress to be made on asps as coverage expands on our patient mix reflects a higher mix of Medicare patients.
The R&D and SG&A lines with Lockheed vestments for the watch of large clinical trials and commercial channel expansion I'll spend more time on that in the next few slides I'll note. The cash burn was elevated in the quarter largely due to timing dynamics Q1 is usually a larger cash usage quarter for us, but that seasonal dynamic was amplified this year.
Because of the large increase in volumes, we processed in March so we experienced the cost of those tests and we book the revenue, but it takes more than a couple of weeks for that testing volume increase could translate into cash the overall cash burn guidance for the year remains the same as I'll cover on the next slide.
Okay, great, let's get to the revised guide.
Revenues previously we were at $770 million to $790 million.
Resetting that range upward to $790 million to $810 million.
We continue to see very strong sequential quarterly progress on Panorama and horizon.
In addition, we are very encouraged by the rapid volume uptake preceded Tara and prosperity give.
Given that Signet Terra volume is ramping this quickly you might expect this growth to result in near term pressure on gross margins in cash. However, we feel comfortable holding these target steady given the positive ASP trend for Terra and the continued traction we are getting on the rest of the products. We are keeping the expense line guide flat despite the higher revenue.
And volumes because we're getting scale on these investments as Steve described and as a reminder, we expect to see the normal seasonality in women's health business, where Q2 was stable versus Q1, and then Q3 Q3 Q4 grow nicely.
On the next slide we've learned a lot in the last five quarters or so as we built out the commercial teams and grown the business dramatically with those results in hand, we can now apply a lot of the forecasting rigor we've developed over the last decade and growing an ITT, while we still have a lot to learn we can now build the volume <unk>.
Cas bottoms up from sales territories based on our own experience.
I think the recent results demonstrate that our existing products and commercial team can drive very significant volume growth for years to come.
That means we should only need to grow SG&A in the low double digits over the next few years to support bigger territories and gain even more scale on the lab a shared functions of the business.
This also means we can focus our R&D efforts on high ROIC projects, including burdening, the existing products expanding the lab and investing in prospective clinical trials.
While these projects required sizable initial investments, particularly in 2022. The results of these projects tend to be reasonably predictable low technical risk and high ROIC endeavors.
Those of you that followed us in the years from 2017 to 2019, no that similar R&D projects helped us drive gross margins from the low <unk> to the high Forty's that we're at today and we think we can do that again.
So that's the background that informs the path to cash flow breakeven.
Stable commercial teams poised to drive further growth in large underpenetrated market opportunities, where we have already built a leadership position.
We think we have a very clear path to get to cash flow breakeven between one three to $1 5 billion in revenues over the next few years, even with relatively minor improvements to our Asps and Cogs.
Our cash usage should go down steadily as we get closer to breakeven and we expect cash usage to go down meaningfully from 22 to 2023.
Over the longer term, we think there is substantially more revenue growth and our future and we believe long term gross margins above 70% and operating margins above 25% are very achievable.
So I think that lines up really well with our existing balance sheet and we feel like we're in a very good position to execute that plan.
So with that.
Very excited about this quarter I'm happy to share with you I'll hand, it to the operator for questions.
Later.
As a reminder to ask a question you will need to press star one on your telephone to deal with.
All your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of Tim has savant from Morgan Stanley . Your line is now open.
Hey, guys good evening and congrats on the strong start to the year Mike.
Mike maybe to kick things off just a couple of points of clarification on the guide given that <unk> code bump that you mentioned for Sigma Tara.
Should we is that sort of fully factored in into the into the increase your or are there any offsets that we should be thinking about in terms of perhaps you know supply chain disruptions or sample shipping delays et cetera, as we look at phasing through the year and then the second part was on the cash burn reduction commentary that you just mentioned for 'twenty three in beer.
Can you just lay out sort of what's included there for perhaps building out that primary care channel for cancer screening and so on.
Yes sure. Thanks for the question. So first on the on the royalty rate that's a fantastic update of the business that is incorporated in the guide for this year, but I'll just remind you that you don't really get to feel the full benefit.
<unk> right.
In the volumes really even this year because that is for the recurrence monitoring indications so.
First you start with Cigna Tara.
In this adjuvant.
Treatment window, which is the first six months, that's kind of a bundled payment and once you graduate from that in your in remission. Then you kind of move to that recurrence monitoring time plenty. So as the Beatles business progresses over the next couple of years, an increasing percent of our volume is going to qualify for that <unk> rate. So yes. It is incorporated in the guide, but I think as the bids.
Need to mature a little bit in order for you to see the full effect of that so that's on the on the ASP on.
On the cash burn guide.
And the Opex. This really what this contemplates is the kind of the current.
Current sales teams in place and just growing kind of modestly.
And not in relation to how fast the revenues have been growing this does not contemplate a full build out of like a separate primary care call point, nor would we anticipate that we would need to do that so with regards to explain a carrier screening lot of wood to chop there a lot of technical work a lot of technical.
Hurdles to clear.
I would just remind you that we feel very strongly we've got a fantastic primary care call point right now because we've got the best the Obgyn channel in the United States and I think longer term, we would hope to leverage that channel.
In.
In the service of an expanded carrier screen, but again.
Need to produce some data first need to make progress there before we make commitments on that front.
Got it that's very helpful. And then on <unk> on the base business. You are one of the questions that I recently got let's just round implications of this rule versus Wade debate of the decision were to be overturned by the Supreme Court and every state starts making its own laws. How do you see that impacting first the slope and also the eventual penetration that you can.
Get to sort of average risk and IPD adoption and then a quick follow up on <unk> as well any any updates on that MGM partnership and how that's evolved.
Since the news came out.
Couple of months ago.
Yes, let me, let me comment quickly on the ROE versus Wade and maybe Mike you can talk about.
Things on the billing side, so on the ROE versus Wade I think there are already states that have more restrictive policies and we haven't really seen any impacts on that.
Our <unk> testing overall.
Who.
A reminder.
Significant.
Amount of benefits that people can get to improve care.
From getting an ITT for example, with the George syndrome treating the baby at birth with calcium can prevent hypocalcemia and prevent seizures.
I think the ROE versus Wade really doesn't factor in the vast majority of cases, but even in states, where they are more restrictive we haven't seen an impact Mike.
Mike you want to take a comment about billing yes.
Yeah, just on the billing side I mean, we talked at length on the on the March call in terms of the P. A volume flowing through the vendor and really.
Yeah.
Becoming.
We turn the turn the page into 2022, because prior authorization is largely <unk>.
Seating as a variable in the women's health business now that Theres kind of a full a cogs support for an IPP in all risk categories. So I expect that to just continue to evolve to a smaller and smaller piece of the business.
Got it very helpful. Thanks for the time guys.
Thank you. Our next question comes from the line of Mack Cali.
From Cowen Your line is now open.
Hi, This is Stephanie on for Matt. Thanks.
Thanks for taking the question and congrats on a great quarter.
Let's start off can you give us some detail about the volume and demand trends.
Power offering and any cross selling fanciful and more generally how some of the newer more targeted women health offerings are being received.
Yes sure.
I'll take that so <unk>.
<unk> hereditary cancer testing.
We're seeing there are there is interest.
Physicians.
Where did that test for me Kara.
We did a pilot.
I think in the 2020 timeframe and then we did a full launch of that in 2021.
And we're seeing good uptake, particularly in the women's health sector, which I think is an area where.
We're poised to do well just given our commercial footprint.
And then on the.
Many of the women's health side, I mean, the vast majority of our volume that we perform as panna.
Panorama noninvasive prenatal testing.
Horizon carrier screening testing and we're still seeing the demand there be very very solid.
Because we've continued to support the products with a very significant amount of peer reviewed data.
One of the key highlights on the peer review data side was the publication of the Smart study for.
For non invasive prenatal testing so that was actually published.
And the Gray Journal in January .
I think everyone knows the smart study was the largest.
Site prospective study that's ever been done in the field of non invasive prenatal testing and the results were really just incredible.
And we think that the publishing peer reviewed evidence is exceptionally important.
And that is driving uptick amongst the base.
Yes.
Got it Super helpful.
And also as we see new draft and final coverage determination quite a new cancer types in oncology and then new Oregon.
Spine applications are pursuing can you give us enough pressure around how long it takes to earn coverage under an umbrella LCD and what that implies for how quickly you can start getting paid on some of the new indications in oncology and transplant.
Yes so.
A couple of things I think we both.
Both transplant oncology now do have these umbrella coverages in place and so in.
In transplants today, we have coverage for.
Kidney donor derived cell free DNA testing and then in oncology today.
We have coverage for colorectal testing and then also <unk>.
Therapy monitoring, but with that said we've done several additional submissions.
Both across the Oregon health business in the oncology business and generally you hear back in the sort of roughly eight to 12 week timeframe and then many times there's questions.
Additional information.
That they want and we followed through and submit that.
I think that that's sort of where we are right now either having just submitted.
Or having just gotten feedback and kind of responded to questions. So ultimately.
To my knowledge I'm not sure if there's any recent of coverage decisions that have come out under the umbrella LCD, but I think we're sort of in the same boat with others, where we're sort of interacting very positively.
And waiting for the additional coverage to come in.
Got it thanks for that color and thanks for taking my question.
Thank you. Our next question comes from the line of Catherine Schulte from Baird. Your line is now open.
Hey, guys. Thanks for the question I guess first and there's been a lot of noise around <unk>. This year and the media between the New York Times reported in the short report are your reps hearing any doctors bring up either of those in the field or is it just something that's partially insulated from your commercial art.
Yes, I think.
<unk> are largely very supportive of screening and.
Screening for.
And employees has been a part of obgyn and care for.
The past 40 years. So when you when you look at biochemical screening that really started in the eighties and unfortunately had a very low positive predicted value in it.
Decent sensitivity, but the positive predicted value was only about 5%.
So with noninvasive prenatal testing because the positive predicted value is much higher like we've published 95%.
Trust Me 21 for example, Theres other micro deletion orders, where it's lower like in the kind of 3% to 50% range in line with biochemical, but it's sort of right in there with what doctors had been experiencing.
And so there is there is a strong support among the physician base for screening.
American Congress of obstetrics and gynecology recommends.
Non invasive prenatal testing and I think the doctors.
All of that and feel very very supportive of what they're doing.
We did notice that.
The volume has actually gone up quite.
Quite significantly in the <unk>.
Past four or five months as well.
Continue to publish data.
Process orders from physicians.
But in addition, I think some physicians were frustrated about the way.
Non invasive testing and screening in general was characterized.
The media and I think largely disagree with how it was characterized.
Alright, very helpful. And then you mentioned seeing record crosstie volumes in recent weeks it sounds like that business is going well, but any commercial repercussions from the recent news around the law suit with your competitor and then how should we think about volume growth training camps to indications this year.
Yes, I mean, we're feeling really positive right now because we've published 10 peer reviewed papers in the last six months and I think largely that was the thing that was.
I think I think they kind of holding us back in some ways.
We had come in slightly later than others, and we had less peer review data, but we're really closing that gap now and putting ourselves in a great position. I mean these are some of the most significant studies that have ever been done in the field and I think what we're seeing as a result of the innovation and the peer review data.
It positions.
Want to order the test and.
We're now as we said at record levels and we.
We're starting to see a nice.
Initial utilization in both heart and lung.
We just published it to.
Clinical validation studies there Mitch.
The last two months roughly and those were received very very well by by leading physicians and we've had a lot of great interaction. So.
We're feeling good about things.
As far as pacing.
With long I think.
He is very early in lung, although theres, a big opportunity there.
It's a very underpenetrated market overall, not just from altera.
I think theres a large.
Very deeply penetrated incumbent in.
We're trying to convince doctors to send to us where we can but I think just uphill battle there, but I think we're kind of pleased.
Pleased with what we're seeing here in the early days.
Alright, great. Thank you.
Thank you.
Our next question comes from the line of Mac Sykes from Goldman Sachs. Your line is now open.
Great. Thank you. Thanks for taking my questions just two quick ones from me.
Both upfront and then hop back in the queue, but just Mike maybe and I apologize. If you cover some of this in the prepared remarks, but maybe just on the Opex spend as you look forward.
Understanding that R&D is probably a little bit less flexible than SG&A, but as you think about some of the levers you can pull over the next.
One to two years in terms of.
Spend.
Where do you see some of the best levers is it given your commercial bet out there you've already done is it on the SG&A side and how much flexibility do you think you have within the model.
And then sorry. The question was just on Oregon, Oregon Health I know you've had a couple of data releases just remind you again about I know, it's supposed to be a big year for we're going to have data points. Just how should we think about future data releases as we go through the course of this year. Thanks.
Yes, I'll give I'll just hit the tops of the waves and Steve I'll hand to you for any additional commentary I mean, I actually do think that there are some levers.
On the operating expense lines both for SG&A.
On R&D I mean, the one that immediately.
Immediately to mind.
Is the is the clinical trial spend.
You just touched on very briefly in the prepared remarks, I was kind of a bubble costs going on.
For large randomized controlled trial.
Uh huh.
Make sure that business is well established and set up for the next 10 years, Steve mentioned arena side as the example, but I think there are many others, where you run that study and it's not necessarily.
That study I mean, the smart trial and the noninvasive prenatal testing space isn't good historical example for US where that was a that's a pretty expensive trial that we had to run for five years, but we don't have to run another trial like that so a lot of that those types of trials can start to roll off as soon as next year and I think theres a lot of a lot of leverage.
You can get from the work we've already done and I think there's this.
This is the same team that executed our growth strategy from 2015 to 2019, a lot of that time Ishares were eight bucks and we had to.
We had to be.
We had to be selective in a way that.
We managed the team.
Hmm.
Some kind of small things that you can do on the commercial side that add up to.
When and if needed so Steve do you have any other comments on that and I'll, let you take the second one as well.
Yes.
No I think I think you covered it and then on the on the Oregon Health side. I mean, we said they were going to be three really big data Readouts. This year.
One on heart, one on lung and we've had both of those and I think they were both very positive and then the next thing is one of the most significant trials ever done in donor derived.
Cell free DNA testing in kidney and Thats the Trifecta study.
And thats in submission.
That's.
You're going to be a very significant trial when it reads out. So we look forward to reporting that out later this year.
Great. Thanks very much.
Thank you. Our next question comes from the line of Puneet <unk>.
You know I think doctors are ordering the test.
<unk> levels in fact, we're seeing that across.
Ontology across women's health and across Oregon home.
Yeah. So I think there's not really any changes there necessarily.
I think it's largely sort.
Sort of status quo.
Yeah I think.
If the context of the question was are we doing anything differently with regards to some of the sort of negative media attention and I would say.
As we've mentioned previously.
In the in the Oregon Health space.
We've removed any of the sort of referenced materials that were part of the lawsuit.
And we don't expect those materials are the removal to have any impact on our ability to sell the product in any way.
And in fact.
As you're seeing we're seeing record numbers.
So Mike do you want to.
Talk about the prior ups permanent.
Yeah, and just in interest of time I didn't get a chance a temporary little bit earlier in the Q I mean prior options as a piece of the business was already a small part of our overall volumes and thats getting even smaller just as we roll into 2022, because there are a lot fewer.
Prior authorization requirements out there just given the broad acre HR support for the products.
Okay got it no thanks for clarifying that guys.
We are when we speak with a number of them.
Kols that are utilizing your testing as well as you know across the field.
It goes into the community setting there appears to be.
Off label use for the product and obviously physicians are excited but maybe just can you give us a sense of where that stands today and you know how should we think about the progress were from signatory perspective, how should we think about the progress of indication expansion here because.
It seems like.
The physicians are you know et cetera about the product, but there are obviously utilizing and and and and and labels that are worse.
Beyond the current indication labels.
Yeah.
I'll just say you know there is there's a difference between where the test is validated and where it's reimbursed and so we are validated today for pan cancer offering and we're seeing physicians ordered the test.
Pan cancer way, which is I think an indication of.
Of their excitement about the product.
Yeah, there are limited areas of reimbursement, but we've published now more than 15 peer reviewed papers.
Cros.
More than 15 different cancer types 3000 different patients and so forth. So you know what.
Not surprised to see physicians using it in line with with a lot of the data that's out there on the performance of the test.
Solomon do you want to talk a little bit about the pipeline and kind of what we're doing.
To generate more data and to get additional reimbursement.
Sure Yeah.
Just before I do that.
I want to emphasize how much.
Continued growth in adoption, we're seeing in the core.
Covered indications and early stage CRC on stage, two three and Resectable stage for in.
In Pan cancer immuno therapy monitoring.
In addition to that as you mentioned growth that we're seeing in.
Other indications, where physicians who have already experienced the test, let's say in early stage CRC, if you're a community physician.
And then a breast cancer patient comes along where you're facing a similar challenging decision, where you're thinking through different treatment options.
Trying to evaluate a patient's risk that positioned its really easy now after the physician to think about Cigna taryn worried about test in terms of our pipeline.
We mentioned this in the prepared remarks, we're continuing to produce a significant amount of clinical validation data.
Much of which is being shared with mol, Dx and packaged up for reimbursement.
With Medicare, but also being shared increasingly with private payors.
We've always said that.
Guideline inclusion, we think will be the most important inflection point for coverage with private payors.
And we think we have a good opportunity to you know to see that first one.
This year or early next year as we discussed in CRC.
Okay got it and then just the last question in terms of <unk> I don't know if you provided updates, but should we be expecting anything IOSCO. Thanks, guys.
Yeah, we we showed in the in the prepared remarks, we've got a 10.
10, abstracts and seven posters.
And we look forward to sharing more data on those when the when the embargo is lifted.
Great. Thanks, guys.
Thank you. Our next question comes from the line of Kyle Mike Sena from Canaccord. Your line is now open.
Hi, guys congratulations on the great quarter.
So from a month to kind of mixing.
A quick question. So in mid April the updated public safety communication titled genetic Noninvasive prenatal screening tests when they have tough results.
Do you believe that things may progress in such a way that the FDA starts to regulate there'll be cheese in the space.
And my second question is I.
Briefly read some publications I forget the growing trend of first time mothers age 35 or older coupled with a higher have been straight a down syndrome.
I guess the first question on that would be is this will also where you're seeing older first time mothers and do you feel about the changing demographic could drive material growth of the and I P. T market as a whole in the near term. Thank you so much.
Yeah. So on the F D. A I would say we strongly support the information shared recently by the F. D. A with grocery N. I P. T. We've always believed that education and transparency in peer reviewed evidence are very important and that's why we published 26 peer reviewed papers on it.
T, including the Smart study, which is the largest study ever performed.
We employ over 100 genetic counselors and offer complimentary genetic counseling sessions pre and post test to all patients. We also put the negative predictive value and the positive predicted value of each disorder directly on each report so because of that we're in a great position to work.
More closely with the FDA given the breadth of our data and the depth of our validation studies. So again, we really support the information.
By the FDA.
With regards to changing demographics, you know things are sort of evolving it does appear over the past many.
Many years towards a slightly older birthrate and I don't know if that's.
An advantage or disadvantage, but it hasnt impacted us in a negative way and you know we continue to grow.
P. T is still Underpenetrated, we think only about 40.
Per cent roughly of pregnancies today are getting <unk>.
P T testing, whereas no.
Vast majority of patients still get biochemical screening which has.
Positive predicted value that is significantly less.
Then that a N a P T.
Okay.
Thank you this.
This concludes today's conference call. Thank you for participating you may now disconnect.
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