Q1 2024 Veracyte Inc Earnings Call
Operator: Good day, and thank you for standing by. Welcome to the Veracyte first quarter 2024 financial results conference call.
Okay.
Good day and thank you for standing by welcome to the first quarter 'twenty 'twenty four financial results conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.
Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Shayla Gorman, Senior Director, Investor Relations. Please go ahead.
Shayla Gorman: And then here an automated message advising that your hand is raised.
Operator: Withdraw your question. Please press star one again.
Operator: Be advised that today's conference is being recorded.
Operator: I'd now like to hand, the conference over to your first speaker today, Shayla Gorman Senior director of Investor Relations. Please go ahead.
Operator: Yeah.
Shayla Gorman: Good afternoon, everyone, and thank you for joining us today for a discussion of our first quarter 2024 financial results. With me today are Marc Stapley, Veracyte's Chief Executive Officer, and Rebecca Chambers, our Chief Financial Officer. Veracyte issued a press release earlier this afternoon detailing our first quarter 2024 financial results. This release, along with a business and financial presentation, is available in the Investor Relations section of our website at www.veracyte.com. Before we begin, I'd like to remind you that various statements that we may make during this call will include forward-looking statements as defined under applicable securities law.
Shayla Gorman: Good afternoon, everyone and thank you for joining us today for a discussion of our first quarter 2024 financial results with me today are Marc Stapley parasites, Chief Executive Officer, and Rebecca Chambers, our Chief Financial Officer.
Shayla Gorman: Issued a press release earlier this afternoon detailing our first quarter 2024 financial result, this release, along with our business and financial presentation is available in the Investor Relations section of our website at <unk> Dot com.
Shayla Gorman: Forward-looking statements are subject to risks and uncertainties, and the company can give no assurance that they will prove to be correct. We are not under any obligation to provide further updates on our business trends or our performance during the quarter. To better understand the risks and uncertainties that cause actual results to differ, we refer you to the documents that Veracyte files with the Securities and Exchange Commission, including Veracyte's most recent Forms 10 Q and 10 K. In addition, this call will include certain non-GAAP financial measures.
Shayla Gorman: Before we begin I'd like to remind you that various statements that we may make during this call will include forward looking statements as defined under applicable securities laws.
Shayla Gorman: Forward looking statements are subject to risks and uncertainties and the company can give no assurance they will prove to be correct. We are not under any obligation to provide further updates on our business trends or our performance during the quarter.
Shayla Gorman: To better understand the risks and uncertainties that could cause actual results to differ we refer you to the documents that Verisign files with the Securities and Exchange Commission, including various sites. Most recent forms 10-Q and 10-K.
Shayla Gorman: In addition, this call will include certain non-GAAP financial measures.
Shayla Gorman: Reconciliation of these measures to the most directly comparable GAAP financial measures is included in today's earnings release accessible from the IR section of Veracyte's website. I will now turn the call over to Marc Stapley, Veracyte CEO.
Shayla Gorman: Conciliation of these measures to the most directly comparable GAAP financial measures are included in today's earnings release.
Shayla Gorman: First of all from the IR section of Aerospace website, I will now turn the call over to Marc Stapley various sites CEO.
Marc A. Stapley: Thanks, Shayla, and thanks, everyone, for joining us today. Following a very robust end to 2023, I am excited to share that we have continued our positive momentum with a very strong start to this year. We delivered first quarter revenue of $96.8 million, growing 17% compared to the prior year period. This strength was driven by our testing business, which grew 25%, meaningfully exceeding our expectations. The performance of the Decipher Prostate and Affirmative Test again demonstrated the incredible power of the Veracyte Diagnostics Platform to drive market penetration.
Marc A. Stapley: Thanks, Sheila and thanks, everyone for joining us today.
Marc A. Stapley: Following a very robust to enter 2023 I am excited to share that we have continued our positive momentum with a very strong start to this year.
Marc A. Stapley: We delivered first quarter revenue of $96 8 million.
Marc A. Stapley: Growing 17% compared to the prior year period.
Marc A. Stapley: This strength was driven by our testing business, which grew 25% meaningfully exceeding our expectation.
Marc A. Stapley: The performance of the decipher prostate in Afirma test again demonstrated the incredible power of the <unk> diagnostics platform to drive market penetration.
Marc A. Stapley: This unique approach relies on broad sets of genomic and clinical data, deep bioinformatic and AI capabilities, and a powerful evidence generation engine, which ultimately drives guideline inclusion and, combined with our proven commercial and managed care excellence, is designed to ensure durable adoption and reimbursement for our on-market diagnosis. In the first quarter, we delivered 16,500 decipher prostate tests, hitting a new quarterly volume record, with growth coming from both new and existing providers.
Marc A. Stapley: This unique approach relies on broad sets of genomic and clinical data deep bioinformatics, and AI capabilities and a powerful evidence generation engine, which ultimately drives guideline guideline inclusion and combined with our proven commercial and managed care excellence.
Marc A. Stapley: And to ensure durable adoption and reimbursement for on market diagnostics.
Marc A. Stapley: In the first quarter, we delivered 16500, decipher prostate test hitting a new quarterly volume record with growth coming from both new and existing providers.
Marc A. Stapley: Our incredibly productive urology salesforce continues to drive adoption through awareness of the test utility and associated clinical evidence, as well as strong guideline representation. In February, updated NCCN guidelines were published, with Decipher Prostate receiving a Level 1B Evidence Rating, the highest rating of all gene expression tests for prostate cancer. Additionally, because of this classification, the Decipher Prostate Test is the only gene expression test for which the guidelines include a separate table that summarizes treatment implications for patients based on both their NCCN risk classification and their Decipher score.
Marc A. Stapley: Our incredibly productive urology sales force continues to drive adoption through awareness of the test utility and associated clinical evidence as well as strong guideline representation.
Marc A. Stapley: In February updated end CCN guidelines are published with decipher prostate receiving a level one evidence rating.
Marc A. Stapley: Highest rating of all gene expression test for prostate cancer.
Marc A. Stapley: Additionally, because of this classification the.
Marc A. Stapley: The striker prostate test is the only gene expression test, which the guidelines include a separate table that summarizes treatment implications for patients based on both their end CCN risk classification and legislate for score.
Marc A. Stapley: These updated guidelines are proving to be a meaningful resource to provide physicians with clear, summarized evidence from clinical trials on how Decipher Prostate can inform treatment decisions. On the reimbursement front, we also made significant progress in the quarter, signing a contract with a major commercial payer to make Decipher Prostate an in-network offering for its close to 30 million members. We are thrilled to see this patient population obtain more seamless access to the Decipher prostate test, enabling their treating physicians to more efficiently optimize their care.
Marc A. Stapley: These updated guidelines are proving to be a meaningful resource to provide physicians with clear summarized evidence from clinical trials on how the cycle prostate can inform treatment decisions.
Marc A. Stapley: On the reimbursement front, we also made significant progress in the quarter signing a contract with a major commercial payer to make decipher prostate and in network offering with close to 30 million members.
Marc A. Stapley: We are thrilled to see the payer's patient population obtained more seamless access to the type of prostate tests, enabling their treating physicians to more efficiently optimize back half.
Marc A. Stapley: Generating additional clinical evidence for DECIPHER remains a priority for us to drive further guideline inclusion, the durable reimbursement I mentioned previously, and increased awareness in the significantly underpenetrated prostate cancer market. Last month, a publication in JCO Precision Oncology showed that among patients undergoing active surveillance for prostate cancer, the DECIPHER test is prognostic for identifying those whose disease is likely to progress. Pinpointing the optimal candidates for active surveillance, which can help patients delay or avoid interventions such as surgery, radiation, or hormonal therapy, is challenging given the potential harms of these treatments weighed against the risks of cancer progression and missed opportunities for cure.
Marc A. Stapley: Generating additional clinical evidence to decipher remains a priority for us to drive further guideline inclusion the durable reimbursement I mentioned previously that increased awareness in the significantly underpenetrated prostate cancer market.
Marc A. Stapley: Last month, a publication in <unk> ACO precision oncology showed that among patients undergoing active surveillance for prostate cancer to decipher test. These prognostic for identifying those whose disease is likely to progress.
Marc A. Stapley: Pinpointing the optimal candidates for active surveillance, which could help patients delay or avoid intervention such as surgery radiation or mono therapy is challenging given the potential harm that these treatments weighed against the risk of cancer progression and missed opportunities for care.
Marc A. Stapley: These significant findings make Decipher the only prostate gene expression test to have treatment outcome data from a prospective multicenter Phase II randomized trial in the active surveillance population. Providing a tool like Decipher that can help to identify those whose disease is likely to progress can give physicians important insights to help them with this critical decision while also aiding in the further penetration of this portion of the map. Moving to a firmer.
Marc A. Stapley: These significant findings make the site for the only prostate gene expression test to have treatment outcome data from a prospective multi center phase II randomized trial in the active surveillance population.
Marc A. Stapley: Providing a tool like the cycle that could help to identify those whose disease is likely to progress to give physicians important insights to help them with this critical decision. While also aiding in the further penetration of this portion of the market.
Marc A. Stapley: We reported approximately 14,000 test results and 14% revenue growth compared with the prior year, in line with our expectations. With Affirma, we continue to demonstrate our differentiation, resulting in market share gains due to broadened awareness of previously published evidence demonstrating the quality and performance of our test. Another point of differentiation has been the launch of Firmagrid, a RUO tool designed to advance the science around thyroid nodules and cancer. This quarter, we saw a high level of interest in GRID, with approximately 50% of physicians requesting the report on their test order forms in March.
Marc A. Stapley: Moving to a further.
Marc A. Stapley: We reported approximately 14000 test result, and 14% revenue growth compared with the prior year in line with our expectations.
Marc A. Stapley: With Afirma, we continued to illustrate our differentiation, resulting in market share gains due to broadened awareness of previously published evidence demonstrating the quality and performance of our test.
Marc A. Stapley: Another point of differentiation has been the launch of Afirma grid.
Marc A. Stapley: Oh tool designed to advance the science around fibroid nodules in cancer.
Marc A. Stapley: This quarter, we saw a high level of interest in grid with approximately 50% of physicians requesting a report on their test order forms in March.
Marc A. Stapley: The addition of the Affirma-Promoter mutation test enhances the clinical utility of our thyroid offering, also reinforcing our competitive position. This quarter, following publication of analytical validity data for the test in the Journal of Endocrinology and Metabolism, TERT Testing received Medicare coverage.
Marc A. Stapley: The addition of the Afirma cut promoter mutation test enhances the clinical utility of our thyroid offering also reinforcing our competitive positioning.
Marc A. Stapley: This quarter following publication of analytical validity data for the test in the journal of Endocrinology and metabolism.
Marc A. Stapley: Testing received Medicare coverage.
Marc A. Stapley: While TURC represents a small portion of our total ephema volume with limited revenue impact, this is yet another indicator of the strides we are making to provide the most complete offering possible for physicians and their patients facing a potential thyroid cancer diagnosis. Looking ahead to our growth drivers over the coming years. We believe that Decipher Prostate and Ephirma will continue to grow meaningfully as we drive towards 80% penetration for both prostate and thyroid cancer molecular tests while continuing to gain market share and bolster ASP.
Marc A. Stapley: While it represents a small portion of our total afirma volume with limited revenue impact. This is yet another indicator of the strides we are making to provide the most complete offering possible for physicians and their patients facing a potential thyroid cancer diagnosis.
Marc A. Stapley: Looking ahead to our growth drivers over the coming years, we believe the decipher prostate in Afirma will continue to grow meaningfully as we drive towards 80% penetration for both prostate and thyroid cancer molecular test, while continuing to gain market share and bolster asps.
Marc A. Stapley: For Decipher, we believe the updated NCCN guidelines will be a meaningful catalyst to broaden awareness and change physician behavior. We recently conducted a voice-of-customer survey on this update, which queried urologists as well as medical, radiation, and urologic oncologists across the academic community and large urology group practice, or LUGPA. Not surprisingly, 82% of respondents were aware of the updated NCCN guidelines, and 75% of respondents utilized the Principles of Risk Stratification section, which details treatment implications based on the NCCM classification and decius. As a result of ordering trends since the publication, as well as the survey feedback, our confidence in our outlook on Decipher growth over a multi-year period has been further solidified.
Marc A. Stapley: But decipher we believe the updated <unk> guidelines will be a meaningful catalyst to broaden awareness and change physician behavior.
Marc A. Stapley: We recently conducted a voice of customer survey on this update which queried urologists as well as medical radiation and Urologic oncologists across the academic community and large urology group practice or lug pathetic.
Marc A. Stapley: Not surprisingly, 82% of respondents were aware of the updated <unk> guidelines and.
Marc A. Stapley: And 75% of respondents utilize the principles of risk stratification section.
Marc A. Stapley: Which detailed treatment implications based on the CCM classification and despite the score.
Marc A. Stapley: As a result of ordering trends since the publication as well as the survey feedback our confidence in our outlook on the cycle growth over a multiyear period has been further solidified.
Marc A. Stapley: In addition, we continue to anticipate the draft of Medicare's Local Coverage Determination, or LCD, for patients with metastatic prostate cancer to become final later this year or early next year. We estimate that there are an additional 30,000 patients annually who could benefit from the prognostic and predictive information Decipher delivers to their clinicians at pivotal moments in their cancer journey. Meanwhile, we unfortunately continue to see growth in the incidence of prostate cancer.
Marc A. Stapley: In addition.
Marc A. Stapley: We continue to anticipate the draft of Medicare local coverage determination or LCD for patients with metastatic prostate cancer to become final later this year already next.
Marc A. Stapley: We estimate that there are an additional 30000 patients annually, who could benefit from the prognostic and predictive information decipher delivers to their clinician a pivot.
Marc A. Stapley: Pivotal moments in their cancer journey.
Marc A. Stapley: Meanwhile, we unfortunately continue to see growth in the incidents of prostate cancer.
Marc A. Stapley: With the American Cancer Society estimating there will be approximately 300,000 new cases in 2024, up again from 2023, making decipher even more important for more patients. For Affirmer, in addition to the market dynamics previously highlighted, we are beginning to see standard of care changes of physician adoption in rural areas where we see a long tail of clinicians who aren't currently utilizing genetic testing for this patient population.
Marc A. Stapley: The American cancer Society estimating there will be approximately 300000, new cases in 2024 up again from 2023, making decipher even more important for more patients.
Marc A. Stapley: For a further in addition to the market dynamics previously highlighted we are beginning to see standard of care changes of physician adoption in rural areas, where we see a long tail of clinicians who are currently utilizing genetic testing for this patient population.
Marc A. Stapley: Additionally, we are engaging with Mordiex on their draft LCD to cover thyroid nodules with Bethesda 5 cytology, expanding access to patients who can also benefit from a firm. Now turning to our longer-term growth drivers, we are focused on three vectors: global expansion through our robust IBD strategy.
Marc A. Stapley: Additionally, we are engaging with more dx on their draft LCD to cover thyroid nodules or with the test of five cytology expanding access to patients who can also benefit from a pharma.
Marc A. Stapley: Now turning to our longer term growth drivers, we are focused on three vectors.
Marc A. Stapley: Global expansion through our robust IBD strategy.
Marc A. Stapley: Solving new cancer challenges through the utilization of our platform, for example, our Perceptor Nasal Swab test. And with the acquisition of C2 Igenomics, serving more of the patient care journey through minimal residual disease, or MRD, and recurrence testing. As we often do, and as we committed to do following the C2I acquisition, during the quarter, we continued our portfolio prioritization to rationalize our investments outside of these three key areas. As a result, we downsized the commercial support for our own visits.
Marc A. Stapley: Solving new cancer challenges through the utilization of our platform for example, up except the nasal swab test.
Marc A. Stapley: And with the acquisition of <unk> genomics, serving more of the patient journey through minimal residual disease or <unk> and recurrence testing.
Marc A. Stapley: As we often do and as we committed to do following the <unk> acquisition during the quarter. We continued our portfolio prioritization to rationalize our investments outside of these three key areas.
Marc A. Stapley: As a result, we downsized the commercial support for our <unk> test.
Marc A. Stapley: While we will continue to offer this important test to those patients facing interstitial lung disease, we will no longer maintain a separate Invisia cell. Now, shifting to our focus on global expansion, we are on track with the key product and market development activities for our multi-platform IVD approach, developing our decipher prostate test on qPCR and our prosignor and nasal swab tests on NGS. Recall that once these tests are made available, we will still need to go country by country to drive adoption and reimbursement, utilizing the clinical evidence that we already have and are continuing to generate with our CLIA-based tests.
Marc A. Stapley: While we will continue to offer this important tests, because those patients facing interstitial lung disease.
Marc A. Stapley: We will no longer maintain a separate in the DSL space.
Marc A. Stapley: Now shifting to our focus on global expansion, we are on track with the key product and market development activities for our multi platform IBD approach.
Marc A. Stapley: <unk> I'll decipher prostate test on Q PCR at our Prosigna, a nasal swab test on Ngls.
Marc A. Stapley: Recall that once these tests are made available we will still need to go country by country to drive adoption and reimbursement.
Marc A. Stapley: Utilizing the clinical evidence that we already have and are continuing to generate with our clear base test.
Marc A. Stapley: This is yet another example of the leverage we get from the Veracyte Diagnostics Platform, where our CLIA strategy built around data, insights, proof, and utility will fuel our AVD strategy outside the US. On our second growth driver, solving new cancer challenges via perceptual nasal, we have made good progress with our Nightingale trial and have patients enrolling across our almost 100 sites. While we remain excited about our progress to date, the current pace of enrollment per site is tracking below our updated expectations.
Marc A. Stapley: This is yet another example of the leverage we get from the verify diagnostics platform, where our clear strategy built around data insights proof and utility will fuel our abd strategy outside the U S.
Marc A. Stapley: On our second growth driver solving new catheter challenges via perception laser swab.
Marc A. Stapley: We have made good progress with our licensee <unk> trial.
Marc A. Stapley: Patients enrolling across our almost 100 sites.
Marc A. Stapley: While we remain excited about our progress to date the current pace of enrollment per site is tracking below our updated expectation.
Marc A. Stapley: We've designed this study with a high degree of scientific and clinical rigor endorsed by the cancer community, and we believe the slower rate of enrollment is consistent with typical challenges currently faced by large, multi-site pulmonology trials and isn't related to physician interest or market potential of the nasal swab. While the pace of a call in April would be indicative of enrollment completion around the end of the year, our internal modeling has wide error bars, and this pace may or may not continue over the coming months.
Marc A. Stapley: We've designed this study with a high degree of scientific and clinical rigor endorsed by the cancer community and we believe the slower rate of enrollment is consistent with typical challenges currently faced by large multi site pulmonology trials and isn't related to physician interest and market potential of the nasal swab test.
Marc A. Stapley: While the pace of accrual in April would be indicative of enrollment completion around the end of the year. Our internal modeling is why they are about and this pace may or may not continue over the coming months given that we will update you next when the study is nearing completion.
Rebecca Chambers: Given that, we will update you next when the study is nearing completion. Our last long-term growth driver is serving more of the patient journey. Now that we have integrated the C2i Genomics team into Veracyte, our excitement for the technology potential has only grown. We kicked off the development of our first MRD test for muscle-invasive bladder cancer in our CLEAR lab, which we intend to launch in the first half of 2021. As we mentioned last quarter, C2I's novel whole-genome sequencing approach to MRD fits well into the Veracyte Diagnostics platform, making it the ideal solution for us to expand our test offering throughout the patient journey.
Rebecca Chambers: Okay.
Rebecca Chambers: Our last long term growth driver is serving more of the patient journey.
Rebecca Chambers: Now that we have integrated the <unk> genomics team and to verify our excitement for the technology potential has only grown.
Rebecca Chambers: We kicked off the development of our first <unk> test for muscle invasive bladder cancer, and a clear lab, which we intend to launch in the first half of 2026.
Rebecca Chambers: As we mentioned last quarter <unk> novel whole genome sequencing approach to MLP with well into the verify diagnostics platform, making it the ideal solution for us to expand our test operating throughout the patient journey.
Rebecca Chambers: As a testament to the strength of this approach, we are continuing many of the collaborations with academia and industry that C2I initiated, and we have seen strong interest from potential partners and collaborators as we present the technology and begin to build clinical evidence for the test. Between the inbound interest we have received since announcing the acquisition and the momentum in our development activities, we are confident in the strength and extensibility of our new MRD platform and its market potential. We believe this will prove to be a pivotal acquisition for Veracyte across numerous indications over time. With that, I will now turn to Rebecca to review our financial results for the quarter and our expectations for 2024.
Rebecca Chambers: As a testament to the strength of this approach we are continuing many of the collaborations with academia and industry that <unk> initiated and are seeing strong interest from potential partners and collaborators as we present, the technology and begin to build clinical evidence for the test.
Rebecca Chambers: Between the inbound interest we have received since announcing the acquisition and the momentum in our development activities. We are confident in the strength and extensibility of our new <unk> platform and the market potential.
Rebecca Chambers: We believe this will prove to be a pivotal acquisition for verify across numerous indications overtime.
Rebecca Chambers: With that I will now turn to Rebecca to review, our financial results for the quarter and expectations for 2024.
Rebecca Chambers: Thanks, Marc. Q1 was a strong start to the year with $96.8 million in revenue, an increase of 17% over the prior year period. We grew total volume to approximately 33,500 tests, a 16% increase over the same period in 2023. Testing revenue during the quarter was $90.3 million, an increase of 25% year-over-year driven by Decipher and Affirmative Volume, along with ASP growth driven by payer contracting and prior period collection. The total testing volume was approximately 31,000 tests.
Rebecca Chambers: Thanks, Mark Q1 was a strong start to the year with $96 8 million in revenue an increase of 17% over the prior year period. We grew total volume to approximately 33500 tests, a 16% increase over the same period in 2023.
Rebecca Chambers: Testing revenue during the quarter was $90 3 million, an increase of 25% year over year, driven by decipher in Afirma volume, along with ASP growth driven by payer contracting and prior period collection.
Rebecca Chambers: Total testing volume was approximately 31000 tests testing ISP was approximately $2900 as we resolved and collected approximately $3 million of out of period payments adjust.
Rebecca Chambers: Testing ASP was approximately $2,900 as we resolved and collected approximately $3 million of out-of-period payments. Adjusting for this impact, testing ASP would have been approximately $2,800. We began to see some benefit of coverage for the deciphered prostate from the payer mark described over the second half of 2020, and a larger benefit with the contract now in place as of the middle of Q1.
Rebecca Chambers: Adjusting for this impact testing AFP would've been approximately $2800, we began to see some benefit of coverage for the cypher prostate from the payer Mark described over the second half of 2023, and a larger benefit with the contract now in place as of the middle of Q1.
Rebecca Chambers: Looking ahead to the remainder of 2024, this incremental contract is now forecasted to benefit testing ASB. First quarter product volume was approximately 2500 tests, and product revenue was $3.5 million, down 9% year over year as Prosigna demand was impacted by supplier issues seen previously. Biopharmaceutical and Other Revenue was $3 million, in line with our expectations and down 51% year-over-year, given overall spending constraints across the industry. Moving to gross margin and operating expenses, I will highlight non-GAAP results which exclude the amortization of acquired intangible assets, other acquisition-related expenses, and restructuring costs, which do include routine stock-based compensation.
Rebecca Chambers: Looking ahead to the remainder of 2020 for this incremental contract is now forecasted to benefit testing ESP.
Rebecca Chambers: First quarter product volume was approximately 2500 tests and product revenue was $3 5 million down nine.
Rebecca Chambers: Percent year over year as Prosigna demand was impacted by supplier issues seen previously.
Rebecca Chambers: Biopharmaceutical and other revenue was $3 million in line with our expectations and down 51% year over year, given overall spending constraints across the industry move.
Rebecca Chambers: Non-gap gross margin was 68%, down approximately 70 basis points compared to the prior year period. Testing growth margin was 71%, down 160 basis points compared to the prior year period as we have invested in our footprint and Equipment Expansion to meet increased Decipher demand. We expect to leverage these investments as volume continues to grow. However, Product Margin was 25%, down versus the prior year period driven by start-up costs associated with full-scale ProSigna manufacturing. Biopharmaceutical and other gross margin was 6% down year-over-year due to lower fixed-cost absorption.
Rebecca Chambers: Moving to gross margin and operating expenses I will highlight non-GAAP results, which exclude the amortization of acquired intangible assets other acquisition related expenses and restructuring costs, but does include routine stock based compensation.
Rebecca Chambers: non-GAAP gross margin was 68% down approximately 70 basis points compared to the prior year period.
Rebecca Chambers: Testing gross margin was 71% down 160 basis points compared to the prior year period as we have invested in our footprint.
Rebecca Chambers: And equipment expansion to meet increased decipher demand, we expect to leverage these investments as volume continues to grow.
Rebecca Chambers: Product margin was 25% down versus the prior year period, driven by start up costs associated with full scale Prosigna manufacturing.
Rebecca Chambers: Biopharmaceutical and other gross margin was 6% down year over year due to lower fixed cost absorption.
Rebecca Chambers: We have taken steps to address the cost structure of this business that we expect to begin to see play out in the second half of the year. Non-GAAP operating expenses, excluding cost of revenue, were up 6% year-over-year at $61.6 million. Research and development expenses increased by $2.5 million to $15.2 million, given personnel additions due to the C2I acquisition and increased costs related to our Nightingale Clinical Study. Sales and marketing expenses declined by $1.2 million to $24 million.
Rebecca Chambers: We have taken steps to address the cost structure of this business that we expect to begin to see play out in the second half of the year.
Rebecca Chambers: non-GAAP operating expenses, excluding cost of revenue were up 6% year over year at $61 6 million research and development expenses increased by $2 5 million to $15 $2 million given personnel additions due to the <unk> acquisition and increased costs related to our Nightingale clinical study.
Rebecca Chambers: Sales and marketing expenses declined by $1 2 million to $24 million G&A expenses were up $2 3 million to $22 $4 million driven by higher personnel costs.
Rebecca Chambers: G&A expenses were up $2.3 million to $22.4 million, driven by higher personnel costs. We reported a gap net loss of $1.9 million, which included $8 million of stock-based compensation, $5.6 million of depreciation and amortization, and $4.6 million of C2I acquisition-related expenses.
Rebecca Chambers: We reported a GAAP net loss of $1 9 million, which included $8 million of stock based compensation $5 6 million of depreciation and amortization and $4 6 million of <unk> acquisition related expenses.
Rebecca Chambers: As expected, we used $9 million of cash in operations and ended the quarter with $209.2 million of cash and cash equivalents, including the benefit of approximately $4 million of acquired cash. Turning now to our 2024 Outlook, we are excited to raise our total revenue guidance to $402 million to $410 million from our prior guidance of $394 million to $402 million. This reflects an improved outlook for our testing business with revenue growth of 15-18%, a meaningful increase as compared to the prior guidance of 13-15%.
Rebecca Chambers: As expected, we used $9 million of cash in operations and ended the quarter with $209 2 million of cash and cash equivalents, including the benefit of approximately $4 million of acquired cash.
Rebecca Chambers: Turning now to our 2024 outlook. We are excited to raise our total revenue guidance to 402 million to $410 million from our prior guidance of 394 million to $402 million.
Rebecca Chambers: This reflects an improved outlook for our testing business with revenue growth of 15% to 18% a meaningful increase as compared to the prior guidance of 13% to 15%.
Rebecca Chambers: We are also raising cash guidance and expect to end 2024 with between 236 million to $240 million in cash cash equivalents and short term investments.
Rebecca Chambers: We are also raising cash guidance and expect to end 2024 with between $236 million and $240 million in cash, cash equivalents, and short-term investments. Moving to the second quarter, we are forecasting a sequential increase in total revenue, given typical seasonality and the impact of reimbursement decisions on Decipher AFP. We expect Q3 to be roughly flat to Q2 with a sequential step-up in revenue in Q4. I am thrilled with our strong start to the year and our commitment to driving revenue growth with a focus on profitability and continued cash generation. I will now go into the Q&A portion of the call. Operator, please open the line.
Rebecca Chambers: Moving to the second quarter, we are forecasting a sequential increase in total revenue given typical seasonality and the impact of reimbursement decisions on the site for ESP, We expect Q3 to be roughly flat to Q2 with a sequential step up in revenue in Q4.
Rebecca Chambers: I am thrilled with our strong start to the year and our commitment to driving revenue growth with a focus on profitability and continued cash generation.
Speaker Change: We will now go into the Q&A portion of the call operator, please open the lines.
Operator: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A list. Our first question comes from the line of Andrew Brackman with William Blair. Your line is now open.
Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Andrew Brackman: Our first question comes from the line of Andrew Backman with William Blair. Your line is now open.
Andrew Brackman: Hi, good afternoon.
Andrew Brackman: Hi, good afternoon, thanks for taking the question.
Andrew Brackman: Maybe just first on the cipher, obviously continued nice growth, there and sort of a lot of tailwind, which you've talked about in the script, but can you maybe parse out the growth rate there for us a little bit how should we be sort of thinking about market penetration impacts versus sort of share Windsor incidents growth here moving forward.
Marc A. Stapley: Thanks for taking the questions. Maybe just first on Decipher, you know, obviously, continue to see nice growth there and sort of a lot of tailwinds, which you talked about in the scripts. But can you maybe parse out the growth rate there for us a little bit? How should we be sort of thinking about market penetration impacts versus sort of share winds or incidence growth here moving forward? Thanks.
Marc A. Stapley: Yeah, it's a great question and thanks for that. You should think of it as being all of the above. It's pretty clear that, you know, we're both penetrating the market, growing the overall market for molecular diagnostics, and, you know, gaining our significant proportion of the share there, and I'd say taking share in particular. You know, when you look at Decipher, I mean, you can do the math on the volume numbers we've given.
Speaker Change: Yes, it's a great question and thanks for that you should think of it as being all of the above.
Marc A. Stapley: It's pretty clear that we're both penetrating the market growing the overall market for molecular diagnostics.
Marc A. Stapley: Gaining.
Marc A. Stapley: A significant proportion of the share there and I would say taking share in particular when you look at decipher I mean, you can do the math on the volume numbers, we have given the volumes grew roughly 30% year over year, and then ASC gains drove a total growth rate of about 36% and decipher revenue year over year.
Marc A. Stapley: The volumes grew roughly 30% year over year, and then ASC gains drove a total growth rate of about 36% in Decipher revenue year over year. So if you compare that to how the market is growing, you can get to those, you know, statements I just made regarding shares. And I think, honestly, it's driven by a lot of things we've talked about. The NCCN guidelines that really only come from the extremely high volume of studies that support Decipher. And then, you know, going forward, of course, we talked about in the prepared remarks, the commercial contract, which certainly helps bolster ASP a little bit.
Marc A. Stapley: If you compare that to how the market is growing you can you can get to those statements I just made regarding share.
Marc A. Stapley: I think honestly, it's driven by a lot of the things we've talked about the NCC guidelines that really only come from.
Marc A. Stapley: Extremely high volume of studies that support decipher.
Marc A. Stapley: Going forward of course, we talked about on the prepared remarks, the commercial contract, which which certainly helps bolster ASP in a little bit and then going forward into later this year early next year metastatic as well, adding another 30000.
Marc A. Stapley: And then going forward into later this year and early next year, metastatic as well, adding another 30,000 potential patients. So as I think about it, I don't really see anything that affects our ability to continue that great trend that we're seeing in both market share and market penetration. And that's why we're confident in saying that we see, you know, a multi-year growth opportunity for Decipher here as we drive this total market to a place where, hopefully, 80% of patients are getting treated with a molecular diagnostic and, most likely, given all the trends that Decipher sees.
Marc A. Stapley: Potential patients so as I think about it I don't really see any.
Marc A. Stapley: The thing that.
Marc A. Stapley: Our ability to continue to.
Marc A. Stapley: Great trend that we're seeing in both market share and market penetration.
Marc A. Stapley: That's why we're confident in saying that we see multi year growth opportunity for <unk> as we drive this total market to a place where.
Marc A. Stapley: Hopefully to 80% of patients.
Marc A. Stapley: Getting.
Marc A. Stapley: Treated with a molecular diagnostic and most likely given all the trends the decisiveness.
Rebecca Chambers: Absolutely. And the only thing to add to that really quickly, Andrew, is that we'll be updating our penetration assumptions annually. We did so most recently on the J.P. Morgan and the Q4 call. And so I think, you know, that's a triangulation exercise that does take some data that's only released annually and stuff like that, and obviously going through other disclosures. So it's challenging to update that quarterly for those reasons.
Speaker Change: Absolutely and the only only thing to add to that really quickly. Andrew is we will be updating our penetration assumptions annually. We did so most recently.
Rebecca Chambers: J P. Morgan in the Q4 call and so I think those.
Rebecca Chambers: Those are that's a triangulation exercise.
Rebecca Chambers: It does take.
Speaker Change: Some data that's only released annually and stuff like that and obviously going through other disclosure. So it's challenging to update that quarterly for those reasons, but I concur with Mark wholeheartedly, we have nothing but.
Rebecca Chambers: But I concur with Marc wholeheartedly, we have nothing but white space to go after here, and the sales team is doing a fabulous job of doing so. And our confidence has only been furthered over the last quarter to the end of having Decipher continue to grow handily over the next, you know, number of years.
Rebecca Chambers: We have nothing but white space to go after here and the sales team is doing a fabulous job to do so and our confidence has only been further over the last quarter to that and having decipher continue to grow handily over the next number of years.
Marc A. Stapley: That's great, Keller. Thank you. And then, maybe, on Nightingale, can you maybe just sort of be a little bit more specific on what might be driving that slowdown in enrollment? And I guess as you sort of think about the scenarios of outcomes here, can you maybe just sort of talk about your level of investment in that channel ahead of a formal readout whenever that may be? Thank you.
Speaker Change: That's great color. Thank you.
Marc A. Stapley: And then maybe I guess on Nightingale can you, maybe just sort of be a little bit more specific on what might be driving that slowdown in enrollment and I guess as you sort of think about the scenarios of outcomes. Here can you maybe just sort of talk about your level of investment into that channel ahead of a formal readout whenever that may be thank you.
Marc A. Stapley: Yeah, thanks for the question. It's actually, actually that's part of the problem is that it's very difficult to be specific because there's a plethora of, you know, situations that are affecting clinical trials in general, but particularly in pulmonology. And I think we all understand how challenging it is to control how much trial enrollment you don't control, how much is controlled by the site. You know, what we can control is how quickly we sign sites up and how many we go after. And I feel really good about the work we've done there, with almost a hundred sites actively enrolling.
Keller: Yes. Thanks for the question is that you actually that's part of the problem is it's very difficult to be specific because there's a plethora of situations that are affecting I'd say clinical trials in general, but particularly in pulmonology.
Marc A. Stapley: I think we all understand how challenging it is to how much of trial enrollment you don't control how much is controlled by the site.
Marc A. Stapley: What we can control is how quickly we signed the sites up and how many we go after and I feel really good about the work we've done there having almost 100 sites actively enrolling and then it's very much within their own internal process of bringing those patients saying now.
Marc A. Stapley: And then it's very much within their own internal process of bringing those patients in. Now, you know, what's really important to us is that Veracyte is a robust trial and good science. And that is a more important priority than velocity of enrollment. Of course, we want to make sure that the trial is done the right way. And so we have limitations around the customers or the patients actually that are eligible for the trial.
Marc A. Stapley: What's really important to us verify it is.
Marc A. Stapley: A robust trial and.
Marc A. Stapley: And good science and that is more important priority even velocity of enrolment of course, we want to make sure that the trial is done the right way and so now we have limitations around the customers the patients virtually.
Marc A. Stapley: Eligible for the trial of course, not every patient who's eligible wants to be part of a trial until you have that factor and then you have resource challenges.
Marc A. Stapley: Of course, not every patient who's eligible wants to be part of a trial. And so you have that factor, and then you have resource challenges at individual sites. And that can cause trial activity to increase or slow down. And that makes it very difficult to predict. So trying not to get into, you know, having now changed that again, trying not to get into the process of trying to predict when that will finish.
Marc A. Stapley: Individual sites.
Marc A. Stapley: And that can cause trial activity to increase will slow down and that makes it very difficult to predict so trying not to get into having having now change that again trying not to get into the.
Marc A. Stapley: But I will tell you that based on our current rates that we saw in April, not that April is an outlier and it's only, I'm not suggesting that the April rate is the rate to apply going forward, but that would take us towards the end of the year. But we're doing everything that we can within the bounds of, as I said, good science and a robust trial to make sure that we get the trial completed as soon as we can. And we'll update you when we, you know, when we're nearing that point.
Marc A. Stapley: Process of trying to predict when that will finish but I will tell you that based on our current rates.
Marc A. Stapley: We saw in April.
Marc A. Stapley: April was not an outlier.
Marc A. Stapley: It's certainly I'm not suggesting that the April rate as the rate to apply going forward, but that would take us towards the end of the year.
Marc A. Stapley: But we're doing everything that we can within the bounds of as I said.
Marc A. Stapley: Good science, and a robust trial to make sure that.
Marc A. Stapley: We get the trial completed as soon as we can and we'll update you when we when we're nearing that point and maybe just wanted to talk about.
Marc A. Stapley: And maybe you just want to talk about what we said in the prepared remarks regarding your commercial, the level of commercial excitement. Yeah, I mean, I think, yeah, that's the real question.
Speaker Change: What we said in our prepared remarks regarding your commercial level commercial excite them.
Marc A. Stapley: I think the real question that comes from a slowdown in enrollment is, you know, does that affect our view of the commercial interest in the product and also the market? And the answer to that is clearly no; we don't see that at all. There's nothing that gives us anything other than the opposite, which is getting 100 sites signed up with the level of enthusiasm that we saw from those sites. Unknown Executive, Puneet Souda, Jacob Krahenbuhl, Yuko Oku, Shayla Gorman, Veracyte Inc. So no, no change in our expectations around the market, the ultimate market for Mason. Okay.
Marc A. Stapley: Yes.
Marc A. Stapley: Yes, and that's the real question I think comes from a slowdown in the enrollment is does that affect our view of the commercial interest in the product and also the market and the answer to that is clearly nothing we don't see that at all.
Marc A. Stapley: Nothing that gives us any signal other than the at this point the opposite which is getting 100 sites signed up with the level of enthusiasm that we saw from those sites.
Marc A. Stapley: Certainly continues to give us a lot of confidence and excitement about getting a test to market and addressing a very significant market.
Marc A. Stapley: So no no change at all.
Marc A. Stapley: Expectations around the market the ultimate market nasal swab.
Speaker Change: Okay. Thank you.
Speaker Change: Yes. Thank you.
Speaker Change: Thank you one moment for our next question.
Operator: Thank you. One moment for our next question. Our next question comes from Sung Jee Nam with Scotiabank. Your line is now open.
Sung Ji Nam: Our next question comes from sung <unk> Nam with Scotiabank. Your line is now open.
Sung Ji Nam: Hi, thanks for taking the questions and congrats on the quarter. Maybe on the MRD for muscle-invasive bladder cancer, I was wondering if you might be able to kind of comment on your development strategy there, given there's some competition out there. Curious if you have a sense of how large the trial or if you're running your own internal trial or do you have plans to partner with biopharma companies running clinical trials and things like that. Just kind of curious if you're looking for partners or kind of pursuing the partnership strategy or if you might be going at it kind of on your own.
Speaker Change: Hi, Thanks for taking the questions and congrats on the quarter.
Sung Ji Nam: On the.
Sung Ji Nam: The MLR D for muscle invasive bladder cancer I was wondering if you might be able to kind of comment on your development strategy. There given there is some competition out there I'm curious if you are a sensitive.
Sung Ji Nam: How large that trial or if you are writing your own internal trial, where do you have plans to partner with.
Sung Ji Nam: Biopharma companies running clinical trials.
Sung Ji Nam: And things like that just kind of curious.
Sung Ji Nam: If you are looking for partners or kind of pursuing the partnership strategy or if you might be going at it kind of.
Marc A. Stapley: Yeah, it's a great question. Actually, one of the reasons that we are launching first in bladder for muscle invasive bladder cancer is because we see a clear pathway to getting our test on the market and getting it reimbursed. So we're able to leverage an existing LCD. We are ingesting the test into our lab, as you can imagine. It's going through the development process. We've already kicked off that program. The core team's on, and they're working very hard on that.
Sung Ji Nam: On your own.
Speaker Change: Yes, it's a great question and Thats one of the reasons that we are launching first in bladder in muscle invasive bladder cancers, because we see a clear pathway to getting all test on the market and getting it reimbursed so we're able to leverage an existing LCD.
Marc A. Stapley: Ingesting the test into our lab as you can imagine its going through the development process. We have already kicked off that program core teams on and Theyre working very hard on that.
Marc A. Stapley: We will do the tech assessment that we need to do in order to get to that reimbursement. We will do the automation steps that we need to do within our lab to be able to scale. And so we see it very much within our control.
Marc A. Stapley: We will do the tech assessment that we need to do in order to get to that reimbursement.
Marc A. Stapley: We will do the automation steps that we need to do within a lab to be able to scale and so we see it very much within our control. The work that we have to do for the Tech assessment is not a significant number of samples that could demonstrate the necessary clinical evidence that we need to be able to demonstrate so.
Marc A. Stapley: The work that we have to do for the tech assessment is not a significant number of. Unknown Executive, Puneet Souda, Jacob Krahenbuhl, Yuko Oku, Shayla Gorman, Veracyte Inc., Unknown, Ed, which is the early part of 2026, and get it on the market and reimbursed. It opens up a potential market, an important one, of about 18,000 patients. And while muscle-invasive bladder cancer was the indication where we saw the earliest path to a product, as you can imagine, this is a platform; it's not a single test. And so we're excited to think about and determine which indications and which conditions we will go after next with our MRD platform.
Marc A. Stapley: So already in progress.
Marc A. Stapley: So, yes, very very confident in our ability to get this test launch by the time, He said, which is the early part of 'twenty.
Marc A. Stapley: <unk> 2026, and get it on the market and reimbursed it opens up a.
Marc A. Stapley: Potential market and important one of about 18000 patients.
Marc A. Stapley: While muscle invasive bladder cancer with the indication where we see the earliest Paul to our product.
Marc A. Stapley: As you can imagine this is a platform it's not a single test.
Marc A. Stapley: So we're excited to think about and determine which indications in which conditions. We go after next with RMR platform and.
Rebecca Chambers: And just one thing to add to that, Sungji, obviously, one of the reasons we've highlighted for really liking the C2I acquisition was effectively the whole genome sequencing approach that is taken, while maybe slightly more expensive, the amount of clinical data we believe that will give us over time, just like in Decipher and now with AffirmaGrid, also like Affirma, will allow us to, you know, just have a body of So I think we have a number of different levers to pull to, you know, compete in this market, and, you know, obviously, MRD is a really large market, and so we're super excited to get our products and tests on the market to go after, you know, first muscle-invasive bladder cancer, but then, thereafter, other indications to follow.
Speaker Change: And just one thing to add to that Sanjay obviously.
Rebecca Chambers: One of the reasons, we've highlighted for really liking the <unk> acquisition was effectively the whole genome sequencing.
Rebecca Chambers: Approach that is taken well maybe slightly more expensive the amount of clinical data. We believe that will give us over time, just like in decipher and now with Afirma grid also just like a pharma will allow us to.
Rebecca Chambers: Just have a body of evidence that we think will help us gain commercial traction above and beyond just what is in the tech assessment. So.
Rebecca Chambers: I think we have a number of different levers to Paul.
Rebecca Chambers: To compete in this market and obviously M&A is a really large market and so we're super excited to get our products and tests on the market to go after first muscle invasive bladder cancer, but then thereafter.
Marc A. Stapley: Yeah, no, well, I think that's a great point. Just to add to that, if you look back at Decipher, Decipher wasn't the first test on the market, and it certainly didn't have the greatest traction initially.
Rebecca Chambers: Indications to follow up and then we will I think thats a great point just to add to that if you look back at decipher decipher wasn't the first test on the market and certainly didnt have the greatest traction initially.
Marc A. Stapley: And the way that we've been able to get to the point where we are now is through that evidence development and that incremental data that we're able to generate, what we call the Veracyte Diagnostics Platform that pieces all that together. And so, yeah, I do think while it's a competitive space, there's plenty of opportunity here.
Marc A. Stapley: The way that we've been able to get to the point, where we're at now is through that evidence development.
Marc A. Stapley: No not that.
Marc A. Stapley: Incremental data that we're able to generate what we call. The <unk> diagnostics platform pieces, all that together and so I do think while it's a competitive space there is plenty of opportunity here.
Marc A. Stapley: Gotcha, that's super helpful. And then just on biopharma, obviously, a very small part of your business now, but just kind of curious, given others are starting to see some, you know, some green shoots in that space. And so I was wondering, you know, especially with grid for pharma and for decipher kind of gaining a lot of traction, things like that. Do you think they're just as we look ahead to kind of later this year and into next year, there could be some more activity around biopharma related activities?
Speaker Change: Got you that's Super helpful. And then just on Biopharma, obviously, a very small part of your business now, but just kind of curious.
Marc A. Stapley: Given others are starting to see some.
Marc A. Stapley: Some green shoots in that state and so was wondering especially with grid for my answer decipher kind of gaining a lot of traction and things like that do you think there.
Marc A. Stapley: Just as we as you look ahead keep kind of later this year and into next year there could be some.
Marc A. Stapley: More activity around Biopharma related activities.
Marc A. Stapley: I think you said it well. I mean, green shoots, for sure. You start to see those soon. It can take a while for those green shoots to really, you know, flourish. But we've got a pipeline. I've said this before.
Marc A. Stapley: I think you said it well I mean green shoots for sure you start to see those soon and it can take a while for those green shoots to really flourish, but.
Marc A. Stapley: We have a pipeline of new customers with new projects. But the time to get those projects from, you know, early indication to decision to contract is longer than it used to be. And so that's part of the challenge: taking time. I do think you're right to point to the data that we have for grid, particularly on the prostate side. And now with MRD, we're actually really starting to see some, I'd say, potentially more than green shoots of interest in our MRD platform.
Marc A. Stapley: And we've got a pipeline I've said this before we have a pipeline of new customers with new projects.
Marc A. Stapley: The time to get those projects from.
Marc A. Stapley: Early indication to decision to contract.
Marc A. Stapley: Is longer than it used to be.
Marc A. Stapley: And so that's part of the challenge is taking time.
Marc A. Stapley: I do think Youre right to point to the data that we have for grid, particularly on the prostate side.
Marc A. Stapley: And now with MLD, we're actually really starting to see some I would say potentially more than green shoots are interested in our <unk> platform.
Marc A. Stapley: So, I'm optimistic that at some point, you know, these green shoots should come to fruition. But I'm not sure exactly when. I'm not willing to try and, you know, put a time frame on it. But, of course, as you can imagine, it's an area we're watching very closely. And to your point, biopharmaceutical and other revenue is now a small percentage as the rest of the business has grown and that has declined, but we continue to maintain a presence and a team and a capability around that in both the, you know, the clear side, supported by the clear side, as well as our immunohistochemistry.
Marc A. Stapley: So I'm optimistic at some point. These these green shoots should come to fruition I'm not sure exactly when I'm not willing to try and put a timeframe on that but of course as you can imagine a scenario, we're watching very closely and to your point. The biopharma in other revenue is now a small percentage as the rest of the business has grown and that has declined but we continue to maintain a press.
Marc A. Stapley: And the team.
Marc A. Stapley: Our capability around that in both the.
Marc A. Stapley: Clear sites supported by the <unk> side as well as our immunohistochemistry products.
Marc A. Stapley: Great. Thank you for taking the question.
Speaker Change: Great. Thank you for taking the questions.
Operator: Thank you. One moment for our next question. Our next question comes from Mason Carrico on behalf of Stevens. Your line is now open.
Marc A. Stapley: Thanks.
Speaker Change: One moment for our next question.
Mason Owen Carrico: Our next question comes from Nathan <unk> with Stephens. Your line is now open.
Mason Owen Carrico: Hey Marc, and Rebecca, congrats on a solid start to the year here.
Mason Owen Carrico: Hey, Mark Hey, Rebecca Congrats on.
Marc A. Stapley: Maybe a higher-level question on the prostate cancer market. Um, what types of patients make up the majority of, to 35% or so of the penetrated market? And then for the remainder of the market, I realized that metastatic patients make up a portion of it. But what type of patients make up the unpenetrated portion of this testing opportunity? Are there material differences between the two?
Mason Owen Carrico: Ill start to the year here, maybe higher level question on the prostate cancer market.
Marc A. Stapley: What types of patients.
Marc A. Stapley: The majority of.
Marc A. Stapley: The 35% or so penetrated market and then for the remainder of the market I realized that metastatic patients make up a portion of it.
Marc A. Stapley: What type of patients makeup the underpenetrated portion of this testing opportunity are there material differences between the two what's the strategy to continue to grow share and expand the market here.
Marc A. Stapley: What's the strategy to continue to grow, share, and expand the market from here?
Marc A. Stapley: Yeah, I mean, there are opportunities to expand and grow in all the indications, as I'm sure that you can imagine. By far, I'd say at this point, the penetration is, you know, mostly going to be in the intermediate space. We can expand into the high, in particular with metastasis.
Marc A. Stapley: Yes, I mean, there's opportunities to expand and grow and all the indications as I'm sure you can imagine by far I would say at this point penetration is mostly going to be in the intermediate space. We can expand into the high <unk> in particular with metastatic as well as you can imagine and active.
Marc A. Stapley: as you can imagine, and you know active surveillance as well is an area of potential growth, so but I'd say no area is particularly an outlier across every part of biopsy as well as RP, there's opportunities for further expansion in that white space that Rebecca referred to earlier.
Marc A. Stapley: Active surveillance as well as an area of potential growth, so, but I'd say no area is particularly an outlier across every part of biopsy as well as RP.
Marc A. Stapley: There's opportunities for further expansion in that white space that Rebecca referred to earlier.
Marc A. Stapley: And we just had a really important study published on active surveillance. Perhaps you want to talk about that, Marc? Yeah, I mean, I mentioned...
Marc A. Stapley: And we just thought that a really important study published.
Marc: On active surveillance, perhaps you want to talk about Mark, Yes, I mean, I mentioned that a little bit in the prepared remarks demonstrated that.
Marc A. Stapley: Yeah, I mean, I mentioned that a little bit in the prepared remarks. But it demonstrated that, you know, the prognostic capability of decipher in the active surveillance space and helping to reclassify which patients should be on active surveillance and which should not, which I think is really important. Because, as I said in the earlier remarks, you don't want to under or overtreat those patients if you can avoid it.
Marc A. Stapley: The prognosis of the capability of decided for any active surveillance space in helping to reclassify, which patients should be on active surveillance and which should not which I think is really important.
Marc A. Stapley: Because as I said in the in the earlier remarks, you don't want to under or over treat those patients. If you can avoid it and theres not.
Marc A. Stapley: And there's not a great deal of molecular information out there, obviously, when these tests aren't being used for two-thirds of patients to help ascertain what's the right approach. And I think with the evidence that we've now got behind decipher, you're going to start to see more utilization there. And especially with the NCCN guidelines, and particularly that table as well, that talks about how to apply decipher and how to change treatment based on the decipher score, as well as the risk category, you can, you can clearly see how we're going to see more penetration across the entire spectrum of patients.
Marc A. Stapley: There's not a great deal of.
Marc A. Stapley: Molecular information out there obviously when these tests are being used for two thirds of patients to help ascertain what's the right approach and I think with with the evidence that we've now got behind decipher youre going to start to see more utilization there and.
Marc A. Stapley: Especially with the CCN guidelines, and particularly that table as well that talks about how to apply decipher and how to change treatment based on the decipher score as well as the risk category. You can you can clearly see how we're going to see more penetration across the entire spectrum of patients.
Marc A. Stapley: I mean, ultimately, Mason, our goal, as I've said many times before, I mean, yeah, I don't think you ever get to 100% for a whole bunch of inertia reasons, but frankly, most patients with prostate cancer should be having a molecular diagnostic, and of course, we strongly believe that DECIPHER is the right one.
Marc A. Stapley: I mean ultimately our goal is met.
Marc A. Stapley: Many times before I mean I.
Marc A. Stapley: I don't think you ever get to 100% for a whole bunch of inertia reasons, but frankly.
Marc A. Stapley: Most patients with prostate cancer should be having a molecular diagnostic and of course, we strongly believe that decide for is the right one.
Marc A. Stapley: Got it, that's helpful. And then on the AffirmaGrid offering, where are you seeing the most demand, you know, from a clinician standpoint? And has it, have you seen any increased traction or higher demand from the academic hospital setting now that you've launched that offering? I feel like we're seeing, especially, I think there's a lot of interest coming from the academic setting around GRID, as we've seen on the Decipher site for many years.
Mason: Got it that's helpful and then on the Afirma grid offering where are you seeing the most demand.
Marc A. Stapley: From a clinician standpoint and has it have you seen any increased traction or higher demand from the academic hospital setting now that you've launched that offering.
Marc A. Stapley: I feel like we're seeing yes, especially I think there is a lot of interest coming from the academic setting around great as we've seen on the <unk> side for many years, we are now seeing on the Afirma side.
Marc A. Stapley: We're now seeing on the Affirma site for research purposes, and, you know, roughly 50% of physicians are interested in GRID. But we're also seeing greater penetration, whether driven by GRID or not, and it's not always possible to correlate all the good things we've done around Affirma to the outcome. I think it's actually a collection of all the things we've done, including GRID and TERT and the portal and everything else associated with that.
Marc A. Stapley: For research purposes.
Marc A. Stapley: Roughly 50% of.
Marc A. Stapley: Physicians are interested in grid.
Marc A. Stapley: But also where we're seeing greater penetration, whether driven by grade or not and it's not always possible to correlate all those good things we've done around afirma too to the outcome I think you've actually the collection of all the things, we've done including grid and Tatton.
Marc A. Stapley: The portal.
Marc A. Stapley: But we're also seeing better penetration in rural communities as well, which is, I think, a positive sign for me because it says that one of the challenges you have with any test like this is getting out to that long tail of physicians who haven't adopted either a molecular test or Affirma.
Marc A. Stapley: Else associated with that but we're also seeing better penetration in the rural communities as well, which is I think a positive sign for me because it says the one of the challenges you have with any tests like this is getting out that long tail of positions.
Marc A. Stapley: Who haven't adopted either a molecular test or afirma and so I think thats a good indication that we are.
Marc A. Stapley: Making good traction there as well.
Speaker Change: Got it thanks guys.
Operator: Thank you. One moment for our next question. Our next question comes from Tejas Savant with Morgan Stanley. Your line is now open.
Marc A. Stapley: Thanks.
Speaker Change: Thank you one moment for our next question.
Operator: Our next question comes from Tejas Savant with Morgan Stanley. Your line is now open.
Tejas Savant: Hey, guys. Good evening. Marc or Rebecca, perhaps a quick one for you here on the AFORMA side of things. So following Medicare reimbursement, over what time frame do you expect the Tort Promoter Testing to provide an ASP uplift for AFORMA, especially as reimbursement, you know, broadens out there beyond the CMS coverage you now have in place?
Tejas Savant: Good evening.
Tejas Savant: Mark or Rebecca perhaps a quick one for you here on the <unk> side of things.
Tejas Savant: Following Medicare reimbursement over what timeframe do you expect the promoter testing to provide an ASP uplift to a farmer.
Tejas Savant: Especially as reimbursement broadens out there beyond the CMS coverage you now have in place.
Rebecca Chambers: Yeah, Tejas, it's a fair question. Effectively, with the test being reimbursed at $185, it's not going to provide a meaningful uplift, especially since, you know, only about 50% of patients select to have, I'm sorry, clinicians select to have TERT run. And then, you know, you have to have a suspicious finding before TERT is actually run. And that's another 50%.
Tejas Savant: Yes.
Rebecca Chambers: It's a fair question.
Rebecca Chambers: Effectively with with the test being reimbursed at $185, it's not going to provide a meaningful uplift, especially since only about 50% of patients select to have I'm, sorry, clinicians select to have term Ron and then you'd have to have a suspicious signing before I turn it actually ran and thats another 50% rate.
Rebecca Chambers: And so, you're talking about small dollar figures on an ASP perspective and not a huge number of patients. And so, you know, I think when we think about it, it's one less barrier to drive penetration more so than an ASP uplift, specifically for AFIRMA. I think more importantly than TERT is the vast majority of work that our managed care business has been doing to drive ASP uplifts across both our products. Obviously, today's news on the Decipher side is huge, and we're very excited and, you know, think the team did a fabulous job negotiating that contract.
Speaker Change: You are talking about small dollar figures on an ASP perspective, and not a huge number of patients and so I.
Rebecca Chambers: I think when we think about it it's one less barrier to drive penetration more so than an ASP uplift specifically for our pharma.
Rebecca Chambers: I think more importantly than <unk> is the vast majority of work that our managed care business has been doing to drive ASP uplift across both our products. Obviously today's news on the decipher side is huge and we're very excited and I think the team did a fabulous job negotiating that contract and on the Afirma.
Rebecca Chambers: And on the AFIRMA side, you know, we still have some room to go, albeit, you know, really do have good coverage and contracting there as well. So, you know, I think with the big pair behind us today, there's nice room to grow, but today's probably a decently sized impact, and from there, they'll be smaller, including TERT.
Rebecca Chambers: We have we still have some room to go, albeit really do have good coverage and contracting there as well so I think with with the big payer behind us today.
Rebecca Chambers: There's nice room to grow, but today's probably a decently sized impact and from there there'll be smaller, including Terry and I just want to punch got it one of your bank.
Marc A. Stapley: I just want to add one of Rebecca's points. I totally agree. To me, TIRT is helping drive Affirma because we have a more complete offering. It's important to have it for our physicians. So it's driving Affirma. But it's not necessarily driving TIRT revenue for TIRT revenue.
Marc A. Stapley: I totally agree IV to me <unk> is dry helping drive afirma, because we have a more complete offering it's important to have it from physicians.
Marc A. Stapley: Physicians, so it's driving a firmer, it's not necessarily driving revenue for revenue sake.
Marc A. Stapley: Got it. That's fair. And then one on just the data monetization strategy, Marc, on a go-forward basis, including that C2I data, which I'm sure you've now had a chance to get better acquainted with. And my question is less so about the reimbursement angle, which you already alluded to earlier, but more so about other ways to monetize it, perhaps on the biopharma side.
Speaker Change: Got it that's fair.
Marc A. Stapley: And then one on just the data monetization strategy Mark on a go forward basis, including that CPI, <unk> data, which I'm sure you've now had a chance to get better acquainted with and my question is less so about some of the reimbursement angle, but you already alluded to earlier, but more so from other way.
Marc A. Stapley: Yes.
Marc A. Stapley: To monetize it perhaps on the Biopharma side.
Marc A. Stapley: Yeah, and that, I think we've talked about that before. There is, there's always a challenge with just monetizing data for data's sake. I think the way we think about it is that data really supports the flywheel that we talk about, that drives the testing, it drives further research, it drives further evidence, and then continues to drive more testing. Now, to the extent that, from a biopharma perspective, there's an interest in that data, we, of course, capitalize on that.
Marc A. Stapley: Yes.
Marc A. Stapley: I think we've talked about that before there is there is always a challenge with just monetizing data for data say I think what the way we think about it is that data really supports the flywheel that we talk about the drives the testing it drives further research to drive further evidence.
Marc A. Stapley: <unk> continues to drive more testing now to the extent from a biopharma perspective is interested in that data we of course capitalize on that and those are great projects. Because typically what you find is the biopharma customer reaches out to you because of the tremendous success that you have and the amount of data that you have versus having to go and build a team to go in.
Marc A. Stapley: And, you know, those are great projects because typically, what you find is the biopharmaceutical customer reaches out to you because of the tremendous success that you have and the amount of data that you have versus having to go and build a team to go and, you know, try and drive that funnel. And so, you can imagine on the prostate side, we get interest. And as I said earlier, what's really exciting is on the MRD side, particularly driven by the fact that it's a whole genome, we get, and the performance of the test, we're getting interest there as well.
Marc A. Stapley: Try and drive that funnel.
Marc A. Stapley: So you can imagine on the prostate side, we get interest and as I said earlier.
Marc A. Stapley: Really exciting is on the MRM side, particularly driven by the fact that this whole genome.
Marc A. Stapley: And the performance of the test we are getting interest there as well and so we will continue to fill those inbounds and.
Marc A. Stapley: So we'll continue to fill those inbounds and see what opportunities come out of that. But it's not at the point where I'd say, you know, put a line on the spreadsheet for monetization of data. At this point, it's fueling the rest of our business.
Marc A. Stapley: See what opportunities come out of that but it's not at the point, where I would say.
Marc A. Stapley: Put a line on the spreadsheet for monetization of data.
Marc A. Stapley: At this point is fueling the rest of our business.
Marc A. Stapley: Fair enough. And one final one for me, on just M&A strategy. The balance sheet is in good shape. You took up the year-end cash guide a little bit over here. Just following C2I, the asset is clearly a strategically important technology. You talked about MIBC and broadening out to other indications over time. But the revenue contributions will take a little bit of time, right? And then you've got the Percepta nasal swab with the Nightingale enrollment delays that you cited.
Speaker Change: Fair enough and one final one for me and just M&A strategy. The balance sheet is in good shape you took up.
Marc A. Stapley: The year end cash guide a little bit over here.
Marc A. Stapley: Just following <unk> the asset is clearly a strategically important technology, you've talked about that might be seeing broadening out to other.
Marc A. Stapley: Indications over time, but the revenue contributions will take a little bit of time right and then you've got the percept on nasal swab with the Nightingale delays that enrollment delays that you cited so as you consider the.
Marc A. Stapley: So as you consider the landscape here and your balance sheet, just remind us again what the priorities for tuck-ins are and how much of a revenue bridge plays into it in the sense of focus on near-term revenue generation. Is that fair to assume as a priority for other tuck-ins you may do here in the next year or so?
Marc A. Stapley: The landscape here and your balance sheet.
Marc A. Stapley: Remind us again sort of what are the priorities for tuck ins and how much of I guess the revenue bridge. Please into it in the sense that a focus on near term revenue generation is that fair to assume.
Marc A. Stapley: Priority for for other tuck ins you may do here in the next year or so.
Marc A. Stapley: Yeah, thanks for the question. And I appreciate you picking up on the strength of our balance sheet, which is obviously only getting stronger as we increase the guidance around cash here. You know, we've been pretty clear about what we're focused on, and I reiterate those points again today.
Speaker Change: Yes. Thanks for the question and I appreciate you picking up on the strength of our balance sheet, which is obviously only getting stronger as we increase the guide around cash here we are.
Marc A. Stapley: Been pretty clear about what we are focused on and I reiterate those points again today.
Marc A. Stapley: There's no question we want to continue to drive the penetration of Decipher into a market that, when we last did the math, was 35% penetrated into a firmer in the market. Whether we lasted, the math was just over 60% penetrated. We see tremendous opportunities there. And as I said today, I see those products helping to fuel the growth of our business for, you know, multiple years ahead. And certainly, you know, bridging us to our long-term growth drivers, which are the next three things that we're very focused on. Perceptor, Nasal Swab, as I talked about, our IBD strategy outside the US, and now MRD.
Marc A. Stapley: No question, we want to continue to drive the penetration of decipher into a market. When we last did the math was 35% penetrated into our firm in a market that we lost through the math was just over 60% penetrated we see tremendous opportunities then as I said today.
Marc A. Stapley: Those products, helping to fuel the growth of our business for multiple years ahead, and certainly bridging us to to our long term growth drivers, which are the next three things that we're very focused on because that's a nasal swab as I talked about our IBD strategy outside the U S and now <unk>. So if you think about those five things.
Marc A. Stapley: So if you think about, you know, those five things, Affirma, Decipher, Nasal Swab, IBD, and MRD, we have a lot on our plates. We're very, very busy. We have a lot of projects going on. Those three long-term growth driver projects are absorbing more than the majority of our R&D spend, as you would expect them to since they're strategic and important to us. And then, of course, growing Affirma and Decipher and sustaining our business and working on Discovery are driving most of the rest of the R&D spend.
Marc A. Stapley: Afirma decipher nasal swab IBD in MLD, we got a lot on I'll place, we're very very busy we've got a lot of projects going on.
Marc A. Stapley: Three long term growth driver projects are absorbing the more than the majority of our R&D spend as you would expect them to since their strategic and important to US and then of course growing afirma and decipher enough sustaining our business and working on discovery is driving most of the rest of the R&D spend.
Marc A. Stapley: So we're very, very focused. We've got very clear priorities. We've got the, you know, we feel like we've got the near-term to mid-term to long-term growth spectrum covered with everything that we're doing. And so I would say that, you know, M&A isn't a priority for us right now. Of course, we're always opportunistic, and things come knocking on our door that look interesting to us, then we would certainly take a look. But that is not something we're focused on because, as I said, we've got a lot of opportunity ahead of us in what we do.
Marc A. Stapley: So we're very very focused we've got very clear priorities. We've got we feel like we've got the near term to midterm to long term growth spectrum covered with everything that we're doing and so I would say that M&A isn't there isn't the priority for us right now.
Marc A. Stapley: Of course, we're always opportunistic things come knocking on our door that look interesting to us than then we would certainly take a look but that is not something where we're focused on because as I said, we've got a lot of opportunity ahead of us and what we're already doing.
Tejas Savant: Fair enough. Thanks for the time, guys.
Speaker Change: Fair enough. Thanks for the time guys.
Operator: Thanks. Thank you. One moment for our next question. Our next question comes from Mike Mattson with Needham & Company. Your line is now open.
Tejas Savant: Thanks.
Mike Mattson: One moment for our next question.
Mike Mattson: Our next question comes from Mike Matson with Needham <unk> Company. Your line is now open.
Mike Mattson: Hey guys, this is Joseph on for Mike. Maybe you just wanted to get an update on how you guys were kind of thinking about the FDA's final rule on LDTs. You know, I guess I imagine it kind of went to your expectations. I guess it wasn't really worrying for you, you know, too much at all. But are you kind of thinking a little bit more positively on any more spending needed for that? Yeah, I guess any update on that would be good.
Operator: Hey, guys. This is Joseph on for Mike.
Mike Mattson: Maybe I just wanted to get an update on how you guys were kind of thinking about the the FDA final rule on <unk>.
Mike Mattson: <unk>.
Mike Mattson: I guess I imagine it kind of went to your expectations I guess it wasn't really worry for you too much at all but.
Mike Mattson: Are you kind of thinking a little bit more positively on any more spend needed for that or.
Mike Mattson: Yes, I guess any update on that would be good.
Marc A. Stapley: Yeah, thanks, Joseph. I appreciate that.
Speaker Change: Yes. Thanks, Joseph appreciate that I mean, just thinking about it at the highest level as a company that has been on the market with clear tests for a number of years.
Marc A. Stapley: I mean, just thinking about it at the highest level, as a company that has been on the market with clear tests for a number of years, with the evidence that we have behind those tests, as well as having an IVD test already on the market and IVD capabilities and developing three IVD tests as we speak, we've always felt very ready for whatever this new regulation might throw at us. We're clear. We've got New York State and all those things.
Marc A. Stapley: With the evidence that we got behind those tests as well as having an IBD test already on the market and IBD capabilities in developing three IBD tests as we speak we've always always felt very ready for whatever this new regulation might throw at us.
Marc A. Stapley: Now, obviously, more regulation adds a burden to any business, of course. And so we actually think we're very well regulated already. We don't necessarily need more, but to the extent there is more, then we're ready for it. If it adds a cost burden in some areas, again, we've got the quality systems in place, but there might be some things that we have to invest in in order to support any new requirements that come our way. We'd be ready to do that, and able to do that.
Marc A. Stapley: We're clear we've got New York State and all those things now and obviously the more regulation at burden to any business of course.
Marc A. Stapley: No.
Marc A. Stapley: We actually think we're very well regulated already we don't necessarily need more but to the extent there is more.
Marc A. Stapley: And then we're ready for it if it adds cost burden in some areas again, we've got the quality systems in place, but there might be some things that we have to invest in in order to support any new requirements that come our way, we'd be ready to do that able to do that and I'd say that's already included in our projections because we also have opportunities to optimize.
Marc A. Stapley: And I'd say that it's already included in our projections because we also have opportunities to optimize and reduce costs as we scale, too. So I would say that that would offset any increased regulation or regulatory burden that might show up in the P&L. I would say, just maybe specifically on what did come out, it was great to see that existing tests get some special treatment as they should, obviously because they serve so many patients.
Marc A. Stapley: And reduce cost as we scale too so I'd say that that would offset any increased regulation or regulatory burden.
Marc A. Stapley: <unk> show up in the P&L.
Marc A. Stapley: I would say just maybe specifically on what did come out of course, it was great to see that existing test.
Marc A. Stapley: Some some special treatment as they should obviously because they serve so many patients today.
Marc A. Stapley: Yeah, okay, great. Absolutely.
Speaker Change: Yeah, Okay, great Yeah, absolutely.
Marc A. Stapley: And then maybe just a question on <unk>.
Marc A. Stapley: Conference.
Speaker Change: You guys had a bunch of posters there you probably pick up a lot of space I was just kind of wondering what was the attendance like there I appreciate the initial color on everything.
Marc A. Stapley: And then maybe just a question about the AUA conference. I mean, you guys had a bunch of posters there, you probably took up a lot of space. Was just kind of wondering, you know, what the attendance was like there? Appreciate, you know, the initial color and everything.
Marc A. Stapley: But I was also wondering if, you know, if there's any discussion at these conferences around deciphered prostate and, you know, how some of the, I guess, American physicians feel about the test potentially moving to PCR? I guess, correct me if I'm wrong, but I guess that's more of a CLIA model here. But just wondering if there's any, you know, discussion around that as that's changed, you know, maybe your viewpoints on test modality? Yeah, I don't have any. Yeah, I
Marc A. Stapley: But was also wondering if.
Marc A. Stapley: There is any discussion at these conferences around decipher prostate and how some of the I guess American physicians.
Marc A. Stapley: Feel about potentially move into PCR I guess.
Marc A. Stapley: Correct me, if I'm wrong, but I guess, that's more inter.
Marc A. Stapley: Internationally in the clear.
Marc A. Stapley: Our model here, but just wondering if there was any discussion around that has that changed maybe your viewpoints on Tesla.
Marc A. Stapley: Yeah, I mean, let me clarify that, in the first instance, you know, the decipher is run as a clear baseline test for the US today, and that's not going to change going forward.
Speaker Change: Yes, let me clarify that in the first instance, the decipher as Ron is clear based test for the U S. Today, and that's not going to change going forward and of course that also we run a whole transcriptome that also helps fuel grid, where we're moving to PCR for decipher is our IBD product that will be launched outside the U S. Okay.
Marc A. Stapley: And of course, you know, that also helps fuel grid, where we're moving to PCR for decipher, our IBD product that will be launched outside the U.S. Okay, so we are hearing a lot of interest for that outside the U.S. We do think there's a pent-up demand. I don't know to what extent that showed up at AUA probably. I'm sure it came up, but probably mostly that conference was mostly focused, I would say, on the U.S. From what I hear, it went really well.
Marc A. Stapley: <unk>.
Marc A. Stapley: We are hearing a lot of interest for that outside the U S. We do think there is a pent up demand I don't know to what extent that that showed up.
Marc A. Stapley: I'm sure it came up probably mostly that.
Marc A. Stapley: Conferences, mostly focused I would say on U S.
Marc A. Stapley: It was a great conference. We, of course, had a very good showing there with all the abstracts that we had presented and the presentations. I understand our booth was very well attended, and our team, congratulations to our decipher team, commercial, and marketing team, who did an outstanding job supporting the conference. So, so far, yeah, everything I've heard is extremely positive. I'm sure there was a buzz around the new guidelines for the points we made in the presentation. We did our own survey, and we heard that a very significant majority of physicians, over 80%, are aware of the guidelines, and 75% of them are actually using them the way that they're
Marc A. Stapley: What I hear it went really well it was a great conference. We both had a very good showing there will be abstracts that we had to.
Marc A. Stapley: Presented in presentations I understand our booth was very well attended and our team congratulations to our decipher team commercial and marketing team, who did an outstanding job.
Marc A. Stapley: Putting the conference so so far everything I've heard.
Marc A. Stapley: It's extremely positive I'm sure there was above around the new guidelines to the points. We made in the presentation. We did our own survey and we heard them.
Marc A. Stapley: A very significant majority.
Marc A. Stapley: Physicians that over 80% are aware of the guidelines and 75% of them are actually using them. The way that they are intended to be used.
Marc A. Stapley: Okay, great. Thanks very much, Marc, for taking our questions.
Speaker Change: Okay, great. Thanks, Thanks, very much Martin for taking our questions.
Speaker Change: Yes. Thank you.
Operator: Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. One moment for the next question. Our next question comes from Matt Sykes with Goldman Sachs. Your line is now open.
Speaker Change: Thank you as a reminder to ask a question you will need to press star one on your telephone.
Operator: One moment for the next question.
Matthew Carlisle Sykes: Our next question comes from Matt <unk> with Goldman Sachs. Your line is now open.
Matthew Carlisle Sykes: Hey guys, congrats on the quarter. Thanks for taking my question. This is Prashant on behalf of Matt.
Matthew Carlisle Sykes: Hey, guys congrats on the quarter. Thanks for taking my questions for Sean on for Matt.
Prashant: Just to follow up on a question that was asked earlier on Decipher Prostate. So you have biopsy tests for monotherapy versus multimodal, as well as the radical prostatectomy test to determine the addition of hormone therapy. Can you just help us understand the opportunity for improvement in terms of volumes and reimbursement with respect to both subsegments?
Prashant: Just to follow up on a question that was asked earlier on decipher prostate. So you have biopsy tests for monotherapy versus multimodal as well as the radical prostatectomy.
Prashant: Determine the addition of hormone therapy. So can you just help us understand the opportunity for improvement in terms of volumes and reimbursement with respect to both sub segments.
Marc A. Stapley: Yeah, I would say I think they really come together. You don't necessarily need to bifurcate them as we talk about the opportunity for growth. I mean, by far, the majority of growth and the majority of volume is going to come from the biopsy side rather than the RP side, but there's opportunity for them both. Mostly, as I say, mostly on the biopsy side, where you have by far the largest volume.
Prashant: Yes, I would say I think they really come together, you don't necessarily need to bifurcate them as we talk about the opportunity for growth by far the majority of growth in the majority of volume is going to come from the biopsy side, Robyn the ERP side, but there is opportunity for them for them both.
Marc A. Stapley: Mostly as I say, mostly on the biopsy side, where you have by far the largest volume in terms of reimbursement.
Marc A. Stapley: In terms of reimbursement, the real opportunity there is commercial contracts like the one that we announced today. We've made great progress and gained great traction in getting both coverage and contracts in place. There are still opportunities. I think we feel really good about where we are so far. There are smaller payers to go after now, and we never really stopped. We are still signing up payers for a firmer 13 years after the product was launched. So you just keep blocking and tackling your way through that.
Marc A. Stapley: Real opportunity there is commercial contracts like the one that we announced today.
Marc A. Stapley: We've made great progress and great traction and getting both coverage and contracts in place. There is still opportunities I think we feel really good about where we are so far there's a smaller payers to go after now and we never really stopped we all still.
Marc A. Stapley: Finding out payers for Afirma 13 years. After the product was launched so you just keep blocking and tackling your way through that so that's where the I'd say the reimbursement opportunity comes from I've talked at length about where the volume growth is going to come from and what's going to drive it and again, it's the CCN the payer contracts metastatic.
Marc A. Stapley: That's where I'd say the reimbursement opportunity. I've talked at length about where the volume growth is going to come from and what's going to drive it. And again, it's the NCCN, the payer contracts, metastats, and just, you know, fantastic execution by ourselves too.
Marc A. Stapley: Yes.
Marc A. Stapley: Fantastic execution by our sales team quite frankly.
Marc A. Stapley: Got it. And then moving to Affirma, do you see the competitive landscape as essentially set, or do you anticipate new competitors entering the space? How high is the barrier of entry to enter thyroid cancer testing?
Marc A. Stapley: Got it and then moving to firm.
Marc A. Stapley: See the competitive landscape is essentially set or do you anticipate new competitors entering the space.
Marc A. Stapley: How high is the barrier of entry to enter thyroid cancer testing.
Marc A. Stapley: I think it would be very difficult for a new entrant to enter this stage with the level of share and penetration and performance of the tests that we have, and, most importantly, the level of evidence behind them, including the recent meta-analysis that we had that really showed the performance of a firmer in a real-world setting, even outperformed our own clinical validation. We actually just got word that it was one of the most cited articles last year in the publication.
Marc A. Stapley: I think it would be very difficult for new entrants to enter this stage with the level of share and penetration and performance of the tests that we have and most importantly, the level of evidence behind them, including the recent meta analysis that we had that really shows the performance of our firm or in a real world setting even outperformed our own clinical.
Marc A. Stapley: Validation, we actually just got word that that was one of the most.
Marc A. Stapley: Cited articles.
Marc A. Stapley: So I think that in and of itself, we've always maintained this, this actually is at the heart of the Veracyte Diagnostics Platform we talk about, that just generating the evidence which comes from the data, and then having more data generate more evidence, is really a significant barrier to entry that shouldn't be underestimated, and it's how a firm has not only maintained, but is also growing its share, and how Decipher has become the number one test with the high level of guidelines that it has.
Marc A. Stapley: Last year in the publication so.
Marc A. Stapley: I think that in of itself. We've always maintained this is Archie is at the heart of the verify diagnostic platform we talk about.
Marc A. Stapley: Generating the evidence which comes from the data.
Marc A. Stapley: Having having more data generating more evidence is really a significant barrier to entry that shouldnt be underestimated and it is how our firm has not only maintained but is also growing its share and how decipher has become number one test with the high level guidelines that it has.
Marc A. Stapley: Thank you. Congratulations again on the quarter. Thank you.
Speaker Change: Got it.
Speaker Change: Thank you congrats again on the quarter.
Speaker Change: Thank you.
Operator: Thank you. One moment for our next question. Our next question comes from Puneet Souda with Lyrinc Partners. Your line is now open.
Speaker Change: Thank you one moment for our next question.
Puneet Souda: Our next question comes from Puneet <unk> with Leerink partners. Your line is now open.
Operator: Yes.
Puneet Souda: Puneet, we can't hear you.
Puneet Souda: We can't hear you.
Operator: I apologize. That's my fault. Marc, can you hear me now? Yes. Are you fine?
Puneet Souda: You might be on mute.
Puneet Souda: I apologize that's my fault.
Puneet Souda: Yes. All right. Great. Thank you. Thanks for taking my question. So, and I apologize if this was covered already, but could you talk about the firma and decipher the growth rates that we ought to be thinking within the context of the guide? And I have a quick follow-up after that. Unknown Speaker
Puneet Souda: Mark can you hear me now.
Puneet Souda: Yes, yes.
Speaker Change: Alright, great. Thank you and thanks for taking my question so.
Puneet Souda: And I apologize if this was.
Puneet Souda: Covered already but just could you talk about the firm and decipher growth rates that we ought to be thinking within the context of the guide.
Marc A. Stapley: Yeah, so without getting into projecting either one of them, let's just, I don't know if you caught it, but just to recap, testing in the first quarter grew 25%. And I mentioned at the beginning of the call that Decipher grew 36% in revenue. We guided testing to 15 to 18%, which is an increase. And, of course, you can imagine Decipher is the larger driver of that growth, and Affirma is obviously smaller, but still growing very, very nicely.
Speaker Change: Quick follow up after that.
Speaker Change: Yes, so without getting into projecting either one of them, let's just I don't know if you caught it but to recap.
Marc A. Stapley: Testing in the first quarter grew 25% and I mentioned at the beginning of the call that decipher grew 36% in revenue.
Marc A. Stapley: We guided testing to 15% to 18%, which is an increase and of course you can imagine decipher is the larger driver of that growth on a firmer is is obviously smaller but still growing very very nicely.
Marc A. Stapley: And I think, you know, it's fair to say that testing overall is exceeding our expectations, and hence we raised the guide for the company. We still have headwinds on the, you know, product and biopharma and other lines at the moment, but testing is firing on all cylinders.
Marc A. Stapley: I think it's fair to say the testing overall is exceeding our expectations and hence we raised the guide for the company, we still have headwinds on the product and Biopharma and other line at the moment.
Marc A. Stapley: Testing is firing on all cylinders.
Marc A. Stapley: Got it. And then, if I could ask you about the AUA, you had a number of presentations there. It was obviously an important conference for you. Anything you would note that, you know, is important, a driver for maybe 2025? And maybe if you could take a few minutes and talk about the sort of the, you know, how should we think about the next set of data sets that could be released either in the second half of 24 or in 25 on other assays that you have, or even decipher? Thank you.
Speaker Change: Got it.
Marc A. Stapley: Then if I could ask about the <unk> you had a number of presentations. There obviously an important conference for you anything you would note.
Marc A. Stapley: Debt.
Marc A. Stapley: As important driver for maybe 2025, and maybe if you could take a few minutes and talk about the sort of the.
Marc A. Stapley: How should we think about the next set of data sets that could be released either in second half of 'twenty four or 25 on.
Marc A. Stapley: Other assays that you have or even decipher. Thank you.
Marc A. Stapley: Yeah, so thanks for mentioning that. And AUA, and we talked a little bit about that earlier, we did have a very strong showing with a large number of abstracts and presentations. The buzz there would have been around, I could say a couple of things, but the NCCN guidelines, for sure.
Speaker Change: Yes, so thanks for mentioning that and we talked a little bit about that earlier, we did have a very strong showing with a large number of abstracts and presentations.
Marc A. Stapley: But there would have been around.
Marc A. Stapley: A couple of things, but the CCN guidelines for sure.
Marc A. Stapley: And metastatic. I think people are excited to have metastatic cancer covered, and it should be. And so I think that's one of the areas that you should think about. Hopefully, by the end of this year, or early next year, we will get an answer. And so maybe that can become a driver for 2025. As I said, I do think data deciphering in and of itself across all indications that we cover and all markets is a potential growth driver for multiple years to come.
Marc A. Stapley: And metastatic I think people are excited to have metastatic covered and it should be.
Marc A. Stapley: And so I think thats one of the areas that you should think about to hopefully hopefully by the end of this year early into next year, we get an answer and so maybe that that can become a driver for 2025 as I said I do think drive decipher in and of itself across all indications that we cover in all markets.
Marc A. Stapley: Potential growth driver for multiple years to come.
Marc A. Stapley: Outside of that, of course, you know, data related to bladder cancer, muscle-invasive bladder cancer, and our MRD test and, of course, completion of Nightingale and further support for that as well. And then, let's just say, our IBD strategy. I mentioned before, but we have three products that we're working on right now, two of which we completed in 25 and one in 26. And so, you know, I think of those as being certainly not necessarily revenue drivers for the timeframe you asked about, but certainly indications of us continuing to execute and knocking down some of the milestones that we've set.
Marc A. Stapley: Outside of that of course, the data related to bladder.
Marc A. Stapley: Muscle invasive bladder cancer, <unk> test and of course completion of mining Gal.
Marc A. Stapley: And further support for for that as well.
Marc A. Stapley: And then let's just say our IBD strategy I've mentioned before but we have three products that were working on right now two of which we released 25 and $1 26, and so I think of those as being certainly not necessarily revenue drivers for the timeframe you asked about the early indications of us continuing to execute.
Marc A. Stapley: Knock down some of the milestones that we set.
Marc A. Stapley: Got it. Helpful, guys. Okay. Thank you.
Speaker Change: Got it helpful guys. Okay. Thank you.
Operator: Thank you. I am showing no further questions at this time. I would like to now turn it back to Marc for closing remarks.
Speaker Change: Thank you.
Marc A. Stapley: Thank you I am showing no further questions at this time I would like to now turn it back to Mark for closing remarks.
Marc A. Stapley: Thank you, Lauren. I appreciate it. So in closing, as you can tell, I'm excited about our strong start to 2024. And the positive signals we're seeing in our core testing business, which bolster our confidence in the growth trajectory of Veracyte, both this year and going forward. We're making progress towards our goal of 80% penetration in the critical markets that Decipher and Affirma serve, and expect to drive significant revenue from these tests over the next few years, bridging us nicely to our numerous and exciting long-term growth drivers.
Marc: Thank you Loren I appreciate it so in closing as you can tell I'm excited about our strong start to 2024 and the positive signals, we're seeing in our core testing business, which bolster our confidence in the growth trajectory of verified both this year and going forward.
Marc A. Stapley: We're making progress towards our goal of 80% penetration in the critical markets decipher in Afirma serve and expect to drive significant revenue from these tests over the next few years bridging us nicely to our numerous exciting long term growth drivers.
Marc A. Stapley: I want to thank the entire Veracyte team for the work they do every day for the patients we serve all over the world. Their tireless efforts have enabled us to grow and scale our company to accommodate the significant growth that we are experiencing in our business. So, thank you.
Speaker Change: I want to thank the entire verify team for the work they do everyday for the patients we serve all over the world. Their tireless efforts have enabled us to grow and scale our company to accommodate the significant growth that we're experiencing in our business. So thank you.
Operator: Ladies and gentlemen, this concludes our call today. Thank you for joining us. You may now disconnect.
Speaker Change: Ladies and gentlemen, this concludes our call today. Thank you for joining US you may now disconnect.
Operator: Okay.
Operator: Okay.
Operator: Okay.
Operator: [music].
Operator: Okay.