Q4 2023 Veracyte Inc Earnings Call
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Operator: Good day, and thank you for standing by. Welcome to Versailles' fourth quarter and full year 2023 financial results webcast. At this time, all participants are in a listen only mode.
Speaker Change: Good day, and thank you for standing by welcome to their side fourth quarter and full year 2023 financial results webcast. At this time all participants are in a listen only mode.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, please press star 1-1 again. And please be advised that today's conference is being recorded. I would now like to pass the call over to the Senior Director of Investor Relations, Shaila Gorman. Afternoon, everyone.
Speaker Change: After the speaker's presentation, there will be a question and answer session to ask the question. During the session you will need to press star one one on your telephone you will then hear a message I buy senior hand, this waste to withdraw your question. Please press star one again and please be advised that today's conference is being recorded.
Speaker Change: I would now like to pass the call over to the senior director of Investor Relations.
Gorman: It'll gorman.
Gorman: Good afternoon, everyone and thanks for joining us today for a discussion of our fourth quarter and full year 2023 financial results with me today are Marc Stapley parasites, Chief Executive Officer, and Rebecca Chambers, our Chief Financial Officer.
Shaila Gorman: And thanks for joining us today for a discussion of our fourth quarter and full year 2023 financial results. With me today are Marc Stapley, Veracyte's Chief Executive Officer, and Rebecca Chambers, our Chief Financial Officer. Veracyte issued a press release earlier this afternoon detailing our fourth quarter and full year 2023 financial results.
Speaker Change: <unk> issued a press release earlier this afternoon detailing our fourth quarter and full year of 2023 financial result, that's released.
Shaila Gorman: This release, along with a business and financial presentation, is available in the Investor Relations section of our website at veracyte.com. 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 that they will prove to be correct. Furthermore, we are not under any obligation to provide further updates on our business trends or our performance during the quarter.
Speaker Change: Along with a business and financial presentation is available on the Investor Relations section of our website at <unk> Dot com.
Speaker Change: 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.
Speaker Change: Or we're looking statements are subject to risks and uncertainties and the company can give no assurance they will prove to be correct.
Speaker Change: Further we are not under any obligation to provide further updates on our business trends or our performance during the quarter.
Shaila Gorman: To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Veracyte files with the Securities and Exchange Commission, including Veracyte's most recent Forms 10-Q and 10-Q-1. In addition, this call will include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable gap financial measures is included in today's earnings release, accessible from the IR section of Veracyte's website. I will now turn the call over to Marc Stapley, Veracyte CEO. Thanks, Shaila, and thanks, everyone, for joining us today.
Speaker Change: To better understand the risks and uncertainties that could cause actual results to differ we refer you to the documents the parasite files with the Securities and Exchange Commission, including <unk>, Most recent 10-Q and 10-K.
Speaker Change: In addition, this call will include certain non-GAAP financial measures reconciliation of these measures to the most directly comparable GAAP financial measures are included in today's earnings release.
Speaker Change: First of all from the IR section of our sites web site.
Speaker Change: I will now turn the call over to Marc Stapley Earth CEO.
Marc A. Stapley: Thanks, Dana and thanks, everyone for joining us today.
Marc A. Stapley: I am pleased to share that 2023 was a record year for Veracyte. Our high-value tests improved care for more than 125,000 patients and their physicians, enabling better diagnosis, prognosis, and treatment decisions. I'd like to thank the entire Veracyte team for their hard work and dedication to our mission of transforming cancer care. Over the course of 2023, we grew revenue by 22% and generated $44 million in cash from operations to deliver our second consecutive year of positive cash flow.
Marc A. Stapley: I am pleased to share that 2023 was a record year for verra site.
Marc A. Stapley: High value test improved care for more than a 125000 patients and their physicians, enabling better diagnosis prognosis and treatment decisions.
Marc A. Stapley: I'd like to thank the entire verify team for their hard work and dedication to our mission of transforming cancer care.
Marc A. Stapley: Over the course of 2023, we grew revenue, 22% and generated $44 million in cash from operations to deliver our second consecutive year of positive cash flow.
Marc A. Stapley: This is a significant proof point that our philosophy to drive cash generation while investing in our strategic growth drivers is paying off, and we expect to achieve positive cash flow going forward. I am extremely proud of our strong financial profile, which allows us to further expand the impact we are having on patients' lives. Our success is attributable not only to the dedication of our employees to our mission but also to the Veracyte Diagnostics Platform, which refers to our unique approach to launching and driving adoption for our diagnostic tests, which is driven by broad sets of genomic and clinical data.
Marc A. Stapley: This is a significant proof point that our philosophy to drive cash generation, while investing in our strategic growth drivers is paying off and we expect to achieve positive cash flow going forward.
Marc A. Stapley: I am extremely proud of our strong financial profile, allowing us to further expand the impact we're having on patients lives.
Marc A. Stapley: Our success is attributed attributable not only to the dedication of our employees to our mission, but also to the verify diagnostics platform, which refers to our unique approach to launching and driving adoption for our diagnostic tests.
Marc A. Stapley: This is driven by broad sets of genomic and clinical data.
Marc A. Stapley: Deep Bioinformatics and AI Capabilities, A powerful evidence generation engine, which ultimately drives guideline inclusion and durable reimbursement for our tests, as well as proven commercial excellence. The platform creates a flywheel for the generation of novel insights that, in turn, drive innovation and pipeline development towards future test expansion in a way that is extensible and repeatable across multiple indications. Decisal Prostate continues to be a clear example of this platform in action. Over the course of 2023, we added 8 publications and 16 abstracts to the Clinical Evidence Library for Decipher Prostate and an additional 12 abstracts and 7 publications from our Research Use Only, or RUO, Decipher Grid Office. During Q4, data from multiple studies were presented at the Annual Meeting of the Society of Urologic Oncology, or SUO, highlighting the ability of Decipher Prostate to identify patients whose prostate cancer is likely to progress. This focus on evidence generation reinforces the test status of the only molecular test to receive Level 1 Evidence Designation in the National Comprehensive Cancer Network's, or NCCN's, Prostate Cancer Guidelines.
Marc A. Stapley: Bioinformatics and AI capabilities.
Marc A. Stapley: A powerful evidence generation engine, which ultimately drives guideline inclusion and durable reimbursement for our tests as well as proven commercial excellence.
Marc A. Stapley: The platform creates a flywheel for the generation of novel insights that in turn drive innovation and pipeline development toward future test expansion in a way that is extensible and repeatable across multiple indications.
Marc A. Stapley: Besides for prostate continues to be a clear example of this platform in action.
Marc A. Stapley: Over the course of 2023, we added eight publications of <unk> abstracts to the clinical evidence library for the size of the prostate and then additional 12 abstracts with seven publications from a research use only while our UO decipher grid offering.
During Q4 data from multiple studies were presented at the annual meeting of the society of Urologic oncology or suo.
Marc A. Stapley: Highlighting the ability of decipher prostate to identify patients, whose prostate cancer is likely to progress.
Marc A. Stapley: This focus on evidence generation reinforces the test status as the <unk>.
Marc A. Stapley: Only molecular test to receive level one evidence designation.
Marc A. Stapley: In the National comprehensive cancer network, so and Ccm's prostate cancer guidelines.
Marc A. Stapley: The backbone of clinical evidence supporting decipher prostate is clearly resonating with physicians, as we delivered approximately 15,500 decipher test results in the quarter. We now estimate that the market for molecular tests in prostate cancer is approximately 35% penetrated, with plenty of headroom remaining for growth, as we believe penetration could get to 80% over time. Looking to 2024, we are focused on bringing Decipher Prostate to even more patients. We believe this will occur through indication expansion, additional payer coverage, and even more clinical studies, some of which will utilize Decipher Grid to further accelerate the flywheel of data generation and claims expansion. As an example of this, we anticipate the current draft of Medicare's local coverage decision policy for patients with metastatic prostate cancer to become final later this year or early next year. As a reminder, we estimate there are an additional 30,000 patients annually who could benefit from the prognostic and predictive information Decipher delivers to clinicians at pivotal moments in their journey to treat cancer. Moving to Affirma, this was another record quarter for test delivery. We reported approximately 15,200 AFIRMA results, with growth driven by new and existing accounts, including competitive winners.
Marc A. Stapley: The backbone of clinical evidence supporting the cypher prostate is clearly resonating with physicians as we delivered approximately 15500 decipher test results in the quarter.
We now estimate that the market for molecular tests in prostate cancer is approximately 35% penetrated with.
Marc A. Stapley: With plenty of headroom remaining for growth as we believe penetration could get to 80% overtime.
Marc A. Stapley: Looking to 2024, we are focused on bringing the FIFO prostate to even more patients.
Marc A. Stapley: We believe this will occur through indication expansion additional payer coverage and even more clinical studies, some of which will utilize decipher great to further accelerate the flywheel of data generation and claims expansion.
Marc A. Stapley: One example of this we anticipate the current draft of Medicare local coverage decision policy for patients with metastatic prostate cancer to become final later this year or early next year.
Marc A. Stapley: As a reminder, we estimate there are an additional 30000 patients annually, who could benefit from the prognostic and predictive information decipher delivers to clinicians at pivotal moments in their journey to treat cancer.
Marc A. Stapley: Moving to Afirma. This was another record quarter for tests delivered.
Marc A. Stapley: We reported approximately 15200 afirma results with growth driven by new and existing accounts, including competitive wins.
Marc A. Stapley: Over the course of the last two years, we have continued to enhance the AFIRMA offering, adding TERT promoter mutation testing, enhancing the online physician ordering portal, and introducing the AFIRMA grid RU02. While GRID for Affirma has only been available for a short period of time, the promise of advancing science and developing prognostic signatures has been well received by customers focused on research. Many have proactively reached out and are interested in collaborating to publish and fully validate new signatures. These launches and enhancements led to increased popularity and adoption of Firma over the course of 2023, which represented a record growth year for a product that launched more than a dozen years ago. Looking to 2024, we expect the firm to deliver solid growth through three key mechanisms.
Marc A. Stapley: Over the course of the last two years, we have continued to enhance the afirma offering adding to promote two mutation testing enhancing the online physician ordering portal and introducing the afirma grid <unk>.
Marc A. Stapley: <unk>.
Marc A. Stapley: While grid for a pharma has only been available for a short period of time, the promise of advancing science and developing prognostics signatures has been well received by customers focused on research.
Marc A. Stapley: We have proactively reached out and are interested in collaborating to publish a fully validate new signatures.
Marc A. Stapley: These launches and enhancements led to increased popularity and adoption of Afirma over the course of 2023, which represented a record growth year for our product, which launched more than a dozen years ago.
Looking to 2024, we expect afirma to deliver solid growth through three key mechanisms first continued execution to further drive penetration into both existing and new physician accounts.
Marc A. Stapley: First, continued execution to further drive penetration into both existing and new physician accounts. Second, engaging with Maldi X on their draft LCD to cover Bethesda five patients who could also benefit from insights provided by a firm. And lastly, scientific engagement empowered by GRID and an enhanced customer experience to ensure that we maintain and grow our community of dedicated physicians. Decipher and Affirma are great illustrations of the Veracyte Diagnostics Platform in
Marc A. Stapley: Second engaging with <unk> on that draft LCD to cover Bethesda, five patients who could also benefit from insights provided biopharma.
Marc A. Stapley: And lastly, scientific engagement empowered by grid and an enhanced customer experience to ensure that we maintain and grow our community of dedicated physicians.
Marc A. Stapley: Decipher into from a great illustration of the verify diagnostics platform in action.
Marc A. Stapley: This proven approach will enable our long-term growth across three vectors: global expansion, solving new cancer challenges, and with the acquisition of C2i Genomics earlier this month, serving more of the patient care journey. With our Perceptor Nasal Swab Tests, we are focused on tackling new cancer challenges. We believe the test will benefit patients and physicians as a non-invasive option to help guide clinicians' next steps for patients with potentially cancerous lung nodu
Marc A. Stapley: This proven approach will enable our long term growth across three vectors.
Marc A. Stapley: Global expansion solving new cancer challenges and with the acquisition of <unk> genomics early this month, serving more of the patient care journey.
Marc A. Stapley: With our preceptor nasal swab tests, we are focused on tackling new cancer challenges.
Marc A. Stapley: We believe the test will benefit patients some physicians as a noninvasive option to help guide clinicians next steps for patients with potentially cancerous lung nodules.
Marc A. Stapley: During the quarter, we made significant progress publishing the clinical validation data for the test in the journal CHEST and bringing the number of sites enrolling for the Nightingale Clinical Study close to 100. Nightingale is designed to demonstrate clinical utility and support reimbursement for the test, and remains a key focus in 2024 as we expect to complete patient enrollment in the summer. The level of interest demonstrated by the large number of sites that have engaged in Nightingale gives us optimism about the value the Perceptor nasal swab test could bring to physicians and their patients.
Marc A. Stapley: During the quarter, we made significant progress publishing their clinical validation data for the test in the journal chest and bringing the number of sites enrolling for the Nightingale clinical study close to 100.
Marc A. Stapley: <unk> is designed to demonstrate clinical utility and support reimbursement for the test.
Marc A. Stapley: It remains a key focus in 2024, as we expect to complete patient enrollment in the summer.
Marc A. Stapley: The level of interest demonstrated by the large number of sites that are engaged in Nightingale gives us optimism in the value of the perception of nasal swab tests could bring to physicians and their patients.
Marc A. Stapley: Shifting to our focus on global expansion, our strategy to deliver IBD versions of our tests to physicians and their patients outside of the United States is another key long-term growth driver. In the last quarter, we have largely completed the transfer of kit manufacturing for our Prosigna breast assay from Nanostring to our Marseilles, France location. With this transition, while we maintain some near-term dependency on NanoString for component supply and instrument service, we have worked through mitigating most of the supplier issues we began experiencing in the second half of last year.
Marc A. Stapley: Shifting to our focus on global expansion our.
Marc A. Stapley: Our strategy to deliver IBD versions of our tests to physicians and their patients outside of the United States is another key long term growth driver.
Marc A. Stapley: Over the last quarter, we have largely completed the transfer of manufacturing for our Prosigna breast assay from nano strength to our Marseille, France location.
Marc A. Stapley: With this transition while we maintain some near term dependency on nano strength of components supply and instrument service. We have worked through mitigating most of the supplier issues. We began experiencing in the second half of last year.
Marc A. Stapley: As a result, Q4 ProSignal volumes were ahead of our prior expectations. Looking ahead, we're monitoring the situation and doing our best to ensure continuity wherever we remain dependent on single-source supply. As we shared previously, we are now executing on a multi-platform IBD approach where we leverage the quality of our diagnostics and the level of evidence supporting them to differentiate. We are focused on key product and market development activities that will help drive a steady pace of IVD test kit launches over the coming year. We will soon submit our existing ProSigna test for approval under the IVDR framework, which is a key step to catalyzing launches across our oncology IVD portfolio. From there, we expect Decipher Prostate to launch in mid to late 2025 on PCR, and an updated NGS-based prosignin test around the same time to be launched on NextCTA. And we continue to expect Perceptor Nasal Swab to be commercially available in 2026 on NGS.
Marc A. Stapley: As a result, Q for Prosigna volumes were ahead of our prior expectations.
Marc A. Stapley: Looking forward, we're monitoring the situation and doing our best to ensure continuity wherever we remain dependent on single source suppliers.
Marc A. Stapley: As we shared previously we are now executing on a multi platform IBD approach, where we leverage the quality of our diagnostics and the level of evidence supporting them to differentiate us.
Marc A. Stapley: We are focused on key product and market development activities that will help drive a steady cadence of IBD test kit launches over the coming years.
We will soon submit our existing Prosigna test for approval under the IBD, All framework, which is a key step to catalyzing launches across our oncology IBD portfolio.
From there we expect this high for prostate to launch in mid to late 2025 on PCL.
Marc A. Stapley: And then updated Mgs based Prosigna test around the same time to be launched on Nick CTX.
Marc A. Stapley: And we continue to expect preceptor nasal swab to be commercially available in 2026 on Ngls.
Marc A. Stapley: Turning to serving more of the patient care journey, we recently closed our acquisition of C2i Genomics, and I'm thrilled to welcome the C2i team to Veracyte. This acquisition enables us to enter the Minimal Residual Disease, or MRD, market and expand our role across the cancer care continuum, building from our position in early diagnosis and risk assessment to treatment monitoring and disease recurrence testing. C2I's novel whole-genome sequencing approach to MRD fits well into the Veracyte Diagnostics platform, making it the ideal solution for us to address this portion of the patient journey. First, the assay requires less than 4 ml of blood, much lower than many competing tests.
Marc A. Stapley: Turning to serving more of the patient care journey, we recently closed our acquisition of <unk> genomics and I'm thrilled to welcome the <unk> team to borrow site.
Marc A. Stapley: This acquisition enables us to enter the minimal residual disease or <unk> market and expand our role across the cancer care continuum.
Marc A. Stapley: Building from a position in early diagnosis and risk assessment to treatment monitoring and disease recurrence testing.
Marc A. Stapley: <unk> novel whole genome sequencing approach to MLP fits well into the <unk> diagnostics platform, making it the idose ideal solution for us to address this portion of the patient journey.
Marc A. Stapley: First the assay requires less some formula blood much lower than many competing tests.
Marc A. Stapley: Second, the rapid generation of patient-specific signatures, available almost immediately after the whole genome assay is performed, is faster than bespoke panels that take weeks to develop. Third, the approach takes the widest possible view of the tumor genetic landscape to deliver performance that we believe enables earlier detection versus imaging and other molecular techniques. By identifying the effectiveness of a treatment almost in real-time, the physician can rapidly tailor the care plan for a patient, which we believe will lead to better outcomes. And because C2i's technology uses whole genome sequencing, we get more data for evidence development, giving us a rich view of tumor biology that allows for more collaborations and will catalyze further discovery.
Marc A. Stapley: Second the rapid generation of patient specific signatures available almost immediately after the whole genome assays performed it's faster than bespoke panels to take weeks to develop.
Marc A. Stapley: Third the approach takes the widest possible view of the tumor genetic landscape to deliver performance that we believe enables earlier detection versus imaging and other molecular tests.
Marc A. Stapley: Identifying the effectiveness of a treatment almost real time, the physician can rapidly tailor the cath lab for Ah patients, which we believe will lead to better outcomes.
Marc A. Stapley: And because <unk> technologies as whole genome sequencing, we get more data for evidence development, giving us a rich view of tumor biology that allows for more collaborations and will catalyze further discoveries.
Marc A. Stapley: As we mentioned when we announced the acquisition, we will commercialize MRD first in muscle-invasive bladder cancer, where we expect to launch a test in the first half of 2026, leveraging the same strong urology channel that has delivered continued growth in disciples. I am excited about our trajectory and even more by the impact we are having on physicians and their patients. With that, I will now turn to Rebecca to review our financial results for the quarter and expectations for 2020. Thanks, Marc.
Marc A. Stapley: As we mentioned when we announced the acquisition, we will commercialize <unk> first in muscle invasive bladder cancer, where we expect to launch a test in the first half of 2026, leveraging the same strong urology channel that has delivered continued growth in decipher.
Marc A. Stapley: I am excited about our trajectory and even more by the impact we're having on physicians and their patients.
With that I will now turn to Rebecca to review, our financial results for the quarter and expectations for 2024.
Rebecca Chambers: Q4 was another record quarter with $98.2 million in revenue, an increase of 22% over the prior year, higher than our pre-announcement due to the finalization of cash collections, which benefited ASP. We grew total volume to approximately 34,000 tests, a 21% increase over the same period in 2022. Testing revenue during the quarter was $90.4 million, an increase of 29% year-over-year, driven by higher-than-expected affirmative volume, decipher growth, and strong prior-period cash collection. Total testing volume was approximately 31,000 tests.
Rebecca Chambers: Thanks, Mark Q4 was another record quarter with $98 2 million in revenue an increase of 22% over the prior year higher than our pre announcement due to the finalization of cash collections, which benefited ASB. We grew total volume to approximately 34000 tests at 21% increase.
Rebecca Chambers: Over the same period in 2022.
Rebecca Chambers: Testing revenue during the quarter with $94 million, an increase of 29% year over year, driven by higher than expected Afirma volume decipher growth and strong prior period cash collections.
Rebecca Chambers: Total testing volume was approximately 31000 test.
Rebecca Chambers: Adjusting for this impact, testing for ASD would have been approximately $2,750. In the fourth quarter, product volume was approximately 2,600 tests, and product revenue was $3.7 million, up 13% year over year as the team did a tremendous job limiting the patient impact of the supplier issues Marc mentioned. Biopharmaceutical and other revenue was $4.1 million, in line with our expectations and down 39% year over year given overall spending constraints across the industry. 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 do include routine stock-based compensation. Non-GAAP gross margin was 70%, up approximately 340 basis points compared to the prior year.
Rebecca Chambers: Testing ASP was approximately $2900 as we've resolved and collected over $4 million of out of period payments.
Rebecca Chambers: Adjusting for this impact testing ASD would've been approximately $2750.
Rebecca Chambers: Fourth quarter product volume was approximately 2600 tests and product revenue was $3 7 million up 13% year over year as the team did a tremendous job limiting the patient impact of the supplier issues Mark mentioned.
Rebecca Chambers: Biopharmaceutical and other revenue was $4 1 million in line with our expectations and down 39% year over year, given overall spending constraints across the industry.
Rebecca Chambers: 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 a routine stock based compensation.
Rebecca Chambers: non-GAAP gross margin was 70% up approximately 340 basis points compared to the prior year cat.
Rebecca Chambers: Testing gross margin was 73%, up 90 basis points compared to the prior year, benefiting from higher lab volume and over $4 million of out-of-period collection. Product growth margin was 52%. Biopharmaceutical and other gross margin was 15%, down year over year due to lower fixed cost absorption.
Rebecca Chambers: Testing gross margin was 73% up 90 basis points compared to the prior year benefiting from higher lab volume and over $4 million of out of period collections.
Rebecca Chambers: Gross margin was 52%.
Rebecca Chambers: Biopharmaceutical and other gross margin was 15% down year over year due to lower fixed costs absorption.
Rebecca Chambers: Non-GAAP operating expenses, excluding cost of revenue, were up 28% year-over-year at $65.6 million, including a $3.5 million technology access fee to develop our IVD-KIDD test on the Next CTX NGS platform. Research and development expenses increased by $7.6 million to $18.7 million due primarily to the tech access fee and increased costs related to our Nightingale and Decipher clinical studies. Sales and marketing expenses increased by $1.8 million to $25 million. G&A expenses were up $5.1 million to $21.9 million, driven by higher personnel costs and infrastructure-related investments.
Rebecca Chambers: non-GAAP operating expenses, excluding cost of revenue were up 28% year over year at $65 6 million, including a $3 $5 million technology access fee to develop our IBD kitted test on the next CTX NGF platform.
Rebecca Chambers: Research and development expenses increased by $7 6 million to $18 7 million due primarily to the tech access fee and increased costs related to our Nightingale and decipher clinical studies.
Sales and marketing expenses increased by $1 8 million to $25 million.
Rebecca Chambers: G&A expenses were up $5 1 million to $21 9 million driven by higher personnel cost and infrastructure related investments.
Rebecca Chambers: We recorded a gap net loss of $28.3 million, which included $32 million associated with the impairment of Halio DX biopharmaceutical intangible assets, $7.6 million of stock-based compensation, and $6.3 million of depreciation and amortization. We increased our cash position by $14 million from the prior quarter and ended 2023 with $216.5 million of cash and cash equivalents, 21% higher than the balance of $178.9 million at the end of 2022. Turning now to our 2024 outlook, we are maintaining our total revenue guidance of $394 million to $402 million. This reflects year-over-year testing and product revenue growth of 13% to 15% and a decline of approximately 50% in biopharma and other revenue, as we have not seen evidence yet of an improvement in the market.
Rebecca Chambers: We recorded a GAAP net loss of $28 3 million, which included $32 million associated with the impairment of Helio Dx biopharmaceutical intangible assets $7 6 million of stock based compensation and $6 3 million of depreciation and amortization.
We increased our cash position by $14 million from the prior quarter and enter 2023 with $216 5 million of cash and cash equivalents, 21% higher than the balance of $178 9 million at the end of 2022.
Rebecca Chambers: Turning now to our 2024 outlook, we are maintaining our total revenue guidance of 394 million to $402 million. This reflects year over year testing and product revenue growth of 13% to 15% and a decline of approximately 50% in biopharma in other revenue as we have not seen.
Rebecca Chambers: Evidence yet of an improvement in the market.
Rebecca Chambers: We expect a non-gap growth margin to be in line with 2023 as tailwinds from operational testing efficiency efforts and fixed cost leverage roughly offset the annual supplier list price increases, merits, and the benefit of more than $10 million of out-of-period collections in 2022. We are also maintaining cash guidance and expect to end 2024 with between $230 million and $234 million in cash, cash equivalents, and short-term investments, including $8 million of one-time acquisition-related items. As always, our cash commentary is barring potential M&A. Moving to the first quarter, we are forecasting a sequential decline in total revenue, given the impact of cash collections in the fourth quarter and typical seasonality. Additionally, we expect non-GAAP operating expenses to be higher sequentially given the impact of the C2I acquisition and the annual reset of taxes and merit.
Rebecca Chambers: We expect non-GAAP gross margin to be in line with 2023 as tailwind from operational testing efficiency effort and fixed cost leverage roughly offset the annual supplier list price increases merit and the benefit of more than $10 million of out of period collections in 2023.
Rebecca Chambers: We are also maintaining cash guidance and expect to end 2024 with between $230 million to $234 million in cash cash equivalents and short term investments, including $8 million of one time acquisition related items.
Rebecca Chambers: As always our cash commentary is barring potential M&A.
Moving to the first quarter, we are forecasting a sequential decline in total revenue given the impact of cash collections in the fourth quarter and typical seasonality. Additionally, we expect non-GAAP operating expenses to be higher sequentially, given the impact of the <unk> acquisition and the annual reset of taxes and merit.
Operator: For the quarter, excluding the benefit of acquired cash and customary closing considerations from the C2I acquisition, we are forecasting a slight usage of cash due to the usual timing of compensation payments. I am excited about the momentum we have heading into 2024 and our commitment to executing on our strategic priorities over the course of the year. Operator, please open the line.
Rebecca Chambers: For the quarter, excluding the benefit of acquired cash and customary closing considerations from the <unk> acquisition, we are forecasting a slight usage of cash due to the usual timing of compensation payments.
I am excited about the momentum we have heading into 2024 and our commitment to executing on our strategic priorities over the course of the year. We will now go into the Q&A portion of the call operator, Please open the line.
Operator: Thank you. And as a reminder, to get in the queue, press star 1-1. Wait for your name to be announced. To remove yourself from the queue, press star 1-1 again.
Speaker Change: Thank you and as a reminder.
Speaker Change: To get in the queue Press Star one one wait for your name to be announced to remove yourself from the queue Press Star one again.
Sung Ji Nam: One moment for our first question, please, and it comes from the line of Soon Yi Nam with Scotiabank. Please proceed. Hi, thanks for taking the questions and congratulations on the quarter and a great year. Maybe they should just kind of kick off with the TERT promoter mutation capability that's part of a firma. Could you give us a sense of kind of what percentage of the volume would actually be useful for that particular testing of the form of the volume? Yeah, Sean, thanks. Thanks very much for your kind comments and compliments. It was certainly a great year.
Speaker Change: A moment for our first question please.
Soon Yunnan: And it comes from the line of soon Yunnan with Scotia Bank. Please proceed.
Soon Yunnan: Hi, Thanks for taking my questions and congratulations on the quarter and a great year, maybe just kind of kick off with.
Soon Yunnan: The Turk promoter mutation capability, that's part of our pharma could you give us a sense of kind of what percentage of the volume.
Speaker Change: That would actually be useful for that particular <unk>.
Speaker Change: Testing.
Speaker Change: The Afirma volume.
Speaker Change: Yes, Sean Thanks, Thanks very much for.
Marc A. Stapley: On TURD itself, you know, it's a very rare, relatively rare condition. And so the percentage of patients that actually show up with that mutation is quite small. Having said that, you know, it's very, it's proving to be extremely useful to order that test, you know, certainly in a larger number of cases. I don't actually know if we've got the percentage that we're currently seeing. I don't know if you have that.
Speaker Change: <unk> comments are certainly a great year.
Speaker Change: On <unk> itself, it's a very rare relatively rare condition and so the percentage of patients that actually show up with that mutation is quite small having said that it was.
Speaker Change: It is proving to be extremely useful to order that test.
Speaker Change: So a larger number of the cases.
Speaker Change: I don't actually know if we've got the percentage that we're currently seeing that don't have you have that.
Rebecca Chambers: Yeah, I believe it's ordered approximately 20% of the time where we have a positive result with the firm. But the actual percentage that has a mutation, in my recollection, is more in the single digit type range. But that just gives you a sense of how frequently it is being ordered and how frequently it is being seen. I think importantly, also, you know, TURD is a competitive differentiator for us, and we aren't necessarily seeing an ASP uplift from TURD because it, you know, is not something we necessarily have coverage for. But it's more, to Mark's point, it's more about the overall clinical benefit of having the assay than it is about a financial contribution to the company. It's more about the patient benefit.
Speaker Change: I believe it's ordered approximately 20% of the time, where we have a positive result with afirma.
Speaker Change: The actual percentage that Hasnt mutation and my recollection is more in the single digit type range.
Speaker Change: So that just gives you a sense of how frequently it is being ordered and how frequently.
Speaker Change: Is being seen I think importantly, also turned is a competitive differentiator for us with regard and we aren't necessarily seeing an ASP uplift from Turkey.
Speaker Change: Because it.
Speaker Change: Is not something we necessarily have coverage for but it's more to Mark's point, it's more about the overall.
Speaker Change: Clinical contribution of having the assay than it is about a financial contribution to the company. It's more about the patient benefit and one of the ways I really think about how having that capability has helped our pharmacy business in particular.
Rebecca Chambers: Yeah, and one of the ways I really think about how having that capability has helped our firma team and our firma business in particular is that it's really given our sales team yet another reason to go and engage with their customers. It's enhanced our test relative to, you know, both the competitive landscape and also where we think, ultimately, guidelines can go. And so we always thought it was important to include that as part of the Firma. And Sanjeev, I apologize.
Speaker Change: Sure.
Speaker Change: Our team is another reason to go and engage with their customers.
Speaker Change: It's in the Homestar test relative to both.
Speaker Change: Now the competitive landscape and also where we think ultimately guidelines can go.
Speaker Change: So we always thought was important.
Speaker Change: And Sanjay I apologize I said, 20%.
Speaker Change: It's actually more like a third.
Sanjay: Oh, Okay, well, okay fantastic Super helpful. And then my follow up is just on you mentioned the <unk>. The first indication is going to be in deep muscle invasive bladder cancer.
Marc A. Stapley: I said 20%. It's actually more like a third. Okay, wow. Okay, fantastic. Super helpful.
Sung Ji Nam: And then my follow-up is just on, you know, you mentioned the C2I; the first indication is going to be in muscle invasive bladder cancer. Could you just remind us about Decipher Bladder, the genomic classifier, and kind of how does that kind of go hand in hand with your MRD offering or the plans for the MRD offering? You know, if there are, do you think there could be synergies there?
Speaker Change: Could you just remind us about decipher bladder genomic classifier and kind of how does that kind of go hand in hand with your MRV offerings, what are the plans for the MRV upbringing.
Speaker Change: Or do you think there could be synergies there just kind of how should we think about the decipher bladder platform.
Marc A. Stapley: Just kind of how should we think about the Decipher Bladder platform? Yeah, I mean, they're always going to be synergies whenever we can continue to increase the menu of offerings and tests that we have in the urology space. As you know, a few years ago, we launched the bladder test. It's more of a subtyping test to help potentially determine the course of treatment. But what we're, and you know, it's had relatively low penetration, and we didn't particularly drive that commercially.
Speaker Change: Yes, I mean, there are always going to be synergies whenever we can continue to increase the menu of offerings and tests that we have in the urology space as you know a few years ago, we launched a blood test that is more of a subtyping tests to help.
Speaker Change: Actually determine.
Speaker Change: So treatment, but what we had.
Speaker Change: Had relatively low penetration and we didn't particularly thrive that commercially one of the reasons being.
Speaker Change: It is while at the same call point.
Speaker Change: Is a completely new.
Speaker Change: Product, if you think about it like that and so we do not want to distract never wanted to distract from the benefit of that we're seeing and decide for prostate.
Marc A. Stapley: One of the reasons being, you know, it is, while it's the same call point, it is a completely new, you know, product if you think about it like that. And so, you know, we do not want to distract and never want to distract from the benefit of what we're seeing in decipher prostate. But the clinical utility is ultimately what matters and we're continuing to develop that test further and, you know, think of ways of enhancing that utility. But we've really refocused our energy now in bladder on the MRD test at this point. We think that the market opportunity for a muscle-invasive bladder cancer test in MRD, which has a clear path to reimbursement, is greater and, you know, we're going to launch a test in the first half of 2026.
Speaker Change: But the clinical utility is ultimately what matters and we're continuing to develop.
Speaker Change: That test further.
Speaker Change: And think of ways of enhancing that utility.
Speaker Change: But we've really refocused our energy now in bladder on the details at this point.
Speaker Change: We think that the market opportunity for a muscle invasive bladder cancer test.
Speaker Change: <unk>, which has a clear path to reimbursement.
Speaker Change: Is greater.
Speaker Change: And yes, we're going to launch a test in first half of 2026.
Speaker Change: So, yes, thats, where youre going to see our investments in both R&D and development activities and then ultimately in our commercial activities as we put that test in the in the hands of the existing urology sales force.
Marc A. Stapley: And so that's where you're going to see our investments in both our R&D and development activities and then, ultimately, in our commercial activities as we put that test in the hands of the existing urology cells. But beyond that, you know, one thing you'll continue to see us do is, and we've talked about this quite a bit before, work across the patient's care continuum. And so, as we can come up with other, you know, helpful diagnostic tests that have utility in either reducing or accelerating treatment or predicting the performance of surgery or therapeutic actions. We'll continue to do so. Continue to consider that an important part of the urology program. I got it. Great Thank you so much. I'll get back in the queue.
Speaker Change: But beyond that one thing Youll continue to see US do is and we've talked about this quite a bit before is that work across the patient care continuum.
Speaker Change: And so as we can come up with other helpful.
Speaker Change: Helpful diagnostic tests have utility and even reducing unnecessary procedures are accelerating treatment.
Speaker Change: Or predicting.
Speaker Change: The performance of.
Speaker Change: Surgery all therapeutic.
Speaker Change: Actions will continue to do that.
Speaker Change: Continue to consider that an important part of the urology roadmap.
Speaker Change: Got it great. Thank you so much I'll get back into queue.
Speaker Change: Thanks Angie.
Speaker Change: Thank you Mo moment for our next question. Please.
Speaker Change: It comes from the line of Tejas Savant with Morgan Stanley. Please proceed.
Tejas Savant: Hello. This is Hugo on the call for T. Jos Thank you for taking our questions I wanted to ask a couple of questions on the <unk> assay.
Operator: Thank you. Please take a moment for our next question. It comes from the collaboration of Tejas Savant with Morgan Stanley.
Hugo: <unk> done prior to launch in first half 'twenty what are the gating factors there and is there any levers you could pull.
Speaker Change: A poll to.
Speaker Change: Pull forward of the launch timelines.
Tejas Savant: Please proceed. Sure. And thanks for that question. Yeah.
Sure. Thanks for that question, yes.
Marc A. Stapley: There are quite a few steps that we need to go through here. One, of course, is the integration of C2I, which is very much in progress at this point. That team is now part of the Veracyte team.
Speaker Change: Quite a few steps that we need to go through here and one of course is the integration of <unk>, which is very much in progress at this point and that team is now part of the verify team.
Marc A. Stapley: Then there's the launch of the product program itself, the Muscle Invasive Bladder Test, which is entering into our normal product development process. And that's kicking off now that the team is part of Veracyte. And then we're going to have to continue to run samples on that test to further validate the test and then do the technical assessment that we need to go through in order to get reimbursement. And then there's that period of, you know, waiting for a response on that as well.
Speaker Change: And then.
Speaker Change: The systems and other integration activities will continue through the early part of this year.
Speaker Change: The launch of the product program itself, the muscle invasive bladder test, which is entering into our normal product development.
Speaker Change: Process.
Speaker Change: Thats kicking off now that the team is part of our site.
And then we're going to have to continue to run samples on that test to further validate the test and then do the tech assessment that we need to go through in order to get reimbursement.
And then there's a period of waiting for a response on that as well so quite a few different steps steps that we have quite a lot of experience in following and I've been through a number of times before to your question on is there a way to pull it forward. If there was we will if there is we will.
Marc A. Stapley: So quite a few different steps, steps that we have quite a lot of experience in following and have been through a number of times before. To your question on, is there a way to pull it forward, if there was, we will. If there is, we will. You know, we've provided a timeline that we feel comfortable with, given all those steps. But along the way, if there's any opportunity to go faster, I think you can rest assured that the team is looking for it.
Speaker Change: We provided a timeline that we feel comfortable with given all those steps.
Speaker Change: Along the way if there's any opportunity to go faster I think you can rest assured that the.
Speaker Change: The team is looking for it and of course, that's a conversation we talked about a lot.
Marc A. Stapley: And of course, that's a conversation we talk about a lot. So yeah, that's where we are right now. But no change on Planet Records for the first half of 2020, and think about... Yeah, so good question. I don't actually have the number in front of me, but it's significant. C2I have been doing this for a number of years, five years or so.
Speaker Change: So.
Speaker Change: That's why we are right now, but no change in the plan of record first half of 2026.
Speaker Change: Thank you for that and then I wanted to also ask about how many genomes.
Speaker Change: <unk> sequence today, and as you think about volumes ramping youll be generating significant amounts of data. How are you thinking about monetizing that data set over time.
Speaker Change: Yes. So good question I don't know if you have the number in front of me, but its significant <unk> have been doing this for a number of years five years or so.
Marc A. Stapley: And as you've seen from a lot of their publications, they've looked at a number of different indications, bladder being one of them. And in each of those indications, they've got a significant amount of whole genome data. In terms of monetizing that data, I think of it very much in the same way as I think about the overall Veracyte Diagnostics Platform. You know, we've been generating whole transcriptomes in endocrinology, in pulmonology, and in urology for a while, and C2I has been generating whole genomes.
Speaker Change: And as you've seen from a lot of our publications they looked at a number of different indications.
Speaker Change: Bladder being one of them.
Speaker Change: And.
Speaker Change: And in each of those indications they've got a significant amount of whole genome data.
Speaker Change: In terms of monetizing that data I think of it very much in the same way as I think about the overall verify diagnostics platform.
Speaker Change: We've been we've been generating whole transcriptome in endocrinology, and Pulmonology and in urology for a while and.
Speaker Change: <unk> has been generating whole genomes.
Marc A. Stapley: And so we now have an incredibly rich data set available to us. We do, of course, get interest from biopharma and expect to continue in the future. And I think, you know, particularly with MRD as an asset that continues to grow, that's not our primary focus.
Speaker Change: And so we now have a incredibly rich data set available to us we could of course get interest from Biopharma unexpected continue in the future and I think particularly with MRV is an asset that continues to grow that's not our primary focus our primary focus is very much on our diagnostics pathway.
Marc A. Stapley: Our primary focus is very much on our diagnostics pathway. But opportunistically, as we have contact with biopharma who are interested in any of the data sets I've described, we'll follow up on those opportunities. We clearly have some in the pipeline right now.
Speaker Change: But opportunistically.
Speaker Change: As we have contact with Biopharma, who are interested in any of that data set I've described.
Speaker Change: We'll follow up on those opportunities, we clearly have some in the pipeline right now we've had some in the past.
Rebecca Chambers: And you can imagine a scenario where in the future, the C2I MRD assay acts very similarly to DecipherGrid and AffirmaGrid, where we are continuously generating clinical utility and other studies which broaden our potential indication expansion and therefore also subsequently help our commercialization efforts and managed care efforts. And so I absolutely agree with Mark, but effectively, when it comes down to the diagnostic platform we have described, this kind of whole X approach, whether it's whole transcriptome or whole genome, really does allow us to monetize these markets more quickly and get a stickier response given, you know, given the differentiated approach we've taken here. So just add that to Mark's commentary.
Speaker Change: We will continue to explore that and you can.
Speaker Change: You can imagine a scenario where in the future.
Speaker Change: The <unk> assay, our <unk> similarly to decipher grid and Afirma grid, where we are continuously generating clinical utility and other studies, which broadened our potential indication expansion and therefore also subsequently help our commercialization efforts and managed care efforts until I, absolutely agree with Mark.
Speaker Change: But effectively when it comes down to the diagnostic platform. We have described this kind of whole ex approach, whether it's whole transcriptome or whole genome really does allow us to monetize.
Speaker Change: Monetize these markets more quickly and get a stickier response, given given the differentiated approach. We've taken here. So just add that to Mark's commentary I think theres a couple of different ways. We can see this play out both of which are obviously quite positive.
Rebecca Chambers: I think there are a couple of different ways this could play out, both of which are obviously quite positive. Thank you. One moment for our next question, please. And it's come from Mason Carrico with Stephens. Hi, yeah, thanks for taking our questions. This is Jacob Unger from Mesa.
Speaker Change: Thank you very much.
Speaker Change: Thank you one moment for our next question. Please.
Speaker Change: And this comes from Nathan <unk> with Stephens, Inc.
Nathan: Hi, yes, thanks for taking our questions. This is jacob on for Mason.
Mason Carrico: So maybe, starting with your guide, could you just help us think through what's embedded in your guidance for 2024? And maybe more specifically, what are the puts and takes that could play out in 2024 that get you to the high end versus the low end of your guide with respect to affirmative action and decipher growth? I know you said that.
Nathan: So maybe just starting with your guide could you just help us think through whats embedded in your guidance for 2024, and maybe more specifically what are the puts and takes that could play out in 2024 that gets you to the high end versus low end of your guide with respect to <unk>.
Nathan: Afirma and decipher growth I know you said.
Rebecca Chambers: Uh, you're expecting testing and product revenue to go 13 to 15%, but maybe just breaking that out a little bit, giving us more color. Yeah, happy to do that. So you're absolutely correct. We're expecting testing and product revenue growth to be 13 to 15%, thereby, you know, absorbing a good portion of the biopharma decline of approximately 50%. When you break down a firma and a decipher, you know, I think the easiest way to think about it is that they're at very different stages in their life cycle. And as a result, as well as the comp on the firma side, obviously, when it comes down to it, the decipher growth will be higher than the average of the two, and the firma growth will be, you know, bring will be below the average of We're not going to get into the expectation to a point range at this point in time.
Nathan: Youre expecting testing and product revenue to grow 13% to 15%, but maybe just breaking that out a little bit more on giving us more color would be helpful.
Speaker Change: Yes happy to so Youre, absolutely correct, we are expecting testing and product.
Speaker Change: Revenue growth to be 13% to 15%, thereby absorbing a good portion of the biopharma decline of approximately 50%.
Speaker Change: When you breakdown affirm and decipher where I think the easiest way to think about it is they are at very different life stages of their life say they are.
Speaker Change: They are at very different stages of their lifecycle and as a result.
Speaker Change: As well as the comp on the Afirma side, obviously, when it comes down to it.
Speaker Change: The decipher growth will be higher than the average of the two and Afirma will be it will be bringing will be below the average of the two.
Rebecca Chambers: But I think the most important thing to know is, you know, we are very confident in our ability to penetrate both of these markets up to the 80% level. And, and while we are, you know, while we are, have significant out of period headwinds from prior periods, significant, significant, I can't get it out. We have significant prior period collections as a headwind, but third time's a charm. We are still very confident in the growth and overall trends of both of these products. I think importantly, and I mentioned this in the prepared remarks, for the first quarter, we do expect a slight difference between the two in seasonality, and that is worth noting.
Rebecca Chambers: On the Affirma side, we have seen, we saw, obviously, quite a strong fourth quarter, and so we are expecting a sequentially down quarter for Affirma, maybe even a little more than we had seen in prior years, given some of the weather impacts so far year to date. And Decipher, we are expecting to grow, and so just a little bit more guide, more color into the Q1 guide, I think perhaps that could also be helpful. Got it, thank you.
Speaker Change: So just a little bit more guide more color into the queue. One guide I think perhaps that could also be helpful.
Marc A. Stapley: Yeah, that's helpful. And then, um, I guess just on the cypherprostate more specifically, um... What are you seeing in terms of competition in the prostate market? Have you started to see any shift in competitive dynamics? Do you still feel like you're taking Cher?
Speaker Change: Got it. Thank you. That's that's helpful and then I guess us on this suffer prostate more specifically.
Speaker Change: What are you seeing in terms of competition and the prostate market have you started to see any shifting competitive dynamics do you still feel like you're taking sure and.
Marc A. Stapley: I guess you guys noted that it's 35% penetrated in the market right now with the potential to reach up to 80%. How much of that is kind of dependent on... More DXLCD coming. Yeah, I mean, to cover that second part first, you know, not obviously not a great deal.
Speaker Change: I guess you guys notice that's 35 per cent penetrating the mercury right now with the potential to reach up to 80%. How much is that is kind of dependent on this what would the X L. C D coming through at the end of this year and into next year.
Speaker Change: Yeah, I mean to cover that second <unk>, obviously, not a not a great deal about it as as I mentioned is about 30000 patients. Yeah. So suddenly very important it'd be great to get that L. C. D from the patient outcomes perspective to be able to benefit from the decided for testing that way but.
Marc A. Stapley: That is, as I mentioned, it's about 30,000 patients a year. So it's certainly very important. It'd be great to get that LCD screen.
Marc A. Stapley: It'd be more great from the patient, you know, outcomes perspective, to be able to benefit from the DeCypher test in that way. But really, if I think about it, the most important thing we're focused on is how we continue to drive DeCypher Prostate and gain that market share, and more importantly as well, also to penetrate more of the market as we do that. Because honestly, at this point, with so many patients who have prostate cancer still not getting our test or any other test, I think that's definitely a concern from the patient's perspective. So, with the level of publications that we've seen for Decipher that we've generated, not to mention all of the clinical and research publications that I referenced today in the prepared remarks, plus the NCCN Level 1 guidelines, the vast array of experience that people have not just in the U.S. but globally with Decipher, it's, you know, we're doing everything that we can in order to drive further penetration and continue to be the market leader. So, I wouldn't say there's any change in competitive dynamics one way or the other.
Speaker Change: But really the you know if I think about it the most important thing we're focused on is how we continue to drive decipher prostate and gain that market Sharon and more importantly, his wallet also to penetrate more of the market as we do that because honestly at this point with so many patients who have prostate cancer is still there.
Speaker Change: Getting our test or any other test I I think that that's definitely a concern from the patient perspective, so with the level of publications that we've seen for decipher we've generated not to mention all of the clinical and research publications that I reference today in the prepared remarks, plus the N C C N level one.
Speaker Change: Guidelines.
Speaker Change: Vast array of experience that people have not just in the U S, but globally with decipher. It. It's you know it we're doing everything that we can in order to drive further penetration and continue to be the market leader.
Speaker Change: So I haven't seen you know I wouldn't say, there's any change in competitive dynamics one way.
Marc A. Stapley: We're very focused on what we can do to have the most effective test. And then, beyond the US, I mean, those are all US-related comments and US market shares, but beyond the US, there's so much KOL experience outside of the US in terms of experience with studies involving Decipher, and we feel there's a pent-up demand for that. So, as soon as we can get our Decipher product launched on PCR, which we're planning to do at the end of 2025, I think our expectations for adoption there are a little bit more optimistic than they otherwise would be had we had to go and create a market or a level of interest from scratch. So, you know, lots of excitement on our side for Decipher going forward. All right, one moment for our next question, please. It comes from the line of Dustin Scourge with William Blair. Please proceed. Hi everyone.
Speaker Change: The other we're very focused on what we can do to have the the most effective test and then beyond the U S. I mean that that those are all U S related comments and you know U S market shares, but beyond the U S. There's there's so much K O L experience outside outside of the U S. In terms of experience with studied.
Speaker Change: Involving decipher we feel there's a pent up demand for that so as soon as we can get our decipher product launched on PCL, which we are planning to do and 20 at the end of 2025 yeah.
Speaker Change: I think our our expectations for the adoption there are a little bit more optimistic than they otherwise would be had we had gunk would have to go out and create a market.
Speaker Change: Or a level of interest from scratch. So you know lots of excitement notified for decided for going forward.
Speaker Change: Alright, one moment for our next question. Please.
Speaker Change: It comes on the line as I <unk> with William Blair. Please proceed.
Dustin Scourge: Good afternoon, and thanks for taking our questions. First, here on Nasal Swab, you guys published validation data in December. Just wondering if you could talk about the feedback you've received on that since publication, and then, as a follow-up to that, how are you thinking about the TAM here, given that this was validated on individuals that had some sort of smoke? Yeah, great questions. So the data that we ended up publishing, or getting published in CHESS in December, is data that we shared previously, actually, a couple of years ago.
William Blair: Hi, everyone. Good afternoon, and thanks for taking our questions first here on nasal swab you guys published validation data in December just wondering if you could talk about the feedback you've receipts on that since publication and then as a follow up to that how are you thinking I got the tan here.
William Blair: Given this was validate on individuals that had some sort of smoking history. Thank you.
Speaker Change: Yeah, great questions Uhm. So the date of the we ended up publishing of getting published and chest in December.
Speaker Change: Which had previously actually a couple of years ago, So getting into a final publication I think he's in now.
Marc A. Stapley: So getting it into a final publication, I think, is an outstanding outcome. And I congratulate our entire team and others that we worked with on that publication. It's great to finally see it out there.
Speaker Change: Now standing out come and I congratulate our entire team and you know others that we worked with on that publication, it's great to finally see it out that you know in terms of level of interest I think the publication really does a couple of things for US one is it helps us to really commence those <unk>.
Marc A. Stapley: In terms of the level of interest, I think the publication really does a couple of things for us. One thing it helps us to really commence those reimbursement conversations and start to get ahead of that. We now have a peer-reviewed publication in hand to do that. It also helps us have conversations with potential partners and others who might want to do some work with Nasal Swab in the future. I am so very excited about that.
Speaker Change: Reimbursement conversations and start to get ahead of that we now have a peer review publication in hand to do that it also helps us have conversations with.
Speaker Change: With potential partners and others, who might want to do some some work with nasal swab in the future. So very excited about that but really where I kind of hanging my greatest uhm can I have a sense of the level of interest in nasal swabs so far.
Marc A. Stapley: But really, where I kind of hang my greatest sense of the level of interest in Nasal Swab so far is in Nightingale. Because, as I mentioned on the call, with close to 100 sites enrolling, the level of interest in those sites, if you think about what it takes from a clinical operations standpoint to identify, gain interest from, contract, sign up, initiate, and then commence enrollment at nearly 100 sites, it's significant. And that can only come from those investigators and those institutions being excited about the prospect of the test itself and being a part of that clinical utility study. So that, to me, I think is, so far, one of our greatest indicators of interest in Nasal Swab. And we're excited to see how that goes and certainly have a desire to see clinical utility come out of that.
Speaker Change: Is in I can go you know because as I mentioned on the cool with close to 100 sites and rolling the level of interest in those sites. So if you think about what it takes from a clinical operations standpoint to identify gain interest from contract sign up initiate and then commenced enrolling nearly 100 sites.
Speaker Change: It's significant and it can only come from those investigators in those those institutions being excited about the prospect of the test itself and being a part of that clinical utility study. So that that to me I think is so far you know one of our greatest indicators of interesting nasal swab and.
Speaker Change: We're excited to see how that goes in and suddenly you know have a desire to see the clinical utility come out about the study.
Marc A. Stapley: Oh yeah, I'm sorry, you did ask. I'm sorry, you asked about the market size for TAM and smoking history. Yeah, I should cover that. Yeah, just to be really clear, I mean, the nasal swab is based on smoking, you know, patients who have a smoking history. You know, it really measures damage to the epithelial airway. One cause of that damage is, of course, smoking.
Speaker Change: Understood staying on that topic.
Speaker Change: Oh, Yeah, and I'm, sorry, you did.
Speaker Change: Sorry, you asked about the market five at the time and smoking history.
Speaker Change: Yeah, I should cover that.
Speaker Change: Yeah, just to to be really clear I mean nasal swab is based on on smoking patients who have a smoking history.
Speaker Change: It really measures the damage to the epithelium airway 1101 cause of that damage is of course smoking ace to expand the time beyond that would require a study.
Marc A. Stapley: To expand the TAM beyond that would require a study that includes non-smokers, and that is not the biggest market we're looking at. By far, the largest market is those, you know, patients who are eligible for lung cancer screening and those who have lung nodules incidentally found, which are 15 million and 1.6 million, respectively. That, by far, is the biggest market, and a significant proportion of those are current or former smokers and would fit the eligibility criteria for the nasal swab.
Speaker Change: That includes non smokers and that is not the biggest market. We're looking at the by far the largest market is those patients who are eligible for lung cancer screening and those who have lung nodules instantly found which are 15 million and 1.6 million respectively.
Speaker Change: That by far the biggest market and a significant proportion of those are carnal former smokers and would fit the eligibility criteria for nasal swab next step in the future could very well be trying to expand that time bite by doing the necessary studies.
Dustin Scourge: A next step in the future could very well be trying to expand that TAM by doing the necessary studies outside of non-smoking. We just don't know whether that's until you've done the study; you don't know whether that actually produces the same results or not, but by far, we focus the product initially on the largest proportion of the market, understood, thank you for that, and switching over to firma. Just wondering if we should be thinking about any reimbursement dynamics for the test in 24 and then any considerations longer-term about pricing for this product. Thank you. Yeah, So AFIRMA, if you rewind the clock back to 2021, with the code change, you know, we did see the impact of that in 2022.
Speaker Change: You know outside of Nonsmoking, we just don't know whether that's it you know until you've done. The study you don't know whether that Stace produces the same results on off by far we focus the product initially on the largest proportion of the market.
Speaker Change: Understood. Thank you for that and switching over to a farmer.
Speaker Change: Just wondering if we should be thinking about any reimbursement dynamics for the test and 24, and then any considerations longer term about pricing for this product. Thank you.
Speaker Change: Yeah, I'm happy to take that Uhm, so affirm and if you rewind the clock back to 2021 with the co change.
Speaker Change: Good to see the impact in 2022 of that and then for the course of 2023, we did see obviously the benefit of resolution of of many of those the impact of of 2021 and 2022 tied to the co changing so the reason why I go back throughout all of that history is you know the a S. P for a firm at this point in time based on.
Rebecca Chambers: And then over the course of 2023, we did see, obviously, the benefit of resolution of many of those impacts of 2021 and 2022 tied to the code change. And so the reason why I go back through all of that history is that, you know, the ASP for AFIRMA at this point in time, based on those resolutions, is quite elevated. And so, when it comes down to it, today, we're in a great position.
Speaker Change: Those resolutions is quite elevated.
Speaker Change: And so I think when it comes down to it today, we're in a great position Mark goal is to maintain that position. We see no reason why we can't continue to do so we had some smaller managed care wins over the course of the back half of last year that really that really help us help.
Rebecca Chambers: Our goal is to maintain that position; we see no reason why we can't continue to do so. We had some smaller managed care wins over the course of the back half of last year that really, you know, that really help us, help us be confident that we'll be able to maintain ASP plus or minus a bit, as we see any given corridor. So I think on the AFIRMA side, not any big, not any big dynamics to think through from a PAMA reset perspective that doesn't come to bear until 2028, as well.
Speaker Change: Help us be confident that we'll be able to maintain ASP plus or minus a bit as we see any getting Carter. So I think on the afirma side, not any big not any big dynamics to think through from a Pam a reset perspective that doesn't come to bear until 2028 as well. So we feel great about the work the team has done both on the.
Rebecca Chambers: So, you know, we feel great about the work the team has done, both on the managed care and the billing side and collection side. And I think we're, we're going to be obviously quite focused on that going forward. Over the course of, I think, also, it's worth highlighting on the Decipher side, obviously, less of a dynamic with a code change, like we had on AFIRMA. But I think a different portion of the story, given it's more nascent in its coverage and contracted lives. And so, you know, we do have a very good story on the Decipher ASP. We've gotten a number of wins over the course of 23.
Speaker Change: Managed care and the billing side and Uhm collection site and I think we're going to be obviously quite focused about that going for it over the course of I think also it's worth highlighting under the safer side, obviously lots of.
Speaker Change: Dynamic with a co change like we had on a farm, but I think a different portion of the story given it's more Nathan and it's and it you know coverage and contract contracted lives and so we do have a very good story and the and the decipher Aspie, we've gotten a number of wins over the course of 23 and and we're hopeful we'll have some more over the <unk>.
Rebecca Chambers: And, and we're hopeful we'll have some more over the course of 24 and 25. And so, you know, we're obviously, obviously hoping that we can continue to progress the coverage for Decipher given effectively the level one status that it has in the publication and clinical support. I appreciate all the color there.
Speaker Change: 24, and 25 and so you know we're we're obviously, we're obviously, hoping that we can continue to progress the the coverage for decipher given effectively the level and status that it has in the publication in clinical support on us.
Speaker Change: I appreciate all the color there. Thank you.
Matt Sykes: Thank you. Thank you. One moment for our next question. It comes from the line of Matt Sykes with Goldman Sachs.
Speaker Change: Thank you one moment for our next question.
Speaker Change: It comes from the line of Matt <unk> with Goldman Sachs. Please proceed.
Marc A. Stapley: Please proceed. The Bulletproof Executive 2013, Yeah, it's a great question. I mean, the urology leverage that we're getting out of our urology sales force in prostate alone has been very significant, and I think you see that in the numbers. We added less than a handful of net total reps last year, and you can see the significant growth that we got out of Decipher. One of the reasons we think, there are a lot of reasons why we actually think an MRD-based test in the bladder is the right test for us, not to mention the cohorts that we've got, the work that's been done already, but really important is leveraging that urology sales force again. And that goes back to the comments we made, and I think it was in response to the first question.
Matt: Hey, guys. Congrats on them order. Thanks for taking my question is there any way to quantify how much benefit you see from your Stablish commercial infrastructure with decipher prostate and how much of that can be applied to your bladder at Mardi test.
Matt: Yeah. It's a great question I mean, the urology the leverage that we're getting out about urology salesforce and prostate alone has been very significant I think you see that in the numbers and we added less than a handful of that total reps and last year and you can see the significant growth that we got out of.
Matt: <unk> one of the reasons, we think there's there's a lot of reasons why we actually think and M. A D. Based testing bladder is the right test for us.
Matt: Not to mention the cohort we've got the work that's been done already but really importantly is leveraging that urology salesforce again, and then it goes back to the comments, we made and I think it was in response to the first question that.
Marc A. Stapley: There is, you know, the benefit of having more and more menus available for our reps as they go out. They've got these fantastic relationships with the urologists from large group practices all the way down to the community. Being able to offer their patients who are dealing with bladder cancer, which is, you know, a terrible prognosis in many cases, and having something to offer them to enable them to, you know, determine whether or not their treatment has been or is being effective will be incredibly meaningful. So we do think we'll be able to leverage the existing sales force that we have and will have at that time without having to grow it substantially. While it might be within a practice, there might be a dozen urologists, and maybe one of them specializes in bladder cancer, and so you might find that it's a different product sold to a specific specialty within that practice. The reality is that we have incredible access to those practices in general, and so we don't anticipate a great deal of extra investment required in order to sell. Agreed.
Matt: There is the benefit of having more and more menu available for all reps as they go out and they've got these fantastic relationships with a urologist from large group practices, all the way down to the community and being able to offer the patients who are dealing with bladder cancer, which is a.
Matt: A terrible <unk>.
Matt: Prognosis in many cases, and having something to offer to them to enable to deter.
Matt: Determine whether or not the treatment has been has been or is being effective it will be incredibly meaningful. So we do think we'll be able to leverage the existing salesforce that we have and we will have at that time without having to grow it substantially well you know it might be within a practice that might be you know.
Matt: Doesn't urologist, so maybe one of them specializes in bladder cancer and so you might you might find that you know it's a different so it's a different product sold to a.
Matt: A specific speciality within that practice.
Matt: The reality is we have incredible access to those practices in general.
Matt: And so we don't anticipate a great deal of extra investment required in order to sell a test and the child agreed and I would just add one more thing obviously that.
Rebecca Chambers: And I would just add one more thing. Obviously, the Decipher franchise extends into the revenue cycle management and client services piece and all the infrastructure to order the test, which has obviously now been invested in, and we will sustain and also benefit from office staff using it historically. That should also help the commercial efforts on the MRD side, the knowledge and awareness of those types of interactions. And then how? We don't have a timeline, but if you think about it, Affirma's been on the market for more than a dozen years at this point, and it's taken that long to get to the penetration that we've currently got.
Matt: Seifer franchise extends into the the revenue cycle management and cut client services peace and and all the infrastructure to order the test which has been obviously now invested in and we will sustain and also benefit from office staff using historically that that should also help the the commercial efforts on.
Marty: Marty sighed, the knowledge and awareness of those types of interactions.
Speaker Change: Thanks, that's really helpful color I know, we touched on earlier, but this is helpful. And then how durable D C a firm of growth.
Speaker Change: As once thyroid cancer diagnostics Tam has reached that 80% penetration and do you have a specific timelines to that penetration mark.
Speaker Change: We don't have a ton of them, but if you think about it a thumb has been on the market for more than a dozen years at this point and it's taken.
Speaker Change: That long to get to the penetration that we've currently got with with an 80%.
Marc A. Stapley: With an 80% estimate out there, there are multiple years of growth still left in Affirma just to target the conditions that we currently cover and the indications that we currently have. As you know, we've been investing heavily in Affirma. We invested in Tert, as we talked about during this call. We invested in the physician ordering experience and portal. We just launched the Affirma grid. Time after time, we're creating new opportunities to engage with physicians and convince even more of them to use Affirma more often in more cases, and so we're gaining wins in terms of both existing accounts and new accounts. It's hard to put a timeframe on when that plateaus, as everything eventually always does, but it's clear that we've got a fairly decent amount of headroom still to go, even in endocrinology.
Speaker Change: Estimate out there's multiple years of growth still left in in affirm or just to.
Speaker Change: Target the the conditions that we currently cover on the indications when we currently have an <unk>.
Speaker Change: <unk> as you know we've we've been investing heavily in a farmer, we invested in to US as we talked about doing this call. We invested in the physician ordering of experienced some portal. We just launched the a from a grid and so you time. After time, we are creating new opportunities to engage with physicians and unconvincing.
Speaker Change: Even more of them to use a phone more often in more cases.
Speaker Change: And so we were gaining.
Speaker Change: Wins in terms of both existing account some new accounts and so yeah, it's hard to put a time frame on when the plateaus as everything eventually away. It does but it's clear that we've got a lot of fairly decent amount of headroom.
Speaker Change: Still to go even in endocrinology.
Operator: Thank you. One moment for our next question, and it's from the line of Mike Mattson with Needham. Please proceed. Hey everyone, this is Joseph Phan from Mike.
Speaker Change: Got it thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And he's from the line of Mike Matson, we'd meet them. Please proceed.
Mike Matson: Hey, everyone. This is Joseph <unk> from like I guess, just looking at other Kid development email you. Obviously you guys have a lot in your hands.
Joseph Stringer: I guess just looking at other kit development, you obviously guys have a lot on your hands with Vizia and Decipher and, you know, now C2I, but maybe I wanted to ask a question more broadly, if there's any other disease areas you guys are focusing on for future test development, or if it's more, you know, focusing on MRD versus a diagnostic, you know, assay, just kind of Yeah, It's a great question.
Mike Matson: <unk> no nasty to lie, but just maybe wanted to ask question more broadly if there's any other disease areas you guys are focusing on.
Mike Matson: For future test development or I guess.
Mike Matson: If if it's more you know focusing on M. R D versus diet, a diagnostic you know assay and just kind of wanted to get your thoughts on that.
Speaker Change: Yeah. It's great question. If you think about it that you verify it's really come from that that single product affirm our company to a broad cancer diagnostic company and now with the addition of M. R. D. We can go even further if you think about the growth factors.
Marc A. Stapley: If you think about it, Veracyte has really come from that single product, the firmer company to a broad cancer diagnostic company and now with the addition of MRD, we can go even further. If you think about the growth factors that we've talked about, I'll start with geographical. So the success that we've had in the U.S. with our launch of our IBD products outside the U.S. and our clear roadmap of what really amounts to three or four products that we're going to launch over the next few years there, you can see that we've got a real opportunity to grow outside the U.S. and really demonstrate that the model that we've adopted works and that has been so successful for us with the extensive publications behind our test can benefit us outside the U.S. as well.
Speaker Change: We've talked about I I'll start with geographical so the success that we've had in the U S with our launch of our IBD products outside the U S and a clear roadmap of.
Mike Matson: What what really amounts to three or four products that we're gonna launch over the next few years that you can see that we we've got a real opportunity to grow outside the U S and really demonstrate the model that we've adopted works and that has been so successful for us with the extensive.
Mike Matson: Extensive publications behind our tests can can benefit us outside the U S. As well. So that's number one the second one is across the cat continue them and I wouldn't say, we're gonna focus on any area in particular, rather than the entire continuum for patients who have cancer or are suspected of having cancer. All the way from nasal swab, which is focused on those patients who.
Marc A. Stapley: So that's number one. The second one is across the care continuum, and I wouldn't say we're going to focus on any area in particular rather than the entire care continuum for patients who have cancer or are suspected of having cancer. All the way from the nasal swab, which is focused on those patients who don't have a cancer diagnosis but have a lung nodule and, therefore, a risk and helping to classify those patients; almost think of that as like part of a high-risk screening program.
Mike Matson: Don't have a cancer diagnosis, but have a lung nodule in there for a risk and helping to classify those patients who must think of that as part of a high risk screening program. All the way through diagnosis prognosis prediction, you're starting to see decipher move into that prediction space in a very meaningful way.
Marc A. Stapley: All the way through diagnosis, prognosis, and prediction, you're starting to see Decipher move into that prediction space in a very meaningful way, as there are more and more publications that talk about the virtues and the benefits of using Decipher in that way all the way through to treatment, recurrence, and monitoring. And so, as you think about it, that way, we are able to cover a very broad part of the care continuum, everything but screening for healthy people, if you think about it that way. And then the third dimension is the indications, and VeriCyte has thyroid, prostate, breast, bladder, and lung.
Mike Matson: More and more publications the the.
Mike Matson: Talk about the virtues and the benefits of using decipher and that way all the way through to treatment recurrences in monitoring and and so what do you think about it that way we are able to cover a very broad part of a K continuum everything about screening for healthy people. If you think about it away and then the third dimension is the.
Mike Matson: Missions and.
Mike Matson: Verify it has thyroid prostate breast bladder lung.
Marc A. Stapley: And now with MRD, you can think about how much more extensible that could also be across other indications. So, one of the great benefits of the platform that we've got, the large amounts of data that we generate, is that we can, you know, make that extensible across other indications as well. Of course, there are always channel considerations you have to go through and think about as well, and we do and will, but you can certainly see there's opportunities for us to expand beyond the current indications that we have. No clarity yet on what those might be, but that's certainly something we're very focused on. Okay, yeah, great. Obviously, like the one-stop shop goal.
Mike Matson: And now with M. R. D. You you can think about how much more extensible that could also be across other indications. So one of the great benefits of the platform that we've got the the the the large amount of data that we generate is that we can you know that is extensible across other indications as well cause they're always channel considerations you have to.
Mike Matson: Go through there and think about as well.
Mike Matson: And we do them well, but you can certainly see there's opportunities for us to expand beyond the current indications that we have no clarity yet on what those might be but that's certainly something we're very focused on.
Speaker Change: Okay, Yeah, great, obviously like the one stop shop.
Marc A. Stapley: But maybe just one more look at C2I. I guess their platform is CE marked in Europe. Just, you know, I was wondering... What's the indication or use case for that? I imagine it's mostly used.
Speaker Change: Go, but maybe just one more looking at C too I I guess the platform is C. Martin in Europe.
Speaker Change: I guess, a wondering what's the indication of use case for that I imagine you know mostly used in clinical trials right now, but maybe if there's any strategic partnerships that are that are ongoing or prospects in in Europe.
Joseph Stringer: In clinical trials right now, but maybe if there's any strategic partnerships that are ongoing or prospects in Europe that you guys are still pursuing after the acquisition. Well, there are some existing ones and, of course, there's a pipeline as well, and you know we're very selective about what makes sense for us to continue to pursue, and as you can imagine, that's been a very key part of the acquisition and integration conversations. Our approach with the test, especially with the bladder test, is going to be an LDT type of approach.
Speaker Change: That you guys are are still pursuing after the acquisition.
Speaker Change: Well there was some existing and of course, the pipeline as well and you know we're very selective about what makes sense for us to continue to pursue and as you can imagine that's been a very key part of the acquisition and it's integration conversations are approach with the test, especially you know with the blood test is gonna be an L. D T type of approach.
Marc A. Stapley: So TBD, if we kit that as an IBD in the future, that's certainly not the plan right now as far as the initial focus is to launch it as a lab-developed test in the way that we've described and leverage the platform that we've built there. So more to come, again, that is another expansion opportunity, and when I talk about geographic expansion and how MRD can play a role in that, there is a lot of optionality for us in terms of how we might use that in the future. Okay, great.
Speaker Change: So you know determine TBD if we.
Speaker Change: Kit that as an Ivy did in the future. That's certainly not the plan right now as far as the initial focus is to launch it as a lap develop test and.
Speaker Change: In the way that we've described in leveraged for platform that we've built so bolsa come again that that is again, another expansion opportunity and and when I talk about geographical expansion on how M. R. D. Complaining that there there was a lot of optionality for us in terms of how we might use that in the future outside the U S.
Speaker Change: Okay, great. Thank you for taking my questions.
Joseph Stringer: Thank you for taking our question. Please take one moment for our last question. And it comes from the line of Puneet Souda with Lyrinc Partners. Please proceed. Hi guys, thanks for the questions. So, yeah, hey, Marc, just first one on, you know.
Speaker Change: Thank you one moment for our last question.
Speaker Change: Any comes from the line of Puneet to that with leaving partners. Please proceed.
puneet: Yeah, Hi, guys and thanks for the questions.
Speaker Change: So.
Speaker Change: Yeah.
puneet: Uhm just first one on.
Puneet Souda: I know C2I has been asked about, but this may be, what is the level of investment that you're expecting here this year, and wondering if you can provide anything for next year, sort of, before you launch this assay, and, you know, how should we think about gross margin, given that this assay, when it starts, does start scaling up, it does require multiple whole genomes initially, and then whole genomes with repeat assays, And maybe just on that point, just help us also understand, you know, how do you want investors to appreciate Veracyte's position in the MRD market? This is a fairly competitive market in its emergence. And there's a leader in the market already. So maybe just conceptualize so that we understand how Veracyte is going to be positioned here in MRD. Yeah, and Puneet, thanks for that. If you don't mind, I'll answer the third question first, then I'll answer the first question, and then I'll let Rebecca answer the second question on gross margin. But if you, yeah, and thanks for asking this.
Speaker Change: <unk> C. Two I have been asked about that just maybe what is the level of investment you're expecting here. This year and I'm wondering if you can provide anything for next year sort of before you launch this assay and how should we think about gross margin.
Speaker Change: Given that this assay when it starts does it start scaling up it it does require multiple whole genomes. Initially and then the whole genome would repeat assays. If my understanding is correct and maybe just on that point just help US also understand you know how do you want <unk>.
Speaker Change: <unk> to appreciate at various sites position in the M. R. D market. This is a fairly competitive market and and that's emergence and there was a leader in the market already so maybe just conceptualize so that we understand how my best.
Speaker Change: Site is gonna reposition here and I'm already.
Speaker Change: Yeah. Thanks for that if you don't mind I'll answer the third question first and I'll answer. The first question and then I'll Rebecca onto the second question on gross margin.
Speaker Change: But yeah and thanks for asking me if I'm I'm I'm glad we have an opportunity to go through this I talked about this a month or so ago, when we announced the acquisition of <unk>, what we'd really like about this the solution not to mention the incredible team, but they have built a product with fits so well with the Variscite diagnostics platform that were.
Marc A. Stapley: I'm glad we have an opportunity to go through this. I talked about this a month or so ago when we announced the acquisition of C2i. What we really like about this solution, not to mention the incredible team, but they have built a product that fits so well with the Veracyte Diagnostics Platform that we're referring to. It is a whole genome-based approach, which means we get that rich data for every single patient. And not only is it whole genome for that landmark, but it's whole genome for every subsequent sequence that we do, and so incredibly rich data. The test performs extremely well. It requires a low input of blood, four milliliters.
Speaker Change: Offering to it as a whole genome based approach, which means we get that rich data for every single patient and not only that whole genome for that landmark, but its whole genome for every subsequent.
Speaker Change: Sequence that we do and so incredibly rich data the test performs extremely well it requires a low input blood full meal. You know you don't have to create the space bespoke assay as well, which speeds up time to turn around time time to answer and then a great performance.
Marc A. Stapley: You don't have to create this bespoke assay as well, which speeds up time to turnaround time, time to answer. And then a great performance that results in, as we believe, better outcomes for patients. So there's so much about the C2i MRD product, in particular, that we like, that fits into Veracyte, not to mention that it's gonna play really well in the bladder market, where we have a channel and a clear path to reimbursement. So, that's how I see now, you know, it is a crowded space, but again, our approach to a specific indication that we have on that channel is really, I think, a very significant differentiator in addition to all the other things that I just mentioned.
Speaker Change: The results in as we believe better outcomes for patients. So there's so much about the <unk> product in particular that we like the fits into verified not not to mention that it's gonna play really well into the bladder market, while we have a channel on a clear path to reimbursement.
Speaker Change: So so that that's how I see it as a crowded space, but again our approach to a specific indication that we have yeah that channel is really I think a very significant differentiator. In addition to all the other things that I just mentioned in terms of the investment.
Marc A. Stapley: In terms of the investment, we've done, I think, a really important thing here is we've applied C2I and absorbed by, you know, refocused our investments and absorbed the project to develop the MRD test for Bladder into our current portfolio. And as you know, we've had a really focused approach to portfolio management over a number of years, and that's enabled us to do this, and that's why And so, you know, without giving an exact figure on what we're investing in, because not only have we acquired an MRD asset, but we've also acquired AI capabilities that we were going to invest in anyway. It's just, I think, fair to say it's absorbed in everything that we do. Do you want to take that, Grace?
Speaker Change: We've we've done I think a really important thing here is we've acquired.
Speaker Change: A quiet <unk> and absorbed by refocused our investments and absorbed the the project to develop the M. R. The test for bladder into our current portfolio and as you know we've done a really focused approach to portfolio management over a number of years and that's enabled us to do this and that's why we gave the guidance.
Marc Stapley: So we gave when we announced the acquisition that.
Speaker Change: This does not change in one way or philosophy around profitability in cash generation in particular.
Speaker Change: And so without giving an exact figure out what we're investing because not only have we acquired an M. R. Diaz. We've also acquired AI capabilities that we were going to invest in any way. It's just I think that if I, it's absorbed and everything that we're doing <unk> yeah happy to you in just one thing to add <unk>. We have also set in the future.
Marc A. Stapley: Yeah, happy to. And just one thing to add, Puneet, we have also said in the future, to answer your question for next year, in the future, we will continue to be generating positive cash flow. And so, you know, I think to some extent, we'll be continuing to follow the financial philosophy we have shared with you time and time again in the future as we go forward with MRD and any other activities that we decide to pursue. With regard to gross margin, you're absolutely correct. It is a multiple whole genome assay over different periods of time.
Marc Stapley: To answer your question for next year in the future. We will continue to be generating positive cash flow and so I think to add to any extent will be absolutely continuing to follow the financial philosophy leave. So we have shared with you all time and time again in the future as we go forward with M. R D and and any other any other activities.
Marc A. Stapley: That we decide.
Marc Stapley: To pursue and with regard to gross margin, you're you're absolutely correct. It is.
Marc A. Stapley: Multiple whole genome assay over different periods of time, but we have we've looked at this very closely as as you would expect ahead of the acquisition and we believe.
Rebecca Chambers: But we have, you know, we've looked at this very closely, as you would expect, ahead of the acquisition. And we believe both between the ASP that we're expecting as well as the lab efficiencies that we think we can deliver, we're expecting to have a gross margin that's very reasonable, perhaps not all the way to our current corporate gross margin average, but very reasonable and something that we think is more than worth doing for the organization and can sustain a profitable business similar to how we have with a firm endowment. With obviously volume going through both the lab and the channel.
Rebecca Chambers: Both between and the S. P that we're expecting as well as the lab efficiencies that we think we can deliver and we're expecting to have a gross margin that's very reasonable perhaps not all the way to our current corporate gross margin average, but very reasonable on something that we think it more than it is worth doing for any organization and can sustain a profitable.
Rebecca Chambers: This is similar to how we have with a farm and decipher over time with obviously volume going through.
Rebecca Chambers: Both the lab and the channels. So it will take a little bit of time to ramp there, but I think we're over time, we will get you exactly where you want to be from a gross margin for a second and more confident to that end.
Rebecca Chambers: So it will take a little bit of time to ramp up there, but, you know, I think over time we will get to exactly where we want to be from a gross margin perspective, and we're confident to that end. Okay.
Speaker Change: Got it okay that makes sense and then just.
Puneet Souda: And then, just briefly on the FDA's, you know, expectations to regulate the cancer LDPs, any latest thoughts from your end and any changes in spend wise or, you know, opex wise from your perspective that was to be implemented? At this point, no changes. One of the things I say about Veracyte is we're very well-prepared for that because our lab-developed testing process and our quality systems are very, very robust and well-proven. The publications behind our tests, as we've talked about at length, are very extensive.
Speaker Change: Just briefly on the F. D. A is expectations to regulate the counter L. D. PS any latest thoughts from your end and anything change.
Puneet Souda: Changes spend wise or get off ex-wives from from your perspective that was to be implemented.
Puneet Souda: At this point no changes one of the things I say about verified as we're very well prepared for that because you are testing lab developed testing process and I'll quality systems are very very robust while improving the guidance the publications behind our test as we've talked about a length of very extensive and so as I think about.
Marc A. Stapley: And so as I think about it, we're the kind of lab, and we have the kind of tests that I think fit well into any kind of model that they come up with. Ultimately, we'll need to invest in the multi-stage process that ultimately gets launched. There would be some level of investment, but not, I don't think, as great as many others who would have to kind of create that backdrop that we've got would have to incur.
Marc A. Stapley: <unk> with a kind of <unk> and we have the kind of tests, the I think fit well into any kind of model that they come out with clearly we'll need to invest in the multi stage process that ultimately gets launched the world would be some level of investment, but not no I don't think it was great.
Marc A. Stapley: Many others, who who've got to kind of create that that backdrop. The week all would have two encouraged so we're quite.
Marc A. Stapley: And so we're quite comfortable with where we are there. We've got the optionality. We've got the experience of IBD development.
Marc A. Stapley: Quite comfortable with where we all that we've we've got the Optionality. We've got the experience of IBD development, and so I I'm not overly concerned about the pathway, whereas involved as others as you can imagine and trying to help <unk> comment on that respond to that and and shaped the way that that that's actually ultimate he gets launched.
Marc A. Stapley: And so I'm not overly concerned about the pathway. We're as involved as others, as you can imagine, in trying to help comment on that, respond to that, and shape the way that that actually ultimately gets launched. Got it. Okay. All right. Thank you. Thank you. And as I see no further questions, I will turn it to Marc Stapley for final comments. Great. Thank you, Carmen.
Marc A. Stapley: So.
Marc A. Stapley: Got it okay alright, thank you.
Marc A. Stapley: Thank you and as I see no further questions I will need to Mark stab before final comment.
Marc A. Stapley: I appreciate it. As you can all see, we ended a very strong year in 2023. And we set ourselves up well for continued growth in 2024 and beyond. I believe our success will continue to hinge on three core pillars of execution, meaningfully expanding the markets we serve, utilizing our established Veracyte diagnostics platform across geographies, indications, and the care continuum. Embracing the best technology, adding new capabilities such as MRD and AI to our world-class platform, and driving revenue growth with discipline and a focus on profitability and continued positive cash generation. These tenets will allow Veracyte to continue to build a strong foundation for growth while achieving our vision of transforming cancer care for patients all over the world. I would like to thank our entire team for their commitment, hard work, and passion. It is fueling our progress and driving our results, so thank you. Ladies and gentlemen, this concludes our call today. Thank you for joining us. You may now disconnect. Thanks for watching!
Marc A. Stapley: Great. Thank you come in I appreciate it. So as you can also see we ended a very strong year in 2023, and we set ourselves up well for continued growth in 2024 and beyond I.
Marc A. Stapley: I believe our success will continue to hinge on three cole pillars of execution meaningfully expanding the market's we serve utilizing our established verified diagnostics platform across geographies indications and the cat continue.
Marc A. Stapley: Embracing the best technology, adding new capabilities, such as M. A DNA AI to our world class platform and.
Marc A. Stapley: I'm driving revenue growth with a discipline and a focus on profitability and continued positive cash generation. These.
Marc A. Stapley: These tenants will allow verified to continue to build a strong foundation for growth, while achieving our vision of transforming cancer care for patients all over the world I would like to thank our entire team for that commitment hardware compassion. It is fueling our progress and driving a results. So thank you.
Marc A. Stapley: Ladies and gentlemen, this concludes our call today. Thank you for joining US you may now disconnect.
Marc A. Stapley: Mmm.
Marc A. Stapley: [music].
Marc A. Stapley: Mm.
Marc A. Stapley: [music].