Q2 2023 Invitae Corporation Earnings Call
Hello, and welcome to the invitation second quarter 2023 financial results Conference call. My name is Alex somebody calls thanks, Nicole stay if you'd like to ask a question at the end of the presentation. You can press star followed by one on your telephone keypad.
If you'd like to remove your question you May press star followed by <unk>.
I'll now hand, it over to your host Keylock, VP Investor Relations and corporate development. Please go ahead.
Thank you operator, and good afternoon, everyone. Thank you for participating in today's call.
Hosting the call today is our president and CEO Tim Knight.
Before we begin I'd like to remind you that various remarks that would make on this call that are not historical include dose about.
Our vision of a business model the company's strategic business realignment.
Financial and operating results.
Expectations for future growth and reduction in dengue.
Future products services, our product pipeline at that time.
Certain points and Mick will constitute forward looking statements within the meaning of the safe Harbor provision of the private Securities Litigation Reform Act.
It is difficult to accurately predict demand for our services and therefore, our actual results could differ materially from our outlook.
Statements on future company performance assumes among other things that we don't conclude any additional business acquisitions.
Restructuring or legal settlement.
We refer you to our most recent 10-Q and 10-K in particular to the section titled Risk factors.
Information on factors that could cause actual results to differ materially from our current expectations.
These forward looking statements speak only as of the date hereof.
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 in the appendix of the earnings slide deck.
Which you can access by visiting the investors section of the company's website at IR Dot Dot com.
Do they tend to discuss our Q2 results and recent developments.
I will cover the financials and key metrics from the second quarter.
As well as update you on our 2023 guidance.
Well, then conclude the call with Q&A.
With that I'll turn the call over to Ken.
Thank you and thank you all for joining us today.
In the second quarter, we continued our steady march towards becoming a profitable business.
While continuing to serve our patients and clients.
As evidence of our pursuit of higher quality revenues and disciplined cost control.
We continued to make solid progress in both GAAP and non-GAAP gross margins were.
Well to decrease our cash burn to well below our projected levels.
We have improved non-GAAP gross margins for eight consecutive quarters.
And ongoing cash burn in the first half of 2023.
67% lower than the same period last year.
We posted $125 million in revenue.
Which is a 1% increase in year over year pro forma top line results.
Looking at the different business lines.
We saw solid double digit pro forma year over year revenue growth in rare disease data in women's health demonstrating continued momentum.
Sequential volume growth for hereditary cancer, and rare disease were both up 5% quarter over quarter.
Despite 8% pro forma year over year volume growth for hereditary cancer in the U S market.
Faced headwinds from several commercial insurance payers in terms of overdue payments.
Which impacted our hereditary cancer revenue by approximately $5 million this quarter.
Our building teams are working with these payers nonstop.
Ensuring that we are doing our part in every way possible to unblock payment processing.
We are committing the necessary resources and these are comp.
Comprehensive.
We have been successful recently in driving better reimbursement in a rare disease and women's health businesses.
And have used our best practices from those efforts to assist in this regard.
We are seeing reductions in the backlog of overdue payments as we enter the second half of 2023.
And are engaging with a high sense of urgency with all stakeholders for faster resolution.
Oncology revenue was also impacted by weaker fee for service.
But as we indicated last quarter would be lumpy and where we are rebuilding our pipeline of pharma orders.
In fact, we are already seeing a stronger pipeline in the third quarter.
Presentations at the 2023 American Society of clinical Oncology conference continues to highlight and confirm.
That hereditary germline cancer testing in combination with somatic testing provides the best picture for physicians.
Together these tools aid in understanding cancer risk diagnosis and treatment selection.
Leading to better outcomes for patients.
And we say it has been a leader in generating this clinical evidence as well as increasing adoption of germline testing in oncology.
As seen by NCC and guideline expansion to that effect.
However, even with guideline expansion and confirmation of the benefits of hereditary cancer testing the usage rate remains elusive and low.
A recent national public radio piece on all things considered showcase this front and center.
And is worth listening to.
Highlighting our recent study that was presented at <unk>.
Led by Dr. Alison Kurian and co op it within VITAS.
Of 1 million patients diagnosed with cancer, and California and Georgia.
Investigators found that 93% of them did not get hereditary cancer testing.
Despite guidelines endorsing universal Germline testing for several tumor types.
This growth under utilization suggest many patients who are eligible for germline testing have not yet received.
This is the burning issue to solve and underscores our current efforts to drive education and additional call points at the community oncology level.
In the second quarter.
We reached the 4 million patient mark across a diverse spectrum of clinical areas.
Of which more than 53% are available for data sharing.
We continue to be well positioned to provide the highest quality of clinical interpretation at an industry leading scale.
Looking ahead to the second half we continue to allocate our resources in the key areas that will drive growth in 2023 and beyond.
Let's start with oncology.
On a pro forma basis, our oncology revenue in the second quarter was $60 million.
Compare to approximately $69 million a year ago.
As I said earlier this was impacted primarily by headwinds in payer reimbursement for a regulatory cancer testing.
Lower sales in fee for service.
And our regulatory cancer guideline expanses and better outcomes are expected to further improve adoption among non genetics expert providers.
And community oncology setting.
Efforts to expand our call points and facilitate the usage of a regulatory cancer testing among these physicians and clinics are underway.
This is where the majority of cancer patients that receive their treatment support and represents the largest growth opportunity for hereditary cancer testing going forward.
In Q2, we had a double digit volume and <unk>.
Our non genetics experts oncology U S channel.
Switching gears to a minimal residual disease efforts, we have made solid progress in updating our PCM platform chemistry.
With updates that provides the same quality and performance as our legacy technology.
While offering streamline processes and improve cost efficiency.
We believe this updated technology with a migration plan that begins in Q4 of 2023.
Also addresses the primary matters arising from the ongoing <unk> litigation.
And provides us an even more differentiated solution.
Overall, we continue to have strong confidence in our ability to operate and most importantly, our ability to continue offering PCM to pharma partners and patients in need of accurate monitoring.
We also expect our updated chemistry to accelerate our fee for service revenue by delivering faster turnaround time.
Complementing the business development and marketing resources, we've added.
Looking at our ongoing efforts for the medium term, yes, we still see synergies between hereditary germline and somatic products.
Together, they will anchor one of the most comprehensive offerings for acquisition, who is considering options on individuals at risk or diagnosed with cancer.
In the meantime, we've been active at recent oncology meetings, presenting new data that supports the use of Germline testing.
From this year's Astro meeting in June .
Study of patients with lung cancer undergoing germline testing was the focus of two separate platform presentations.
In this study.
10% of lung cancer patient with no family or personal history of cancer at.
Had positive pathogenic germline variance with potential clinical management implications.
This prevalence is similar to what we have seen in patients with breast ovarian and pancreatic and colorectal cancer.
All of which have guidelines endorsing universal Germline testing.
We continue to do the work, making investments and support clinicians as they pursue the benefits of Universal Germline testing.
In the rare disease business line, we saw significant pro forma revenue both in Q2 of approximately 32% year over year.
By cardio and neuro panels as well as strong performance in pediatric genetics, we continue to broaden our offerings.
And lots of expanded neurodevelopmental disorders, or NBD testing panel in Q2.
We've also implemented a number of programs to improve reimbursement rates and are seeing improved gross margins in this category.
In women's health revenue was up approximately 18% year over year on a pro forma basis.
Our carrier screening panel continues to perform well and is well received by our growing customer base.
We are seeing increasing productivity with our sales team along with market share gains.
On the data side we.
We continue to introduce new products, such as linking in VITAS genetic data with clinical claims and prescription data to enable more researchers and biopharma partners to deepen their understanding of the patient journey.
And ultimately deliver a more effective therapy to the most precise patient population.
We also continue to expand partnerships through other data products, which provide genetic insights to our partners and their specific areas of interest.
We've achieved steady improvements in revenue cycle and working capital.
Which have helped to bolster our cash flow and gross margin.
Finally, we made the decision to exit our pharmacogenomics testing business and close the Seattle lab that is dedicated solely to pega.
While exploring the best strategic path for the related assets.
While we fully believe in the utility of <unk> and its future impact on patient care.
We have decided that the resource investment and path to consistent reimbursement.
<unk> within our desired time horizon.
The impact on second half and full year 2023 revenue is expected to be approximately a $3 million reduction.
Although it will be accretive to our efforts to further expand gross margin.
And with that I will turn the call back to <unk> to discuss the financials.
Thanks, Ken.
We are providing revenue breakdowns on GAAP reported and pro forma basis for clarity in the second quarter of 2023, we generated approximately $121 million of revenue compared with $137 million in the prior year quarter.
The decline reflects the effects of the exited product lines country and territory as a result of our realignment last summer.
On a pro forma basis, we grew the business by about 1% from last year's second client.
Looking at the details of the business category.
$50 million from oncology, including hereditary cancer and fee for service people on platform offered to pharmaceutical partners.
$27 million from our womens health business <unk> testing services, and then that yet.
$22 million from Red meat, including neuro cardio pediatric and other testing products.
And patient networks revenue was about $12 million. This includes our sponsored testing programs data management and a number of data partnership project.
Now, let's look at our revenue growth profile on a pro forma basis for that specific business line.
And oncology as Ken mentioned earlier this category was impacted by large payers following reimbursement for hereditary cancer testing.
Well its timing and size of PCM fee for service contract.
Gary from quarter to quarter and that decline in the second quarter and more than $8 million on a pro forma basis from last year's period.
Women's health business grew 18% year over year.
Largely led by our carrier testing panel and getting better in backbone and billing practices.
Whereas business grew about 32% year over year.
Led by our cardio neuro pediatric testing revenue.
Cancer reimbursement of certain channel efforts continued billing and revenue management effort.
Data business also rose over 17%. Thanks to continued growth of our patient identification program.
Partnership contract.
Data products.
non-GAAP gross margin in the second quarter was 49, 8%.
Which increased significantly compared to 41% in 2022.
And what's also a step up from the 47, 9% in the first quarter of 2023.
non-GAAP operating expenses in Q2 of 2023 were $158 million.
431% of revenue.
Prior to $200 1 million.
146% of revenue flow through to 2002.
And up from 113% last quarter.
The quarter over quarter increase was primarily due to the PCM related litigation expenses that we recorded this quarter, which total approximately $20 million.
If we exclude that.
non-GAAP operating expenses as a percentage of revenue would have been approximately flat on that quite yet.
Cash cash equivalents restricted cash and marketable securities totaled 336 million on June 32023.
Compared to $389 million on March 31, 2023.
As you can see on the graph non-GAAP gross margin has been improving for eight quarters now wrong.
We're getting close to 50% and into the range with projected for the year.
In addition to improving our revenue management. We are also continuing to work to drive cost out of a system.
You get the client chain and other operational and process efficiency.
In the second quarter, the cash burn of our ongoing business.
On slide 14, plus about $53 million.
Which represents an approximate 64% decrease from the same period last year and a 2% increase from Q1 of this year.
Recall that in the first quarter ongoing cash burn benefited from approximately $13 million in accounts receivable reductions associated with the previous auction business.
Excluding that second quarter ongoing cash burn would have shown solid quarter over quarter improvement.
In addition to our strong cash position with a declining burn rate we all.
Also have close to $250 million additional secured debt capacity available to us.
Now separately to the Q2 'twenty three business metrics.
Revenue per patient as measured by total company revenue divided by the number of ordering patients for the quarter.
In the second quarter revenue per patient was formed to $59 versus $460 million in the prior period.
This small decline was primarily due to lower payments from hereditary cancer as well as product mix.
And the third and fourth quarter of 2022. This metric was higher due to the kit business revenue.
At our hereditary cancer payment trend stabilizes and a fee for service revenue recovers, we anticipate this metric to follow suit.
We're also happy to see continued quarter over quarter improvement in variable cost productivity.
Stabilization in cash burn as a percentage of revenue.
Moving to our financial guidance.
Management is suggesting 2023 revenue guidance to 480 to $5 8 million compared to previous guidance of over $500 million.
The reduction was primarily based on the average payment shortfall that Ken mentioned.
Approximately $3 million related to our PGM exit.
As Ken discussed.
Putting in comprehensive resources, so we thought that payment and backlog and are optimistic that our efforts to yield results in the second half.
We're maintaining our non-GAAP gross margin guidance of 48% to 50% for the full year, thanks to our more focused portfolio.
The quality of revenue.
<unk> improvements and lab operations supply chain and logistics.
In 2023 as a result of the voluntary repayment of our term loan cash burn will be higher and the ongoing cash burn figure.
On an ongoing basis based on our current trajectory, we are bringing down our previous cash burn guidance to a range of $220 million to $245 million.
From the previous range of $250 million to $275 million.
The revised guidance range calls for a more than 50% improvement from the 2022 figures.
Actually you can thanks.
Thanks Tobey.
To summarize todays call.
First.
We continued solid progress on our non-GAAP gross margin in cash burn trajectory.
Headwinds on reimbursement in the PGS testing business exits are impacting our full year revenue guidance.
Second.
We continue our efforts on expanding our hereditary cancer customer base.
Improving overall customer experience and expanding adoption of our product offerings.
U S hereditary cancer volumes grew by 8% on a pro forma basis, and we are continuing our push to improve payment rates and average payment per test.
And finally, we.
We are ahead of plan on cash burn.
Lowering our full year cash burn guidance.
Still have additional secured debt capacity remaining as a potential funding options.
One year into our corporate realignment.
Performance has improved and visibility into our portfolio strength and weaknesses is more clear.
Execution now.
Global path for profitable growth tomorrow.
Capacity to pursue innovation and investment in our future strategic.
Strategic tenant that we rolled out last year.
These tenants will inform our efforts on strengthening the foundation, we have built to position us for future success.
Operator, I'll now hand, it over to you for questions.
Thank you as a reminder, if you'd like to ask a question you compressed followed by one on intensifying keypad.
Thanks, a lot to remove your question you May press star followed by two please.
Please ensure you're on mute locally when asking your question.
Our first question for today comes from Mike How Becker of Cowen.
Your line is now open. Please go ahead.
I think we were going on Im sorry, guys.
Dan Brennan.
<unk>.
For the question and congrats on navigating through a choppy market here, maybe first question would just be.
On the reduced guidance I guess, how much are you taking down your oncology guide and kind of how much is attributed to this inability to collect payments maybe can you just quantify that.
And then the second question was going to be.
Nice progress on.
The cash burn despite the lower revenue.
Just wondering.
As we kind of look out for the impact on the business this year.
Do you think the weaker oncology growth will impact your ability to take the burn down next year.
Thanks, Dan This is Ken I appreciate the question and thanks for joining us.
First is the <unk>.
Revised guide and the impact on oncology as we said above $5 million this quarter and as we were working hard on that and we've got a dedicated team that are focused on it but the lower end of the range.
Basically.
The flex that if were not successful in changing that for the second half of the year, it's probably worth about $15 million to our total revenue for the year $5 million. This quarter and then continuing on for the rest of the year.
That's probably that's kind of what's guided towards the lower end of the range as well as the $3 million that we expect will be.
A result of exiting the pdx business and so.
Does that give you some some ideas about kind of the totality of the impact on the downside for the oncology business. We don't expect that we are obviously working hard to not have that happen.
That kind of.
Describe the rationale behind the range if you will.
And yes, it's pretty clear that oncology has an impact on on our debt.
Overall business.
Great business for US we are market leader.
Got.
Great quality revenue, there and so as.
As we are.
Our efforts to drive more more revenue from oncology does have an impact on our gross margins and gross margins will drive our Ava.
Available.
Cash to spend in the business and so it all is somewhat intertwined.
<unk> activity, but we still feel very confident that we can grow not only the <unk> back in oncology, but we're growing the.
The sequential revenue sequential volume I should say.
So we still are big on arm on a hurricane business, we see growth, we see an opportunity to grow it outside of the traditional <unk>.
Places, where we've been already strong and so we're seeing double digit growth in the non expert community.
And so we've seen we see more upside than downside with it.
Got it and then you talked about PCM during the prepared remarks kind of a.
And you kind of altered the chemistry, which I guess allows you to maybe not bumping into terra directly in the last maybe you could just clarify a little bit so specifically.
What are the changes that you are deploying.
Would that would that you think negate this kind of about the competitive risks there and then any color on just how that business is doing.
As hard for us to see inside kind of what the revenue contribution was just wondering.
Any any any quantification of your <unk> business and kind of what the growth outlook. There is.
Yeah, So the chemistry update for us.
To get into too many details about what we've done, but we basically streamlined our processes and streamlining the process actually eliminated some of the process.
<unk>.
Issues that were raised in the near term.
Litigation, So I'll leave it at that we streamline our processes and that.
It created.
Situation, where we don't feel we have.
The issues that were raised in the litigation with Natera.
From the standpoint of what to do for our product, but obviously streamlining the process takes out cost and as well as it takes out time and so.
We already felt we had a.
Very competitive product from a turnaround time in.
Availability to get information to patients sooner than others and this is only going to improve that.
And so from a standpoint of how we see MRV in fee for service.
Coming together from a revenue standpoint, I do believe in the appendix there are some slides that show the the.
The dollars associated with the MRV.
<unk> for us.
We recognized last year third quarter last year, or so that we had kind of.
<unk> our pipeline on the fee for service World.
Clear and transparent about that we've stated that on multiple calls that our pipeline needed to be bolstered and we've added our business development team and sales team the marketing effort.
And we believe that having.
And even better chemistry, and streamlined process is going to accelerate the business that we're out there fighting for every day, we are in contact with pharma customers.
We're working to secure more MRV business for us on a fee for service World and then obviously our studies that are underway that.
Working to help.
Confirm reimbursement path for more commercial launch of our <unk> product is still in our in our portfolio of efforts as well and we're going to be spending some time and resources in the second half of this year to keep that push going too.
Great. Thanks, Kevin appreciate it.
Thank you Dan.
Thank you our.
Our next question comes from Matt <unk> from Morgan Stanley .
Please go ahead.
Hi, this is not a fantastic shack, Ontario T. J, thanks for taking my questions and congrats on the quarter.
Thank you Keith will continue.
Looking to the update at <unk>.
On guidance I was wondering if you could give some color on just how we should be thinking about it.
So far in Q3 whiskey and continue momentum on the the <unk>.
There really.
I'm really excited about the way our rare disease business is going in terms of revenue acceleration.
Date of business, a salad and you know in the carrier business has gone very well. So there's there's you know really strong indications that our second half is going to continue momentum.
And we've we've kind of map it out at 48 50, 249, 51, that's kind of what the range would tell you there and in terms of the guidance.
Hi, Thank you that's very helpful.
And then I might even need the strawberries all time Rosemary again.
I'm just.
Just wondering how to be thinking about that for the fiscal year and if there's any dynamics that you could see providing potential.
<unk> to the Guy just kind of white.
The full you're guided baking in there yeah any any.
Mmm.
Yeah, I mean, a great question and you know, we we delivered almost 50 per cent gross margins in queue too and that was in the <unk> in the face of what we also highlighted is.
H, a lower revenue for a hurricane business due to the a P. T efforts and so you know.
Continue to work on that a P. T should continue to solidify our position and our guidance range on on.
Gross margin and so it's really about continuing to do the things that we've already been doing and then if if we're able to over deliver then we will see some upsides, but right now we feel really confident in our guide a range of 48 to 50 per cent and as you can see we're performing solidly with.
And that at this point so.
You know that that hurricane a P T.
It can be very impactful on on gross margins.
Got it thank you so much.
Thanks for the question.
Thank you Uhm next question comes from my <unk> from Goldman Sachs.
Minus I'm open to please go ahead.
Hey, guys.
Is there <unk>.
Hey, Eddie increase.
Detail additional details you can give us on the increasing sales team productivity in the market share gains you mentioned there.
Yeah, I mean, okay, Yeah, you know.
If you look at the part of the way we are continuing to lever are <unk> as a percent of revenue is that you know we I think we just getting smarter about the utilization of our costly.
We we allocate a sales force and and stomach regards and we boasted sales teams in other in other regards and what we're seeing is Ah increase in productivity and kind of in terms of revenue per sales rep.
And.
<unk>, it's it's it's kind of holistic for US we've said, we're gonna be focusing on more profitable both are more profitable revenue in so our teams are embracing that and they're all working really hard to try to deliver.
Deliver on that for us and so yeah you know.
Our sales teams are are pretty solid in terms of the number of reps that we have we've grown in some areas in other areas, we reallocate it and that's what I would say about our sales team.
[noise] got it and happy to see the reduced cash burn any additional details you'd give us on the puts and takes a driven that where there might be a little more <unk>.
Well I mean [laughter], we we've we've got it down you know 220 to 245 and so we are.
We're basically as we get more confident in how the numbers are performing we wanted to share that with all of you as well I mean, we see how the the first half of the year is gone and the efforts that we've put in place are durable and there.
<unk> <unk> <unk> <unk> repetitive and so we don't.
We don't see ourselves kind of.
Falling asleep at the wheel, we're gonna keep working hard to improve the business and.
And continue to drive the right decisions for us and I think the way we've done it so far and wide as I said in my <unk>, you know one year and I think we're we're we're demonstrating that we're we're putting some muscle into how we're running the business and.
And trying to do it in the right way, we still have an.
An undeniable passion for the patients that.
That we serve and that and the conditions that we are partnering with and so we're trying to do it in the right way, but we think we can also do it and build a healthy business at the same time.
And you know we have some some studies that are gonna come to fruition hopefully in the second half of the year and that that's some of the.
There will be some cash consumption there, but that's within our our stated range of of what we've got it too and so we just making the hard tradeoff decisions and trying to get it right more than we get it wrong.
Alright, thanks, guys.
Thank you.
Thank you Uhm next question comes from Rachel passed and still from J P. Morgan.
<unk>. Please go ahead.
Great. Good afternoon, and thank you for taking the questions and the first half just kind of wanted to talk about oncology and you know coverage from private person off of Medicare can you just give us an update on where you stand with C. M. S coverage on the data that you submitted and then also how conversations are calling like private payer coverage.
You know when they can see any needle needle moving updates there.
And so are you talking about for our somatic products M. R. D or are you talking about our hereditary cancer products.
Yeah and the energy.
Yeah.
No new updates from the last time, we talk we we we talked about that we had gotten coverage by Blue Shield Blue Shield of California.
We've gotten some indications from CMS as to the favorable the towards coverage and and what the potential reimbursement rates would be we're in active discussions with them. So I'm not gonna go.
Go much further than that and so the process is moving forward, we know and specifically for M. R. D. C. R. C. Colorectal cancer is one of the the areas that has you know.
You know more widely accepted coverage and reimbursement and so we're looking at our trials where.
We're working on you know, making sure that we are leveraging our validation in efforts to to the areas that are more commonly reimbursed.
And so we've got a few places where we've seen some traction and and this in that regard and we just gonna keep working hard with all of the payers and <unk>.
And you know the the clinicians who also dependent upon our pride out there's still some work to be done in terms of getting you know the adoption.
And acceptance and so we're working off once it's in parallel.
Great and then may be shifting over to be willing to help business can you just kind of walk us through what are you she seemed to must share perspectives on prenatal testing.
And you know shifting over to the opportunity micro deletion can you just kind of walk us through what are your expectations for timing on when we could expect that potential guideline change and without kind of blade to Richard Pryor private pay our coverage as well. Thank you.
Yeah, I'll start with the micro deletion and you know there there is growing.
Growling momentum to to widen the coverage to include micro deletions, we have the way we we we execute our product allows us to be able to pivot.
Very very nicely when that guideline expansion does occur we provide micro deletion and so we will be will be fine when that does occur tough to predict when that's gonna happen, but the way we've got our product develop that were really.
We would welcome that and we're well positioned for that is.
As far as shares concerned for an I P. S. That's that's a great question and is not one that I I can tell you I have total.
Confidence in just Blurting out a number.
I will say that one thing that's been great about our women's health business has been a carrier business has been growing significantly this year and that's really been feeling are I think it was 18% <unk> you have a year of growth in revenue for Q2 has really been out.
Care of your business and that's been going very well so.
But I I don't know that I have the market share numbers I know we are growing at such right that we were taking share now some of that chair could've been just exited businesses exit the company to have exited that that the business and the shares been there to take.
And so it's hard to say what that number is right now.
Great. That's it for me thank you.
Thank you Rachel.
Thank you Uhm next question comes from Penn each suitor of S. Phoebe.
<unk>. Please go ahead.
Hey, guys. Thanks for the questions. So I'm just wondering if you can update us on where do you stand with the commercial stuff for each segment and where their reductions is still in the quarter just given the sort of Katherine guidance you have and.
Given the expectations for the second half.
And so it was <unk> was your question that we reduce sales force sales team in the quarter to fuel our Casper reduction is that what you're asking.
Yeah. So could you maybe update us on the double sales force you have today and I'm wondering if you can provide that context with respect to each sort of segment I'm wondering if they were a recent productions beyond the ones that you had conducted before.
Does that makes sense, yeah. So no yeah. It does.
There's been no.
No.
Say you know.
Uhm plan reduction in forces or anything like that associated with our sales force. We did some re alignment last fall when we exited some territory's in N N reallocated resources and we actually added sales force in our efforts to expand call points for hereditary cancer and.
We've gone after some of the non genetic experts community, which right now and call in double digits Forest.
And so but since then we've not made any wholesale changes to our sales force coming out of the re alignment from last fall.
Obviously, our decision to exit the P. G X business, we had a small sales team that was focused on pharmacogenomics and the teams are looking to buy now and you know kind of understanding as it is the opportunity to reallocate those resources and so we'll we'll we'll make the right decision.
On the rest of the business with the talent that we have in that regard.
But there's been no no other Oh <unk>.
<unk> sales force any wholesale reductions since we did a realignment.
Okay. Thanks, and then within the context of the Cashback 222, 45, I mean I appreciate it coming to look you're exiting P. G X business, it's understandable I mean that.
That is a highly competitive market, but you are competing and a number of other areas, which are highly competitive just wondering sort of the you know the level of focus and commitment that you have for you know things like rare diseases versus you know sort of areas of.
Data services and things that you are providing so would love to have a you know sort of a context around where you see the core business continuing to be very much core to your versus areas, where you know a potential four neato potential for further exit.
If if need be.
Obviously, that's not a question that I'm going to be able to answer a yes. At this point I mean, I I don't want a signal anything that would be inappropriate.
Alright, I appreciate it and so I mean look look I I'd say I would say this is that.
And I think I, even maybe you said it in my my opening comments that we have more visibility into.
Into how each of our businesses are business lines in clinical areas of performing today than we ever have <unk>.
And.
The good news is that they have visibility is also spring, knowing where our strengths and our weaknesses are in the dressing.
The the weaknesses and trying to leverage our strength is what every one of our.
<unk> and I've put in a claim on quite areas are striving to do we still have our overall business that we are trying to build and and we have some objectives that we're <unk>. We're looking to bill we haven't we haven't rolled out our 2024 business plan, yet and sell some of the things you're talking about would really be.
Material to how we build out our business plan for 24, and so not ready to talk about that but you know we we have visibility we know what was good and what we need to be better at it and we're working hard every data.
To address those and and.
We'll keep working hard on building a profitable business that can really.
Knock that out of the park in terms of serving customers and patience and has great growth prospects for the future too. So that's what we're going to be five <unk>.
Sure No I understand thanks, again and I appreciate the color you provided.
Yeah. Thank you.
<unk>. Our next question comes from Karl cruise of credit space.
<unk>. Please go ahead.
Hey, Thank you for taking the questions going back to the cash burn.
Capital expenditures has become significantly lower than prior years and I was maybe wondering if you could speak to the sustainability of keeping the capital expenditures solo and maybe provide some broader color on how your ensuring that you're investing and profitable growth, while maintaining the more stringent cashback and reduction and beyond that in fact, the carrier screen.
If maybe you could comment on the reimbursement environment for carrier screening and if you've been able to secure more favorable transfer reimbursement. Thank you.
Yes, it's from a capital standpoint mm mm certainly talked about that before part of what we.
What we want one of the reasons, we've been able to kind of lower capital spending at least for the for the time being is because we had.
We.
We we just we found ourselves with more capacity than we when we had demand if you will and so we just didn't need to continue to buy new capital equipment as as we went through a realignment and and and kind of trimmed our portfolio and where we were doing.
Business and things like that the international space, we started pulling back out of some of that we found that we had we had sufficient.
Kind of capital utilization still to go and.
And so that's that's been the case now you know the question has been asked before you know alumina has some new <unk> and should we could we take an opportunity to to look at those we've said we would we would take a look at it and and there's opportunity to improve our cost per unit and and three.
Put in speed and so you know, we are willing to and and and kind of continually looking at those types of opportunities, but they won't be requiring them.
I think some significant capital spending that the company had.
And the years prior I don't think we need to go back to that level of capital spending anytime soon.
Relative to carrier and I think the question was related to cap carry a reimbursement.
You know I think what we found is that we have a really solid team. That's that's the understanding what the reimbursement landscape is an carrier and and we've been very successful in improving our average payment protest and a carrier business that's actually contributed to.
Our gross margin improvement you know in the <unk>.
Past with hereditary cancer, having some headwinds on rosemont on ATT and the.
The company would have probably been more so explaining why low 40 per cent gross margins would have occurred but because we've done a really good job in carrier in women's health and rare disease in terms of increasing gross margins. There we still are making progress in the aggregate for the company, even though we saw.
Little bit of a headwind on revenue for right, sorry cancel business, though.
You know, we we know what the opportunities are we know how to to to address it and we're working hard on it and I think we are showing great progress there.
Thank you so much.
Thank you next question comes from like John Peterson <unk>.
<unk>. Please go ahead.
Alright. This is actually David Westenburg on for for John Here Uhm. So I'm. Just my first question is on some of the benefits we've seen some of the competitors get in and reproductive health I think there was California is now, allowing more than two vendors and you know a lot of companies have been talking about.
Carrier screening being in particular spend a carrier screening being better paid are you seeing any of those benefits where she could we anticipate in any of those benefits. This year and then maybe I'll just ask a second question upfront here are there any are in big R&D projects that you expect a fall off in the next couple of years that would just be kind of automat.
<unk> decreases in and some of the Opex. Thank you.
Okay.
<unk>.
And I think you're referring to the last year there was some.
Efforts by California to restrict the number of providers.
Especially a N I T S. The noninvasive prenatal screening.
Due to kind of.
Pricing solicitation effort that was going on and many of us in the industry mm disagree with that effort and and we were we were happy to see when the <unk> that after it was kind of paused I believe it was a a call an injunction.
Pause that effort.
And so the good news is that it didn't it didn't really go into effect in it. So it didn't change our positioning of a business in California.
And.
So.
Really I would say that the impact has been.
Minimal and it and it really hasn't changed the way we go to market in California for women's health.
So far it's kind of opex reductions with R&D, Let me <unk> R&D spend is I'm gonna say somewhere.
45, 50% lower than it was a year ago.
And.
You know, where we are continuing to to really refine what our needs are and what's gonna be the real growth drivers. We we barely get process is now that we're measuring the effectiveness of what we're doing and so we were we have a good handle on where we need to spin and where are we.
Where we don't and.
You know.
<unk> is is really about.
You know, making sure that we are continually not only having great products today, but our products have the ability to to to.
Continue to grow where customers and patients need them to be not just for today, but for tomorrow and beyond and.
So.
We're always asking ourselves what's it gonna take for us to be the best in the business.
And this clinical area three to five years from now and so it helps when you're already we think we are ready to burst and when you think about hereditary cancer were as good as anybody but that's not that's not where we stay we have to continue to invest in that product and so.
We will be stewards, we will be.
Responsible stewards of the capital that we have access to.
To make sure that those investments are.
The fungible.
Okay.
Thank you how this time, we have no further questions. So how back to Ken ninth any further remarks.
Well. Thank you operator, and thank you all for your questions really really really good to have to have you on the call and I appreciate and many of you who said congrats on a quarter I mean, it goes a long way we've working hard we're trying to deliver and appreciate the fact that you've noticed.
I appreciate your continued support and look forward to sharing more updates with you in the near future in the meantime have a great afternoon and evening Goodbye now.
Thank you for joining <unk> you may now disconnect your lines.
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