Q2 2023 Veracyte Inc Earnings Call
Good day, and thank you for standing by welcome to the various <unk> second quarter 2023 financial results Conference call.
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I'd now like to hand, the conference over to your speaker today, She look warming director of Investor Relations.
Good afternoon, everyone and thanks for joining us today for a discussion of our second quarter 2023.
Actual results.
With me today are Marc Stapley, Berthage, Chief Executive Officer and.
Rebecca Chambers, our Chief Financial Officer.
Verisign issued a press release earlier this afternoon.
Detailing our second quarter of 2023 financial result, that's really along with our business and financial presentation.
It's available on the Investor Relations section of our website at their site.
Before we begin I'd like to remind you that various statements that we may make during this call.
Will include forward looking statements as defined under applicable securities laws.
Forward looking statements are subject to risks and uncertainties.
And the company can give no assurance they will prove to be correct.
Further we are not under any obligation to provide further updates on our business trends or our performance during the quarter.
To better understand the risks and uncertainties that could cause actual results to differ we refer you to the documents that are.
Files with the Securities and Exchange Commission, including its most recent Form 10-Q and 10-K.
In addition, this call will include certain non-GAAP financial measures reconciliation of these measures. The most directly comparable GAAP financial measures are included in today's earnings release accessible from the IR section of everything.
I will now turn the call over to Marc Stapley birthday Yep.
Thanks, Sheila and thanks, everyone for joining us today.
Our second quarter was incredibly strong with revenue of over $19 million representing growth of 24% compared to the prior year.
This success was driven by our core testing business, which grew an impressive 37% and this is another clear demonstration of our proven framework of driving test adoption through robust clinical evidence reimbursement guideline inclusion.
Our performance in Q2, once again demonstrates our ability to consistently deliver strong top line results as well as our commitment to enhancing our already differentiated financial profile.
To this end.
This quarter, we generated approximately $17 million in cash from operations a record for the company.
We reported approximately 15000, despite the prostate test in the quarter with our level one evidence status in the most recent <unk> guidelines, we believe now contributing to a meaningful step up in test delivered to patients.
This and the execution by our talented commercial team led US led to US recording the highest number of new physicians receiving a decisive test result, we have experienced so far.
We are proud to be empowering so many physicians with key insights to guide important treatment important treatment decisions for their patients with prostate cancer.
We last updated our penetration estimates for the prostate market at year end.
Given the outperformance about the size of the franchise year to date, we now believe that the market for molecular diagnostics to prostate cancer is approximately 30% penetrated.
With decisive continuing to represent the majority of that penetration.
While we've made significant progress in adoption, we believe that there is still ample opportunity for continued growth for many years to come as we work to make this test available to more patients facing a prostate cancer diagnosis.
In line with our strategy of developing clinical evidence for our test.
We continue to add to our impressive library of over 75 published studies supporting the performance and clinical utility of the decipher prostate genomic classifier.
We were pleased to share real World studies published in J, NCI cancer spectrum, which matched the data from other type of prostate tests with that from the National Cancer Institute population base their program.
Results of the clinical utility study suggests that use of that the size of the prostate test helps physicians personalized prostate cancer treatment approaches.
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Specifically the findings showed that physicians treat patients with higher risk type of schools more aggressively.
Patients with lower risk to Cypress grows more conservatively.
Administrating clear real world utility for the test.
Our dedication to evidence development extends to leveraging our testing capabilities and data sets to help advance scientific understanding in the disease areas that we address.
A good example, as a research use only decides of grid offering in prostate cancer.
This quarter at the American Society of clinical oncology annual meeting findings from three separate studies with share demonstrating the ability of the size of the grid to help provide new insights into specific molecular profiles may predict individuals response certain treatments.
And endocrinology, we delivered another record quarter with more than 13000.
It has performed helping physicians make better diagnostic and personalize treatment decisions for their patients with thyroid nodules.
This outstanding performance is due in part to continued enhancements we've made to the tests, including the addition of promote to mutation testing as well as ongoing customer experience improvements to our online physician portal, including online ordering.
Our excellent commercial team leveraged these enhancements to add over 70, new accounts in the quarter.
To drive further penetration of existing accounts.
Given this performance we are now raising our afirma revenue growth expectations to be in the low to mid teens for 2023.
We are excited about the potential to leverage our testing capabilities and data sets, but also help provide researchers with further insights into thyroid nodule biology.
Similar to how we are using the site for grid.
This quarter for example in a study presented at the Endo 2023 meeting investigators developed and tested hundreds of genomic risks signatures based on the firm as a whole transcriptome gene expression profiling.
Interestingly, they were able to identify risk signatures to show potential to differentiate indeterminate thyroid nodules that were low risk for tumor Beijing and regional lymph node metastasis.
Insights such as these may help fuel product development efforts in the future as we continue to improve that.
And enhance our ability to help patients faced in fireeye.
Turning to our Biopharma business like others in the space, we continue to face significant challenges this year given the current macro environment.
As a result, we are seeing reductions in existing projects as well as banks and timelines for signing new bids.
At this point, we have not yet seen a shift that would indicate this trend is robust in the near term and so we continue to expect declines in our Biopharma and other revenue line and have updated our guidance accordingly.
Moving to our long term growth drivers, we made significant progress in the second quarter on site initiation of Nike the clinical utility study for our nasal swab test.
I am extremely proud of our clinical and medical teams, who have signed up almost 70 sites to be part of the study so far with even more in the pipeline.
This demonstrates we believe the strong support and enthusiasm for the nasal swab test for principal investigators OPI and patients with the vast majority of lung nodule patients who were offered the test choosing to participate.
However, the pace of individual site ramp up and patient enrollment is lower and we end up as anticipated driven largely we believe by ongoing staffing challenges that many of our investigator sites.
Given that we have conservatively adjusted our estimates for enrolling the last patient in the trial and that will be during the second quarter 2020.
Our IBD strategy, which will enable us to deliver tests to physicians and their patients outside of the United States is focused on our current IBD offering the prosigna breast cancer test as well as the development of enthusiasm decipher a nasal swab IBD products.
Beginning with Prosigna, we had another solid quarter.
Compelling clinical utility data for the test was presented at the ESMO breast cancer Congress from the EIA study in Norway.
Prospective multi year population based study, including data from over 2100.
The results of these initial data demonstrated the Prosigna test results also treatment decisions, including significantly reducing the use of chemotherapy among patients with clinically high risk disease.
Consequently, prosigna has been adopted as the definitive breast cancer test in Norway and is now used routinely for patient care.
On the development front with Nvidia already submitted for regulatory approval, we continue to make good progress on the site for prostate and perception nasal swap offering with regulatory submission slated for 2024 and 2025, respectively.
In summary, Q2 was an exceptional quarter with strong execution in our core testing business.
Progress across our diagnostic long term growth drivers were.
We're excited about our performance through the first half of the year and as such are meaningfully raised our expectations for the full year.
So with that I will now turn to Rebecca to review, our financial results for the quarter and updated guidance 2020.
Thanks, Mark as Mark mentioned, we achieved excellent results in the second quarter with $93 million of revenue an increase of 24% over the prior year.
<unk> grew total volume to approximately 31800 tests, a 28% increase over the same period of 2022.
Quarterly testing revenue was $81 7 million, an increase of 37% year over year, driven by higher than expected decipher prostate and afirma volume as well as strong cash collections in the quarter.
Total testing volume was approximately 29000 tests.
Testing AFP with over $2800 per test benefiting from approximately $2 million of out of period collection.
Adjusting for this impact testing ASP would have been more than $2700.
Second quarter product volume was approximately 27.
100 tests and product revenue was $4 million up 29% year over year.
Pharmaceutical and other revenue totaled $4 $6 million down 55% year over year.
Reductions in customer project and extended sales cycles, driven by overall spending constraints across the industry. It led to the decline.
Moving to gross margin and operating expenses I will highlight non-GAAP results, which exclude the amortization of acquired intangible assets other acquisition related expenses and restructuring costs, but does include routine stock based compensation.
non-GAAP gross margin was 67% up approximately 100 basis points compared to the prior year.
Testing gross margin was 71% up 250 basis points compared to the prior year benefiting from higher lab volume test mix and $2 million of out of period collection.
Product gross margin was 42%.
Biopharmaceutical and other gross margin was 12% down year over year, given lower fixed cost absorption.
non-GAAP operating expenses, excluding cost of revenue were up 21% year over year at $59 3 million.
Driven by higher personnel costs as well as clinical trial in IBD development expenses.
Research and development expense increased by $3 4 million to $12 5 million sales and marketing expenses increased by $1 7 million to $24 9 million and G&A expenses were up $5 1 million to $21 9 million.
We recorded a GAAP net loss of $8 4 million, which included $10 4 million of stock based compensation expense and $6 9 million of depreciation and amortization.
Overall, we ended the quarter with $191 million of cash cash equivalents and short term investments well ahead of our expectation.
Turning now to our 2023 guidance, we have raised our revenue projections to $342 million with $350 million.
As compared to our prior guidance of $330 million $340 million.
This increase is a result of our strong first half results as well as updated full year expectations of mid Twenty's growth in testing revenue and 18% to $19 million of Biopharma and other revenue.
We are forecasting Q3 revenue to be down sequentially across testing products and biopharma and other given typical seasonality and normalized testing collection before finishing the year with strong quarter over quarter growth.
On full year non-GAAP gross margins, we are raising our total company projections to mid to high <unk> from the prior guide of mid 60.
This assumes second half testing and product gross margins that are roughly in line with Q2 results as.
As well as lower Biopharma and other gross margin given the fixed cost structure of this business.
Moving to our expectations for cash cash equivalents and short term investments as always our comments are barring potential M&A.
<unk> now expect to end 2023 with $190 million of cash on hand accounting for the impact of upcoming contingent consideration payments capital expenditures related to our lab expansion and other working capital trends.
Importantly, this updated guidance represents an increase of approximately $25 million compared to our expectations at the beginning of this year driven by the strength of our testing portfolio as well as the fabulous execution of our managed care and billing team.
I am proud of how our entire <unk> team has performed through the first half of the year.
And I am excited to continue to deliver on the financial goals, we set for 2023.
I'll now turn the call back to Mark for closing remarks.
Thanks, Rebecca before closing I'd like to share some organizational updates gives.
Given the underlying strength of the decipher business and our focus on succession planning Tina Nova has decided that now is a good time for her to step down from an operational role.
So effective on September 3rd Tina will be transitioning from GM of the urology business and will continue to support verify it in a consulting capacity.
Ciena has been instrumental in the success of decipher refocusing the company for growth in 2018 and has provided valuable leadership of Werra site since our acquisition of decipher Biosciences in 2021.
Thanks, Tina for all of her contributions including building an incredibly strong team to support our clear business going forward.
To that end John light will move into the role of Chief commercial officer clear business, providing leadership and oversight to our urology endocrinology and pulmonology businesses as well as our managed care team.
We just had an excellent quarter and we're on track for a strong 2023.
I'm, especially pleased with the growth in our core testing business. The progress we are making on our long term growth drivers and our differentiated financial profile to enable sustained growth I'd.
I would like to thank the verify team for their hard work execution and commitment to the patients we ultimately serve and to our vision to transform cancer care will.
Now go into the Q&A portion of the call. So operator, please open the lines.
Thank you we will now conduct a question and answer session. As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Our first question comes from Mike Sykes of Goldman Sachs.
Hey, good afternoon, Thanks for taking my questions and congrats on another strong quarter.
Thank you maybe if I just.
Maybe just start with Afirma.
Mark you gave a couple of different sort of dynamics that led to that sort of the guidance raise for afirma growth.
But just given what we've seen I know, obviously COVID-19 had an impact, but it's been pretty impressive to see that growth continue.
Just wondering if you could dig in a little bit more into some of those dynamics you were talking about obviously than your accounts you signed up but also the online ordering and just kind of help us understand what are some of the bigger levers within that that's driving that increased growth.
Yeah. Thanks, I appreciate that and I appreciate the comments as well.
So a firm has been a very key focus for us for quite a time as you know and we've talked fairly consistently about enhancing the product which includes as you just pointed out.
Improved ordering capabilities as well as recently, our addition of the term.
Promotion mutation are promoting mutation gene as well so something.
Number of our customers would be looking for and is now available to them.
And we've really focused on sales.
Sales execution.
Communications with our physicians, we've had multiple reasons over that timeframe to engage with our customers.
Including even ironically back to the supply chain challenges that we had kind of around this time last year, which.
You kind of got a little bit take a little bit of adjustment for in terms of the comp, but even then an opportunity to engage with our customers reassure them that we were on top of that and clearly we were and then obviously with the ordering process and since then we just have this regular drumbeat now of communication, helping us to continue to gain new customers gained.
Sure and existing customers.
And grow.
Both.
Current accounts and new accounts so.
I am attributing this thought too.
Great execution by our very talented team and a lot of focus internally, yes, just one thing Mark's comments are absolutely spot on with regard to the volume drivers. Matt. In addition to the volume drivers. We've also had a good news Asps story.
Thanks to the managed care and billing seems as I as I mentioned in my prepared comments.
If you recall last year, we were battling through the headwind of the CPT code change.
Which obviously, we have the benefit of having that behind US now as well as you know we did collect a couple of million dollars of prior period collections of which about half of that was tied to a pharma. So if you look at where we are year to date.
Prior period collections totaling around $4 million again.
Half of that coming to Afirma, that's going to be.
Eight tailwind to the growth story as well. So so this is both a volume and ASP story currently.
And we're obviously very excited about raising the guide to that low to mid teens from where we started earlier in the year, which was mid to high single digits. So all in all.
Great story, all around and congratulations to the Afirma team for their execution.
Great. Thanks for all that color and then just for my follow up just on the Biopharma business you guys have flagged. This very early so it's clearly not a surprise.
Some of the dynamics in that industry, but just given sort of the level of revenue where it sits today and the gross margin, which seems to be dilutive to the group.
A little bit how are you thinking about that business. It's obviously longer term attractive just given kind of the bio repository you have and the relationships you have but how are you thinking about that business in terms of level of investment and sort of commitment to that business moving forward just given the strength in the rest of your portfolio.
Yes, it's a great point and so maybe just to recap a couple of things biopharma fits within the Biopharma. Another line, which in aggregate is less than 10% of our total revenue in the biopharma pieces slightly the majority of that less than 10%.
And so also included in there is IBD subsystem contract services revenue on the Biopharma side in particular, we did call out quite a while ago some.
Some macro level headwinds, which we're continuing to see in those affect us in two ways. One we have seen terminations of projects in particular are very significant large project.
That was based out of our Marseille organization that.
Terminated we talked about that a few quarters ago and.
So that clearly affected the backlog that we had there as well.
Yes, signing up new business I mean, there has been we have a lot of good conversations, but then transitioning from conversation to contract is taking longer than it has done in the past because of these macro headwinds so thinking about that business going forward of course, just like we always do we always think about the strategy for all.
Various businesses in our portfolio.
Making the right investments and balancing those investments when we see the opportunities for growth right in front of us.
Those opportunities are going to come the visibility so far too.
And are these temporal macro headwinds is not clear at this point. So we have to continue to be very prudent in how we how we grow or stable.
Stabilize that business.
Given these customer effects, so something as you can imagine.
All of US myself, Rebecca and our general manager of that business are very focused on right now and we will continue to be until we start to see the opportunity for that to continue to ramp up again.
Got it thanks, Mark I appreciate it.
Thank you.
Please hold for our next question.
Our next question comes from Tejas Savant of Morgan Stanley .
Hello. This is Hugo on for T cells. Thank you for taking our questions.
Following up on that Biopharma question. You previously mentioned that you are putting efforts towards diversifying.
We're supplying that customer portfolio could you talk about some of the strategies that you're employing and also provide some color around the progress youre, making to diversify that.
Yes, it's a good point.
The comment that I provided previously is that that has been a very concentrated customer base with a few large customers, making up a significant portion of the revenue.
And that's obviously impactful when when you start to see those customers holding back on their spending and so we've been on a drive here to bring in more new customers. Even for those initial small pilots that often lead into bigger contract. So as I said earlier one of the things that we have seen.
Is an increase certainly more conversations than we were having with more customers previously, but again its that issue of those transitioning to firm contracts and <unk>.
Arrangements that we are able to deliver on them and turn into revenue.
So some of those are happening, but none of the peso, we would like to see but we're continuing to be very focused on that a couple of other areas, where see diversification opportunities are very much in the U S. Most of our revenue as I think you're probably aware is very focused on our customers that are based out of all of them I'll say.
<unk>.
Delivery, we also have the <unk>.
Incredible data that we have with <unk>.
<unk> further we can also leverage in the U S and globally and so those create other opportunities for customer diversification and there are conversations again.
<unk> that but but it's the same macro level issue of getting those those over the finish line. So continue to focus on that and diversification of that customer base is clearly going to be something that we're going to continue to strive for.
Thank you. Thank you for the color.
And then also.
For Rebecca could you provide early color for 2024.
Particularly for <unk> as we begin to lap tough comps how should we think about steady state growth in the medium term.
Yes.
Happy to.
I think when you think about decipher, we've obviously had an outstanding year this year.
And have now penetrated this market.
Around to be to be around 30% right. So when you think about where we are with <unk>.
Different products like Afirma that are longer in their lifecycle. If you will there is still a number there's a lot of headroom for us to move from that 30%, even up to 60 or 70%. So I don't have any worries that we will continue to be able to continue to deliver.
Strong decipher growth for an extended period of time.
We still have a lot of work to do in 2023, let alone to start commenting on 2024, so we're not going to do that today, but when it comes down to decipher we have a lot of confidence in our ability to continue to penetrate this market and grow this grow this revenue level.
For an extended period of time affirm and now is on year 12 or 13 so.
It's a safer bet.
Very much further behind that so when it comes down to it.
We're going to start lapping tough comps in the back half, but over the course of 2023, we're now expecting to grow in the mid to high Thirty's for decipher. So that's still as ending the year at quite a high growth rate in cadence on a go forward basis, so not going to comment on the level for 2024 again, but very excited about the ability to continue to.
Growth in this market and continue to help more patients.
Prostate cancer patients over time.
Thank you.
Thank you one moment for our next question.
Our next question comes from Puneet Suiter of Leerink partners.
Hey, Mark Rebecca Thanks for taking the questions and congrats on the quarter here.
<unk>.
Tina grid work on decipher all along and really wonderful working with you. So good luck going forward.
Maybe with that let me ask a question on decided for wondering.
Obviously clinical evidence is built that's helping you get to the 30% penetration you talked about.
Could you talk a little bit about the commercial sales force that's in place where there are additions to that was there anything that changed on the commercial that helped you drive the strength in the current quarter end.
Attributing to the business.
And they've been very successful our entire sales team, which is only roughly about 45 or so people.
Have been very successful at you know growing an existing accounts and also growing new accounts. So both those leaders contributed to the performance. This year. If you think back to this time last year. When we we announced we had roughly 10000 tests and this quota 15000 test, though that that's a <unk>.
50 per cent growth in volume just in one year alone and I really do attribute that mostly too that sounds excellent but also as.
As you know we always talk about the evidence generation that you you you brought up at the beginning of the question.
And with over 75 publications, and then N C. C N level, one guidelines now I'll be honest I go first.
First I didn't know that would be such a significant step up.
In ordering and I think it's pretty clear now that we're seeing the that has resulted in a step function increase there and is probably also one of the reasons why we're seeing so many new customers. This quota.
So I think that bodes well for decipher for the for the long term. That's so much additional white space to go after here in the marketplace with still even with up to 30% estimated penetration still you know a significant number of patients with prostate cancer, who aren't getting any kind of molecular diagnostic and so.
Our goal is to.
Try and drive decipher to be that test and for more patients to be able to get access to that not just in the U S, but globally as well.
Got it that's very helpful and on Afirma, Rebecca I mean, you give context around decide for in the prostate uhm could you maybe even just provide some context.
<unk> about 2024, I know, it's hard to sort of give.
We're all guidance, but you know how.
How do you expect that business or trend given these higher growth rates for afirma that you're seeing now thank you.
Yeah, So anytime and we continue to be excited about it for a man and as I mentioned with the safer it is it.
Later in its lifecycle that I think this year surprised all of us in the execution of the teams surprised all of that so I'm not I am not going to comment I can.
A firm it just like I didn't comment on decipher for 24.
This is this is a well established franchise, we're continuing to invest enhanced product differentiation.
The team is excited about continuing to penetrate this market we haven't updated the penetration numbers beyond what we shared it year round and that was around you know.
Afirma being around 50 per cent penetrated in the market alongside the other the other tests available in a form of having them. The majority of that so I think we're in a decent spot, but they're still they're still white room here to our white space here too and so we're just gonna go after it and get it done and we think that's it.
Going to be continue to be a good story for us in 24 and beyond you know I think that's where we're at Herman decipher are driving the vast majority of our growth and we're in a good spot given that they're approaching 90 per cent of our revenue.
Okay.
That's sir thanks, guys.
Thank you.
One moment for our next question.
Our next question comes from some Tina <unk>.
Hi, Thanks for taking the questions and congratulations on the corner.
So just Don D and Dizzy IBD submission that you know that was completed at the end of last year. Just was wondering if there is any active engagement with the with the regulators in Europe .
You know it might be getting any feedback on that and then also you know is there a possibility we might be you might be able to see that clearance uhm.
In the next 12 months or so.
Yeah, I certainly hope so so thanks for that question again. This goes back to just to ground everybody. Just goes back to our IBD strategy, where where are launching multiple of all products, including and visit with you mentioned and then decided for prostate and maybe there was hope as I mentioned in the prepared remarks outside the U S has diabetes and you're quite.
Right, we submitted and video in December last year, a little bit ahead of our own schedule. There is absolutely communication with a notified buddy.
We've had several round, but you would get several rounds of questions. The first round comes back with a lot of questions and you answer those quickly and in our team did an excellent job of responding to those very very fast and then you hope to get fewer questions coming back and we did get fewer questions by an order of magnitude in the second iteration.
And and for those handful of questions will so Ah being responded to will have been responded to roughly at this point and and so you know hopefully at some point in the near future. We get some approval if not more questions. We just don't know the problem is still very early the IBD I'll process.
I'm proud of what our team is being able to accomplish and I'm I'm very encouraged by the feedback that we've been getting sofa, but you know it's not over the finish line until it's done so I wouldn't want a set of expectations on when that might happen, but we're going to continue to respond and answer all their questions and give them what they need and continue to generate the evidence to then drive in.
<unk> remember you know even once we get approval that doesn't that mean adoption by every country that just means we've got approval in Europe . We then still have to go country by country get reimbursement drive adoption using you know the body of evidence that we've got for the test and and just keep.
Pushing the test throughout throughout the various different countries and then the same will apply once we submit and get approval for prostate as well and then nasal slope.
Great. Thank you and then just a quick follow up for Rebecca for the IBD contact manufacturing revenue. That's part of <unk> I know, there's a portion of that that we see prioritize right mm.
This again, when you'd expect that at the anniversary that.
And I would love to say, that's an easy question to answer sent to you, but it's a little bit more fluid than that so I would think about I would think about the majority of the impact.
Kind of being in the run right now if you would if you would not.
Not necessarily.
Anniversarying out so I apologize if I'm not being clear because they think it's just a challenging question to answer because those resources are relatively fluid.
Okay Gotcha. Thank you so much and it's not going to be a major driver one way or the other in terms of the 18 to 19 million dollar guide above and beyond where we're at now.
Okay does that make thank you okay. Yeah. Thanks.
Thank you one moment for our next question.
Our next question comes from Andrew Brachman of William Blake.
Hey, everyone. This discussion on the line for Andrew Thanks for taking our questions.
Very strong cash generation a corner just wondering what the number one priority is now or what this what this changes the most M&A reinvestment in the business or just continuing to build up the cash in anticipation anticipation of something else in the future.
Yeah. That's a good question I don't say at this point it really changing anything thesis as in all strategy is still the same we're very focused on investing in these long term growth drivers of both nasal swab and the IBD strategy moving those as quickly as we can and this doesn't allow us to go any faster we will go down as fast as we can any way on both those <unk>.
Jack's, but you know I.
I think just continue to to push on those as cole strategies for long term growth and continuing to make decipher enough from be as successful as they clearly all being at the moment. So those are the key on M&A doesn't change all our thesis at all I mean for for me the ball. It's a voice that is very high.
We would not we would we would be focused on businesses like decipher the contributed very quickly.
To the unique financial profile that we have and then as I said before the funnel is not very brought for that so no no change.
I'm proud to see that strong cash generation by a team and I think that's been a lot of focus.
By many people in our company to achieve that kind of outcome and they're going to continue to do that.
Understood Rebecca on the prior period cash collections are any future collections anticipate on the guide and was this any part of the reason you haven't redness.
Can you repeat the second part of that question I didn't catch it fully.
Yeah, I understood the geico person, but.
At all we broke you broke up a little bit on our end.
Okay, sorry about that y'all just for people.
No prior period collections yet.
Yeah. It was us anticipate in any part of the race and work with the whole your total will be so.
Yeah totally ferrets, so uhm with regard to the guide the only thing that's contemplated in the guide is what we have both the ear to date, which is that $4 million. So on a go forward basis, we're expecting more normalised ISP and that's what's implied in the guide and just again on a year to date basis, it's around 50 50 decipher afirma.
Great. Thank you.
And we do believe that's prudent to just take that one step further and the reason why we believe that's prudent is because those are very much related to both the the.
The increasing performance of the number of managed care contracts that we hand on the decipher side, which has been relatively stable now for a couple of quarters as well as the normalization of the affirm a CPT code issue and so right now starting to anniversary, though so it's it is prudent that we are not necessarily counting on on collection.
<unk> performance the extent, we taught year to date, because those are a temporary all issues in nature of that had been resolved.
Okay understood. Thank you.
Of course.
One moment for our next question.
Our next question comes from Mason <unk> Stevens.
Hey, guys. This is jen.
And thanks for taking the questions.
Maybe one on decipher here I appreciate the color.
You guys gave on the updated penetration for that Mark.
But could you just may be updated on the competitive dynamics within the market have you seen any competitors.
Traction where do you guys feel like you're capturing share at the rate you were in 2022.
Yeah, and if you think thanks for the question of you. If you think about that growth rate and as I mentioned you know the the.
50 per cent growth in volume this quarter versus the same time last year.
You look at the you know you can.
Look at your own competitive reports on outcomes that to the extent that they they've been announced I think it's pretty clear that we're continuing to tape it.
It certainly feels that way in terms of anecdotally, what we hear from ourselves team in terms of where.
With a they see other tests on where they don't of course, you know you can always find examples where where those puts and takes that a customer level, but if you take it at a very high macro level I think the numbers speak very lovely for themselves and and you know I really do attribute that to to the two things I talked about the incredible evidence generation that we have for decipher which.
Led to the NCC on level, one guidelines and also the the excellent sales team that we have this really performing on every metric.
Alright got it thanks for that maybe switching gears a little bit here on when you guys as manufacturing transition assuming that is completed by the end of the year what factors should we take into account as we think about the products gross margin.
Going into next year.
Yeah, you I mean, I'll, let rebecca come into but you really shouldn't take up too much into account because in terms of how it shows up in the income statement, because where it really isn't going to make the biggest difference is when we have volume.
In our IBD tests outside the U S. So today is you will know with selling prosigna. The volumes. Good test has been performing well, but it's a few thousand tests a quarter and what we really need to see is I think decipher across the evening. Once we launch envisage remember that's a rare condition.
And and so we will see some volume from and visit but we really need a test like decipher prostate on the market.
Commercialized to be able to really see the benefit of the manufacturing transition show up in the income statement and we're going to submit that test as I said in 2024, so it'll be commercials sometime after that so we got we got some room that but but still important for us to do we have a team very focused on this and.
Trucking nicely and we're in the final phase now of making that transition happen.
Anything to add on the piano with that.
All of them.
Thank you one moment for our next question.
Our next question comes from Mike Matson of Needham and company.
Hey, this is Joseph I'm from Mike just one from us.
With the I guess pushback of the estimated completion for the enrollment in the Nightingale study was maybe wondering if you could given updated expectation for when you would be able to relief like preliminary data from that study.
Yeah, So as I mentioned in the beginning of the call here, we push back the final patients coming through that.
Trial and two the first second quarter of next year, which which I view as a conservative estimate the one that we absolutely want to achieve even even with the lower enrollment that we've seen in the lower ramp up that we've seen in a number of our site.
What I'm really encouraged by I'm pleased about is the Homo 70 sites.
The we've initiated so far all clinical medical and commercial team had done an excellent job of identifying in enrolling those sites. The level of excitement is very high bypass patients and and the P is in the the teams involved in this of the sites and so that's all very encouraging now in terms of the data itself.
As I've said before once we finish the enrollment and even actually you know before then we we are able to look at the data we are able to see what it tells US having said that you do need.
To some extent for clinical utility, we all going to need to see the the benign status and that can take time, obviously to follow that up standard guidelines. There are two years, but suddenly evidence to suggest one year follow up may be sufficient so no change in our strategy that will a mass of data will take a look at.
It will see what it's telling US we'll we'll do the necessary follow up and publications on that and have the appropriate conversations with the with Medicare on that and you know our goal is to get this test commercialized as soon as possible in the U S. The second elements of this of course is C. O U S launch as well, which as I mentioned before we're gonna submit in 2025.
And we'll get that through regulatory approval in Europe , and then we'll be able to launch nasal swap globally very excited I'm encouraged by the reaction to the test so far from what we've seen and I'm looking forward to getting it through through this pivotal study.
Okay, Yeah. Thank you for.
During that in congrats on a great quarter.
Thank you.
Thank you.
Ladies and gentlemen. This concludes today's conference. Thank you for participating you may now disconnect.
Mmm.
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