Q1 2024 NeoGenomics Inc Earnings Call
Operator: Welcome to the Neogenomics First Quarter 2024 Financial Results Conference Call and Webcast. At this time, all participants are in a listen-only mode. Please note this call is being recorded and an audio replay will be available on the company's website. Kendra Sweeney, Vice President of Investor Relations, you may begin your presentation.
Welcome to the Neogenomics first quarter 2024 financial results conference call and webcast at this time all participants are in a listen only mode. Please.
Please note. This call is being recorded and an audio replay will be available on the company's website.
Sweeney Vice President of Investor Relations you May begin your conference.
Kendra Sweeney: Thank you, Holly. Good morning, everyone, and welcome to the Neogenomics First Quarter 2024 Financial Results Call. With me today to discuss the results are Chris Smith, Chief Executive Officer, and Jeff Sherman, Chief Financial Officer. Additional members of the management team are available for Q&A, including Warren Stone, Chief Commercial Officer, Melody Harris, Chief Operations Officer and President of Informatics, and Ali Olivo, Executive Vice President, General Counsel in Business Development. This call is being simultaneously webcast.
Sweeney: Thank you Holly good morning, everyone and welcome to the Neogenomics first quarter 2024 financial results call with me today to discuss the results are Chris Smith, Chief Executive Officer, and Jeff Sherman, Our Chief Financial Officer additional members of the management team are available for Q&A, including warrants Donahue Chief commercial officer.
Sweeney: Melody Harris, Chief operations Officer, and President and Informatics and allele Levo Executive Vice President President General Counsel and business development.
This call is being final tenuously webcast, we will be referring to a slide presentation that has been posted to the investors tab on our website at IR Dot Neogenomics dotcom.
Kendra Sweeney: We will be referring to a slide presentation that has been posted to the investors tab on our website at IR.Neogenomics.com. Starting on slide two, during this call, we will make forward-looking statements regarding our anticipated future performance. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to our most recent forms 10-K, 10-Q, and 8-K we filed with the SEC to identify important risks and other factors that may cause our actual results to differ materially from the forward-looking statements.
Sweeney: Starting on slide two during this call we will make forward looking statements regarding our anticipated future performance. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. Please refer to our most recent forms 10-K, 10-Q and 8-K, we filed with the SEC, which identify important.
Sweeney: Risks and other factors that may cause our actual results to differ materially from the forward looking statements. The forward looking statements made during this call speak only as of the original date of the call and we undertake no obligation to update or revise any of these statements.
Kendra Sweeney: The forward-looking statements made during this call speak only as of the original date of the call, and we undertake no obligation to update or revise any of these statements. During this call, in order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results. The non-GAAP financial measures presented should not be considered an alternative to the financial measures required by GAAP, should not be considered measures of liquidity, and are unlikely to be comparable to non-GAAP financial measures provided by other companies.
Sweeney: During this call in order to provide greater transparency regarding our operating performance, we refer to certain non-GAAP financial measures that involve adjustments to GAAP results to.
Sweeney: The non-GAAP financial measures presented should not be considered an alternative to the financial measures required by GAAP should not be considered measures of liquidity and are unlikely to be comparable to non-GAAP financial measures provided by other companies.
Kendra Sweeney: Any non-GAAP financial measures referenced on this call are reconciled to the most directly comparable GAAP financial measures in a table available in the press release we issued this morning. I will now turn the call over to Chris Mint, the Chief Executive Officer of Neogenomics.
Sweeney: These non-GAAP financial measures referenced on this call are reconciled to the most directly comparable GAAP financial measures and a table available in the press release, we issued this morning.
Sweeney: I'll now turn the call over to Chris Smith, Chief Executive Officer of Neogenomics.
Christopher Michael Smith: Thanks, Kendra, and welcome everyone. Thanks for joining us this morning to go through our first quarter financial results. As always, I want to begin with our mission and vision statements because they're what motivates our company and teammates on a daily basis. Our mission at NIO is to save lives by improving patient care, and before we get into the financial results, I just want to thank our teammates for everything they do every single day to make a difference in so many patients' lives. Now let's move to slide four and get into the first quarter highlights.
Christopher Michael Smith: Thanks, Kendra and welcome everyone. Thanks for joining us this morning to go through our first quarter financial results.
Christopher Michael Smith: I want to begin with our mission and vision statements because it's what motivates our company and teammates on a daily basis. Our mission at Neal is to stabilize by improving patient care and before we get into the financial results I just want to thank our teammates for everything they do every single day to make a difference in so many patients lives.
Christopher Michael Smith: Now, let's move to slide four and get into the first quarter highlights as you can see we delivered another quarter of strong revenue growth growing 14% over prior year to $156 million.
Christopher Michael Smith: As you can see, we delivered another quarter of strong revenue growth, growing 14% over the prior year to $156 million. Clinical services revenue increased 17% to $135 million, primarily driven by the execution of the commercial strategy and increased adoption of our NGS products. The compounding effect of volume and revenue cycle management initiatives, including an AUP lift, enabled NGS growth of over 50% and is now approaching 30% of our total clinical revenue. As growth rates accelerate and NGS becomes a larger portion of our base business, the comparables will become tougher as the year progresses. Advanced diagnostics revenue declined by 3% over the prior year, in part due to macro conditions in the pharma sector and margin optimization initiatives from 2023.
Christopher Michael Smith: Cynical services revenue increased 17% to $135 million, primarily driven by execution of the commercial strategy and increased adoption of our NGL products. The compounding effect of volume and revenue cycle management initiatives, including an AEP lift enabled NGL growth of over 50% and now is approaching 30%.
Christopher Michael Smith: Of our total clinical revenue.
Christopher Michael Smith: As growth rates accelerate in Ngl's becomes a larger portion of our base business. The comparables will become tougher as the year progresses.
Christopher Michael Smith: Advanced diagnostics revenue declined by 3% over prior year in part due to macro conditions in the pharma sector and margin optimization initiatives for 2023.
Christopher Michael Smith: As a business, adjusted gross profit was up 19% to $71 million, and adjusted EBITDA improved 149% or $11 million over Q1 of last year to a positive $3 million. Now on slide five, I'm very pleased that the first quarter continues the trend we've seen since the fourth quarter of 2022 of consistent year-over-year improvements in revenue, adjusted growth profit, and adjusted EBITDA. This is especially noteworthy as we did not see the typical industry seasonality in Q1, with total revenue actually increasing sequentially from the fourth quarter. We believe that we've laid a solid foundation for growth in 2023 and expect that momentum will continue as we move forward. Let's move on to slide six.
Christopher Michael Smith: As a business adjusted gross profit was up 19% to $71 million and adjusted EBITDA improved 149% or $11 million over Q1 of last year to a positive $3 million.
Christopher Michael Smith: Now on slide five I'm very pleased that the first quarter continues a trend we've seen since the fourth quarter of 2022 of consistent year over year improvements in revenue adjusted gross profit and adjusted EBITDA.
Christopher Michael Smith: Especially noteworthy as we did not see the typical industry seasonality in Q1 with total revenue actually increasing sequentially from the fourth quarter.
Christopher Michael Smith: We believe that we've laid a solid foundation for growth in 2023, and expect that momentum will continue as we move forward.
Christopher Michael Smith: Let's move on to slide six.
Christopher Michael Smith: On our full year 2023 call, we laid out our strategic priorities for 2024. They included probably growing the core business, accelerating advanced diagnostics, driving value creation, and enhancing our people and culture. Our people are our greatest asset, and we are devoting time and resources to enhance teammate development and engagement. Everything we do internally is centered around developing a customer-oriented and growth mindset, and our teammates show each day their dedication to improving patient care. This morning, though, I'm going to focus on our three financial priorities.
Christopher Michael Smith: On a full year 2023 call, we laid out our strategic priorities for 2024. They included profitably growing the core business accelerating advanced diagnostics driving value creation and enhancing our people and culture. Our people are our greatest asset and we are devoting time and resources to enhanced teammate development.
Christopher Michael Smith: Everything we do internally is centered around developing a customer oriented and growth mindset and our teammates show each day their dedication to improving patient care. This morning, though I'm going to focus on our three financial priorities.
Christopher Michael Smith: We continue to grow our core clinical business as we execute on our commercial strategy, which is protect, expand, and acquire. This has contributed to our strong volume growth, increased AUP, and improved mix. The mixed shift towards higher-value modalities and tests has supported the delivery of yet another quarterly improvement in revenue per test. Even with the focus on growing NGS, we continue to see growth in clinical volumes across all modalities.
Christopher Michael Smith: As we continue to profitably grow our core clinical business as we execute on our commercial strategy, which is protect expand acquire.
Christopher Michael Smith: This has contributed to our strong volume growth increased AEP and improved mixed the.
Christopher Michael Smith: The mix shift towards higher value modalities and test has supported the delivery of yet another quarterly improvement in revenue per test.
Christopher Michael Smith: Even with the focus on growing Ngls, we continue to see growth in clinical volumes across all modalities.
Christopher Michael Smith: To win in oncology, we have the breadth of the menu and the products that deliver value in real-world clinical settings through high-quality, actionable, differentiated tests that help support treatment decisions, as well as a best-in-class, customer-focused mindset. Earlier this month, we announced senior leadership promotions as part of our ongoing efforts to optimize our operating structure. Warren Stone is now NEO's Chief Commercial Officer and will lead our clinical and pharma service commercial efforts. Melody Harris is now NEO's Chief Operations Officer and President of Informatics and will oversee data-oriented teams and continue to manage all enterprise operations.
Christopher Michael Smith: To win in oncology, we have the breadth of menu and the products that deliver value and real world clinical settings through high quality actionable differentiated test that helps support treatment decisions as well as best in class customer focused mindset.
Christopher Michael Smith: Earlier this month, we announced senior leadership promotions as part of our ongoing efforts to optimize our operating structure.
Christopher Michael Smith: Sharon Stone is now <unk>, Chief commercial officer, and will lead our clinical and pharma service commercial teams.
Christopher Michael Smith: All of the Harris is now <unk>, Chief operations Officer, and President of Informatics and will oversee David oriented teams and continue to manage all enterprise operations.
Christopher Michael Smith: Warren and Melody have shown exceptional leadership and performance in their roles, and I'm confident their new responsibilities will strengthen the commercial synergies and drive growth as well as improve operating efficiency. As a result of these changes, the legacy pharma business is now reporting to Warren, Informatics is now under Melody's leadership, and R&D will be reporting to me.
Christopher Michael Smith: Warren and Melanie have shown exceptional leadership and performance in their roles and I'm confident there are numerous responsibilities with strength of the commercial synergies and drive growth as well as improving operating efficiencies.
Christopher Michael Smith: As a result of these changes the legacy pharma business now reporting is now reporting to Warren Informatics is now under melodies leadership and R&D will be reporting to me.
Christopher Michael Smith: We remain focused on R&D as we believe that innovation is a turbocharger for growth. Specifically, we're committed to offering an MRD product to patients and health care providers, and we believe we have several viable pathways to accomplish that. As we noted over the past several quarters, macro trends as well as operational challenges continue to impact our pharma revenue.
Christopher Michael Smith: We remain focused on R&D as we believe that innovation is a turbocharger for growth specifically, we are committed to offering in MRV product to patients and health care providers and we believe we have several viable pathways to accomplish that.
As we noted over the past several quarters macro trends as well as operational challenges continue to impact our pharma revenue.
Christopher Michael Smith: Building on the strength and our go-to-market strategy seen in our clinical business, we are integrating the pharma commercial organization under Warren's leadership to leverage the success and commercial execution seen in the clinical business. We are expanding our pharma sales organization as it moves under Warren's leadership and expect to see benefits from its initiatives in the future. In addition, our margin optimization efforts in ADX have continued to improve adjusted gross margin performance.
Building on the strength in our go to market strategy as seen in our clinical business. We are integrating the pharma commercial organization under Warren's leadership to leverage the success and the commercial execution seen in the clinical business.
We are expanding our pharma sales organization as it moves under Warren's leadership and expect to see benefits from minutes initiative in the future.
Christopher Michael Smith: In addition, our margin optimization efforts and ATX have continued to improve adjusted gross margin performance Informatics revenue continues to grow as we drive increased investment and look to expand product offerings. We continue to focus on the acceleration of innovation in our R&D, including the launch of a new liquid biopsy comprehensive genomic profile tests.
Christopher Michael Smith: Informatics revenue continues to grow as we drive increased investment and look to expand our product offering. We continue to focus on the acceleration of innovation in R&D, including the launch of a new liquid biopsy comprehensive genomic profile test expected in late 2024. Additionally, building on the success of neocomprehensive 1.0, we are focusing on the development of our next generation broad solid tumor panel, which is targeted to be one of the largest solid tumor CGP panels on the market while providing industry-leading turnaround times.
Christopher Michael Smith: Expected in late 2024. Additionally.
Christopher Michael Smith: Additionally building on the success of the Neo comprehensive one point out we are focusing on the development of our next generation broad solid tumor panel, which is targeted to be one of the largest solid tumor CGP panels on the market, while providing industry, leading turnaround times. We believe this new large NGF panel will provide additional growth opportunities in clinical pharma.
Christopher Michael Smith: We believe this new, large NGS panel will provide additional growth opportunities in clinical, pharma, and the informatics space, and we will remain focused on driving value creation from a financial perspective. In late 2023, we kicked off our LIMS project that will consolidate fragmented systems into one end-to-end solution, which will serve as the foundation for our digital transformation strategy while enhancing operating efficiency. We're driving gross margin expansion through investing in automation and lab and supply chain optimization.
Christopher Michael Smith: And the informatics space.
Christopher Michael Smith: We remain focused on driving value creation from a financial perspective in late 2023, and we kicked off our lambs project that will consolidate fragmented systems into one end to end solution, which will serve as the foundation for our digital transformation strategy, while enhancing operating efficiencies.
Christopher Michael Smith: Third driving gross margin expansion through investing in automation and lab and supply chain optimization.
Jeffrey S. Sherman: We also continue to invest in our quality programs to improve our products and services as well as to prepare the company for increasing regulatory oversight. Yesterday, the FDA released its final ruling regarding the regulation of lab-developed tests. Our initial view is that the rule is favorable to our business. The rule significantly expands LTTs that would not be required to get pre-market approval from the FDA, including tests marketed before May 6, 2024, and those approved by New York State.
Christopher Michael Smith: We also continue to invest in our quality programs to improve our products and services as well as to prepare the company for increasing regulatory oversight.
Christopher Michael Smith: Yesterday, the FDA released its final ruling regarding regulation of lab developed tests. Our initial view is that the rule is favorable to our business. The Roes significantly expands ltte's that would not be required to get pre market approval from the FDA, including test marketed before may six 2024, and those approved by.
Christopher Michael Smith: New York State.
Jeffrey S. Sherman: This enforcement discretion is favorable to our broad test menu and should reduce the anticipated cost of compliance. We've been preparing for the increasing regulatory environment, and we believe we're well-positioned to comply with the rule. From a legal perspective, we are vigorously defending our radar technology. A hearing to appeal the preliminary injunction against radar was held on March 29th in the Federal Circuit Court, and we are awaiting that outcome. The North Carolina District Court case is currently in discovery, and the jury trial is scheduled for March of 2025.
Christopher Michael Smith: This enforcement discretion is favorable to our broad test menu and should reduce the anticipated cost of compliance.
Christopher Michael Smith: We've been preparing for the increasing regulation and we believe we're well positioned to comply with the rule.
Christopher Michael Smith: From a legal perspective, we are vigorously defending our radar technology, a hearing to appeal. The preliminary injunction against radar was held on March 29th in the Federal Circuit Court and we are waiting that outcome.
Christopher Michael Smith: The North Carolina District Court case is currently in discovery and a jury trial is scheduled for March of 2025.
Jeffrey S. Sherman: We have also filed IPR petitions with the U.S. Patent and Trademark Office seeking to determine whether Natera's two patents at issue are unpatentable in view of prior art. With that, I will now turn the call over to Jeff to review our first quarter financial results in more detail.
Christopher Michael Smith: We have also filed IPR petitions with the U S patent and trademark office seeking to determine that Natera has two patents that issue or unpalatable and the view of prior art.
Christopher Michael Smith: With that I'll now turn the call over to Jeff to review, our first quarter financial results in more detail.
Jeffrey S. Sherman: Thanks, Chris, and good morning, everyone. I'll begin with a little more detail on our operating results for the quarter. As Chris said, we started the year with revenue experiencing double-digit growth over prior years. First quarter revenue was $156 million, a 14% increase over the prior year and higher than the fourth quarter of 2023. Revenue growth was driven by growth in clinical test volume, a continuing shift to higher-value tests, and improvement in revenue per test driven by business mix and revenue cycle improvements. Adjusted EBITDA improved 149% from the prior year to positive $3 million.
Thanks, Chris and good morning, everyone I'll begin with a little more detail on our operating results for the quarter as Chris said, we started the year with revenue experiencing double digit growth over prior year first quarter revenue was 156, million% to 14% increase over the prior year and higher than the fourth quarter of 2023.
Christopher Michael Smith: Revenue growth was driven by growth in clinical test volume continuing shift to higher value tests and improvement in revenue per test driven by business mix and revenue cycle improvements.
Adjusted EBITDA improved 149% from prior year to positive $3 million.
Jeffrey S. Sherman: Q1 marks the sixth consecutive quarter that adjusted EBITDA increased from the prior year as we continue to generate significant operating leverage on our revenue growth. Looking at slide 8, clinical services revenue of $135 million was an increase of 17% over the prior year, driven by an 11% improvement in revenue per test and a 5% increase in volume. The optimization of our sales force, along with the increased adoption of our NGS products, continues to drive higher volume growth, and GS Growth continues to be strong and is helping to drive revenue growth and earnings.
Christopher Michael Smith: Q1 marks the sixth consecutive quarter that adjusted EBITDA increased from prior year as we continue to generate significant operating leverage on our revenue growth.
Looking at slide eight clinical services revenue of $135 million was an increase of 17% over prior year, driven by an 11% improvement in revenue per test at a 5% increase in volume.
Christopher Michael Smith: The optimization of our sales force along with the increased adoption of our NGL products continues to drive higher volume growth.
Christopher Michael Smith: N G. S growth continues to be strong and is helping to drive revenue growth and earnings.
Jeffrey S. Sherman: Turning to slide nine, average revenue per clinical test increased by 11% over the prior year to $447. This is the third consecutive quarter of double-digit growth and represents an improvement for the 12th consecutive quarter as we maintain our focus on higher-value tests and revenue cycle management initiatives. As we shared with you in the past, NGS is a strategic priority and is approaching 30% of our total clinical revenue. The focused efforts of our sales team to penetrate new and existing oncology accounts and drive adoption of our higher value NGS portfolio accelerate NGS revenue growth.
Christopher Michael Smith: Turning to slide nine average revenue per clinical test increased by 11% over prior year to $447. The third consecutive quarter of double digit growth and represents an improvement for the 12th consecutive quarter as we maintain our focus on higher value tests and revenue cycle management initiatives as we shared with you.
Christopher Michael Smith: In the past <unk> is a strategic priority and is approaching 30% of our total clinical rebel.
Christopher Michael Smith: The focused efforts of our sales team to penetrate new and existing oncology accounts and drive adoption of our higher value engineers portfolio accelerated Ngls revenue.
Jeffrey S. Sherman: Turning to slide 10, advanced diagnostics revenue declined 3% over the prior year in Q1 as a result of macroeconomic conditions in pharma and R&D spend, as well as a continuation of 2023 decisions to rationalize our global testing sites and low-margin contracts. However, the focus on profitability and margin growth is driving performance in ADX, with adjusted gross profit and gross margins increasing versus the prior year. Looking at the income statement on slide 11, adjusted gross profit increased by 18.6% over the prior year, and adjusted gross margin was 45.3%, an improvement of 182 basis points over the first quarter of last year.
Christopher Michael Smith: Turning to slide 10 advanced diagnostics revenue declined 3% over the prior year in Q1 as a result of macroeconomic conditions in pharma and R&D spend as well as the continuation of 2023 decisions to rationalize our global testing sites and low margin contracts.
Christopher Michael Smith: The focus on profitability and margin growth is driving performance in <unk> with adjusted gross profit and gross margins increasing versus the prior year.
Christopher Michael Smith: Looking at the income statement on slide 11, adjusted gross profit increased by 18, 6% over prior year and adjusted gross margin was 45, 3% an improvement of 182 basis points over the first quarter of last year.
Jeffrey S. Sherman: Regarding operating expenses, sales and marketing expense was $20 million as we continue to increase our commercial investment, and R&D expense was $7.6 million. G&A expense increased by $4.2 million over the prior year, primarily driven by legal costs associated with the ongoing Nitero litigation and costs related to the closure of the lab in La Jolla, California.
Regarding operating expenses sales and marketing expense was $20 million as we continue to increase our commercial investment in R&D expense was $7 6 billion.
Christopher Michael Smith: G&A expense increased by $4 2 million over prior year, primarily driven by legal costs associated with the ongoing material litigation and cost related to the closure of the lab in La Jolla, California, the ongoing costs for this litigation as well as the costs related to a lab closure are being added back to adjusted EBITDA.
Jeffrey S. Sherman: The ongoing costs for this litigation, as well as the costs related to the lab closure, are being added back to adjusted EBITDA as non-recurring items in the quarter. Turning to the balance sheet on slide 12, we ended the first quarter with cash and markable securities of $385 million. Cash flow from operations decreased by $13 million in Q1 over the prior year.
Christopher Michael Smith: Nonrecurring items in the quarter.
Christopher Michael Smith: Turning to the balance sheet on slide 12, we ended the first quarter with cash and marketable securities of $385 million cash.
Christopher Michael Smith: Cash flow from operations decreased by $13 million in Q1 over prior year. The first quarter is typically the largest use of cash quarter. When annual bonuses are paid in addition, cash collections were impacted by approximately $5 million in the quarter due to the change healthcare data breach as our hospital and payer clients struggled to man.
Jeffrey S. Sherman: The first quarter is typically the largest use of cash in the quarter when annual bonuses are. In addition, cash collections were impacted by approximately $5 million in the quarter due to the changed healthcare data breach as our hospital and payer clients struggled to manage their claims adjudication and payment. We have started to recover some of this collection shortfall in the second quarter. Our strong cash position gives us the financial flexibility to address our 2025 convertible notes with a principal balance of $201 million maturing in May 2025.
Christopher Michael Smith: Their claims adjudication and payments we have started to recover some of this collection shortfall in the second quarter.
Christopher Michael Smith: Our strong cash position gives us the financial flexibility to address our 2025 convertible notes with a principal balance of $201 million maturing in May 2025.
Jeffrey S. Sherman: These notes will become current liabilities on our balance sheet in the second quarter. Given our liquidity profile, our current expectation is to use our existing cash and marketable securities to retire the 2025 convertible notes when they mature. However, we are starting to evaluate strategic M&A opportunities, which could ultimately impact our capital structure decision. Now turning to our 2024 financial expectations, on slide 13, we are reiterating full-year revenue guidance of $650-$660 million, representing 10-12% growth, and expect to be at the high end of the adjusted EBITDA range of $21-24 million.
Christopher Michael Smith: These notes will become current liabilities on our balance sheet in the second quarter.
Christopher Michael Smith: Given our liquidity profile, our current expectation is to use our existing cash and marketable securities to retire the 2025 convertible notes when they mature. However, we are starting to evaluate strategic M&A opportunities, which could ultimately impact our capital structure decisions.
Christopher Michael Smith: Now turning to our 2024 financial expectations on Slide 13, we are reiterating full year revenue guidance of $650 million to $660 million, representing 10% to 12% growth and expect to be at the high end of the adjusted EBITDA range of $21 million to $24 million.
Jeffrey S. Sherman: In summary, Q1 continues the revenue, margin improvement, and earnings growth from 2023 and positions us well to achieve our goals for the year. I will now turn it back to Chris for his closing remarks. Thanks, Jeff.
Christopher Michael Smith: In summary, Q1 continues to revenue margin improvement and earnings growth from 2023 and positions us well to achieve our goals for the year.
Christopher Michael Smith: I will now turn it back to Chris for his closing remarks, thanks, Jeff.
Christopher Michael Smith: I'm very proud of our team's first quarter progress, including strong revenue growth and a significant improvement in adjusted EBITDA. In addition, we saw meaningful progress in the execution of our strategic priorities. We believe we are well on our way to becoming the leading cancer testing, information, and decision support company. The investments we have made in our teammates, labs, commercial organization, and R&D position us well to execute through the next stage of our growth.
Christopher Michael Smith: Very proud of our team's first quarter progress, including strong revenue growth and significant improvement in adjusted EBITDA. In addition, we saw meaningful progress in the execution on our strategic priorities. We believe we are well on our way to becoming the leading cancer testing information and decision support company. The investments we have made in our teammates labs commercial organization.
And R&D position us well to execute through the next stage of our growth and while it's still early days. We believe the initial read on the FDA final rule is favorable to our business I'm excited for our teammates and our customers, but most of all for the patients we serve on a daily basis. Thanks for your time and we'll now open up for questions.
Christopher Michael Smith: And while it's still early days, we believe the initial read on the FDA final rule is favorable to our business. I'm excited for our teammates and our customers, but most of all for the patients we serve on a daily basis. Thanks for your time, and we'll now open up the line to questions.
Speaker Change: At this point, we will open up the line for questions. The company asks that each person limit their questions to one so that we may hear from everyone within the hour allotted for this call.
Operator: At this point, we will open up the line for questions. The company asks that each person limit their questions to one so that we may hear from everyone within the hour allotted for this call. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.
Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for.
<unk> using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question for today is from Mark Massaro with BTIG.
Speaker Change: Your first question for today is from Mark Massaro with B T I D.
Mark Anthony Massaro: Hey, Mark. Hey, guys. Hey, Chris.
Mark Anthony Massaro: Hey, Mark Hey, Yeah, Hey, guys, Hey, Chris Congrats on a strong.
Christopher Michael Smith: Congratulations on a strong quarter in Q1. So I heard some interesting commentary about, I think that you're starting to evaluate M&A opportunities. And then I heard that you're planning to participate in the MRD market one way or another. If those are my words, not yours. But can you just give us a sense of, maybe your confidence about radar litigation?
Mark Anthony Massaro: Quarter in Q1 so.
Mark Anthony Massaro: I heard some interesting commentary.
Mark Anthony Massaro: <unk>.
Mark Anthony Massaro: I think that you are starting to evaluate M&A opportunities and then I heard that you are planning to participate in the <unk> market, one way or another.
Mark Anthony Massaro: Those are my words, not yours, but can you just give us a sense for maybe your confidence about.
Mark Anthony Massaro: Radar.
Christopher Michael Smith: And then can you speak to maybe the types of things you're looking at? Are you looking at partnerships or potential all-out acquisitions? And just give us a sense of what you're seeing in the marketplace. It appears to me that valuations are pretty depressed, so maybe an outright acquisition could work.
Mark Anthony Massaro: Litigation and then can you speak to.
Mark Anthony Massaro: Maybe the types of things Youre looking at or are you looking at partnerships or potential all out acquisitions, and just give us a sense for what youre seeing in the marketplace.
Mark Anthony Massaro: It appears to me that valuations are pretty depressed.
Mark Anthony Massaro: Maybe an outright acquisition could make some sense.
Christopher Michael Smith: Yeah, Mark, I'm going to hit a high level, and then I'll let Ali kind of take it because she is our general counsel but also leads BD, so she can handle it. But look, I think all along we talked about that the first 12 to 18 months we're going to be very internally focused on getting the house back in order and starting to put wins on the board, and that, really, for us, is really delivering double-digit growth and improving operating earnings at a faster rate, and that's gone incredibly well.
Speaker Change: Yes, Mark I'm going to hit at a high level and then I'll, let Ali kind of take it because she is our general counsel, but also leads BD. So she can and have them look I think all along we've talked about that the first 12 to 18 months, we're going to be very internally focused on getting the house back in order and starting to put wins on the board and that really does is really Joe.
Speaker Change: Delivering double digit growth in improving the operating earnings at a faster rate and Thats gone incredibly well.
Christopher Michael Smith: I think that now that being said, we believe there are some interesting opportunities that we think strategically would help our mission and kind of vision for the company to grow, and so Ali took on the role of BD at the beginning of the year. We've hired, we've brought on, you know, built out a team there just to start to explore those, so I think we definitely see that as an opportunity because we really think we're very uniquely positioned to kind of lead this oncology diagnostics testing business, right, from a reference perspective. But Ali, do you want to talk a little bit more about BD and then just touch on how we're feeling about the legal commitment to radar? So, I guess we'll start backwards.
Speaker Change: That now being said we believe there are some interesting opportunities that we think strategically would help our mission and vision for the company to grow and so Ali took on the role of BD beginning of the year. We've hired we've brought on build out a team there is to start to explore those so I think we definitely see that as an.
Speaker Change: <unk>, because we really think we're very uniquely positioned to kind of lead this oncology diagnostics testing business right from a reference perspective, but Ali do you want to talk a little bit more about BD and then just touch on how we're feeling about the legal.
Ali: Our manager radar, so I guess I'll start backwards through those three pathways that we kind of alluded to.
Ali Olivo: So, there are three pathways that we kind of alluded to in our prepared remarks. One is obviously the litigation, and we see that via the district court matter as well as our IPRs that were filed against both patents that are asserted by Matera. The other is certainly with our R&D activity and our continued development of tests, including MRD tests, and then the third being in M&A, and that could take many forms. It can. You're right, valuations are depressed. It could take full acquisition. It could also be tech transfer licensing, you know, all of these things. So, all of these pathways are viable, and we're evaluating all of them. Okay.
Ali: Our prepared remarks, one is obviously the litigation and we see that.
Ali: Strict matter as well as our our IPR that were filed against both patents that are asserted by the tariffs. The other is certainly with our R&D activity and our continued development.
Ali: Tests, including EMR data and then the third being in an M&A and that could that could take many forms that can you're right valuations are depressed it could take a pool acquisition. It could also be tech.
Ali: Tech transfer licensing.
Ali: All of these statements and so all of these pathways are viable and where we're evaluating all of them.
Speaker Change: Okay, Great I'll keep my question to one.
Mark Anthony Massaro: Okay, great. I'll keep my question to one.
Speaker Change: Thanks Mark.
Speaker Change: Your next question is from Puneet <unk> with Leerink partners.
Puneet Souda: Your next question is from Puneet Souda with Lyrinc Partners.
puneet: Hey, Chris Hey, Chris Hey, Thanks for taking my questions. So.
Christopher Michael Smith: Hey Chris. Hey Chris.
Puneet Souda: Hey, thanks for taking my questions. So, first one, on the clinical beat that you had, it's really great to see AUP continues to work, so congrats there. But, you know, you came in 7 million ahead of us and the street number, I believe, as well, but you're not raising the full-year guide. I'm just wondering, you know, where's the moderation?
puneet: Just one on the.
puneet: Clinical beat that you had.
puneet: Really great to see AEP continues to work so congrats there but.
puneet: You came in at $7 million ahead of us.
puneet: The Street number I believe it as well, but you are not raising the full year guide. So I'm. Just wondering you know, whereas the moderation is it on the pharma business or on the clinical side I know you talked about a week or pharma environment. Obviously, we're seeing that on the pharma side, but just wondering if what are some things that we ought to consider.
Christopher Michael Smith: Is it on the pharma business or on the clinical side? I know you talked about a weaker pharma environment. Obviously, we're seeing that on the pharma side, but just wondering if there are some things that we ought to consider?
Jeffrey S. Sherman: Yeah, I'm going to let Jeff kind of hit it, getting into detail, but look, but at a high level, you did hear me talk about not only kind of the macro issues in pharma but also kind of some operational challenges in that business. And look, we've, I would say, from a strategic perspective, brought Warren over to lead that business. And I think some of the strategies that we've implemented in clinical around salesforce optimization and our go-to-market have worked significantly well.
puneet: Yes, I'm going to let Jeff kind of hit it.
Jeffrey S. Sherman: They are getting into detailed look but high level. You did hear me talk about not only kind of the macro issues in pharma, but also kind of some operational challenges in that business and look we I would say from a strategic perspective, bringing more in over to lead that business and I think some of the.
The strategies that we've implemented and clinical around sales force optimization and our go to market have worked significantly well in.
Jeffrey S. Sherman: And, you know, Warren grew up a lot in the pharma business, key roles at Millipore and being able to call on that. And so we think that's going to make a difference in the back half of the year. But as far as specific guidance, let me kind of comment. Yeah, sure.
Jeffrey S. Sherman: Warren grew up a lot in the pharma business.
Jeffrey S. Sherman: Key roles at Millipore, and being able to call on that and so we think thats going to make a difference in the back half of the year, but as far as specific guidance, let me, let Geoff kind of comment yes sure. Thanks, Chris Yeah. So puneet I think as we looked at guidance you know, where we're only a couple months out from giving our annual guidance.
Jeffrey S. Sherman: Sure. Thanks, Chris. Yeah, so, Puneet, I think as we looked at guidance, you know, we're only a couple months out from giving our annual guidance. I would remind everyone, when we started the year, our initial guidance was over $20 million higher than consensus when we started the year. And as we looked at our Q1 performance, you know, we were about $6 million ahead of consensus in Q1, so we had a strong Q1 from an execution standpoint.
Geoff: I would remind everyone. When we started the year you know our initial guidance was over $20 million higher than consensus when we started the year and as we looked at our Q1 performance. We are about $6 million ahead of consensus in Q1. So we had a strong Q1 from execution standpoint, we did not see the typical seasonal slowdown in clinical.
Jeffrey S. Sherman: We did not see the typical seasonal slowdown in clinical that we've seen in prior years, so I think that's a testament to our commercial teams and the execution we've seen, particularly on the NGS growth side. But we also have just put the pharma commercial sales team under Warren, so we do want to give Warren a little time to get his arms around it and look at the business. We have been adding, you know, sales reps there as well, so I think more of our expectation is ADX has been a challenge over the last couple quarters, as well as what's happened in the overall macro situation, so we want to give Warren time to get his arms around the business, and we'll look how performance happens in Q2, and we'll reevaluate guidance as we exit the second quarter.
Geoff: All of that we've seen in prior years, So I think Thats, a testament to our commercial teams and the execution, we've seen particularly on the Ngls growth side, but we also have just put the farm our commercial sales team under warranty. So we didn't want to give one a low time to get his arms around it and look at the business, we have been adding sales reps.
Geoff: There as well so I think more of our our expectation is AVX has been a challenge over the last couple of quarters as well as what's happening in the overall macro situations. So we wanted to give warren time to get his arms around the business and we will look out performance happens in Q2, and we will reevaluate guidance as we exited the second quarter.
Geoff: Yeah.
Speaker Change: Got it that's helpful. And then just a quick follow up on that FDA L. T rule.
Speaker Change: Thanks for your comments and it's great to see the majority of the portfolio is protected here.
Puneet Souda: Thank you for your comments, and it's great to see the majority of the portfolio is protected here, despite the rule. Chris, when you think about the next round of tests and the products yet to be launched, for those to go through the FDA approval process, how are you thinking about the cost? Do you think it raises the cost for those, even though that process is over the next, you know, three to four years? And maybe just talk to us at a high level: how do you see this FDA LDT regulation implementation playing out?
Speaker Change: Despite the rule.
Speaker Change: When you Chris when you think about the next round of test in the products yet to be launched.
Speaker Change: For those to go through the FDA approval process. How are you thinking about the cost do you think it raises the cost for those even though that processes over the next.
Speaker Change: Three to four years, and maybe just talk to us a high level. How do you see this FDA Ltte rule regulation implementation playing out.
Christopher Michael Smith: Yeah, so look, I think the ruling was very favorable. I'll start by saying that.
Speaker Change: Yes, So look I think it is I think the ruling was very favorable.
Speaker Change: I'll start by saying that I think also just to say that look we're board member to UCLA and we're kind of a line that we don't believe it's medical devices and so we'll see how that unfolds, but as far as cost and the impact of the business. One of the things that we did as a leadership team is everybody that we brought on has come from our regulated FDA environment. So the <unk>.
Christopher Michael Smith: I think also just to say that, look, you know, we're a board member at ACLA, and we're kind of aligned, and we don't believe it's medical devices. And so we'll see how that unfolds. But as far as cost and the impact of the business, one of the things that we did as a leadership team is everybody that we brought on has come from a regulated FDA environment. So the person that runs QRC grew up only with FDA regulations.
Speaker Change: Listen that runs <unk> grew up an only FDA regulated so we started probably 18 months ago of putting the systems in place, including design control and new products and so we've been going through that process. We've got two key products that are under development now that are that are kind of running through that process and so while there is definitely a big cost associated with it.
Christopher Michael Smith: So we started probably 18 months ago putting the systems in place, including design control and new products. And so we've been going through that process. We've got two key products that are under development now that are kind of running through that process. And so while there's definitely going to be costs associated with it, we believe we can manage them in the day to day business. There won't be a significant change to our outlook or our forecast to be able to manage that business.
Speaker Change: We believe we can manage it in the day to day business that there won't be a significant change to our outlook our forecast to be able to manage that business.
Puneet Souda: Got it. Super. Okay. Thank you.
Super: Super Okay. Thank you.
Super: Thanks.
Daniel Gregory Brennan: Your next question for today is from Dan Brennan on TV.
Super: Your next question for today is from Dan Brennan with TD Cowen.
Daniel Gregory Brennan: Thanks for the question. Sorry about that.
Daniel Gregory Brennan: Hey, Dan.
Daniel Gregory Brennan: Hey, Thanks for the question sorry about that.
Christopher Michael Smith: Hey, guys, can you speak a little bit just about the core clinical business? Just wondering, you know, ex-NGS, kind of, you know, what you guys saw in the quarter. It looks like the results are okay there. And kind of how you're thinking about the progression of maybe volume and price as we look out in Q2 and beyond. Yeah, look, I mean, I mentioned in our prepared remarks that we did grow in all modalities, but Warren's here, so maybe I can let Warren kind of give you the high-level piece of it, and then maybe Jeff can kind of give you more specifics in the detail, if you want to. Yeah, certainly. Thanks. Thanks, Chris. Dan, good morning.
Daniel Gregory Brennan: Hey, guys can you speak a little bit just to the core clinical business. Just wondering <unk> kind of what you guys saw in the quarter. It looks like the results. We're okay, there and kind of how youre thinking about the progression of maybe volume and price as we look out in the Q2 and beyond.
Speaker Change: Yes look I mean, I did mentioned in our prepared remarks that we did grow in all modalities, but warrants here. So maybe I can let warren kind of give you the high level piece of it and then maybe Jeff kind of around more specifics in the detail on US yes, Sidney thanks, Thanks, Chris and good morning.
Warren Stone: Q1 was a strong source for all modalities, as Chris said. And from our data, we feel that we continue to grow from a volume perspective above markets across all modalities, and that really speaks to our sort of account penetration strategy that we have from a commercial perspective. Yes, we over-index on NGS because of the relative importance of that, but the overarching sales strategy does target account ownership, and we're seeing the benefits of that through all of our modalities. And we feel, based on the fact that it's sort of broad-based across multiple customers and across the geography of the United States, that it should be sustainable.
Speaker Change: Q1 was a strong solid <unk>.
Sidney: And from our data we feel that we continue to grow from a volume perspective above market.
Warren: All modalities and that really speaks to sort of account penetration strategy that we have from a commercial perspective, yes, we over index on Ngls because of the relative importance of that but.
Warren: The overarching sales strategy does target on sort of account ownership.
Warren: We are seeing the benefits of that through to all of our modalities in them. We feel based on the fact that it's sort of broad based across multiple customers and across the geography of United States that it should be sustainable.
Jeffrey S. Sherman: Yeah, and I think, you know, I would expect a similar kind of flow of revenue, Dan, from a quarterly perspective. You know, Q1 is generally our softest quarter, tends to ramp up, and Q2 and Q3 are in a similar range. And then we finish the year stronger in Q4, so I would expect a similar sequence of clinical performance this year. Yeah, and I guess the last thing on that, Dan. Remember we went through a field expansion where, probably, over an 18-month period, we doubled the size of our field organization.
Warren: Yeah, and I think you know I would expect a similar kind of flow of revenue down from a quarterly perspective Q1 is generally our softest quarter. It tends to ramp in Q2 and Q3 are in a similar range and then we finished the year stronger in Q4, So I would expect a similar a similar.
Warren: Sequencing of.
Speaker Change: Clinical performance this year and I guess lastly on that Dan remember, we went through a field expansion, we're probably over an 18 month period, we doubled the size of our field organization and so I think what you see in this business. It really does take six to nine months of time and grade to get flowing from a sales perspective, whether it's new products new processes new custom.
Jeffrey S. Sherman: And so I think what you see in this business, it really does take six to nine months of time and grade to get flowing from a sales perspective, whether it's new products, new processes, new customers, you know, new business. And so I think we're starting to see the benefit of that, and to a point where I think it's something we've got to continue to evaluate is kind of what we call feet on the street in making sure that we have, you know, the right amount of coverage because we believe the opportunity is significant, and so it's about capturing it.
Speaker Change: <unk>, new business and so I think we're starting to see the benefit of that and to a point, where I think it's something we've got to continue to evaluate it as kind of what we call feet on the street and making sure that we have.
Speaker Change: The right amount of coverage because we believe the opportunity is significant and so it's about capturing it.
Speaker Change: And then maybe just one follow up just on the sequencing side so the liquid.
Speaker Change: So is there anything baked into the guide for that and then you said later in 'twenty three like is that a fourth quarter event, just any any more color on kind of what the impact of that being from a timing perspective. Thank you.
Christopher Michael Smith: And then just one follow-up just on the sequencing side. So the liquid test, so is anything baked into the guide for that? I know you said it's later in 23. Like is that a fourth quarter event? Is there just any more color on kind of the impact of that being from a timing perspective? Thank you.
Speaker Change: Not expecting any material revenue from that in this year Dan.
Daniel Gregory Brennan: Yes late Q, it's late in the year.
Speaker Change: Okay, Alright, great guys. Thank you.
Daniel Gregory Brennan: I am not expecting any material revenue from that this year, Dan.
Speaker Change: Thanks take care.
Speaker Change: The next question is from Andrew Brachman with William Blair.
Christopher Michael Smith: Yeah, it's Lakeview. It's late in the year.
Andrew Frederick Brackmann: Hey, guys. Good morning, Thanks for taking the questions.
Daniel Gregory Brennan: Okay. All right. Great, guys. Thank you. Thanks, take care. The next question is from Andrew Brackmann with William Blair. Good morning. Thanks for taking the questions.
Andrew Frederick Brackmann: Maybe on Neo comprehensive I think it's been just over a year since you offset launch that product can you maybe just give us a sense of the scale for that business in that product line and I guess just related to that any any color. You can provide on sort of success rate with cross selling initiatives are sort of accounts you are really seeing a lot of uptake in thanks.
Andrew Frederick Brackmann: The next question is from Andrew Brackmann with William Blair.
Christopher Michael Smith: Yeah, Andrew, I'll take it at a high level, then I'm gonna let Warren kind of get the details on it. But you know, remember, we've talked a lot about this, that from a heme perspective, we're a market leader in NGS. But from a solid tumor, we would have a very low double-digit share. So you know, we knew that when we launched kind of that product, but let me maybe have Warren give more. Yeah, just just the correction there for Chris, we have a low single digit share in
Speaker Change: Yes, Andrew I'll take a high level, nonetheless, warranty kind of get into detail to it but remember we've talked a lot about this said from a heme perspective, we're a market leader in Ngls, but from our solid tumor we would have very low double digit share. So we knew that when we launched that product, but let me maybe have Warren give more yeah, just just to create significant.
Warren: We have low single digit share in solid units that way. So when you say double digit I am so sorry, we had a single day.
Warren Stone: Yeah, just a correction there for Chris, we have a low single-digit share in Solid Tumor. Is that what he said? You said double-digit. I am so sorry.
Warren: Thank you.
Warren: And one of the reasons why we had low single digit share in solid tumors effect that we didn't have this board CGP panel and as you correctly pointed out we launched this in late March of last year, and we've done an upgrade on the products as well as penetrate penetration continues to evolve very very favorably.
Christopher Michael Smith: We have a single-digit share in Solid Tumor. No, that's what I meant to say. I think it's correct.
Warren Stone: And, you know, one of the reasons why we had a low single-digit share in Solid Tumor is the fact that we didn't have this broad CGP panel, and as you correctly pointed out, we launched this in late March of last year, and we've done an upgrade on the product as well. Our penetration continues to evolve very, very favorably. We see it coming across in two areas; obviously, our area of strength lies within the hospitals, and we're tapping into that opportunity, and we estimate that sort of 20% of the market potential comes from the hospital side of things, and the balance of the opportunity is with community oncologists.
Warren: We see it coming across and in two areas. Obviously, you asked area of strength lies within the hospitals.
Warren: And we tapping into that opportunity and we estimate that a 20% of the market potential comes from the hospital side of things and the balance of the opportunity is in the community oncologists, sometimes they're independent and sometimes they are affiliated but that's where we were.
Warren Stone: Sometimes they're independent, sometimes they're affiliated, but that's where we have a lot of opportunity to grow in the community oncology space because we're largely underpenetrated for lack of a portfolio. We see robust growth quarter over quarter in terms of volume within that space as well, and ultimately, this is one of the leading drivers of the 50% growth in NGS we spoke about earlier today.
Warren: We have a lot of opportunity to grow and accumulate oncology space, because we have largely underpenetrated for lack of a portfolio, we see robust growth quarter over quarter in terms of volume within that space as well and ultimately this is one of the leading drive visits to that 50% growth in Ngls we spoke.
Warren: Earlier today.
Speaker Change: Great. Thanks, guys.
Tejas Rajeev Savant: Your next question for today is from Tejas Savant with Morgan Stanley.
Chaos seven: Your next question for today is from Chaos seven with Morgan Stanley.
Christopher Michael Smith: Hey guys, good morning.
Chaos seven: Hey, guys.
Tejas Rajeev Savant: So maybe just to kick things off, Chris, you know, you raised your long-term targets to north of 10% on the last earnings call. Three years out, where do you expect the NGS test mix to be in terms of your clinical revenue? It's about 25% today. Just given the growth you're seeing here, is there a scenario in your mind where, over the course of those long-term targets, the NGS mix could essentially be approaching 50% on an XMRD basis?
Chaos seven: Good morning.
Chaos seven: So maybe just to kick things off Chris.
Chaos seven: You raised your long term targets are north of 10%.
Chaos seven: On the last earnings call three years out where do you expect <unk> test mix to be in terms of your clinical revenue. It's about 25% today just given the growth Youre seeing your is there a scenario in your mind, where over the course of those long term targets and yes makes could essentially be approaching 50% on an ex <unk>.
Chaos seven: <unk> basis.
Christopher Michael Smith: Well, look, I think when you think of it, Tejas, and you talk about it over the timeline that you mentioned, we will be launching other products along the way. So, for example, we're really excited about this liquid product that we're going to be launching. There'll be new products that will come in.
Chaos seven: Well look I think when you think of it chaos and you talked about it over the timeline that you've mentioned, we will be launching other products along the way. So for example, we're really excited about this liquid product that we're going to be launching so there'll be new products that will come in but without question. We believe we have a ton of runway on Ngls I mean, I think all the data that.
Christopher Michael Smith: But without question, we believe we have a ton of runway on NGS. I mean, I think, you know, all the data that we see is that the NGS market is probably only penetrated 30 to 40% and growing at 20 to 25% per year. And so we think that we will get our share of that growth. And then, I think, as we bring out our next large panel, we think that that will be a product that will make a significant impact in the market.
Chaos seven: We see is that NGL market is probably only penetrated 30% to 40% and growing.
Chaos seven: The 20% to 25% per year, and so we think that we will get our share of that growth and then I think as we bring out even our next large panel, we think that that will be a product that will make a significant impact in the market. So it's hard to say percentage wise, but I will tell you, we're starting from a low base, especially compared to our competitors we look at.
Christopher Michael Smith: So it's hard to say percentage-wise, but I will tell you, we're starting from a low base, especially compared to our competitors. We look at Foundation, you look at Tempest, you look at, you know, Keras. I mean, these are companies that are probably doing high, high double digits of their business in NGS, and solid, and we just haven't been. So we think there continues to be a lot of runway.
Chaos seven: Foundation, you look at Tampa as you look like.
Chaos seven: It carries I mean these are companies that are probably doing high high double digits of their business and in Ngls and solid and we just haven't been so we think there continues to be a lot of runway there.
Tejas Rajeev Savant: Got it. And a quick follow-up on informatics, actually. Chris or Melody, perhaps, I'm just curious as to your updated thoughts there on better monetizing your informatics offering. And on a somewhat related note, you've talked in the past about your product sort of moving towards more data-intensive formats, whole genome sequencing, whole exome, etc. As you move in that direction, do you envision an additional level of investment that's needed to build the infrastructure to support those back-end analytics and so forth for those kinds of tests?
Speaker Change: Got it and a quick follow up on informatics actually.
Speaker Change: Chris automatically perhaps I'm just curious as to your updated thoughts there on better monetizing your informatics offering and on a somewhat related note you've talked in the past of you know.
Speaker Change: Your products sort of moving towards more data intensive formats whole genome sequencing whole eggs zoom et cetera, as you trend in that direction do you envision an additional level of investment that's needed to build the infrastructure to support those backend analytics and so forth for those kinds of tests.
Melody Harris: Yeah, I'm going to let Melody kind of get into the details with you, but now you have to remember, she's only had it officially for like two weeks.
Speaker Change: Yes, im going to let Melanie you kind of get into the detail with you, but now remember she has only had it officially I think for like two weeks, but look I think zinc high level and we believe that there is opportunities, especially in these markets that are growing double digits, we need to invest in now.
Melody Harris: But look, I think at a high level, we believe that there are opportunities, especially in these markets that are growing double digits, we need to invest in them. You know, I think, our view is that we think that the business, in entirety, we talk about it being a portfolio, has the ability to grow double digits. And so I think informatics is no different from our other businesses, where we think if we invest the right amount, we can drive growth. But some of that has to do with product and strategy. And on that, let me kind of throw it to Melody to give you kind of some more color on that.
Melanie: I think our view is is that we think that the business in a tiny we talked about it being portfolio has the ability to grow double digits and so I think informatics is no different than our other businesses, where we think if we invest the right amount. We can we can drive growth, but some of that has to do with product and strategy in that on that let me kind of throw it to melody to give you some more color.
Melody Harris: We're on that yes, so two weeks I've been here to us on this project.
Melanie: So.
Melody Harris: Just looking at it and learning, but I do feel we have quite a bit of opportunity.
Melody Harris: Yeah, so for two weeks now, Tejas, I've been here on this project, so just looking at it and learning. But I do feel we have quite a bit of opportunity. We are only now, with our LIMS system, really transforming the underlying system such that we have the data structure for the back-end analytics that you mentioned. And as we get into new product offerings with whole genome sequencing, and liquid biopsy, a lot of the magic of those products is in the back-end pipeline.
Melody Harris: We are only now with our limb system really transforming the underlying system such that we have the data structure for the backend analytics that you mentioned and as we get into new product offerings with whole genome sequencing with.
Melody Harris: Liquid biopsy a lot of the magic of those products is in the Bakken pipeline and so we're already building that infrastructure for that which then also lays the foundation for us for purposes of monetizing that in a meaningful way and so if you think about.
Melody Harris: And so we're already building that infrastructure for that, which then also lays the foundation for us for purposes of monetizing that in a meaningful way. So if you think about data being the new oil, this means that we're going to have more oil production coming from whole genome sequencing and liquid biopsy. So the team's very excited about those new product offerings and what that means for their product down the road from that.
Melody Harris: Data being the new oil.
Melody Harris: This means that we're going to have more oil production coming from whole genome sequencing and liquid biopsy. So that team is very excited about those new product offerings and what that means for their product down the road from that and I think from an investment perspective.
Melody Harris: And I think from an investment perspective, we are continuing to capture gross margin savings and efficiencies throughout the company and have several different work streams going towards that. So part of those savings, we can reinvest into things like informatics and R&D as well. So there'll be profit growth from that, but there'll also be some reinvestment from some of those operational efficiencies that we gain over the next couple quarters and years.
Melody Harris: We're continuing to capture gross margin savings and efficiencies throughout the company and have had several different work streams going going towards that so part of those savings, we can reinvest into things like informatics and R&D as well so there'll be there'll be profit growth from that but they'll also be some reimbursement from some of those.
Melody Harris: Operational efficiencies that we garner over the next couple of quarters and years and speaking of the lens, obviously, that's going to be a big cost savings to move multiple systems onto one platform and we've talked a lot about the lives, but that really is.
Melody Harris: Yeah, and speaking of the LIMS, you know, obviously, that's going to be a big cost savings to move multiple systems onto one platform. And we've talked a lot about the LIMS, but that really is the turbocharger for informatics growth. It's been very hard for us from an informatics perspective on multiple LIMS systems to aggregate all that data and be able to have data scientists create the things that we needed. So the LIMS project, think about it almost as an R&D campaign for informatics. It's going to create that. Got it.
Melody Harris: The turbocharger for informatics growth, it's been very hard from us from an informatics perspective on multiple limb systems to aggregate all that data and be able to have data scientists create the things that we needed. So the limbs project think about it almost as an R&D campaign for informatics is going to create that.
Speaker Change: Got it I appreciate the color guys. Thank you.
Melody Harris: Thanks.
Melody Harris: Your next question is from Mike Matson with Needham and company.
Tejas Rajeev Savant: Got it. I appreciate the call, guys. Thank you.
Michael Stephen Matson: Hey, Mike.
Michael Stephen Matson: Your next question is from Mike Matson with Needham and Company.
Michael Stephen Matson: Hey, guys.
Michael Stephen Matson: Just one on the.
Michael Stephen Matson: Hey guys, just one on the patent litigation. So, with this hearing on March 29th, I guess, what is the next step? And is it just a decision on your appeal? And, you know, what's the expected timing of that decision?
Michael Stephen Matson: The patent litigation so.
Michael Stephen Matson: With this hearing on March 29, I guess, what is the index.
Michael Stephen Matson: Just the decision on your appeal and whats the expected timing of that decision.
Michael Stephen Matson: Yeah, I'll, let Alex take that sure. So yes, what was appealed was the preliminary injunction and typically divisions take 1% to four months.
Ali Olivo: So, yes, what was appealed was the preliminary injunction, and typically, decisions take one to four months, depending on various factors, including if there's a dissenting opinion, you know, sort of who the judges are, whether it's precedent-setting in nature. And so we were about one month out, and so we don't really have greater visibility into the timing other than generally one to four months, with the four months being, you know, if it's precedent or has a dissenting opinion.
Alex: Depending on various factors, including if theres a dissenting opinion.
Alex: Start of who the judges are whether it's precedential in nature and so we were about one month out.
Alex: And so we don't really have greater visibility into the timing other than generally one to four months wins performance being if.
Alex: If it's precedential or has a defense.
Michael Stephen Matson: Okay, thanks. And then with this new liquid biopsy test that you mentioned, how does that fit with the, you know, prior radar? Is this radar kind of 2.0? Is this something that, you know, would you sell both versions of the test, assuming, you know, you get the preliminary junction overturned?
Speaker Change: Okay. Thanks, and then with the new liquid biopsy tests that you mentioned I mean, how does that fit with <unk>.
Speaker Change: Prior radar is this radar kind of 2.0 is this something that would you saw both versions of the tests, assuming you get the preliminary injunction that returned.
Ali Olivo: So, the liquid that we're looking to launch in the latter part of this year doesn't relate to MRD. It's really a liquid test; it's a CGP pan-cancer liquid test that we're launching so that we're able to offer sort of concurrent testing opportunities with solid tumor and liquid biopsies. I got it. Okay.
Speaker Change: So the liquid that we're looking to launch in the latter part of this year.
Speaker Change: It doesn't relate to <unk> its really its a liquid test into CGP pan cancer liquid test.
Speaker Change: There were launching so that we're able to offer sort of concurrent testing opportunities in the solid tumor and liquid biopsy.
Speaker Change: Got it okay. Thank you.
Speaker Change: Thanks.
Michael Stephen Matson: Got it. Okay. Thank you.
Speaker Change: Your next question is from Michael Ruskin with Bank of America.
Michael Stephen Matson: Your next question is from Michael Riskin with Bank of America.
Michael Stephen Matson: Hi, good morning.
Michael Stephen Matson: Good morning.
John Kim: Hi, good morning. Good morning. This is John Kim. I'm on behalf of Mike.
Michael Stephen Matson: John Kim on for Mike.
John Kim: You mentioned.
John Kim: You mentioned that you'd actually be looking at the higher end of the adjusted EBITDA guidance. So I wanted to ask about price and the mix. I think you've previously talked about NGS contributing more than 60% of the increase in AUP last quarter. I'm wondering what that was this quarter, and looking at the 2024 guide and looking at that adjusted EBITDA, if you had any change in your AUP expectations, um, yeah, and related to that note, and how much improvement you're seeing in the revenue cycle, and I know you talked about that it's a multi-year opportunity, but what sort of upside is left this year?
John Kim: That you'd actually be looking at the higher end of the adjusted EBITDA guidance.
John Kim: I wanted to ask on the price and the mix.
John Kim: I think you previously talked about.
John Kim: The engie is contributing more than 60% of the increase in A&P last quarter I'm wondering what that was this quarter.
John Kim: And looking at the 2024 guide in looking at that adjusted EBITDA. There. If you had any change in your expectations.
Michael Stephen Matson:
Speaker Change: Yeah, and I guess.
Speaker Change: Related to that node and how much improvement you're seeing in the revenue cycle and I know you talked about that it's a multiyear opportunity, but what sort of upside is less this year.
Jeffrey S. Sherman: Yeah, and so in terms of the pricing question, NGS continues to drive over 60 plus percent of the AUP increase, and so that trend has continued. In terms of the revenue cycle, I mean, we have kind of a lot of initiatives under that umbrella. We have what you would consider your historical kind of billing and collections, denials, and management piece. You know, we're having success there. There is a kind of conversion of tests from single panel to larger panel tests.
Michael Stephen Matson: Yes. So in terms of in terms of the pricing question I N. G. S continues to drive over 60.
Michael Stephen Matson: 60, plus percent of the AEP increase and so that that trend has continued in terms of our bragging revenue cycle. I mean, we have kind of a lot of initiatives under that umbrella. We have what you would consider your historical kind of billing and collections denials management piece, we're having success there are there.
Michael Stephen Matson: There is kind of conversion of tests from from single Pan on the larger panel tests that kind of falls under what we would consider our revenue cycle initiatives.
Jeffrey S. Sherman: That kind of falls under what we would consider revenue cycle initiatives as well. And then there are payer policy movements as well. So as state biomarker legislation continues to get passed, that's long-term favorable for us. But it's going to take time to kind of matriculate through our performance and get payers to pay. And then finally, there's the rate aspect where we're seeing rate increases. And so I would say we continue to have success across all of those.
Michael Stephen Matson: As well and then we have payer policy movements as well so as state biomarker legislation continues to get pass that's long term favorable for us that's going to take time to matriculate through through our performance and getting payers to pay so and then finally there is the right aspect, where we're seeing you know.
Michael Stephen Matson: Rate increases and so I would say, we we continue to have success across all of those.
Jeffrey S. Sherman: They don't really start or end in any one particular quarter, so I continue to see kind of a multi-year opportunity for seeing improvements there, and that's really where the focus is on getting paid for the work that we do and making sure we're getting, you know, we're capturing the value of the service we're delivering to our clients and their patients. And I think that the progress has been good, and we still see a lot of opportunity to improve further going forward.
Michael Stephen Matson: They don't really start or in any one particular quarter. So I continue to see kind of a multi year opportunity of seeing improvements there and thats really where the focus is on getting paid for the work that we're doing.
Michael Stephen Matson: Making sure we were getting were capturing the value of the service, we're delivering to our clients and their patients and I think that the progress has been good and we still see a lot of opportunity to improve more going forward.
Speaker Change: Understood and.
John Kim: understood and sort of related to it. I, you know, you've doubled the sales force and now, as a team transitions to be under Warren, you talked about expanding it further. How should we think about this additional investment in the commercial team? Is that going to be, what sort of impact is that going to have on the financial statement?
Speaker Change: Sort of related to it I know you've doubled the sales force and now as that team transitioned to the under Warren talked about extending it further.
Michael Stephen Matson: How should we think about this additional investment in the commercial team is that going to be what sort of impact is that going to have on the financial statements.
Christopher Michael Smith: Yeah, I would say, look, all of our strategies are kind of built into our guide. So anything that we would do investing this year is already built into the guide.
Speaker Change: Yes, I would say look all of our strategies are kind of built into our guidance. So anything that we would do investing this year are already built into the guide.
John Kim: Noted. Thank you. Your next question for today is from Mason Carrico with Stevens. Imagine.
Speaker Change: Noted thank you.
Speaker Change: Thanks.
Speaker Change: Your next question for today is from Nathan Carrico with Stephens.
Mason Owen Carrico: Hey, Matt.
Mason Owen Carrico: Your next question for today is from Mason Carrico, with Stevens.
Mason Owen Carrico: Hey, guys.
Mason Owen Carrico: You gave some color on this in a previous question, but to ask it more directly for the ATX business. Overall is this still a business that you believe can consistently grow double digits.
Christopher Michael Smith: Yeah, look, we have a couple things on that. I mean, I think we do believe that business can grow double digits. But that being said, I think we've got to make sure from a commercial optimization perspective that we have the right strategies in place. And I think also some of the newer tests that we're bringing to market are going to help us significantly. So why is neo comprehensive 1.0 a broad panel? I think getting our next gen big panel out there, that's going to be one of the largest, if not the largest on the market, is going to have a big impact as well as liquid biopsy.
Mason Owen Carrico: And if so what needs to happen to get there and how do you think about the timeline to return to that level of growth.
Speaker Change: Yes look we a couple of things on that I mean, I think we do believe that business can grow double digits, but that being said I think we've got to make sure from a commercial optimization perspective, but we have the right strategies in place I think also some of the newer tests that we're bringing to market I think are going to help us significantly. So why neocart brands at 1.0 is broad panel.
Speaker Change: Getting our next Gen Big panel out there thats going to be one of the largest if not the largest on the market.
Speaker Change: It's going to have a big impact as well as.
Christopher Michael Smith: So I think one of the things with the pharma is taking these new products and presenting them as new products. And then I think the other piece is when we came in, and we talked a lot about the clinical business, bringing in Warren, and we talked about, you know, Salesforce optimization. And when you look at the clinical group, you know, we were below, you know, a best in class optimized, optimized Salesforce or an effective Salesforce is probably scoring about 60 on the Gardner scale, and we were well below 20.
Speaker Change: Liquid biopsy. So I think one of the things with the pharma is taking these new products and presenting them as new products and then I think the other piece is when we came in and we've talked a lot about the clinical business, bringing in Warren we talked about sales force optimization, and we and when you look at the clinical group we were below.
Mason Owen Carrico: Best in class optimism I optimize salesforce, our effective sales force is probably scoring about was <unk> 60 on the Gardner scale, and we're well below 20, and I would say, we've got a lot of things to lift that on the clinical side, you've seen those financial results I would say, we not we did not grow that through that process on the pharma side and we're just beginning that now so I think kind of the same thing with allowing warranty.
Christopher Michael Smith: And I would say we've got a lot of things to lift that on the clinical side, you've seen those financial results. I would say we did not go through that process on the pharma side, and we're just beginning that now. So I think kind of the same thing with allowing more people to get their arms around this business and understand it, but the market's there. So the question is not whether the market's there; the question is for us to put in the right strategies and execute to do it.
Mason Owen Carrico: Get his arms around this business and understand it but the market's there. So the question is that whether the markets. There. The question is for us putting the right strategies and execute to do it but to be fair, it's going to take quarters to get it going I think we did make some good strategy moves on looking at optimizing the financials around that especially around the gross margin in closing some of those out out of the country.
Christopher Michael Smith: But to be fair, it's going to take quarters to get it going. I think we did make some good strategic moves on looking at optimizing the financials around that, especially around the gross margin and closing some of those out of the country or global sites and cutting loose underperforming profitable customers. But now it's about growth and getting it back to that growth mode. I think the other point is we have relatively new sales.
Mason Owen Carrico: Or or global sites and cutting loose.
Mason Owen Carrico: Underperforming profitable customers, but now it's about the growth and getting it back to that growth mode. I think the other the other point is we have a relatively new sales force. So it has come on over the last couple of quarters and so I think there's also the component of this of just the natural ramp there and then I think we have built a comprehensive sales structure.
Christopher Michael Smith: I think the other point is we have a relatively new sales force that has come on over the last couple of quarters, and so I think there's also the component of this of just the natural ramp there. And I think we have built, you know, a comprehensive sales structure and support structure under Warren on the clinical side that will now be really available for the pharma side as well. I'll keep the one you picked. Thanks, guys. Your next question for today is from Matt Sykes with Goldman.
Mason Owen Carrico: Port structure under one on the clinical side that will now be really available for the pharma side as well.
Speaker Change: Got it I'll keep it to one thanks guys.
Speaker Change: Thanks.
Mason Owen Carrico: Okay.
Mason Owen Carrico: Your next question for today is from Mac Sykes with Goldman Sachs.
Matthew Carlisle Sykes: Hey, guys. They are asking the question. This is <unk> on for Matt.
Mason Owen Carrico: Your next question for today is from Matt Sykes.
Matthew Carlisle Sykes: So that's two questions. Would you like to talk a little bit about the first one, and then I'll give Melody the second one?
Matthew Carlisle Sykes: Lots been covered already but despite the increase sequentially in clinical revenues for this quarter, how much erosion of clinical testing volumes could have been attributed to winter seasonality.
Matthew Carlisle Sykes: Then how are you thinking about investments into digital pathology across your business.
Speaker Change: So it's two questions. So you want to talk a little bit Yeah, I think Ryan and I will give <unk>. The second yeah, I think as Jeff mentioned in his commentary we didn't name history.
Warren Stone: Yeah. I think, as Jeff mentioned in his commentary, we didn't actually see a meaningful change in our demand patterns in quarter one. And actually, just from a weather perspective, maybe there was marginally more weather phenomenon this year versus last year, but it wasn't materially different. And as a result, we didn't actually see as large a dip as what we have normally seen in quarter one. So we saw what I would define as fairly robust volume demand across all of our modalities in the first quarter. Yeah, on digital pathology, we do
Mason Owen Carrico: A meaningful change in AD demand patents.
Mason Owen Carrico: In quarter, one and actually is from a weather perspective, maybe there is margin Nemo awareness phenomenon in this year versus last year, but it wasn't materially different and as a result, we didn't necessarily see as larger dip is what we have seasonally seen in quarter one so.
Mason Owen Carrico: We saw what I would define as fairly robust volume demand across all of our marriage entities in the first quarter.
Melody Harris: Yeah. On digital pathology, we do have a couple of internal initiatives. We do, to some extent, employ a level of digital H&E and other circling methodologies today, but to really do it at our full production scale, we're not seeing digital path AI vendors in the marketplace that have the breadth of our menu. So we're trying to figure out ways that we could piece that together in a full-scale production method. So today, we've done it opportunistically by taking some of the higher pain points and digitizing that. But as far as across-the-board digital pathology solutions go, we don't see that they're quite out there yet today.
Mason Owen Carrico: Yeah on digital pathology, we do have a couple of internal initiatives, we do to some extent employee.
Mason Owen Carrico: Level of.
Mason Owen Carrico: Digital age knee and other circling methodologies.
Mason Owen Carrico: The methodologies today, but.
Mason Owen Carrico: To really do it at our full production scale, where we're not seeing digital path.
Mason Owen Carrico: Vendors in the marketplace that has the breadth of our menu. So we're trying to figure out ways that we would piece that together in a full scale production method. So today, we've done it opportunistically and taking some of the higher pain points and digitize that but as far as across the board digital pathology solutions.
Mason Owen Carrico: We don't see that they're quite out there yet today.
Speaker Change: Thanks, Thank you.
Andrew Harris Cooper: Your next question is from Andrew Cooper with Raymond.
Speaker Change: Your next.
Speaker Change: Question is from Andrew Cooper with Raymond James.
Andrew Harris Cooper: Hey, everybody. Good morning.
Speaker Change: Andrew.
Andrew Harris Cooper: Thanks for the questions here. Lots have already been asked, but maybe one more on MRD and the mention of sort of the various different pathways you could go down. Just would love kind of the high-level thoughts of how you think about the value of time from that perspective.
Andrew Harris Cooper: Hey, everybody. Good morning. Thanks for the question here Lot's already been asked but maybe one more on <unk> and the mention of sort of the various different pathways. You could go down this would love kind of at the high level thoughts on how you think about the value of time from that perspective.
Christopher Michael Smith: And, you know, with a trial potentially starting in 2025 with the IPRs underway, the timeline of seeing those through to the end versus potentially going another route where you could do something faster, even if it may cost a little bit more. Just help us think about how you balance those things as you think about what the next step should be to add MRD to the portfolio from a commercial perspective. Yeah, look, I think it's a good question.
Speaker Change: With the trial potentially starting in 2025 with the IPR is underway the timeline of <unk>.
Speaker Change: Those through to the adverse potentially going another route where you could do something faster even if it may be cost a little bit more just help us think about how.
Speaker Change: You balance those things as you think about what the next steps would be to add <unk> to the portfolio.
Speaker Change: Our commercial landlord.
Speaker Change: It's a good question.
Christopher Michael Smith: Look, we do have a lot of confidence in the legal strategy, because I think, especially these IPRs, and I think that's gone kind of under the radar through all of this, because we're going through the natural steps, but those are now final, and see if we can get those patents overturned. And so, look, I think from a radar perspective, we like that technology a lot, and the team has already started working on the next-gen, you know, radar product.
Speaker Change: We do have a lot of confidence in the legal strategy, because I think especially the IPR and I think thats gone kind of under the radar through all of this because we're going through the natural steps, but those are now final.
Speaker Change: And.
Speaker Change: See if we can get those patents overturn and so look I think from a radar perspective, we like that technology, a lot and the team had already started working on the Nextgen.
Speaker Change: Radar product. So I think we're not abandoning that path, but I think that being said look we're a company that sells over 600 cancer tests, and we know that <unk> will be a product that needs to be there, but our ability we have multiple mgs tests. So I think our ability to evaluate other options. I think is just prudent on our part and it's one of the big projects that Alley and her team are looking.
Christopher Michael Smith: So I think we're not abandoning that path, but I think that being said, look, we're a company that sells over 600 cancer tests, and we know that MRD will be a product that needs to be there. But our ability, you know, we have multiple NGS tests, so I think our ability to evaluate other options. I think it's just prudent on our part.
Christopher Michael Smith: And it's one of the big projects that Ali and her team are looking at. There are a lot of interesting, innovative, early-stage companies out there from a technology perspective. So, look, I think we would do that.
Speaker Change: There's a lot of.
Speaker Change: Interesting innovative early stage companies out there from a technology perspective, So look I think we would do that.
Andrew Harris Cooper: As far as timing is concerned, look, I think at the end of the day, you've got to remember a lot of that product is still not getting reimbursed. I think they're, you know, I think Dentera's done a good job with Multi-X and getting coverage, but if you still look at the whole industry, it's pretty deep in colorectal, but not a lot of other cases. And there are some very good companies that are bringing those products to market in the next year or two, which we think will only grow the market at a faster rate and help adoption, especially from a payer perspective.
Speaker Change: As far as <unk>.
Speaker Change: Timing look I think at the end of the day, you've got to remember a lot of that product is still not getting reimbursed I think you know I think <unk> done a good job with multi exiting in getting coverage, but if you still look at the whole industry, it's pretty deep in colorectal, but not a lot of other cases and there are some very good companies that are bringing those products to market in the next year or two which we think.
Speaker Change: Will only grow the market at a faster rate and help adoption, especially from a payer perspective, but this is still so it's such early days from mrna I think it's almost like if you would go back with NGL 10 years ago and today in <unk> is only about 30%, 35% penetrated. So we think that this is going to be a long game with <unk> and we believe that with being <unk>.
Andrew Harris Cooper: But this is still so; it's such early days for MRD. I think it's almost like if you would go back with NGS 10 years ago. And today, NGS is only, what, 30, 35% penetrated. So, we think that this is going to be a long game with MRD, and we believe that as the leading cancer company, it's going to be important to us, but it's also about being prudent and making sure that we have multiple opportunities.
Speaker Change: Leading cancer company Thats going to be important to us, but it's also about being prudent in making sure that we have multiple opportunities.
Andrew Harris Cooper: Awesome. That's super helpful. Maybe just one more. In terms of some of the Salesforce commentary, can you just remind us from a numbers perspective sort of where you sit in precision oncology versus the traditional sort of call points and then as well in ADX and maybe versus those numbers where you'd like to be, you know, end of year or long term to the degree there's material change there?
Speaker Change: Okay.
Speaker Change: Awesome, that's super helpful. Maybe just one more.
Speaker Change: In terms of some of the Salesforce commentary can you just remind us from a numbers perspective sort of where you sit in that precision oncology versus the traditional sort of.
Speaker Change: Call points, and then as well in <unk> and maybe versus those numbers, where you'd like to be end of year or long term to the degree there is theres a material change there.
Warren Stone: Yep. So, as Chris said earlier, we've sort of doubled our sales force in the last 18 months, which ultimately means we now have an organization that's north of 100 on the clinical side. And if you think of the allocation of time, etc., that we apply, roughly 40% of the sales force's time is now focused on the community oncology setting, with the remaining roughly 60% focused on our traditional core point with pathology and the hospital. So, that's really the breakdown with regard to the clinical side of things.
Speaker Change: Yes so.
Speaker Change: As Chris said earlier, we sort of doubled our sales force in the last 18 months, which ultimately means we now have an organization that its north of 100 on mechanical side.
Speaker Change: And if you think of allocation of time et cetera that we apply roughly 40% of the sales force time is now focused on the community oncology setting with the remaining roughly 60% focused on our multi additional coal point pathology and the hospital.
Speaker Change: That's really the breakdown with regards to the.
Speaker Change: The clinical side of things on the.
Warren Stone: On the pharma side of things, just getting my arms around it, today we have less than 10 people within our commercial organization targeting our pharma customers, and I think there is a real opportunity for us to make investments here, but not necessarily what I want to call traditional investments. I think there are opportunities to drive a much more sophisticated sales, commercial strategy, and sales deployment to support that. So, I wouldn't just think about this as scaling the number of BDs.
Speaker Change: Pharma side of things just getting my arms around it today, we have less than 10 people within our commercial organization.
Speaker Change: Targeting ophthalmic customers and I think there is a real opportunity for us to make investments, yet, but not necessary what I'm going to call traditional investments I think there is opportunities to drive a much more sophisticated sales commercial strategy and sales deployment to support that so I wouldn't just think about this is scaling a number.
Speaker Change: <unk> of Bd's I would think about this in a much more transformational manner and different solutions that will drive better efficiency and reduce costs.
Warren Stone: I would think about this in a much more transformational way and different solutions that will drive better efficiency and reduce costs to serve. So, I think investment's there, but with two weeks under the belt, it's probably a little early for me to comment.
Speaker Change: I think investments there, but with two weeks ended about probably a little early for.
Speaker Change: For me to comment.
Andrew Harris Cooper: Great, I'll leave it there. Thank you so much.
Speaker Change: Okay I'll leave it there. Thank you so much.
Speaker Change: Thanks, Ken.
Speaker Change: Yeah.
Operator: We have reached the end of the question and answer session, and I will now turn the call over to management for closing remarks.
Speaker Change: We have reached the end of our question and answer session and I will now turn the call over to management for closing remarks.
Christopher Michael Smith: Okay, thanks so much Holly and everybody for taking the time to catch up with us today. As we talked about, it was a strong quarter, and we're pleased with the progress that we continue to make, and we'll look forward to catching up with you next quarter.
Speaker Change: Okay. Thanks, so much everybody. Thanks for taking the time to catch up with US today as we talked about it was it was a strong quarter and we're pleased with the progress that we continue to make and we'll look forward to catching up with you next quarter.
Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Take care. Thank you.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.