Q4 2022 Castle Biosciences Inc Earnings Call
Speaker 2: Good afternoon and welcome to Castle Biosciences fourth quarter 2022 conference call. As a reminder today's call is being recorded. We will begin today's call with opening remarks and introductions followed by a question and answer session.
Speaker 2: I would like to turn the call over to Camilla Zucchero, Vice President Investor Relations and Corporate Affairs. Please go ahead. Information recorded on this call speaks only as of today, February 28, 2023. Therefore, if you are listening to the replay or reading the transcript of this call, any time-sensitive information may no longer be accurate.
Speaker 2: reform act of 1995. These four looking statements include, but are not limited to, statements about our financial outlook, CAM and similar items referenced in our earnings release issued today, and statements containing projections regarding future events or our future financial or operational performance.
Speaker 2: including our 2023 to 2025 outlook, our expectations and assumptions related to the impact of the COVID-19 pandemic and macroeconomic conditions, and the impact of our investments in growth initiatives and expanded commercial teams.
Speaker 2: Forward-looking statements are based upon current expectations and involve inherent risks and uncertainties, and there can be no assurances that the results contemplated in these statements will be realized. A number of factors and risks could cause actual results to differ materially from those contained in these forward-looking statements.
Speaker 2: These factors and other risks and uncertainties are described in detail in the company's annual report on Form 10-K for the year ended December 31, 2022 under the heading Risk Factors and in the company's other documents and reports filed with the Securities and Exchange Commission. The forward-looking statement...
Speaker 2: speak only as of today and we assume no obligation to update or revise these four looking statements as circumstances change. In addition, some of the information discussed today includes non-GAAP financial measures such as adjusted revenue, adjusted gross margin, and adjusted EBITDA that have not been calculated in accordance with generally accepted accounting principles in the United States.
Speaker 2: to the most directly comparable GAAP financial measures are presented in the tables at the end of our earnings release issued earlier today, which has been posted on the investor relations page of the company's website.
Speaker 2: We are not providing a target for or reconciliation of anticipated 2025 adjusted gross margin to gross margin, the most directly comparable gap measure, because we are unable to predict certain items contained in the gap measure without unreasonable efforts.
Speaker 3: I will now turn the call over to Derek. Thank you, Camilla. And good afternoon, everyone. Thank you for joining us today for CASEL's fourth quarter and full year 2022 earnings call.
Speaker 3: Across the board, 2022 represents another fantastic year of execution for CASL.
Speaker 3: before I begin discussing highlights of our year.
Speaker 3: I'd like to start today by personally thanking the CASEL team for their excellent execution, which enabled our fantastic results.
Speaker 3: I'd like to start today by personally thanking the CASEL team for their excellent execution, which enabled our fantastic results. Each and every employee contributes to our success.
Speaker 3: 2022 was a year of tremendous progress for CASEL. We delivered strong financial results, we made meaningful advances on our growth initiatives, and delivered value to our customers and the patients we serve.
Speaker 3: The fourth quarter was a very strong finish, driving our full year revenue to $137 million, the top end of our guided revenue range, and a 46% increase over 2021.
Speaker 3: Our total test reports delivered were 44,419, a 58% growth over 2021. We believe our success in 2022 provides us with momentum for 2023 and expect full year 2023 revenue in the range of $170 to $180 million.
Speaker 3: I will now turn to highlights with each of our businesses, starting with our dermatology franchise.
Speaker 3: We delivered 37,331 dermatologic test reports in 2022, a 41% increase over 2021. We believe our three dermatology offerings, Decision DX Melanoma, Decision DX SCC, and MyPath Melanoma.
Speaker 3: despite our continued growth, represents significant future growth opportunity. We continue to see new clinicians order our dermatologic tests for the very first time. For the year ended December 31, 2022, we saw approximately 2,312 new ordering clinicians for our dermatologic tests.
Speaker 3: and total order in clinicians for a dermatologic test of approximately 7,670.
Speaker 3: In developing our SCC test, we believe that in addition to addressing significant unmet clinical needs
Speaker 3: we would see strategic opportunities for leverage, as many of the clinicians already ordering our risk stratification decision DX melanoma test would likely be the same clinicians who would be diagnosing patients with cutaneous squamous cell carcinoma with one or more risk factors, and therefore would find value in our risk stratification decision DXSCC test.
Speaker 3: We are seeing this leverage by virtue of the fact that for the year ended December 31, 2022, approximately 79% of all clinicians ordering DecisionDx SCC had also ordered our DecisionDx melanoma tests during the year.
Speaker 3: We believe the clinical value provided by our tests today, coupled with our investment and our growth initiatives.
Speaker 3: We believe the clinical value provided by our tests today, coupled with our investment and our growth initiatives, should continue to drive increased adoption.
Speaker 3: Our growth initiatives include regular commercial team assessment and evolution, and R&D investments, and robust peer-to-peer programs. As it relates to commercial investments, in 2022, we re-established a dedicated sales team to focus on our gene expression profile test.
Speaker 3: to assist in the differential diagnosis of pigmental lesions. This means that we have a larger team focusing on our dermatology call point, primarily supporting decision DX melanoma and decision DX SCC together, and a smaller focus dedicated team focusing on the dermatopathology call point.
Speaker 3: as we have seen historically that our target market is promotion responsive.
Speaker 3: So we believe these expanded commercial investments can contribute to continuum amendment 2023.
Speaker 3: As part of our long-term strategy, we plan to continuously assess the impact of our commercial teams, including the commercial team that is now focused on decision DX melanoma and decision DX SCC, and the separate diagnostic gene expression profile commercial team focused on dermatopathology, and we'll make moderate adjustments if necessary.
Speaker 3: but ending 2023 with slightly more outside territories than we have today. In the long term, that is beyond 2023, with three dermatology offerings...
Speaker 3: We believe around 80 to 100 total outside sales territories for our dermatology commercial teams could make sense for us.
Speaker 3: As it relates to our R&D investments, in dermatology alone, we had 12 peer-reviewed manuscripts published in 2022. Continuous serial publications support our educational efforts for both existing and new clinical customers. That's how I turned to our gastroenterology franchise.
Speaker 3: I would like to comment on current expectations for Decision DX SCC. In the late fourth quarter of 2022, CMS decided to gap fill our Decision DX SCC rate.
Speaker 3: In a regular gap fill process, we would expect the outcome from this process to go into effect in January 2024. In the interim, and since we were just contractor priced in the second quarter of 2022, we expect our current rate of $3,873 to be maintained during the gap fill process in 2023.
Speaker 3: Separately, we currently have coverage through Novotov following their evidentiary review that was completed early in 2022.
Speaker 3: Separately, there is a draft broad LCD entitled DL 39365, genetic testing for oncology, whose purpose we believe is to streamline reviews in the future.
Speaker 3: We have no new updates from Novotos on the status of this draft LCD. Separately Palme de Moldex has not issued a draft LCD to date, and we have no control over timing.
Speaker 3: If and when we do receive a MOLDX LCD draft, we expect it would take about 12 months to finalize. So we expect to have a final coverage determination from MOLDX in 2024. However, as I said earlier, we have no new updates from Palmetto about a potential LCD or timing.
Speaker 3: I would now like to turn to our gastroenterology business. We delivered 2128 tissue cipher test reports in 2022.
Speaker 3: You may recall we acquired tissue cipher in December of 2021. We have made significant progress since then with our integration efforts and look forward to the opening of our new Pittsburgh laboratory in the second quarter of 2023, which is scaled to enable us to continue processing our tissue cipher test in Pittsburgh.
Speaker 3: Additionally, we expect the Pittsburgh facility to have capacity to process our other tests as well. I will remind you that we hired the initial commercial team in early January 2022 and given the momentum that we saw in the second quarter, we added territories for our tissue cipher test in the late third quarter of 2022.
Speaker 3: $4,950.
Speaker 3: As an ADLT, the Medicare rate will be recalculated for 2025 based upon payer data collection between January and June of 2023.
Speaker 3: I will now discuss our mental health business. From late April , we acquired iD Genetics. Through the remainder of 2022, we delivered 3,249 tests.
Speaker 3: As with tissue cipher, our integration efforts are progressing according to plan, and we are pleased with the momentum we are seeing. As we have stated previously, we believe the pharmacogenomic and mental health opportunity isn't just a matter of a single large market.
Speaker 3: but an opportunity to enter a series of very large markets. One of our integration objectives is to focus on those market segments where we expect the value of iD-GenX will be seen by clinicians and their patients, including the value of drug-drug and drug-g interactions with lifestyle factors all combined in a single test report.
Speaker 3: We entered 2023 with a solid commercial team in place and will look to add a few territories throughout the year. One final note on our iGenX test. The iGenX multi-gene panel test is currently reimbursed by Medicare at a contract to determine price of approximately $1,500 per test.
Speaker 3: iGenX has historically been billed to Medicare using a multi-test, unspecified CPT code along with the iGenX test specific MOLDEX Z code.
Speaker 3: In February 2023, Moldex notified us that as part of their annual CPT code updates, beginning in March 2023, IDX genetics should shift billing to a different multi-test generic gene sequencing CPT code and to continue using the iGenics specific Z code.
Speaker 3: The new CPT code is currently contracted price at $917. Well, it goes through the CMS's gap fill process in 2023.
Speaker 3: The new CPT code does not describe all the components of the iDigenics test. We therefore do not believe that the new CPT code in conjunction with the iDigenics specific Z code provides additional specificity and thus we believe the new CPT code is unappropriate for iDigenics.
Speaker 3: Now, I want to provide an update on our inflammatory skin disease pipeline test. As a reminder, the focus of this pipeline test is to be able to predict response to systemic therapy in patients who are diagnosed with inflammatory skin disease such as psoriasis or atopic dermatitis and are initiating...
Speaker 3: therapy on a systemic therapy or on a systemic therapy and either not receiving optimal response or experiencing treatment-limiting side effects. Development and validation of this test is occurring under the umbrella of our identity study protocols. In 2022, we presented data supporting our non-invasive collection method.
Speaker 3: had demonstrated or passed our technical thresholds. I am pleased to report that as of February 2nd, 2023, we have 54 committed sites.
Speaker 3: and 507 patients enrolled in the identity study.
Speaker 3: We expect initial development data in the second half of 2023, and we believe we are on track to launch this test by the end of 2025. If successful, we believe this test would add $1.9 billion to our estimated U.S. TAM.
Speaker 3: I would now turn the call over to Frank to provide additional detail relating to our financial results and what to expect in 2023. Thank you, Derek. Good afternoon, everyone. We again delivered strong financial results in 2022 while continuing to make progress on our growth objectives.
Speaker 4: which we believe leaves us in a position of strength for 2023 and beyond. In the fourth quarter of 2022, we delivered total revenue of $38.3 million, a 53% increase over the fourth quarter of 2021, and we delivered $137 million for the full year of 2022, a 46% increase over 2021.
Speaker 4: Overall, the increased revenues are primarily attributable to dermatologic test revenues reflecting an increase in test report volume and higher per unit revenue. The increases in total revenue for the full year were partially offset by the effect of variations in revenue adjustments related to tests delivered in previous periods associated with changes in estimated variable consideration.
Speaker 4: which were net negative $2 million for the year ended December 31, 2022, compared to net positive $3.3 million.
Speaker 4: for the year ended December 31, 2021. Revenue adjustments related to tests delivered in prior periods may fluctuate from quarter to quarter and over time.
Speaker 4: Our adjusted revenue, excluding the effects of revenue adjustments related to tests delivered in prior periods, was $37.5 million for the quarter and $139 million for full year 2022. As Derek mentioned earlier, for 2023, we anticipate generating between $170 million and $180 million in total revenue.
Speaker 4: driven by further consistent execution of our growth plans. In order to support those growth plans, we increased the size of the organization in 2022, and headcount increased from 345 on December 31, 2021 to 543 on December 31, 2022.
Speaker 4: For 2023, we expect further increases in total headcount, including the modest adjustments to our commercial team Derek just discussed, but not to the same extent as our headcount growth in 2022.
Speaker 4: Our gross margin during the fourth quarter was 69.4% compared to 77.6% in the fourth quarter of 2021. And our gross margin for the full year was 70.6% compared to 81.1% in 2021. Our adjusted gross margin...
Speaker 4: which excludes the effects of intangible asset amortization related to our acquisitions and revenue associated with test reports delivered in prior periods, with 74.6% for the quarter and 77% for the year, compared to 82.2% and 82.6% for the same periods in 2021.
Speaker 4: We believe this compares favorably to the margin profiles of our peer companies. Our total operating expenses, including cost of sales, for the quarter ended December 31, 2022, were $61.2 million compared to $40.2 million for the prior year.
Speaker 4: And we're $209.9 million for the full year, compared to $134.2 million for the full year 2021.
Speaker 4: Sales and marketing expense increased by $37.6 million, or 76.9%, for the year ended December 31, 2022, compared to the year ended December 31, 2021.
Speaker 4: Approximately 23.1 million, or 61.4% of the increase, is attributable to higher personnel costs, including salaries, stock-based compensation, and bonuses.
Speaker 4: The remainder of the increase in sales and marketing expenses was primarily associated with travel, training events, and conference fees. General and administrative expenses increased by $18.6 million, or 49.3%, for the year ended December 31, 2022, compared to the year ended December 31, 2021, with increases primarily attributable to higher personnel costs including the number of people who are in the business.
Speaker 4: and was primarily associated with increase in personnel costs including increases in stock-based compensation attributable to additional headcount to manage and run our clinical studies and increases in other expenses associated with increased clinical study activity.
Speaker 4: Total non-cash stock-based compensation expense, which is allocated among cost of sales, R&D expense, and SG&A expense, totaled $36.3 million for the year ended December 31, 2022, compared to $21.7 million for the year ended December 31, 2021.
Speaker 4: We expect to continue granting stock-based compensation awards in future periods as we continue to grow our headcount. For 2023, we expect stock-based compensation expense to increase by approximately 30 to 35 percent over 2022. Income tax benefit was $1.8 million for the year ended December 31, 2022 compared to $8.7 million for the year ended December 31, 2021.
Speaker 4: Substantially, all of the income tax benefit was a tribute to a reduction of $1.6 million of our valuation allowance on net deferred tax access assets.
Speaker 4: resulting from our acquisition of the Althea DX in April 2022. Specifically, we took into consideration the additional deferred tax liabilities resulting from the acquisition of the Althea DX in April 2022.
Speaker 4: and determine that a portion of our existing valuation allowance should be reduced. Our net loss for the fourth quarter of 2022 was $20.6 million compared to net loss of $6.4 million for the fourth quarter of 2021. And our net loss for the full year of 2022 was $67.1 million compared to net loss of $31.3 for 2021.
Speaker 4: Deluded loss per share for the fourth quarter was 78 cents, compared to diluted loss per share of 25 cents in the fourth quarter of 2021. Deluded loss per share for the full year 2022 was $2.58.
Speaker 4: compared to diluted loss per share of $1.24 for 2021. Adjusted EBITDA for the fourth quarter and full year 2022 were negative 10.4 million and negative $42.6 million respectively, compared to negative 6.9 million and negative $14.9 million for comparable periods in 2020.
Speaker 4: during the 12 months ended December 31st 2022 was 166.5 million dollars primarily attributable to the purchases of marketable investment securities of 135 million dollars
Speaker 4: and the cash portion of the acquisition of Althea DX of $27 million. In 2023, we expect our capital allocation priorities to remain consistent.
Speaker 4: These priorities include continued acceleration of our R&D efforts to build our expansive body of evidence that supports our marketed As well as to develop our pipeline test The continued assessment and evolution of our commercial team and to a lesser priority opportunistic tuck-in M&A in the areas of our existing franchises.
Speaker 4: Finally, we had cash, cash equivalents, and marketable securities at December 31, 2022 of $259 million, which we expect, together with the anticipated cash generation from sales of our tests, will be sufficient to operationalize our business through 2025. Before I close, I wanted to remind you that in September , we hosted an investor day.
Speaker 4: where we outlined our three-year financial targets. We anticipate achieving total revenue in the range of $255 million to $330 million for the year ending December 31, 2025, with adjusted gross margins in the range of 80 to 85%. Combining these expectations for strong top-line growth and gross margins to fund better education programs.
Speaker 4: along with a continued disciplined approach to capital allocation, we continue to expect to be net operating cash flow positive for 2025.
Speaker 4: Disciplined approach to capital allocation, we continue to expect to be net operating cashflow positive for 2025. I'll now turn the call back to Derek.
Speaker 3: Thank you, Frank. We are executing well against our long-term plans and are pleased with our successes of 2022. Again, we have a people-first culture focusing on our patients.
Speaker 3: Thank you, Frank. We are executing well against our long-term plans and are pleased with our successes of 2022. Again, we have a people-first culture focusing on our patients, our finishing customers, and our employees.
Speaker 3: It is this people first culture combined with offering innovative tests that drives our relentless pursuit of excellence in every aspect of our business. We believe the momentum that we finished with in 2022 will provide us with another strong year of performance in 2023.
Speaker 3: for its culture, combined with offering innovative tests that drives our relentless pursuit of excellence in every aspect of our business. And we believe the momentum that we finish with in 2022 will provide us with another strong year of performance in 2023. This concludes our remarks.
Speaker 5: Thank you for your continued interest in CASL. Operator, we are now ready for Q&A. Thank you. If you would like to ask a question, please do so now by pressing start followed by 1 on your telephone keypad. In order to allow everyone in the queue an opportunity to address the CASL management team, please limit your time on the call to one question and only one follow-up. If you have additional questions, please return to the queue. Please stand by while we compile the Q&A roster.
Speaker 5: The first question comes from Sung Jee Nam with Scotiabank. Please go ahead. Hi, thanks for taking the questions. So maybe once we're frank, could you talk about for your 2020 guidance, your kind of the quarterly pacing?
Speaker 4: if there's going to be seasonality, typical seasonality, how should we think about the first quarter? Yeah, sure, I think that what we saw with the end of 22 is that we kind of have returned to a pre-COVID pattern of seasonality as it relates to melanoma diagnoses. So,
Speaker 4: I think we're assuming that same kind of progression that we saw through 2019 into 2023. So the typical increased activity in the second quarter from patients identifying more lesions and more physician practice days, we would expect to see again this year..
Speaker 6: Got it. And then just on the SEC reimbursement, could you just clarify kind of what's different from before to kind of figure out what's changed? On SEC? Yeah, just trying to figure out if they'll... I don't know. The reporter, I'm sorry, I'll think right. Yeah, no, I think same assumptions there, Sanji. We as Derek...
Speaker 1: Thank you. Thank you.
Speaker 5: Thanks, Sanjeev. The next question comes from Mason Carrico with Stevens. Please go ahead.
Speaker 7: Hey guys, this is Jacob on from Mason. Thanks for taking our questions. It's first here, just on the closure of Alphys and Ego Lab facility. I should be thinking about the magnitude of those cost savings there. What are the majority of those savings going to show up in the P&L and what quarter of the anticipated, hitting the full run rate of those savings?
Speaker 4: Yeah, thanks. I think that we did complete that close at the end of the year. And the primary benefits are, of course, to reduce real estate. But also we have sufficient capacity in Phoenix that we don't believe that we'll have to see the
Speaker 4: the staffing level increases that we might have had to see had we remained operational in Southern California. So I think that not Q1, I don't think we fully see it through there. There's still some winding down going on, but my expectation is probably Q2, we have the full benefit of that for San Diego. Now as it relates to Pittsburgh,
Speaker 4: We expect to be in that facility in the second quarter. We expect a complete build out and to be there. And it'll probably take us a couple of quarters to see the full benefit from the COGS and the efficiency standpoint for the Pittsburgh transition. So we'll be in a little bit of a transition period here on the COGS side through second, third quarter as we get that done.
Speaker 7: got it and then uh... sorry if you touched on this early in the call and juggling feat or not but what's the latest update on the soon adlc status for the scc test kind of any updates on how you think about this opportunity uh... on a time-on-terrace practice this is that there a check up so we do believe
Speaker 3: that decision DX SCC would qualify for ADLT status based upon the criteria set forth in the statutes. However, because that process can be short or long, we are not commenting upon timing when that may or may not take place. I would put that as a question mark.
Speaker 3: And as Frank mentioned earlier during his monologue that for 2023, I would have us all model or assumes 3873 is the price for FCC and it happens to be modified or changed because of ADLT that would represent upside to that. Fair, Frank? Sure. Our next question comes from Thomas Flassen with...
Speaker 8: Got it. And then just out of curiosity, you mentioned that 79% of the FCC orders also ordered the X melanoma. Is there something unique there? Is there a question of timing that all of those doctors have at some point or melanoma or something? Is there a unique selling feature to FCC that has pushed them to that product versus having adopted melanoma previously?
Speaker 3: That's an excellent question, Thomas. I think of a general medical dermatologist. They're going to see melanomas that will be appropriate for testing for melanoma test and squamous cell carcinomas with high risk features. While I don't have the numbers here in a serage-giving exact differences here, we also have a group of dermatologists that are trained in most surgery. So most surgeons is a subspecialty of dermatology. There are a good number of most surgeons who don't perform most surgery techniques on invasive melanoma.
Speaker 3: And so some of that delta, I would never expect it to be 100% because some of the physicians who have seen good value in our squamous cell carcinoma test are those Mohs surgeons who preferentially are seeing or at least performing surgical procedures on patients with squamous cell carcinoma, many of whom have a high risk factor or more, but they would not be necessarily doing surgical excisions in people with invasive melanomas. That's part of differentiation there.
Speaker 3: I would never expect it to be 100% because some of the physicians who have seen good value in our squamous cell carcinoma test are those Mohs surgeons who preferentially are seeing or at least performing surgical procedures on patients with squamous cell carcinoma, many of whom have a high risk factor or more, but they would not be necessarily doing surgical excisions in people with invasive melanomas. That's part of differentiation there. Thank you.
Speaker 3: The next question comes from Kyle Mixen with Canacord. Kyle, please go ahead. Hi, I'm Steve Alcourt, I'm from Kyle Mixen. I guess the good place to start would be, I'm just curious about a few comments on whether an ID genetics or tissue cypher could have a meaningful contribution to your assumptions there. Thanks. It's Alex, right? Yes. We certainly have a revenue in the 2023 guidance for both tissue cypher and ID genetics.
Speaker 3: to set back to 2022 and our conversations around those two acquisitions, those weren't about sort of creating lift in 22 or 23 in terms of revenue from a significant material perspective. Those are really about making sure that we continue to be a profitable high growth company in the middle of this decade and beyond. And so we do expect and we will receive, I guess, meaningful revenue from those combined products in 2023. But we're not expecting, I guess, what you would call a material impact probably until 2024, 25 and beyond. That was the real goal of those acquisitions. So that hasn't changed from a thesis perspective. Got it. And apologies if you, let's touch on this a little bit previously, but just on that new CPT code for IDGenetic in the roughly $9 or $17 range, I believe, compared to the...
Speaker 3: You previously quoted a roughly $1,500 range for the Medicare code. I was just curious if you could elaborate on the ways in which you feel that this new code doesn't fully appreciate what the test offers. I know you stated that in your prepared remarks. I was wondering if you could elaborate on that. Thanks. A little bit, sure. So the main differences are that that's a sort of generic multi-gene panel test for pharmacogenomic tests or for gene sequencing tests.
Speaker 3: And that includes things that might cover cardiovascular disease events, Alzheimer's events, maybe even mental health, pharmacogenomic tests like ours, for example. However, what we do know is that when IGNX was initially built, it was built upon a combination of both drug gene interactions that were then integrated using a annotation algorithm tool that incorporated drug interactions and lifestyle factors as well. Those other components are clearly not covered in description.
Speaker 3: of this generic multi-panel code, which covers a whole variety of indications and test types. Is that that add clarity? Yes, thank you very much. It's surely helpful. The next question comes from Penet Suda with SBB. Penet please go ahead. Hi, you have Michael on, if you need. I kind of want to be back a little bit on the question about the guide. So I was wondering, do you mention tissue cipher and maybe not a huge contributor, but how much of the guide is?
Speaker 4: really driven by growth in a core melanoma versus some of the other tests like maybe SCC? Yeah, as we've said, we believe most of our growth or a significant portion of the growth will be driven by the dermatology franchise this year. And so we expect to continue to grow penetration in the melanoma market and squamous cell as well.
Speaker 7: So, yeah, we included in that guide our expectations for higher volumes for both tests through the year. Yeah, thanks. And I was wondering, with the SBL franchise, now that you have this dedicated sales force and it's going to be, I think, fully productive in the second quarter, you said, and you also have the LPD coming online for gift EX. I was wondering if you should expect any sort of…
Speaker 3: meaningful growths around there perhaps in the second half of the year. In terms of personnel or in terms of volume? Volume I'm assuming right? Volume primarily yes. Yes so that would be our expectation. We only really established that Dermanopathology focus group and I guess late September of 2022 so we do believe that
Speaker 3: We don't get full productivity in our sales teams until about six months after they're trained in the field So we obviously are seeing an impact now. We should see an impact in the first quarter of 2023 But we really would expect that they hit the ground running beginning Late to Q and and the fall so I so yes is a is a short answer That we should see continued growth and acceleration of growth with those investments being made late last year Great, thank you very much You're welcome The next question comes from Mark Massaro with BTOG
Speaker 6: Mark, please go ahead. Hey guys, this is Vivian on for Mark. Thanks for taking the question. So as far as your 80 to 85 percent growth margin target by 2025, which doesn't look too far off, can you just remind us of what remaining levers you're hoping to pull to reach that target? Sure, so as we said we expect to see the benefits of the rationalization of our our laboratories through this year and into that period of time.
Speaker 4: We were strained for capacity in Pittsburgh, which of course limits efficiency. And in the case of Southern California, we have great efficiencies in our Phoenix lab that we think benefit there. So the primary levers are rationalizing those labs, continued scale, which of course absorbs fixed costs, and continuing to drive the number of tests that are currently not paid or reimbursed appropriately, and converting those to being appropriately reimbursed. Awesome, thank you. And just a quick follow-up. Could you potentially refresh us on the publication of the MPI data, and how you're expecting that to unlock any new reimbursement here? Thanks. Sure, so...
Speaker 3: The publication is in the review process of having been submitted and undergoing comments. We obviously don't control timing of the journal's speed of review and acceptance and online publication timing. It's our expectation or hope or belief that that should be published in the first half of this year, at least based upon current trends that we're seeing from a review cycle standpoint and clearance of NCI. So that would be the timing of it, at least by the end of June , I would think is a reasonable assumption. In terms of what that means impact-wise, we have been discussing with our customers for most of 2022 some of the preliminary abstract data. So there is awareness among customers.
Speaker 3: of the value of our tests as being proven out by this real world, large scale, prospective study population as reported up through the NCIC or program. That's not nearly as effective as having a peer reviewed publication to walk through in detail as you can expect. So we would expect on the physician penetration standpoint to really have another hit in terms of accelerating awareness of the value of our tests, not just in terms of having the risk stratification confirmed in this large unselected patient population, but also in terms of the survival benefit that patients are experiencing when they're clinically tested with decision DX melanoma. Presumably those results are then followed or impacting patient care compared to patients who do not receive our tests clinically. So that should be more impactful I would think when you have a full peer reviewed publication to have a...
Speaker 3: that NCR article does exactly that. Now I wouldn't expect us to see policy coverage change at a dime, but I would hope as we go out through the remainder of 2023 and 2024, that becomes that significant landmark study that would force a commercial payer to actually say, you're right, we've been asking for this as being a litmus test of coverage that's been met right now. But again, I wouldn't see that being an automatic dime turn in July of 2023, that's gonna occur over a period of time. Perfect, thank you for taking the question.
Speaker 4: Next question comes from Katherine Schultz with bed. Please go ahead, Katherine. Thanks, I'm on for Katherine. I wonder if you guys just kind of build on that last point here, and maybe just give us a status update on a commercial payer progress for the Exile MoMA. I'd particularly just any expectations throughout the central NCCN dialogue that is introduced in 23. Sure, couple comments there. It continues to be challenging to push over commercial payers. As I think you know, they're, they're not necessarily swayed by evidence that are driven by other factors. We did have some nice wins in the year that will begin to be implemented in 2023.
But as we've said before, I think that's going to continue to be steady but slow progress. And really, I think it would take an NCCN positive inclusion to see any kind of stepwise increase in the rate there. Now, in terms of NCCN timing, as your second question there, Tom, historically, the melanoma group has had their in-person or significant meeting, I guess, in the July time period.