Q3 2024 Fulgent Genetics Inc Earnings Call
[inaudible]
Speaker Change: Greetings and welcome to the Folger Genetics Q3 2024 conference call and webcast.
Speaker Change: At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation.
Speaker Change: You may be placed into question Q at any time by pressing star 1 on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Melanie Solomon, Investor Relations. Please go ahead.
Melanie Solomon: Good morning and welcome to the Fulgent Third Quarter 2024 Financial Results Conference Call. On the call today are Ming Hsieh, Chief Executive Officer, Paul Kim, Chief Financial Officer, and Brandon Perthuis, Chief Commercial Officer.
Melanie Solomon: The company's press release discussing the financial results is available on the Investor Relations section of the company's website, bulgingenetics.com. A replay of this call will be available shortly after the call concludes on the Investor Relations section of the company's website.
Melanie Solomon: Management's prepared remarks and answers to your questions on today's call will contain forward-looking statements. These forward-looking statements represent management's estimates based on current views, expectations, and assumptions which may prove to be incorrect.
Melanie Solomon: Listeners should not rely on any forward-looking statements as predictions of future events and should listen to management's remarks today with the understanding that actual events, including the company's actual future results, may be materially different than what is described in or implied by these forward-looking statements.
Melanie Solomon: Please review the more detailed discussions related to these forward-looking statements, including the discussions of some of the risk factors that may cause results to differ from those described in the forward-looking statements contained in the company's filings with the Securities and Exchange Commission, including the previously filed $10K for the year ended December 31st.
Melanie Solomon: 2023, and subsequently filed reports which are available on the company's industrial relations website.
Melanie Solomon: Management's prepared remarks, including discussions of earnings and earnings per share, contain financial measures not prepared in accordance with accounting principles generally accepted in the United States or GAAP.
Melanie Solomon: Management has presented these non-GAAP financial measures because it believes they may be useful to investors for various reasons, but these measures should not be viewed as a substitute for or superior to the company's financial results in accordance with GAAP.
Melanie Solomon: Please see the company's press release discussing its financial results for the third quarter 2024 for more information, including the description of how the company calculates non-GAAP income or loss, earnings or loss per share, non-GAAP gross profit, non-GAAP gross margin.
Melanie Solomon: Non-GAAP Operating Profit or Loss, and Margin, and Adjusted EBITDA, and a Reconciliation of the Exponential Measures to Income or Loss, Earnings or Loss per Share, and Operating Margin, the Most Directly Comparable GAAP Financial Measures.
Speaker Change: With that, I'd now like to turn the call over to Ming.
Speaker Change: Thank you, Madam Dean. Good morning, and thank you for joining our call today.
Ming Hsieh: I will start with some comments on the third quarter and our two business lines. Then Brandon will review our product and go through market updates.
Ming Hsieh: and Paul will conclude with the financials and the outlook before we take these questions.
Ming Hsieh: We are pleased with our results in the third quarter, with $71.7 million of total revenue.
Speaker Change: Third quarter revenue of $31.7 million was driven by our momentum in precision diagnosis.
particular the product itself and oncology.
Speaker Change: We were pleased with our growth from the second to third quarter of 2024 in all three areas of our laboratory service business.
Speaker Change: And we see good momentum ahead as we continue to invest in reproductive health, asking to see the benefit of those investments.
Yeah, I was therapeutic in the opening business.
Speaker Change: This year, we initiated a phase 2 clinical trial of FID-007 in combination with cytosine in patients with HNFCC and EROS that began in the second quarter.
Speaker Change: So far, we've had close to 80 patients in this trial, and we've currently pretty literally resolved this initial patient.
Speaker Change: We expect to enroll approximately 40 patients at the world's site and two completely enrollment in early 2026.
Speaker Change: We continue to estimate the total patient-faced trial cost of the Phase 2 trial to be approximately $10 million.
Speaker Change: We continue to advance our second drug candidate, FID-022, a nano-decapsulant SN38, in a frequent study towards
Speaker Change: and the West Kitchin Road new drug application by the end of this year.
all have observed FIDO.
Speaker Change: who, too, has shown that a superior advocacy for Irene P. King in various geographic models, including COVID, outbreak, sclerosis, pancreatic cancers, in our preclinical studies.
Speaker Change: No significant unexpected toxicity was observed in both RAS and monthly GLP toxicity studies.
Speaker Change: In addition, we also made a significant advancement in development of antibody drug conjugates using our novel patient linker and payload platform technology.
Speaker Change: In preclinical studies, we observed that our ABCs will have a basher-esque effect over different accumulators. There is a broad range of alpha, alpha-carbohydrates, and D-genes expressed in that.
Speaker Change: compared with some of the best ADC benchmarks on the market in preclinical settings.
Speaker Change: In the meantime, ABC Army's three novel targets using our novel platform technology are also being prepared with the goal of generating leading candidates for clinical studies.
and remember
Speaker Change: All our drug candidates were funded with our novel nano-encapsulation technology, which includes over 30 issues of active patterns and active pattern applications.
Speaker Change: and the Arctic Therapeutic Platform designed to improve therapeutic windows for pharmacogenetics.
and the YouTube Channel.
Speaker Change: Overall, we believe we have a good strategy with both our core med-free services business and our therapeutic development business.
Speaker Change: We see momentum in our core business, which we believe will continue to grow, potentially strengthening our business model and fueling our therapeutic initiatives.
Speaker Change: We continue to maintain a strong balance which will execute our strategy.
Speaker Change: I would like to thank our employees, partners, and stakeholders for your hard work and loyalty in a very good third quarter for our business.
We hope to have a strong close to the year.
Speaker Change: Now, I turn the call over to Brandon Perthuis, our Chief Commercial Officer, to talk more about our laboratory services business results in the third quarter. Brandon?
Brandon Perthuis: Thanks, Ming. It was another solid quarter for our company with quarter-over-quarter growth in all three areas, precision diagnostics, anatomic pathology, and pharma services. This marked the second quarter in a row where we have seen growth in all three areas of our laboratory service business.
I'll provide some highlights for each.
Brandon Perthuis: For precision diagnostics, we continue to see strength in reproductive health. Our Beacon Expanded Care Screening Test continues to be in high demand, and we are leveraging our excellent turnaround time, quality, and flexibility to drive business.
Brandon Perthuis: We are also seeing strength in hereditary cancer screening. We recently announced a new contract with the VA hospitals for hereditary cancer and other germline tests.
This contract is up to $99 million over five years.
Brandon Perthuis: This was a very competitive process and we are honored that the VA chose to work with Fulgent. We believe the VA selected Fulgent based on our rapid turnaround time, ability to build custom panels, our quality, and our strength for IT integrations.
Thank you.
Brandon Perthuis: A quick update on NOVA, our novel NIPT test, our sales team is now fully trained and began selling in September of this year.
Brandon Perthuis: that the feedback from clients has been positive as they see the value of adding de novo point mutations to aneuploidy and microdeletions.
Brandon Perthuis: We expect adoption to be a bit slow as we look to replace testing that has been in place for a very long time. However,
Brandon Perthuis: We believe NOVA has the potential to create a paradigm shift in NIPT considering the increased detection rates of severe conditions.
Brandon Perthuis: Turning to our oncology offering, we were excited to receive Mold-EX approval for many of our hereditary cancer panels during the quarter. This adds to our portfolio of Mold-EX approved cancer tests, which includes our liquid biopsy tests, solid tumor panel, heme panel, and now several hereditary panels.
Brandon Perthuis: Looking at Precision Diagnostics overall, we saw an increase in revenue of 18.8% year-over-year.
Brandon Perthuis: Moving on to anatomic pathology, we believe our investments here are really beginning to pay off. For a few quarters, we definitely had some headwinds. However, we kept our heads down and remained focused and dedicated to improving this business.
Brandon Perthuis: We are pleased with the progress we are making in this business as a result of a larger improved sales team, a major focus on lab turnaround time, and improved logistics, among other things.
Brandon Perthuis: These areas of focus are leading to the sales team closing new deals.
Brandon Perthuis: From what we can tell, there is strain on many other labs as it relates to turnaround time. Specifically, some labs are delivering DERM path turnaround time of two to three weeks. We are typically at two or three days.
Brandon Perthuis: Add to this the quality we deliver with our subspecialty trained pathologists, and we have a very compelling offering for physicians.
Brandon Perthuis: This has led to a deep pipeline of opportunities which we believe will continue to fuel growth. We mentioned on the last call that we have moved into our new building in Capell, Texas. During the quarter, we saw this operation run at scale, and it is impressive. We believe the improved design and workflows are leading to a more efficient, scalable laboratory.
Brandon Perthuis: One other thing worth mentioning is our increased adoption of digital pathology. For the third quarter, overall, we digitized 80% of our slides. We believe this leads to improved operational efficiency, quality, and in the future, the ability to layer on AI.
Brandon Perthuis: Turning to our biopharma services division, as we had mentioned in previous calls, we are now able to leverage a large portfolio of tests which are in demand from biopharma clients.
Brandon Perthuis: In addition to Illumina Next Generation Sequencing, we have now validated the platforms from 10X Genomics, Okoye, O-Link, and Mission Bio. This larger service offering has increased our addressable market, allowing us to potentially compete for additional requests for proposals.
Brandon Perthuis: This area of our business does have the longest sales cycle, and these winds can come in waves, so we do expect to see some variability quarter to quarter. However, we are enthusiastic about the long-term potential for our biopharma services division.
Brandon Perthuis: Overall, it was a solid quarter and we are thankful for the dedication of our employees. We believe we are taking the right steps to set Fullerton up for continued growth and long-term success.
Brandon Perthuis: I'll now turn the call over to Paul Kim, our Chief Financial Officer. Paul? Thank you, Brandon. Revenue in the third quarter of 2024 totaled $71.7 million, compared to $84.7 million in the third quarter of 2023.
Paul Kim: Revenue from COVID-19 testing is negligible this quarter. Revenue from our core business totaled $71.7 million.
Paul Kim: Gap gross margin was 37.3% and on a non-gap basis was 40%. Gross margins continue to improve year over year, showing the benefit of our continued efficiencies and streamlining of our business.
Paul Kim: Total GAAP operating expenses were $43.9 million for the third quarter, compared to $45.9 million
Paul Kim: $4 million in the second quarter of 2024 primarily related to reversal of legal accrual and lower R&D spend in Q3
Paul Kim: Non-GAAP operating expenses totaled $32.9 million compared to $33.8 million in the second quarter of 2024.
Paul Kim: Non-GAAP operating margin increased approximately 2 percentage points sequentially to minus 6 percent primarily due to higher revenue, reversal of legal accrual, and lower R&D spend in Q3.
2020-2021
July 2021 investment in HelioHealth.
Paul Kim: a private company which gave the company access to emerging liquid biopsy testing technology.
Paul Kim: Our projections for the performance of this investment have weakened, leading management to recognize an impairment loss.
Paul Kim: This impairment reflects management's assessment of the future cash flows associated with this investment.
Adjusted EBITDA income for the third quarter was approximately $400,000.
Paul Kim: compared to an income of $18.1 million in the third quarter of 2023 on a non-GAAP basis and excluding equity-based compensation expense.
Paul Kim: Intangible asset amortization and impairment of available for sale debt securities income for the quarter was $9.4 million or $0.31 per share based on $30.7 million weighted average fully diluted shares outstanding.
Paul Kim: Turning to the balance sheet, we ended the quarter with approximately $815.4 million in cash, cash equivalents, restricted cash, and marketable securities.
Paul Kim: Cash used in the period included $24.6 million for income tax credits.
Paul Kim: purchased an $11.1 million for the purchase of the building and property in our Alpharetta, Georgia lab is located, which is partially offset by cash from other operating activities.
Paul Kim: Moving on to guidance, we're reiterating our revenue outlook for 2024 and improving our EPS guidance as outlined in our press release issued today.
with minimal future revenue from COVID-19 testing expected.
Paul Kim: We are guiding to core revenue, which is total laboratory services revenues for the company without COVID-19 testing revenue. We continue to expect total core revenue to be approximately $280 million for 2024, representing core growth of 7% year-over-year.
Turning to expected margins for 2024, exploiting COVID-19 revenue.
and stock-based compensation.
We expect non-gap gross margins.
Paul Kim: for the full year to be in the high 30% range and exiting the last quarter around our target of 40%, which we saw in both Q2 and Q3. We expect to see slightly lower non-GAAP operating margins in the fourth quarter as we further invest resources to grow our business.
Speaker Change: with operating margin of approximately minus 12% for the year. We remain focused on managing our spend and continue to believe that our foundational technology platform supports a strong margin profile long-term.
Speaker Change: We continue to expect associated cash burn for our therapeutics development business of about $15 to $17 million this year, which is contemplated in our EPS and cash guidance.
Speaker Change: We expect to see improvement in our gap EPF loss from
Speaker Change: from a net non-gap loss of $0.30 per share to a net non-gap income of $0.33 per share.
Speaker Change: for shareholders, excluding stock-based compensation, impairment of available for sale debt securities, and amortization of intangible assets, as well as any one-time charges.
Speaker Change: Finally, our cash position remains strong. As mentioned earlier, the company purchased investment tax credits in the third quarter of 2024.
Speaker Change: The company expects to receive an income tax refund from the federal government of $27.1 million in Q4 of 2024 as a result of the purchase of those tax credits.
Speaker Change: excluding any stock repurchases or other expenditures outside the ordinary course, which could include M&A, we anticipate ending 2024 with approximately 800 million of cash, cash equivalents, investments, and marketable securities.
Speaker Change: Overall, we see strength in our core business, which has grown organically through strategic acquisitions, and we see good momentum ahead.
Speaker Change: Thank you for joining our call today, operator. Now you may open it up for questions. Certainly. We will now be conducting our question and answer session. If you would like to be placed into question queue, please press star 1 on your telephone keypad.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. One moment please while we poll for questions.
Speaker Change: Our first question is coming from Dan Leonard from UBS, your line is now live.
Speaker Change: Great. Thank you. Good morning. This is Luan from Dan. Thank you for taking my questions.
Speaker Change: I guess my first thing, definitely great momentum in precision diagnostic in the AP business, two quarters of growth. I'm wondering, how do you think about the trends in the next 12 months?
It turns into the next 12 months.
Speaker Change: Yeah, just like, how do you think about, like, going into 2025?
Speaker Change: Well, as we mentioned on the call, we certainly see momentum. The business we have in precision diagnostics, as well as anatomic pathology, you know, it's sticky business. It's long-term business. So we see that as a foundation to grow on. But our position in both of those markets continues to strengthen.
Speaker Change: We continue to deliver excellent turnaround time, quality, ease of use. I think we're continuing to strengthen both of those areas. So I think the momentum continues for the next 12 months.
The pipelines across both AP as well as Precision Diagnostics
Speaker Change: has some significant opportunities in them. I believe sales leadership and the sales team are all executing. So I think we're going to exit this quarter and exit 2024 with good momentum heading into next year.
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Speaker Change: Great, and then talking about the EAA contract, it's $99 million over five years.
Speaker Change: Should we think about like any kind of like big contribution in 2025 or is it like just simply divided by five? And also in terms of like kind of like the pipeline for that kind of like contract, do you see anything that will coming up like in the next 12 months as well?
Speaker Change: So you know I think each year will probably be a little bit more than the previous. You know is our sales team responsibility to connect with these hospitals?
Speaker Change: You know, we have to get them to a point where they can order these tests. That does take some time, but we do think it will contribute meaningfully in 2025, and we are very proud to have won that award.
Speaker Change: There are very good labs out there offering hereditary cancer tests, and that opportunity with the VA was a big one, a prestigious one. It was highly competitive.
Speaker Change: and Fullerton Genetics won it. So we're very pleased that they chose us. We look forward to serving the VA and I think we're going to do a great job for them and be a great long-term partner for the VA.
and many more. Thank you. Thank you.
I mean, also sequentially decline.
Speaker Change: I'm wondering, like, what were the changes in the quarter, and then, and then also, I guess, like, maybe you also mentioned the growth margin for kind of, like, in around like 40%, low for like 40% in Q4, I'm wondering, is that good, like a jumping, jumping off for him for 25 as well.
Speaker Change: Yeah, so I will address the question about the gross margins.
Speaker Change: the SG&A, and then I'll touch on the R&D spend, and I'll turn it over to Ming who can talk about, you know, our development efforts.
Speaker Change: I think, you know, based on what we're seeing, Q4 should be at least that. We're targeting 40. We're hopeful that, you know, it can potentially be higher than that.
Speaker Change: And as we, you know, look out to 2025 and the expansion of our business, continued automation and efficiencies, we like where our gross margins are heading.
Speaker Change: As far as the OPEX and the SG&A, for this particular quarter,
Speaker Change: We had, you know, a few things, you know, happened, you know, for...
The upside meaning that, you know, less spending.
as you have probably seen over the past several quarters.
reserves which has favorably you know impacted
Speaker Change: GNA, you know, number be even more favorable. Having that said, I think, you know, on a going forward basis, excluding stock-based compensation.
Thank you.
Speaker Change: And then as far as the spending on R&D, that tends to fluctuate.
Speaker Change: Based on what we have happening, you know, during our programs.
Speaker Change: On the one hand, we are okay with the R&D spend being where it is, but on the flip side, we also are very cognizant that development efforts and our focus in that area is tied to the future of the company from a technology perspective. So I'll turn it over to Ming, who can make some comments about our development efforts, both on the diagnostics as well as on the therapeutic side.
Yes, thank you, Paul.
Ming Hsieh: The only way to commercialize it has to be that we're very efficient.
Ming Hsieh: We continue to invest in the new technology in the diagnostic side, continue developing new tests, and continue to receive the modax from those new tests and initiatives.
Oh
We are...
Ming Hsieh: Ranking up comes our clinical trials as well as the new drug-targeted pre-trials.
Speaker Change: As Paul mentioned, you've got some risks, but in general, the R&D cost is going to increase as we have more products and more drugs moving into the clinical trials.
I appreciate it. Very helpful.
Thank you.
Speaker Change: Thank you. Next question is coming from David Westenberg from Piper-Sandler. Your line is now live.
Speaker Change: Hi, thanks for taking my question. So you mentioned all three business segments in lab contributed to growth. Can you remind us about the strategy change you had in anatomically pathology? It does seem like it's working. Do you see this as
Speaker Change: you know, kind of completely fixed. And then as we think about that business on a go forward basis, how should we think about growth? It's still, you know, a more mature market. So I would guess it would be below company rates.
Hmm.
Speaker Change: Yeah, thank you for the question. You know first and foremost, I'd like to acknowledge and thank our laboratory and our pathologist
Speaker Change: Our subspecialty trained pathologists in our lab, they're fantastic. Our turnaround times are great, our quality is great, our relationship with our clients are great. So first and foremost, a lot of the credit goes to the operations, the pathologists and our staff.
Speaker Change: That quality has allowed our sales team to go out there and represent a fantastic laboratory.
Speaker Change: So we're out there finding clinicians, whether it's DERM, GI, GU, that are having pain points with their existing labs.
Speaker Change: And sometimes that's quality, often it's turnaround time. Mentioned on the call, we've done very well in DermPath. We run into a lot of clients out there that are getting two or three week turnaround time for dermatology services. We're at two or three days right now. And that's really important in all aspects of service, but especially in pathology.
Speaker Change: We've brought in some very experienced people, some very good people. We've also brought in some additional sales leadership to complement the existing good leadership we have. So I believe we do have a world-class sales team now for that organization.
Speaker Change: We did also revamp how we compensate our sales team. When we acquired the company, we felt like there was too much emphasis on account management and too much incentive pay.
Speaker Change: Waited to account management. The sales team needs to go out there and drive new business. We need to find new clients
Speaker Change: So, we did completely overhaul that comp plan. We heavily weighted it for new business compensation. So, that happened in January, and that team has calibrated their activities to not just focus on account management, but instead go out there and hunt new business. They're doing that.
Speaker Change: We've had back-to-back-to-back great quarters for that line of the business. The pipeline is as strong today as it ever has been.
Speaker Change: I think on a monthly basis we can continue to set new volume records since we acquired that business. So we're pretty optimistic and I think it's going to carry into 2025.
and Ming Hsieh.
of
Speaker Change: with the strategic direction and the technique and some of our, you know,
Speaker Change: AI technology or developed implants in-house. We do see the efficiency and increase the power pathologies efficiency and as well as the quality.
Speaker Change: So we're proud of our technology enhancements, and in collaboration with Brandon's self-team's effort. So we do see a very good growth path for the business.
Got it.
Speaker Change: Thank you very much. I'm going to go to the OPEX and maybe get Paul involved here. Is there any additional OPEX associated with the VA contract that we should expect before, say, the revenue hit?
Speaker Change: with some of the stuff associated with the gross margin improvement or things like that. Thank you. And maybe some, yeah, GNA in the lab.
Yeah, thank you for the question.
So, on the VA, the answer is no.
Speaker Change: and the usage of the Texas facility, we purchased that in cash. We're very happy that we own that facility. That facility is fully up and running.
Speaker Change: staffed by extremely capable people. We also took a look at our entire organization to see how much leverage we can get out of that facility. And I'll turn it over to Brandon, who can make some additional comments as to our intention.
as well as, you know, our usage of that facility.
Brandon Perthuis: Yeah, I don't have a whole lot to add. I'll just say, you know, it's a big testament to our team. You know, we relocated that lab.
Brandon Perthuis: the entire lab, all the equipment, all the people, everything, and had almost zero disruption in turnaround time. So I think it just shows how strong we are in that operation. In addition, we do have some space there to continue to expand. I mentioned in the quarter that it was running at scale.
And it actually gave, by moving it...
Brandon Perthuis: It actually gave us an opportunity to design it from the ground up.
Brandon Perthuis: and not a lot of pathology labs, because a lot of them have been around a long time, you know, have the opportunity to build it from scratch. So, you know, we were there and just seeing the flow, the operation, the efficiency, the scalability, it is an impressive operation. So it will support our growth in AP, but in addition, we do have some space should we decide to build out further capabilities in the future, you know, which we're talking about.
Speaker Change: And then just the last one, and I don't know if you guys disclose this, but I think it might be in the queues Just in terms of end market by payer. Are you doing a lot of stuff inpatient versus outpatient?
And, you know, we're a running lab for, as a...
as a provider for other labs.
Speaker Change: If you can give us kind of a breakdown of that and there's two things I'm trying to get at with that
Speaker Change: Generally speaking, I mean, like there's not been as many true ups with your business versus what we're seeing with, you know, Garden and Tempest and all the other ones that are, you know, getting a lot of those billing in prior from prior quarters. But then I also just want to get, you know, your sense for, as some of these payers, there's maybe some expectations in the coming years that they're going to be a little bit more conservative with payouts.
Speaker Change: potentially. So I just want to know about your exposure and some of those and I'll that'll be my last question. Thank you
Speaker Change: We have commercial pay insurance. We do have government pay. We have partnerships like the VA, for example. You know, we have B2B relationships. We have direct-to-consumer relationships.
Speaker Change: through our platform. So we are a diversified business and I think the question you have to ask a little more granularity because it's really test driven, right? I mean, you know, if you're a company that's offering a novel test
Speaker Change: That insurance haven't really picked up on reimbursement yet So if it's investigational experimental unproven, you know your life becomes a little more difficult in terms of reimbursement But you know a lot of the things that we're offering are pretty much standard of care these days
Speaker Change: Reimbursement is pretty solid. And again, we're not entirely reliant on reimbursement. So I think, you know, in terms of our collectability, you know, the quality of revenue, so to speak, you know, what we can collect on what we run, it's been pretty good.
Did I answer your question?
Speaker Change: You may have lost David. No, I'm on, I'm on. That was the last of my questions. So I thought I was, that was the end. Thank you so much. Yeah, thank you.
Speaker Change: Thank you. Next question is coming from Andrew Cooper from Raymond James. Your line is now live.
Hey everyone, thanks for the question.
Speaker Change: Maybe just first, a lot going on in the space over the last week or so in general, so
Speaker Change: Any change or any opportunities you see with M&A occurring in particular that you could call out? And then I also want to talk about just, you know, recent coverage decision or change in coverage for pharmacogenomics that felt like an area you were
Speaker Change: highlighting a little bit in the VA announcement that that was included. So, just would love to hear sort of how you think about that space and
Speaker Change: if there's anything that's changed since that announcement with United's decision not to cover.
Speaker Change: Yeah, thanks for the question, Andrew. You know, in terms of PGX...
in the VA, you know, it's a cash-paid opportunity, essentially.
You know, we have almost, you know, no exposure.
Speaker Change: to reimbursement as it relates to PGX. So, obviously, PGX is an important test for us. I mean, we think it provides a lot of value in terms of patient care, precision medicine.
Speaker Change: But it's also not a super high-volume test for us, historically. But, you know, we're happy to partner with the VA, right? That's a great opportunity for us to expand our PGX offering, but it's not relying on third-party reimbursement, if that makes sense.
Speaker Change: There's no M&A, we would like to call out, as you said, but this entire management team spends a lot of time evaluating M&A, nearly on a daily basis.
Speaker Change: As we've mentioned on the call, we're pretty happy with our cash position, you know, somewhere north of $800 million, so we have the optionality there to do M&A, and for us, we're just being careful, being cautious.
Speaker Change: We've done M&A so far and it's worked well for us. So I think we've proven we can identify the right targets We've proven we can integrate those assets
Speaker Change: and proving we can improve those assets. So we know we can make it work, but we need to find the right target. So nothing to call out yet, but certainly high on the priority list at the company.
Speaker Change: Sorry, I actually meant for M&A, that's helpful, but I actually meant, you know, is there any potential disruption to others where you could pick up share if the landscape changes at all competitively with Ambry under the the broader Tempest umbrella at this point as they try to build up, you know, a little bit more fulsome of an offering.
Speaker Change: Yeah, I gotcha. Look, I don't think we want to comment too much on that acquisition. I mean...
Speaker Change: I don't think it affects us too much either. So, I mean, we're more focused on what we're doing here than kind of what's going on with some of the other companies. And I just don't think that's going to affect how we operate here at the company. And we'll just kind of leave it at that.
Speaker Change: Okay, helpful. And maybe just one last one on the VA contract again. Just want to be clear, so the up to 99, I mean, are we thinking about this right to think it's...
Speaker Change: really kind of a hunting license now for you to go to these VA clinicians and say, hey, we are something you're able to order.
Speaker Change: have sort of reimbursement and an established relationship, but it is incumbent on you to go
Speaker Change: create that volume that maybe is easier with the contract than without? Or just how do we think about that? And maybe if you could give us a sense, how much revenue were you generating from the VA prior to this news? And is this entirely incremental to that? Or perhaps a little bit of it is growth along with that?
Yeah, you nailed it. It is a hunting license.
Speaker Change: And you said, you know, is it easier now than it was? Well, it's possible now, right? I mean, it would not be possible.
Speaker Change: Without this 99 million dollar contract. So now that we have it our sales team can call on those hospitals Get them set up in our system. Get them the wrecks the kits and get them ordering. So yes, it is a hunting license
Speaker Change: I mentioned on the call that we think it will take some time to scale that. It's not necessarily $99 million divided by 5, I think it will take some time to scale it. But it is a hunting license that now makes that possible. It was not possible for us to sell hereditary cancer into the VA without that contract. We're very happy to get that contract and really happy with the team that made that happen. It is all incremental.
Speaker Change: to our VA. We don't break out clients by revenue, but I can represent to you that it is all incremental and is significantly incremental overall to the business. We think in 2025, we do think we're going to capture a significant amount of the contract starting next year.
Perfect. I'll stop there. Thanks.
Speaker Change: Thank you. We've reached the end of our question and answer session. Ladies and gentlemen, that does conclude today's teleconference and webcast. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.
and many more. Thank you. Thank you.