Q3 2024 Myriad Genetics Inc Earnings Call
Speaker Change: Good afternoon and welcome to the Myriad Genetics 3rd Quarter 2024 Financial Earnings.
France: I am France, and I'll be the operator assisting you today.
France: All lines will be placed on mute to prevent any background noise.
France: After the speaker's remarks, there will be a question and answer session.
Speaker Change: If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you had to withdraw your question, press star 1 again. Thank you. And I would like to turn the call over to Matt Scalo. Please go ahead.
Matt Scalo: Thank you, friends, and good afternoon and welcome to the Marriage Genetics third quarter 2024 earnings call. During the call, we will review financial results we released today and afterwards we will host a question and answer session.
Matt Scalo: Our quarterly earnings release was issued this afternoon on Form 8K and can be found on our website at investor.myriad.com.
Matt Scalo: This call can be heard live via webcast at investor.meria.com and a recording will be archived in the investor section of our website along with the slide presentation.
Matt Scalo: Please note that some of the information presented today contains projections or other forward-looking statements regarding future events or the future financial performance of the company.
Matt Scalo: These statements are based on management's current expectations and the actual events or results may differ materially and adversely from those expectations for a variety of reasons.
Matt Scalo: We refer you to the documents the company files from time to time with the SEC, specifically the company's annual report on Form 10-K.
Matt Scalo: It's quarterly reports on Form 10-Q and its current reports on Form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements.
Speaker Change: I will now turn the call over to Paul. Thanks, Matt. Good afternoon, everyone, and thank you for joining us. On today's call, we will discuss the highlights from our strong third quarter performance and provide an update on the progress we continue to make accelerating profitable revenue growth.
Paul: We will also address how we are actively engaging with UnitedHealthcare regarding the importance of maintaining access to our gene site tests.
Paul: For those UnitedHealthcare enrollees struggling with the medication management challenges associated with depression, anxiety, and ADHD.
Paul: First, I want to thank my Myriad teammates and our provider partners for their continued support and commitment to advancing our mission and vision to make genetic testing and precision medicine more accessible to help people take more control of their health.
Unknown Speaker
Paul: Our focus on profitable growth continues as we generated approximately $150 million in gross profits.
Paul: 14 million of adjusted EPA, positive adjusted EPS of six cents and maintain approximately 149 million in liquidity in the third quarter.
Paul: At our investor event in October, we laid out the commercial growth strategy supporting our long-term financial targets and provided updates on our product portfolio, including First Gene, Precise Liquid, and Precise MRD.
Paul: We encourage investors to view our Investor Day presentation on the Investor section of our website for a deep dive into our product enhancements, new product pipeline, and initiatives to better serve our customers and improve efficiencies.
Paul: Despite a return to more typical seasonal ordering patterns and heavy storms and flooding in the southeast that prevented patients and providers from testing, our teams delivered a strong third quarter.
Paul: With this positive momentum in mind and the strong pickup in volumes we have experienced over the last four weeks, we are tightening our 2024 revenue range target around the midpoint of $840 million.
Paul: And we are increasing our 2024 adjusted EPS target to between 12 and 14 cents.
Unknown Speaker .
Unknown Speaker 0
Speaker Change: Last week, UnitedHealthcare updated its medical policy restricting access to multi-gene panel PGX testing.
Speaker Change: We believe that the existing body of clinical evidence for gene sites, including peer-reviewed research studies, supports the clinical validity and utility of the gene site test.
Speaker Change: We were surprised by United's policy update because this topic never came up during our contract negotiations at the end of 2023, nor in subsequent meetings just three weeks ago.
Speaker Change: Additionally, the American Psychiatric Association updated its recommendations on PGX testing earlier this year, which did not change their long-held stance on this type of testing.
Speaker Change: GeneSite has a strong value proposition which Mark Verratti will address further on today's call.
Speaker Change: And with approximately 3 million tests today, we believe that primary care providers see the value in gene sites.
Speaker Change: as an important tool that helps reduce the costly and potentially harmful trial and error when working with patients to get them on the right medications for depression, anxiety, and ADHD.
and hope for an outcome in the next few months.
Speaker Change: GeneSite revenue associated with the United Commercial Business was approximately $40 million for the 12
month period ending the third quarter of 2024.
Speaker Change: We want to reinforce that this policy change, if implemented, is effective January 1, 2025, and does not affect United's Medicare Advantage or managed Medicaid business.
Speaker Change: Nor do we have any reason to believe that other payers are likely to adjust their medical policies.
Speaker Change: Especially as biomarker laws in a growing number of states require state regulated plans to expand coverage of PGX testing pursuant to national and local coverage determinations.
With that, I'll turn the call over to Mark.
Mark Verratti: Thanks, Paul. I would like to start with the product group. Myriad continues to lead the market with differentiated scientific insights offered via MyRisk with RiskOrTest. Last 12-month year-over-year revenue growth through Q3 of 11% demonstrates the continued growth
Mark Verratti: of our category, and our commercial capabilities during the period of continued dislocation in our sector.
Mark Verratti: Despite a strong end to the third quarter, typical seasonal softness in July and August, as well as our ongoing focus on profitable growth, which inhibits some of the volume growth in Q3. Investors should note that our hereditary cancer testing business includes both MyRisk and Brack Analysis CDX.
Mark Verratti: While we continue to see strong growth in MyRisk with increased adoption and strong payer coverage, hereditary cancer testing growth was partially impacted by slower growth of our BRAC analysis CDX business in the U.S. and internationally.
Mark Verratti: MyRisk is expected to continue its strong growth as it benefits from expanded guidelines as well as an acceleration of EMR integrations, which play an important role in overall customer experience and revenue cycle management.
Mark Verratti: We are on track to transition several large accounts, including several multi-state health systems, and we continue to expect to achieve double-digit growth in the hereditary cancer testing volumes with stable average revenue per test in 2025.
Mark Verratti: In the third quarter, our women's health teams delivered 10% prenatal revenue growth year-over-year and 24% for the trailing 12-month period, excluding CNP.
Mark Verratti: While volume growth in Q3 was softened by typical seasonality, we continue to see growth from both current and new accounts.
Mark Verratti: We believe the market is becoming more rational regarding market pricing for these services and continue to see strong growth opportunities with new customers as we move into year end.
Next slide.
Mark Verratti: In the third quarter, gene site revenues increased 34% year-over-year, as we reported volume growth of 10%. Gene site revenue per test improved both year-over-year and quarter-over-quarter in the third quarter, reflecting a combination of strong
Mark Verratti: Provider demand, commercial pull through, and improving payer coverage driven in part by the growing list of states that have enacted biomarker laws and positive contribution from prior periods.
Thanks a lot.
Speaker Change: The critical need in mental health treatment is demonstrated by the fact that 96% of counties in the United States have an unmet need for specialty mental health care.
Speaker Change: This leaves a burden on primary care who provide over 70% of antidepressants.
Speaker Change: Far too often this results in trial and error to find the right medication.
GeneSite is an easy-to-use tool backed by strong clinical evidence.
including the largest randomized control trial in the space.
Speaker Change: conducted by the VA. In that trial published in JAMA, both primary endpoints were met, including the gene set group achieving greater remission rates over the 24-week period.
Speaker Change: The clinical utility and ease of use of Genesight has driven an overall satisfaction to over 93% among its current providers.
Next slide.
We continue to see positive.
Speaker Change: Momentum with our precise tumor test, which we acquired in early 2024 and launched from our Salt Lake City
Speaker Change: facility this quarter. We're also excited to have launched Foresight Universal Plus in June and await ACOG guideline updates that could potentially expand this market opportunity. At our investor event in October, we spoke about Precise Liquid and MRD as these new products will provide tremendous value for our providers and support our long-term growth ambitions.
Speaker Change: Now I will turn the call over to our Chief Operating Officer, Samraat Raha.
Thanks, Mark.
Samraat Raha: As Paul mentioned, we hosted investors in New York this past October to provide a deep dive into our growth strategy and the enterprise initiatives that support our longer-term goals. Therefore, on this call, I'll keep my comments brief. Let me start on slide 13 with an update of our Labs of the Future program.
Samraat Raha: The overall objective of our Labs of the Future program is to drive innovation and operational excellence at scale, to continue delivering high-quality testing results that meet regulatory requirements while shortening turnaround times and reducing our costs per test.
Samraat Raha: The work we're doing on this program supports our ongoing focus to improve the overall patient and provider experience and also support continued strong gross margins.
Samraat Raha: Over the last three years, we've invested over $75 million in state-of-the-art labs, standard-based technologies, and digital capabilities.
Samraat Raha: In 2023, we completed the construction of our new lab facilities, both in Salt Lake City and South San Francisco.
Samraat Raha: This year, in 2024, we made important progress at both sites, including with permitting, lab moves, lab validation, and operational scale-up.
Samraat Raha: In Salt Lake City, we continue to ramp up the volume of samples processed for both Prolaris as well as PRECISE-MRD clinical validation research projects.
Samraat Raha: A precise tumor, which is our therapy selection test that we acquired from Intermountain Precision Genomics, I'm pleased to report that we have completed validation and started processing samples in Salt Lake City as of last week.
Samraat Raha: We continue to see monthly volume growth and expect this trend to continue accelerating as we head into 2025.
Samraat Raha: In South San Francisco, we have completed validation and are ramping up sample volume for both PREQOL, our NIPS test, and FORESIGHT, our expanded carrier screening test in our new lab.
Samraat Raha: Based on our continued progress, we're on track with our plan to complete the South San Francisco move in early 2025 and Salt Lake City move by the end of 2025. Next slide.
Samraat Raha: Digital capabilities continue to be a key focus area of investment across our enterprise.
Samraat Raha: to both improve customer experience and increase internal efficiency and productivity. Our efforts with EMR systems are making a difference in the way we're engaging with our customers and will be an important driver of future volume growth.
Samraat Raha: It's clear that providers are seeking to integrate genomic and genetic information into the care of their patients.
Samraat Raha: And to provide the ease of use, this increasingly requires our products to be natively ordered and resulted in EMR systems.
Samraat Raha: Over the past two years, we've doubled our investment in EMR programs, including in engineering, integration, commercial pull through, I've seen an almost 10x increase in the pace of newly integrated clinical sites.
Samraat Raha: In fact, we're tracking to integrate about 4,000 new provider sites this year.
Samraat Raha: We have system integrations across 15, more than 15 different vendors, including strategic partnerships with TMR, EMR providers including Athena, Epic, Flatiron for Oncology, and Lumea for Urology.
Samraat Raha: As we look at the first half of 2025, we expect to add INOMED and LK-EMR systems to enable for the first time healthcare providers and systems to be able to order the continuum of our oncology products from germline to somatic. Next slide.
Samraat Raha: As we shared during our recent investor day, we see a meaningful opportunity for Myriad to serve community oncologists and healthcare systems who trust Myriad's gold standard hereditary cancer and HRD tests with precise tumor now and precise MRD, a differentiated, highly sensitive MRD assay in the future.
Samraat Raha: We continue to strengthen our freedom to operate, an ability to deliver tumor-informed, high-definition MRD assays with the issuance of a third foundational method patent from the USPTO, a personalized method for detecting circulating tumor DNA.
Samraat Raha: In addition, our agreement with Personalis to cross-license patent estates, cover tumor-informed approaches to MRD, fortifies our IP position.
Samraat Raha: We plan to launch our first MRD commercial offering for breast cancer first half of 2026.
Last month, we announced five ongoing research collaborations.
Scott Leffler, Mark Verratti, Paul Diaz, Matthew Scalo, Unknown Executive
Samraat Raha: The Pembrolizumab and hormonal therapy in patients with HR positive inflammatory breast cancer who did not achieve pathological complete response at the time of surgery. This is being led by Dr. Bora Lynn, University of Texas MD Anderson Cancer Center.
Samraat Raha: Another study is to evaluate whether ctDNA levels correlate with nodal involvement in patients with newly diagnosed HR positive breast cancer and if so how the correspondence may be used to aid in surgical decision-making. Led by Dr. Anna Weiss at the University of Rochester Medical Center.
Samraat Raha: As well as a multi-center perspective study, prospective study to evaluate the maintenance of complete response to trust to the map, DEXA, DECAN.
Samraat Raha: and her two positive advanced or metastatic breast cancer patients and whether ctDNA can be used to optimally guide therapy being led by Dr. Yoichi Naito of National Cancer Center Hospital East in Japan.
Samraat Raha: Across our studies, we have more than 4,000 patients receiving precise MRD tests.
Samraat Raha: And with each patient having multiple draws, this will result in more than 30,000 time points, which will be an important part of the clinical evidence for our MRD test.
Samraat Raha: We look forward to sharing data from our ongoing studies in the first half of 2025 and submitting data to Moldex in the second half of 2025 for reimbursement.
Samraat Raha: We're also engaging biopharma companies are currently running their MRD samples in our new Salt Lake City lab, where we bring together the power of high performance MRD assay with our efficient lab workflows and cutting edge infrastructure.
Samraat Raha: We're excited about the sizable opportunity for Myriad to serve this market with our MRD assay as part of our Precise Oncology Solution portfolio, enabling thousands of providers and healthcare systems that count on us to serve their patients through the continuum of cancer care. I look forward to updating you on our progress.
Samraat Raha: Moving on to our key performance indicators on the next slide.
Samraat Raha: We continue to see a high level of team engagement across the company. The work we've been doing over the last couple of years to increase internal efficiency and productivity is paying off.
Samraat Raha: Compared to 2021, we're seeing a 75% increase in the revenue per commission sales rep, and a 70% increase in the number of cases processed per customer service rep. Our ongoing focus on revenue cycle management is also continuing to pay off, as evidenced by a 5% increase in revenue per test.
Samraat Raha: We continue providing industry-leading test turnaround times to support providers making treatment decisions. Our turnaround times, along with the focus we're putting into improving customer experience, are supporting our strong Net Promoter Score of 72.
Speaker Change: With that, let me turn the call over to our Chief Financial Officer, Scott Leffler.
Speaker Change: While hereditary cancer testing revenues grew by only 5%, we were encouraged by 11% growth in MyRisk for the affected population, which is the area most likely to benefit from disruptions in the competitive landscape.
Speaker Change: We did benefit from a favorable change of estimates from prior periods in Q3 of 24, primarily impacting gene sites.
Speaker Change: As a reminder, we disclosed the meaningful benefit in Q3 of last year from change of estimates as well. This year's change of estimate benefit was similar to last year's benefit on a consolidated total company basis, making it easier to compare consolidated year-over-year revenue.
Speaker Change: On a year-to-date basis, revenues across our three major product categories were even more impressive, with growth ranging from 13% for hereditary cancer testing up to 26% for gene site. Next slide.
Speaker Change: As a reminder, we went into some detail at our recent investor event regarding some of the key drivers for sustainable progress in average revenue per test, including various investments and initiatives by both our revenue cycle and payer markets team.
Speaker Change: In Q3, we saw stability in underlying rates across the portfolio, which represents another proof point for the great work being done by our revenue cycle and payer markets team, along with others throughout the company.
Speaker Change: On the next slide, I'll highlight some of the wins from these efforts.
Speaker Change: These include, among other things, working with health plans to encourage their implementation of medical policies that conform to state biomarker legislation.
Speaker Change: As discussed on prior earnings calls, there's a growing list of states that have passed biomarker legislation that lends itself to ensuring access to precision medicine and advanced diagnostics.
Speaker Change: As we have mentioned, we recently received expanded commercial and managed Medicaid coverage for GeneSite with Blue Shield of California and Peach State Health Plan under the Centene umbrella, and there are several other payers with which we have had positive discussions regarding GeneSite coverage.
Speaker Change: In total, our team won 10 new product coverage or medical policy expansions from payers and executed seven contracts with new payers as we seek to bridge gaps in coverage across our no pay universe during the third quarter.
Speaker Change: Those Q3 results bring us to 18 new contracts and 29 new coverage wins on a year-to-date basis.
Next slide.
Speaker Change: As a reminder, we closed the sale of our European EndoPredict business during the third quarter. There was a one-time non-cash charge as well as minimal cash restructuring costs associated with the transaction.
Speaker Change: But it's important to note that the transaction removes about $11 million of annual run rate revenue.
Speaker Change: Importantly, it will be accretive by more than four million dollars per year to our go-forward adjusted operating income by streamlining our cost structure. We had about two months of this impact in our Q3 results.
Speaker Change: Despite the impact of the transaction, we nonetheless delivered a solid 11% revenue growth on a consolidated basis and maintained healthy margins above 70%. OPEX remained modest, contributed to a solid bottom line performance with 6 cents of adjusted EPS.
Next slide.
Speaker Change: Our 11% revenue growth in Q3 also translated to 11% year-over-year growth in gross profit dollars.
Speaker Change: On a year-to-date basis, we've generated 14% growth in gross profit dollars. Our adjusted EBITDA for the quarter was $14 million and is now $40 million on a trailing 12-month basis as of Q3.
Speaker Change: The combination of our generous gross profit base and increasing levels of adjusted EBITDA profitability demonstrate the profit and cash generating potential of the business, especially as we generate more operating leverage over our operating expenses.
Speaker Change: We also finished Q3 in a strong liquidity position, with $149 million of total liquidity from a combination of cash and cash equivalents and availability under our revolver.
Speaker Change: We saw sequential increases in cash and cash equivalent balances from Q2 to Q3 and expect to be free cash flow positive in Q4 as well.
Speaker Change: We saw sequential increases in cash and cash equivalent balances from Q2 to Q3 and expect to be free cash flow positive in Q4 as well.
Next slide, please.
Speaker Change: Next slide please.
Speaker Change: Finally, before handing it back to Paul, I wanted to update our guidance for full year 2024. As a reminder, we began the year with a revenue guidance range of $820 to $840 million.
Speaker Change: Finally, before handing it back to Paul I wanted to update our guidance for full year 2024.
Speaker Change: As a reminder, we began the year with a revenue guidance range of $820 million to $840 million on our last earnings call, we updated that range to $835 million day $145 million.
Speaker Change: On our last earnings call, we updated that range to $835 million to $845 million.
Speaker Change: In light of our Q3 performance and continued execution, we are narrowing our full-year revenue range to $837 million to $843 million.
Speaker Change: In light of our Q Q3 performance and continued execution, we are narrowing our full year revenue range to 837 million to $843 million. Our updated gross margin expectation is 69, 8% to 73% and our Opex is now expected.
Speaker Change: Our updated gross margin expectation is 69.8% to 70.3%, and our OPEX is now expected to be $565 million to $570 million.
Speaker Change: To be 565 million to $570 million.
Speaker Change: The net impact of these updates is a more favorable bottom line performance with adjusted EBITDA of $34 million to $39 million and an increase in adjusted EPS of $0.12 to $0.14.
Speaker Change: The net impact of these update as a more favorable bottom line performance with adjusted EBITDA of $34 million to $39 million and an increase in adjusted EPS of 12 to 14.
Paul: We have been pleased to have delivered solid performance proof points throughout the year and are also proud of these expected full year results now let me turn the call back to Paul.
Speaker Change: We have been pleased to have delivered solid performance proof points throughout the year and are also proud of these expected full year results.
Now, let me turn the call back to Paul.
Paul: Thanks Scott. We continue to build on the pillars of long-term growth and profitability that delivered our strong results in the third quarter. The momentum we continue to see across the enterprise supports our decision to update our 2024 financial guidance.
Speaker Change: Thanks, Scott we continue to build on the pillars of long term growth and profitability. The delivered our strong results in the third quarter the momentum we.
We continue to see across the enterprise supports our decision to update our 2024 financial guidance.
Paul: While the GeneSite medical policy change by UnitedHealthcare is disappointing, we remain encouraged about our future.
Speaker Change: While the gene site medical policy change by Unitedhealthcare disappointing, we remain encouraged about our future.
Paul: As I mentioned earlier, revenue related to patients under UnitedHealthcare's commercial policies represent about $40 million in the most recent 12-month period.
Paul: As I mentioned earlier revenue related to patients under United Healthcare's commercial policies represent about $40 million in the most recent 12 month period.
Paul: If the policy change goes into effect in January, we would expect a loss of about $40 million of revenue.
Paul: If the policy change goes into effect in January we would expect a loss of about $40 million of revenue.
Paul: That would translate to approximately 30 million of lost gross profits.
Paul: That would translate to approximately $30 million of loss gross profits.
Paul: Our preliminary view is that we can mitigate at least 10 million of that bottom line impact.
Paul: Our preliminary view is that we can mitigate at least $10 million of that bottom line impact.
Paul: In addition, we continue to believe that we can grow our remaining business at double-digit pace, even after adjusting our projected 2024 revenue for the loss of the UnitedHealthcare commercial revenue.
Paul: In addition, we continue to believe that we can grow our remaining business at double digit pace, even after adjusting our budgeted or projected 2020 for revenue for the loss of the United Healthcare commercial revenue.
Paul: Our clinically differentiated products, supported by technology, deliver value in real-world clinical settings and enable early detection and better treatment decisions for providers and their patients.
Paul: Our clinically differentiated products supported by technology deliver value in real world clinical settings, and enabled early detection and better treatment decisions for providers and their patients.
Paul: Our modernized labs and commercial engines are examples of where investments in automation and advanced technology are yielding improved workflows, faster turnaround times, and reduced operating costs.
Paul: Our modernized labs and commercial engines are examples of where our investments in automation and advanced technology are yielding improved workflows faster turnaround times and reduce operating costs.
Unknown Speaker
Paul: All of this is reinforcing our position as a trusted and reliable lab with specialized expertise committed to quality and service excellence.
All of this is reinforcing our position as a trusted and reliable lab with specialized expertise committed to quality and service excellence.
Paul: We continue to energize the enterprise around our shared mission and vision to make genetic testing and precision medicine more accessible, helping people take more control of their health and to enable providers to better treat and prevent disease.
Paul: We continue to energize the enterprise around our shared mission and vision to make genetic testing in precision medicine more accessible.
Paul: Helping people take more control of their health.
Paul: And to enable providers to better treat and prevent disease.
Speaker Change: I'll now pass the call back over to Matt for Q&A.
Paul: Ill pass the call back over to Matt for Q&A. Thanks.
Matt Scalo: Thanks, Paul. And as a reminder, during today's call, we use certain non-GAAP financial measures.
Speaker Change: Thanks, Paul and as a reminder, during today's call we use certain non-GAAP financial measures a reconciliation of the GAAP to non-GAAP financial results can be found in our earnings release and under the Investor Relations section of our website now we're ready to begin the Q&A session to ensure broad participation we are asking participants to.
Matt Scalo: A reconciliation of the GAAP to non-GAAP financial results can be found in our earnings release and under the Investor Relations section of our website. Now we're ready to begin the Q&A session. To ensure broad participation, we're asking participants to please ask only one question and one follow-up.
Please ask only one question and one follow up France, we are now ready for the Q&A portion of the call.
Speaker Change: France, we are now ready for the Q&A portion of the call.
Thank you and we will now begin the question and answer session.
Speaker Change: Thank you and we will now begin the question and answer session.
Speaker Change: I would like to ask the question again, Please press star one on your telephone keypad to raise your hand and joined the queue if you'd like to withdraw your question simply press Star. One again, if you are called upon to ask your question and our listening via loud speakers.
Speaker Change: And on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question and again just a reminder, we ask that you please limit.
Speaker Change: Yourself with one question and one follow up only thank you and your first question comes from the line of Doug Schenkel from Wolfe Research.
Speaker Change: Please go ahead.
Doug Schenkel: Good afternoon, guys. Thanks for taking my questions.
Doug Schenkel: I'm going to probably no surprise start on gene site and.
Doug Schenkel: I want to I want to start with a couple of math questions in that.
Speaker Change: Want to kind of get it until a philosophical question for you Paul So.
Speaker Change: United accounts for I think roughly a quarter of gene site revenue.
Speaker Change: Presumably volume is about 15% to 20% and as we think about updating our models for next year assuming this holds.
Speaker Change: I believe <unk> gross margin is 75% to 80%. So I just wanted to make sure those are right from a math standpoint.
Speaker Change: And.
Speaker Change: But why don't I pause, there and then and that I'll talk come back with a follow up on the philosophical question.
Speaker Change: Yes, so Doug tried to be real clear about the math.
Speaker Change: So.
Speaker Change: Of our $840 million of revenue that we expect this year approximately $40 million of it is United commercial.
Speaker Change: And we expect to be able to grow in double digits on that sort of pro forma base.
Speaker Change: We are still aiming for a <unk>, 5% growth rate next year and beyond we've said that that's our long term growth rate.
Speaker Change: Our four days into evaluating this and most importantly, engaging with United on some additional data that we think they failed to take into account.
Speaker Change: Frankly, some some interpretations of some of the information out there so.
Speaker Change: We're looking forward to continuing that discussion we have a really great working relationship with United.
Speaker Change: This clearly kind of caught us.
Out of the Blue.
Speaker Change: And quite frankly is.
Speaker Change: Consistent with typically how policy is made typically some study would be issued that would say that the test is dangerous or problematic and so we're not really sure what gave rise to this policy change but.
Speaker Change: But we're looking forward to those continued discussions and quite frankly, continuing to share with them. The differentiating nature of change site that I think sets. It apart in some to some extent from other apologetic from other PGS tests. So that's the math that I would anchor you on and again I wanted to.
Speaker Change: Give you a sense of the gross profits there of around $30 million and that we've already started putting our arms around at least $10 million of mitigation with respect to that and Thats again, assuming four days into what we what we can do so I hope that guide you on your modeling and gives you a.
Speaker Change: Baseline from which to think about 2025.
No that's super helpful and that's pretty impressive and four days. So we'll see what you do next week.
Speaker Change: On the philosophical question so.
Speaker Change: I understand the unmet need associated with gene site.
Speaker Change: That being said going back to the time of the <unk> scale, which of course predates you.
Speaker Change: This has been a pretty consistently controversial area of focus for the company at least in the minds of Wall Street, and I think to an extent and even the clinical community.
Speaker Change: The motivation behind that deal again, which it is not you Paul but it was questionable from the start in my opinion the way your predecessors cut data wasn't straightforward.
Speaker Change: All that said I bring this up because in Europe, three plus years with the company you've done a commendable job of not doing these types of things you stopped the lawsuits you're really good with disclosure.
Speaker Change: Haven't done adversarial with payers that you've worked with them.
Speaker Change: Simply put you've worked hard to optimize the good at myriad and reduce the drama and increase the predictability.
Speaker Change: So let me put aside clinical need and maybe be the Cherokee Wall Street Guy for a second but recognizing this is a quarterly financial call.
Speaker Change: <unk> kind of remains the last fashion of drama at myriad and the eyes of the investment community and again I think to a certain extent in the clinical community.
Speaker Change: What's the criteria you decide you used to decide if any asset keeping gene side very much in mind.
Speaker Change: B part of myriad to point out should be part of Europe business. Thank you.
Speaker Change: Yes, Thanks, Doug well first of all let's underscore our big we hear the last four five years.
Speaker Change: A real team effort, including our board of directors and we have continued to deliver double digit growth and now profitable growth for the last five six quarters and we're committed to continue to do that and I. Appreciate your kind words, we have divested those non strategic assets.
Speaker Change: We've just completed which was a little noisy in Q3, our international restructuring and despite that we delivered on the 11% growth in AR.
Speaker Change: And quite frankly, a nice beat on the EPS line to look.
Speaker Change: I will tell you there are there are.
Speaker Change: <unk> of patients 3 million patients out there, including a number of personal stories.
Speaker Change: That then I can get into offline of people, whose life is really changed because of the gene site tests. There is nothing more painful than watching your teenage daughter struggled with depression anxiety and going through the trial and error of three or four drugs over the course of 18 months.
Speaker Change: And the weight gain and the loss productivity and so we're looking forward to sharing more of that data and clinical utility with.
Speaker Change: With United including the work that we've done with Optum.
Speaker Change: And try to better understand this policy change, but I can tell you that our gene site team and the 500000 patients this year.
Speaker Change: They're going to benefit from getting on the right medication faster, we're not going to abandon them anytime soon.
Speaker Change: And your next question comes from Samsung.
Speaker Change: From Morgan Stanley. Please go ahead.
Speaker Change: Hi, This is Madison on for T. J, thanks for taking the question.
Speaker Change: I guess wanted to start off I guess in light of the body of evidence for use of multi gene panels and mental health deteriorating relatively less mature than say for like oncology can you think that there is a risk of payers who are facing growing headwinds on the cost Scott Scherr will view the field is kind of like low hanging fruit to deny claims.
Speaker Change: Sure.
Speaker Change: Mr Barker prior off.
Speaker Change: Okay.
Speaker Change: Well I think that we acknowledge that the payers it's their turn in the cycle here.
Speaker Change: And there they are facing on their enormous profit based by the way a fair amount of pressure.
Speaker Change: So and that Theres, a drowned stream effect on that and Theres, a great deal of scrutiny bipartisan scrutiny.
Speaker Change: On prior authorizations and in a number of their practices again, we've worked really hard with United and others to be transparent to work through coding changes and we're going to continue to do that because I think that goes to the underlying integrity of our of our revenues and our business model, but theres no question that there pressure.
Speaker Change: Sure.
Speaker Change: The extended like everybody else in the healthcare ecosystem.
Speaker Change: It is also true that we've had a disciplined approach to managing our costs, which is important here.
Speaker Change: As well in terms of improving the value proposition the data on the evidence that we see for gene side quite frankly is that it improves the ml. The MLR that when you look at the other costs associated with patients whether it's their primary diagnosis or secondary is that whether you're talking about the elderly or.
A person their working years or a teenager.
Speaker Change: That depression anxiety, ADHD have enormous personal and financial cost to the system and so again, we're going to continue to build that body of evidence, but we think in the context and I have a fair amount of experience in this in terms of looking at the total cost of care and and the MLR.
The payor.
Speaker Change: That people would be short sighted to not use the gene side tool as part of the process to get people on the right drugs faster and improve their overall treatment process.
Speaker Change: Got it okay.
Speaker Change: Sure.
Speaker Change: And then maybe one other one.
Speaker Change: Kind of attachments and former just wondering if you've had any imbalance from other payers following the.
Speaker Change: This is and then more specifically.
Speaker Change: What had you our revised long term.
Speaker Change: Long term targets assumed by.
Speaker Change: By way of improvement in the June Titan, our pay rate over the next couple of years.
Speaker Change: Yes.
Speaker Change: Well no no imbalance.
Speaker Change: And again, we continue to.
Speaker Change: As Scott pointed out and I've talked about over the last couple of years, we view, reducing or no pay as a lot of ground game.
Speaker Change: Small wins that are adding up.
Speaker Change: Most of those wins have just been in the last couple of quarters, So you're not even seeing that yet.
Speaker Change: Many of these say biomarker law is just went into effect in July some are just going into effect in January and it takes some months if not a year to make it into medical policy and they make it into contract. So it is as we've articulated before a slow process.
Speaker Change: The biomarker laws or not.
Speaker Change: Hi to United's medical policy.
Speaker Change: Tied to national coverage determinations in LCD specifically.
Speaker Change: So.
Speaker Change: Again, we don't we don't expect that to impact our ability to continue to reduce no pays for gene site.
Speaker Change: Quite frankly continue to grow gene site.
Speaker Change: And again, we will look forward to.
Speaker Change: Hopefully affecting this policy change it at United in terms of our long term growth I think of sort of spoken to that.
Speaker Change: Certainly that we will continue to revisit that.
Speaker Change: We are confident in our ability to continue to grow.
Speaker Change: Our revenue base, our pro forma revenue base on a double digit basis and continue to grow profitably as we continue to get the productivity gains of our lab of the future and see the rest of the leverage in our P&L that you really saw this quarter and the drop through that is happening.
Speaker Change: Across our P&L.
Speaker Change: Yes.
Speaker Change: Got it okay very helpful. Thanks for the time guys.
Speaker Change: Thank you.
Speaker Change: And your next question comes from Puneet <unk> from Leerink partners. Please go ahead.
Speaker Change: Yes, Hi, Paul.
Speaker Change: So just wanted to clarify on gene side could you. Please confirm the Medicare rate there and as you pointed out.
Speaker Change: That would become the larger portion of the <unk>.
Speaker Change: Mix.
Speaker Change: As a result only.
Speaker Change: About half of the impact on the bottom line. So I just wanted to confirm that.
Speaker Change: And then on the.
The payer side why would we not expect to continue to see more pressure from the payers because they themselves are experiencing in MA and other pressure in other area. So why wouldn't we expect that on other parts of the portfolio or any conversations that you've had on that end.
Speaker Change: Yes, let me start with the last one for me. Thank you.
Speaker Change: As I said, a few minutes ago.
Speaker Change: Health care system is going to see continued pressure.
Speaker Change: Our sector is a little different position because of adoption rates are still pretty low and we have significant no pace across our portfolio, whether it's in prenatal or for hereditary cancer and <unk> seen progress across the board there yes, there are many.
Speaker Change: Payers that only cover.
Speaker Change: Brac in terms of hereditary cancer for example, so.
Speaker Change: I think there is more than enough upside to improving our ASP not.
Speaker Change: Notwithstanding the global pressures and we're not seeing and we've talked about this year to date, we haven't seen any contract.
Speaker Change: <unk> pricing pressure in any of our discourse with Payors that has not come up our Medicare rate is $13 56 per gene side.
Speaker Change: And again, while again this is disappointing and we're working through this again for days Inn.
Speaker Change: We don't see this having an overall impact on our ASP opportunity over the next few years, we think that across our portfolio. We have three or four to five more years of opportunity to expand medical policy to improve Rev cycle and reduce no pace.
Speaker Change: Got it.
Speaker Change: Thats helpful and then let.
Speaker Change: Let me switch away from gene side, there was an acquisition in the space.
Speaker Change: On the hedge security side just wondering.
Speaker Change: How are you thinking about the competitive land.
Speaker Change: The landscape, you've obviously taken some share.
Speaker Change: The disruption in the marketplace.
Speaker Change: Now with this acquisition just wondering how youre thinking about.
Speaker Change: <unk> positioned and potentially maybe even the ability to take share.
Speaker Change: Yes. Thank you I'll start and then turn it over to Mark I think you've probably all heard enough from me already but.
Speaker Change: Yeah.
Mark Verratti: The recent.
Mark Verratti: Changes.
Mark Verratti: And in the marketplace and VK semaphore and now the transaction of the Ambry all create opportunities for us to gain share.
Mark Verratti: As a respected and quite frankly, the leading provider for <unk> cancer test. This is both for affected patients in oncology and particularly for unaffected patients principally in our women's health channel.
Mark Verratti: So as I've said throughout the year. These changes take time, even with respect to the most recent change in beta and Labcorp.
Mark Verratti: Policy changes are just taking us into effect now the integration is just going to happen here in January as I understand from some of our field people.
Mark Verratti: So I think 2025.
Mark Verratti: Is going to be a great year for us to win share, particularly as we land. These large accounts continue to advance our EMR integrations.
Mark Verratti: To expand our my risk panel that we've talked about at the Investor day.
So we're quite bullish on our opportunity to grow.
Speaker Change: My risk our hereditary cancer tests across all of our channels in 2025, Mark Yes. The only thing I would add to that just to echo Paul's comments on the unaffected side, our women's health channel myriad is by far the market leader.
Speaker Change: I don't see much much competition, there I think on the unaffected side clearly virus is considered the gold standard test at anytime we've seen this dislocation that opens up different providers and health systems to now have to make a choice because they have to remove our products. So that means that opens up a choice for marriott to get into that account.
Speaker Change: In addition, it takes a long time for these integrations as we sort of talked about right. We would expect those to be a lot quicker, but unfortunately when you are trying to when you are trying to integrate a test like hereditary cancer tests. It does take a long time, so that that move from one competitor to another.
Speaker Change: It doesn't happen overnight, but it really does open up a lot of opportunities for merit to be back and theyre selling the best in class past, so similar to what we've seen with the previous dislocation.
Speaker Change: We're going to take this opportunity to really focus on.
Speaker Change: Get back in there and win share.
Speaker Change: There is a war room already stood up on in detail Ambry I promise you.
Speaker Change: [laughter] alright.
Speaker Change: Paul I'll leave it at that.
Speaker Change: Okay.
Speaker Change: And your next question comes from Chen COTA from Goldman Sachs. Please go ahead.
Speaker Change: Hey, guys. This is <unk> on for Matt.
Speaker Change: Congrats on the quarter.
Speaker Change: Sad to hear about the gene site development, but.
Speaker Change: Was wondering how youre thinking about the timeline of further dilution.
Speaker Change: Pay rate.
The addition of new products for example would you ever consider.
Speaker Change: During the launch of certain products to avoid dilution of the no pay ray all at once which could potentially affect margins.
And then I have another question on <unk>, but I wanted to ask that first.
Yes, that's a really great question.
Speaker Change: I actually spoke about this at a panel recently with our friend, Doug who is on the line earlier.
Speaker Change: The industry has great opportunity here is to close the gap between science.
Speaker Change: And the great innovation happening in our labs.
Speaker Change: <unk> medical policy.
Speaker Change: But in between there are guidelines and whether we're talking about prenatal test or guidelines for oncology products.
We got to close those gaps now I think we're as part of our product management here really trying to be thoughtful about how we go to market with products like first gene.
Speaker Change: In fact, our discussions with United around <unk> or right around this topic, we will expect to continue.
Speaker Change: And so we certainly expect that as we launch new products like everyone has experienced.
Speaker Change: Some no pay some even margin degradation, we have plenty of other ways to to continue to maintain margins, but ultimately we want to close the gap between launch and payment, but you will see that in first gene you will see that with precise liquid.
Speaker Change: And we've been pretty open about those things.
Speaker Change: The strength of myriad genetics, though is the diversity of our portfolio and the many different levers we have to pull here to grow profitably.
Speaker Change: Sam I don't know if you'd add anything to that.
Samraat Raha: I think you said it very well Paul yes.
Speaker Change: Okay.
Speaker Change: Got it. Thank you that's helpful.
Speaker Change: And then just playing Devil's advocate, if what if the revenue contribution from our Mardi.
Speaker Change: For some reason it takes longer than expected do you still feel confident in achieving that 12% plus long term guide.
Speaker Change: For topline growth.
Speaker Change: Yes, we have.
Speaker Change: We have said consistently.
Speaker Change: Ill underscore this that our long term growth target.
Speaker Change: Is based on our core portfolio of products, including the enhancements, we're making to those products.
Speaker Change: Cross the portfolio.
Speaker Change: We don't expect.
Speaker Change: <unk> contributions for first gene to get US there, we don't expect contributions from precise tumor precise liquid to get us there and we certainly don't expect.
Speaker Change: Those products, we hope and expect as we think about 26, and 27 start pointing us to growth in the mid teens.
Speaker Change: And again with many different levels levers to maintain our 70% gross margins.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: And your next question comes from <unk> from.
From Guggenheim Partners. Please go ahead.
Speaker Change: Hey, guys. Thank you for taking my question.
Speaker Change: Clearly the United Health decision wasn't so guys one of the things that made it all the more surprising is that of United affiliate Optum Health was a key group that generated health economic data supporting gene side views that this relationship actually help you as you engage with United on this or does this make the decision all the more challenging.
Speaker Change: How close do you think it should be to how the data was generated.
Speaker Change: Well.
Speaker Change: Yes.
Speaker Change: I think United is a big complex organization.
Speaker Change: And that's been incredibly successful one of the more successful health care companies in America, but it is it is quite a big complex organization.
Speaker Change: And not really sure if they took that health economics data into account, but I assure you when we sit down with them in the next couple of weeks that that data is going to be shared as we've said previously there is no doubt that gene site contributed to some of those savings that's clear from.
Speaker Change: The phase one study so we will be reviewing that data along with the additional gene site specific meta analysis that was recently completed.
Speaker Change: And again part of what I think we're going to.
Speaker Change: Discussed with United is that.
Speaker Change: The difference between gene side and some of the other PGS test out in the marketplace and that differentiation both in terms of clinical utility and clinical validity. So we can't tell you exactly what we read.
Speaker Change: The policy just like you have.
Speaker Change: But there's more to talk about and we're looking forward to those conversations and having a more holistic conversation and that's probably what's disappointed here that.
Speaker Change: The position of other stakeholders wasn't taken into account and again that there wasn't some big study that was recently redeemed relief that would given a rise to this policy change. So we're really scratching our heads about this but we will know more in the weeks to come once we sit down with them.
Speaker Change: Thank you for that.
Speaker Change: Just to.
Speaker Change: And so as the elephant in the room, what gives you the confidence that other peers won't be.
Speaker Change: <unk> pulled their conference for gene site, especially payers are always looking for an excuse.
Speaker Change: Flotek, especially your diagnostic does so just anything any sign I know you said about the <unk>.
Speaker Change: <unk> facilities and the data that's out there, but these are all out there even when United took that decision. So just just trying to see how are you planning to medicate that.
Speaker Change: We're not offering a guarantee here.
Speaker Change: What we are saying is those other coverage determinations were not based on United's policy.
Speaker Change: They are based on.
Speaker Change: Local coverage determinations.
Speaker Change: And.
Speaker Change: And we are obviously, we've talked about this before we are always trying to build the clinical evidence across all of our products and while the company fell behind on those research in those clinical studies. There has been a great deal of work over the last three years and you've seen this at various conferences.
Speaker Change: <unk> to bring forth more clinical evidence to support our cast is an ongoing obligation and commitment that we have.
Speaker Change: But we have no reason to believe that there will be changes in other payors coverage determinations are policies, that's not to say as you and others have pointed out that payers might not.
Speaker Change: Look to this and attempt to do that.
Speaker Change: Just inconsistent with how medical policies have been underwritten to date and it would be a big departure from their contractual obligations.
Speaker Change: To to look to this policy to make a change here.
Speaker Change: And four days in the best we can tell you.
Speaker Change: Thank you thank you for that.
Speaker Change: Sure no. Thank you.
Speaker Change: Okay and your next question comes from sung <unk> Nam from Scotiabank. Please go ahead.
Speaker Change: Paul I may have misunderstood your comments earlier, but do you have a sense of what additional data they're looking for at this point or.
Speaker Change: Provided any kind of specific.
Speaker Change: Endpoint or metrics or <unk>.
Speaker Change: Size of the patient cohort.
Speaker Change: Cohorts. They are looking for just trying to better understand kind of what's missing from their perspective.
Speaker Change: We're not quite clear on what's missing quite frankly.
Speaker Change: But again, we have a good working relationship with the team at United and we are scratching our heads about how a policy change was affected without some study being released that that pointed to the negative aspects of these tests.
Speaker Change: And including from the different societies and others. So.
Speaker Change: Again, we're looking forward to sitting down with United and understanding what gave rise to this policy change because again, we don't see the the trigger for it.
Speaker Change: But I can't speak for them. So again, we will we will look forward to having that conversation and presenting the additional data that was not presented in the policy statement that we think should have been taken into account. So that's that's the clarifying point, we do have additional data.
Speaker Change: And we think that the input of stakeholders is going to be important here.
Speaker Change: I don't think that this policy changed allowed for.
Speaker Change: Getting the state.
Speaker Change: The stakeholder input from providers and patient advocacy groups about gene side or the other test. So we will have more to share after we sit down with United.
Speaker Change: I don't want to prejudice those conversations I want to go into them.
Speaker Change: Listening and learning and hopefully they will respond in kind to be open to the data that we want to provide any additional input from other stakeholders.
Speaker Change: Got you and then just curious on that note.
Speaker Change: That's the best case scenario worst case scenario, maybe the worst case scenario is more obvious but decades scenario do you think.
Speaker Change: Something like that.
Speaker Change: After presenting additional data, it's something like that could be resolved within the next year or would be kind of at the earliest we might know is kind of the next decision cycle for United.
Speaker Change: Their coverage perspective, and then also just.
Speaker Change: Curious if the Unitedhealth portion of the 18 site business has been growing at kind of roughly the same rate as the rest of the business or has it been growing faster in over the last few years.
Thank you.
Speaker Change: Sure Mark do I take the last one and then I'll take the program. Yeah. So latter part yes, you are correct the United business has been growing at a very similar rate as the rest of our business actually maybe maybe a little bit more just because of the focus that we've had on profitable volume versus no pay reductions that we've talked about earlier.
Speaker Change: With respect to.
Speaker Change: Our hope.
Speaker Change: That.
Speaker Change: That United by modify this most recent policy, we can't speak to the Timeframes around that.
Speaker Change: But.
Speaker Change: We do think that there is enough here for them to revisit the policy potentially suspended while they evaluate more data and more stakeholder input.
Speaker Change: So the base best case scenario here is that they put a pause button on the January one effective date and take another year to evaluate the data and stakeholder input.
Speaker Change: And I think we've given you the worst case.
Speaker Change: We believe we can mitigate a lot of it not all of it and we're certainly going to come to work everyday beginning January one two to address this policy and growth through it.
Speaker Change: But I think we wanted to give you sort of a pro forma view of what we think is the worst case and how we approach it and despite this we're going to grow next year.
Speaker Change: And so I think that's the part that I would underscore for investors about.
Speaker Change: About our ability to continue what we've done the last four years, which is disciplined transparent.
Speaker Change: Execution and delivering on the commitments that we make to you all so unfortunately, we've had to reset that pro forma base and we'll go from there.
Speaker Change: Great. Thank you so much.
Speaker Change: Okay.
Speaker Change: Okay and before we proceed to the next question again, just a friendly reminder, we will just be having one question and one follow up for your participant on me and your next question comes from Rachel <unk> Sundar.
Speaker Change: From Jpmorgan. Please go ahead.
Speaker Change: Great. Thanks semi ratio with your question Hi, guys.
Speaker Change: So I wanted to dig in a little bit more on gene side again.
Speaker Change: Specifically just on the actual market size for pharma <unk> IMAX senior analyst asking weeks, but now you talked about how the market sizes 10 billion. You said that was based on the last updated data that you had at the time as we look at the year before you guys had really pointed us towards that $5 billion actionable market I know you talked about how some of the underlying data you're just working on is what the basket how does the.
Speaker Change: Can you breakdown for us what really changed in that underlying market data and then I. Appreciate that you are working with United just trying to reverse the decision, but as it stands today does that give you a further change in terms of your current deal in the $2 billion Tam theme provided a few weeks ago.
I'm sorry.
Speaker Change: We will sit down with you and Rami <unk>, who is our market expert and.
Speaker Change: And Matt I'll commit to you that they will sit down with you and go through the Tam Tam data that we have.
Speaker Change: And as we said our Investor day, that's the best data that we have look I would just say more importantly generally.
Speaker Change: That there is a tremendous amount of interest and pharmacogenetics testing the medication errors in America are pronounced across many different indications.
Speaker Change: Tough sledding right here being the early leader in PGS testing, but we get calls from physicians all the time across a number of indications of the need they have for further guidance on medication administration and in my prior life I will tell you that so many of hospital readmissions where being.
Speaker Change: Driven by improper medication administration, particularly among seniors so.
Speaker Change: This goes back to the first question from Doug.
Speaker Change: Long term, we think this is really important.
Speaker Change: And for American healthcare and for myriad genetics.
Speaker Change: And there is a long term opportunity here to continue to look at other indications build a better body of evidence work with other stakeholders. How we can be part of the solution to do better medication administration and you look at the rise in specialty drug costs.
Speaker Change: And across the MLR of pay.
Speaker Change: Payers, it's a problem it's an issue.
Speaker Change: No.
Speaker Change: Whether the Tam is 3 billion or $5 billion level will get back to you on that I think the bigger thing is there is a real need to bring more science to medication administration and that part of what we are committed to here.
Speaker Change: And we think Theres, a real long term opportunity for us and for our patients here at myriad genetics in this regard.
Speaker Change: Fair enough, maybe just been shifting over to the women's health side, you've talked about how there is some dislocation in the market given current competitive dynamics. There. So can you just give us an update where are we at in terms of <unk> exiting the market there how much more greenfield opportunity for you to kind of compete on some of that share.
Speaker Change: Shift expectation do you expect going forward.
Speaker Change: Yes.
Speaker Change: If I could put a number on it but I would still say that there are still a lot of disruption right. I think when you think about as I mentioned earlier accounts are still making choices and in some cases accounts made choices because they were forced to move quickly and so they may have chosen another lab and now they are evaluating that they're not happy with that particular service and so we are still.
Speaker Change: Continuing as I comment that are winning new accounts and in many cases in the women's health space. It is about stealing share. It is about providers, making choices and so I still think theres a lot of green space for us to win back DJ share as well as other competitors that are better in this space because as we continue to improve our products as we continue to improve.
Speaker Change: Our ease of use.
Speaker Change: Customers do you believe that myriad has had some of the best in class test in some cases it was because of ease of use and now that we're doing EMR integrations that we're doing other investments where we are in a very strong position to continue to win back share from from other competitors, yes look.
Speaker Change: Im going to just actually get.
Speaker Change: Yeah I mean.
Speaker Change: The opportunity in prenatal.
Speaker Change: For prequel for example on Ips tests that we're going to be launching at eight weeks of <unk> that's big.
Speaker Change: Particularly given all the reproductive rights issues in America today, having an answer at eight weeks and not having the failure rates that many of our competitors have at nine or 10.
Speaker Change: Big we are.
Speaker Change: That gives our folks a differentiated experience and prequel is more accurate with amplify and we have less failure rates at first pass in terms of blood draws so that's an opportunity moving to average risk is move has lifted all boats in terms of prenatal testing.
Speaker Change: And that's even before we get to carrier screening and a potential <unk> guideline expansion and our prelaunch of fore sight universal plus so in the prenatal space. That's narrowed to 345 different providers, we have a lot of white space to gain share but also participate.
Speaker Change: And the expansion of guidelines and adoption, particularly in a lot of underserved communities.
Speaker Change: The real secret sauce, there, though as Mark pointed out is the ability to bring my risk with risk score.
Speaker Change: And our newly recently launched breast cancer risk assessment program into that channel and so I will tell you that one of the things that we're most excited about not only is the prenatal in women's health, but doing more particularly with with.
Speaker Change: Breast density being an issue and FDA guidelines expansion, bringing more of our my risk tests with risk score that is not available for anybody else for patients of all ancestry into that women's health channel lots of opportunity in green space for us there.
Speaker Change: And your next question comes from Brandon Couillard from Wells Fargo. Please go ahead.
Speaker Change: Thanks Sachin.
Speaker Change: Couple of questions.
Speaker Change: Adam.
Yes.
Speaker Change: You alluded to volumes coming back pretty strong in the last few weeks just wanted to make sure there is.
Speaker Change: No hurricane effect and as the prior period revenue benefit in the third quarter at $7 million I think that's about what it was last year.
Speaker Change: Hey, Brian I'm, sorry, I might need to ask you to repeat the first part of your question, but yes. So I mentioned in my prepared comments that our prior period impact benefit was similar to last year's last year. It was around $7 million. This year was a little over $8 million.
Speaker Change: But if you could repeat the first part of your question.
Speaker Change: Yes, I was asking is just the implied fourth quarter guide embeds any headwind from that.
Speaker Change: The hurricane disruption.
Speaker Change: I think Paul talked about volumes coming back strong in the last few weeks, but I wanted to make sure there is.
Speaker Change #100: That's the case.
Speaker Change #101: Yes, I think we were pleased to see a normalization in volumes, but.
Speaker Change #101: So no. The Q4 guide doesn't assume any kind of particular weather related headwind coming at us.
Speaker Change #102: Okay last question, you've got it looks like a number of.
Speaker Change #103: EMR site integrations are planned for the fourth quarter can you just remind us how quickly you start to see pull through with those new sites come online and whether we should maybe be thinking about the first quarter, perhaps heavy less.
Speaker Change #104: The step down less seasonality.
Speaker Change #104: In light of <unk>.
Speaker Change #104: Integrations. Thanks.
Speaker Change #104: Yes, I think the way I would think about the integration similar to the comment that Scott made about some of our payer contract wins, which is we have multiple integrations going on I think Scott mentioned, we're connecting over 4000 different sites and so some of those sites we see immediate.
Speaker Change #104: Adoption and just because of the.
Just because of the individual connections and others, Yes, I would think when you think about larger health systems. This is going to continue through Q4 into Q1 of next year and throughout all of all of 'twenty five.
Speaker Change #105: And your next question comes from Tycho Peterson from Jefferies. Please go ahead.
Speaker Change #106: Hey, thanks.
Im not going to ask you about United I'm curious about just some nuances around guidance you lowered gross margin guidance 20 bps you took the top end of the range down maybe just touch on that.
Speaker Change #107: Yes, there is no change in the underlying fundamentals of the business. Its just there is some variability from product to product in terms of the gross margin profile and that's just updating the blended average.
Speaker Change #107: Overall, the underlying gross margin profile remains just as healthy as before as the individual product level.
Speaker Change #107: Okay.
Speaker Change #108: Paul I want to stress test.
Speaker Change #108: Yes went up cycle.
Speaker Change #108: We are dropping through the growth.
Speaker Change #109: Hello, I, just stress tests kind of your comments around the ambry deal because and VK went through bankruptcy <unk> exited reproductive health I mean, you did have some other factors there that accelerated share gains.
Speaker Change #110: It does seem like Cambria could be a different setup why why would it be what would the share gain opportunity there be similar I guess to the other deal.
Speaker Change #111: No I think the semaphore situation is different just like the VCA Lab Corp situation is different each one of these are different.
Speaker Change #111: And the <unk> guys do a good job just a question of when you go through these changes whether it's <unk> to Labcorp and some of the policy changes, we understand theyre going to go into effect in January.
Speaker Change #111: And and people wait and see what the integration of Ambry does.
Speaker Change #111: You got to harmonize products you have to harmonize Salesforce you have.
Speaker Change #111: Have to harmonize Rev cycle contracting this is complicated work.
Speaker Change #112: And it always takes time Tycho what I've said in his experience is.
Speaker Change #112: You go through an integration most customers. This is not on the top of their list. This is like number 30 of the things that are providers worried about but if they see changes and more importantly, their frontline staff. Their office workers are nurses start seeing changes in service levels turnaround times and.
Speaker Change #112: Saar comparing products in terms of quality.
Speaker Change #112: Is that just enables our sales force to go in and talk about the differentiation of our products and our experiences.
Speaker Change #112: So I can't I wouldn't call out any specific but I think all of these disruptions.
Speaker Change #112: What we hear from.
Speaker Change #112: Genetic counters and others.
Begin to set us apart as a more reliable trusted stable provider that isn't going through the churn that we're seeing within <unk>.
Speaker Change #113: Okay. Thank you.
Speaker Change #113: Sure.
Speaker Change #113: Alright.
Speaker Change #114: And your next question comes from Dan Brennan from TD Cowen. Please go ahead.
Speaker Change #115: Hey, Good afternoon, guys. This is Kyle on for Dan. Thanks for taking the question I'll just ask one here non gene site related.
Speaker Change #115: Moving on to hereditary cancer, and you talked about this category I guess as a whole growing volume sort of low double digits and stable pricing in the future I think when we look at year to date year over year in last 12 months on volume.
Speaker Change #115: You've sort of ground half this rate call it 6% both year to date year over year in last 12 months given these volume trends. How confident are you that hereditary cancer can accelerate and grow at the corporate average next year and I guess one of the drivers.
Speaker Change #116: Yes, I think I'll take that I think what we try to do is sort of split out because when we think about what's baked into our hereditary cancer number as we've mentioned there is my risk on the affected on the unaffected side. There is also the Brac CTX component and so I think what we've seen pulling down. The overall average that you just talked about is some of that back CTX business not only domestic.
Speaker Change #116: But also internationally that is going to continue to be a lesser drag on the overall by risk growth that I think we're talking about so.
Speaker Change #116: We feel confident and Thats why we stated that we see the double digit growth going into next year of total hereditary because of the my risk adoption that we see I think on the unaffected side, Paul referenced our breast cancer risk assessment.
Speaker Change #116: That is a huge underpenetrated market.
Speaker Change #116: And we have a highly differentiated product there and we're seeing growth there and we're integrating more brisk risk assessment program, especially coming out of the October breast cancer risk awareness month.
Speaker Change #116: Effective side as we've mentioned we are seeing double digit growth. There now now we have the dislocation. So there is there's just a lot of headroom for us here and Theres been guidelines change by the way that are also recommended that.
Speaker Change #116: Any effective cancer patients should get a hereditary cancer tests so.
Speaker Change #116: All of those things added Paul.
I'll just underscore one thing there's been a lot of change we've talked about.
Speaker Change #116: Organizationally and our go to market and.
Speaker Change #116: And we clearly given up some volume.
Speaker Change #116: Our net revenue.
Speaker Change #116: I mean, so we have been much more careful about our targeting with Salesforce and trying to move the model from you can have any hereditary cancer test for $2 49 to you can have the clinically differentiated my risk test with <unk>.
Speaker Change #116: Risk score, but we need to work through your Payor, we need to walk you through prior off and we've moved our whole sales force. This year to a revenue based model then.
Speaker Change #116: The net effect has been yes.
Speaker Change #116: Cautiously given up a couple of percentage points of volume, but we're getting it back in spades on the ASP.
Speaker Change #116: And so I think thats.
Speaker Change #116: That's where the model needs to go for this industry.
Speaker Change #116: Notwithstanding the fact that as we said throughout the year, we didn't expect to see the upswing of share shifts for hereditary cancer to even start until Q4 and accelerate next year as they said labcorp and out of those guys do a great job, but theyre just starting to integrate some of their practices and policy.
Speaker Change #116: These as I understand it from the field are just going to affect on January.
Speaker Change #116: So I would expect that that the share shifts for hereditary are as we've said before really going to be more of a 'twenty five issue that large accounts are just being on boarded now in Q4.
Speaker Change #116: Net net to start moving asps, and hereditary and lower or no pay which is like 36% for hereditary that's a big number so knocking that back.
Speaker Change #116: That's why you've seen the bottom line improve here and so it's profitable growth that we're focused on.
Speaker Change #117: Got it thanks guys.
Speaker Change #117: Alright.
Speaker Change #117: Your next question comes from.
Speaker Change #117: Michael Thank.
Speaker Change #117: Bank of America. Please go ahead.
Speaker Change #117: Hello, This is John Kim on for Michael.
Speaker Change #118: I'll also get that.
Speaker Change #118: Ahead of the same.
Speaker Change #118: Insight.
Speaker Change #118: We can talk about I don't know need to apologise, okay got that.
Speaker Change #118: <unk> talked extensively about it.
Speaker Change #119: Yes, I understand the uncertainty, but you guys are doing everything you can but and it's great to hear that thank you.
Speaker Change #119: Hi, there.
Speaker Change #121: But you mentioned the 2% reduction in no pay rate your RCM effort could you size, what sort of progress has been made very says what sort of opportunity remains.
Speaker Change #121: And how much of that could you quantify how much of that we can see we might see in 2025.
Speaker Change #122: So we're certainly not at this point going to be projecting are committing to a 2025 improvement in just for everyone else on the call I think what you are referencing is back at our investor of that we had referenced an improvement so far this year and no pay rate from 46.
Speaker Change #122: To a 44%.
Speaker Change #122: That is as you can see from the robustness of the average revenue per test in our Q3 results that is a four.
Speaker Change #122: The progress that we continue to see even into Q3 and so certainly we are anticipating that that would continue into Q4 as well.
I had gotten the question at the Investor event around what might be a reasonable target for annual benefit from continued no pay improvement and we've talked and again I am not committing by any means something for 2025, specifically, but we've talked about certainly being able to achieve that 2%.
Speaker Change #122: At a minimum that we've seen so far this year in a typical year and certainly in a good year, we could expect to do better than that potentially go for three or 4% as well.
Speaker Change #123: Got it I'll keep it to one thank you.
And your next question comes from Nathan <unk> from Stephens. Please go ahead.
Speaker Change #123: Okay.
Speaker Change #124: Hi, this is on for Jason Thanks for thanks for taking the question today.
Speaker Change #125: I'm going to circle back to Jean side here, but more of a more from a strategic standpoint.
Speaker Change #125: I was hoping you'd be able to sort of lay out there's obviously a profitability gap that you pointed to.
Speaker Change #125: As a result of this decision here. So just kind of curious if you could give any color on sort of where the resources are going to be coming from to really address this decision with UNH. The additional interactions touch points that youre going to have with the provider and then just as a quick follow up there.
Speaker Change #125: As you think about investing sort of across your business and you remain very committed to gene side of course, and as well as your future offerings.
So just kind of curious if you could.
Speaker Change #126: Help us think about investing across those different growth initiatives moving forward.
Speaker Change #127: That's a really good question.
Speaker Change #127: Again in terms of mitigation strategy Thats early in <unk>.
Speaker Change #127: Youre right in terms of the underlying question strategy is all about choices and where we make investments.
Speaker Change #127: What we tried to highlight at the Investor day is having rationalized our portfolio it positions us to try to invest in clinical evidence across all of our products. So that is a commitment to continue to look at all of our products and continue to position them to get to their full potential and gene side is include.
Speaker Change #127: And that and clearly we need to continue to invest in building the body of clinical evidence to continue to support gene site coverage and adoption.
Speaker Change #127: There are opportunities as we spoke to.
Speaker Change #127: In women's health as we said.
Speaker Change #127: <unk> are not in our 12% growth target.
Speaker Change #127: And we've already made those investments and foresight Universal plus we have made investments and prequel to move to eight weeks gestational to have amplify make it the most accurate test and continue to do studies there.
Speaker Change #127: So if.
Speaker Change #127: If you go back to our Investor Day presentation. There was a lot of studies that Katy and the team and they'll have a advance there are more studies in the hopper.
Speaker Change #127: This is coming from a place where four years ago. The quite frankly, the cover was pretty empty in terms of this.
Speaker Change #127: But certainly the biggest area of opportunity to push this company into mid teens growth rates is in oncology and the work that Dr. Danaher is doing our medical affairs group the opportunities we have to pair my risk with precise tumor and in the future liquid and obviously with a highly sensitive.
Speaker Change #127: <unk> assay that we think for certain indications is going to be incredibly important.
Speaker Change #127: We're thinking about de escalating care.
Speaker Change #127: But as our friends that United pointed out at the conference that we both the tenant here recently.
There is a lot of work that needs to be done in terms of the clinical utility around MRV and there's a long runway. There. So I would just underscore for investors for long term investors in mirror generics, we have a lot of different levers to pull here and we are building a company for the next two.
Speaker Change #127: 10 years not for the next 10 quarters and whether it's the ASP opportunities that debt.
Speaker Change #128: Scott pointed to our continued investment across the portfolio. They all give us different ways to achieve all the great work that Sam and the team is doing in lab of the future. None of that has come into play yet. This year has been about multiple lab move multiple validation and so.
Speaker Change #128: Our best days are really ahead of us, but it's a really good question and we will continue to look at investing capital wisely, where the biggest returns are for our patients and for our investors.
Speaker Change #128: Yeah.
Speaker Change #129: Thank you I'll keep it to one I appreciate the update today.
Speaker Change #130: No. Thank you.
Speaker Change #130: Okay.
Speaker Change #130: Okay.
Speaker Change #131: There are no further questions at this time I would like to turn the call back over to Matt Carlo for the closing remarks. Please go ahead, okay. Thanks.
Matt Carlo: Thanks, Francis and thanks, everyone for your participation. This concludes our earnings call a replay will be available via webcast on our website for one.
Matt Carlo: You again for joining us this evening and have good night.
Matt Carlo: Thanks, everybody. Thank you.
Matt Carlo: Okay.
Matt Carlo: Please wait the conference will begin shortly.
Matt Carlo: Okay.
Matt Carlo: Sure.
Matt Carlo: Okay.
Matt Carlo: Okay.
Matt Carlo: Okay.
Matt Carlo: Yes.
Matt Carlo: Okay.
Matt Carlo: Yes.
Matt Carlo: Okay.
Matt Carlo: Okay.
Matt Carlo: Okay.
Matt Carlo: Yes.
Matt Carlo: [music].
Matt Carlo: No.
Matt Carlo: [music].
Matt Carlo: No.
Matt Carlo: Okay.
Matt Carlo: Okay.
Matt Carlo: Yeah.
Matt Carlo: Yes.
Matt Carlo: Okay.
Matt Carlo: Sure.
Matt Carlo: Yes.
Matt Carlo: Yes.