Q2 2024 GeneDx Holdings Corp Earnings Call

We'll see you next time.

Operator: and Thank you for standing by. Welcome to the GeneDx Second Quarter 2024 Earnings Conference. At this time, all participants are in a listen-only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising that your hand is raised.

Speaker Change: Good day and thank you for standing by. Welcome to the GeneDx 2nd Quarter 2024 Earnings Conference Call.

Speaker Change: At this time, all participants are in a listen-only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session.

Speaker Change: To ask a question during this session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded.

Operator: To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being. I would now like to hand the conference over to Sabrina Dunbar, Investor Relations. Please go ahead.

Speaker Change: I would now like to hand the conference over to Sabrina Dunbar, Investor Relations. Please go ahead.

Sabrina Dunbar: Thank you, operator. And thank you everyone for joining us today. On the call, we have Katherine Stueland, President and Chief Executive Officer, and Kevin Feeley, Chief Financial Officer. Earlier today, GeneDx released financial results for the second quarter and for June 30, 2024. Before we begin, please take note of our cautionary statement. We may make forward-looking statements on today's call, including about our business plans, guidance, and outline. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, July 30th, and we are under no obligation to update them. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results.

Sabrina Dunbar: Thank you, Operator, and thank you to everyone for joining us today. On the call, we have Katherine Stueland, President and Chief Executive Officer, and Kevin Feeley, Chief Financial Officer.

Speaker Change: Earlier today, GeneDx released financial results for the second quarter and to June 30, 2024.

Speaker Change: Before we begin, please take note of our cautionary statement. We may make forward-looking statements on today's call, including about our business plans, guidance, and outlook.

Speaker Change: Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, July 30th, and we are under no obligation to update.

Speaker Change: When discussing our results, we refer to non- GAAP measures , which exclude certain items from reported results.

Sabrina Dunbar: Please refer to our second quarter 2024 earnings release and slides available at ir.gndx.com for definitions and reconciliations of non-GAAP measures and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements. And with that, I will turn the call over to Katherine. Thanks, Sabrina, and thank you all for joining us. The second quarter proved to be another strong quarter by all measures.

Speaker Change: Please refer to our second quarter 2024 earnings release and slides available at ir.gndx.com for definitions and reconciliations of non-GAAP measures and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements.

Speaker Change: And with that, I will turn the call over to Katherine. Thanks, Sabrina, and thank you all for joining us. The second quarter proved to be another strong quarter by all measures. We delivered nearly $69 million in revenues.

Katherine A. Stueland: We delivered nearly $69 million in revenues, expanded growth margins to 62%, and achieved our 9th consecutive quarter of cash burn reduction. We've been relentlessly focused on these three metrics, and that focus continues to pay off. Given the strength in the first half of the year, I'm happy to say that we're raising our revenue guidance for the year to $255 to $265 million, and we're even closer to our goal of becoming profitable.

Speaker Change: expanded growth margins to 62% and achieved our ninth consecutive quarter of cash burn reduction.

Katherine A. Stueland: We've been relentlessly focused on these three metrics, and that focus continues to pay off.

Speaker Change: Given the strength in the first half of the year, I'm happy to say that we're raising our revenue guidance for the year to $255 to $265 million.

Katherine A. Stueland: This is an important milestone for us as a company because of the massive opportunity in front of us to serve an ever-growing number of families and to positively impact the future of healthcare. Today, GeneDx is primarily focused on pediatric patients and the providers that care for them, including medical geneticists, genetic counselors, pediatric neurologists, developmental pediatricians, and neonatologists.

Speaker Change: and we're even closer to our goal of becoming profitable. This is an important milestone for us as a company because of the massive opportunity in front of us to serve an ever-growing number of families and to positively impact the future of healthcare.

Speaker Change: Today, GeneDx is primarily focused on pediatric patients and the providers that care for these patients, including medical geneticists, genetic counselors, pediatric neurologists, developmental pediatricians, and neonatologists.

Katherine A. Stueland: We have now sequenced more than 665,000 exomes and genomes and have performed more than a million genetic tests, working tirelessly to carry one of the largest and most diverse databases of disease-associated genomic variants. This industry-leading data set, combined with our proprietary bioinformatics and variant identification and interpretation capabilities, coalesce to create the most advanced diagnostic exome and genome sequencing options available. And those tests continue to be recommended as first-line tests in the standard of care, resulting in better health outcomes and cost benefits for both patients and healthcare staff.

Speaker Change: We have now sequenced more than 665,000 exomes and genomes and have performed more than a million genetic tests, working tirelessly to curate one of the largest and most diverse databases of disease-associated genomic variants.

Speaker Change: This industry-leading dataset, combined with our proprietary bioinformatics and variant identification and interpretation capabilities, coalesce to create the most advanced diagnostic exome and genome sequencing options available.

Speaker Change: And those tests continue to become recommended as first-line tests on the standard of care, resulting in better health outcomes and cost benefits for both patients and health care systems.

Katherine A. Stueland: So to track our success, one of the key metrics we focus on is testing. This quarter, Exome and Genomes accounted for over 74% of our total revenue, reflecting our successful transition towards a more streamlined and impactful product. The upshot of strong commercial execution has been amplified by our team's operational and technological teams. These teams continue to put additional wind in our sails by reducing costs and shortening turnaround times by identifying opportunities for improved efficiency.

Speaker Change: So to track our success, one of the key metrics we focus on is TestMix.

Speaker Change: This quarter, Exome and Genomes has accounted for over 74% of our total revenue, reflecting our successful transition towards a more streamlined and impactful product mix.

Speaker Change: The upshot of strong commercial execution has been amplified by our team's operational and technological excellence. These teams continue to put additional wind in our sails by reducing costs and shortening turnaround times by identifying opportunities for improved efficiency,

Katherine A. Stueland: Scaling our lab with support from AI and machine learning technologies and improving our billing workflows in service of better patient, provider, and payer experiences. In the third quarter of last year, I shared that we had adopted a mindset of discipline and focus on near-term, highest-impact business drivers, and that we must earn our right to invest in longer-term strategies as the point-of-profitability approach. It's the right time to lean in and invest in our future, starting with a focus on whole genome sequencing. This quarter, we announced a partnership with EPIC to integrate with health system workflows and improve provider and patient journeys via EPIC's electronic connection.

Speaker Change: scaling our lab with support from AI and machine learning technologies, and improving our billing workflows in service of better patient, provider, and payer experiences.

Speaker Change: In the third quarter of last year, I shared that we had adopted a mindset of discipline and focus on near-term, highest-impact business drivers, and that we must earn our right to invest in longer-term strategies as the point of profitability approached.

Speaker Change: It's the right time to lean in and invest in our future, starting with a focus on whole genome sequencing. This quarter, we announced a partnership with Epic to integrate with health system workflows and improve provider and patient journeys via Epic's electronic connections.

Katherine A. Stueland: And today, we share more information about investments in our products as we translate our leadership in Exome to pave the way for a genome future. We unveiled a series of enhancements to our genome product to reduce turnaround time, expand accepted sample types, and increase diagnostic yield. We will remain absolutely disciplined as we approach future investments and focus on commercial viability for the dollars we invest.

Speaker Change: And today, we share more information about investments in our products as we translate our leadership in Exome to pave the way for a genome future.

Speaker Change: We unveiled a series of enhancements to our genome product to reduce turnaround times.

Speaker Change: expand accepted sample types, and increase diagnostic yields. We will remain absolutely disciplined as we approach future investments and focus on commercial viability for the dollars we invest.

Katherine A. Stueland: We're also making progress on key policies across the United States that ensure there is expanding access to exome and genome testing nationwide. We're pleased by the adoption of additional biomarker legislation in the second quarter and know the direct impact these laws will have on patients and families. As a company headquartered in Connecticut, we were proud to see rapid whole genome sequencing passed into law here, effective July 1. Today, 14 states cover RAPID genome sequencing, with North Carolina adding and announcing added coverage in just the last few days.

Speaker Change: We're also making progress on key policies across the United States that ensure there is expanding access to exome and genome testing nationwide.

Speaker Change: We're pleased by the adoption of additional biomarker legislation in the second quarter and know the direct impact these laws will have on patients and families. As a company headquartered in Connecticut, we were proud to see rapid whole genome sequencing passed into law here, effective July 1st.

Speaker Change: Today, 14 states cover rapid genome sequencing, with North Carolina announcing added coverage in just the last few days.

Katherine A. Stueland: We also see certain commercial partners taking steps in the right direction, as shown through our partnership with UnitedHealthcare to offer whole genome sequencing to their patients across. We believe that equitable access to testing is fundamental and are thrilled to see bipartisan support among policymakers throughout the country. In addition to the supremely important work being done by state Medicaid programs and commercial payers, we've taken our own steps to drive progress forward. In the second quarter, we launched a patient access program for epilepsy patients in partnership with biopharmaceutical leaders to open up access to exome testing while helping eligible patients enroll in clinical trials and other therapeutic opportunities.

Speaker Change: We also see certain commercial payers taking steps in the right direction, as shown through our partnership with UnitedHealthcare to offer whole genome sequencing to their patients across the country.

Speaker Change: We believe that equitable access to testing is fundamental and are thrilled to see bipartisan support among policymakers throughout the country.

Speaker Change: In addition to the supremely important work being done by state Medicaid programs and commercial payers, we've taken our own steps to drive progress forward.

Speaker Change: In the second quarter, we launched a patient access program for epilepsy patients in partnership with biopharmaceutical leaders to open up access to exome testing while helping eligible patients enroll in clinical trials and other therapeutic opportunities.

Katherine A. Stueland: Our proprietary genomics data set was built by patients across America, thus offering one of the most representative and diverse looks at genomic data available. As we think about differentiation, we appreciate the steps we've taken historically to prioritize equitability and remove barriers to cost on our journey to serving patients and providers of every circumstance. But we're not done yet.

Speaker Change: Our proprietary genomics data set was built by patients across America.

Speaker Change: thus offering one of the most representative and diverse looks at genomic data available. As we think about differentiation, we appreciate the steps we've taken historically to prioritize equitability and remove barriers to cost on our journey to servicing patients and providers of every circumstance.

Katherine A. Stueland: There are millions of patients and families in the U.S. and globally that can benefit from the actionability of a genetic diagnosis. A diagnosis can immediately change clinical management, unlock clinical trial opportunities, qualify patients for the financial support they desperately need, connect families to communities unified around their child's diagnosis by way of patient advocacy groups, and much more. We recognize the privilege that a market-leading position offers us, and we are continuing to invest in accelerators for our business while balancing growth and scale with financial discipline and strength. With that, I'll pass it over to Kevin to go through our results. Great. Thanks, Katherine.

Speaker Change: But we're not done yet. There are millions of patients and families in the U.S. and globally that can benefit from the actionability of a genetic diagnosis.

Speaker Change: A diagnosis can immediately change clinical management, unlock clinical trial opportunities, qualify patients for the financial support they desperately need, connect families to communities unified around their child's diagnosis by way of patient advocacy groups, and much more.

Speaker Change: We recognize the privilege that a market-leading position offers us, and we are continuing to invest in accelerators for our business while balancing growth and scale with financial discipline and strength.

Speaker Change: With that, I'll pass it over to Kevin to go through our results. Great. Thanks, Katherine.

Kevin Feeley: Second quarter 2024 revenues from continuing operations grew to $68.9 million compared to $45.2 million in the second quarter of 2023 and $61.5 million in the first quarter of 2025. That's an increase of 52% year over year and 12% sequentially in total. Drilling into that, Exome and Genome revenues grew 77% year-over-year and 15% sequentially, delivering $50 million in revenue this quarter. Both volume and collection performance contributed nicely. The adjusted gross profit from continuing operations was $42.8 million in the second quarter of 2024.

Kevin Feeley: Second quarter 2024 revenues from continuing operations grew to $68.9 million compared to $45.2 million in the second quarter of 2023 and $61.5 million in the first quarter of 2024.

Speaker Change: That's an increase of 52% year-over-year and 12% sequentially in total.

Kevin Feeley: Drilling into that, Exome and Genome revenues grew 77% year-over-year and 15% sequentially, delivering $50 million in revenue this quarter. Both volume and collection performance contributed nicely.

Kevin Feeley: Adjusted gross profit from continuing operations was $42.8 million in the second quarter of 2024. That's up 153% compared to Q2 2023 and up 13% from the first quarter of 2024.

Kevin Feeley: That's up 153% compared to Q2 2023, and up 13% from the first quarter of 2024. Adjusted gross margin from continuing operations was 62% in the second quarter of 2024, up from 37% a year ago and up from 61% in the first quarter. Gross profit growth and margin expansion are driven by increased volume, improved average reimbursement rate, continued cost per test leverage, and favorable mix shift. On volume and mixed, exome and genome testing was 31% of all tests resulted this quarter, up from 22% a year ago and up from 30% in the first quarter.

Kevin Feeley: Adjusted gross margin from continuing operations was 62% in the second quarter of 2024, up from 37% a year ago and up from 61% in the first quarter.

Kevin Feeley: Gross profit growth and margin expansion is driven by increased volume, improved average reimbursement rate, continued cost-per-test leverage, and favorable mix ship.

Kevin Feeley: On volume and mix, exome and genome was 31% of all tests resulted this quarter, up from 22% a year ago and up from 30% in the first quarter.

Kevin Feeley: Overall, I'm quite pleased with the mix, given the strong underlying exome and genome volume, whereby our team delivered over 18,000 tests this quarter, an increase of 52% year-over-year and 9% sequential, and will continue to optimize the test portfolio towards exome and genome balancing unit economics, clinical impact, and customer satisfaction over time. On average reimbursement rates, our exhaustive effort to improve exome reimbursement rates through denial reduction is working. In the second quarter of 2024, our average reimbursement rate for exome and genome, after all denials, was approximately $2,800, up from $2,600 last quarter and up from $2,500 in the fourth quarter of 2023. Across the commercial insurance payer environment, we continue to enable and calibrate insurance-specific workflow to reduce administrative and procedural denials.

Kevin Feeley: Overall, I'm quite pleased with the mix given the strong underlying exome and genome volume whereby our team delivered over 18,000 tests this quarter, an increase of 52% year-over-year and 9% sequentially.

Kevin Feeley: We'll continue to optimize the test portfolio towards exome and genome balancing unit economics, clinical impact, and customer satisfaction over time.

Kevin Feeley: On average reimbursement rate, our exhaustive effort to improve exome reimbursement rates through denial reduction is working.

Kevin Feeley: In the second quarter of 2024, our average reimbursement rate for Exome and Genome, after all denials, was approximately $2,800, up from $2,600 last quarter and up from $2,500 in the fourth quarter of 2023.

Kevin Feeley: Across the commercial insurance payer environment, we continue to enable and calibrate insurance-specific workflow to reduce administrative and procedural denials.

Kevin Feeley: That said, we remain clear-eyed about the complex operating environment where some payer business models are inherently predicated on collecting premiums while narrowly interpreting archaic medical policy and administrative requirements to suit their own business. Our focus on generating clinical data and articulating the value proposition of our differentiated exome as a first-in-line test will continue to underpin our advocacy for equitable access and patient-centric medical policy, all so that we can help get more families the care they need and get reimbursed fairly.

Kevin Feeley: That said, we remain clear-eyed about the complex operating environment where some payer business models are inherently predicated on collecting premiums while narrowly interpreting archaic medical policy and administrative requirements to suit their own business needs.

Kevin Feeley: Our focus on generating clinical data and articulating the value proposition of our differentiated exome as a first-in-line test will continue to underpin our advocacy for equitable access and patient-centric medical policy.

Kevin Feeley: all so that we can help get more families the care they need and get reimbursed fairly.

Kevin Feeley: Across Medicaid populations, denials are and should continue to come down as medical policy continues its momentum towards broad coverage for exome and genome testing. In particular, state Medicaid programs continue to expand coverage for rapid genetic testing in the NICU. We highlighted North Carolina, Texas, and Connecticut in our release today.

Kevin Feeley: Across Medicaid populations, denials are and should continue to come down as medical policy continues its momentum towards broad coverage for exome and genome.

Kevin Feeley: In particular, state Medicaid programs continue to expand coverage for rapid genetic testing in the NICU. We highlighted North Carolina, Texas, and Connecticut in our release today.

Kevin Feeley: And on cost per test, the team's done a great job optimizing the wet lab, and there remains opportunity to couple our unparalleled genomic data set with a new generation of automation tools to drive scalability and efficiency across dry side clinical interpretation, analysis, abstracting, and report writing. Now moving down to operating expenses, total adjusted operating expense was $45 million in the second quarter of 2024.

Speaker Change: And on cost per test, the team's done a great job optimizing the wet lab, and there remains opportunity to couple our unparalleled genomic data set with new generation of automation tools to drive scalability and efficiency across dry side clinical interpretation, analysis, abstracting, and report writing.

Speaker Change: Now moving down to operating expense.

Speaker Change: Total adjusted operating expense was 45 million dollars in the second quarter of 2024. That's a reduction of 24% year-over-year and 1% sequentially.

Kevin Feeley: That's a reduction of 24% year-over-year and 1% sequential. And now consider us to be at a normalized relative OPEX space for the business ready to drive operating leverage as we do. One call out this quarter's gap expense and gap net loss in the second quarter of 2024 includes a one-time litigation charge net of expected insurance recovery of approximately $13 million. The charge relates to a stockholder-commenced lawsuit brought in the prior year as a class action on behalf of former stockholders of CM Life Sciences who did not redeem their shares in connection with the 2021 business combination between CM Life Sciences and Legacy Semaphore. The suit names CM Life Sciences and its directors at the time of that business combination. And on the bottom line, the total company adjusted net loss for the second quarter of 2024 narrowed to $2.7 million.

Speaker Change: And now consider us to be at a normalized relative OPEC space for the business, ready to drive operating leverage as we grow.

Speaker Change: One call out this quarter, GAAP expense and GAAP net loss in the second quarter of 2024 includes a one-time litigation charge net of expected insurance recovery of approximately 13 million dollars.

Speaker Change: The charge relates to a stockholder commenced lawsuit brought in the prior year as a class action on behalf of former stockholders of CM Life Sciences who did not redeem their shares in connection with the 2021 business combination between CM Life Sciences and Legacy Semaphore.

Speaker Change: The suit names CM Life Sciences and its directors at the time of that business combination.

Speaker Change: And on the bottom line, total company adjusted net loss for the second quarter of 2024 narrowed to $2.7 million. That is an improvement of 93% year-over-year and 68% sequentially, driven by gross profit growth and operating expense rationalization.

Kevin Feeley: That is an improvement of 93% year over year and 68% sequentially driven by gross profit growth and operating expense rationalization. With that, we're approaching the turn to profit. Our second quarter net cash burn was $6.1 million, which improved 89% year-over-year and 65% sequentially. And we've now delivered nine consecutive quarters of cash burn reduction. On the balance sheet, cash, cash equivalents, marketable securities, and restricted cash were a total of $108 million as of June 30, 2024. And as of June 30, 2024, there were 26,926,383 Class A common shares outstanding.

Speaker Change: With that, we're approaching the turn to profitability.

Speaker Change: Our second quarter net cash burn was 6.1 million dollars which improved 89% year-over-year and 65% sequentially and we've now delivered nine consecutive quarters of cash burn reduction.

Speaker Change: On the balance sheet, cash, cash equivalents, marketable securities, and restricted cash was a total $108 million as of June 30, 2024.

Speaker Change: and as of June 30, 2024, there are 26,926,383 Class A Common Shares outstanding.

Speaker Change: The outstanding share count includes the issuance of 645,414 shares of Class A common stock to Perceptive in April 2024 to satisfy a cashless exercise of the 800,000 warrants they received in connection with the October 2023 debt placement.

Kevin Feeley: The outstanding share count includes the issuance of 645,414 shares of Class A common stock to Perceptive in April 2024 to satisfy a cashless exercise of the 800,000 warrants they received in connection with the October 2023 debt placement. Now turning to guidance, we are again raising previously issued revenue guidance and now expect to deliver revenues between 255 and $265 million for the full year 2025. We are reiterating previously issued adjusted gross margin guidance to land full year 2024 at 60% or higher.

Speaker Change: and now turning to guidance.

Speaker Change: We are again raising previously issued revenue guidance and now expect to deliver revenues between $255 and $265 million for the full year 2024.

Speaker Change: We are reiterating previously issued adjusted gross margin guidance to land full year 2024 at 60% or higher.

Kevin Feeley: And we're improving our net cash burn guide and now anticipate using $65 to $75 million of net cash for the full year 2024. This latest guide here contemplates fully absorbing the legal settlement should that be required in 2024. The ultimate timing of that payment is still uncertain at this time, and as a reminder, the next scheduled payment under the 2022 Legacy Semaphore Payer Settlement is $10 million, and that will be paid in December of 2020. Finally, we once again reiterate our expectation to turn the business profitable in 2025. With that, I'll turn you back to Katherine.

Speaker Change: And we're improving our net cash burn guide and now anticipate using 65 to 75 million dollars of net cash for the full year 2024.

Speaker Change: That latest guide here contemplates fully absorbing the legal settlement should that be required in 2024. The ultimate timing of that payment is still uncertain at this time.

Speaker Change: And as a reminder, the next scheduled payment under the 2022 Legacy Semaphore Payer Settlement is $10 million, and that will be paid in December of 2024.

Speaker Change: Finally, we once again reiterate our expectation to turn the business profitable in 2025.

Katherine A. Stueland: It's wonderful. Thanks, Kevin. Over the past few years, we've successfully transformed GeneDx into a driving force in genetic diagnostics, and we couldn't have gotten here alone. Our patients and their families, our customers, collaborators, our team members, and our shareholders make all of this possible. And I want to thank each one of those constituents for their ongoing dedication and support. We're painting a vision for a better future in health care, one where every family can benefit from earlier diagnosis of disease through genomics, and with another successful quarter under our belt, or one step closer to realizing that, I will now open the call up for questions. As a reminder, to ask a question, please press star 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 once again.

Katherine A. Stueland: With that, I'll turn it back to Katherine. Wonderful. Thanks, Kevin. Over the past few years, we've successfully transformed GeneDx into a driving force in genetic diagnostics, and we couldn't have gotten here alone.

Katherine A. Stueland: Our patients and their families, our customers, collaborators, our team members, and our shareholders make all of this possible, and I want to thank each one of those constituents for their ongoing dedication and support.

Katherine A. Stueland: We're painting a vision for a better future in healthcare, one where every family can benefit from earlier diagnosis of disease through genomics, and with another successful quarter under our belt, we're one step closer to realizing that future.

Katherine A. Stueland: We'll now open a call up for questions.

Speaker Change: As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.

Operator: Please stand by while we compile the Q&A roster. Our first question comes from a line from Tyco Peterson with Jef... Hey, good afternoon. Maybe starting with pharma, biopharma, it looks like you added 11. I think you had 21 at the end of the first quarter.

Speaker Change: Please stand by while we compile the Q&A roster.

Speaker Change: Our first question comes from a line of Tyco Peterson with Jeffreys.

Tyco Peterson: Okay, good afternoon. Maybe starting with pharma, biopharma, it looks like you added 11. I think you had 21 at the end of the first quarter. So maybe just talk a little bit about momentum, you know, spend, you know, on biopharma, how much is data versus kind of new program ads?

Tyco Peterson: So maybe just talk a little bit about momentum, you know, spend on biopharma, how much data versus kind of new program ads? Certainly. So we added, as you pointed out, several new programs for the quarter. We're really pleased. Some of that is repeat business from existing biopharma partners. That is the nature of these programs, predominantly connecting biopharma partners with providers who have patients who may be eligible for a clinical trial.

Speaker Change: Certainly. So we added, as you pointed out, several new programs for the quarter. We're really pleased. Some of that is repeat business from existing Biopharma partners.

Speaker Change: The nature of these programs is predominantly connecting biopharma partners with providers who have patients who may be eligible for a clinical trial.

Tyco Peterson: And then, as you saw in June, we announced a program with support from biopharma companies to open up access to epilepsy exome testing. And so we are, through that program, able to run all patients through insurance, work with biopharma companies on those patients who have been denied, to be able to ensure that no patient has a barrier to that testing.

Speaker Change: And then as you saw in June , we announced a program in support from biopharma companies to open up access to epilepsy exome testing.

Speaker Change: And so we are, through that program, able to run all patients through insurance, work with biopharma companies.

Speaker Change: on those patients who have been denied to be able to ensure that no patient has a barrier to that testing.

Katherine A. Stueland: So it's data by way of connecting these biopharma companies to patients, and we continue to see that as being the most, I think, representative commercial approach for the data business over the next 18 months or so. It's meaningful, not only in terms of building up that ecosystem, diversifying our revenue streams, but, importantly, really paving a path forward for a lot of these patients to make sure that they know what they can do beyond getting a diagnosis, and being able to connect them with it. And then what are you assuming for the whole exome, genome mix, and revised guidance? Can you kind of bridge the new guide with the old and explain what's getting better?

Speaker Change: It's data by way of connecting these biopharma companies to patients.

Speaker Change: And we continue to see that as being the most...

Speaker Change: I think representative commercial approach for

Speaker Change: The data business over the next 18 months or so, it's meaningful not only in terms of building up that ecosystem, diversifying our revenue streams,

Speaker Change: But I think, importantly, really paving a path forward for a lot of these patients to make sure that they know what they can do beyond getting a diagnosis, being able to connect them with those next steps.

Speaker Change: And then what are you assuming for whole exome, genome mix, and revised guidance? Can you kind of bridge the new guide with the old and what's getting better?

Katherine A. Stueland: Yeah, so I look, I'm really encouraged with the trajectory of exome and genome volumes. From a mixed perspective, the 31% was a function of really strong underlying volume growth for exome and genome, but then also growth in other lines. And we continue to look at the test, menu, and our offerings to optimize for unit economics as well as clinical impact. As we've said previously, we expect sequential growth in the exome genome mix in terms of total tests anywhere from one to three percent per quarter.

Speaker Change: Yeah, so I, look, I'm really encouraged with the trajectory of exome and genome volumes. From a mixed perspective, the 31%

Speaker Change: was a function of really strong underlying volume growth for exome and genome, but then also growth in other lines. And we continue to look at the test.

Speaker Change: menu and our offerings to optimize for unit economics as well as clinical impact.

Speaker Change: We've said previously expect sequential growth and exome genome mix in terms of total tests anywhere from one to three percent per quarter. We deliver that this quarter and I'd expect the similar pacing for the remainder of 2024.

Katherine A. Stueland: We deliver that this quarter, and I'd expect a similar pacing for the remainder of 2025. And last one on pricing over $2800, you know, in 2Q. Is there still kind of room to go in the back half of the year? And then Kevin, I think you talked about reaching profitability in the next couple quarters. I mean, that's a little bit different than what you previously said about 2025. I'm just curious if you can give us a sense of when in 2025 you think you'll hit it.

Speaker Change: And the last one, just on pricing, over $2,800 in 2Q, is there still kind of room to go in the back half of the year? And then, Kevin, I think you talked about reaching profitability in the next couple quarters. I mean, that's a little bit different than what you previously said on 2025. I'm just curious if you can give us a sense of when in 2025 you think you'll hit it.

Kevin Feeley: Yeah, really encouraged about the performance on collection and bringing down denials to raise that average reimbursement rate. Previously, we said to expect with each passing quarter of 2024 to assume something close to $100 in uplift in that aggregate rate. We were able to outperform that in the second quarter, and I think that remains the expectation. The expectation is that we ought to be able to raise that rate by something in the order of magnitude of $100 per quarter for each of the remaining quarters in 2024. Overall, really strong with where we came out in the second quarter.

Speaker Change: Yeah, really encouraged about the performance on collection and bringing down denials to raise that average reimbursement rate.

Speaker Change: Previously we said expect with each passing quarter of 2024 to assume something close to $100 in uplift in that aggregate rate. We were able to outperform that in the second quarter and I think that remains

Speaker Change: The expectation is that...

Speaker Change: We ought to be able to raise that rate, something in the order of magnitude of $100 per quarter for each of the...

Speaker Change: remaining quarters in 2024.

Speaker Change: Overall, really strong with where we came out in the second quarter, or really pleased with where we came out.

Kevin Feeley: We're really pleased with where we came out. Overall, on timing for the turn to profitability, look, we just posted a net loss of under $3 million, $2.7 million. So we're right on the doorstep.

Speaker Change: Overall on timing for the turn to profitability, look we just posted a net loss of sub 3 million dollars, 2.7 million dollars, so we're right on the doorstep. It will be in a coming quarter.

Kevin Feeley: It will be in the coming quarter. The guide reiterated that the full year of 2025 on that measure of adjusted net loss, the balance of the full year 2025 will be profitable, and there will be a quarter coming up here, likely in the first half of 2025. But we're on the precipice of hitting that milestone. Great, thank you very much.

Speaker Change: The guide reiterated that the full year of 2025, on that measure of adjusted net loss, the balance of the full year 2025 will be profitable, and there will be a quarter upcoming here, likely in the first half of 2025.

Speaker Change: but we're on the precipice of hitting that milestone.

Speaker Change: Great, thank you very much.

Tyco Peterson: Our next question will come from the line of Bill Bonello with Greg Howard. Hey guys, great quarter. Can you tell us a little bit more about the EPIC collaboration?

Speaker Change: Our next question will come from the line of Bill Bonello with Greg Hallam.

William Bishop Bonello: How quickly do you expect to have that rolled out? Maybe, you know, the breadth of your clients who are using Epic and then maybe a little bit on the cost. Certainly, I'll kick it off.

Bill Bonello: Hey guys, great quarter. Can you tell us a little bit more about the EPIC collaboration? How quickly do you expect to have that rolled out? Maybe you know

Bill Bonello: the breadth of your clients who are using Epic and then maybe a little bit on the cost.

Katherine A. Stueland: And thanks, Bill. You know, the EPIC partnership is one that other companies in our space have proven really can drive patient access and can accelerate utilization. And so we took a very data-driven approach to assessing the opportunity and whether or not the timing was right for us to make the investment now. And we saw a really impressive pipeline of opportunity, particularly in the NICU, to be able to drive our rapid whole genome sequencing product into that space. And strategically, that becomes a fantastic opportunity in terms of being able to embed our services. It also ensures that it is easier for these providers to order.

Speaker Change: Certainly, I'll kick it off and thanks, Bill. You know, the EPIC partnership is one that other companies in our space have proven really can drive patient access and can accelerate

Speaker Change: And so we took a very data-driven approach to assessing the opportunity and whether or not the timing was right for us.

Speaker Change: to make the investment now.

Speaker Change: And we saw a really impressive pipeline of opportunity, particularly in the NICU, to be able to drive our rapid whole genome sequencing product into that space. And strategically, that becomes...

Speaker Change: a fantastic opportunity in terms of being able to embed our services.

Speaker Change: It ensures that it is easier for these providers to order, and then if you think about then extending...

Katherine A. Stueland: And then if you think about extending that same sort of service through an entire health system more broadly into the pediatric setting, we think that it will translate nicely. So, we took a look at the pipeline of opportunity, and we're really pleased with what we believe we can achieve, likely in the second half of 2025. It requires some work later this year and into the first part of next year to actually make sure that the engineering side of things is well-planned and well-deployed in partnership, And so we've got that on our roadmap for Q4 and into next year. But as I said, we expect to start to see the benefits of that in the second half of 25, but even more so broadly into 26. Okay, thanks.

Speaker Change: [inaudible]

Speaker Change: So we took a look at the pipeline of opportunity.

Speaker Change: And we're really pleased with what we believe we can realize, likely in the second half of 2025.

Speaker Change: Some work later this year and into the first part of next year to actually make sure that the engineering side of things is well-planned and well-deployed in partnership with EPIC.

Speaker Change: And so we've got that on our roadmap for Q4 and into next year. But as I said, we expect to start to see the benefits of that in the second half of 25, but even more so broadly into 26 and beyond.

William Bishop Bonello: And then just one other question, maybe you could talk a little bit more about what you're calling the reinvestment in whole genome and sort of specifically, you know, what it is you're spending on, what, you know, what the improvements will be, and I'm assuming those expenditures are probably in the guidance, but just to confirm. Yeah, all of the investments are contemplated in the guide that we provided today, the updated guide.

Speaker Change: Okay, thanks. And then just one other, maybe you could talk a little bit more about the, what you're calling the reinvestment in whole genome, and sort of specifically, you know, what it is you're, you're, you're spending on.

Speaker Change: What the improvements will be, and I'm assuming those expenditures are probably in the guidance, but just to confirm that.

Speaker Change: Yeah, all of the investments are contemplated in the guide that we provided today, the updated guide.

William Bishop Bonello: So, the reality is that when we prioritized the company's efforts last fall, everything was organized around really driving exome utilization, and we put a pause on some of the genome improvements that we would have wanted to invest in earlier. Those are, namely, faster turnaround times, getting a written report out in five days. We previously had been doing a verbal and a number of dates, and that is no longer what customers deem to be the right product delivery.

Speaker Change: The reality is, when we prioritized the company's efforts last fall,

Speaker Change: Everything was organized around really...

Speaker Change: driving exome utilization and we put a pause on some of the some of the genome improvements that we would have wanted to invest in earlier. Those are namely faster turnaround times, getting a written report out in five days,

Speaker Change: We previously have been doing a verbal and a number of dates, and that is...

Speaker Change: no longer what customers deem to be the right product delivery. So being able to drive a written report in five days.

William Bishop Bonello: So, being able to deliver a written report in five days makes it easier for sample collection. So, a cheek swab or a buckle sample is something that is an additional product feature, and then repeat expansions help us drive a higher diagnostic yield and ensure that there doesn't need to be any retesting.

Speaker Change: making it easier for sample collection, so a cheek swab or a buckle sample.

Speaker Change: is something that is an additional product feature and then repeat expansions help us drive a higher diagnostic yield.

Katherine A. Stueland: So, those features we have put a pause on, but because of the strength of our performance, we're really, really pleased to be able to start, as we said, reinvesting in genome and ensuring that we can continue to translate our leadership that we've enjoyed with 80% of clinical exomes coming through GeneDx, into having that same sort of market leadership on the rapid whole genome side of things. Yeah, the only other thing I'd add to that is just overall reducing friction on the customer experience. And the EPIC collaboration is a prime example of that.

Speaker Change: and ensure that there doesn't need to be any retesting. So.

Speaker Change: Those features we have put a pause on, but because of the strength of our performance, we're really, really pleased to be able to be in a place where we can start.

Speaker Change: As we said, reinvesting in genome and ensuring that we can continue to translate our leadership that we've enjoyed with 80% of clinical exomes coming through GeneDx, having that same sort of market leadership on the rapid whole genome side of things as well.

Speaker Change: Yeah, the only other thing I'd add to that is just overall reducing friction on the customer experience, and the EPIC collaboration is a prime example of that. We've heard loud and clear from

Katherine A. Stueland: We've heard loud and clear from, in particular, hospital-based physicians, that the EPIC ordering process is really important to their experience. And we want to meet customers where they are in that regard. And just to follow up on that, I assume Epic is sort of a two-way street, it's it's it's ordering and results delivery. Yes, yes. Okay, thank you very much.

Speaker Change: in particular, hospital-based physicians.

Speaker Change: that the EPIC ordering process is really important to their experience, and we want to meet customers where they are in that regard.

Speaker Change: And just to follow up on that, I assume EPIC is sort of a two-way street, it's ordering and results delivery?

Speaker Change: Yes, yes.

Speaker Change: Okay, thank you very much.

Mark Anthony Massaro: Our next question will come from the line of Mark Massaro with BTIG. Hey, guys, congratulations on a solid quarter. When I look at Q2, I guess this might be for you, Kevin, the $69 million of revenue from continuing operations, that's approximately 7 or 8 million operations sequentially. Can you quantify if there was any material contribution from prior period collections?

Speaker Change: Our next question will come from the line of Mark Massaro with BTIG.

Mark Anthony Massaro: Hey guys, congratulations on a solid quarter. When I look at the Q2, I guess this might be for you, Kevin.

Mark Anthony Massaro: The $69 million of revenue from continuing ops, that's approximately $7 or $8 million of ops sequentially. Can you quantify if there was any material contribution from prior period collections?

Kevin Feeley: Yeah, and the way I characterize that is that average reimbursement rate, the $2,800 that we cited, is looking at the resulted volume in the quarter as a function of revenue and the calculations. They're taking a historical look back in order to quantify the rate, and we continue to see overall improvements in collection performance vis-a-vis a reduction in denials, and we've seen that consistently over the past three quarters or so, and so those calculations used to derive revenue are continuing to be refined to pick up the improved performance, and so the way you see that is in the uplift in the overall rate there. I think $2,800 or so is a good baseline to assume moving forward as a minimum.

Kevin Feeley: Yeah, and the way I characterize that is that average reimbursement rate, the $2,800 that we cited, is looking at

Speaker Change: resulted volume in the quarter as a function of revenue and the calculations. They're taking a historic look back in order to quantify the rates and we continue to see overall improvements in collection performance.

Speaker Change: vis-a-vis a reduction in denials and we've seen that consistently over the past three quarters or so and so

Speaker Change: Those calculations used to derive revenue are continuing to...

Speaker Change: be refined to pick up the improved performance.

Speaker Change: And so the way you see that is in the uplift in the overall rate there. I think the $2,800 or so is a good baseline to assume.

Speaker Change: Moving forward as a new baseline from which we'll look to improve in future quarters.

Mark Anthony Massaro: And then, you know, when I look back on the last couple of years, and I know that you guys underwent a transformation and a management change, but, you know, the last couple of years, you had about 55% of revenue in the second half, obviously, and 45 in the first half. When I look at your guidance split this year, it's 50-50 right down the middle. And that would sort of imply that, like, Q3 and Q4, if they come in flat with Q2 levels, you know, you're still going to come in above the high end of your guidance.

Speaker Change: Okay, and then, you know, when I look back the last couple of years, and I know that you guys underwent a transformation and a management change, but, you know, the last couple of years you had about

Speaker Change: 55% of revenue in the second half, obviously 45% in the first half.

Speaker Change: When I look at your guidance split this year, it's 50-50 right down the middle. And that would sort of imply that Q3 and Q4, if they come in flat with Q2 levels,

Mark Anthony Massaro: So, I guess I'm really asking about seasonality and pacing and maybe walking me through how, you know, what could happen in Q3 or Q4 that could cause revenue to come in down sequentially from the Q2 level.

Speaker Change: You know, you're still going to come in above the high end of your guidance. So, I guess I'm really asking about seasonality and pacing and maybe walk me through how.

Speaker Change: You know, what could happen in Q3 or Q4 that could cause revenue to come in down sequentially from the Q2 level?

Kevin Feeley: Yeah, maybe one way to think about it, Mark, is that the revised guide still puts us at the low end there, nearly $10 million higher than the previous high end. So we view it as a substantial increase in the guide, which should tell you our relative confidence in the business to continue its momentum. Overall seasonality, as we've always said, Q4 is typically the strongest of the quarters, with Q3 being particularly light given the available days for physicians to have appointments.

Speaker Change: Yeah, maybe one way to think about it, Mark, is the revised guide,

Mark Anthony Massaro: still puts us at the low end there, nearly $10 million higher than the previous high end. So we view it as a substantial increase in the guide which should tell you our relative confidence on the business to continue its momentum.

Speaker Change: Overall seasonality, as we've always said, Q4 is typically the strongest of the quarters with Q3 being particularly light given available days for physicians to have appointments.

Kevin Feeley: We certainly don't want to signal any hesitancy with respect to continuing on our growth path. We think the guide uplift was meaningful and should be read that way. The third quarter is expected to come in a little bit lighter than the second in terms of seasonality, and then the fourth quarter on top of that.

Speaker Change: And so...

Speaker Change: I certainly don't want to signal any hesitancy with respect to continuing on our growth path. We think the guide uplift was meaningful and should be read.

Speaker Change: The third quarter expected to come in a little bit lighter than the second in terms of seasonality and then the fourth quarter on top of that. I'd say all of that within the context of

Kevin Feeley: I'd say all of that within the context of we wanted to leave room in the guide throughout the year with respect to any decisions we might make on the non-exome portion of the portfolio as we continue this effort to rationalize and optimize test offerings. And so the guide allows some room to absorb if we make any of those decisions. Okay, that's helpful.

Speaker Change: We've wanted to leave room in the guide throughout the year with respect to any decisions we might make on the non-exome portion of the portfolio as we continue this effort to rationalize and optimize test offering.

Speaker Change: And so the guide allows some room to absorb if we make any of those decisions.

Mark Anthony Massaro: And then maybe the last question for me, you guys are clearly knocking on the door of profitability, and you come in at, you know, $2.7 million adjusted net loss. I think, you know, for people listening on the line, I think, would you mind just reminding us that your definition of profitability would be an adjusted net loss of either break even or slightly above? Or is there some other definition?

Speaker Change: Okay, that's helpful. And then maybe the last question for me, you guys are clearly knocking on the door of profitability and, you know, coming in at

Speaker Change: you know, $2.7 million adjusted net loss.

Speaker Change: I think, you know, for people listening on the line, I think, would you mind just reminding us

Speaker Change: that your definition of profitability would be to an adjusted net loss of either, you know, breakeven or slightly up.

Kevin Feeley: Because it seems like there is an opportunity to potentially get there sooner than 2025. But maybe just walk me through some of the incremental spending you have in the back half and how we should be thinking about, you know, your definition of profitability. Yeah, the right definition there being like for like with that adjusted net loss of $2.7 million we posted in the second quarter here. And that's adjusted really to take out non-cash items, depreciation, amortization, share-based compensation, and any non-recurring one-time item.

Speaker Change: Or is it some other definition? Because it seems like there is an opportunity to potentially get there sooner than 2025. But maybe just walk me through some of the incremental spending you have in the back half and how we should be thinking about your definition of profitability.

Speaker Change: Yeah, the right definition there being like-for-like with that adjusted net loss of $2.7 million we posted in the second quarter here. And that's adjusted really to take out non-cash items, depreciation, amortization, share-based compensation.

Speaker Change: and any non-recurring one-time item.

Mark Anthony Massaro: That was the second part of your question, Mark? Yeah, it was on, you know, obviously, if you keep doing what you're doing, you have a chance to get to profitability before 2025. So I'm just trying to think about what type or incremental level of spending you have contemplated in the second half of this year that, you know, because you're call it 3 million away from your goal. So I'm just trying to understand what you have planned for OPEX in the back half of this year that could, you know, keep your profitability out to 25. Yeah, look, I think you're thinking about it the right way.

Speaker Change: Is that the second part of your question, Mark?

Mark Anthony Massaro: Yeah, it was on...

Mark Anthony Massaro: Obviously, if you keep doing what you're doing, you have a chance to get to profitability before 2025.

Mark Anthony Massaro: What type or incremental level of spending do you have contemplated in the second half of this year?

Mark Anthony Massaro: that, you know, because you're, call it, three million away from your goal. So I'm just trying to understand what you have planned for OPEX in the back half of this year that could

Kevin Feeley: We provided the guide on gross profit of 60% or higher. We outperformed that in the second quarter, here with 62%. I would expect a fairly stable gross margin profile for the remainder of the year. And like I said in my prepared remarks, I think that OPEX has really leveled out. And so if the business were to continue on its top line growth trajectory, which we expected to be imminent with respect to the next couple quarters, having one of those hit that point of break. Great, thanks for the time.

Mark Anthony Massaro: You know, keep your profitability out to 25.

Mark Anthony Massaro: Yeah

Speaker Change: Look, I think you're thinking about it the right way. We provided the guide on gross profit of 60% or higher. We outperformed that in the second quarter here with 62%.

Speaker Change: would expect fairly stable gross margin profile for the remainder of the year. And like I said in my prepared remarks, I think that OPEX has really leveled out.

Speaker Change: And so if the business were to continue on its top-line growth trajectory, which we expect it to, we're imminent with respect to the next couple quarters having one of those hit that point of break-even.

Speaker Change: Great. Thanks for the time.

Daniel Gregory Brennan: Our next question will come from the line of Dan Brennan with TD County. Great, thanks for the questions. Congratulations on the quarter. Maybe just on denial rates, can you just reflect what they were in Q2, Kevin? I didn't hear you say you made progress on that, but I know you've talked about a still meaningful opportunity to close those. Maybe in that context, could you speak to how the progress with state Medicaid coverage plays into that? Yeah Dan, thanks.

Speaker Change: Our next question will come from the line of Dan Brennan with TD Cowan.

Daniel Gregory Brennan: Great, thanks for the questions. Congrats on the quarter. Maybe just on denial rates, can you just reflect what they were in Q2, Kevin? I didn't hear... I know you said you made progress on it, but I know...

Speaker Change: You've talked about a still meaningful opportunity to close those. Maybe in that context, could you speak to how the progress with state Medicaid coverage plays into that?

Kevin Feeley: I think the denial rate, slightly less than 50% of all tests now being denied, with a fairly equal split between the commercial insurance portfolio and Medicaid, but for vastly different reasons on those denials. Where we've seen a nice reduction in denials, as you can imagine, on the Medicaid side, is on the heels of the momentum in various states picking up coverage for exome and whole genome sequencing. What we tend to see is that when a Medicaid program picks up coverage, there are fairly clear medical necessity guidelines, administrative guidelines, and, therefore, predictable behavior with respect to the adjudication of claims.

Kevin Feeley: Yeah, Dan.

Kevin Feeley: I think the denial rate is slightly less than 50% of all tests now being denied, with a fairly equal split between the commercial insurance portfolio and Medicaid, but for vastly different reasons on those denials.

Speaker Change: where we've seen...

Speaker Change: Nice reduction in denials, as you can imagine, on the Medicaid side is on the heels of the momentum in various states picking up coverage.

Speaker Change: for exome and or whole genome sequencing.

Speaker Change: What we tend to see is that when a Medicaid program picks up coverage, there's fairly clear medical necessity guidelines, administrative guidelines, and therefore predictable behavior with respect to adjudication of claims. And so it's a matter of policy becoming effective.

Kevin Feeley: And so it's a matter of policy becoming effective, working out some initial kinks operationally, but then we tend to see a much lower denial rate and something far more predictable. Many payers have some published criteria, but then we're still subject to individual claim adjudication subjectivity with respect to meeting administrative requirements and or medical necessity.

Speaker Change: Working out some initial kinks operationally, but then we tend to see a much lower denial rate and something far more predictable. Within a commercial insurance portfolio, almost the opposite, whereby many

Speaker Change: Many payers have some published criteria, but then we're still subject to individual claim adjudication subjectivity with respect to meeting administrative requirements and or medical necessity.

Daniel Gregory Brennan: And so we're attacking the problem by ensuring that we can retrofit payer-specific workflows up front. Very different experiences, but slightly less than half of all claims are being denied at this point, which is significant progress from where we were at this point a year ago. And in terms of the 14 Medicaid states where you have approval, have you baked in any more expectations for further coverage expansion within your guidance for 2024?

Speaker Change: And so we're attacking the problem.

Speaker Change: by ensuring that we can retrofit payer-specific workflows up front. Very different experiences, but slightly less than half of all claims being denied at this point, which is significant progress from where we were at this point a year ago.

Speaker Change: And in terms of the 14 Medicaid states where you have approval, have you baked in any more expectation for further coverage expansion within your guidance for 2024?

Daniel Gregory Brennan: What we tend to look at it is, To count it once enacted and published publicly. I think the uncertainty in, the way in which states need to take up the issue individually, subject to political and other bureaucratic and fiscal means within the state makes it really hard to predict.

Speaker Change: We tend to look at it is

Speaker Change: To count it once enacted and published publicly, I think the uncertainty in

Speaker Change: The way in which states need to take up the issue individually, subject to political and other bureaucratic and fiscal means within the state, makes it really hard to predict.

Kevin Feeley: So we're not in the business of predicting which states will come on next and only incorporating into the guide those states and coverage decisions that we have a direct line of sight on. Got it. And maybe just staying on that theme, like the biomarker bills, have they had much impact yet? Obviously, there's enthusiasm for what could happen, but just kind of wondering what kind of progress, if any, you've seen from payers kind of starting to pay in those states.

Speaker Change: So, we're not in the business of predicting which states will come on next and only incorporating to the guide those states and coverage decisions that we have direct line of sight to.

Speaker Change: Got it. And maybe just staying on that theme, like the biomarker bills, have they had much impact yet? Obviously there's enthusiasm for what could happen, but just kind of wondering what kind of progress, if any, you've seen from payers kind of starting to pay in those states.

Kevin Feeley: Yeah, we are seeing a direct impact of biomarker bills and then Medicaid coverage coming online, a product of patient advocates, our team in market access, policymakers, thought leaders, all coming together to take a look at the problem that these states are facing. And so there is a really nice correlation between it. We see other states where they're going right to Medicaid coverage without a biomarker bill, but there is a correlation, including recently here in Connecticut.

Speaker Change: Yeah, we are seeing a direct impact of biomarker bills and then Medicaid coverage coming online and it's...

Speaker Change: The product of patient advocates, our team in market access, policy makers, thought leaders.

Speaker Change: all coming together to take a look at the problem that these states are facing. And so there is a really nice correlation between it. We see other states where they're going right to Medicaid coverage without a biomarker bill, but there is a correlation, including recently here in Connecticut.

Daniel Gregory Brennan: And maybe one more, just on Whole Genome, since you kind of seem to be an increasing focus now, just, can you remind us, like, how big is Whole Genome today for you within that genome-exome split? And to the extent that it does really pick up here, what kind of impact could it have on your business from a revenue margin standpoint? So, no impact on our 2024, you know, the percentage. We have not broken it down between the exome and genome. It's a small, small percentage, though, in terms of the business. It is small, but it is growing rapidly. Right?

Speaker Change: Got it. And maybe one more, just on Whole Genome, since you kind of seem to be an increasing focus now. Just, can you remind us, like, how big is Whole Genome today for you within that genome-exome split? And to the extent genome does really pick up here, what kind of impact could it have on your business from a revenue margin standpoint?

Speaker Change: So, no impact on our 2024, you know, the percentage, we have not broken it down between Exome and Genome. It's a small, small percentage, though, in terms of the business. Small, but growing rapidly, right? So.

Katherine A. Stueland: So, as we think about 2025, I think that's where we expect to see that it will really be a greater focus by way of volumes, by way of revenues, and we'll put some thought into gross margins as well. One thing to note, Dan, one thing to note is that Texas actually, their Medicaid actually skipped exome and went directly to genome. And I think that that's really an important flag that they're planting.

Speaker Change: As we think about 2025, I think that's where we expect to see that it will really be a greater focus by way of volumes, by way of revenues, and we'll put some thought into gross margins as well on that.

Daniel Gregory Brennan: Great, okay, thank you, congrats. One thing to note, Dan, one thing to note is...

Speaker Change: Texas actually, their Medicaid actually skipped exome and went directly to genome.

Speaker Change: And I think that that's really an important flag that they're planting.

Katherine A. Stueland: You know, we're not going to be moving forward in a genome world if we're not going to be reimbursed. And so making sure that we continue to tie back our strategy to ensuring that our services get paid for is something we're going to continue to have a lot of discipline on. But I think that that's a really interesting one to take a look at, and we'll keep our eyes open to see if other states might also think about leapfrogging over the exome straight to the genome.

Speaker Change: Thank you so much.

Speaker Change: We're not going to be moving forward in a genome world if it's not going to be reimbursed. And so making sure that we continue to tie back our strategy to ensuring our services get paid for is something we're going to continue to have a lot of discipline on. But I think that that's a really interesting one.

Speaker Change: to take a look at and we'll keep our eyes open to see if other states might also think about leapfrogging over exome straight to genome.

Kevin Feeley: And the pivot there is more to say we'll be ready for that, right? If you go back to January 2023, we changed the name of the company to GeneDx and intentionally picked our ticker symbol as WGS, knowing there was a day where we'd be leading towards an exome and genome only bet. Great. Sounds good.

Speaker Change: Yeah, and the pivot there is more to say, we'll be ready for that, right? If you go back to January 2023, we changed the name of the company to GeneDx and intentionally picked our ticker symbol as WGS.

Speaker Change: knowing there was a day where we'd be leading towards an exome and genome only backbone.

Speaker Change: Great. Sounds good. Thanks, Kevin. Thanks, Katherine.

Daniel Gregory Brennan: Thanks, Kevin. Thanks, Katherine. Our next question will come from the line of Matt Sykes with Goldman Sachs. Hey, good afternoon. Hey, Katherine. Hey, Kevin.

Speaker Change: Our next question will come from the line of Matt Sykes with Goldman Sachs.

Matthew Carlisle Sykes: Thanks for taking my questions. Congratulations on the quarter. Kevin, if we could just start out, you made some comments about reducing the cost per test. You made great progress there.

Matthew Carlisle Sykes: Hey, good afternoon. Hey, Katherine. Hey, Kevin. Thanks for taking my questions. Congrats on the quarter. Kevin, if we could just start out, you made some comments about reducing cost per test. You made great progress there. Is there any way you can kind of help quantify what those changes in cost per test have been historically or maybe on a quarterly basis, just to give us some context with what progress you've made?

Kevin Feeley: Is there any way you can kind of help quantify what those changes in cost per test have been historically or maybe on a quarterly basis, just to give us some context about what progress you've made? [inaudible] Yeah, maybe one way to think about it is if you go back to this quarter 2021, when Katherine joined the company, and I think it's fair to say we nearly halved the cost per test on Exome in that period of time.

Speaker Change: This quarter, 2021, is when Katherine joined the company, and I think it's fair to say we...

Kevin Feeley: Nearly halved the cost per test on Exome in that period of time.

Kevin Feeley: Primarily coming from wet lab process improvements. Fairly modest impact, but appreciative of some lower input cost from manufacturers, but much of those improvements coming in the form of automation and process improvements that we were able to introduce into the laboratory.

Speaker Change: predominantly coming from wet lab process improvements.

Kevin Feeley: Fairly modest impact, but appreciative of some lower input cost from manufacturers. But much of those improvements coming in the form of automation and process improvements that we were able to introduce into the laboratory.

Matthew Carlisle Sykes: Certainly, we're seeing the benefit of scale. With more volume comes some scalability and efficiency gains on a cost per test basis. And we've made good progress in reducing dry side costs. That being analysis, interpretation, abstracting, and report writing, but those processes are still fairly manual, and we have a large dedicated differentiated team there, but that's where we see a major opportunity in the next year to three years in further reducing costs as we scale to be able to further deliver margin expansion via cost per test reduction.

Kevin Feeley: Certainly we're seeing the benefit of scale with more volume comes some scalability and efficiency gains on a cost per test basis.

Kevin Feeley: We've made...

Kevin Feeley: Good progress in reducing dry side costs.

Speaker Change: That being analysis, interpretation, abstracting, report writing.

Speaker Change: Those processes are still fairly manual, and we have a large, dedicated, differentiated team there. But that's where we see major opportunity in the next year to three years in further reducing costs.

Speaker Change: as we scale to be able to further deliver margin expansion via cost per test reduction.

Kevin Feeley: And then just on the cash burn guide you brought down. I'm just trying to square that guidance change with the comments you made about leaning into investment. So I'm just wondering where that cost savings is coming from. I don't know if it's the legacy test portfolio and supporting those tests or other areas, but maybe just help me square the leaning into investments with the continual reduction in cash burn that you've shown. Yeah, there are a few different areas to think about there.

Speaker Change: Got it. And then, just on the cash burn guide, which you brought down,

Speaker Change: I'm just trying to square that guidance change with the comments you made about leaning into investments.

Speaker Change: So I'm just wondering where that cost savings is coming from, I don't know if it's legacy test portfolio and supporting those tests or other areas, but maybe just help me square the leaning into investments with the continual reduction in cash burn that you've shown.

Matthew Carlisle Sykes: Certainly, exome cost per test, like we spoke about, we've been able to drive meaningful margin expansion, both from COGS reductions, but also from increased average reimbursement rates, therefore expanding gross profit. I'd say ancillary to improvements we've made focused on exome, we are seeing improved gross margin on the non-exome tests that remain. We've gone through a fairly extensive exercise over the past year to retire tests that were of lower value clinically to physicians and patients but also dragged on gross margin. We've retired those tests.

Speaker Change: both from COGS reductions, but as well as increased average reimbursement rate, therefore expanding gross profit.

Speaker Change: I'd say ancillary to improvements we've made focused on exome, we are seeing improved gross margin on the non-exome tests that remain.

Speaker Change: We've gone through a fairly extensive exercise over the past year to retire tests that were lower value clinically to physicians and patients, but also dragged on gross margin. We've retired those tests.

Kevin Feeley: The bulk of the other panel line that you'll see in our volume splits in the release is chromosomal microarray, and that test, along with the hereditary cancer line, we've been able to expand gross margins nicely over the last year. I'd say that was somewhat a byproduct of the improvements we've made throughout processes to benefit exome and genome, but nonetheless, we're seeing good margin expansion in those test From an OPEX standpoint, muscle memory throughout this organization to find ways to get more efficient, to look at processes, to use technology, and we're going to continue to do that. So do expect that in the coming quarters, that adjusted net loss or net income will pretty closely conform to our cash flow on a quarterly basis. I did call out, of course, two large lumpy items.

Speaker Change: The bulk of the other panel line that you'll see in our volume split in the release is chromosomal microarray.

Speaker Change: And that test, along with the hereditary cancer line, we've been able to expand gross margins nicely over the last year. I'd say those were somewhat a byproduct of the improvements we've made throughout processes to benefit exome and genome, but nonetheless, we're seeing good margin expansion in those test offerings.

Speaker Change: From an OPEX standpoint,

Speaker Change: muscle memory throughout this organization to find ways to get more efficient.

Speaker Change: to look at process, to use technology, and we're going to continue to do that.

Speaker Change: So do expect...

Speaker Change: that in the coming quarters, that adjusted.

Speaker Change: Net loss or net income will pretty closely conform to our cash flow on a quarterly basis. I did call out, of course, two large lumpy items. December will be $10 million for

Kevin Feeley: December will be $10 million for the payer settlements that Semaphore signed in 2022 and then potentially making that $13 million net payment on the litigation settlement. So that might help bridge the cash burn guide to our current run rate on adjusted net loss.

Speaker Change: the payer settlement that Semaphore signed in 2022.

Speaker Change: and then potentially making that $13 million net payment on the litigation settlement. So that might help bridge the cash burn guide to our current run rate on adjusted net loss.

Matthew Carlisle Sykes: And if I can just ask one more, Katherine, just following up on one of Dan's questions. Do you believe that sort of what you guys have achieved so far in Whole Exome and sort of the growing acceptance from payers plus the biomarker bills? Do you think it's a fair assumption to assume that when acceptance for a whole genome gets closer to that, that makeshift could actually progress even more rapidly than what you've done with the whole exome? Exome has kind of paved the way. I mean, you mentioned the example of Texas skipping over the exome to go to the genome.

Speaker Change: Got it. And if I can just ask one more, Katherine, just following up on one of Dan's questions,

Speaker Change: Do you believe that sort of what you guys have achieved so far in Whole Exome and sort of the growing acceptance from payers plus the biomarker bills...

Speaker Change: Do you think it's a fair assumption to assume that when acceptance for a whole genome, we get closer to that, that that makeshift could actually progress even more rapidly than what you've done with a whole exome?

Speaker Change: Exome is kind of paved the way. I mean you mentioned the example with Texas skipping over exome to go to genome. I'm just wondering what your thoughts are in the future of the pace of whole genome acceptance going forward relative what you experience in whole exome.

Katherine A. Stueland: I'm just wondering what your thoughts are on the future of the pace of Hold Genome Acceptance going forward relative to what you experience at HoldX. Yeah, I think, as I said, that Texas flag that they've planted is really encouraging to us in terms of where this market is going. We have debates routinely about is it exome, is it genome, and making sure that providers are ready to order the tests that we're offering. So, I do think that an important element of it is most definitely the policy to support payment for it.

Speaker Change: Yeah, I think

Speaker Change: As I said, that Texas flag that they planted, I think, was really encouraging to us in terms of where this market is going. We have debates routinely about is it exome, is it genome.

Speaker Change: making sure that

Katherine A. Stueland: There's still a lot of education that we need to do on exome and genome, more broadly in terms of the benefits by way of faster turnaround times and more comprehensive answers. So there's still, I would say, an important educational mission that we have to continue to drive in order to realize the opportunity for exome and genome. But I do think that once payers and policymakers start lining up behind a technology, we will see a faster clip of adoption there.

Speaker Change: providers are ready to order the tests that we're offering. So I do think that...

Speaker Change: An important element of it is most definitely the policy to support payment for it. There's still a lot of education that we need to do on exome and genome.

Speaker Change: more broadly in terms of the benefits by way of faster turnaround times, more comprehensive answers. So there's still, I would say, an important educational

Speaker Change: mission that we have to continue to drive in order to realize the opportunity for exome and genome. But I do think that

Speaker Change: payers and policy makers start lining up behind a technology that we will see a faster clip of adoption there. So all really important in terms of being able to lay the groundwork for

Katherine A. Stueland: So all really important in terms of being able to lay the groundwork for us. We're fortunate, as I said, 80% of exomes come through GeneDx, and we are making ourselves synonymous, not just with Exome, but with Genome. And so we intend to be that market leader. Regardless of whether a provider or a payer wants to be covering Exome or Genome, we will be the leader in either one of those. Thank you very much.

Speaker Change: We're fortunate, as I said, 80% of exomes come through GeneDx, and we are making ourselves synonymous.

Speaker Change: not just with Exome but with Genome. And so we intend to be that market leader regardless of whether a provider or a payer wants to be covering Exome or Genome, we will be the leader in either one of those spaces.

Speaker Change: Got it. Thank you very much.

Speaker Change: That concludes today's question and answer session. I'd like to turn the call back to Katherine Stueland for closing remarks.

Katherine A. Stueland: Thank you so much. We appreciate everyone joining today and look forward to seeing you hopefully in the near future at a conference. So have a good, safe rest of your summer. Thank you.

Speaker Change: This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change: This is a production of the Center for Autism and Related Disorders Center for Autism and Related Disorders

Speaker Change: [inaudible]

Katherine A. Stueland: That concludes today's question and answer session. I'd like to turn the call back to Katherine Stueland for closing remarks. Thank you so much. We appreciate everyone joining us today and look forward to seeing you hopefully in the near future at a conference. So, have a good, safe rest of your summer.

Speaker Change: Good day and thank you for standing by.

Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect. ??? ??? ??? ??? ??? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Good day and thank you for standing by.

Speaker Change: Welcome to the GeneDx Second Quarter 2024 Earnings Conference Call.

Operator: Welcome to the GeneDx Second Quarter 2024 Earnings Conference. 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 this session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised.

Speaker Change: At this time, all participants are in a listen-only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session.

Speaker Change: To ask a question during this session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again.

Sabrina Dunbar: To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being. I would now like to hand the conference over to Sabrina Dunbar, Investor Relations. Please go ahead.

Speaker Change: Please be advised that today's conference is being recorded.

Speaker Change: I would now like to hand the conference over to Sabrina Dunbar, Investor Relations. Please go ahead.

Sabrina Dunbar: Thank you, operator. And thank you, everyone, for joining us today. On the call, we have Katherine Stueland, President and Chief Executive Officer, and Kevin Feeley, Chief Financial Officer. Earlier today, GeneDx released financial results for the second quarter and for June 30, 2024. Before we begin, please take note of our cautionary statement. We may make forward-looking statements on today's call, including about our business plans, guidance, and outline. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, July 30th, and we are under no obligation to update them. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results.

Sabrina Dunbar: Thank you, Operator, and thank you to everyone for joining us today. On the call, we have Katherine Stueland, President and Chief Executive Officer, and Kevin Feeley, Chief Financial Officer.

Speaker Change #100: Earlier today, GeneDx released financial results for the second quarter and to June 30, 2024.

Speaker Change #101: Before we begin, please take note of our cautionary statement. We may make forward-looking statements on today's call, including about our business plans, guidance, and outlook.

Speaker Change #101: Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, July 30th, and we are under no obligation to update.

Speaker Change #101: When discussing our results, we refer to non- GAAP measures , which exclude certain items from reported results.

Sabrina Dunbar: Please refer to our second quarter 2024 earnings release and slides available at ir.gndx.com for definitions and reconciliations of non-GAAP measures and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements. And with that, I will turn the call over to Katherine. Thanks, Sabrina, and thank you all for joining us. The second quarter proved to be another strong quarter by all measures.

Speaker Change #101: Please refer to our second quarter 2024 earnings release and slides available at ir.gndx.com for definitions and reconciliations of non-GAAP measures and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements.

Speaker Change #101: And with that, I will turn the call over to Katherine.

Katherine A. Stueland: Thanks, Sabrina, and thank you all for joining us. The second quarter proved to be another strong quarter by all measures. We delivered nearly $69 million in revenues.

Sabrina Dunbar: We delivered nearly $69 million in revenues, expanded growth margins to 62%, and achieved our 9th consecutive quarter of cash burn reduction. We've been relentlessly focused on these three metrics, and that focus continues to pay off. Given the strength in the first half of the year, I'm happy to say that we're raising our revenue guidance for the year to $255 to $265 million, and we're even closer to our goal of becoming profitable.

Speaker Change #102: expanded growth margins to 62% and achieved our ninth consecutive quarter of cash burn reduction.

Katherine A. Stueland: We've been relentlessly focused on these three metrics, and that focus continues to pay off.

Katherine A. Stueland: Given the strength in the first half of the year, I'm happy to say that we're raising our revenue guidance for the year to $255 to $265 million.

Sabrina Dunbar: This is an important milestone for us as a company because of the massive opportunity in front of us to serve an ever-growing number of families and to positively impact the future of healthcare. Today, GeneDx is primarily focused on pediatric patients and the providers that care for them, including medical geneticists, genetic counselors, pediatric neurologists, developmental pediatricians, and neonatologists.

Katherine A. Stueland: and we're even closer to our goal of becoming profitable. This is an important milestone for us as a company because of the massive opportunity in front of us to serve an ever-growing number of families and to positively impact the future of healthcare.

Speaker Change #103: Today, GeneDx is primarily focused on pediatric patients and the providers that care for these patients, including medical geneticists, genetic counselors, pediatric neurologists, developmental pediatricians, and neonatologists.

Katherine A. Stueland: We have now sequenced more than 665,000 exomes and genomes and have performed more than a million genetic tests, working tirelessly to curate one of the largest and most diverse databases of disease-associated genomic variants. This industry-leading data set, combined with our proprietary bioinformatics and variant identification and interpretation capabilities, coalesce to create the most advanced diagnostic exome and genome sequencing options available. And those tests continue to be recommended as first-line tests in the standard of care, resulting in better health outcomes and cost benefits for both patients and healthcare systems.

Speaker Change #103: We have now sequenced more than 665,000 exomes and genomes and have performed more than a million genetic tests, working tirelessly to carry one of the largest and most diverse databases of disease-associated genomic variants.

Speaker Change #103: This industry-leading dataset, combined with our proprietary bioinformatics and variant identification and interpretation capabilities, coalesce to create the most advanced diagnostic exome and genome sequencing options available.

Speaker Change #103: And those tests continue to become recommended as first-line tests on the standard of care, resulting in better health outcomes and cost benefits for both patients and health care systems.

Katherine A. Stueland: So to track our success, one of the key metrics we focus on is testing. This quarter, Exome and Genomes accounted for over 74% of our total revenue, reflecting our successful transition towards a more streamlined and impactful product. The upshot of strong commercial execution has been amplified by our team's operational and technological teams. These teams continue to put additional wind in our sails by reducing costs and shortening turnaround times by identifying opportunities for improved efficiency.

Speaker Change #103: So to track our success, one of the key metrics we focus on is TestMix.

Speaker Change #103: This quarter, Exome and Genomes has accounted for over 74% of our total revenue, reflecting our successful transition towards a more streamlined and impactful product mix.

Speaker Change #103: The upshot of strong commercial execution has been amplified by our team's operational and technological excellence.

Speaker Change #103: These teams continue to put additional wind in our sails by reducing costs and shortening turnaround times by identifying opportunities for improved efficiency.

Katherine A. Stueland: Scaling our lab with support from AI and machine learning technologies and improving our billing workflows in service of better patient, provider, and payer experiences. In the third quarter of last year, I shared that we had adopted a mindset of discipline and focus on near-term, highest-impact business drivers, and that we must earn our right to invest in longer-term strategies as the point-of-profitability approach. It's the right time to lean in and invest in our future, starting with a focus on whole genome sequencing. This quarter, we announced a partnership with EPIC to integrate with health system workflows and improve provider and patient journeys via EPIC's electronic connection.

Speaker Change #103: scaling our lab with support from AI and machine learning technologies, and improving our billing workflows in service of better patient, provider, and payer experiences.

Speaker Change #103: In the third quarter of last year, I shared that we had adopted a mindset of discipline and focus on near-term, highest-impact business drivers, and that we must earn our right to invest in longer-term strategies as the point of profitability approached.

Speaker Change #103: It's the right time to lean in and invest in our future, starting with a focus on whole genome sequencing. This quarter, we announced a partnership with Epic to integrate with health system workflows and improve provider and patient journeys via Epic's electronic connections.

Katherine A. Stueland: And today, we share more information about investments in our products as we translate our leadership in Exome to pave the way for a genome future. We unveiled a series of enhancements to our genome product to reduce turnaround time, expand accepted sample types, and increase diagnostic yield. We will remain absolutely disciplined as we approach future investments and focus on commercial viability for the dollars we invest.

Speaker Change #103: Today, we share more information about investments in our products as we translate our leadership in Exome to pave the way for a genome future.

Speaker Change #103: We unveiled a series of enhancements to our genome product to reduce turnaround time, expand accepted sample types, and increase diagnostic yield. We will remain absolutely disciplined as we approach future investments and focus on commercial viability for the dollars we invest.

Katherine A. Stueland: We're also making progress on key policies across the United States that ensure there's expanding access to exome and genome testing nationwide. We're pleased by the adoption of additional biomarker legislation in the second quarter and know the direct impact these laws will have on patients and families. As a company headquartered in Connecticut, we were proud to see rapid whole genome sequencing passed into law here, effective July 1. Today, 14 states cover rapid genome sequencing, with North Carolina adding and announcing added coverage in just the last few days.

Speaker Change #103: We're also making progress on key policies across the United States that ensure there is expanding access to exome and genome testing nationwide.

Speaker Change #103: We're pleased by the adoption of additional biomarker legislation in the second quarter and know the direct impact these laws will have on patients and families. As a company headquartered in Connecticut, we were proud to see rapid whole genome sequencing passed into law here, effective July 1st.

Speaker Change #103: Today, 14 states cover rapid genome sequencing, with North Carolina announcing added coverage in just the last few days. We also see certain commercial payers taking steps in the right direction, as shown through our partnership with UnitedHealthcare to offer whole-genome sequencing to their patients across the country.

Katherine A. Stueland: We also see certain commercial payers taking steps in the right direction, as shown through our partnership with UnitedHealthcare to offer whole genome sequencing to their patients across. We believe that equitable access to testing is fundamental and are thrilled to see bipartisan support among policymakers throughout. In addition to the supremely important work being done by state Medicaid programs and commercial payers, we've taken our own steps to drive progress forward. In the second quarter, we launched a patient access program for epilepsy patients in partnership with biopharmaceutical leaders to open up access to exome testing while helping eligible patients enroll in clinical trials and other therapeutic opportunities.

Speaker Change #103: We believe that equitable access to testing is fundamental and are thrilled to see bipartisan support among policymakers throughout the country.

Speaker Change #103: In addition to the supremely important work being done by state Medicaid programs and commercial payers, we've taken our own steps to drive progress forward.

Speaker Change #103: In the second quarter, we launched a patient access program for epilepsy patients in partnership with biopharmaceutical leaders to open up access to exome testing while helping eligible patients enroll in clinical trials and other therapeutic opportunities.

Katherine A. Stueland: Our proprietary genomics data set was built by patients across America, so it offers one of the most representative and diverse looks at genomic data available. As we think about differentiation, we appreciate the steps we've taken historically to prioritize equitability and remove barriers to cost on our journey to serving patients and providers of every circumstance. But we're not done yet.

Speaker Change #103: Our proprietary genomics data set was built by patients across America.

Speaker Change #103: thus offering one of the most representative and diverse looks at genomic data available. As we think about differentiation, we appreciate the steps we've taken historically to prioritize equitability and remove barriers to cost on our journey to servicing patients and providers of every circumstance.

Katherine A. Stueland: There are millions of patients and families in the U.S. and globally that can benefit from the actionability of a genetic diagnosis. A diagnosis can immediately change clinical management, unlock clinical trial opportunities, qualify patients for the financial support they desperately need, connect families to communities unified around their child's diagnosis by way of patient advocacy groups, and much more. We recognize the privilege that a market-leading position offers us, and we are continuing to invest in accelerators for our business while balancing growth and scale with financial discipline and strength. With that, I'll pass it over to Kevin to go through our results. Great. Thanks, Katherine.

Speaker Change #103: But we're not done yet. There are millions of patients and families in the U.S. and globally that can benefit from the actionability of a genetic diagnosis.

Speaker Change #103: A diagnosis can immediately change clinical management, unlock clinical trial opportunities, qualify patients for the financial support they desperately need, connect families to communities unified around their child's diagnosis by way of patient advocacy groups, and much more.

Speaker Change #104: We recognize the privilege that a market-leading position offers us, and we are continuing to invest in accelerators for our business while balancing growth and scale with financial discipline and strength.

Speaker Change #104: With that, I'll pass it over to Kevin to go through our results. Great. Thanks, Katherine.

Kevin Feeley: Second quarter 2024 revenues from continuing operations grew to $68.9 million compared to $45.2 million in the second quarter of 2023 and $61.5 million in the first quarter of 2024. That's an increase of 52% year over year and 12% sequentially in total. Drilling into that, Exome and Genome revenues grew 77% year-over-year and 15% sequentially, delivering $50 million in revenue this quarter. Both volume and collection performance contributed nicely. Adjusted gross profit from continuing operations was $42.8 million in the second quarter of 2024.

Kevin Feeley: Second quarter 2024 revenues from continuing operations grew to $68.9 million compared to $45.2 million in the second quarter of 2023 and $61.5 million in the first quarter of 2024.

Kevin Feeley: That's an increase of 52% year-over-year and 12% sequentially in total.

Kevin Feeley: Drilling into that, Exome and Genome revenues grew 77% year-over-year and 15% sequentially, delivering $50 million in revenue this quarter. Both volume and collection performance contributed nicely.

Kevin Feeley: Adjusted gross profit from continuing operations was $42.8 million in the second quarter of 2024. That's up 153% compared to Q2 2023, and up 13% from the first quarter of 2024.

Kevin Feeley: That's up 153% compared to Q2 2023 and up 13% from the first quarter of 2024, at just a gross margin from continuing operations was 62% in the second quarter of 2024, up from 37% a year ago and up from 61% in the first quarter. Gross profit growth and margin expansion are driven by increased volume, improved average reimbursement rates, continued cost-per-test leverage, and favorable mixed shifts. On volume and mix, exome and genome testing was 31% of all tests resulted this quarter, up from 22% a year ago and up from 30% in the first quarter.

Kevin Feeley: Adjusted gross margin from continuing operations was 62% in the second quarter of 2024, up from 37% a year ago and up from 61% in the first quarter.

Kevin Feeley: Gross profit growth and margin expansion is driven by increased volume, improved average reimbursement rate, continued cost-per-test leverage, and favorable mixed-ship.

Kevin Feeley: On volume and mix, exome and genome was 31% of all tests resulted this quarter, up from 22% a year ago and up from 30% in the first quarter.

Kevin Feeley: Overall, I'm quite pleased with the mix, given the strong underlying exome and genome volume, whereby our team delivered over 18,000 tests this quarter, an increase of 52% year-over-year and 9% sequential. We'll continue to optimize the test portfolio towards exome and genome sequencing while balancing unit economics, clinical impact, and customer satisfaction over time. On average reimbursement rates, our exhaustive effort to improve exome reimbursement rates through denial reduction is working. In the second quarter of 2024, our average reimbursement rate for exome and genome, after all denials, was approximately $2,800, up from $2,600 last quarter and up from $2,500 in the fourth quarter of 2023.

Kevin Feeley: Overall, I'm quite pleased with the mix given the strong underlying exome and genome volume whereby our team delivered over 18,000 tests this quarter, an increase of 52% year-over-year and 9% sequentially.

Kevin Feeley: We'll continue to optimize the test portfolio towards exome and genome balancing unit economics, clinical impact, and customer satisfaction over time.

Kevin Feeley: On Average Reimbursement Rate, our exhaustive effort to improve Ex-Im reimbursement rates through denial reduction is working.

Kevin Feeley: In the second quarter of 2024, our average reimbursement rate for Exome and Genome, after all denials, was approximately $2,800, up from $2,600 last quarter and up from $2,500 in the fourth quarter of 2023.

Kevin Feeley: Across the commercial insurance payer environment, we continue to enable and calibrate insurance-specific workflow to reduce administrative and procedural denial. That said, we remain clear-eyed about the complex operating environment where some payer business models are inherently predicated on collecting premiums while narrowly interpreting archaic medical policy and administrative requirements to suit their own business.

Kevin Feeley: Across the commercial insurance payer environment, we continue to enable and calibrate insurance-specific workflow to reduce administrative and procedural denials.

Kevin Feeley: That said, we remain clear-eyed about the complex operating environment where some payer business models are inherently predicated on collecting premiums while narrowly interpreting archaic medical policy and administrative requirements to suit their own business needs.

Kevin Feeley: Our focus on generating clinical data and articulating the value proposition of our differentiated exomes as a first-in-line test will continue to underpin our advocacy for equitable access and patient-centric medical policy, all so that we can help get more families the care they need and get reimbursed fairly. Across Medicaid populations, denials are coming down as medical policy continues its momentum towards broad coverage for the exome and genome. In particular, state Medicaid programs continue to expand coverage for rapid genetic testing in the NICU. We highlighted North Carolina, Texas, and Connecticut in our release today.

Kevin Feeley: Our focus on generating clinical data and articulating the value proposition of our differentiated exomes as a first-in-line test will continue to underpin our advocacy for equitable access and patient-centric medical policy.

Kevin Feeley: All so that we can help get more families the care they need and get reimbursed fairly.

Kevin Feeley: Across Medicaid populations, denials are and should continue to come down as medical policy continues its momentum towards broad coverage for exome and genome.

Kevin Feeley: In particular, state Medicaid programs continue to expand coverage for rapid genetic testing in the NICU. We highlighted North Carolina, Texas, and Connecticut in our release today.

Kevin Feeley: And on cost per test, the team's done a great job optimizing the wet lab, and there remains opportunity to couple our unparalleled genomic data set with a new generation of automation tools to drive scalability and efficiency across dry side clinical interpretation, analysis, abstracting, and report writing. Now moving down to operating expenses, total adjusted operating expense was $45 million in the second quarter of 2024.

Speaker Change #105: And on cost per test, the team's done a great job optimizing the wet lab, and there remains opportunity to couple our unparalleled genomic data set with new generation of automation tools to drive scalability and efficiency across dry side clinical interpretation, analysis, abstracting, and report writing.

Speaker Change #106: Now moving down to operating expense.

Speaker Change #107: Total adjusted operating expense was 45 million dollars in the second quarter of 2024. That's a reduction of 24% year-over-year and 1% sequentially.

Kevin Feeley: That's a reduction of 24% year-over-year and 1% sequentially. And now consider us to be at a normalized relative OPEC space for the business, ready to drive operating leverage as we One call out this quarter, gap expense and gap net loss in the second quarter of 2024 includes a one-time litigation charge, net of expected insurance recovery of approximately $13 million. The charge relates to a stockholder-commenced lawsuit brought in the prior year as a class action on behalf of former stockholders of CM Life Sciences who did not redeem their shares in connection with the 2021 business combination between CM Life Sciences and Legacy Semaphore. The suit names CM Life Sciences and its directors at the time of that business combination. And on the bottom line, the total company adjusted net loss for the second quarter of 2024 narrowed to $2.7 million.

Speaker Change #107: And now consider us to be at a normalized relative OPEX space for the business, ready to drive operating leverage as we grow.

Speaker Change #107: One call out this quarter, GAAP expense and GAAP net loss in the second quarter of 2024 includes a one-time litigation charge net of expected insurance recovery of approximately 13 million dollars.

Speaker Change #107: The charge relates to a stockholder commenced lawsuit brought in the prior year as a class action on behalf of former stockholders of CM Life Sciences who did not redeem their shares in connection with the 2021 business combination between CM Life Sciences and Legacy Semaphore.

Speaker Change #107: The suit names CM Life Sciences and its directors at the time of that business combination.

Speaker Change #108: And on the bottom line, total company adjusted net loss for the second quarter of 2024 narrowed to $2.7 million. That is an improvement of 93% year-over-year and 68% sequentially, driven by gross profit growth and operating expense rationalization.

Kevin Feeley: That is an improvement of 93% year over year and 68% sequentially driven by gross profit growth and operating expense rationalization. With that, we're approaching the turn to profit. Our second quarter net cash burn was $6.1 million, which improved 89% year-over-year and 65% sequentially. And we've now delivered nine consecutive quarters of cash burn reduction. On the balance sheet, cash, cash equivalents, marketable securities, and restricted cash were a total of $108 million as of June 30th, 2024.

Speaker Change #108: With that, we're approaching the turn to profitability.

Speaker Change #108: Our second quarter net cash burn was $6.1 million, which improved 89% year-over-year and 65% sequentially. And we've now delivered nine consecutive quarters of cash burn reduction.

Kevin Feeley: And as of June 30th, 2024, there are 26,926,383 Class A Common Shares outstanding. The outstanding share count includes the issuance of 645,414 shares of Class A common stock to Perceptive in April 2024 to satisfy a cashless exercise of the 800,000 warrants they received in connection with the October 2023 debt placement. Now, turning to guns.

Speaker Change #108: On the balance sheet, cash, cash equivalents, marketable securities, and restricted cash was a total $108 million as of June 30, 2024. And as of June 30, 2024, there are 26,926,383 Class A common shares outstanding.

Speaker Change #108: The outstanding share count includes the issuance of 645,414 shares of Class A common stock to Perceptive in April 2024 to satisfy a cashless exercise of the 800,000 warrants they received in connection with the October 2023 debt placement.

Kevin Feeley: We are again raising previously issued revenue guidance and now expect to deliver revenues between 255 and $265 million for the full year 2024. We are reiterating previously issued adjusted gross margin guidance to land full year 2024 at 60% or higher. And we're improving our net cash burn guide and now anticipate using $65 to $75 million in net cash for the full year 2024. This latest guide here contemplates fully absorbing the legal settlement should that be required in 2024.

Speaker Change #108: And now turning to guidance.

Speaker Change #108: We are again raising previously issued revenue guidance and now expect to deliver revenues between 255 and 265 million dollars for the full year 2024.

Speaker Change #108: We are reiterating previously issued adjusted gross margin guidance to land full year 2024 at 60% or higher.

Speaker Change #108: And we're improving our net cash burn guide and now anticipate using $65 to $75 million of net cash for the full year 2024.

Speaker Change #108: That latest guide here contemplates fully absorbing the legal settlement should that be required in 2024. The ultimate timing of that payment is still uncertain at this time.

Kevin Feeley: The ultimate timing of that payment is still uncertain at this, and as a reminder, the next scheduled payment under the 2022 Legacy Semaphore Payer Settlement is $10 million, and that will be paid in December of 2021. Finally, we once again reiterate our expectation to turn the business profitable in 2025. With that, I'll turn it back to Katherine.

Speaker Change #108: And as a reminder, the next scheduled payment under the 2022 Legacy Semaphore Payer Settlement is $10 million, and that will be paid in December of 2024.

Speaker Change #108: Finally, we once again reiterate our expectation to turn the business profitable in 2025. With that, I'll turn you back to Katherine. Wonderful. Thanks, Kevin. Over the past few years, we've successfully transformed GeneDx into a driving force in genetic diagnostics, and we couldn't have gotten here alone.

Katherine A. Stueland: Our patients and their families, our customers, collaborators, our team members, and our shareholders make all of this possible. And I want to thank each one of those people for their ongoing dedication and support. We're painting a vision for a better future in health care, one where every family can benefit from earlier diagnosis of disease through genomics, and with another successful quarter under our belt or one step closer to realizing that, we will now open the call up for questions. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 once again.

Katherine A. Stueland: Our patients and their families, our customers, collaborators, our team members, and our shareholders make all of this possible, and I want to thank each one of those constituents for their ongoing dedication and support.

Speaker Change #109: We're painting a vision for a better future in healthcare, one where every family can benefit from earlier diagnosis of disease through genomics, and with another successful quarter under our belt, we're one step closer to realizing that future.

Speaker Change #109: We'll now open a call up for questions.

Speaker Change #110: As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again.

Operator: Please stand by while we compile the Q&A raw. Our first question comes from a line from Tyco Peterson with Jeff. Hey, good afternoon.

Speaker Change #111: Please stand by while we compile the Q&A roster.

Speaker Change #112: Our first question comes from a line of Tycho Peterson with Jeffreys.

Tyco Peterson: Maybe starting with pharma and biopharma, it looks like you added 11. I think you had 21 at the end of the first quarter. So maybe just talk a little bit about momentum, you know, spend on biopharma, how much data versus kind of new program ads? Certainly. So we added, as you pointed out, several new programs for the quarter. We're really pleased. Some of that is repeat business from existing biopharma partners.

Tycho Peterson: Hey, good afternoon. Maybe starting with pharma, biopharma, it looks like you added 11. I think you had 21 at the end of the first quarter. So maybe just talk a little bit about momentum, you know, spend, you know, on biopharma. How much is data versus kind of new program ads?

Speaker Change #114: Certainly. So we added, as you pointed out, several new programs for the quarter. We're really pleased. Some of that is repeat business from existing Biopharma partners.

Tyco Peterson: These are the nature of these programs, predominantly connecting biopharma partners with providers who have patients who may be eligible for clinical trials. And then, as you saw in June, we announced a program with support from biopharma companies to open up access to epilepsy exome testing. And so we are, through that program, able to run all patients through insurance, work with biopharma companies on those patients who have been denied, to be able to ensure that no patient has a barrier to that testing.

Speaker Change #115: The nature of these programs is predominantly connecting biopharma partners with providers who have patients who may be eligible for a clinical trial.

Speaker Change #115: And then as you saw in June , we announced a program in support from biopharma companies to open up access to epilepsy exome testing.

Speaker Change #115: And so we are, through that program, able to run all patients through insurance, work with biopharma companies.

Speaker Change #115: on those patients who have been denied to be able to ensure that no patient has a barrier to that testing.

Katherine A. Stueland: And so it's data by way of connecting these biopharma companies to patients, and we continue to see that as being the most, I think, representative commercial approach for the data business over the next 18 months or so. It's meaningful, not only in terms of building up that ecosystem, diversifying our revenue streams, but, importantly, really paving a path forward for a lot of these patients to make sure that they know what they can do beyond getting a diagnosis, and being able to connect them with it. And then what are you assuming for the whole exome, genome mix, and revised guidance? Can you kind of bridge the new guide with the old and explain what's getting better?

Speaker Change #115: It's data by way of connecting these biopharma companies to patients.

Speaker Change #115: And we continue to see that as being the most...

Speaker Change #115: I think representative commercial approach for the data business over the next 18 months or so. It's meaningful not only in terms of building up that ecosystem, diversifying our revenue streams,

Speaker Change #115: But I think, importantly, really paving a path forward for a lot of these patients to make sure that they know what they can do beyond getting a diagnosis, being able to connect them with those next steps.

Speaker Change #116: And then what are you assuming for whole exome, genome mix, and revised guidance? Can you kind of bridge the new guide with the old and what's getting better?

Katherine A. Stueland: Yeah, so look, we're really encouraged with the trajectory of exome and genome volumes. From a mixed perspective, the 31% was a function of really strong underlying volume growth for exome and genome, but then also growth in other lines. And we continue to look at the test, menu, and our offerings to optimize for unit economics as well as clinical impact.

Speaker Change #117: Yeah, so I...

Speaker Change #118: Look, we're really encouraged with the trajectory of exome and genome volumes. From a mixed perspective, the 31% was a function of really strong underlying volume growth for exome and genome, but then also growth in other lines, and we continue to look at the test.

Speaker Change #118: menu and our offerings to optimize for unit economics as well as clinical impact.

Katherine A. Stueland: We've said previously that sequential growth in the exome genome mix in terms of total tests anywhere from one to three percent per quarter. We delivered that this quarter, and I'd expect a similar pacing for the remainder of 2025. And last one, just on pricing over $2800, you know, in 2Q, is there still kind of room to go in the back half of the year? And then Kevin, I think you talked about reaching profitability in the next couple quarters. I mean, that's a little bit different than what you previously said about 2025. I'm just curious if you can give us a sense of when in 2025 you think you'll hit it.

Speaker Change #118: We've said previously expect sequential growth in exome genome mix in terms of total tests anywhere from one to three percent per quarter. We deliver that this quarter and I'd expect the similar pacing for the remainder of 2024.

Speaker Change #119: And last one, just on pricing, over $2,800 in 2Q, is there still kind of room to go in the back half of the year? And then, Kevin, I think you talked about reaching profitability in the next couple quarters. I mean, that's a little bit different than what you previously said on 2025. I'm just curious if you can give us a sense of when in 2025 you think you'll hit it.

Kevin Feeley: Yeah, really encouraged about the performance on collection and bringing down denials to raise that average reimbursement rate. Previously, we said to expect with each passing quarter of 2024 to assume something close to $100 in uplift in that aggregate rate. We were able to outperform that in the second quarter, and I think that remains the expectation. The expectation is that we ought to be able to raise that rate, something in the order of magnitude of $100 per quarter for each of the remaining quarters in 2024. Overall, really strong with where we came out in the second quarter. We're really pleased with where we came out. Overall, on timing for terms of profitability, look, we just posted a net loss.

Speaker Change #120: Yeah, really encouraged about the performance on collection and bringing down denials to raise that average reimbursement rate.

Speaker Change #121: Previously we said expect with each passing quarter of 2024 to assume something close to $100 in uplift in that aggregate rate. We were able to outperform that in the second quarter and I think that remains

Speaker Change #121: The expectation is that we ought to be able to raise that rate something in the order of magnitude of $100 per quarter for each of the remaining quarters in 2024.

Speaker Change #121: Overall really strong with where we came out in the second quarter. We're really pleased with where we came out.