Q4 2024 Veracyte Inc Earnings Call
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Speaker Change: I would now like to hand, the conference over to your speaker today Shayla Gorman.
Senior Director Investor Relations. Please go ahead.
Speaker Change: Good afternoon, everyone and thank you for joining us today for a discussion of our fourth quarter and full year of 2024 financial results with me today are Marc Stapley Earth, It's Chief Executive Officer, and Rebecca Chambers, our Chief Financial Officer.
Speaker Change: <unk> issued a press release earlier this afternoon detailing our fourth quarter and full year of 2024 financial result.
Speaker Change: It's really a copy of the presentation. We will review during the call today are available in the Investor Relations section of our website at Earthlink.
Speaker Change: Before we begin I'd like to remind you that various statements. We make during this call will include forward looking statements as defined.
Speaker Change: Under applicable securities laws.
Speaker Change: Forward looking statements are subject to arrest.
Speaker Change: And the company can give no assurance they will prove to be correct.
Speaker Change: Additionally, we are not under any obligation to provide further updates on our business trends or our performance during the quarter.
Speaker Change: Better understand the risks and uncertainties that could cause actual results to differ we refer you to the documents.
Speaker Change: But the Securities and Exchange Commission, including various its most recent Form 10-Q.
Speaker Change: In addition, this call will include certain non-GAAP financial measures reconciliation of these measures to the most directly comparable GAAP financial measures are included in today's earnings release.
Speaker Change: First of all from the IR section of the site.
Speaker Change: Right.
Speaker Change: I will now turn the call over to Marc Stapley parasites CEO.
Marc Stapley: Thank you Taylor and thanks to everyone for joining us today.
Marc Stapley: 'twenty 'twenty four with a record year for parasite I could not be more proud of our team for their hard work on behalf of the patients we serve.
Marc Stapley: Which is the reason we come to work every day.
Marc Stapley: Not only did that focus and dedication lead to approximately 150000 patients benefiting from the information provided by a test. It also enabled us to execute on our key strategic objectives and deliver a best in class financial profile.
Marc Stapley: We capped off a record year with Q4 revenue totaling $119 million.
Marc Stapley: 21% year over year growth.
Marc Stapley: This brought full year total revenue to $446 million for robust growth of 23% year over year.
Marc Stapley: Testing revenue, which now accounts for almost 95% of our business.
Marc Stapley: <unk> grew 28% year over year.
Marc Stapley: Fourth quarter testing revenue increased 24% over the prior year marked our 10th consecutive quarter of 'twenty to settle greater testing revenue growth demonstrating.
Marc Stapley: Demonstrating the durability and runway for summer to cycle that we have consistently signaled.
Marc Stapley: And we drove class, leading bottomline performance delivering full year, adjusted EBIT margin of 26% and cash generation.
Marc Stapley: <unk> of more than $17 million.
Marc Stapley: Okay.
Marc Stapley: With the sites, we further strengthened our position as the market leader with outstanding adoption over the course of 2024 as we delivered more than 80000 tests, representing volume growth of 36%.
Marc Stapley: During the fourth quarter the size of the volume grew 45% year over year to a new record at more than 22400 tests.
Marc Stapley: We are particularly proud of our land and expand approach in prostate cancer, which has enabled us to go from an early beginning in RP, only adding biopsy almost a decade ago and growing that to be the vast majority of our testing today.
Marc Stapley: In Q4, we saw 40% to 55% volume growth across each of the LTC and biopsy risk categories from low risk to intermediate risk and high risk.
Marc Stapley: Importantly, low risk now represents an impressive 20% of our total decipher volume.
Marc Stapley: This is a testament to the value that the cycle brings to this population better managing their disease.
Marc Stapley: From those that will benefit from access available to those who have a worse prognosis and might need treatment.
Marc Stapley: As a demonstration of the clinical utility of the site and the NCC and low risk population.
Marc Stapley: Our extensive real world evidence about a third of those patients are reclassified to decipher intermediate or high.
Marc Stapley: Besides this clinical validity and utility has already been demonstrated in approximately 85 clinical studies.
Marc Stapley: This includes 42 on biopsy samples more than a dozen of which could inform an active surveillance decision and 43 on radical prostatectomy.
Marc Stapley: Since our last earnings call. We added 20, new publications posters abstracts and presentations highlighting the clinical utility for <unk> as well as incremental disease insights powered by the size of the grid.
Marc Stapley: Looking ahead to further decisive catalyst, we now estimate the growing prostate cancer market is approximately 40% penetrated.
Marc Stapley: And we believe we have more than 65% market share, which we estimate has increased by more than 500 basis points over the course of 2024.
Marc Stapley: As we have previously shared our goal is to drive at least 80% market penetration in all of our indications.
Marc Stapley: With the 2025 updated <unk> guidelines for prostate cancer.
Marc Stapley: We're still the only gene expression test with Simon level, one evidence and we believe it's now the only gene expression test that is recommended by the CCM pedal to make personalized treatment decisions for prostate cancer patients.
Marc Stapley: Now to expanding the fact that cover the entire risk spectrum for patients with prostate cancer metastatic technical assessment was approved in late December.
Marc Stapley: And we secured New York State approval in January.
Marc Stapley: We are well on our way to finalizing all the necessary commercialization and training activities to launch into this expanded population first half with volumes benefiting in the back half of 2025 and beyond.
Marc Stapley: Given our leadership position the expansion of this cycling into the metastatic patient population as well as significant Greenfield opportunity ahead for our test and look like it could be.
Marc Stapley: We expect to drive meaningful decided to growth for the foreseeable future.
Marc Stapley: Moving to Afirma volume growth continues to be very strong and increased 12% in 2024.
Marc Stapley: Spike a challenging Q4 comp we delivered more than 16300 tests during the fourth quarter growing 8% year over year, while revenue grew 4% given the large prior period collection in the fourth quarter of 2023.
Marc Stapley: Deeper penetration into existing accounts, along with some sizable new customers drove the majority of growth in the quarter, a testament to our firm's differentiated level of evidence service and overall performance.
Marc Stapley: As a reminder, an expanded LCD for Oklahoma went into effect in July 2024, adding reimbursement from Medicare and Medicare advantage patients with thyroid nodules.
Marc Stapley: Revenues for the first of $5 six grew more than 80% year over year in the fourth quarter.
Marc Stapley: We expect this to be a module ASP tailwind in 2025 at the clinical utility has further developed resonates more with physicians.
Marc Stapley: Meanwhile, the research use only grid data is driving interest in evidence generation from the Kols and academic community.
Marc Stapley: We look forward to sharing a number of upcoming publication for poster presentations leveraging this data in 2025.
Marc Stapley: As we continue to build on our commitment to patients and physicians to advanced thyroid cancer research.
Marc Stapley: The.
Marc Stapley: Energy market is still only about 65% penetrated as theyre getting beginning of 2025, and we estimate is growing in the low single digits.
Marc Stapley: The pharma grew share in 2024 continues to serve the majority of the market and will make gains in both share and penetration to the strong revenue growth of high single digits. This year.
Marc Stapley: We are confident that the site for the firm will have ample growth runway ahead to purchase to a longer term growth drivers, which I will discuss next.
Marc Stapley: First I'll start by providing a quick update on the state with about 19 Gulf study for nasal swab.
Marc Stapley: To date, we have enrolled more than 85% of the 2400 patients that we're targeting and look forward to sharing when enrollment is fully completed.
Marc Stapley: Next I'd like to provide an update on our efforts to serve more of the patient journey, Marty and recurrence testing.
Marc Stapley: Alright, Marty approach is differentiated in the <unk> whole genome every step of the way, including the initial baseline sequencing followed by the sequencing of serial testing samples.
Marc Stapley: This approach is backed by our fundamental belief that more data drives more insights more clinical evidence multiyear coverage and therefore more durable adoption.
Marc Stapley: As we have said we are working on the first indication of our multi platform the muscle invasive bladder cancer.
Marc Stapley: This indication will leverage our strong dislike the channel.
Marc Stapley: Urologists the radiation oncologists.
Marc Stapley: We are also focused on expanding into other indications, where we already have a commercial presence.
Marc Stapley: We have completed setting up the workflow in our lab and submitted for New York State approval.
Marc Stapley: Further we recently submitted to <unk> I'll propose Z codes and expect to submit up Tech assessment this quarter.
Marc Stapley: These are critical steps for us to be able to launch and we're pleased with the progress we're making.
Marc Stapley: As is our strategy across our platform, we are committed to having reimbursement in place and all development managed care and commercial activities are progressing well. So that we can launch our inaugural MLD test in the first half of 2026.
Marc Stapley: Finally, turning to our longer term strategic growth driver of international expansion.
Marc Stapley: Here, we are dedicated to launching aircrafts with IBD to address patient needs outside the U S.
Marc Stapley: As you know, our French subsidiary Ferrotype, SaaS or SaaS has been focused on supporting our IBD strategy as well as the legacy Biopharma in third party contract development and manufacturing business.
Given the declines in Biopharma in our manufacturing and supply challenges for Prosigna. We believe that continued to support such a large operation in infrastructure may be inconsistent with our core strategy and may not be in the best interest of the parasite.
Marc Stapley: Given this we notified SaaS the verified ink is considering no longer funding their operations.
Marc Stapley: As a result, SaaS will engage in consultation proceedings with the work council over the coming months, while in parallel seeking to identify one or more buyers for all or part of the SaaS activities.
Marc Stapley: Without verified inked continued funding our identification of a buyer.
Marc Stapley: May be required to commence bankruptcy proceedings this year.
Marc Stapley: Consequently, verified Inc would no longer own or operate the Marseille facility by year end, if not sooner.
Marc Stapley: Our first priority is to our patients and see what we will do our utmost to maintain continuity of Prosigna and counsel supplied for the foreseeable future, which will depend in part on finding a buyer for this portion of the business.
Marc Stapley: Further we remain committed to our IBD strategy and our ongoing development programs.
Marc Stapley: <unk> said that this potential change is expected to impact our timelines and we are diligently reassessing our development roadmaps.
Marc Stapley: In terms of the financial impact. This year. This is this is of course highly dependent on the final outcome and the timing of that.
Marc Stapley: Rebecca will share where she can help you bracket of potential impacts.
Speaker Change: <unk> team has worked hard on behalf of customers and patients and I truly appreciate their efforts.
Speaker Change: We always do we will compassion, we support our employees during this information and consultation period.
Speaker Change: Okay.
Speaker Change: Despite these challenges and what is now a very small part of our business I don't want to lose sight of the success, we are having in the coal business.
Speaker Change: As you can see Q4 was another incredible quarter that capped off a truly exceptional year per barrel site.
Speaker Change: Thanks to our team for their relentless focus on our mission to serve patients.
Speaker Change: It is their hard work that sets us apart as we transform cancer care for patients around the world.
Speaker Change: This year, we are committed to continuing to deliver robust testing revenue growth as.
Speaker Change: As we execute on a number of key catalysts that will expand our reach both further along the patient journey and geographically.
Speaker Change: We look forward to sharing more details with you as we progress towards these goals.
Speaker Change: With that I will now turn to Rebecca to review our financial results for the fourth quarter and full year 2024, as well as our outlook for 2025.
Rebecca Chambers: Thanks, Mark as mentioned Q4 was a strong conclusion to 2024 as we delivered revenue of $118 6 million an increase of 21% over the prior year period. Further total volume grew to approximately 41000 tests, a 22% increase over the same period in 2023.
Rebecca Chambers: Testing revenue during the quarter was $112 $2 million, an increase of 24% year over year, driven by the cipher and afirma revenue growth of 44% and 4% respectively.
Speaker Change: Total testing volume was approximately 39100 tests testing ESP with approximately $2875, which included approximately $600000 of prior period collection.
Speaker Change: Adjusting for the impact in the quarter testing AFP would've been approximately $2850 up 4% compared with the prior year period.
Speaker Change: Turning to the product line fourth quarter volume was approximately 2200 tests and revenue was $3 million down 18% year over year as we continued to experience supply and manufacturing challenges, while also managing demand for protect now.
Speaker Change: Biopharmaceutical, another revenue was $3 $5 million down 17% year over year.
Speaker Change: Moving to gross margin and operating expenses I will highlight our non-GAAP results.
Speaker Change: non-GAAP gross margin was 69, 3% down approximately 130 basis points compared to the prior year period.
Speaker Change: Testing gross margin was 72, 3% down approximately 150 basis points due to the impact of approximately $4 million of lower prior period collections.
Speaker Change: Compared with the same period in 2023.
Speaker Change: Product gross margin was seven 3% down materially from the prior year period due to lower fixed cost absorption and manufacturing challenges biopharmaceutical and other gross margin was 26, 5% up nine 4% year over year.
Speaker Change: non-GAAP operating expenses were flat year over year at $57 9 million research and development expenses increased by <unk>.
Speaker Change: $2 million to $17 $4 million given personnel additions from our <unk> acquisition and increased development cost partially offset by the next CTX IBD technology access fee that was recognized in Q4 2023.
Speaker Change: Sales and marketing expenses increased by <unk> 2 million to $23 million G&A expenses were down <unk> 3 million to $17 $6 million driven by lower compensation expense, partially offset by infrastructure investment.
Speaker Change: Moving to profitability metrics, our financial profile continues to be best in class driven by our disciplined approach in the fourth quarter. We recorded GAAP net income of $5 $1 million and delivered adjusted EBITDA of $26 1 million or 22% of revenue full year 2024.
Speaker Change: At EBITDA margin was in line with our guidance of over 20% at 26%.
Speaker Change: We ended 2024 with $289 $4 million of cash and cash equivalents generating over $70 million of cash driven by $75 million of cash from operations.
Speaker Change: During the fourth quarter, we made an election to treat variscite SaaS as a disregarded entity for U S. Federal income tax purposes, resulting in a 356 million dollar worthless stock deduction.
Speaker Change: Given this our Q4 GAAP effective tax rate was minus 48, 5%.
Speaker Change: Our full year 2024 tax rate was six 2% and exiting 2024, our Nols available to offset U S. Future income now stands at more than $600 million.
Before moving to our outlook for 2025, I would like to provide you with additional information regarding the France business. Please.
Speaker Change: Please bear in mind that we are subject to a strict legal process until are somewhat limited in what we can share.
Speaker Change: Biopharma and other revenue now runs at about $2 million per quarter as does product revenue our fixed cost structure in France runs about seven.
Speaker Change: $7 million per quarter, and our net operating losses or approximately $5 million per quarter revenue could be negatively impacted anytime depending on our ability to continue servicing current customers, including through per cigarette production.
Meanwhile, our cost structure will be positively impacted in the future SaaS complete a sale to a potential purchaser or finalize these bankruptcy proceedings. The timing of these events could occur in different quarters or not at all.
Speaker Change: This year. We are currently estimating one time cost of up to $15 million going forward into 2026 and beyond if this goes ahead, we would see an improvement in our annualized profit of approximately $13 million.
Speaker Change: Looking ahead to 2025, given the dynamic nature of the situation with our French entity. Our guidance were a highlight testing revenue and total company adjusted EBITDA margin for the year.
Speaker Change: We are forecasting testing revenue of $470 million to $480 million or 12% to 15% year over year growth.
Speaker Change: As a reminder, and as we shared on our Q3 call. We made the difficult decision to pause offering the Nvidia CLIA test at the end of 2024.
Speaker Change: Adjusting for the approximately $6 million revenue impact testing growth would be 14% to 16%.
Speaker Change: For 2025, we are forecasting adjusted EBITDA margin to improve by approximately 100 basis points as we balance investment in organic revenue opportunities for long term growth with enhancing our already best in class financial profile, our guidance assumes 2025, GAAP and non-GAAP tax rate will be.
Speaker Change: In the mid to high single digits.
Speaker Change: Turning to the first quarter, we expect testing revenue to step down from Q4.
Speaker Change: Given afirma seasonality as well as lower product in Biopharma revenue with the annual reset of taxes and merit as is typical we expect Q1 adjusted EBITDA margin to be in the mid teens.
Speaker Change: Further due to standard first quarter personnel costs, we plan to use cash in Q1 before generating cash over the remainder of the year.
Speaker Change: In closing I am proud of the tremendous strides we've made in 2024 and together with the entire various a team committed to delivering to the strategic priorities. We set in 2025 and beyond further I am proud of this organization is focused on delivering what is best for all stakeholders, we do our best to balance of each and every day with.
Speaker Change: Patients as our purpose will now turn to the Q&A portion of the call.
Speaker Change: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: The interest of time, we ask that you. Please limit yourself to one question and one follow up please standby, while we compile the Q&A roster.
Speaker Change: Yes.
Okay.
Moderator: And our first question comes from Doug Schenkel with Wolfe Research. Your line is open.
Moderator: Good afternoon, everybody and thank you for taking my questions I have two and I will just rattle through both of them here and then I'll get back in the queue.
Moderator: The first is stay higher level question 2024 was a really strong year for the company.
Moderator: You said testing expectations for 2025, taking out all the adjustments at levels that I think we're well ahead of consensus expectations. So.
Moderator: In many ways you're in a position of strength in what is a tough environment for the broader market in the group.
Moderator: I'm just wondering mark if you would talk a little bit about how you balance the potential to maybe get more aggressive with either for further investment in growth and or capital deployment.
Moderator: With really the desire and the need in this environment to continue improving margin and cash flow. How are you balancing those those those options on those levers that you have to Paul So that's the first topic.
The second is for Rebecca Rebecca I think.
Speaker Change: The assumption for our firm our revenue growth is high single digit growth. This year I think that's what's embedded into guidance, assuming I have that right.
Speaker Change: Much has expanded LCD coverage versus pricing or other levers contributing to growth within our front within the Afirma franchise. This year. Thank you.
Great. Thanks, Doug appreciate the questions I'll take the first one Rebecca will take the second.
Speaker Change: So I appreciate you pointing pointing that out.
Speaker Change: 2024 has been an incredible year.
Speaker Change: It's clear, it's driven by our core testing business and the growth of decipher in Oklahoma in we've been signaling for quite a while now that both products have plenty of runway I cited the amount of.
Speaker Change: That kind of opportunity there is in the market to grow each further the opportunities to take share even though we're coming from a position of strength there and so we feel confident that those two businesses. The coal franchise bridges us to a long term growth drivers and we talk about three things that we're doing within the company.
Speaker Change: Including our international expansion on <unk> platform.
Speaker Change: Innovative tests like nasal swab and of course as you can imagine we're working on other things as well but.
Speaker Change: We're not ready to get into at this stage, but there's there's a lot of things that we're focused on as a company and yes, I think what you've seen us announce today with again another step in our kind of portfolio rationalization work.
Difficult decision rather than decision a recommendation or.
Speaker Change: Sure.
Speaker Change: The desire to look at the further investment in France, we have.
Speaker Change: Our continued portfolio process and.
Speaker Change: As a consequence stack.
Speaker Change: It goes ahead at some point that might create opportunity for us to invest in other ways and so this portfolio.
King process that we go through.
Speaker Change: Being key to create opportunity.
Speaker Change: So that we can focus our company and focus our team and focus our investment.
Speaker Change: In things that we think is going to drive a positive ROI for the company in the next few years.
Speaker Change: Five years, and even 10 years, so we think very long term and for our site.
And we're excited about the opportunities we have capital deployment is one lever we have.
Speaker Change: Well, obviously coming from a position of strength in terms of generating positive cash flow gives us even greater opportunity there. So.
Speaker Change: Let's first to do but right now our team is very very focused on the things that are right in front of US we have to get through this consultation period with France, we have to get launched we have to get metastatic loans.
Speaker Change: Doing things within the company to improve Cogs.
Speaker Change: There's a lot there's a lot in front of US right now all very positive things in one or two things that we just have to get through and let the dust settle.
Speaker Change: Absolutely and the other thing I would just that is the benefit of the structure of our P&L allows us to both enhance profitability over a multiyear period, while also investing for those growth drivers that Mark mentioned and others that have not yet been mentioned so we're pretty excited about.
Speaker Change: 24 results 2025 outlook and even beyond.
Speaker Change: All is headed in the right direction to that and Doug on your question on Afirma effectively yes, Youre correct guidance does contemplate high single digit growth for pharma.
Speaker Change: Given.
Speaker Change: Some of the.
Speaker Change: Given effectively the benefit of what we're seeing both competitively.
Speaker Change: Incidents growth as well as kind of share gains.
Speaker Change: Driving most of that through volume.
Speaker Change: There is not a huge tailwind assumed in the Afirma guide for the year.
Speaker Change: So I think we're good.
Going to kind of continuously play our playbook here for a firm that is continuously introducing product introductions.
Speaker Change: Whether thats your customer experience or new grid signatures et cetera.
Speaker Change: Get out there pounding the pavement share what we're doing and execute.
Speaker Change: <unk> execute as we have for that product for the last number of years now.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from Nathan <unk> with Stephens. Your line is open.
Speaker Change: Hey, guys. Thanks for the question I'll, just keep it to one here.
Speaker Change: When it comes to guidance could you give us.
Speaker Change: Some color around how youre thinking about metastatic revenue this year.
Speaker Change: You talked about the back half, but any incremental color around cadence or potentially the opportunity to pull that revenue forward. This year.
Speaker Change: Maybe makes them ill start and Rebecca can jump on in.
Speaker Change: In terms of the guidance, but a reminder for everybody. The metastatic indication is about 30000, new incidents of the year, which is about 10% of them the total market.
Speaker Change: We're very deliberate about it.
Speaker Change: <unk> language that around the second half of the year, we've still got work to do to get this launched.
Speaker Change: The hardest part about getting everything ready and approved is pretty much behind US now it's a lot of just blocking and tackling internally to get it done.
Speaker Change: And then.
Speaker Change: And we've got to go out to customers.
Speaker Change: And really talk about the benefit of this test for patients in that setting and so in that regard we are starting from ground zero and so you would.
Expect to ramp as our sales team to do that we also don't want to distract from a core.
Speaker Change: Localized business Thats been growing fantastically as well so how we meet either of those two things out and balance those two things is a really important part of the equation. So given that we've been very deliberate about this being more of an impact in the second half.
Speaker Change: Accelerating it wouldn't necessarily be in our best interest we are thinking about the long term doing it right launching it right getting it right and having the most success with that for the benefit of patients absolutely and on the guidance front, we have assumed a relatively small contribution given it'll be the first two quarters of launch for that 30000 patient population. So.
I think that there'll be upside to that potentially but I think.
Speaker Change: The bigger upside driver would be outperformance during the year and the core merit on the quarter decipher business.
Speaker Change: Obviously be a piece of it but I think given given our projections for where volumes coming from them where volume growth is coming from this year.
Speaker Change: Metastatic will be a multiyear growth driver more so than the second half of <unk>.
Speaker Change: Our 2025 growth driver Nathan if you don't mind, maybe perhaps we can go into some of the sequential trends for guidance for the year.
Speaker Change: Given the highlight of the second half.
Speaker Change: With metastatic that absolutely is the case as is typical we do you expect Q1 seasonality there's.
Speaker Change: Theres a couple of drivers to that one is a firm last year. Obviously, we saw a step down on Afirma, we're expecting something similar. This year also we are not having going to have the benefit of the <unk> revenue in the fourth and the first quarter, which was around $1 million in the fourth quarter and then.
Speaker Change: We did have.
Speaker Change: Little bit more weather so far this year than we have had in prior years. The reason I say this isn't because.
Speaker Change: That has impacted order trends on the contrary order trends are actually quite strong, but it has impacted effectively three days of samples getting to us and we'll make that up within the first half, but it depends on whether or not weather kind of strains out from here on out whether it would make it up in the first quarter or so so just want to make sure you all have the benefit of that information we're incredibly excited.
Speaker Change: What about this year for it is safer for Afirma for kind of the strategic long term growth drivers and what we're setting up for here. So don't want to have have some.
Speaker Change: Sequential trends be a surprise given those are effectively what we see every year.
Speaker Change: Got it thank you guys.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Puneet <unk> with Leerink partners. Your line is open.
puneet: Yes, hi, guys.
Speaker Change: For taking my questions.
First one just given the puts and takes on the NCS and first of all very strong.
Speaker Change: Herein decipher volumes, just wanted to understand and CCN.
Speaker Change: Contribution versus other factors that are contributing to that and how do you expect that to play out in 2025, you have the advanced table as well.
Speaker Change: And also in terms of.
Speaker Change: Overall, the penetration of decipher is a strong well established in the market. So just trying to understand.
Speaker Change: How should we think about decided for 2025 and decided for volume growth and longer term as well given the status of this product with the strong clinical evidence behind it in metastatic also hoping.
Speaker Change: Yes, Thanks, Brian you talked about the key point here is the evidence because the NCC and is really just.
Speaker Change: Kind of a manifestation of the great evidence.
Speaker Change: For our products and we have to decipher.
Speaker Change: I'll start by saying, obviously I appreciate the incredible amount of work that goes into the CCN process.
Speaker Change: But very hardworking individuals to spend time understanding the evidence.
Speaker Change: Yes.
Speaker Change: Making sure they can assimilate that evidence and provide guidelines that are in the best interest of patients.
Speaker Change: Very clear is end CCN has I think raise the bar and is very focused on Simon level, one evidence, whether it's level one level won't be.
Speaker Change: They've determined that the table thats in the guidelines would be tests that have level. One evidence on me and I think no.
Speaker Change: It's probably fair to say as an industry, we will strive to get to that level of robust evidence demonstration.
Speaker Change: And so yes, decipher is there and I think I think that would be doing a disservice to our team and our kols and Apis and collaborators.
By not calling out that that distinction and how important that is having said that.
When it comes to.
Speaker Change: For example, metastatic could be a good example of this when it comes to launching a new part of the test that doesn't have and CCN guidelines.
Speaker Change: We need to continue to generate the evidence to get that.
Speaker Change: And so I do think the guidelines are very important but.
Speaker Change: But as we demonstrated before we all had guidelines you can continue to grow and penetrate the market without they certainly help to I think step it up but really at the end of the day, what they do is they demonstrate.
Speaker Change: The test has incredibly robust evidence behind it with 85 publications peer reviewed publications to decipher.
Speaker Change: Be more pleased with how much evidence we've gotten we are continuing and we're not standing still we're continuing to generate evidence sort of at a very nice clip.
Speaker Change: That certainly helps to provide a tailwind continued tailwind for deciding I don't want to get specifically into guidance, you're going to see the testing guidance guide that we have we have guided to afirma.
And so the disciple volume is obviously, a part of that equation as well, yes, and the only other thing to help with that equation is effectively.
Speaker Change: Sorry.
<unk>.
Speaker Change: The plug if you will between Afirma and decipher and decided it doesn't necessarily grow that materially. So I think you can assume silos.
Roughly around the same level in 'twenty five as it wasn't plentiful.
Speaker Change: And then just a clarification question in terms of Prosigna is that just wanted to clarify.
Speaker Change: The biopharma products.
Speaker Change: Prosigna both of those will be obviously terminated.
Speaker Change: With.
Speaker Change: The French entity, just can you clarify what products will continue forward. It appears to the pharma and decipher are the only two commercial products at this point, but.
Speaker Change: I just want to make sure that alright. Thank you.
Speaker Change: Yes, Im glad you brought that up because I really do want to avoid confusion on this and so we want to be Crystal clear. One is there is no decision at this point.
Terminate or anything else at this point we are in consultation.
Speaker Change: And we're considering no longer funding French legal entity and assume that that operation.
Speaker Change: And that will impact as that goes.
Speaker Change: Either sell or bankruptcy process, it will impact all biopharma.
Speaker Change: And other revenues.
Speaker Change: Clearly.
Speaker Change: Yes.
Speaker Change: That's coming out of that entity, we do have a small amount of biopharma revenue that comes out of the U S on Steve, but thats neither handle there at this point in terms of.
Speaker Change: Getting into and I don't want to confuse the situation turning to Prosigna, though this is a really important point no. We fully expect to continue for Sigma.
Speaker Change: The encounter.
Speaker Change: As we mentioned before at some point, we will move that test to Ngls them, we do need to get our IBD or approval for that test.
Speaker Change: Encana and ultimately on Ngls.
Speaker Change: So it's important now that is being run out of all being manufactured by Marseille operation.
Speaker Change: So being able to continue that supply of Prosigna is dependent as I've said in the prepared remarks.
Speaker Change: Being able to find a buyer for all or part of that business. So we want to continue we want to make sure our customers have access to that test and that is top of mind for us right now so.
Speaker Change: So no. This is this doesn't ultimately affect the long term goal in the long term IBD strategy, we're committed to our IBD strategy. We are committed to getting tests. It makes sense into other markets, including first of Europe.
Speaker Change: And so this doesn't change that commitment.
Speaker Change: Changes I mentioned in the prepared remarks is our timelines for when we are able to get that certification and launch those tests and so we're going to have to revisit our development roadmaps that depending on how this process plays out.
Speaker Change: And then we will have we will have an update on those timelines when we've done that.
Speaker Change: Hopefully that.
Speaker Change: Clarifies the situation. If there is any remaining questions. Please do let me know.
Thank you. Our next question comes from Andrew Blackman with William Blair. Your line is open.
Speaker Change: Hi, everyone. This is Maggie buoy on for Andrew Thanks for taking our question maybe the first one on guidance could you talk about.
Speaker Change: You view, our potential upside lever for.
Speaker Change: <unk> in 2025.
Speaker Change: What type of area can meet the.
Speaker Change: Paul upside there thanks.
Speaker Change: Yes, I mean, it's been.
Speaker Change: I'd come from a couple of standpoints. So undecided. So one is the significant amount of white space opportunity. There is there in the market as we've talked about the.
Speaker Change: Test is only 40% penetrated coming into this year, we clearly have a lot of share there, but there. The key point there is the 60% that isn't penetrated and our goal is to drive molecular diagnostics and.
Speaker Change: Prostate cancer testing to 80% and clearly we'd like to size that would be the leader there. So yes that is.
Speaker Change: Is priority number one two and three and that's done through expanding the utilization within existing accounts as some by expanding into new accounts.
Speaker Change: It is also done by expanding into new indications like as I said earlier metastatic being a factor in kind of later in the year than earlier in the year the.
Speaker Change: The incidence is also growing sadly, which is an important point.
Speaker Change: And I think those are probably the key ones.
Speaker Change: The only other one I would add is typically at this point in time of the year, we don't have a ton of clarity on prior period collections and so.
Speaker Change: To the extent we see.
Speaker Change: A strong amount of those over the course of 2025 that could be upside as well.
Speaker Change: Got it. Thank you and then maybe just one on Nightingale.
Speaker Change: You continue to make progress on enrollment here with over 85% of the enrollment completed can you just talk about your view on the market opportunity here has there been any changes to that as you continue to make progress there.
Speaker Change: Yes, the market thanks for asking the market opportunity hasn't changed or at least our view of it hasn't it's still leading major cause of.
Speaker Change: Of cancer deaths in cancer in terms of lung cancer, Unfortunately, and it's a vast market plenty of opportunity to test utility.
Speaker Change: Validity has already been demonstrated.
Speaker Change: With respect to how it can actually help patients.
When determining classified patients into appropriate categories.
Speaker Change: 19, Gill will hopefully demonstrate and that's the key to it.
Speaker Change: It also is able to change practice.
Speaker Change: Patients will be treated differently, depending on whether they have a low intermediate high result, based on our nasal swab test.
Speaker Change: But there is a tremendous amount of work to get done to get to that point not only complete the enrollment.
Analyze the results.
Speaker Change: Great.
Speaker Change: The publication from those results and.
Speaker Change: Get reimbursement in place.
He said yes.
Speaker Change: Well, we will make sure reimbursement is in place before we launched the test and then we're off to the races.
So no nothing nothing has really changed with respect to our view of the market and the market opportunity for nasal swab. It all hinges on as it always has the clinical utility and us being able to demonstrate two nights ago and it's too early to say whether that will be the case or not.
Speaker Change: Step number one is continuing enrollment and follow up those patients and look at the data.
Speaker Change: Great. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Thank you.
Our next question comes from Lee with UBS. Your line is open.
Lee: Great. Thank you for taking my question.
Lee: Has been also I will keep it short I guess the first one on the cyber.
Lee: The math right it seems like the guidance assumed 25%.
Lee: Can I, just get a little bit more color on that and how much is coming from pricing assumed the majority is coming from volume.
Lee: Second on the MRP. It sounds like you already are you planning to submit a clinical assessment mode. He asks in the quarter.
Lee: I Wonder what is still kind of like the latest timeline, we can export from Maui reimbursement outcome and then.
Lee: The thing that.
Lee: All kind of like basis around government agency will impact the top line for the with Neil Thank you.
Lee: Yes. Thanks, So on your first question I think.
Lee: Higher than the guideline the guidance would suggest to decipher.
Lee: Again, if you think about our guidance that we provided just for Nvidia and lead you to a testing revenue growth of 14% to 16% net new this year and we said high single digits for pharma. So if you do that math, you get decided for somewhere in the low twenties, something like that so slightly lower than you.
Lee: You cited.
Lee: That's a volume if we think about it right now that's a volume.
Speaker Change: But more than anything else, given and Rebecca feel free to jump in here. If you guys think about that given we had a lot of onetime.
Speaker Change: Collections last year, we had a big player in the early part of last year that is now nicely embedded in the numbers.
Speaker Change: So think of it that way for decipher on MLD.
Speaker Change: Sure.
Speaker Change: The reimbursement.
Speaker Change: And with that this quarter.
Speaker Change: And then yes case of.
Speaker Change: Completing everything we need to do in a lab automation et cetera, getting the test launched and then reimbursement should flow and with regard to your question around.
Speaker Change: Federal agencies and will that have an impact theres always a chance I don't think any of us know really what the impact on the types of decisions that are going on will be that being said we are in active engagement with mol Dx.
Speaker Change: Another reimbursement questions and haven't seen any change in their in their posture or their engagement. So we would hope that this would progresses as planned but.
Speaker Change: Obviously, there's always a tail risk sort of these sort of Thanksgiving the dynamic of the situation.
Speaker Change: Thank you.
Sung Nam: Thank you. Our next question comes from sung <unk> Nam with Scotiabank. Your line is open.
Speaker Change: Hey, this is Cory rosenbaum for sung <unk>, thanks for taking my questions.
Speaker Change: We're continuing to strengthen your clinical evidence for decipher bladder, including a recent study published in European Urology Open Science do you see the prognostic and.
Speaker Change: And predictive use cases.
Speaker Change: Cyber bladder is largely distinct from the <unk> that's under development.
Speaker Change: And do you think there could be a significant opportunity to use both paths concurrently.
Speaker Change: Yes.
Speaker Change: So the first part of your question, we do see it as the things obviously the MLP test has now become our most important priority in bladder for muscle invasive bladder cancer.
Speaker Change: But that has a very distinct use case.
For patients who've been treated.
Speaker Change: In terms of the prognostic test itself clearly, it's another opportunity to drive more into the channel.
Speaker Change: Investment in the clinical utility.
Speaker Change: More studies like the ones you mentioned.
Speaker Change: That will be part of our roadmap over time Im sure, but its not the immediate priority right now but of course you have the more we can continue to serve the urologists.
Speaker Change: Sure.
Speaker Change: <unk>.
Speaker Change: Their offices.
Speaker Change: The more we will do that as long as we see it as a.
Speaker Change: The cost of creating these studies is offset by the revenue opportunity in the future.
Speaker Change: Yeah.
Got it thanks for the insight and again on MLD.
Speaker Change: Given the sensitivity advantage do you expect from the CTO that's deeply.
Speaker Change: Do you believe that the test will be viable potentially in the non muscle invasive market as well for bladder cancer.
Speaker Change: Essentially I mean, it's a platform right and you've talked about the sensitivity of it and the whole genome approach that we take for every sample, including just not just the initial sample but.
Speaker Change: The serial testing samples. We think is unique helps improve the performance of the test and optimize performance as measured by detection earlier than imaging.
Speaker Change: And so that we can we believe that that test will have multiple applications and multiple cancers.
Speaker Change: Muscle invasive bladder cancer is current focus whether it can be utilized in other blood cancers in non muscle invasive.
Speaker Change: Maybe but I wouldn't be in my mind that wouldn't necessarily be the first place we would go.
Speaker Change: We can say that the larger market opportunity I think there are larger opportunities where we currently have channel.
Speaker Change: And serve customers, who will have well.
Speaker Change: Where we could launch that platform.
Speaker Change: We're not ready to actually get the detailed roadmap yet, but you can imagine if anything is in play where there's a utility opportunity for MRV.
Speaker Change: Got it thanks for taking my questions.
Speaker Change: Well thank.
Speaker Change: Thank you.
Speaker Change: Our next question comes from <unk> <unk> with Guggenheim Securities. Your line is open.
Speaker Change: Hey, guys. Thank you for taking my questions coming into 2025, what is your commercial head count.
Speaker Change: Meaning what is the proportional mix of focused by product and where do you land would you expect to build out mode over the course of the yard. That's question one question two.
Speaker Change: That in the long term outlook for <unk> to the extent that is interested in using the digital pathology complement to your existing assays.
Speaker Change: Are you positioned to bring something to market.
Speaker Change: Yes, So let me just quickly address the head count question, because one thing Thats been really I think important for both at the site from a pharma franchises, we've got tremendous leverage in our sales team. So we haven't added significant number of sales heads.
Speaker Change: Single digits over each year, and I don't see that changing going forward.
Speaker Change: Given.
Speaker Change: The current opportunities we have for both tests.
Speaker Change: Both market penetration and share.
Speaker Change: And I think it's roughly 50 50 heads.
Speaker Change: And decide for a little bit more.
Speaker Change: So in terms of the digital pathology I think the important thing to think about there is some of the studies that we've seen so far.
Speaker Change: Really don't demonstrate.
Speaker Change: The digital pathology is.
Speaker Change: Any better than and then some.
Speaker Change: Some cases actually not performing as well as the genomic test I think the reason for that is the kind of focus on different biology different parts of the biology.
Speaker Change: So looking at different things and consequently, there is not a great deal of correlation there.
Speaker Change: So if anything we see maybe a complementary opportunity in the future.
Speaker Change: We do see the opportunity to be and you can imagine we watch it very very closely.
Speaker Change: We couldnt be better positioned.
Speaker Change: And the reason I say that as we have.
Speaker Change: Hundreds of thousands of samples tissue samples.
Speaker Change: We've already scanned in our lab over 50000 samples across more than 30000 patients and the vast vast majority of those have clinical outcomes and so.
Speaker Change: The richness of our data and remember the richness comes from us.
Speaker Change: Being able to run a whole transcriptome and every case that gives us rich genomic data.
Speaker Change: <unk> scanning so we would have as rich.
Speaker Change: Digital pathology data with anybody else would have and then we have incredible AI capabilities already within our company. It's not like we have to go out and build or buy that we already have that and so without richness of data.
Speaker Change: We could we could do whatever analysis, we need to do and publish on that.
Speaker Change: Again, it would be a question of the priorities, we have lots of things to do right now, which we think have a better.
Speaker Change: Some priority and opportunity for the company.
Speaker Change: But.
Speaker Change: Bear in mind, we always have this in our back pocket to the extent, we need it and we will continue to do research in foundry and fund research or support research.
Speaker Change: The luxe as the opportunities for digital pathology in AI in all markets not just in prostate.
Speaker Change: We'll always stay ahead of the curve.
Thank you Paul.
Speaker Change: I'll hop back into queue. Thank you.
Speaker Change: Thanks.
Speaker Change: Thank you our.
Speaker Change: Our next question comes from Joseph.
Speaker Change: Josh <unk> with Morgan Stanley Your line is open.
Speaker Change: Hello. This is Hugo on the call for T cells. Thank you for taking our questions.
Speaker Change: Some of our current players in the emerging market are now pursuing both tumor informed and tumor nave approaches.
Speaker Change: Or your thoughts on the direction of travel in MRV in could we see you pursue both options down the road and then more important.
Speaker Change: Do you think that physician preference.
Where each approach is preferred in certain cancer types versus one size fits all approach.
Speaker Change: Yes, it's a great question, because we think about that.
Speaker Change: In a nutshell I do believe that our MLD approach with whole genome in particular lends itself very well to all the research and studies, we would need to do to demonstrate validity and tumor nave, but I think at this point and where we are in the market. Our view is tumor informed where you have tissue obviously.
Speaker Change: Is by far the better performing test cumulated comes into its own where you don't have tissue to get to tissue et cetera, but right now for the vast majority of the market you do have tissue you have enough of it you don't need.
Speaker Change: You don't need a lot to do that initial sequence.
Speaker Change: And with a whole genome approach.
Speaker Change: It is by far the best approach, but as I say it does lend itself to the studies, we need to do to support accumulate even in the future and I do think the.
Speaker Change: Both will be offered whether a physician preference, although I think it's a little it's a little early for me to say, yes, I don't have the data to suggest one way or the other one that certainly we could get that.
Speaker Change: But I think it's going to come down to a number of factors I think what's most important as.
Speaker Change: A company like us that has the platform to be able to support whatever paradigm.
Speaker Change: Make most sense for the patient and the physician in the future and it's hard for me to imagine a world where.
Speaker Change: We're not only thinking about whole genome approach is five to 10 years from now.
Speaker Change: I think whole genome is absolutely the way to go because it does support those kinds of stuff.
Speaker Change: Studies and products product enhancements and expansions.
Speaker Change: Great that was helpful color. Thank you for that.
Speaker Change: And then my follow up question.
Speaker Change: Given the unique approach that you're taking in our merger with <unk> do you think that you'll have an opportunity to file for a DLT status is that something you may pursue.
Speaker Change: It depends obviously for muscle invasive bladder cancer. The answer is no we don't need to right. So we are where we are right now.
Speaker Change: There is an LCD and we're going to be able to just get to the market as soon as we can with that approach.
Speaker Change: <unk> is a unique situations and if there are unique situations, where a DLT makes sense then it is open to us to do.
Speaker Change: It is to anybody else.
Speaker Change: But.
Speaker Change: So I don't think I would build a.
Speaker Change: <unk> around <unk>, our strategy is built around can.
Speaker Change: Can we get at the test reimbursed at an appropriate level given the number of sequences you have to do.
And there are some things as an industry I think we need to evolve.
In terms of how <unk> priced MLD is the paradigm that hasnt been contemplated.
Speaker Change: When all of these.
Speaker Change: Coverage determinations, we put in place.
Speaker Change: And so theres, some evolution that needs to happen there but.
With that said I think we'll build on our strategy around getting the tests launched with the appropriate pricing managing our cogs to a level, where we feel that the test is able to perform with an appropriate level of gross margin.
Speaker Change: Great. Thank you.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Mike Matson with Needham <unk> Company. Your line is open.
Speaker Change: Hey, everyone. This is Joseph on for Mike.
Speaker Change: I guess under safer.
Speaker Change: A lot of levers of growth there.
Speaker Change: Indication expansion, obviously the market in general, but maybe just to focus on.
Speaker Change: Share gains in the market from your competitors can you maybe just talk about the big picture of what that looks like for you guys. As it is a more individually with your sales force going in converting people directly or do you think a lot of it is more passively driven from clinicians seeing stuff.
Speaker Change: The CCN recommendation and just the.
Speaker Change: Division between your competitors in terms of the clinical evidence and then if I could just ask a follow up.
Speaker Change: Afirma grid I was just kind of curious if you could give any metrics there maybe compare it to the safer grid.
Speaker Change: I guess at the same proportion kind of opting for that I believe you said it was somewhere around 1% one in every two physicians through decipher grid.
Speaker Change: Yes, thanks for taking my questions.
Speaker Change: Yes.
Speaker Change:
Speaker Change: Yeah happy to so maybe I'll just go to the grid one first.
Speaker Change: Remember the exact metrics you're right it was wanting to for.
Speaker Change: Decide for lymphoma was roughly around roughly around the same maybe 30% to 50% would be a reasonable estimates that the uptake has been.
Speaker Change: Has been pretty decent so far.
Speaker Change: In terms of the.
Speaker Change: Decipher in share.
Speaker Change: You can't really separate sales team going out and blocking and tackling from what you described as the passive.
Speaker Change: Reaction or response from Kols, because this kind of the sales team will highlight to the.
Speaker Change: The physician data is the extent of evidence that exists and what it means and why it's important including the NCC guidelines. So we take a step back all of this comes from robust evidence.
Speaker Change: With robust evidence, which in our view starts with a whole transcriptome approach that drives a lot of studies. Both studies, though we funded support to study. So we aren't even remotely involved in that just get done with decipher given how how much real world data there exists for the test.
Speaker Change: And so we see we see are.
Speaker Change: A lot of studies being completed.
Speaker Change: Our sales reps bring those to the physicians attention.
Speaker Change: Obviously pay more attention to those studies and others, saying, obviously those studies resulted in CCN guidelines. They result in things like level, one evidence, which then result in guidelines and and that again that's.
Speaker Change: One factor to sway some physicians not all but some I think when you put it all together, it's the blended effect of all of these things.
Speaker Change: It's really driven decisive success in both RP and.
Speaker Change: Biopsy.
Speaker Change: I couldnt be more excited with the growth we've seen across all end CCN categories.
Speaker Change: I think that just demonstrates how decipher is really.
Speaker Change: Covering the whole care continuum, and once we had metastatic im truly will be able to see the whole care continuum.
Speaker Change: For the cycle or the whole risk risk stratification for the site for patients.
Speaker Change: Hard to say.
Speaker Change: It's all of that just.
Speaker Change: It's giving our sales reps incredible.
Speaker Change: Information to share with physicians.
And have a good reason to go out and do that.
Matt: Thank you. Our next question comes from Matt <unk> with Goldman Sachs. Your line is open.
Speaker Change: Hey, guys. This is <unk> on for Matt.
Speaker Change: I have one question that's a two parter so building off of <unk> question earlier is it possible to quantify the benefit of NCC and guideline inclusion for a given test in terms of adoption insurance reimbursement and competitive positioning and then my second part is as you enter new indications given your <unk> guide.
Speaker Change: Align inclusion for decipher prostate does this increase the likelihood that future tests, you may develop where get included in guidelines.
Speaker Change: Yes, I appreciate the questions, it's not possible to quantify the benefit of Ns CCM, because theyre just part of a whole package of positive.
Speaker Change: Indicators that really support the use of the test for patients.
Speaker Change: Obviously, it's helpful. It incredibly valuable.
Speaker Change: But you can literally take it apart and figure out which decides for tests would've been utilized with or without <unk> guidelines.
Speaker Change: And I don't think <unk> actually helps us.
Speaker Change: The starting point of our level playing field when it comes to new indications.
Speaker Change: And different indications as well.
Speaker Change: For different cancer types.
Speaker Change: So a good example of that is metastatic <unk>.
Speaker Change: <unk> guidelines for metastatic is going to be based on the peer reviewed publications what level of evidence when you get the assignment level, one evidence which is the new threshold.
Speaker Change: And we're going to have to get there over time same with a new indication and a new cancer types. So no I don't think it helps you there at all I.
Speaker Change: I do think that knowing what it takes to.
Speaker Change: And having the engine in the company to support and create that level of evidence.
Speaker Change: Have those strong robust studies with scientific rigor behind them.
Speaker Change: Get them through peer reviewed publications those are all factors that help you.
Speaker Change: This kind of recognition that we're getting from NCC.
Speaker Change: And so yes, there is a competitive advantage to having done it before but but that's how I would characterize it.
Speaker Change: Thank you. This concludes our question and answer session and today's conference call. Thank.
Speaker Change: Thank you for participating you may now disconnect.
Speaker Change: Okay.
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