Q3 2024 Natera Inc Earnings Call
The next slide where double clicking on the signature of clinical volumes. We processed 137000 units in Q3, which includes a 130000 signature of clinical volumes. This represents growth of about 11400 units in the quarter well above our average of between eight and 10000 units. The volume was one of our.
Best quarters of growth ever.
Given sequential quarters tend to have some variability in terms of holidays and number of receiving days. It's also useful to look at the trend year on year.
Q3 clinical units were $48 4000, higher this year compared to Q3 of last year a record for the company.
Lots of great starting Q4, despite the impact of hurricane and the trends are continuing to be very positive.
Speaker Change: Okay. The next slide shows total revenues year on year, and a sequential quarter trend. We're very pleased to post 64% revenue growth year on year, we have $34 5 million of revenue true ups, which is lower than last quarter as expected and Mike will talk more about that later in the call even stripping out there.
Q3, again that was driven by strong S p's execution.
Yes.
Signature.
Signature.
Well reimbursement can fluctuate from quarter to quarter, we feel like we're very well positioned to continue to drive margins higher led by signature of volumes and asps continuing to ramp.
Quarter to quarter.
Very well.
Yes.
Alright.
Did you want to grab.
So accelerating revenues and gross margins, coupled with cash collections well in excess of prior expectations are leading us through our first quarter of meaningful cash flow generation.
Oh.
Operating revenues.
Our cash.
Prior expectation.
Yes.
Cash flow generation.
The chart demonstrates quite a journey from Q1 of 2022, where we burned $162 million in a single quarter. The reality is that our strategy has remained the same throughout this timeframe depicted on the chart. We've made the big investments required to deliver excellent care for patients and the volumes and reimbursement followed while we've been very efficient with it.
Sure.
I just wanted to.
One of them.
Single quarter.
The reality of it.
Okay.
If you look at on the chart.
Good parents.
With me I have ever.
There for patients.
Unfortunately, followed.
Resources, we've gotten here without big cost cuts that jeopardize the future of our business in fact as Mike will cover in the guide we've continued to invest in future growth by adding meaningful investments to our R&D and commercial teams as we look into 2025, we will continue to prioritize innovation and customer service, while managing to cash flow break.
Sure.
Got it.
The future of our business.
And the Guy.
Yes.
Right.
Our commercial team.
The 25.
Innovation customer service.
Absolute cash flow break even.
We think that's the best approach for patients for doctors and for the business given the size of the markets that we're in with that let me hand, it over to Alex to provide an update on oncology.
For paid for doctors.
Besides the markets that we're in.
Yeah.
In oncology.
Alex.
Thanks, Steve I am pleased to share some of the recent results from the Galaxy study in colorectal cancer.
Alex.
Thanks.
Bruce.
Whether you're in colorectal cancer.
We believe we are universally excellent across the board, particularly on <unk> ability to predict overall survival as well as adjuvant chemotherapy benefit in patients with CRC.
Okay.
Off the board.
Yeah.
Predictable.
Sure.
And all of them.
Eric.
Darcy.
As many of you know galaxy as part of the circular platform study, we have presented a few datasets, thus far which are focused on disease free survival since overall survival takes longer to mature.
Yeah.
Platform.
Okay.
New data from our dose.
Hum.
Free survival.
In order to mature.
At the ESMO conference in September and published concurrently in nature Medicine, We show for the first time and overall survival signal associated with Sigma Terror in a prospective study.
Hum.
Hum.
In nature Medicine.
Okay.
Oh tariffs.
You were randomized to either receive adjuvant chemotherapy, plus placebo or adjuvant chemotherapy plus celecoxib.
The original study results published in 2021 show. The addition of Celecoxib did not significantly improved disease free survival in patients with stage III colon cancer.
Oliver that study was initially around without Sigma Tara.
The new analyses you samples from seminal to studying to investigate whether cigna, Eric can be utilized to identify a subgroup of patients who may benefit from escalation of adjuvant therapy with the addition of Celecoxib.
This pre specified analysis included more than 1000 patients with Sigma terrorists Cts status post surgery. So it will be a sizable readout.
We will report on <unk> ability to predict PFS and OS benefit from the addition of Celecoxib.
The results have been accepted as a late breaking abstract for <unk>, along with the results of the Altair study.
So we look forward to sharing more details on both in late January.
On this next slide we provided a bit more context on Celecoxib also known as Celebrex, which as I mentioned is the drug being investigated in this trial.
Celecoxib is a nonsteroidal anti inflammatory drug or NSAID and as many of you are likely aware since our class of drugs like aspirin that can be used to relieve pain reduce inflammation and bring down fevers.
These medicines are widely available relatively non toxic and generally low cost.
And sites have also shown promise and benefiting certain sub populations and CRC.
For example, several studies suggest that <unk> reduced the risk of developing precancerous colon polyps.
There is a clear need for additional adjuvant treatment options for patients with colorectal cancer as there has not been a new drug approval in this space for over 20 years.
Our analysis will be the first randomized study to help address this unmet need.
And we're hopeful that Cigna Tara can help open the door to affect us treatment options in colorectal cancer.
Personalized to patients who are most likely to benefit.
And with that I'll turn it over to Mike Mike.
Mike.
Great. Thanks, Alex the next slide is just a summary of the P&L in Q3 and the year over year progress Steve covered the trends on revenues and gross margins, which I think is set in stark relief on this slide we really are in a completely different place in terms of revenue scale in gross margins compared to where we were even just a year ago, which at the <unk>.
Time was actually a very good result R&D.
R&D, we've grown as we've staffed up to accelerate the tempo of new product launches and additional clinical trials SG&A.
SG&A has also stepped up meaningfully although significant chunk of the step up is related to litigation expenses and noncash charges related to stock based comp.
We of course added the <unk> women's health sales team this year and we've made steady investments in the payer commercial operations through the course of the year. Despite all of those investments you'll note that the loss per share narrowed significantly as our strategy continues to play out.
That's consistent with the positive cash flow generation, we posted in the quarter that you see at the bottom of the slide related to the cash flow generation I was very pleased to see the days sales outstanding dropped again dramatically to approximately 73 days in Q3 after hovering in the mid 90 range for several quarters previously and after we had.
<unk> to about 100 days during the first few quarters ive seen inherent growth I wouldn't be surprised to see dsos in quarterly cash bounce around a lot based on typical working capital dynamics for our business, but we are seeing clearly much more efficient conversion of our covered services to cash after years of hard work with payers to make this happen.
Okay.
One other key subsequent events to mention is we are very pleased to retire the convertible notes that you actually see here on the slide at the beginning of the pandemic when the shares were roughly $25. We issued the convertible notes as an insurance policy to make sure that we had cash available to survive whatever might happen as the world was shutting down.
The notes don't mature until 2027, but we were able to retire the notes early via a soft call feature given the tremendous share price performance. We've delivered since then this was a purely opportunistic move that cleans up our balance sheet at a time when many other players in our space have convert maturities over the next few years that our math.
Relative to their market caps, we are now essentially debt free as the UBS line of credit is secured by our own cash and earn roughly the same as the cost of the capital.
We closed this transaction in October so the convert will be wiped off the books when we put the 10-K this year.
Okay. Good let's get to the guide on the next page that Steve covered we now expect revenues between $1 1 billion and $1 64 billion, which is up roughly $300 million compared to our initial guide this year and implies continued growth in Q4.
Had very strong volume growth this year, but the revenue growth has really accelerated this year as we've seen strong realized pricing performance in all of the major products.
Tara, especially has seen it is premature this year moving from the eight hundreds in the past and now roughly $1050 as of Q3.
Note that 1050 number is before the true ups, that's the kind of organic repeatable number that we anchor on internally.
These same drivers are also transforming gross margins and we now expect full year gross margins in the range of 58% to 61%. We are pumping opex to account for elevated litigation and stock based comp expenses for the year. In addition to the fact that we continue to keep our foot on the gas procedure growth.
I'm very pleased to update the guide to cash generation of $50 million to $75 million. This year, where we started the year expecting to burn about $50 million so meaningful swing there.
As you think about how this continues into 2025 do keep in mind that there's about $108 million in true ups baked into Q1 through Q3 revenue actuals now that we would not included in our guide for next year. So the organic underlying range fiduciary revenue translates to $1 five 1 billion to 154 billion.
And gross margins at 56% to 58%.
Those results are still well above our initial expectations and form a solid baseline for growth into next year as in the past baseline 2025 goal should be to grow the same number of units next year as we have in 2024.
There I think we will need to take into consideration. The fact that we got a bolus of women's health units from <unk> in Q2 and that same influx of new units won't repeat next year and then on the plus side of course, our base Cigna Terra users continue to grow and we expect to continue to receive recurrence monitoring orders as we can.
With those patients on their cancer journey.
We would typically presume some erosion in women's health ASP pricing, but given the progress. We've made this year I think it's plausible to hold asp's steady into 2025.
We are cautiously optimistic that cemetery asps still have room for modest improvement as we continue to see better coverage for Medicare advantage plans and possibly in the second half of the year, we could start to see some additional contributions from commercial volumes were stayed biomarker laws are in place.
On Opex and cash generation, Steve clearly laid out that our priority is to do everything we need to do the servicing and their patients more commercial operations more clinical trials and enhancing our menu of offerings.
We recognize it's important to remain cash flow positive. We think the best use of that cash for the immediate term is to turn around and reinvested in the business, particularly in support of Sydney care growth.
Okay with that let's open it up for questions operator.
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Our first question comes from the line of Puneet <unk> with Leerink partners. Please go ahead.
Yeah, Hey, guys.
Really strong Congress I mean, a strong quarter here congrats on this.
<unk>.
It's great to see the cash generation, maybe Mike first for you or Steve can you outline the.
S P pickup that youre seeing across the product I know you highlighted signatory can you elaborate how that Sigma Terra ASP, you can continue to grow and the stability of it.
Asps.
Across the other products because I think that has come in scrutiny a bit some of the commercial pairs.
Paying closer attention to.
Coverage in Asp's. So I'm wondering if you can elaborate a bit on that than I have questions on oncology.
And Mike do you want to take that yes.
Sure Yeah. Thanks for the question so.
<unk>, it's really the same.
Talk track that we've we've discussed previously.
Got.
Got really rapid.
Moving upward in the Terra Asp's from the $800 to now we're at about 1050 on an organic basis.
The path from here I think there's always puts and takes and there is always potential for kind of quarter to quarter volatility with asps.
But from here, we feel like there's more room to run in terms of just execution with <unk>.
Medicare advantage payers continue to increase.
Personal allowance for covered services with Medicare advantage payers and then as I mentioned in the prepared remarks, it's kind of it's kind of it's going to be a grind, but I think.
We're cautiously optimistic maybe second half of next year, you could start to see some additional tailwind and the secretary of Asps.
As these.
<unk> had a chance to kind of go into effect and immature and we've had a chance to interact with payers in terms of getting them online with them with covering those covered services as well so.
It looks like a good.
Good 18 months or so trajectory for Cigna Asps on.
On the rest of the product portfolio, we've actually seen really strong kind of improvement, particularly.
Particularly in the the major women's health products, both our horizon.
And Panorama and I hear you I mean, I think there is always.
Having just been in the diagnostics business for a long enough you always kind of thinking about well.
Is there some chance for erosion.
And these more mature products and use that say, yes, I think just the actuals that we're seeing and just see.
The maybe the time on task and the fact that these.
These offerings are more and more and trying to I was just kind of without doubt kind of in the standard of care for prenatal health.
Has kind of given us more confidence in a bit more visibility on our asp's. There. Let me pause there I don't know if you had anything else to add.
No. That's good I mean, I'll just said you know over the last couple of years, we've invested a lot into improving things like medical Appeals.
Getting the medical records when requested I think youre seeing some of the benefit of just executing on those things and then of course, you know there's still upside opportunity. When we look at some of the tests that we're performing today, where we're not really getting paid for example, like 22, Q or our H testing of the women's health sector more expanding to.
Additional indications in oncology, so I think it's positive upside opportunity ahead.
Got it that's great and then on the Cigna Tara can you elaborate.
How much of the lift are you seeing from volume growth in the community setting or maybe the tier two setting versus when you present data at these conferences, including <unk> and others.
The lift you get from that is I assume is mostly in the community and the academic setting, but just trying to parse out.
Where youre seeing the growth and the sustainability of this growth obviously very strong in the quarter.
Yeah. Good question. So it's really a mix I mean, you know, we we see uplift here in both the academic and the community setting. Yes. We've said, we think about 40% of oncologists are using signet terror today, and so there's still a long way to go.
Market is very underpenetrated in sort of the kind of low single digit penetration every time, we generate data I think that that just helps bring more and more physicians.
Yes.
The fray and especially when you're talking about the type of data that we generated with galaxy that's.
<unk> what people want to see.
This is this longer term overall survival data.
Now I'll kind of we're getting to that level of follow up where you're hitting that that mark where you're kind of meeting the threshold that the some of the doctors that have been holding out have been waiting for and then of course, where we're really excited about them data that we're gonna have upcoming the future randomized readouts.
So I think there's a long way to go but yeah, we're seeing it from both academic and community.
Got it and last one just about Alex maybe.
The nature Medicine paper, where is that most helpful.
Most helpful for NCC N or is it.
Driving deeper into the clinical practices and maybe just elaborate what do you expect.
Out of the 702 study.
At ESMO.
And then would that study actually give you any further insights into the invigorate 011 study. Thank you.
Sure. Thanks for the question Puneet.
I would say sort of a nature medicine study, it's helpful. I would say pretty much across the board I.
I would say first of all a lot of doctors have been waiting for OS data.
You know I think DFS is one thing, but actually seeing the biopsies predictor of patients living longer I think the whole fuel has been kind of waiting for a well powered study that read that out.
I think the second part for that study is the pharmaceutical market.
I think we've really been able to show the Cta dynamics.
As predictive of overall survival and that's really the first steps to kind of validate a new circuit endpoint.
So I think we're seeing a lot of interest in those results.
And you know I think they make us very confident worried about some additional readouts that we.
A waiting.
I think the 702 study I think will kind of defer commenting on that.
The outcome of that until the embargo is lifted for ESMO Gi, but again, it's over 1000 patients. It was a well designed prospective randomized study, but we're excited to share those results when we're able to.
And then for Invigorate 011, I think that's on track, we expect our partner Genentech have probably read out those results.
The first half of 2025.
Got it Super Congrats guys. Thank you.
Yeah. Thanks Pete.
Our next question comes from the line of Dan Brennan with P. D. Cowen. Please go ahead.
Great. Thank you congrats on the quarter.
Maybe first one just on senior care price Mike.
10 50.
Nice improvement, but a little bit more modest than what we've seen in prior quarters can you just speak to I know you gave some color in the prepared remarks speak to kind of some of the drivers of price from here in particular like on the biomarker I know you guys have been I thought.
Early constructive on what this opportunity could be.
I think five states lie for over a year you had three of the biggest states in the country are alive in the last month or so so I'm just wondering what your experience has been and whether or not that could be more of an upside driver and maybe you're kind of baking in some conservatism there.
Yeah no. Thanks for the question no it's been.
Been really constructive so far I mean interactions with fashion pants has been.
That's been quite positive actually.
Our experience has been anytime you have coverage like this that kind of online.
Takes about a year between the time that the coverage comes on line two you get some denials.
Back in the door you appeal days denials.
Kind of get a critical mass.
The cases, where you submit.
The claim correctly and appeals have been denied.
And then you've got to interact with an actual human you know one more thing.
Yeah.
At that payer and just work with them on the workflow and then it's been really collaborative so.
So far so as I sit here today, and I'm really optimistic about it.
The timeline of games.
It's just reflecting the way things work and how long it takes just to get the logistics right.
Hopefully you can come faster beg them.
Blow out to sea.
In terms of like the pace of the increase the I mean, I think that's an important point I mean, there is no way for us to.
You know increase in taking care of his P 200 Bucks a year forever.
There is a maturity debt.
We tried to get to here as we've kind of gotten into the launch so that's.
That's a that's just saying we must take consideration, having said that I mean, the gross margins and our products are quite strong I think they can continue to get stronger so.
Coupled with the data that that Alex highlighted on the call today, we're feeling really strong about the skin care franchise.
Got it and then maybe just one follow up.
Maybe I'll find the financial side just on the gross margins really nice gross margin expansion 400 basis points ex the true ups.
I know you talked about Steve talked about in the prepared remarks, some of the only cost initiatives can you just give us some more color on the driver there or are we starting to see the benefit of the adjuvant to surveillance mixed shift starting to come through which is a nice gross margin leverage and I know you've kind of updated the full year guide, but as we I think you've talked a little bit about 25, Mike in the prepared remarks.
But how do we think about the trajectory of gross margins as we turned the.
Kind of turn the calendar into 'twenty five.
Yes, I mean, I think that on the mix shifts and that has remained relatively steady I mean, we've seen some move in favor of the recurrence monitoring within the mix I think what's more important if you're thinking about mix for all corporate gross margins is the mix between kind of franchisees so for a long.
Pan.
Panorama was far and away our biggest product and now.
First last quarter, but not really this quarter is really the first quarter were sitting at Taro revenues meaningfully higher then.
And then Patrick.
It is now our biggest revenue product so given the margins that we're seeing in <unk> and that accretive to corporate gross margins that itself is kind of driving this kind of corporate gross margin improvement so I think that trend.
Can continue.
Move in our favor as far as core business margins go after next year, having said that I mean, I think it's worth just understanding kind of the prior.
Stuart: Stuart first question, which is like what's the kind of.
Rate of increase in Asps.
Stuart: And they have to they have to.
Speaker Change: Right I mean, it has to be kind of more kind of steady improvements and I'd expect that to be reflected in our corporate gross margin trajectory as you go into next year as well.
Speaker Change: Great. Thanks, a lot.
Okay.
Speaker Change: Our next question comes from the line of Tejas Savant with Morgan Stanley. Please go ahead.
Speaker Change: Hey, guys good evening.
Just a couple of clean up to start on.
Speaker Change: Perhaps the guidance framework or even just what youre seeing in terms of recent trends in the business Steve So.
Speaker Change: First of all in light of some of the pain. The private payors are going through in the Medicare book of business have you seen any uptick in prior off or just more documentation required in the last few months across the oncology portfolio.
Speaker Change: I know you mentioned, the biomarker or build rollout starting to help a little bit in the back half of next year, but is that a risk here that some of these private payers might drag their feet on the implementation of the Dol and then Mike just to clean up on the guide really can you quantify the weather impact and to what extent that was a little bit of an offsetting factor in the revised guidance.
Yes, I think good question on on the insurance payers.
Speaker Change: The good news for US is we've sort of been dealing with.
Speaker Change: All sports of obstacles for years with respect to payers you know whether that's prior authorization medical records requests.
Speaker Change: Just sort of outright denials and then having to appeal and this is something that like we've developed systems.
Speaker Change: Our protocols and processes.
In order to make sure that we can follow through and just not get cut bogged down by these these various bureaucratic procedures. So we've invested heavily there.
Speaker Change: Over the last couple of years, we've had tons of improvements and I don't think we'd noticed anything really different recently than what we've seen.
Speaker Change: Historically, but what we are seeing is that the terrorists getting better.
Speaker Change: Just responding to those types of things and so I think that was that was definitely good investment with regards to the the biomarker bills and commercial opportunities.
Speaker Change: As Mike said these things take time and it's good that we have that ahead of us.
Speaker Change: We've done really well historically and that we still have this upside opportunity from biomarker bill implementation of commercial payer coverage and Cigna Tara.
Speaker Change: The other area that Mike didn't highlight earlier, there could be upside opportunity, it's just getting.
Speaker Change: Medicare coverage and some additional indications and theres lots of areas, where we published that.
Speaker Change: We were in the process of submitting are interacting with Medicare.
Speaker Change: To get additional coverages for signature. So we think that's an opportunity and then of course when you look back at both in Oregon Health.
Speaker Change: And then in women's health, because theres opportunities for ASP improvement, particularly around getting coverage for indications where or test today, where we where we currently don't have coverage.
Speaker Change: Got it okay.
Speaker Change: Thank you Sean.
Speaker Change: Weather.
Speaker Change: On the weather question.
Speaker Change: We think it's always hard to measure these things with precision, but we think we saw a really modest impact of the weather.
Speaker Change: With the hurricanes hitting like that last week in Q3, so that that probably had a modest impact in the Q3 results and I think that there was.
Speaker Change: Does that impact.
Speaker Change: We saw in October and it remains to be seen.
Speaker Change: What that impact would be for the full quarter, but we've kind of taken that into account. We're trying to take a kind of a cautious approach keeping guide too.
Speaker Change: I've been trying to work around that as people kind of not only just the weather itself as people kind of get.
Speaker Change: To get their homes, rebuilds and kind of get themselves back into senior positions and such.
Speaker Change: Got it okay.
Speaker Change: And then one on things that are on the 702 study guys.
Speaker Change: How should we be thinking about framing those DFS in their last result in terms of what's clinically meaningful for physicians and also given that the results will be dependent on on the drug evaluated obviously can you provide a little bit of color or context around prior studies that showed celebrex and topless.
Speaker Change: Standard adjuvant chemo as a promising approach and in certain populations.
Speaker Change: Yes.
Alex: Yeah, Alex you want to take that.
Alex: Yeah absolutely.
Alex: Well I think there's two parts to the question. The first is how well is the drug tolerate or that class of drugs tolerated and then kind of what could be clinically meaningful in terms of the outcome from the study.
Alex: I think the good news is that unlike traditional adjuvant chemotherapy, which has significant toxicity is sometimes the risk of death.
Alex: And third class of drugs of which celebrates its one of them.
Speaker Change: Pretty well tolerated.
Speaker Change: It's obviously not without side effects completely but relatively this is a class of drugs.
Speaker Change: Thousands of millions of folks are taken for other indications.
Speaker Change: I think what good looks like.
Speaker Change: Obviously, that's going to depend on a few things.
How does the readout look in terms of DFS in terms of OIS and how does it compare to prior studies.
Speaker Change: I think we've said in the past kind of.
Speaker Change: The last study that led to an approvable with a new agent.
Speaker Change: Mistakes IBM had a hazard ratio and kind of though.
Speaker Change: 7577 range for DSS and.
Speaker Change: And a very small benefit for a while so we do think thats kind of a good number to think about.
I think celebrex itself and the initial 702 study without any selection.
Speaker Change: Thank showed a hazard ratio of <unk>.
Speaker Change: I think.
Speaker Change: Around.
Kind of the point.
Speaker Change: 8.9 range, depending if those for.
Speaker Change: DFS or OS and it was obviously not statistically significant.
Speaker Change: So maybe kind of a long answer, but I think the short of it is we do think anything that's significant below 0.8 hazard ratio for DFS and <unk> can be significant, especially with the class of drugs, that's pretty well tolerated.
Speaker Change: Okay got that.
Actually really helpful and.
Speaker Change: Steve last one for me on screening we've been getting the question a little bit I think back in December you talked about being relatively close to sharing that data and I think you'd also called out are.
Speaker Change: Do you expect initial proof of concept to be a little bit more sophisticated and fulsome than your initial expectations, which.
Speaker Change: Was going to help you sort of informed that go no go decision. So just curious as to where we are in terms of that process is year end still the right.
Speaker Change: Benchmark on timelines, there and had the goalpost evolved a little bit in your mind in light of the ESMO data on advanced adenoma from one of your peers.
Speaker Change: Yeah. It's a good question. So yeah, we plan on actually reading that out.
As we said I would say very early in 2025.
Speaker Change: There's a couple of big Investor conferences, and medical conferences, where we're gonna be reading out.
Speaker Change: The initial.
Speaker Change: Early cancer detection screening data in CRC and just stay tuned.
Speaker Change: We're very close now.
Speaker Change: Fair enough thanks, guys.
Speaker Change: Our next question comes from the line of Rachel that install with J P. Morgan. Please go ahead.
Rachel: Hey, great good afternoon, and congratulations on the quarter you guys. So far.
Rachel: That's just the signature of volume can you walk us through what you guys are assuming within 14th straight quarter over quarter seem to track volume growth you've historically talked about this eight to 10000 rate for the past few quarters, you've obviously been beating not as well. So should we expect that trend to beating that volume level into <unk> to continue.
Speaker Change: What is kind of a statement.
Speaker Change: Sequential assumption when you head into 2025.
Speaker Change: Yeah. So I think as we well first of all Q3 I mean, obviously this was like really strong quarter I think we did 11400 sequentially.
Speaker Change: That was I think the third fastest we've ever had well above this average rate to 10000.
Speaker Change: We said all along that you just really can't kind of get into the kind of quarter over quarter sequential comparison, just because there's.
Speaker Change: You know there's differences in sort of the number of holidays. There are differences in the number receiving days and you know you can just I mean, one day could be 2000 additional samples right that that you weren't able to obsession because maybe it was a sunday or maybe it was a holiday or something like that so.
We just sort of sticking with that conservative estimate of saying look eight to 10000 is sort of the average that's kind of roughly what.
Speaker Change: What we've plugged in but of course, we're always trying to beat that in <unk>.
Speaker Change: Other for outperformance or for.
You know just kind of the way the days fell and so forth, we've we've been able to come above that.
Speaker Change: In the last several quarters.
Speaker Change: I think on the Q4 number in particular, we don't really have enough Q4s in our <unk>.
Speaker Change: I can tell you exactly what that seasonality is with this product just yet.
Speaker Change: And to Steve's point, I mean, like obviously in Q4 youre going to have.
Speaker Change: You can have more holidays last Q4, we ended up having a strong number but like Christmas and new year's landed.
Speaker Change: Opposing weekends that made it very tempting to take the whole week off. So we ended up I think in retrospect that a lot of units into the first two weeks in January that would have normally landed in December so hence the.
Speaker Change: Caution around trying to.
Land on a specific number for a quarter here.
Speaker Change: Although it's taking a little bit more caution around Q4, just because there are a lot of holidays.
Speaker Change: Yeah, but I think also as we.
Speaker Change: We said in the prepared remarks, I mean, we.
Speaker Change: Despite I think this hurricane hit in the beginning of the.
Speaker Change: October we were off to a fast start Q4.
Speaker Change: Got it thanks for that and then maybe just on SG&A you raised the guidance for SG&A for the year and you talked about accelerating some of your growth investments. So obviously it makes sense to invest in the business.
Speaker Change: Can you breakdown for us, whereas on driving increased spend going towards and then on 2025, you've historically talked about this like annual Opex growth is mid single digits to high single digits over time. So is that the right way for us to think about 2025 or one other factor should we be considering that would move that number higher or lower relative to that range.
Yeah, Let me, let me comment on just kind of where we're investing and then maybe Mike you can you.
Mike: You can comment on sort of what it looks like in 'twenty five.
Speaker Change: Look we've there's obviously a lot.
Speaker Change: Areas of investment and expanding our clinical trials.
Speaker Change: <unk> heavily into.
Speaker Change: Innovation.
User experience customer service.
Speaker Change: New patient portals EMR connectivity.
Speaker Change: Expanding I think certain areas of marketing.
Speaker Change: Certain areas, where it makes sense too.
Speaker Change: Handful of salespeople here or there maybe more significant expansions.
Speaker Change: So we're doing all those things and.
Speaker Change: Like we said where we're in the very early stages of this opportunity.
We plan on investing them in order to be able to serve as many patients as possible.
With our test and we're making those investments Mike you want to talk about a 25.
No I think that's still the right kind of framework going into 'twenty.
Speaker Change: We mentioned in the prepared remarks, I mean, we're going to.
Speaker Change: We don't really have an appetite to come back to you guys and say, we're gonna burn significant amounts of cash next year and what we understand.
Speaker Change: We need to be on the on the plus side of the ledger in terms of cash but beyond that our focus really our primary focus really does remain on serving our patients and continuing to grow the opportunity.
Speaker Change: Okay. That's it for me Thank you guys.
Speaker Change: Our next question comes from the line of Doug Schenkel with Wolfe Research. Please go ahead.
Doug Schenkel: Okay. Good afternoon, guys. Thanks for taking the questions.
Speaker Change: First on volume growth, you're tracking the year on year volume growth of I think about 550000, maybe 600000 Mike.
Speaker Change: Mike If I heard you right I think you said at some point on the call. We should expect similar volume growth next year did I get that right and if so does that mean similar number incremental test across the across the portfolio next year.
Speaker Change: Yes, I mean, I think that's the way, it's kind of our baseline.
Speaker Change: To try and do that.
Is it growth goal.
Speaker Change: One is to focus on this quantify this is absolute units rather than growth rates I think the growth rates become challenging because the base business because so much bigger.
Speaker Change: So that's going to be the one that's going to be the goal.
Speaker Change: Similar comments is what Steve gave previously though as it relates to the different drivers, but that's.
Speaker Change: Okay. Thank you for that.
Speaker Change: You year to date, you have about $110 million in Trups, hopefully I did that math right. Obviously, we don't know what Q4 true ups are going to be.
Speaker Change: That said as we model out next year should we be kind of taking trips out of the base as we think about normalizing the business space or is there an argument that these true ups are actually indicative of better collections and sustainable ASP improvements.
Speaker Change: Well I think it's both I mean, the reality is is that.
Speaker Change: The collections have come in ahead of our expectations as defined by our accruals from last year and so that's what's kind of driving trips.
Speaker Change: True ups, which should happen when the asps are going up this much.
Speaker Change: The asps being up a lot is in an attempt to kind of respond to that and just kind of match. The revenue as best we can based on the information we have available to us at the time when we put the Q. So.
Speaker Change: It's our kind of expectation that we're going to continue to win.
Speaker Change: Ctrip is moderate.
And as we kind of go into next year with a guy that I still think it's appropriate to guide without the trips because it's just impossible to kind of model.
Speaker Change: Timing of when you get cashmere.
Speaker Change: Thank you units at your own second appeal for them that you're trying to get the cash in that that's no way to.
Speaker Change: The guide you know kind of an operational business.
Speaker Change: Yeah, Mike I'm with you and again for whatever my opinions worth like everything you just said makes sense, what I'm what I'm getting at is you've had these consistent trups, presumably from periods that arent years ago there.
Speaker Change: <unk> closer and closer to the quarter. We're in so it's almost as if you know like these true ups are actually indicative above.
Speaker Change: Obviously their collections from past periods, but youre actually getting paid more frequently on these tests. So I wouldn't expect you to model through our guide true ups into the model.
Speaker Change: But I could see this being assigned that like yes. The asps are actually going higher and this is sustainable is that is that logical yeah. Yeah definitely I mean, I think that the fact that.
Speaker Change: For those of you who have followed the farthest thing I time know that we typically have some pretty curmudgeonly commentary about which way asp's are going one way.
Speaker Change: As a guide to some erosion.
Speaker Change: And that some.
Speaker Change: The trends that we're seeing I think gives us some confidence that we can win.
Women's health that we can.
We can deal with loan where we are now and then there's there are some specific drivers to the superintendent and speed and we think we are ahead of US right. So the eye care advantage you can take.
Speaker Change: And potentially state biomarker bills. So I do think you are.
Speaker Change: The improvement in the kind of the collections and a reduction in Dsos I mean, I think that where that gets reflected as one and the asps actually are getting higher returns like what we're reporting every quarter and also that's that's getting reflected in our confidence in terms of what we can do over the longer term.
Speaker Change: With the caveat remaining equal.
Speaker Change: Ups and downs with ASC, the diagnostics business I think the way it goes but we think we're in a good spot there.
Mike: Okay last one Mike what what was the mix of.
Speaker Change: First time test versus recurrence monitoring I think Dan may have tried to get at that earlier, but I'm. Just curious if you could give us anything specific there because it was a really good gross margin quarter.
Speaker Change: Obviously as that mix shifts starts to to to kind.
Speaker Change: Kind of kick in and that's that's another leg to gross margin, but I didn't hear anything on the call to suggest that that was like a material driver in this period to the to the margin improvement.
Speaker Change: Yes, and just 111 tweak there rather than like for patients I think what we typically talk about is the split between patients that are in their adjuvant treatment window like volume up in the adjuvant treatment window, we're getting reimbursed from the bundle for example, and then patients who are getting a monitoring tests.
Speaker Change: And that that trend has.
Speaker Change: Tend to be pretty balanced between the between the two and what's happening there that you have very healthy.
Speaker Change: Retention of patients that have stayed with us and continue to get seen in Tara through their journey as they go into their mission.
Speaker Change: We continue to say this type of the channel and.
Speaker Change: We continue to get new patients into there.
Speaker Change: And so that has continued to increase our patients here and answering excuse me.
Speaker Change: Net of all that is that we've been pretty balanced between aggregate window patients and recurrence monitoring so far so that by itself is not kind of they can ask them.
Speaker Change: Huge move in that trend just in this quarter.
Speaker Change: The bigger move though is kind of it just.
Speaker Change: The mix of the different franchisee in terms of contribution to total revenue and the implications that has for corporate gross margins as I described today.
Speaker Change: Okay fantastic. Thank you so much.
Our next question comes from the line of Matt <unk> with Goldman Sachs. Please go ahead.
Speaker Change: Hey, good afternoon, Thanks, taking my questions and congrats on the quarter.
Speaker Change: Maybe just the first one for you just following up on on Rachel's question on the Opex I'm just curious as you think about the women's health business certainly as it relates to sales and marketing.
Speaker Change: Are we at kind of a steady state there on the sales and marketing side, where theres sort of some maintenance investment needs to be made but most of the sales and marketing is going towards sticking Tara I am just trying to think about as we move into 'twenty five how youre thinking about the allocation of opex across the product portfolio and just want to make sure that my assumption to the secretary of this assembly.
Speaker Change: The beneficiary of spend are going to be maintained.
Speaker Change: Next year.
Speaker Change: Steve do you have a take on that or you want me to go.
Steve So: Yeah, Yeah, I'll comment and then do you have extra but yeah I would say that's that's about right I mean look there's we already have.
Steve So: Pretty big.
Steve So: Presence from a commercial standpoint of women's health and we built out over the last.
Steve So: 12 years or so.
Steve So: We are sometimes able to kind of add an additional medical science liaisons or genetic counselors.
Steve So: Medical directors maybe.
Steve So: You do some of these clinical trials and do innovative things like we did with the <unk> test that we.
Steve So: It was a very timely launch we're able to help.
Steve So: You know a lot of patients, but largely we're focusing on.
Steve So: I think helping.
Steve So: Ecology patients.
Steve So: We see that signal Terra is really making an impact on care and we're seeing that it's at the very early stages, and that's where a lot of the spending is going.
Steve So: And when you when you look at additional clinical trials you'd look at research and development.
Steve So: At innovation, you look at sort of we already do have a big commercial presence there, but you look at sort of rounding that out.
Steve So: That's where a lot of the spending is going.
Speaker Change: Got it and then just for my follow up just on the fingers here has there been any noticeable differences in indication growth, meaning I know, it's CRC and breakfast from the main ones, but have you seen any shift towards different indications.
Speaker Change: Any of that are ramping up significantly that might've been sort of <unk>.
Speaker Change: Lower volumes to begin with or has it been pretty consistent this whole time.
Speaker Change: Yeah, I think it's been pretty consistent but certainly you know what.
Speaker Change: What drives utilization probably is peer reviewed evidence.
Speaker Change: Where we're able to generate data, which we've done a lot of I think we now have more than 85.
Speaker Change: Publication supporting the use of the signature of technology.
Speaker Change: You know, where we're able to generate data.
Speaker Change: You know that tends to be kind of where you see physicians using the product and that makes sense right you won't have the evidence based decision making.
Speaker Change: There are some of the areas that we've talked about your muscle invasive bladder, we're excited about that with vigor.
Speaker Change: Figure of one L being I think a very strong start.
Speaker Change: The study itself and now with the vigor of one one data.
Speaker Change: You know reading out in 2025, as Alex mentioned, yes, I think that's a great opportunity.
Speaker Change: Yes of course, I O monitoring is another area, where we do see quite a bit of utilization.
Speaker Change: We generated some good data there so yes, it's a mix.
Speaker Change: It's one of the reasons why I think there's still some upside opportunity from.
From getting coverage even for Medicare on additional indications is that we do have.
Speaker Change: A decent chunk of utilization thats outside of the currently.
Speaker Change: Covered indications.
Steve So: Thanks, Steve I appreciate it.
Steve So: Yep.
Speaker Change: Our next question comes from the line of Tycho Peterson with Jefferies. Please go ahead.
Speaker Change: Hey, Thanks, a lot has been asked already I just a couple on the numbers here in the near term what would seem to be take contribution in the quarter and then you did raise by more than the beat 40 million by more than to beat what what's the delta.
Speaker Change: That.
Speaker Change: Yes, the Delta is really just the.
Speaker Change: <unk> continued growth kind of across the book is what we've seen.
Speaker Change: I would also encourage you to come back off the trips as well, but nonetheless, even backing out the true ups. So we increase the guide more than substantially more than the beat and that's just kind of.
Speaker Change: All the comments we've made.
Speaker Change: On the call so far in terms of who's going to win the businesses.
Speaker Change: You say contribution we haven't broken out specifically other than to say like I think the beginning of the year, we added $25 million contributor to the guide and we kind of bumped up to 40 and it's been in that it's been in that zone in terms of full year contribution and that's that's why we haven't gone through the year.
Speaker Change: And then I guess thinking about the framework you've put in place for next year, the 5% to 600000 tests.
Speaker Change: Do you think kind of the community penetration goes and then it sounds like you don't feel like you need to add additional reps at this point as we think about next year.
Speaker Change: Yeah, I'll just comment on penetration I mean look obviously, it's slightly different by tumor type and then whether you're talking about sort of the adjuvant setting or do incident patients or the prevalent pool of patients, but you know looking broadly at the bigger opportunity I mean, we still think we're in the low single digit.
Speaker Change: It's.
Speaker Change: So there's a ton of opportunity ahead and community and academic settings.
Speaker Change: And we are adding sales team our team members and additional two.
Speaker Change: Medical team members and.
Doing more clinical trials, which is a big part of our investment.
Speaker Change: Okay, and then lastly, I guess on timelines for the Readouts on breast in kidney should we still expect those next year as well I mean, I know it was covered CRC in bladder and some of the other indications, but how do we think about the breast and kidney timelines.
Speaker Change: Yeah, we've got a I think a very solid roadmap of data that's going to be reading out.
Speaker Change: So not just across those indications, but you know I think abroad.
Speaker Change: Span of indications, we've got you know pretty big datasets reading out.
Speaker Change: Which we're excited about.
Speaker Change: Right now there is.
Speaker Change: Probably over over 100 trials that are underway that are going to be reading out of various time points. So.
Speaker Change: We're excited about that.
Speaker Change: Cited about generating evidence.
Speaker Change: Can you know drive additional coverage from Medicare and that can drive additional utilization.
Speaker Change: Okay. Thanks.
Speaker Change: Yep.
Speaker Change: This will conclude our Q&A session and with that we will conclude today's conference call. Thank you all for your participation you may now disconnect.
