Q2 2022 Invitae Corp Earnings Call
To differ materially from our current expectations.
These forward looking statements speak only as of the date hereof.
As you listen to today's conference call. We encourage you to have our press release available.
It includes financial results.
Key growth metrics and commentary on the quarter.
To supplement our consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States.
GAAP.
We monitor and consider several non-GAAP measures.
We encourage you to review our GAAP to non-GAAP reconciliations, which are available in the press release and India Appendix of the earnings slide deck.
Both of which you can access by visiting the investors section of the company's website at IR Dot <unk> Dot com.
Yes.
We have already pre announced key financials, along with our corporate announcements in July .
Today, we'll discuss our strategy post the realignment plan.
To provide some recent developments and continue onto a published second quarter financials.
By our key metrics and outlook.
We would then proceed to Q&A.
With that I'll turn the call over to Ken.
Thank you <unk> and thank you all for joining us today.
After the first quarter results, we communicated our company's return to extend our cash runway through the end of 2024.
July realignment was the translation of that into a thoughtful operating plants.
With the realignment plan in place we are now ready to further accelerate the work that had actually begun months ago.
We're pleased to see that our second quarter non-GAAP gross margin operating expenses and cash management for all demonstrating necessary improvements.
More importantly.
The trailing 12 month trend in those metrics that's consistently delivered in a positive direction.
Confirming our ability to execute on our overall plan.
Our team remains committed to achieving our financial goals that we have laid out with.
Which are expected to strengthen our balance sheet.
Having said that.
One of management's top priorities include finding the right option for our debt obligations due in 2024.
And we continue to be in discussing with various parties looking for the most optimal solutions.
Despite the recent challenges. These events have also provided an opportunity for us to take a close examination of our focus and priority.
And throughout this process, we found that <unk> continues to have many valuable assets that would position us to win in the future.
And we believe that those assets along with our mission and the execution of our plan.
We will increasingly provide a compelling proposition for investors, who share our vision and believe in our potential.
Now I would like to move on to our strategic focus going forward.
We will continue to solidify our leading position in the testing space.
While utilizing digital tools and support to provide value for our patients and our providers.
These combined capabilities will be leveraged to deliver our vision of transforming health care.
And unlocking the true potential of genetics.
Under this premise patients payers pharma partners physicians providers and more will be able to use our information insights and system for more pieces of the puzzle.
Leading to more complete results in these data.
Data that will be the basis for further research treatment and better health.
That is where we are headed and we continue to see that as a defensible and differentiated strategy.
Sets us apart from others.
Yes.
Next we would like to touch on a few positive developments in these areas beginning with our recently updated MCC and guidelines.
Let's now endorses universal Germline genetic testing for all patients with colorectal cancer.
Notably in.
And VK has advocated for this guideline change thanks to the efforts of our clinical specialists and research team.
The updated guidelines have also cited two of our published collaborative study.
Based on this development, we estimate that in the U S alone the colorectal cancer Germline testing patient population were more than double.
We are glad that we have contributed to this change and additional efforts are well underway to do the same for breast prostate and lung cancer that have larger patient population.
We will also be making efforts to further promote clinical adoption and implementation of these guidelines.
Along with continuing to raise provider and patient awareness.
In oncology and <unk> is a leading genetic testing provider offering both germline and somatic assays.
Which is exciting and support the growing value engineering testing.
And an increasing number of studies presented each year at ESCO.
And other major clinical meetings.
Delivering more and more evidence that indicate the combination of germline and somatic information yields earlier diagnosis more actionable results for ongoing monitoring and.
And potentially better outcomes.
The great thing about our portfolio is that we will leverage our technology to utilize the same tissue sample to perform tumor profiling, which.
Which is vital for therapy selection and prognosis.
As well as to generate a patient specific panel for Cte DNA detection and monitoring in the blood via our <unk> assay, which we call personalized cancer monitoring or PCM.
For example, a patient with advanced cancer frequently need tumor profiling for biomarker detection and treatment planning.
And that same patient can also benefit from measuring treatment response.
So our platform and bioinformatics approach.
One sample input for two important clinical results.
This is particularly beneficial in patients with limited tissue availability.
And we are adding personalized insights via our pharmacogenomic offering.
Have the potential to reduce adverse reactions to prescription medications.
We continue to believe that <unk> has a unique proposition based on our combined offerings, our relentless focus on ease of use our commitment to provide the best customer service.
And our distribution channel.
Speaking of our channel we have a strong sales team.
Led by highly experienced commercial leaders.
We also have a presence in most large NCI and community cancer centers.
Many of the talented genetic counselors, we work with have direct relationships with oncologists, who oftentimes serve the same pace.
We are in the early stages of penetrating the somatic market and.
And we expect these strong relationships to offer us a competitive edge.
Touching on our efforts in digitizing Provider's workflow and patient is Germany and.
An example is the adoption of our Geos chatbot.
Which provides clinicians with patient driven information such as health and family history.
With this risk assessment in the patient's record.
Our algorithm and offers concrete actions for the physician to further guide the patient.
Such as lifestyle choices health monitoring for genetic testing.
We're seeing continued uptake for our GSE chat tool for risk assessment.
As our interactions in the second quarter increased 75% from the same quarter in 2021.
We have also formed a number of partnerships with different institutions, including worldwide clinical trials incorporate it.
Contract Research organization.
Through this partnership worldwide has access to data insights based on prevalence incidents.
Graphics, and epidemiology for rare disease patients.
This aggregated data enables worldwide to recruit patients faster and.
And pinpoint optimal study location.
Its sponsors uncover new and potentially life saving treatment.
Longer term I would like to emphasize the importance and value of the network effect that we're trying to create.
This network effect continues to benefit patients we serve well after their initial testing experienced with <unk>.
Rather than providing a test to a patient and as a discrete one time interaction.
We view the first interaction whether it be a test for risk assessment this year.
As the starting point of forming a relationship with the patient through the rest of their journey.
Currently almost $2 million of our patients have made their data available for sharing.
Solidifying their belief in our long term relationship as well.
In reality.
<unk>.
Many patients, particularly in rare diseases do not have the information they need at a critical time when outcomes can change for the better.
In addition to providing the test to these patients.
We intend to provide a more holistic solution addressing other important needs in their journey.
Such as by offering the connection to patient advocacy and other support groups.
Finding optimal treatment and alternative therapy options.
We're searching for clinical trial opportunities with the ultimate goal being to stand by these patients along every step of their way.
And while it will take time for us to get there.
Patient stories that we hear internally continues to accumulate.
And gives us confidence that our strategy is working.
I'll now hand, the call over to biopsy to walk us through the details of our second quarter results.
Thanks, Tom.
Second quarter of 2022, we've generated approximately $137 million of revenue.
And the breakdown with us.
Approximately $81 million oncology, including Germline testing therapy selection, PCM and companion diagnostics, representing a 14% growth over prior year.
Approximately $27 million women's health offerings, including Ikea, Canada, and other reproductive past the 27% growth over Q2.
Constantly $17 million on <unk> and <unk>.
Other testing products, including pharmacokinetics, the 18% growth over prior year.
Data on platform revenue was approximately $12 million grew 19% over last year.
<unk> data management analytics data as a service.
<unk> biopharma or coupon.
So this would be a second quarter non-GAAP gross margin was 41% a 465 basis point improvement over the same quarter of 2021, and 350 basis point improvement from the first quarter of this year.
Our communications since the beginning of the year pointed to our confidence in being able to achieve cost productivity in many parts of our business operations and we're encouraged by the steady positive trend. Thanks to our efforts in improving pricing level of accretion and product design.
Other measures.
non-GAAP operating expense was $200 million.
146% of revenue compared to $209 million or 169% of revenue in the first quarter of 2022 and.
170% of our revenue in the prior year.
Second quarter operating losses include costs from acquired businesses and the annual stock based compensation go ahead.
As we stated on our first quarter call, we plan to hold our operating expenses at a stable level beside from adjustments and stock based compensation. This quarter was our lowest non-GAAP operating expense as a percent of revenue since the fourth quarter of 2020.
As communicated on our July call, we will be further reducing that figure by.
Significant demand going forward as a result of multiple initiatives, including reduction in head Count Lab and office space Third party services as well as I've said in certain businesses and geographies.
Speaking of exiting certain businesses, which included arent distributed oncology kits business, we're moving along with our plan.
Aware the kids business has several different offerings of which we are having productive discussions with multiple parties.
We also want to note that we have created a large noncash write downs of goodwill in the quarter, resulting from a significant decline in the stock price and market capitalization as well as lower than projected financial performance.
In the third quarter, we also expect to make certain adjustments for intangible assets in relation to the realignment we announced in July .
Moving to our cash position cash cash equivalents restricted cash and marketable securities totaled $737 million at June 32022, compared to $885 million at March 31, 2022.
Cash burn in the second quarter was $147 million compared to $169 million in Q1, 'twenty, two and $196 million in Q4 'twenty one.
We're encouraged by the progress we've made in reducing our cash burn.
Now turning to the business metrics that are intended to offer more transparency and more consistent balanced perspective on our performance.
And the portfolio grow our active accounts and active partner both continue the growth momentum in Q2. Similarly.
Similarly, the number of patients we serve and the ones who are available to share their data has also expanded nicely.
Our new product vitality remains flat quarter over quarter are down from the previous quarter.
As a reminder, this metric represents our revenue contribution by new products over the trailing three years.
As previously communicated we saw a pullback in a number of resulting from the slowdown in new product launches in 2020 and parts of 2021, primarily due to Covid disruptions.
We have a number of product launches either going on now where our plans for the remainder of the year, which will contribute to new product revenue in future periods.
Revenue per patient as measured by total company revenue divided by the number of ordering patients for the period. So in the first quarter due to higher growth from our women's health and international businesses, which have lower average price points.
This number has recovered in the second quarter and even exceeded the preceding quarters, largely driven by our effort to improve quality of revenue.
Moving to operational excellence.
We're seeing continued quarter over quarter improvement in all categories.
The initiatives were already put in place are taking hold our margin cost productivity operating expense profile are improving and flowing through to our cash flow metrics.
As previously mentioned, we're pleased to see trend, reflecting the effectiveness of our initiatives and the team's ability to drive positive changes and we are ready to accelerate further from here.
Moving on to the financials and guidance revenue was $260 million.
First half of 2022, a realignment plan indicates revenue impact from the businesses to be exited in the second half as.
As such we expect the second half of 2022 to be flat compared to the first half, resulting in full year revenue to grow in the low double digits compared to 2021.
We have previously communicated that about 15% to 18% of our 2022 revenue will not recur due to our plan to exit certain businesses and as such this would set a new baseline in 2023.
Offsetting this adjustment will be the growth of the remaining business in the range of 15% to 25% in 2023.
This range is in line with our long term revenue growth assumption towards cash flow breakeven.
non-GAAP gross margin for the first half of the year is roughly 48, 4% and we expect continued improvement throughout the year with our full year non-GAAP gross margin to be between 42% to 43%.
Similar to revenue as a result of our assets. We also expect non-GAAP gross margin profile to change the non-GAAP gross margin of our access are in the range of mid teens.
As such we're moving them will lead to a higher gross margin baseline in 2023.
This along with our focus on higher quality revenue and the other continuous improvement initiatives.
Dissipated to further expand our gross margin over time.
Lastly, we are maintaining our 2022 cash burn guidance of $600 million to $650 million, which includes up to $75 million cash to be used for the realignment activity, including seven with.
We also continue to anticipate our cash burn to be in the range of $225 million to $275 million in 'twenty <unk>, three which includes up to $25 million cash to be used for realignment.
I'm, turning the call back to Ken.
Thank you Rafi.
As we close the call I thought I would summarize with a few thoughts.
First and foremost.
Mission of <unk> and the passion of our people to pursue that mission have not changed.
We are however, changing the pathway.
Amid a realigned to focus on business imperatives.
We find ourselves at a pivotal moment in the company's history.
We stand closer than ever to the day when patients and providers are equipped with the testing tools that informed risk delivered results and guide actions that can instantly incorporate the latest research treatment and advancements that the medical community has to offer.
This will require a broad integrated testing improved tools and transformative applications.
All of which are within our strategic focus.
I appreciate all envision while executing through this transition.
By an unwavering concern for every patient that we can touch.
And we are getting after it.
With that we'll now turn the call over to the operator for Q&A.
If you'd like to ask a question. Please press star followed by a one on your telephone keypad if for any reason you'd like to remove that question. Please press star followed by two.
Again to ask a question press star one.
We ask that you limit yourself to one question at a time, but feel free to re queue. If you have any additional questions.
We will pause here to briefly ask questions are registered.
Our first question comes from Tejas Savant with Morgan Stanley . Your line is now open.
Hello. This is Hugo on for <unk>. Thank you for taking our question why.
Why are you extended the runway to 'twenty for some of your peers are considering alternative non dilutive sources of funding such as royalty financing is that something that you may explore in the future.
Thanks for the question.
We are we cannot be very specific about the ongoing conversations we're having and.
What I will say is as you mentioned, we have extended our cash runway through the end of 2024, and we're very encouraged by the early signs of success we have.
<unk> over that last quarters since we put a number of initiatives in our margin expansion and cash flow cash management in place we've seen some results. So we're confident.
With our ability to execute the plan, we put together to extend our cash runway and build a stronger business in the meantime.
Yes, we're having multiple conversations and we look forward to update investors.
Investors.
And our shareholders.
Yes.
As we have more specifics.
Many options are on the table and we are very open minded about solution to build a strong and flexible balance sheet from here.
Got it thank you and then sorry.
A follow up could you help us think about the pace of incurring $75 million in cash expense associated with realignment activities and severance over over the <unk> and <unk>.
Just to clarify you do you want to understand the cadence of the 75, we estimate that.
Yeah like I said most of it go into three Q or should it be roughly equal across both quarters.
Yes.
To give you precise guidance on this because these things are related to the exact time timing of the initiatives are.
Being executed.
People's access timeline, a lot of the details are still being worked out.
But as <unk> 70 up to $75 million of cash expenses in the second half as we're way Uh huh.
More clear visibility too.
Great. Thank you.
Our next question comes from Puneet <unk> with SBB Securities. Your line is now open.
Yeah, Hi, guys. Thanks for taking the questions. So first one is really just wanted to understand in terms of the 2023 guide I mean, it seems like obviously there is a.
Reset the baseline, but you were expecting.
Growth on top of that.
Based on what Im looking at it in your guidance.
Slide it appears that there is.
A step up in growth from.
In 2023 versus 2022, net net but I just wanted to be very clear I mean is this can.
Can you can you maybe quantify that.
Or should we expect it to be just.
Just slightly better than that better than flat could you just clarify based on all the moving parts.
We are going through right now.
Yes. Thank you for the question so 2023, we're.
We're providing a range at the moment.
Sure.
We presented today, you've probably seen the chart.
Our 2020, we will have a 2023, new baseline up we exit this year with approximately 15% to 18% of our 2022 realized revenue not reoccur in 2023, and then from that new baseline, we expect 2023 to grow in the range.
<unk> of 15% to 25% in that range. So are we.
It's not a affirmed guidance that we're providing for 2023 is a range estimate.
Yeah.
Okay.
And then you know.
Could you outline for us where do you I know these upwards workforce reduction efforts have been implemented but.
What extent, maybe sort of just help us understand on the size of the commercial organization now.
Curious out of the business in oncology side of business and I. Just wanted also wanted to clarify on the.
Oncology kit piece is that what you were referring to as a mid teens gross margin I just wanted to clarify you made a comment around.
Exiting business, having mid teens gross margin.
So this is Ken maybe I'll start with the commercial question.
When we look at our commercial team.
Look at the size of our team we still have a very strong commercial team as I've said in the call.
Our oncology team for the most part we are just as strong as ever we're continuing to invest in our oncology commercial channel.
The changes that we made commercially were either related to <unk>.
Existing territories.
Or exiting countries outside of the U S.
Or exiting.
Yeah.
Specific product line as we talked about back in July .
So for the most part our commercial team is still strong, especially in oncology.
And we continue to invest there.
Yes, I will add.
Can't comment.
Any comments on that in terms of your question about margin.
Mid teens gross margin for the accent business.
Yes include that.
Maybe the oncology kits business as well as the.
About 100 countries or exiting a and also a part of our IVF.
IVF business.
So all parts of the exit business.
Again to about mid teens in gross margin level.
Okay got it okay. Thank you.
Okay.
Thanks, Tony.
Our next question comes from Brian Weinstein with William Blair.
Your line is now open.
Hi, there good afternoon, Chris.
Griffin our propriety. Thanks for taking our question just on the on the Guy here in the second half flat first half versus second half so somewhere around 269 in the second half, but can you just give us a little bit more color on how youre thinking about Q3 versus Q4, and how we should think about the pacing of that.
Exited businesses revenue rolling off in the second half second half year.
Yes. Thank you for the question.
We expect Q3 in general to be higher than Q4 for a couple of reasons one is.
As you mentioned our accent business.
Well.
The impact on the access business will primarily be felt in Q4, we'll start seeing that in Q4 and <unk>.
Also certain seasonality will also play and so we Oh Q3 issue would be end up being higher.
Higher revenue than Q4.
Okay. Thanks for that and then.
Kevin maybe just recognizing it's early days since the restructuring announcement.
It really just beyond the financing I guess, if you had to point to a few things.
<unk> really kind of went wrong.
I mean, how do you overcome some of the structural issues like maybe a lack of demand or early adoption for genetic testing.
Widespread clinical practice is that really the last iteration of in vitro should come to here.
Yes.
You know what.
Just to kind of go back too much to do Monday morning quarterback and looking back into the into the year I would say that we on a journey to establish a new era of <unk>.
And it's really basically focusing on two or three fundamentals one is two two.
To ensure that as we operate our business that we do it in a way that drives toward cash independent.
Capital Independents, so when we focus on getting to cash flow positive, that's because we want to be able to invest in ourselves and invest in our business and along for the long term.
Secondly, we had to extend our cash runway that was not an option we had to deliver on our plan to do that and we believe we have.
And then I think a third offshoot of this as I talked about earlier is as we started looking internally.
Our focus on our prioritization, we found opportunities to really kind of codify the team.
Items that we really can deliver.
And I believe that that focus and that prioritization is going to result in better execution and that execution is going to be how we earn the right to continue to invest into our future. So.
Looking backwards and looking forward and that's how I see the opportunities for <unk>.
And we are still a leading.
Kinetic testing testing in this organization in this industry. So.
We like our chances.
Yeah.
Okay I appreciate the questions. Thank you.
Our next question comes from Dave <unk> with Goldman Sachs. Your line is now open.
Hey, guys.
So if.
My math is right here.
16% to 17% decline.
Next year, followed by a 20%.
Kris.
Three.
Then.
Put us at all.
About flat in 'twenty, three am I thinking about that right.
Yes, you're thinking about that right.
We're expecting to roughly half a year all stable stabilization from my total revenue in.
In 2023, given the access that we're planning.
And also the growth.
<unk> in 2023 for the remainder of the business.
Mhm.
So what do you expect to be the main sources of that growth.
When we get out there longer term.
I mean, I think a couple of things as we talked about we're going to have an opportunity to really have scalable growth with our ability to.
To bring to the market better workflows and aggregation of testing menus and better ability to serve our customers and are in Ah patients. We see a scalable growth opportunity that we are currently pursuing and that's going to continue to fuel our long term growth are our core testing businesses.
Great opportunities to grow as well as I talked about.
With our somatic offering combining that with our.
Germline hereditary cancer offering.
Our oncology product portfolio is going to be strong and.
The combination of our PCM.
We can we can help cancer patients throughout their entire journey, and we will be able to do that better than we ever had before so we see core growth in our testing business and then the final piece of it as we talk about our transformative growth opportunity.
With how we put all the pieces of the puzzle together for the future.
That's going to be our data business and our patient network is going to be part of our growth as well. So we've got three pillars of growth.
<unk>.
Into the future and that's why we're so bullish on our opportunity to continue to grow the business. While we are.
Containing cost and managing cash.
Great. Thanks, and then any puts and takes on the more conservative gross margin expectations.
And when you say more conservative, but what do you mean by that.
Yeah.
Did we lose you.
Yes, no I'm here.
Just any additional color you can give us on here.
Are you expecting for gross margin.
I think what mark laid out for you is how we see it is that obviously.
We've shown over the last several quarters that we can expand our gross margin and we've done that through.
Managing revenue managing costs.
And just being a little bit more intentional about it and then we see opportunities with some of the exited businesses and territories and things like that we chose to exit businesses that were in aggregate in the mid teens in terms of gross margin. So.
Getting better quality revenue.
Our journey on improving our cost and efficiency.
Focusing and investing in businesses that have higher growth.
And higher gross margin potential is.
That's why we see a positive upward trajectory on our gross margins up into the short term and into the long term.
So that's what we're signaling and Thats, how we see the business going forward.
Great. Thanks, guys.
Thank you.
Our next question comes from David Westenburg with Piper Sandler.
Your line is now open.
Hi, Thank you for taking the questions.
I wanted to actually go to a different angle and talk about the NCC and guidelines in Germline testing on CRC could you give US a reminder, on how often germline testing is done by the oncologists versus the primary care physician or.
Versus the obgyn and is there an opportunity to increase that and then can you talk about the long term synergies.
During that Germline testing with the oncologist and then maybe going back to some of that.
MRV asset.
Potential in the future.
Yeah sure so the.
SEC guidelines really open up the <unk>.
Adoption.
And utilization of.
Germline genetic testing for colorectal cancer patients. This has been something we've been advocating for.
And it's the right thing to do.
<unk> care for those patients.
And so we are extremely excited about it and as we see it.
We see the patient population who would be.
Having availability for core.
For Germline genetic testing doubling conservative we'll be doubling.
As a result of these guidelines and so who's going to order that and how that works out.
We've more than we can get into on the call but the.
The.
The changes in the guidelines are is an accelerator for opportunity to serve those patients and we are well positioned to take advantage of that.
You started talking about the.
<unk>.
The opportunity with <unk>.
Our.
PCM monitoring and how we see all that playing out is obviously a patient with cancer.
It needs.
The things they need the right therapies to be.
Prescribed for them and we believe knowing the.
The DNA of the tumor.
As well as how the patients body operate give them the best opportunity to getting therapy selected and guide it.
Sometimes the therapy needs to change however is the tumors can become resistant to that.
The treatments and so it's not just that initial guidance of therapy, but it's also a continual helping the patient through that journey.
And then once a patient is in remission, we have the ability to kind of monitor.
Looking at circulated.
No.
Cte DNA in their bloodstream and.
And detecting whether or not the tumors recurring and so.
The diagnosis and prognosis of better with early detection and so this is a compilation of.
A body of work that's going to be super important for oncology patients for the future and.
We also believe that.
Getting access to these treatment does not always have to come through and oncologists. We work with genetic counselors. We also work with obgyn, we here to serve the patient in any way.
That we can and how they get access to our services is in a variety of ways.
Oh.
But the combination is going to be powerful for the patient.
Got it I appreciate it and then just as a quick follow up.
I know on the last on the pre announcement call you didn't really want to talk are you werent ready to talk about the 2024.
Refinancing of term loans I'm just curious if maybe now is the right time, particularly because you would know did extend your cash runway I believe to 2024 and it doesn't look like you you don't have a good roadmap, but if youre not.
If that's not a conversation for today, we understand that as well.
Yeah.
I mean, we've been pretty.
Open web.
Responding to the question.
What we've done is again.
With the realignment plan we have.
On time, two to attract the 2024 our maturity.
Terminal at Baird.
We are.
No.
Again, very encouraged as Ken mentioned went that went that trajectory we're seeing that.
Performance in <unk>.
Both men with fee on both on gross margin cash management.
And we're having a lot of conversations.
Options are on the table, having lot of conversations with folks at the moment can be very specific.
Is that something by now we understand the impact of that that overhang on our stock.
Our performance.
We.
<unk>.
This is something we are working as a priority and we will update folks once we have that.
More information to share.
As important to us.
Working towards a sanction.
Hopefully mid of 2023.
Perfect. Thank you so much.
Yeah.
Our next question comes from Daniel Brennan with Cowen. Your line is now open.
Great. Thank you thanks for taking the questions.
Maybe to start just on the cost cutting plans kind of oxy could you just help us think through while certainly a meaningful reduction and a great step in the right direction could.
Could you even walk us through.
Maybe some of the metrics that got you there and is there potential to even go further.
In particular, maybe on the gross margins it sounds like if we strip away the sale of the low margin businesses. Your gross margin should get to like 50, or so I guess.
Kind of what's the potential for that to go higher and then as we look at your Opex what stands out to us as your R&D, which certainly high versus peers, particularly given your business mix I'm wondering if there is further potential on R&D or maybe you can just cleanup.
Within your cost structure. If you were to go further kind of what are the right levers.
Let me take I'll take a run at that first of all when we talked about the cost reduction the opex improvements when we announced it in July .
He was very clear that we aren't going to kind of go through each of the.
<unk> line.
The line items in our <unk>.
Cost table.
But it was.
Pretty obvious that our R&D is one of our larger expenditures and so.
Yeah.
There was there is going to be material impact to our R&D as a result of this now at the same time. We were we feel we were really intentional I'm pretty darn smart about how we went about this.
We looked at the business opportunity.
The ability to serve our patients and clients and we try to do this holistically it wasn't yesterday.
And kind of we didn't just make it up at the last minute. We really worked on this thoughtfully over a period of weeks to months.
And we feel really good about the fact that we.
We targeted the right businesses for us to exit we.
Targeted.
They had they weren't hitting our long term.
Objectives, or we didn't like the the path it was going to take to get those businesses or those territories.
To be cash flow positive. It just was going to take too long. So we had an element of time that we looked at.
Going through this.
And when we say, we like what we learned to that and as we can tell by when we talk about what's happening in second half of 'twenty, two and going into 'twenty. Three these decisions did not come without an implication on revenue.
When we looked at the revenue cycle.
The impact on cost.
Improvement on gross margins, we saw for the longer term health of the business and the health of the company.
With all of those inputs and so we feel we landed at a really good space now we just have to execute.
The question is could we have gone farther.
I think we I'll just say I think we landed at the right place for us at this time.
And the execution of it is in our hands, it's right in front of us and so.
We're pretty excited about the opportunity for the new era of VK.
And.
We're going to control, what we can control and when we do that.
We think we will deliver.
Extend the cash runway and our path towards cash flow positive business.
In the near term.
Great. Thanks.
Thanks, Ken maybe on the top line.
Could you just walk through maybe a little color on the factors that support the 15% to 25% growth across your markets. Maybe in particular there is the view as you mentioned like the cost cutting obviously is brought down the growth rate from the prior like 40% targets down at this level, but would be great to hear maybe some of the basic building blocks, if you would like across <unk>.
Collagen woman's health in rare disease, and data like which of those businesses like do you expect to grow kind of towards the high end or the low end of that range and are you anticipating.
As the addressable market like in which of the segments do you think youll grow in line or which goes are you taking share or losing share any any color that would help us get like some visibility and confidence in that 15% to 25%.
Yes, I mean.
So when we when we kind of looked at the business lines themselves and we're just kind of just look at Q2.
Our women's health business grew.
Higher than.
Our total company.
Quarter over year over year was about 18% and women's health.
Outpace that.
Our data business is just getting started and it's starting to get into.
Mid upper.
Upper teens.
Of growth and we are excited about the projection of opportunity in our in our long term data transformative business.
Oncology was a little bit lower than the corporate total number.
But we have products that we're launching we have somatic.
The assay is coming out in the second half of the year PCM is just getting started so we're bullish on on on our hereditary cancer or oncology business and the future prospects for growth. So.
There is nothing that really we see at the current time frame that would say that our 15% to 25% is not achievable.
And.
When we when we decided to solve for the the the health of the business.
We decided to to make sure that we were not.
Depending on outsized growth that was not delivering quad.
Quality revenue.
To solve for the health of the business and so.
By no means where we turned down growth that is healthy growth and we expect that we're going to be out there fighting and competing.
For business into the future.
Are we going to do it in a very responsible way.
And we have great products and great people.
And great relationships that.
We don't plan to abandon any of them.
And so yeah.
Yes.
It's different than what we've may be signaled in the past in the 40% growth.
But it's also.
Well within our capabilities to hit that 15% to 25% growth and deliver on the.
The cost improvements and the cash management I continue to talk to our team about this isn't an moment for us.
Maybe in the past we were trying to decided we could do one or the other.
So we go 40% or could we get the cash management I think now this has been an moment for our company and were intended upon.
<unk>, both growing and delivering a healthy business.
Yeah.
Great. Thank you.
Okay.
Our next question comes from Bruce Jackson with the Benchmark Company. Your line is now open.
Hi, Thank you.
Do you have a capex target for this year and next year.
Yes.
Thank you for the question Capex as part of our.
Our cash burn target and we are.
Are not and have not issued a specific path capex target.
Included in part of as part of our cash burn guidance.
Okay.
Thank you very much.
Yes.
There are no further questions waiting at this time, so I'll pass the call back over to management team for closing remarks.
Thank you operator.
I remain positive about the market opportunities for <unk>.
Our team's ability to execute and what the future holds for our company I want to thank everyone for joining us on our call today.
And if you have any questions. Please reach out to our Investor Relations team. We appreciate your continued support and have a great rest of your day. Thanks al.
That concludes the conference call. Thank you for your participation you may now disconnect.