Q4 2024 Adaptive Biotechnologies Corp Earnings Call
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Speaker Change: Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Karina, how Cynthia <unk>, Vice President of Investor Relations and S. P N a.
Please go ahead.
Speaker Change: Thank you Denise and good afternoon, everyone I would like to welcome you to adaptive Biotechnologies fourth quarter and full year 'twenty four earnings conference call.
Speaker Change: Earlier today, we issued a press release reporting adopted financial results for the fourth quarter and full year 2020 for the press release is available at Www Dot adaptive biotech dot com. We are conducting a live webcast of this call and we'll be referencing the slide presentation that has been posted to the investors section in our corporate website.
Speaker Change: During the call management will make projections and other forward looking statements within the meaning of federal security law regarding future events and the future financial performance of the company.
Speaker Change: These statements reflect management's current perspective on the business as of today.
Speaker Change: Actual results may differ materially from today forward looking statements depending on a number of factors.
Speaker Change: As set forth in our public filings with the SEC and listed in the presentation.
Speaker Change: In addition, non-GAAP financial measures will be discussed during the call and a reconciliation from non-GAAP to GAAP metrics can be found in our earnings release.
Speaker Change: Joining the call today are Chuck Robbins, our CEO of compound or on the call. Please call our chief Financial Officer additional members of the management team will be available for Q&A with that I'll turn the call over to Chad Chad.
Speaker Change: Thanks Karina.
Speaker Change: Good afternoon, and thank you for joining us on our fourth quarter and full year earnings call.
Speaker Change: As highlighted on slide three 2024 was a year of key wins and strong execution on all fronts.
Speaker Change: In M D.
Speaker Change: Revenue increased 42% versus 2023.
Driven by both clinical testing and pharma.
Speaker Change: Two major catalysts occurred in the year, which we believe will drive long term growth profile of the MRM business.
Speaker Change: First we obtained a new gap fill rate for our Kronos week test of $2007, which is about $300 higher per test than our previous implied rate and second the old act vote in favor of using M. D. As a primary endpoint to support accelerated approval, but multi myeloma therapies represents a pair.
Speaker Change: Aerodyne's shift and the development of heme cancer drugs.
Speaker Change: An immune medicine, we made significant progress in our autoimmune programs and recently nominated our lead clinical indication. We are now focusing on the preclinical development of an antibody therapeutic candidate in this lead indication.
Speaker Change: In conjunction with driving.
Top line growth and advancing our IEM programs, we completed restructuring initiatives and yielded a 40% reduction in cash burn from 2023, concluding the year with a robust cash position of $256 million.
Speaker Change: Let's take a closer look at the business performance and outlook, starting with clinical testing on slide five.
Speaker Change: Full year currency clinical revenue grew 40% versus prior year as shown in the chart volumes continued to increase quarter over quarter with a record high 20945 tests delivered in the fourth quarter, representing a 34 increase percentage increase versus prior year.
Speaker Change: <unk> and a 7% increase sequentially meaningful growth was observed in all reimbursed indications.
Speaker Change: Myeloma contributed 43% of U S. <unk> volume in Q4, followed by a O L at 34% CLO of 10%.
Speaker Change: PCL at 6% and Mcl at 4%.
Speaker Change: Looking at some of the key indicators in the quarter. It is encouraging to see the positive trends versus the same time a year ago.
Speaker Change: Blood based <unk> testing grew 55% and contributed 41% of <unk> in the United States.
Speaker Change: That's in the community grew 38% and represented about 25% of tests delivered.
Speaker Change: Ordering health care providers grew 30% over 3000.
Speaker Change: We successfully completed epic integration and nine accounts during the quarter, including several of our largest accounts. We've now have completed integrations of 19 accounts, which together represented about 20% of our order volume in 2024.
Speaker Change: In January we announced an exclusive strategic commercial partnerships with Neogenomics to cross promote our currency test along with <unk> Compass and chart meta pathology services.
Speaker Change: We expect this collaboration to expand our presence in the community and fuel our growth in this segment.
Speaker Change: In addition to the contributions from volume clinical revenue growth was also fueled by an increase in <unk> asps.
Speaker Change: As shown on slide six.
Speaker Change: We ended the year, an average ASP of $11 17 per test in the United States, which represents a 7% increase versus fiscal year 2023.
Speaker Change: This increase was due to the ongoing execution of various initiatives to improve collections and expand coverage.
Speaker Change: We have reduced the proportion of tests delivered for indications not covered by Medicare from 17% to 7% throughout the year, we obtained Medicare coverage for mcl at the new GAAP fill rate under the episodes structure.
Speaker Change: We initiated agreements with several large previously uncontrolled blue Cross Blue shield payers, including Texas and independence Blue Cross and establish our first Medicaid coverage in the key states of New York and California.
Speaker Change: And we completed the transition of our payers to the new Pele code, which improved our prior authorization success rate from 46% at the beginning of 2024% to 69% at the end.
We will continue to drive these efforts, which combined with the new GAAP fill rates give us confidence that we can reach an ASP of around $300 per test on average for fiscal year 2025.
Speaker Change: Looking at <unk> pharma on slide seven.
Speaker Change: Our MLD pharma business had a strong year with revenue growth of 44% versus 2023.
Speaker Change: Which included $12 5 million in regulatory milestone revenue.
Excluding milestones farmers sequencing revenue grew 14%. In addition, we ended the year with a healthy backlog of over $200 million.
Speaker Change: Which is about 10% increase over 2023.
Speaker Change: Yeah.
Speaker Change: We've experienced significant momentum following the <unk> vote in April.
Speaker Change: We've closed 20, new myeloma studies in 2024, 15 of which closed post oded. We now have 10, multi myeloma studies using closely because a primary endpoint, including three that were upgraded from secondary to primary post audette.
Speaker Change: We're seeing a positive impact for the continued acceptance of MRV in other disease states as our partner there is increasingly seek to incorporate MLD as a primary endpoint in both cielo and diffuse large b cell lymphoma.
Speaker Change: And we believe there is a halo effect and adoption in the clinic as pharma companies are starting to highlight the clinical utility of them already testing and its relevance as a key measure of treatment response.
Speaker Change: In summary, we achieved great success in both the clinical and pharma businesses in 2024, which sets the stage for continued execution on our key priorities in 2025.
Speaker Change: Yes.
Speaker Change: As shown on slide eight we intend to drive topline growth in 2025 by continuing to focus on a few key strategic priorities, including expanding blood based testing to contribute 45% or more of our total NRT volume by further growing our presence in the.
Speaker Change: In the community and by generating more data in blood.
Speaker Change: Integrating additional epic accounts and launching the Alco EMR integration with Flatiron and the community by mid year, so that greater than 50% of our test volume is integrated by year end.
Speaker Change: Third increasing asps to an average of $300 per test based on the initiatives mentioned earlier.
Speaker Change: And fourth increasing the number of new farmers studies and primary endpoint studies across indications continuing to leverage momentum from last year's <unk> recommendation.
Speaker Change: Bottom line initiatives for the year include further reducing cost per sample in the lab by supporting volume growth with stable direct labor personnel and overhead.
Speaker Change: Completing the transition to the <unk> X and the second half of the year and finally, maintaining similar operating spend levels as in 2024.
Speaker Change: Execution of these priorities will enable us to achieve our primary goal for MRV. This year, becoming adjusted EBITDA positive in the second half of the year, while maintaining a strong long term profile.
Speaker Change: Now, let's turn to immune medicine on slide 10.
Speaker Change: Our immune medicine business focus on two differentiated immune based therapeutic strategies. The first is in cancer with our partner Genentech, where the goal is.
Speaker Change: Deliver highly effective TCR based cell therapies to treat patients with different solid tumors and the second is in autoimmunity based on our precision immunology approach. Our goal is to discover and develop antibodies that deplete or block the auto reactive T cell receptors that are causing disease.
Speaker Change: As shown on slide 11, and 2024, we made significant progress in both therapeutic strategies in oncology. Our focus is to enhance the profile of our cell therapy product by improving turnarounds turnaround time, and reducing cost as such we have made progress in replacing our TCR discovery.
Speaker Change: Cellular assay with a digital or in silicone TCR antigen binding model, we're making good progress in generating the necessary training data for this digital model. This.
Speaker Change: This digital TCR antigen prediction model should provide the foundation for TCR based cell therapy, with Genentech and allow us to pursue additional high value applications beyond cancer cell therapy.
Speaker Change: In auto immunity, we successfully identified a subset of auto reactive or a Fender T cell receptors that are likely causing disease in patients with multiple sclerosis type one diabetes and several other autoimmune indications we completed various antibody mouse immunization campaigns.
Speaker Change: And successfully selected and functionally tested a subset of antibodies to a number of disease, causing targets and prioritize indications based on these data. We collected we also recently nominated a lead indication and are focusing on the preclinical development of antibody therapeutic candidates in this first indication.
Speaker Change: As highlighted on slide 12, the immune medicine business has three clear strategic priorities in 2025. The first is to continue to support our partner Genentech in the development of cell therapy products. The second is to generate a robust preclinical data package for our differentiated antibody program and our lead.
Speaker Change: <unk> immune indication and the third is we are going to execute on these strategies with a targeted cash burn of $25 million to $30 million. We will achieve this by gating, our R&D investments and leveraging our pharma business revenue to offset the iam spend now I'm going to pass thorough Kyle.
Kyle: Who's going to walk through the financial results and 2025 full year guidance.
Kyle: Thanks, Chad starting on slide 13 with revenue for the fourth quarter and full year.
Kyle: Total revenue in the fourth quarter was $47 $5 million with 85% from March 15% from immune medicine, representing 4% growth from the same period last year.
Kyle: <unk> revenue of $40 1 million up 31% from a year ago, with clinical and pharma contribution of 65% and 35% respectively.
Kyle: Carlos C test volume increased 34% to 20945 tests delivered from 15680 tests in the same period last year.
Kyle: I mean in medicine revenue was $7 3 million down 51% from a year ago, driven as expected by lower Genentech amortization, which decreased 56% and lower pharma and academic services of <unk> focus has centered around drug discovery efforts.
Kyle: Full year 2024 revenue was $107 $179 million, representing a 5% increase year over year.
Kyle: <unk> revenue was $145 5 million up 42% from a year ago with $12 5 million in milestone revenue recognized in the year, excluding milestones MRC revenue grew 29% versus 2023 and.
Kyle: EMEA medicine revenue was $33 4 million.
Moving down the P&L.
Kyle: <unk> gross margin, which excludes milestones and genentech amortization was 59% for the fourth quarter. This represents an increase of 11 percentage points versus prior year and three percentage points sequentially.
Kyle: Full year sequencing gross margin was 53% compared to 41% in 2023.
Kyle: Lower overhead costs from efficiencies in the production lab and direct labor leverage, which combined drove lower cost per sample contributed to these employees.
Kyle: Total operating expense for the quarter inclusive of cost of revenue was $81 3 million, which excluding the impairment charge from last year represents an 11% decrease from Q4 2023.
Kyle: This decrease continues to be mainly driven by our focus on driving leverage across functions with R&D. Once again being the biggest contributor of the decline given more targeted investments and amendments.
Kyle: Full year operating expense, excluding onetime asset impairment and restructuring charges was $332 3 million down 11% from 2023, excluding the prior year's asset impairment charge.
Kyle: Total company adjusted EBITDA in Q4 was a loss of $16 4 million compared to $24 7 million in Q4 of 2023.
Kyle: Adjusted EBIT loss for the full year was $80 4 million versus $116 4 million in 2023.
Kyle: As you can see from the segment reporting table at the bottom of the slide our full year 2024, <unk> adjusted EBITDA loss has been reduced by 50, 454% in 2024 versus last year, driven primarily by higher revenue and lower operating expense.
Kyle: Madison adjusted EBIT loss for fiscal year, 2024 increased 26 million versus $14 1 million in 2023, primarily due to lower noncash revenue from Genentech of $29 1 million, partially offset by a 27% reduction in operating expense.
Kyle: Interest expense from our royalty financing agreement with Oregon was $3 million in the fourth quarter and $11 6 million for the full year.
It was offset by interest income of $3 1 million for the fourth quarter and $14 5 million for the full year.
Kyle: Net loss for the quarter was $33 $7 million and net loss for the full year was $159 6 million.
Kyle: As a result of strong topline performance, improving operating efficiencies and focused spending we ended the year with $256 million in cash cash equivalents in marketable securities.
Kyle: Now, let's turn to our full year 2025 guidance on slide 14.
Kyle: We expect full year revenue for the <unk> business to be between 175 and $185 million.
Kyle: Guidance includes conservative mrna pharma services growth as we navigate through a new administration and monitor broader impacts from the Biopharma industry.
Kyle: It also includes MRV milestones.
Kyle: $6 million to $7 million, which could have upside depending on regulatory decision making.
Kyle: At the midpoint this guidance represents growth versus 2024 up 24% and 30% growth excluding milestones.
Kyle: With respect to revenue trends throughout the year, we expect <unk> revenue to be 40, 60 weighted between the first and second half respectively.
Kyle: Growth in clinical volumes and Asps combat compound.
Kyle: Of note given that our immune medicine efforts are focused on drug discovery revenue from our Iam pharma collaborations will continue to be used to offset R&D investments, we anticipate around $15 million in amortization from the genentech collaboration.
Kyle: Okay.
Kyle: We expect full year operating expenses, including cost of revenue to be between 340 and $350 million.
Kyle: This reflects similar levels of operating spend as in 2024, as we continue to leverage our commercial and operational infrastructure, while supporting our higher volumes.
Kyle: Of this total spend we expect about 69% to be driven by the MRM business and 23% from immune medicine, the remainder will come from unallocated corporate costs.
Kyle: Maintaining a strong cash position continues to be a key priority.
Kyle: We expect our total cash burn for the year to be between 60% and $70 million, representing an annual reduction at the midpoint of the range of about 28% versus prior year.
Kyle: We anticipate approximately 30% of the burn this year to come from the <unk> business and 40% from any medicine.
Kyle: The remaining is due to unallocated corporate costs.
Kyle: Of note consistent with past years, the first quarter will be our highest cash utilization quarter, primarily due to the payout of our annual corporate costs.
I am encouraged by the strong results in 2024, we are growing our revenue managing our operating expenses and have a strong capital position to continue to fuel growth and execute on our goals with that ill hand, it back over to Chad.
Kyle: Kyle.
Kyle: 2024 was a pivotal year of execution and we are looking forward to building on the success in 2025.
Kyle: In MLD, we are executing on our strategy and we are confident in reaching our profitability goal later this year with an enhanced growth and margin profile.
Kyle: An immune medicine, we are advancing our drug discovery efforts, which we believe could have an enormous future potential and importantly, we have a strong cash position that enables us to achieve our goals in both businesses. We've got the people the market position and the momentum to drive success in 2020.
Kyle: Five and beyond I'd like to now turn the call back over to the operator and open it up for questions. Thank you.
Kyle: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Operator: And our first question comes from Andrew Brachman of William Blair. Your line is open.
Andrew Brachman: Good afternoon, thanks for taking the questions.
Andrew Brachman: Maybe if I could start just on the underlying assumptions of the guide here for the <unk> business. Obviously, a lot goes into this one but maybe if I could just ask on pricing that seems to be a pretty big lever. This year can you just unpack for us at $300 assumed asps for the year a bit more what's included there whats not included as you sort of think about some potential upside.
Andrew Brachman: <unk> there.
Andrew Brachman: Maybe drive something a little bit higher than that.
Andrew Brachman: Sure Andrea Kyle I'll have you answer that Andrew.
Andrew Brachman: Probably four important things to align on the ASP drivers.
Andrew Brachman: First is the full year impact from the gap fill rates for our Medicare line of business.
Andrew Brachman: And 2024 that was only partially reflected in the last quarter of the year. So we're going to see the full year impact of that being in place.
Andrew Brachman: Second and probably most important is the pacing at which we're able to re contract with existing contracted payers as well as coverage as well as contract with the remaining kind of larger open payers that we have.
Andrew Brachman: The third component is.
Andrew Brachman: Revenue cycle management to some extent, we think this has a meaningful opportunity with the gap fill pricing being available not only in helping us to win appeals, but to win appeals at a higher price point.
Andrew Brachman: So that we think can drive some some meaningful improvements and last is Medicaid not only with having the capsule referenced right available even though they are traditionally a lower payor, we can start to gain some meaningful traction in the reimbursement environment and a bit organically as our volume mixes to the community we will see a mix.
Andrew Brachman: From that Medicare line of business, which has been historically a lower payer. So those are the kind of the four main things I would focus on for ISG.
Andrew Brachman: That's perfect and then if I could for my follow up here, obviously, a pretty big year in terms of catalysts that sort of milestones to get to adjusted EBITDA positivity for the MRV business. Here can you just sort of talk to us about sort of the pacing of that margin progression throughout the year and then specifically as it relates to the <unk> X transition what sort of needs that.
Get done in order for that to sort of equal it derisked at this point thanks guys.
Speaker Change: Yeah on the pacing.
Speaker Change: We exited Q4 at about 59% on the sequencing margin profile I think thats, probably a fair number for the first half of the year, depending on the contribution mix from pharma.
Speaker Change: But thats, probably the right ballpark at the end I think the Novus seek acts in the second half of the year, We've said historically between five and eight percentage points lift there.
Speaker Change: Over 12 months, so youll start to see an improving margin profile in addition to.
Speaker Change: An improving revenue profile from the ASP drive that margin profile. So.
Speaker Change: On the longer term front, we see the note note seek driving about 10 percentage points on the margin profile, but as it relates to the adjusted EBITDA profitability timeframe.
Speaker Change: Driving that and we're fairly confident in our ability to achieve this with the initiatives we've outlined.
Speaker Change: Yes, I'll take it all together yes.
Andrew Brachman: Yes, Andrew just taken altogether we.
Andrew Brachman: We're certainly confident in our ability to achieve EBITDA positivity in the second half of 2025.
Andrew Brachman: Okay.
Andrew Brachman: Thank you.
Andrew Brachman: Yes.
Speaker Change: Our next question comes from Rachel that in sale of Jpmorgan. Your line is open.
Speaker Change: Perfect. Good afternoon, and thanks, so much for taking the questions. So first up here just on the Neogenomics partnership great to see that fine can you walk us through what's contemplated in guidance currently in terms of contributions from that partnership and how should we see that trend throughout the year.
Speaker Change: Sure Susan you want to take that Sarah Thanks for the question Rachel So the near term with partnerships.
Speaker Change: <unk> already begun working in earnest with the team and we expect that it's going to take around four months for us to work closely to design and implement the customer experience.
Speaker Change: The supporting backroom operation and will facilitate delivering quality tests through neogenomics channels.
Speaker Change: Our goal is to start the cross promotion with an initial group of pilot accounts in the second half of this year and we were really planning to take a slow ramp on that to allow time to collect and implement customer feedback Nick Childs mechanics are in order and so while we could go faster both companies have experienced with lab to lab partnerships since they were intentional here we're not.
Speaker Change: <unk>, we have the opportunity to jointly ensure that we implement all of the best practices in our longer term success and so as a result, the guide this year really doesn't incorporate any material volume from Neogenomics and it's really in 2026 and 2027 that we expect to see that our contract.
Speaker Change: And that's to help us be prudent in kind of our outlook.
Speaker Change: Additional uptake earlier thats, great gravy for us.
Speaker Change: Yes.
Speaker Change: Perfect and then just on my follow up just in terms of the <unk> guidance I think I heard you say, it's a $40 60 weighting between the first half second half on a revenue basis will walk us through your assumptions in terms of the phasing of volume growth should we assume a similar progression or more linear or more hockey stick in terms of the volume ramp throughout the year. Thank you.
Speaker Change: Yes, I think thinking about it linearly is probably right I would say the back half of the year with the flat iron launch and the catalyst from continued epic integrations might have a more profound impact.
But as it relates to our guidance, we're kind of thinking about it linearly while we watch the uptake from both epic and flat iron, which could drive us to the upside of the range.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Martin <unk> of <unk>. Your line is open.
Speaker Change: Hey, guys. Thanks for taking the questions.
Speaker Change: Sure Marco Yes, yes, it's great to see that.
Speaker Change: Progress in 2024, and so my first question is I recognize that you are not contemplating any material uptake with the neo partnership in 2005. However, many of US do cover Neogenomics and we're not super familiar with the size of the company and chart offerings. So can you just give us.
Speaker Change: A sense maybe.
Speaker Change: Qualitative quantitative about how significant of an opportunity is campus and chart as we think about 2006 and 2017 what type of.
Speaker Change: Catchment rate do you think.
Speaker Change: Currency could have as part of that product offering.
Speaker Change: Yes. Thanks for the question Mark I want to start first by saying that I think the companies see this as a win win collaboration that's going to potentially offer upside to both products.
Speaker Change: The conference in Shanghai on neuroscience currency are adaptive and.
Speaker Change: Yes.
Speaker Change: The estimated that volumes and I'll leave it to Neogenomics to comment on your current business, but I will say that we think that it could have a material impact to our volumes and we are looking at certainly mid to high single digits over time.
Speaker Change: <unk> is a three year deal with the opportunity to expand and sell again, you'll start to see more of that come through in the later years.
Speaker Change: Okay got it and then as a follow up.
Speaker Change: Can you speak to any success that youre, having with commercial payers.
Speaker Change: <unk> recognized the higher.
Speaker Change: $2007 price on the Medicare side.
Speaker Change: Do you think that that is an opportunity for you in 'twenty five to kind of go back to.
Speaker Change: Some commercial health plans and negotiate a higher a higher rate.
Speaker Change: Yeah, absolutely we've already seen.
Speaker Change: Some nice conversion of re contracting with the existing <unk>.
Speaker Change: Commercial payers and we're under.
Speaker Change: Late stage discussions with several on contracted payers that are contracting at a higher rate.
Speaker Change: So.
Speaker Change: We absolutely believe.
Speaker Change: This will drive our asps.
Kyle: One of the components one of the core components of Kyle mentioned that will drive asps for the year, but certainly having that new CLA code in place has been extremely extremely helpful.
Speaker Change: Okay, great congrats on the quarter.
Kyle: Thanks Mark.
Speaker Change: Thank you.
Speaker Change: Our next question comes from LNG, None of Scotiabank. Your line is open.
Speaker Change: Hi, Thanks for taking the question.
Speaker Change: Could you remind us in terms of your pipeline for Mardi <unk> Medicare reimbursement for mantle cell lymphoma.
Speaker Change: Remind us again kind of what's in the pipeline kind of what if some of the next indications that we could look forward to over the next kind of.
Speaker Change: 12 to 24 months.
Speaker Change: Sure. So yes, as you noted <unk> commerce, and most recently Medicare covered indication, which we launched commercial promotion for <unk> in mid Q4.
Speaker Change: I just want to note that that that an indication that we're already seeing at significant enthusiasm around is the high unmet need and we have some really nice data coincided with our launch ash 'twenty 'twenty, four which demonstrated the ability of quantity you get tinder negative six sensitivity.
Speaker Change: <unk>.
Speaker Change: To inform the decision on whether or not to transplant a patient.
Speaker Change: Clinical action ability data kind of right out of the gate, which is great.
Speaker Change: Going forward, we are anticipating submission of additional indications to <unk> X for potential reimbursement.
Speaker Change: <unk> coverage for T cell <unk> and we're also exploring advanced stages of cutaneous T cell lymphoma, Tcl, which is often center east income.
Speaker Change: We're actually enacted efforts to get that T cell application in.
Speaker Change: And utilizing data from the validation of our recently updated T cell assay, which we launched in the clinic in Q4.
Speaker Change: And which for which we recently received conditional approval from the <unk> clip as well.
Speaker Change: I do also want to mention that on the mantle cell front, we're not entirely done with our work in the sense that wed like to continue to seek additional reimbursement at framework on more tax which is recurrent monitoring. So in addition to getting coverage under our current episode reimbursement structure will look for incremental time points and we're in active discussions with <unk>.
Speaker Change: On that topic, as well and that will allow us to get coverage for our testing our patients off therapy.
Speaker Change: At the time.
Speaker Change: Great. Thank you so much for that and then just curious on the the reason.
Speaker Change: Updated guidelines NTT and guidelines for T cell lymphoma, specifically the pet positives.
Speaker Change: Dr. Bcl following first line therapy, just curious whether there might be opportunities for you guys for adaptive.
Speaker Change:
Speaker Change: Realizing that these very specific indication, but whether it's pretty I think significant in that the first C. T DNA.
Speaker Change: <unk> inclusion in the guidelines in the Mtc and guidelines and so.
Speaker Change: Kind of curious what kind of your positioning is here.
Speaker Change: Thank you.
Speaker Change: So lately the inclusion of <unk> and NTT and guidelines for diffuse large b cell as a positive step forward.
Speaker Change: The space in general and are providing access to patients for NRT testing it right in line with our strategy like most companies we periodically submit proposals to end CCN as to other companies in the space and so it was great to see <unk> get into the guidelines as a first step although there's still more work to do.
Speaker Change: As a level TV recommendation and relatively narrow in scope.
Speaker Change: On an ongoing basis, we anticipate continuing to generate data and submit that data and began to support expansion of those guidelines and in the meantime.
Speaker Change: And CCN has generally been consistent about not specifying particular assays in the guidelines and Bill mentioned classes are specified performance of expecting.
Speaker Change: The current update is relevant to Kronos began to other <unk> assays in the space with recommended.
Speaker Change: Just to tack onto that Sanjay if you remember we've already obtained Medicare coverage for diffuse large b cell lymphoma, and so any additional guideline inclusion also helps us in our efforts for contracting with commercial payers around that indication. So again thrilled to see it more work to be done, but we are in the clinic.
Speaker Change: <unk> already with <unk>.
Speaker Change: <unk>.
Speaker Change: Great. Thank you so much.
Thank you sure.
Speaker Change: Our next question comes from Tom Stevenson TV Kelly Your line is open.
Speaker Change: Yes.
Speaker Change: Oh, sorry.
Speaker Change: Sorry about that it's Dan Brennan I apologies.
Speaker Change: So first question just congrats on the quarter, maybe just back to the Asps bridge.
Speaker Change: For 2025% to 300.
Speaker Change: So for the commercial rate, we come up with around 12 <unk> in the fourth quarter. This year is that right kind of what's assumed in 'twenty five and then.
On Medicaid since now you have two state approvals and I think that 10% of volumes. How are you thinking about Medicaid contribution to that $300 and 25.
Speaker Change: Yes.
Speaker Change: In your commercial rate, maybe a little high.
Speaker Change: Obviously, you've got a pump something else up to get there it might be on the Medicare front or our direct sell direct to hospital, Asps, which we call roster.
Speaker Change: What was the second part of your question Doug.
Speaker Change: On the Medicare.
Speaker Change: Yes, I think.
Speaker Change: Now that we have state approval.
Speaker Change: At least at the very least have a right to peg against it.
Speaker Change: You may have heard on other companies. Some people think of this is 50% to 60%.
Speaker Change: That kind of gap fill rate as being somewhat traditionally recognized obviously, we want to do better than that but we acknowledge it will take time.
Speaker Change: But not only with those payers, but some of the managed care organizations for Medicaid We think we can start to.
Speaker Change: Use this rate as a reference point to.
Speaker Change: This reimbursement I think California's probably most notable where we can start to see some improvement.
Speaker Change: In New York, and then hopefully, Florida overtime to once we get coverage there.
Speaker Change: Yeah.
Speaker Change: Got it Okay, and then maybe just on the epic side. So I think you said, 20% of volumes are on epic and 24 kind of what are you seeing those accounts that adopt is there a meaningful difference in payment volumes and kind of what are you assuming in 'twenty five.
Yeah. So at this point, we have 19 accounts that are integrated with epic that includes two of our largest accounts and we are we've been.
Speaker Change: Actually monitoring these although many of them nine of them went live just in the last quarter of 2024, So we still have.
Speaker Change: Early days in terms of data, but we do see consistently is that our relative in those accounts in terms of order volumes outpaces our growth in the rest of the business and additionally that the growth into outpaced on an ongoing basis for the accounts that we've had.
Speaker Change: Our integrated for more than a couple of quarter.
Speaker Change: And we additionally to order lines, we see significant numbers of new ordering providers, so to expand access to the test across the accounts versus what we saw prior to integration and we get consistent positive feedback about the workflow improvements.
Speaker Change: Mining is the ability to get samples collected and out the door and into adaptive Sam.
Speaker Change: So overall quite bullish on the opportunity to continue to accelerate growth with epic integration and we expect to have eight out of our 10 top accounts integrated by the end of 'twenty five and a total of 50% of our business flowing through an EMR integration, whether FX last night and our other community by the end of this year.
Speaker Change: Got it.
Speaker Change: The last one just on <unk>.
Speaker Change: Obviously targeting an adjusted EBITDA positivity in 'twenty five.
Speaker Change: I think you said flat Opex I think thats been consistent.
Speaker Change: Is it is there any view on maybe being too restrictive on the sales force I mean penetration rates are still extremely low volume growth is pretty healthy.
Speaker Change: Why not maybe.
Speaker Change: To expand the sales force further too.
Speaker Change: Question on the community or other just kind of wondering on that sales force to kind of level, what's the right number to think about.
Speaker Change: Yes, I think we feel at this point pretty good about where we are at the sales team.
Speaker Change: Yeah.
Speaker Change: Clearly a very promotional sensitive test.
Speaker Change: But at the same time, we want to make sure that we are.
Speaker Change: Managing spend and Wilson, who along with our ability to achieve our profitability goals.
David The Neogenomics steel is one of the ways that we're looking to expand access and touch points without investing directly in our sales team is certainly not off the table that would be kind of our sales team.
Speaker Change: Is that right.
Speaker Change: Okay.
Speaker Change: Great. Thanks, a lot.
Speaker Change: Thanks, Dan.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Matt <unk> with Goldman Sachs. Your line is now open.
Speaker Change: Hey, guys. This is for Sean on for Matt.
Speaker Change: Congrats on the quarter, a lots been covered already but.
Speaker Change: You've shown us consistent sequential improvement of around 1200 clinical units for <unk> for the past several quarters do you see that as a sustainable cadence going forward or do you anticipate any inflections at all in that growth.
Speaker Change: Yes, I think.
Speaker Change: We'll continue to see growth.
Speaker Change: Yeah.
Speaker Change: Aggregate volume and percentage of volume.
Speaker Change: We're expecting around north of 25% volume growth for the full year relative to 2024, so thats kind of whats baked into our guidance assumptions for the mid point of 180. So.
Speaker Change: At the end of the day, we still got a lot of opportunity, we're still low penetrated in our core indications. So I think we've got long term durable growth.
Speaker Change: The coming three to five years in this business.
Speaker Change: Got it I'll keep it to one thank you.
Speaker Change: Thank you as a reminder, if you have a question. Please press star one one.
Speaker Change: And our next question comes from Josh <unk> of.
Josh <unk>: Of Morgan Stanley Your line is open.
Speaker Change: Hey, guys good evening.
Speaker Change: So maybe one quick housekeeping one for you Kyle and I have a couple of follow up so on that $6 million to $7 million in pharma and Marty milestones. How are you thinking about it in terms of the first versus second half should we just assume that oil come through in <unk> as a placeholder assumption.
Speaker Change: I would just spread it evenly I mean.
Speaker Change: We could try and get very precise with it but I think just for practical purposes spread it evenly.
Speaker Change: We have line of sight for some earlier some later, but it's really difficult to put it into a precise quarter. So I think just spreading it easily is the best way to do it.
Speaker Change: Got it perfect.
Speaker Change: And then on that 5% to 8% margin improvement in the first 12 months of the <unk> X transition Chad.
Speaker Change: Just curious as to how should we think about the impact that will have on your currency turnaround time.
Speaker Change: You need to Bachelor samples now to fully realize the Cogs benefit.
Speaker Change: Yeah, so basically.
Speaker Change: <unk> is replacing four to see 40 $40 to 42 next weeks, but ultimately you do you do need to do do some batching on it.
Speaker Change: But but we should not impact our turnaround time, given the volume profile that we have how long do you want to add to that.
Speaker Change: Yes, so the volume that we have right now takes up many next six per day. So we're.
Speaker Change: <unk> going to be able to low daily our entire clinical volume.
Speaker Change: And we will still have plenty of room for growth. So so that's why we're getting such a nice return on the <unk>. So in fact, one half of the notice it takes up the equivalent of <unk>.
Speaker Change: Effectively like 30 next fix in terms of our rock. So so if you think of it that way when we're only filling up a portion right now and so we will continue to add more on that $1 five <unk>. So in other words will it scales beautifully without having to increase.
Speaker Change: Our cost to us we can just more and more samples from the same machine, obviously eventually will hopefully.
Speaker Change: Hopefully in the not too distant future.
Speaker Change: Triple thresholds to needing to run into two halves of the one machine, but boy we're excited about this.
Speaker Change: Got it that's helpful.
Speaker Change: And then I thought I should ask.
Speaker Change: The timing of about the same.
Speaker Change: Yes turnaround time.
Speaker Change: It doesn't really change it just because the machine runs about the same.
Speaker Change: Yes effectively.
Speaker Change: Got it okay.
Speaker Change: And then on the <unk> side of things guys. Just a quick clarification on the <unk> partnership Chad you talked about the switch to.
Speaker Change: Digital or in silicone model to reduce time and cost to deliver that cell therapy product. So when you switch over to that new method, what additional data if any do you have to provide the FDA to deploy that approach in a clinical trial setting.
Speaker Change: Data has to be I'm not sure we're there yet and genentech controls kind of the regulatory component of this we're providing we provided all the work and supporting documentation for that but that.
Speaker Change: We're not there yet.
Speaker Change: Okay fair enough and on that point around if this effort were to succeed.
Speaker Change: Can you just help us flesh out the broader potential upside here.
Speaker Change: If this transition to the digital approach goes well.
Speaker Change: Sure.
Yes so.
Speaker Change: I mean, I'm, a scientist, though I'll give a start with a scientific answer which is one of the huge problems in immunology is trying to figure out what what T cells actually do what are they bind to and so as part of the solution. What we're really doing is solving that bigger problem, which was the first step of that just got the Nobel Prize this year on <unk>.
Speaker Change: And folding, but but figuring out how.
Speaker Change: Proteins interact with each other it was.
Speaker Change: No one had the training data to be able to do that so so theres. Many many applications one of which it is.
Speaker Change: <unk> cell therapy, and the real advantages there is two big advantages one is a massive time advantage something that presently we would have to do in our assay that takes multiple weeks.
Speaker Change: We should be able to do in a matter of a day or two something like that that's number one and number two is the cost advantage where were.
Speaker Change: Having any kind of personalized.
Speaker Change: <unk>, you have to literally buy or make reagents for each patient.
Speaker Change: And then Ron your assay in the lab. So so the huge advantage there.
Speaker Change: You don't have to do any of that Youre, just youre just using some.
Speaker Change: Compute and then separate from that the other set of those like the most direct other applications of personalized cancer vaccine for example, immune monitoring Theres theres tons. So we're excited about the potential.
Speaker Change: Got it.
Speaker Change: Thanks, guys.
Speaker Change: Thank you that concludes our question and answer session and today's conference. Thank you for participating and you may now disconnect.
Speaker Change: Thank you.
Speaker Change: [music].
Speaker Change: [music].