Q3 2023 Myriad Genetics Inc Earnings Call
Adult please continue to standby your myriad genetics earnings call will begin shortly we thank you for your patience. Please remain on the line your call will begin shortly thank.
Thank you.
[music].
Greetings. Thank you good afternoon.
My apologies Julien precede that.
Okay. Thank you okay. Good at Greenville, and myriad genetics third quarter 2023 earnings call. During the call. We will review the financial results. We released today and afterwards, we will host a question and answer session. Our quarterly earnings release was issued this afternoon on form 8-K and can be found on our website.
At Investor got myriad Dotcom I met Gala senior Vice President of Investor Relations on the call with me today are Paul Diaz, Our President and Chief Executive Officer, Bryan Riggsbee, Our Chief Financial Officer, and Mark variety, our Chief commercial officer. This call can be heard live via webcast at <unk>.
<unk> Dot <unk> dot com and a recording will be archived in the investors section of our website along with this slide presentation.
Please note that some of the information presented today contains projections or other forward looking statements regarding future events or the future financial performance of the company.
These statements are based on management's current expectations and the actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's annual report.
On Form 10-K, its quarterly reports on Form 10-Q, and its current reports on form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward looking statements with that I'll now turn the call over.
So Paul Thanks, Beth good afternoon, everyone and thank you for joining us on today's call. We will discuss highlights from our strong third quarter performance and provide an update on the progress we continue to make accelerating revenue growth on our path to profitability.
First I'd like to take a moment to reflect on the great work that the team has done to reposition the company over the last three years.
Like many early entrants to new market myriad genetics relied on its early successes, but failed to adopt adapt to evolving market conditions.
This created overhangs in the business and complexity that inhibited growth and innovation.
Unfortunately, misguided product development, the poor integration of acquisitions outdated technologies deteriorating facilities in litigation also wrote of the brand.
To return married to a leadership position, we embarked on a multi year transformation journey with four key objectives first.
To build and re energize the team refocus us on the patients and providers, we serve and the commission and the mission we committed to.
Second to modernize and expand our lab.
And support center capabilities.
Third to restore organic growth and profitability.
And fourth to build the company's R&D and product management strengths.
While this hard work continues today, we can confidently say that we have made great progress on all four of these objectives.
As well as advancing our mission.
Asian to empower patients with the opportunity for better health wellness to genetic testing and precision medicine.
Now on slide four I want to highlight certain key performance indicators and operational activities that are fueling our growth.
First we have continued to build an experienced and engaged team is demonstrated by our low turnover just nine 3%.
And best places to work designation.
Enabling our teammates to perform at their highest level, putting tools and resources, where they are needed most as we invested to upgrade our labs, it infrastructure and support center capabilities.
Driving our double digit growth has been our focus on the patient and provider experience. Our net promoter scores are strong at 69% provider retention is up to 70% turnaround times are down to just six three days and we've added 5000, new ordering providers to the franchise this quarter.
Making it easier to do business with myriad is starting to pay dividends as we see market share gains across all our product lines and make progress on large account wins and new strategic partnerships.
Our payer markets and revenue cycle teams have been hard at work, making sure we get paid for delivering on our mission.
Recent highlights included a four year contract extension and Polaris coverage expansion with United Healthcare as well as gene site coverage determinations, among a number of Medicaid and commercial payers. The team made great progress this quarter on improving asps cash collections and Dsos.
We talk a lot about the company increasing teammate productivity that we see across the entire business exclude.
Excluding sneak peek, our Cogs shrank to $179 per test in Q3 of this year as compared to $196 in Q3 of last year.
Adjusted gross margins improved to 74% and operating expenses as a percentage of revenue shrank from 80% in Q1 of this year to 72% in Q3.
And we resolved several.
Legacy litigation matters, which provides more legal and financial visibility and operating focus moving forward.
Lastly, we've made significant progress advancing our clinical validation efforts and prelaunch commercial and operational activities for fore sight, Universal plus first gene and precise MRV for Biopharma partners.
Turning to slide five.
Myriad genetics drove significant volume growth in the third quarter across the portfolio as our commercial and lab operations team continued to execute well.
Gaining share in the hereditary cancer market growing volumes, 18% year over year in the third quarter.
Driven by competitive account wins and increase adoption by providers of my risk.
We've continued to see momentum in our prenatal business as well.
<unk> contribution from sneak peek prenatal testing volumes grew 20% in the third quarter.
This third consecutive quarter of double digit prenatal volume growth reflects ongoing commercial execution for our women's health team as we strive to make it easier providers to partner with married.
Other products like gene side in Polaris also contributed to our fourth consecutive quarter of double digit revenue growth, we continue to see our gross margins.
Have been and we've been diligent in our cost manage activities as our operating as our adjusted operating loss of $2 2 million was reduced significantly from an operating loss of $20 6 million in Q3 of last year.
Other highlights from Q3 included a raise in our full year revenue guidance with Bryan will speak to later, a new four year agreement with United Healthcare and a settlement of the Rab Jen.
Litigation, which now puts that let us see legacy litigation firmly behind us. So we can focus on running the business.
Lastly, I am pleased to announce that <unk>, our new Chief operating officer, who joined the company. Shortly Sam brings over 25 years with general management commercial and operations experience to the business and will hit the ground running on December 11th building on Nicole Lambert success in our lab operations customer service product.
<unk> innovations as well Sam initial focus areas will include improving the patient provider journey and overall customer experience.
Executing on our labs are the future strategy.
And identifying opportunities to strengthen supply chain management, and procurement and helping us to grow our emerging biopharma business.
Look forward to introducing Sam to the Investor community in the near future I would like to again, thank Nicole Lambert for 22 years of serving myriad genetics its patients and providers.
I'll turn it over to our Chief commercial officer, Mark Parotic. Thanks.
Thanks, Paul I'd like to start on slide seven and talk about our core business units.
Third quarter hereditary cancer testing volumes from our oncology sales team grew 15% year over year.
Well above the estimated industry growth, which speaks to our enduring franchise and improving brand reputation.
Pro Polaris, our prostate cancer test continued its momentum with third quarter revenues up 18% year over year. We are pleased to share that Unitedhealthcare has issued a positive medical policy covering.
Polaris and the biopsy setting for all risk groups. This policy will take effect on January one of 2024 and represents another win for urology teams that continue to reach patients with diagnosed prostate cancer to provide them and their physicians with important information needed for better treatment decisions. This aligns with several other positive.
Pro Polaris policy that were released in the third quarter now I will move to women's health on slide eight married genetics Women's health business serves women of all ancestry by assessing the risk of cancer and offers prenatal testing solutions for those who are pregnant or planning a family in the quarter hereditary cancer testing volumes in women's.
<unk> increased 22% year over year, making five consecutive quarters of positive volume growth prenatal volumes, excluding sneak peek grew 20% in the quarter with quarterly sales force productivity up 25% and women's health and leading turnaround times. It's no surprise that this team continues to outperform and <unk>.
Our share of these markets.
Recently much attention has been placed on 20, <unk> micro deletion syndrome, and prenatal screening test we want to highlight that our internal data on <unk> positive predictive value for micro deletion syndrome.
Significantly higher nearly two times that of our leading competitor.
Lastly, I want to give a shout out to the sneak peek team for reaching 1 million test today, and now thats attached to stock out of our 4000 Walgreens stores, we're optimistic on future test growth let's.
Let's move now to slide nine and talk about gene side mental illness continues to have a lasting effect on patients and their families in the U S. As those suffering failed to receive proper medical treatment gene site helps physicians better understand how our data presence and other drugs will affect their patients importantly for this patient group the tests can be performed.
With a single cheek swab sample that can be taken and the privacy of their own home in the third quarter gene site volumes increased 19% year over year and 24% year to date as we've added approximately 4000, new clinicians to the franchise during the quarter.
Mirrored continues to build on gene sites solid foundation of clinical data, including a collaboration with Optum genomics to create a multi phase study designed to better understand Jean site's ability to improve clinical outcomes and reduce overall healthcare cost as.
As mentioned at our Investor Day in September we are pleased with the positive phase one readout from our real World study with Optum.
I would also like to point out a couple of new partnerships and collaborations on the next slide.
We recently announced the collaboration between <unk> and Qiagen to develop kit based companion diagnostic tests.
Biding, our strengths and assay development clinical testing and regulatory approvals. We are excited to offer a comprehensive global companion diagnostic solution based on a wide range of testing platforms to our pharma partners not only are we excited about the opportunity to better serve pharma partners, but we hope that this collaborations set so.
Stage for advanced analysis, and accessibility of MRV in HRD assays to potentially improve cancer treatment decision, making additionally.
Additionally, in the quarter, we announced a new partnership with onsite women's health to launch a new breast cancer risk assessment program to help more women understand their breast cancer risk combining marriott's strengths in hereditary breast cancer risk assessment with onsite expertise in breast health services. This new partnership is expected to deliver.
Personalized breast cancer risk insights to more than 400000 patients that onsite currently.
<unk> nationwide I'll now pass the call over to our Chief Financial Officer, Bryan Riggsbee to discuss the financial highlights in further detail.
Thanks, Mark I'd like to start by reviewing product volume trends on slide 12.
Overall hereditary cancer test volumes in the quarter grew 18% year over year, marking five consecutive quarters of volume growth for hereditary cancer testing.
Combined quarterly volumes for prenatal and carrier screening grew 20% year over year, excluding contributions from sneak peek, our pharmacogenomics test gene site experienced healthy growth of 19% and test volumes year over year, and Polaris Q3 volumes grew 9% year over year, we credit the ongoing commercial momentum of the business to competitive account wins as well.
Disciplined execution from our tenured sales force.
While Q3 has historically been a seasonally weaker quarter impacted by fewer patient provider interactions and general summer travel on a year to date basis hereditary cancer and gene type test volumes have grown at or above 20% year over year, and prenatal and Polaris have grown at 14% year over year.
Now on slide 13, we will discuss our quarterly revenue trends.
Excluding contributions from change of revenue estimates in the Q3 of last year in Q3 of this year quarterly revenue grew 14%, marking four consecutive quarters of double digit revenue growth.
For the nine months ending September 31, or September 32023, total revenue excluding the contribution from change of estimates grew 15% over the nine months ending September 32022.
I would mentioned our third quarter 2023 revenue growth rate includes a negative headwind in tumor profiling revenue of approximately $3 million due to the completion of a commercial arrangement with one of our European Biopharma clients, which biopharma clients, which ended in Q3 of last year.
You may recall commentary from our second quarter earnings call up this year that we along with many peers in our industry experienced a negative impact to our revenue cycle process from the transition of multiple health plans to a new claims administrative process. During Q3, we made substantial progress in revolt and resolving these issues and ultimately collected more cash.
Cash than we expected, which drove the majority of the $7 million change of estimate that we experienced in this quarter.
Excluding the impact of change of estimates for third quarter revenue, we expect sequential revenue growth of 3% to 6% from Q3 to our implied Q4 revenue guidance range, which is in line with historical seasonal trends.
Moving down the P&L adjusted gross margin was approximately 70% compared to 68% in Q3 of last year and approximately 69% last quarter, reflecting the impact of the positive change in estimates as well as the impact of positive volume leverage.
We will now turn to slide 14, and discuss quarterly progression through the year.
We have seen nice improvement through the year on our path to profitability with first quarter, showing an adjusted loss of 21.
Second quarter at an adjusted loss of eight <unk>.
And third quarter and an adjusted loss of <unk> we.
I am confident in our ability to achieve our goal of reaching adjusted profitability and generating positive adjusted operating cash flow in the fourth quarter of this year for the full quarter for the full year, we have narrowed the adjusted EPS guidance range to a loss of between 33% and 28.
I'll now turn to slide 15 to review, our liquidity and cash flow.
Looking at the balance sheet, we ended the quarter with $86 $3 million of cash and marketable investment securities and expanded our asset based credit facility from $90 million to $115 million with the capital needs for the construction of our new lab substantially behind US we anticipate total liquidity of approximately 107.
$5 million at the end of 2023, we believe that this along with our continued business business momentum gives us financial flexibility as we enter 2024.
Note that we have not made a final decision on funding the remainder of the shareholder lawsuit settlement as you may recall, we have given ourselves the flexibility to use shares for the final payment and as we make our final determination on whether you use cash stock or a mixture of both for the final payment. We will continue to review our capital structure funding requirements and I'll turn.
It is available to us.
As stated in the earnings release, the Rab Gen litigation or first with settlement of which $5 million was paid on October 31, 2023 $5 million is payable on or before October 31, 2024, and $2 seven $5 million is payable on or before October 31 2025.
The final payment of the $21 million to $5 million is contingent on whether <unk> is successful in resolving all outstanding patent reexamination and litigation.
If wrapped in a successful contingent payments will be payable over a five year period, beginning no earlier than 2026.
Now on slide 16, we are updating our full year financial guidance.
The midpoint of our 2023 revenue guidance by $10 million, representing 10% to 11% year over year revenue growth from 2022, which is in line with our long term estimates adjusted gross margins are expected to be at the high end of our prior guidance, we increased our full year GAAP opex.
Guidance, primarily to include expected costs associated with the settlement of the <unk> litigation and we narrowed our full year adjusted Opex range with one quarter remaining in the year adjusted operating expense in the current quarter reflected the impact of normal expense fluctuations based on timing, we expect Q4 expenses to decline from Q3.
<unk> and be approximately $134 million at the midpoint of our guidance range.
On Slide 17, we also want to take this opportunity to introduce our 2020 for revenue guidance of between 815 and $835 million or 9% to 11% growth over the midpoint of our 2023 revenue guidance range. This revenue. This range is consistent with our longer term revenue growth target of 10%.
<unk> discussed at our September Investor event and reflects the performance we have demonstrated over the last year. In addition, we reiterate our other long term financial targets discussed in September which include gross margins over 70% annual growth in SG&A spend of approximately 5% to 6% and positive adjusted operating income and adjusted cash.
But I'll now turn it back over to Paul for closing remarks on the next slide.
Thanks, Brian as I mentioned in my introduction, we continue to build on the pillars required for long term growth and profitability.
Top tier science and products with clinical differentiation and adoption are enabled by technology that deliver value and real world clinical settings, and enable early detection and better treatment decisions.
Our commitment to continuous quality improvement and customer satisfaction powered by a modernized lab and commercial platform to improve workflows.
Test turnaround times and reduce costs through advanced technology and automation.
Together with best in class regulatory reimbursement and revenue cycle capabilities, Great science used to develop practical high quality diagnostic test.
Operated and efficient state of the art facilities with the ability to get paid for our efforts.
As discussed excluding contributions from peak total test volumes year to date in 2023 have grown 18% compared to last year and total year to date revenue excluding out of period adjustments is up 15% compared to 2022.
We believe these results demonstrate our ability to execute on our long term growth strategy as the investments we have made across the enterprise to take hold.
2023 has been a foundational year and we are confident in our balance sheet as well as our forward looking financial guidance and are pleased to put the rest of the litigation that has been an overhang for investors behind us.
We continue to Reenergize the enterprise around our shared mission and vision to make genetic testing in precision medicine more accessible helping people take more control of their health and to enable providers to better treat and prevent disease I'll turn it back to Matt now for Q&A. Thank you.
Thanks, Paul and as a reminder, during today's call we use certain non-GAAP financial measures reconciliations of GAAP to non-GAAP financial results and a reconciliation of GAAP to non Canadian guidance can be found in our earnings release and under the Investor Relations section of our website now we're going to begin with the Q&A session.
To ensure broad participation we are asking participants to please ask only one question and one follow up operator, we're now ready for the Q&A portion of the call.
Thank you.
If you would like to register a question. Please press the one followed by the four on your telephone you will hear three to impromptu acknowledged that request.
If your question has been answered and you would like to withdraw your registration. Please press. The one followed by the three once again to register for a question. It is one four on your telephone keypad and your first question comes from the line of Matt <unk> with Goldman Sachs. Your line is open.
Hi, This is <unk> on for Matt Thanks for taking my questions.
So first can you walk us through any progress you've made on addressing zero pays and what type of positive impact that could have on margins as we move into next year.
Yes, I think.
Lot of progress in the quarter as you can see.
Year to date $6 2 million of net out of period cash collections Dsos are down gross margins are up which reflect ASP improvement.
And.
Starting to feel more optimistic about the progress we've made.
Beginning to follow the state biomarker laws. There are 14 states now include in California that have passed them 10, 11 of those states, including California.
Should cover gene side, so we're beginning to engage state by state and this quarter, we saw two different payers.
Under the biomarker loss pick up coverage. So these are.
<unk> singles, so it's not going to be huge overnight successes, but we think the momentum there and the general recognition on things like prior authorizations within the Medicare program and other places.
A lot of opportunity to continue to improve ASP.
And so good cost management.
And ASP improvement are what gives us the confidence that we can grow gross margins above 70% going into next year.
Great that's super helpful. Thank you.
And then great to see Youre still getting share than hereditary cancer testing could you talk to the market penetration within my risk I think in the past you've said the market is only 15% penetrated has there been any progress in recent months and what actions we've taken to further drive that.
Yes, just to clarify the 15% market penetration within the unaffected market, which is where our women's health team focuses and so we see a great opportunity there, but quite honestly for the rytary cancer growth, we'd see that both in our affected population on the oncology side, where we continue to drive depth within our core Cup.
Customers, but we're also winning back customers from the competition and then we also see the same amount of growth on our women's health side and the unaffected population, where again, we see a huge blue ocean opportunity there and that speaks to the collaborations that we talked about on the call as well and being able to penetrate larger accounts.
And quite honestly, just increase the adoption of both providers and patients.
Great. Thank you.
Your next question comes from the line of Andrew Cooper with Raymond James Your line is open.
Hey, everybody. Thanks for the question.
Maybe first.
Diving in a little bit just on the gross margin you had that $7 million sort of makeup looking at the sequential gross margin movement. Just wondering if you could give a little commentary it seems like maybe a little bit of an impact, but just what are some of the key things. We should think about as we think about <unk> and then heading into that 70 plus number for next year.
Well, thanks, Andrew I mean.
As I mentioned, the operational highlights where youre seeing productivity in the sales force as Mark said, 25% cost per test drop year over year I mean, that's net of inflationary increases.
And as Brian mentioned, just starting to see the leverage in the P&L. So.
We think opportunities to continue to affect sequencing cost.
Opportunities to leverage our new labs, both in South San Francisco and in Salt Lake.
We're just beginning to start seeing some of that in the automation hasn't even taken hold yet we haven't moved our arches project over yet so.
I would just say we are increasingly optimistic about our ability to grow gross margins over the next couple of years as we see lab of the future.
Automation as well as the other productivity things that we're focusing on and take hold.
And as we talked about at the Investor Day, We've just identified a lot more opportunities to reduce no pays and we think over the next year that can be meaningful as well.
Okay, Great Super helpful. And then maybe just one on the guidance that youre, giving for 24 already obviously early to give that but just was hoping you could give us a little bit more flavor for maybe some of the underlying kind of pieces, where maybe there is wider error bars versus versus more narrow as we think about.
That initial guide for 2024 already here in November.
Yeah, Andrew this is Brian.
I'll start and let Paul chime in but I think that where we started.
Really looking at what we've laid out over the last four plus quarters now we've seen double digit topline revenue growth and.
Our stated long term goal is for 10 plus percent, we just feel very confident that when you look at the midpoint of the current year guide based on what we're seeing today in the business.
Adds up to something Thats in that in that range. So we felt like that was something that we wanted to we wanted to make sure that people understood that that's not an aspirational.
That's kind of what the business is doing today.
Yes.
So let me just underscore this we grew 15% year to date, excluding out of periods and we continue to produce net positives there.
And.
Theres just a clearly of some folks still doubt we can do that and we see a lot of momentum going into 'twenty four so the midpoint of the revenue guide is consistent with our long term its 10% over the state of the midpoint of the guidance. This year and we felt it was important for investors and for shareholders.
To see that we have great confidence in that 10% plus particularly based on the 15% year to date and the momentum in the business.
It's just that clearly there are people out there that don't think we can do that and we believe we clearly have demonstrated that and are just sort of now bringing things together here with our new labs and stuff. So it's just a it's an expression of our confidence and the visibility that we see in the business going forward and I would say the only thing.
I would add Andrew is just getting the United renewal behind Us in October as obviously, another thing that was incremental relative to where we sat back at Investor day that was a part of it.
Okay, Great I'll stop there and let others ask.
Thanks, Andrew.
And your next question comes from the line of retool that install with J P. Morgan Your line is open.
Hi, This is Joe on for Joe Congrats on the quarter.
Just digging into the 2020 for guidance just a little bit more can you give us any incremental color on that $18 $8 15 to $8 35.
Guidance is significantly above the street.
Is that mainly due to that United contract renewal as you just reference here can you give us any sort of updated volume or price expectations heading into 2024 or anything that you can sort of do just sort of frame that.
2024 year would be super helpful. Thanks.
So volumes are up 18%.
Revenue year to date is up 15%.
We see acceleration in customer acquisitions, and wallet share, we see acceleration in market adoption.
And.
ASP visibility with the United contract and other recent wins.
So.
That's those are the component pieces that would drive us to high degree of confidence of that midpoint.
And that longer term guidance, it's not a really big numerical jump to get from our guidance. This year to 825 next year.
It's 10% off the midpoint of this year's guidance.
Yes, I'll follow up.
What kind of margin profile. So it seems like you might also be tracking ahead of the margins.
Is that any.
Is that mainly driven by that increase.
Per <unk>.
<unk> or is that.
Something that you can think of as.
Go ahead.
The margins our margins are a function of everything going down the P&L. So as we talked about.
It has increased productivity is just a function of our fixed cost versus variable cost.
And the ASP product progress all play into that and I think incrementally as Brian spoke to as we think going into next year now that we've.
I've moved along in terms of opening our both of our new labs, as we're seeing turnover down to nine 6% nine 3%.
All of the operationally is what plays into our opportunity to continue to gross margins beyond the adjusted 74 going into next year.
There's a lot of leverage in this P&L.
Yeah.
Great. Thanks, so much.
Sure. Thank you.
And your next question comes from the line of Daniel Brennan with TD Cowen Your line is open.
Hi, Paul and Brian Thanks for taking the questions. This is Dan smartphone on for Brian Tonight.
Just a question on I apologize.
We missed this on the call, but on an <unk> side can you provide any timeline for additional publications supporting.
Its utility.
So.
Go ahead, Mark Yeah, the only thing I would add and so we at the Investor Day, we talked about the prelim results from phase one of the opt in trial and we also talked about at Investor Day Phase two of the opt in trial, which will be coming later this year, where we've got some control groups and we'll also be looking deeper into the economic utility as well as the clinical utility there are several other publications.
<unk> that are going on and you'll see those published sometime next year.
Alright, great. Thank you and then on the pipeline.
Do you have any updates on timing for products, including first gene.
Previously expected soft lunch in fourth.
Fourth quarter this year and then.
When should we expect to hear any updates on your <unk> offering.
So no updates to the pipeline since our Investor day in September.
Everything is sort of tracking consistent with that still got a lot of work to do but as we mentioned in the call continuing.
Continue to make great progress on our clinical validation work, we're excited about the new studies with with MD, Anderson and others and so.
Thats, all tracking well and the new partnership with Qiagen.
Really exciting in terms of the ability and when those are those are additional discussions with having with qiagen about M D.
And different offerings there so.
Progress continues but nothing substantive since our investor day.
Alright, Thank you have a good night.
Thanks, you too.
And your next question comes from the line of Jack Meehan with Nephron Research. Your line is open.
Okay.
Thank you good afternoon.
Cash bridge that you laid out in the press release landing at $107 5 million at year end just wanted to clarify are the payments to ramp gen incremental to that or is there a reason that the $5 million from October 31 towards excluded.
We didn't exclude the $5 million.
It's been the expectation that said the one out of seven has that and then the other payment would be a year from now October 31 of next year.
Okay, just because they see it says end of the third quarter, a $6 3 million then the amount available under the facility of 28, and then it has the fourth quarter Capex, but I didnt see the <unk> payment, but it's included in what we just didn't bring it out numbers, we should think yes.
Yes, just to break it out as Jack said and cash flow from operations. So it would be in that cash flow from operations number for the fourth quarter.
Okay.
As a reduction in accrued liabilities.
Got it okay.
And then Paul wanted to follow up on LDC regulations. I was just curious after you had a chance to review the Fda's proposed rule from the end of September was curious of your opinion has changed at all about potential future regulation of gene side or just how you're preparing for an ODT environment.
We.
I remain quite confident in our ability to navigate those regulatory changes, we're obviously engaged with our associations.
On.
Comment period with respect to that.
I would just remind everyone that we're running FTA like labs already.
So many of our quality assurance processes are are already in existence, and we've been contemplating FTA regulation across our products through this whole lab of the future planning process.
And I would.
Stand again behind the comments that I've made before Jack with respect to.
Jean site, there has been no under its enforcement authority any inquiries about gene site from the FDA and the comments and the proposed regulations were stated about the broad issues that have been raised by investors as evidenced by the New York <unk>.
<unk> article.
And the litigation that has now been resolved. So I think you took that out of context in your note.
And your next question comes from the line of Puneet suitor with SBB Securities. Your line is open.
Yes.
Okay.
Thanks for taking the question just on the $40 billion opportunity you highlighted China.
Would you mind, just talking us through how much of the benefit will be assumed in the 2024.
I'm sorry, you were talking about the ASP opportunity, we talked about at Investor day, the no pay opportunity Yeah I mean.
We didn't put a specific timeline on that but as you can see from this quarter's results we made progress on asps cash collections.
And quite frankly, we're incrementally.
See more visibility again under the context of the United contract Thats been signed for four years, the progress that we've been making with different payers for gene side and other products.
And and the.
<unk> growth of these biomarker laws that are not only for oncology tests, but also extend the gene side of the majority of the states. So.
Again, the first half of the year and some of the ISP challenges just gave us a refresh view and so we've really doubled down on our efforts there.
And again as we talked about earlier, we think it can contribute to margin expansion as we go into 'twenty four and beyond.
Okay, great Yeah that makes sense and contain site specifically would.
Would you mind walking us through what the 2023 entrenchment. Thank God, it's contemplating dependent whether that sustained volume growth.
Thanks Kristen.
Well, we don't break that out separately I think we've talked about and we've sort of and we've done. It this year Jane sites around 24% year to date, we have said that we think we continue to grow gene side at 20% and we've got that's where our biggest no pay issue.
And so we continue to work and are as I just mentioned incrementally.
See opportunities to reduce no pace for gene site and increase the Asps for gene site. So again a lot of progress.
Particularly in this quarter with respect to that.
Okay, great. Thanks for that.
And as a brief reminder, tool to register for a question. It is one four on your telephone keypad. Your next question comes from line of Derik de Bruin with Bank of America. Your line is open.
Hi, This is book channels on for Derik, Thanks for taking the questions and congrats on the quarter.
Wanted to start by digging into some of the topline drivers here as you guys talked about a fair amount of the beat was due to period adjustments.
Just looking for some clarity on how do we should be thinking about the impact of adjustments going forward and kind of a normalized rate given the dynamics that you've laid out that you are currently experiencing.
A follow up.
Can I just underscore that when we've given you the 14 and 15% revenue numbers, it's excluding the out of period collections, we've gone to great lengths to separate that out it was actually a 23% increase when you look at the.
The out of period collections and year to date.
Youre going to have some quarterly volatility, particularly given the what happened with the third party payers last quarter.
But that the revenue trends.
And the stability of ASP.
Coming through the P&L and so.
And anyway I hope that's responsive.
There's nothing else in terms of the pieces here, but Brian would you add anything yes, I would just say that if you exclude the out of period change in estimate and you get more like a 185 number that would be the adjusted number I think thats still a fair amount ahead of us.
Exploration wise, which is $1 79 to $1 80 range.
And really what we've tried to do over the course of the year is to really get the out of period to be an immaterial amount.
However, we did have the Carol the issue with a payer and administrative claims processing agent last quarter that we talked about on our last call and we were able to significantly recover that a lot of that this quarter. So that's a dynamic that's a little bit unique to the current quarter, but I would think I would say all in all it's that even if you exclude that it still.
A fair amount ahead of kind of where our expectation was.
And which is why we try to point everyone's attention to understanding there's been some quarterly volatility that year to date, it's all yours.
Head of our long term growth rates so.
Anyway, yes.
Thank you and that was certainly cleared in the PR and then you also you guys also did a great job kind of laying out the what's at hand here during the prepared remarks itself, but was wondering if you could give us a little bit more color on the puts and takes around the options for how you could pay for the litigation expenses.
In the near term and going forward, just what would drive you towards different mechanisms there. Thanks.
Sure Yes.
Yes, I would just say that.
As we highlighted on the last quarterly call out on this call and we're tracking right to the cash and liquidity estimate that we gave at the end at the Investor day. So we feel really good about the momentum of the business and where we are from reaching an adjusted cash flow.
Adjusted positive operating cash flow perspective in Q4, and we believe that gives us lots of flexibility not only from an operating standpoint, but also based on the fact that we had negotiated the ability to settle the shareholder suit in either cash or shares and so.
We're not at the point, where we have to make that determination yet but.
Yes, when we did we'll consider.
What our future liquidity looks like where we are from a capital standpoint, and we'll make the best call at that time.
Much appreciate it thanks.
Yeah.
Yeah.
And there are no further questions I'll turn the call back to Matt <unk> for closing remarks, Thank you very much.
Okay. Thanks, Dave. This concludes our earnings call a replay will be available via webcast on our website for one week. Thank you again for joining US this afternoon and have a good night.
Okay.
Okay.
Yes.
Yes.
Okay.
Yes.
Okay.
Yes.
[music].
Okay.
Okay.
Okay.
Okay.
So.
Okay.
Yes.
Sure.
[music].
Okay.
Okay.
Yes.
Yes.
<unk>.
[music].
Okay.
Okay.
Sure.
Okay.
Okay.
Sure.
[music].
Thanks.
Okay.
Okay.
Yes.
Thanks.
Okay.
[music] units.
Okay.
Sure.
Hum.
Okay.
[music].
Okay.
Okay.
Okay.
Okay.
Okay.
[music].
Bruce.
Yes.
Hum.
[music].
Okay.
Sure.
Okay.
Thanks.
Yes.
[music].
Yes.
Sure.
Sure.
Sure.
Yes.
[music].
Thank you.
Sure.
[music].
Okay.
Sure.
Okay.
[music].
Got it.
[music].
Yes.
[music].
Hum.
Okay.
[music].
Okay.
Okay.
[music].
Okay.
Yes.
Yes.
Yeah.
Okay.
[music].
Yes.
[music].
Okay.
[music].
Yeah.
Thanks.
Uh huh.
[music].
Okay.
Yes.
Yes.
Yes.
Okay.
Yes.
[music].
Okay.
Yes.
[music].
Yes.
Yes.
Yes.
Okay.
Sure.
[music].
Yes.
Yes.
Okay.
[music].
Okay.
Sure.
Yes.
Okay.
Yeah.
[music].
Yes.
[music].
Yes.
Sure.
Yes.
[music].
Okay.
Yes.
Yeah.
Sure.
So.
Yes.
Yes.
Yeah.
<unk>.
Okay.
Yes.
Sure.
Yes.
Yeah.
Yes.
Oh.
Yes.
Okay.
Okay.
Okay.
Okay.
Okay.
Sure.
Yes.
Yeah.
Okay.
Yes.
Yes.
Yeah.
Okay.
Mhm.
Sure.
Yes.
No.
Yes.
Yes.
Yes.
Yeah.
Yes.
Okay.
No.
Yes.
Sure.
Okay.
Sure.
Yes.
Sure.
Yes.
Yes.
Okay.
Yes.
Okay.
Okay.
Yes.
Okay.
Okay.
Yeah.
Okay.
[music].
Yes.
Sure.
Yeah.
Yes.
Okay.
Yes.
Okay.
Sure.
No.
Okay.
Okay.
Yes.
Yes.
Okay.
Okay.
Alright.
Yes.
Okay.
Yes.