Q4 2024 Fulgent Genetics Inc Earnings Call

Operator: Greetings and welcome to the Fulgent Genetics Q4 2024 conference call and webcast. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad.

Greetings and welcome to the Fulton Genetics, Q4, 2024 conference call and webcast at this time all participants are in a listen only mode.

I didn't want you require operator assistance. Please press star zero on your telephone keypad.

Operator: A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star 1 on your telephone keypad. As a reminder, this conference is being recorded.

A question answer session will follow the formal presentation human replaces the question queue at any time by pressing star one on your telephone keypad.

Melanie Solomon: As a reminder, this conference is being recorded its now my pleasure to turn the call over to your host Melanie Solomon Investor Relations. Please go ahead.

Melanie Solomon: It's now my pleasure to turn the call over to your host, Melanie Solomon, Investor Relations. Please go ahead. Thanks, Kevin.

Melanie: Thanks, Kevin.

Melanie Solomon: Good morning and welcome to the Fulgent fourth quarter and full year 2024 Financial Results Conference call.

Melanie: Good morning, and welcome to the Fulgent fourth quarter and full year 2024 financial results conference call on the call today are many Shea Chief Executive Officer, Paul Kim Chief Financial Officer, and Brandon <unk>, Chief Commercial officer.

Melanie Solomon: On the call today are Ming Hsieh, Chief Executive Officer, Paul Kim, Chief Financial Officer, and Brandon Perthuis, Chief Commercial Officer. The company's press release discussing the financial results is available on the Investor Relations section of the company's website, ir.fulgentgenetics.com. A replay of this call will be available shortly after the call concludes on the Investor Relations section of the company's website.

Melanie: The company's press release discussing our financial results is available on the Investor Relations section of the company's website IR jobs genetics Dotcom I read.

Melanie: This call will be available shortly after the call concludes or in the Investor Relations section of the company's website.

Melanie Solomon: Management's prepared remarks and answers to your questions on today's call will contain forward-looking statements. These forward-looking statements represent management's estimates based on current views, expectations, and assumptions, which may prove to be incorrect. As a result, matters discussed in any forward-looking statements are subject to risks, uncertainties, and changes in circumstances that may cause actual results to differ from those described in the forward-looking statements. Company assumes no obligation to update any of the forward-looking statements it may make today to reflect actual results or changes in expectations.

Melanie: Management's prepared remarks and answers to your questions on today's call will contain forward looking statements. These forward looking statements represent managements estimates based on current views expectations and assumptions, which may prove to be incorrect.

Melanie: As a result matters discussed in any forward looking statements are subject to risks uncertainties and changes in circumstances that may cause actual results to differ from those described in the forward looking statements.

Melanie: Company assumes no obligation to update any of the forward looking statements. It may make today to reflect actual results or changes in expectation listeners should not rely on any forward looking statements as predictions of future events and should listen to management's remarks today with the understanding that actual events, including the company's actual future results may be materially different than what is described in or.

Melanie Solomon: Listeners should not rely on any forward-looking statements' predictions of future events and should listen to management's remarks today with the understanding that actual events, including the company's actual future results, may be materially different than what is described in or implied by these forward-looking statements.

Melanie: These forward looking statements.

Melanie Solomon: Please review the more detailed discussions related to these four looking statements, including the discussions of some of the risk factors that may cause results to differ from those described in the four looking statements contained in the company's filings with the Securities and Exchange Commission, including the previously filed 10-K for the year ended December 31st, 2023, and subsequently filed reports which are available on the company's investor relations website.

Melanie: Please review the more detailed discussions related to these forward looking statements, including a discussion of some of the risk factors that may cause results to differ from those described in the forward looking statements contained in the company's filings with the Securities and Exchange Commission, including the previously filed 10-K for the year ended December 31st 2023, and subsequently filed reports which are available on the company's.

Melanie: Investor Relations website.

Melanie Solomon: Management's prepared remarks, including discussions of earnings and earnings per share, contain financial measures not prepared in accordance with accounting principles generally accepted in the United States or GAAP. Management has presented these non-GAAP financial measures because it believes they may be useful to investors for various reasons, but these measures should not be viewed as a substitute for or superior to the company's financial results prepared in accordance with GAAP. Please see the company's press release discussing its financial results for the fourth quarter and full year 2024 for more information, including the description of how the company calculates non-GAAP income or loss, earnings or loss per share, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating profit or loss and margin, and adjusted EBITDA.

Melanie: Management's prepared remarks, including discussions of earnings and earnings per share.

Melanie: Financial measures not prepared in accordance with accounting principles generally accepted in the United States or GAAP management has presented these non-GAAP financial measures because it believes they may be useful to investors for various reasons that these measures should not be viewed as a substitute for or superior to the company's financial results prepared in accordance with GAAP.

Melanie: Please see the company's press release discussing its financial results for the fourth quarter and full year 'twenty 'twenty four for more information, including the description of how the company calculates non-GAAP income or loss earnings or loss per share non-GAAP gross profit non-GAAP gross margin non-GAAP operating profit or loss in margin and adjusted EBITDA.

Melanie Solomon: And a reconciliation of these financial measures to income or loss, earnings or loss per share, and operating margins. The most directly comparable gap financial measure.

Melanie: A reconciliation of these financial measures to income or loss earnings or loss per share and operating margin. The most directly comparable GAAP financial measures.

Ming Hsieh: With that, I'd now like to call over to Ming. Thank you, Melanie. Good morning, and thank you for joining our call today. I will start with some comments on the fiscal year 2024 and our two business lines.

With that I would now like to start the call over to Nick.

Nick: Thank you Manny good morning, and thank you for joining our call today.

Nick: I will start with some comments on the fiscal year 2024, and our two business lines and Brendan will review our product and go to market updates for our laboratory services business in the fourth quarter and 2024 and the poll will come.

Brandon Perthuis: Then Brandon will review our product and go-to-market updates for our Laboratory Service Business in the fourth quarter and 2024.

Ming Hsieh: And Paul will conclude with the financials and outlook before we take your questions. We are pleased with our results for the fourth quarter and the year. We have shown growth in laboratory service business for the year and we have good momentum in 2025 as we continue to invest in business. In our therapeutic development business, we now have a clinical pipeline. In 2024, we begin a phase 2 clinical trial of FID-07 in combination with cytoxamine in patients with recurrent or metastatic head and neck cytoplasm cell carcinoma. So far, we have dosed 17 patients in this trial and are very encouraged by the preliminary results, which we intend to publish at the upcoming ASCO meeting in June.

Nick: Hulu is the financials and outlook before we take your questions.

Nick: We are pleased so as a result for the fourth quarter and the year.

Nick: I was shown growth in laboratory services businesses for the year and a half.

Nick: Good momentum in 2025.

Nick: We continue to invest in business.

Nick: You know our therapeutic if you want them busy we now have a critical pipeline in 2020 before we begin a phase two clinical trial of I V O seven in combination with cetuximab in patients with recurrent or metastatic head and neck squamous.

So carcinoma.

Nick: So far we have with those 17 patients in this trial and where we encourage you to buy the premium the results, which we intent to publish.

Nick: The upcoming <unk> meeting in June.

Ming Hsieh: We expect to complete enrollment up to 46 patients by late 2025. We'll continue to estimate the total Clinical Trial Cost for the Phase II trial to be approximately $10 million. Our second clinical candidate is FID-022, a nano-encapsulated SN38 for the treatment of solid tumors, including potentially colon, pancreatic, ovarian, and bile duct cancers. We submit an investigational new drug application to US FDA in December 2024. And it was cleared in January 2025. We expect to enroll the first patient in a phase one trial. In the second quarter of 2025, we expect the trial cost for the Phase I and I B trial is approximately $8 million.

Nick: We expect to complete enrollment of up to 46 patients but.

Nick: Late 2025, we will continue.

Nick: Absolutely the total.

Nick: Clinical trial costs for the phase two trial to be approximate $10 million.

Our second clinical Kenzie is F. I D 022, and nano in capsid Sn 38 for the treatment of solid tumors, including potentially colon pancreatic and ovarian cancers.

Nick: We submitted an investigational new drug application to U S. EBITDA in December 2024, and it was cleared in January 2025, we expect to enroll the first patient in.

Nick: The phase one trial.

Nick: In the second quarter of 2025.

Nick: We expect the trial calls for the phase one now.

Nick: And the one B trial is approximately $8 million.

Ming Hsieh: As a reminder, Our drug candidates were formulated with our novel nano-encapsulation technology, which includes many issued active patent and active patent applications. And the target therapy platform designed to improve therapeutic windows and the pharmacokinetics profile of both new and existing cancer drugs. I'm excited about the progress we're making in our clinical pipeline and the potential for both FID 07 and FID 022. We are targeting heavily pre-treated patients with a few options left, and I hope we will be able to provide additional treatment options to further their life. Our anticipated cost for this program is very reasonable, and we believe our investment will be rewarded.

Nick: As a reminder.

Nick: Our drug candidates, who were formerly with our novel Nano encapsulation technology, which includes mainly issued active patents and the patent applications and the targeted therapies that are from design to improve therapeutic windows and the pharmacokinetics profile.

Nick: Both new and existing cancer drugs.

Nick: I'm excited about the progress, we're making in our clinical pipeline and the potential for both I D O seven and if I D 022.

Nick: We are heavily pre treated patients with few options left and I hope, we will be able to provide additional treatment options to further their life.

Nick: He used to be the cause for this program is what are reasonable and there will be a reimbursement will be rewarded.

Ming Hsieh: Finally, we have made a significant advance in the development of antibody drug conjugates using our novel patent linker and payload platform technology. In preclinical study, we observed our ADC have better efficacy over various tumors with a broad range of targeting antigens expression level when compared with some of the upper ADC benchmarks on the market. At the same time, ADC honing a novel target using our novel platform technology are also being prepared for the goal of generally leading can. Candidates for the similar trial. Overall, I'm pleased with the growth we have seen year over year in our core laboratory services business and the progress we have made with our therapeutic development business.

Nick: Finally, we have made a significant at once and in the development of antibody drug conjugates using.

Nick: Novel patent linker and payload platform technology.

Nick: In preclinical studies.

Nick: We absorbed our AUC better efficacy over whereas tumors with a broad range of targeting energy's expression level when compared with some of the.

Nick: IDC benchmarks on the market at the same time.

Nick: ADC horny, a novel targets using our novel platform technology are also being prepared for the go over generally leading tech.

Nick: I was trying to do for the clinical trials.

Nick: Overall I'm pleased with the growth we have seen.

Nick: Year over year in our core laboratory services business and the progress we have made with our therapeutic development business.

Ming Hsieh: will continue to be in a strong financial position to execute our strategy.

Nick: Seems to be in a strong financial position to execute our strategy.

Ming Hsieh: I would like to thank our employees, partners, and the stakeholders for your hard work and loyalty in a great year for our business. We look forward to further progress in 2025.

I would like to thank our employees partners and stakeholders for your hard work and loyalty and great year for our business. We look forward to further progress in 2025.

Brandon Perthuis: I will now turn the call over to Brandon Perthuis, our Chief Commercial Officer, to talk more about our laboratory services business. Thanks, Ming. It was another strong quarter for Fulgent and a strong close to the year, delivering fourth quarter growth of 14% year over year and 6% growth sequentially, in addition to slightly exceeding our annual core revenue guidance of $280 million. Throughout the year, we executed on both the commercial and operational front.

Nick: I'll now turn the call over to Brendan <unk>, our Chief commercial officer to talk more on part of our laboratory service businesses.

Nick: Brendan.

Brendan: It was another strong quarter for Fulgent and a strong close to the year delivering fourth quarter growth of 14% year over year and 6% growth sequentially. In addition to slightly exceeding our annual core revenue guidance of $280 million.

Brendan: Throughout the year, we executed on both the commercial and operational front.

Brandon Perthuis: I'll discuss each as we break down and reflect on our three business areas within laboratory services. First, anatomic pathology had a great quarter, growing sequentially 9% as a result of our revised go-to-market plan. We believe that quarterly growth outpaced the market. We did scale the sales team throughout the year and plan to continue to do so in 2025. This team was successful in driving new business by taking our excellent turnaround time and quality to physician clients who are not receiving the same level of service from their previous labs. To put it in perspective, it was not uncommon for our sales team to uncover accounts who were receiving 2-3 week turnaround time from another lab while we were delivering 2-3 day turnaround time.

Brendan: I'll discuss each as we break down and reflect on our three business areas within laboratory services.

Brendan: First anatomic pathology had a great quarter growing sequentially, 9% as a result of our revised go to market plan. We believe this quarterly growth outpaced the market.

Brendan: We did scale the sales team throughout the year and plans to continue to do so in 2025.

Brendan: This team was successful in driving new business by taking our excellent turnaround time in quality to physician clients, who are not receiving the same level of surgeon from their previous lab.

Brendan: To put it in perspective, it was not uncommon for our sales teams to uncover account, we're receiving two to three week turnaround time from another lab, while we were delivering two to three day turnaround time.

Brandon Perthuis: Our sales team has built a robust pipeline of opportunities, which we believe will lead to continued momentum.

Brendan: Our sales team has built a robust pipeline of opportunities, which we believe will lead to continued momentum in.

Brandon Perthuis: In addition, we took several steps throughout the year to improve operational efficiency, including relocating our lab to our recently purchased building in Capell, Texas, and consolidating our New York lab into the Capell operation. Overall, we're pleased with the performance of our AP business and are optimistic about its future.

Brendan: In addition, we took several steps throughout the year to improve operational efficiency, including relocating our lab to our recently purchased building and Capella Texted and consolidating our New York lab into the Capella operation.

Brendan: Overall, we're pleased with the performance of our AP business and are optimistic about its future.

Brandon Perthuis: Turning to Precision Diagnostics, this area continues to expand, delivering fourth quarter growth of 23% year-over-year, while flat-sequential growth continues to grow. Equivalent performance was in large part due to the timing of several new client wins that were pushed into early 2025. Reproductive health outpaced some of our other tests due to the market adoption of our Beacon Expanded Care screening product. Even with the strong growth in Beacon, we consistently delivered on our turnaround time and maintained exceptional quality. This is a true testament to our technology platform and operational excellence.

Brendan: Turning to precision diagnostics. This area continues to expand delivering fourth quarter growth of 23% year over year, while flat sequentially.

Brendan: This is of course the performance was in large part due to the timing of several new client wins that were pushed into early 2025.

Brendan: Reproductive health outpace some of our other test due to the market adoption of our beacon expanded carrier screening product.

Brendan: Even with the strong growth and began we consistently delivered on our turnaround times and maintained exceptional quality.

Brendan: As a true Testament to our technology platform and operational excellence.

Brandon Perthuis: We also recently launched a significant new product, Exome and Genome RISE. R-I-S-E stands for RNA Integrated Sequencing Evaluation. With this service, we are co-analyzing the DNA and RNA, which could potentially increase diagnostic yield by as much as 30%. Integrating DNA-centric and RNA-centric analysis maximizes diagnostic utility by assessing the RNA-level impact of coding regions, splice-like changes, and variants in non-coding regulatory regions of phenotypically relevant target genes. This is a significant improvement, and it's the first major advancement in exome and genome testing in several years. Our rollout has seen significant interest from clients, and we believe this may be a paradigm shift in how we diagnose rare disease.

Brendan: We also recently launched a significant new product exome and genome Ray R. I S E. Stanford RNA integrated sequencing evaluation.

Brendan: With this service we are co analyzing the DNA and RNA, which could potentially increase diagnostic yield by as much at 30%.

Brendan: Integrating DNA centric and RNA centric analysis maximizes diagnostic utility by assessing the RNA level impact of coding regions splice site changes and variant and non coding regulatory region up you know typically relevant target genes.

Brendan: This is a significant improvement in is the first major advancement in exome and genome testing in several years.

Brendan: Our rollout has been significant interest from clients and we believe it may be a paradigm shift in how we diagnosed rare disease.

Brandon Perthuis: Our newly launched novel NIPT test, NOVA, is performing well with our early adopters. Clinicians are realizing the value of a test that combines antipoies, microdeletions, and de novo point mutations, leading to higher detection rates for severe genetic conditions. The focus in 2025 will be to build out the sales team to create additional awareness and demand.

Brendan: Our newly launched novel in ITT to Nova is performing well with our early adopters.

Brendan: In terms of realizing the value of a test that combine antibodies micro deletion and de Novo point mutation, leading to higher detection rate for severe genetic condition.

Brendan: Focus in 2025 will be to build out the sales team to create additional awareness and demand.

Brandon Perthuis: Within our Precision Diagnostics phase, we recently announced a very exciting new partnership with Foundation Medicine. Via this new partnership, Foundation Medicine will be launching two tests. Foundation One Germline and Foundation One Germline More. Both tests are powered by Folger's proprietary technology platform and analyze single nucleotide and copy number variants. When combining the Foundation Medicine's Comprehensive Genomic Profiling Tests, Foundation 1 CDX, Foundation 1 Liquid CDX, Foundation 1 Heme, and Foundation 1 RNA, germline testing supports healthcare providers in building a more comprehensive molecular profile for their patients. Foundation Medicine is one of the largest providers for tumor profiling services and we are excited to partner with them to bring these germline tests to market.

Brendan: Within our precision diagnostic space, we recently announced a very exciting new partnership with Foundation medicine.

Speaker Change: This new partnership Foundation medicine will be launching two test.

Brendan: Foundation, one Germline and foundation that one's Drumline more.

Brendan: Both tests are powered by <unk> proprietary technology platform and analyzed single nucleotide and copy number variance.

Brendan: When combining the foundation medicine's comprehensive genomic profiling Test Foundation, one PDF Foundation, one liquid Pdx Foundation, one heme and foundation, one RNA Germline testing support health care providers and building a more comprehensive molecular profile for their patient.

Brendan: Foundation Medicine is one of the largest providers for tumor profiling services and we are excited to partner with them to bring these germline test the market.

Brandon Perthuis: Foundation Medicine plans to begin accepting orders for these tests in March.

Brendan: Foundation Medicine plans to begin accepting orders for these tests in March.

Brandon Perthuis: This is the second partnership we have launched for germline oncology testing after previously announcing the large win with the VA hospital. We are optimistic these wins can be transformational for oncology volumes.

Brendan: This is the second partnership we have launched for Germline oncology testing after previously announcing a large win with the VA hospitals.

Brendan: We are optimistic these wins can be transformational for oncology volume.

Brandon Perthuis: Our biopharma services had an excellent quarter, delivering 56% growth quarter over quarter, going from $3.9 million in the third quarter to $6.1 million in the fourth quarter. As we mentioned in previous calls, our capabilities at Biopharma Services have drastically expanded, allowing us to address many more client research studies. These capabilities include high-demand services such as proteomics, transcriptomics, spatial biology, and more. While we still see some large swings quarter to quarter in this business, it is our hope that in the near future we can hit a steadier state of growth, leveraging an expanded client base and pipeline of opportunities.

Brendan: Our Biopharma services had an excellent quarter, delivering 56% growth quarter over quarter going from $3 $9 million in the third quarter to $6 $1 million in the fourth quarter as we've mentioned in previous calls our capability Biopharma services have drastically expanded allowing us to address many more clients.

Brendan: Research studies.

Brendan: These capabilities include high demand services, such as proteomics transplant, Dominic spatial biology and more.

Brendan: You'll see some large swings quarter to quarter in this business. It is our hope that in the near future. We can hit a steadier state of growth leveraging and expanding client base and pipeline of opportunities.

Brandon Perthuis: In closing, we are pleased with our performance in both the fourth quarter and the year. The growth we witnessed this year was organic, leveraging our expanded laboratory capabilities, sales team performance, and strategic partnership. That said, we continue to evaluate opportunities for M&A and believe our strong cash balance puts us in an enviable position.

Brendan: In closing we are pleased with our performance in both the fourth quarter and the year.

Brendan: We witnessed this year with organic leveraging our expanded laboratory capabilities sales team performance and strategic partnerships.

Brendan: That said, we continue to evaluate opportunities for M&A and believe our strong balance.

Brendan: Strong cash balance puts us in an enviable enviable position.

Brandon Perthuis: We'd like to again thank our employees and stakeholders for their dedication, and we look forward to another great year in 2025.

Brendan: We'd like to again, thank our employees and stakeholders for their dedication and we look forward to another great year in 2025, I'll now turn the call over to Paul Kim Our Chief Financial Officer.

Paul Kim: I'll now turn the call over to Paul Kim, our Chief Financial Officer. Thank you, Brandon. Full-year core revenue, which excludes COVID-19 revenue, totaled $281.2 million, growth of 7% compared to revenue of $262.1 million in 2023, and slightly exceeding our overall guidance of $280 million. The full-year revenue from our three revenue streams was as follows. $168 million from precision diagnostics, $97 million from anatomic pathology, and the remaining $16 million from biopharma services.

Brendan: Paul.

Paul Kim: Thank you, Brian and then full year core revenue, which excludes COVID-19 revenue totaled $281 2 million growth of 7% compared to revenue of $262 1 million in 2023 and slightly exceeding our overall guidance of 280 million the full year revenue from our three.

Paul Kim: Revenue streams was as follows $168 million from precision diagnostics 97 million from anatomic pathology and the remaining $16 million from Biopharma services. The 2024, GAAP loss was $42 7 million or a loss of $1 41 per share.

Paul Kim: The 2024 gap loss was $42.7 million, or a loss of $1.41 per share. We had non-gap income of $15 million, or $0.49 per share, for the year.

Paul Kim: We had non-GAAP income of $15 million or 49 cents per share for the year now for the quarterly results revenue for the fourth quarter totaled $76 2 million compared to 75 million in the fourth quarter of 2023 revenue from COVID-19 testing is negligible.

Paul Kim: Now for the quarterly results. Revenue for the fourth quarter totaled $76.2 million, compared to $70.5 million in the fourth quarter of 2023. Revenue from COVID-19 testing is negligible. Revenue from our core business totaled $76 million. Over the course of the year and sequentially, showing the benefit of our continued efficiencies and streamlining of our business.

Paul Kim: Revenue from our core business totaled 76 million GAAP gross margin was 41, 8% and non-GAAP basis was 44, 2% gross margins improved.

Paul Kim: Over the course of the year and sequentially showing the benefit of our continued efficiencies and streamlining of our business now turning to operating expenses total GAAP operating expenses were $48 million in the fourth quarter compared to $43 9 million.

Paul Kim: Now turning to operating expenses. Total gap operating expenses were $48 million in the fourth quarter compared to $43.9 million of 2024, primarily related to reversal of legal accrual and lower R&D spend in Q3. Non-GAAP operating expenses totaled $37.4 million compared to $32.9 million in the third quarter of 2024. Non-GAAP operating margin increased approximately 1 percentage point sequentially to a minus 5 percent primarily due to higher revenue and gross margin. Adjusted EBITDA income for the fourth quarter was approximately $774,000 compared to a loss of $6.8 million in the fourth quarter. Non-GAAP basis and excluding equity-based compensation expense and intangible asset amortization income for the quarter was approximately $1.2 million or 4 cents per share based on $31.2 million weighted average diluted shares outstanding.

For 2024, primarily related to a reversal of legal accrual and lower R&D spend in Q3.

Paul Kim: non-GAAP operating expenses totaled 37.4 million compared to $32 9 million in the third quarter of 2024, non-GAAP operating margin increased approximately one percentage point sequentially to a minus 5% primarily due to higher revenue and gross margin.

Paul Kim: Justice EBITDA income for the fourth quarter was approximately 774000 compared to a loss of $6 8 million in the fourth quarter of 2023.

Paul Kim: non-GAAP basis, and excluding equity based compensation expense and intangible asset amortization income for the quarter was approximately $1 2 million or four cents per share based on 31.2 million weighted average diluted shares outstanding since the end of the fourth quarter as of today, we have <unk>.

Paul Kim: Since the end of the fourth quarter, as of today, we have repurchased approximately 185,000 shares at an aggregated cost of $3.1 million. As of today, a total of approximately $147 million remains available for future purchases of our common stock under the repurchase program.

Paul Kim: Repurchased approximately 185000 shares at an aggregated cost of $3 1 million as of today, a total of approximately 147 million remained available for future purchases of our common stock under the repurchase program.

Paul Kim: Turning to the balance sheet, we ended the fourth quarter and the year with approximately $828.6 million in cash, cash equivalents, restricted cash, and marketable securities. The increase over the third quarter is primarily from federal tax refund received in the fourth quarter.

Paul Kim: Turning to the balance sheet, we ended the fourth quarter and the year with approximately $828 6 million in cash cash equivalents restricted cash and marketable securities. The increase over the third quarter is primarily from federal tax refund received in the fourth quarter.

Paul Kim: Moving on to our outlook for 2025, with minimal future revenue from COVID-19 testing expected, we're guiding to core revenue, which is total laboratory service revenue for the company without COVID-19. We expect total core revenue to be approximately $310 million for 2025, representing core growth of 10% year over year. We expect growth for this year in all areas of our core business, which include precision diagnostics, anatomic pathology, and biopharma services. With recent customer wins, we believe reproductive health testing remains strong and helps drive growth in precision diagnostics. Anatomic pathology experienced a decline in 2024, but ended the year with a strong fourth quarter.

Paul Kim: Onto our outlook for 2025 with minimal future revenue from COVID-19 testing expected or guiding to core revenue, which is total laboratory service revenue for the company without COVID-19.

Paul Kim: We expect total core revenue to be approximately 310 million for 2025, representing core growth of 10% year over year, we expect growth for this year in all areas of our core business, which include precision diagnostics anatomic pathology and Biopharma services.

Paul Kim: Recent customer wins, we believe reproductive health testing.

Remained strong and helped drive growth in precision diagnostics anatomic pathology experienced a decline in 2024, but ended the year with strong fourth quarter. We believe this momentum will carry into 2025, although we expect variability from quarter to quarter. As these services are dependent on patients being treated by health.

Paul Kim: We believe this momentum will carry into 2025, although we expect variability from quarter to quarter as these services are dependent on patients being treated by healthcare providers that may experience seasonality. The biopharma services, which we sell to pharmaceutical businesses, is dependent on those partners, so it may be variable from quarter to quarter. We have been building this business and expect moderate growth.

Care providers that may experience seasonality.

Paul Kim: Pharma services, which we sell to pharmaceutical businesses. It is dependent on those partners. So it may be variable from quarter to quarter. We've been building this business.

Paul Kim: A moderate growth do you expect that 2025 revenues from these three areas of the business are estimated as follows $187 million from precision diagnostics $106 million from anatomic pathology and the remaining 17 million from Biopharma services.

Paul Kim: The expected 2025 revenues from these three areas of the business are estimated as follows. $187 million from precision diagnostics, $106 million from anatomic pathology, and the remaining $17 million from biopharma services. Turning to expected margins for 2025, excluding COVID-19, and stock-based compensation, we expect non-gap gross margins for the full year to slightly exceed 40 percent, continuing the strong momentum we've experienced in recent quarters. We expect to see lower non-gap operating margins at approximately minus 15 percent for the year as we continue to invest in business growth, develop further laboratory operations, and enhance our existing laboratory facilities.

Paul Kim: Turning to expected margins for 2025, excluding COVID-19.

Paul Kim: And stock based compensation, we expect non-GAAP gross margins for the full year to slightly exceed 40% continuing the strong momentum we've experienced in recent quarters, we expect to see lower non-GAAP operating margins at approximately minus 15% for the year as we continue to invest in business grow.

Paul Kim: <unk> develops further laboratory operations and enhance our existing laboratory facilities, we remain focused on managing our spend and continue to believe that our foundational technology platform supports a strong margin profile longer term we.

Paul Kim: We remain focused on managing our spend and continue to believe that our foundational technology platform supports a strong margin profile longer term.

Paul Kim: We expect associated cash burn for a therapeutics development business of approximately $25 million this year, which is contemplated in our EPS and cash guidance. We expect our GAAP EPS to be a loss of approximately $1.95 per share, excluding any future one-time charges, using a $32 million average share count. Utilizing a non-GAAP tax provision and average share count of $32 million. We expect our full year 2025 to be at a net non-GAAP loss of $0.65 per share, excluding stock-based compensation, impairments, and amortization of intangible assets, as well as any one-time charges.

Paul Kim: We expect the associated cash burn for therapeutics development business of approximately $25 million. This year, which is contemplated in our EPS and cash guidance, we expect our GAAP EPS to be a loss of approximately $1 95 per share excluding any future onetime charges using.

Paul Kim: 32 million average share count utilizing a non-GAAP tax provision and average share count of 32 million. We expect our full year 2025 to be at a net non-GAAP loss of 65 per share excluding stock based compensation impairment and amortization of intangible assets as well.

Paul Kim: Well as any one time charges finally, our cash position remains strong we focused on efficient capital allocation that allows us to reinvest in our business fund key initiatives and support future growth, excluding any stock repurchases.

Paul Kim: Finally, our cash position remains strong. We focus on efficient capital allocation that allows us to reinvest in our business, fund key initiatives, and support future growth, excluding any stock repurchases or other expenditures outside the ordinary course, which could include M&A. We anticipate ending 2025 with approximately $780 million of cash, cash equivalents, and investments in marketable securities.

Paul Kim: Or other expenditures outside the ordinary course, which could include M&A, we anticipate ending 2025, what's approximately 780 million.

Paul Kim: There's a cash cash equivalents and investments and marketable securities, but overall, we see strength in our card business, which has grown both organically and through strategic acquisitions as we see good momentum in the years ahead. Thank you for joining our call today, operator now for <unk>.

Paul Kim: Overall, we see strength in our core business, which has grown both organically and through strategic acquisitions, as we see good momentum in the years ahead.

Paul Kim: Thank you for joining our call today.

Operator: Operator, now you may close for questions.

Paul Kim: <unk>.

Operator: Certainly, we'll now be conducting a question and answer session. If you'd like to be placed into question queue, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question. One moment, please, while we poll for questions.

Paul Kim: Well now be conducting a question and answer session, if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. One moment. Please while we poll for questions.

David Westenberg: Our first question is coming from David Westenberg from Piper Sandler. Your line is now live. Hi, thank you for the question. I got a few.

Speaker Change: First question is coming from David Westenburg from Piper Sandler Your line is now live.

Hi, Thank you for the question I got a few so I'll just start with a mean shay and the the key milestones to look forward and <unk>.

Ming Hsieh: So I'll just start with Ming Hsieh and the key milestones to look for in FID 107, endpoints and whatnot, why the clinical trial is only going to cost $10 million and what we should expect at ACOG. And then just finally, do you see head and neck as the biggest opportunity? Are you more excited about the indications afterwards? Yeah, thank you, David. That is a great question. The cost for the clinical trials, we expect to enroll about 46 people, and they're using an average around $200,000 per patient, and that's about $100,000.

Speaker Change: And then endpoints and whatnot why do the clinical trial is only going to cost $10 million and what we should expect that a cog and then just finally do you see it had neck is the biggest opportunity or are you more excited about the the the.

Speaker Change: Indications afterwards.

David Westenburg: Yes. Thank you David if it does it's a great question.

David Westenburg: The cost for the clinical trials, we are we.

David Westenburg: We expect to enroll about a 46 people using average around 200000 per patient.

Ming Hsieh: Thank you. It's pretty much on track with our spending so far. So that's for the head and neck cancer. We are very encouraged with the preliminary results. As David, you remember, last year at the ASCO, we published the data for the FID-07 single agent for treatment of head and neck cancer, and we showed very, very promising results.

David Westenburg: Bob.

David Westenburg: Okay.

Speaker Change: It's pretty much on track with our spend is so far so it does afford the head and neck cancer. We aren't we're encouraged with the preliminary results as David you remember last year at the ESCO, we published with the.

David Westenburg: Data.

David Westenburg: Oh, seven single agent for treatment of over head and neck cancer. We show that were were very promising results.

Ming Hsieh: At the last year's ASCO conference, and this year, we This is the data we'll have with 17 patients or a bit more by the time in June in the combination with Cetuximab and we see the great synergy between the two drugs work together. Okay, got it.

David Westenburg: At last year's <unk> conference this year.

David Westenburg: Peter.

David Westenburg: With the 17 patient.

David Westenburg: The more.

David Westenburg: At the time in June in the combination with Cetuximab and we see the great synergy between the two drugs work together.

David Westenburg: Okay got it.

David Westenberg: And this one, I don't know if this one would be for Paul or Brandon, I'm guessing Paul here on Q4, but as you had a 14% year over year growth, that's really good growth. Can you talk about it? Was there any one time dynamics going on in the quarter that you got? Because you are guiding to a little bit of slowdown from that 14% in the following year.

David Westenburg: Just one I don't know if this wont be for Paul or Brandon I'm guessing Paul here on Q4, but as you had a 14% year over year growth.

That's really good growth can you talk about it was there any one time dynamics going on in the quarter on that you got because you are guiding to a little bit of slowdown from that 14% in the following year.

Brandon Perthuis: Brandon, do you want to take that? Yeah, yeah, certainly. I can take that. And thanks for the question.

Brian: Brian do you want to take that.

Brian: Yeah, certainly if you take that and thanks for the question.

Brandon Perthuis: No, I can't think of any one time events that happened in the fourth quarter. I think it was blocking and tackling and gaining market share. So I think you are correct. You know, Q1 of this year will be slightly down from Q4. But that's in large part, you know, due to some of the setting in the first quarter. We also had two significant adverse weather events in Capell in Dallas, Texas. And Texas doesn't do well with snow and ice. So there's just a couple of sort of seasonality type things that we experienced in Q1. It's going to bring it down a little bit from Q4.

Speaker Change: No I can't think of any one time events that happened in the fourth quarter I think it was blocking and tackling and gaining market share.

So I think you are correct.

Speaker Change: Q1 of this year wont be slightly down from Q4.

Speaker Change: But that is in large part due to some of the health care benefits resetting, meaning you'll copays coinsurance deductibles resetting in the first quarter.

Speaker Change: Also had two significant adverse weather events in Capella in Dallas, Texas and.

Speaker Change: It doesn't do well with snow and ice. So there's just a couple of sort of seasonality type things that we experienced.

Speaker Change: In Q1 is going to bring it down a little bit from Q4, but I think you know.

Brandon Perthuis: But I think, you know, maybe more applicable is looking at it, you know, year over year. And it normalizes those events. So we experienced similar events, you know, every year in the first quarter. So I think in 2024, in the first quarter, we were at $63 million. And in this quarter in 2025, the first quarter will be well north of that. But we are coming off a record quarter. In the fourth quarter, we had these sort of seasonality dynamics in the first quarter. So we expected to come down a little bit. But, you know, no sort of macro issues or any one time issues we experienced in the fourth quarter.

Speaker Change: Maybe more applicable is looking at it year over a year and it normalizes.

Speaker Change: We experienced similar event every year and therefore in the first quarter. So I think in 2024 and the <unk>.

Speaker Change: First quarter, we were at $63 million and in this quarter in 2025 in the first quarter will be well north of that.

Speaker Change: But we are coming off a record quarter in the fourth quarter.

Speaker Change: These sorts of seasonality dynamic in the first quarter. So we expect it to come down a little bit but.

Speaker Change: No no sort of macro issues or any one time issues, we experienced in the fourth quarter.

David Westenberg: Perfect.

David Westenberg: And then, and that gets us right, did you see a revised plan on onatomic pathology? Or did you say our precision diagnostics? And can you maybe talk about that 9% what happened? What would the actual revised plan was that would drive the 9% sequential growth?

Speaker Change: Perfect and then.

Speaker Change: And I catch this right did you see a revised standard anatomic pathology or did you say.

Speaker Change: Our precision diagnostics and can you maybe talk about that 9% what happened what would the actual revised plan wise that would drive the 9% sequential growth. Thank you that'd be my question.

David Westenberg: Thank you. That'd be my last question. Sorry, David, are you saying what what did we change in the anatomic pathology? Did I? You mentioned there was a revised plan. I think you said on entamic. I think you were saying anatomic pathology, although could have been precision diagnostics. But you you highlighted a sequential growth of nine percent because of the revised plan. I was hoping you can dig on a little bit further in terms of what that revised plan was. Yeah, certainly. Yeah, that was only in anatomic pathology. So, you know, the anatomic pathology business is diverse.

Speaker Change: Alright, David are you, saying, what what did we change the anatomic pathology when the market's right did I I have you you mentioned there was a revised plan I think you said on <unk>.

Speaker Change: Thank you were saying in terms of anatomic pathology, although could've been precision diagnostics, but you you highlighted a sequential growth of 9% because of the revised plan.

Speaker Change: I was hoping you could dig in a little bit further in terms of what that revised plan was.

Speaker Change: Certainly yeah that was only anatomic pathology. So you know the anatomic pathology business is diverse we have GI services, you use services Derm services general surgical pathology and in 2020 for we really made a decision to go go pretty hard after the <unk>.

Brandon Perthuis: We have GI services, GU services, DERM services, general surgical pathology. And in 2024, we really made a decision to go pretty hard after the DERM business. As I mentioned in the script, for whatever reason, there's just sort of a national issue right now as it relates to some of the DERM turnaround times. We have tremendous capabilities in dermatopathology. We have very good pathologists that have been sub-specialty trained in dermatopathology. And our turnaround times have been fantastic. So, as I mentioned, you know, we're delivering two- to three-day turnaround time. We're seeing some of the competition out there at two or three weeks.

Speaker Change: The derm business.

Speaker Change: Is it in the script.

Speaker Change: For whatever reason, there's just sort of a national issue right now as it relates to some of the derm turnaround times.

Speaker Change: We have tremendous capabilities their metal pathology.

Speaker Change: We have very good that there's been some specialty training dermatophyte biology, and our turnaround times have been fantastic.

Speaker Change: So as I mentioned, we're delivering two to three day turnaround time, we're seeing some of the competition out there two or three weeks and these are patients who are anxious.

Brandon Perthuis: And these are patients who are anxious for results. They need to know, you know, the results of their biopsy if it's cancer or not, for example. So, we really deployed the sales team throughout the year to go target that particular area of our business. And it's done well for us. We've captured a lot of dermatopathology business for the AP division. In addition, we did expand the sales team some. And I think we're going to continue to do so. Almost every new salesperson we've brought on has been successful in growing their pipeline, their business. And I think it's a testament to our quality and turnaround time at the lab and good sales leadership and good sales recruiting.

Speaker Change: For results and they need to know.

Speaker Change: Most of their biopsy, if its cancer or not for example, so we really deployed the sales team throughout the year to go target that particular area of our business.

Speaker Change: And it's done well for US we've captured a lot of your amount of pathology business for the AP for the AEP Division. In addition, we did expand the sales team some.

Speaker Change: And I think we can continue to do so in almost every new sales person. We brought on has been successful in growing their pipeline their business and I think it's a testament to our quality and turnaround time at the lab and in good sales leadership and good sales recruiting so we want to continue to scale the sales team this year.

Ming Hsieh: So, we want to continue to scale the sales team this year. And I think we're pretty optimistic that, you know, AP has turned a bit of a corner. We've had a few down quarters, you know, since we acquired the business. But, you know, Q3 and especially into Q4, we're seeing some good growth. And we think that's going to carry into 2025. Yeah, David, we've had a very strong fourth quarter that when we close out the year, Brandon talked about the dynamics, you know, of the anatomic pathology business, but we've had, you know, growth in others as well.

Speaker Change: And I think we're pretty optimistic that.

Speaker Change: Has turned a bit of a corner, but we've had a few down quarters. Since we acquired the business, but Q3 and especially into Q4, we're seeing some good growth and we think that's going to carry into 2025.

Speaker Change: Yes, David we've had a very strong fourth quarter that whether you close out the year Brandon Tom talk about the dynamics.

Speaker Change: Of the anatomic pathology business, but we've had.

Speaker Change: In other areas as well and as Brandon talk about we're going to continue to invest in the sales and marketing probably more aggressively than we have before so for example, if you take a look at 2024, excluding stock based compensation, our selling and marketing expense was $32 million, that's going to be close to 40 in 2024.

Paul Kim: And as Brandon talked about, we're going to continue to invest in the sales and marketing, probably more aggressively than we have before. So for example, if you take a look at 2024, excluding stock based compensation or selling a marketing expense was $32 million. That's going to be close to 40 in 2025, because we like what we're seeing, you know, in that area. And we see, you know, specific, you know, parts of that business as good investments as we expand the sales organization.

Speaker Change: Because we like what we're seeing.

Speaker Change: In that area and we see.

Speaker Change: Specific parts of that business.

Speaker Change: As good investments as we expand our sales organization.

David Westenberg: Thank you so much, and congrats on the turning around of that business, or the atomic apology. Thank you. Thanks, David. Thank you.

Speaker Change: Thank you so much and congrats on the the turning around of that business are they in Tom Mcfall. Thank you.

Speaker Change: Thanks, David.

Speaker Change: Thank you next question is coming from Lee from UBS. Your line is now live.

Lu Li: Next question is coming from Lu Li from UBS. Your line is now live. Good morning. Thank you for taking my question. I guess like the first one probably sticking to the guy. So 10% in 2025, but you just finished a very good quarter as well. I wonder specifically on position on college dynastic, you have like 23% year-over-year growth, but it seems like the 2025 will be lower. But you also have like two new wins in VA, FMI. I wonder, are we going to see any upside to the guy or is it more like a timing that will be like pushing back to 2026?

Lee: Good morning, Thank you for taking my questions I.

Speaker Change: I guess my first person I'm, probably slipping to the di so 10% in 2025, but you just finished a very good quarter, a small I wonder are specifically on precision oncology.

Speaker Change: Diagnostics, you have like 23%, Oh, yeah, well, but it seems like the 2025 will be a little bit lower but you also have like a key new wins in VA F&I I wonder.

Speaker Change: Do we are we going to see any upside to the guide or is it more like a timing double b like pushing back in 2026.

Paul Kim: Yeah, Paul, you and me, you and me take that one first. Luke, can you hear me? Yeah, I can hear you. Yeah, I can take it to start with. And thank you for the question. Look, I think the guide is a number that we feel really good about. It's a number that we have really good visibility into. And that said, we certainly have opportunities and new wins that we've not built into that number only because they're not fully based. And these are new wins, or we need some time to understand what they may mean to our revenue.

Speaker Change: Yeah, Paul do you want me to take that one first.

So looking here.

Speaker Change: Yeah, I can tell you.

Speaker Change: Yeah, I can take you to start with and and thank you for the question.

Speaker Change: Look I think the guide is the number that well we feel really good about and it's a number that we have really good visibility into.

Speaker Change: That said, we certainly have opportunities and new wins that we've not built into that number only because they're not fully baked and these are new wins, but we need some time to understand what they may mean to our revenue you mentioned Foundation medicine I mean, that's that's a Great example, right Amit Foundation Medicine is a great example, we're really excited about the new partnership with <unk>.

Paul Kim: You mentioned Foundation Medicine. I mean, that's a great example, right? We want to make Foundation Medicine a great example. We're really excited about the new partnership with Foundation Medicine, but we don't have any Foundation Medicine in the 2025 guide, zero dollars. Why? It's a new win. We just don't know enough about it yet, and we don't have the experience and data. to feel comfortable to put a number on that part. That said, it's certainly something north of $0, right? So yes, there could be some potential upside. So I think as we think about these new wins and partnerships, and as they begin to produce and we have a better understanding of their run rate, and if they are meaningful, we can certainly adjust guidance in the following quarters.

Speaker Change: <unk> medicine, but we don't have any foundation medicine, and the 2025 Guy $0.

Speaker Change: Why is it a new win we just don't know enough about it yet and we don't have the experience and data.

Do you feel comfortable to put a number on that partnership.

Speaker Change: That said, it's certainly something north of zero dollars right. So yeah, there could be some potential upside there.

Speaker Change: So I think as we do we think about these new wins and partnerships and as they begin to produce and we have a better understanding of their run rate and.

Speaker Change: You know what they are meaningful we can certainly adjust guidance in the following quarters, but I think where we sit today with a clear visibility we have into this number we feel really good about it.

Lu Li: But I think where we sit today, with the clear visibility we have into this number, we feel really good about it. Got it, understood.

Speaker Change: Got it understood.

Paul Kim: Can you give us a little bit update in terms of the VA hospital contract? What have you heard from the physician office and how much of the revenue that you think will come in 2025? Yeah, I'm not ready to just kind of disclose how much revenue in 2025, because we're still a little bit early in that launch. I will say it's going extremely well, extremely well. I think we've been pretty conservative how much VA revenue we've built into the guide for this year. That could possibly be some upside there, if it continues to go as well as it has, but so far we're really pleased with the progress we've made with the VA.

Speaker Change: Can you talk a little bit about in terms of the VA Hospital Kantar.

Speaker Change: What have you heard from the physician office.

Speaker Change: And how much of the revenue that you seem more will.

Speaker Change: <unk> com in 2025.

Speaker Change: Yeah, I am not ready to just kind of disclose.

Speaker Change: How much revenue in 2025.

Speaker Change: Because we're still a little bit early in that launch I will say, it's going extremely well extremely well.

Speaker Change: I think we've been pretty conservative in how much D. E revenue, we built into the guide for this year.

Speaker Change: That could possibly be some upside there if it continues to go as well as it has but so far we're really pleased with the progress we've made with the D. A.

Lu Li: Got it.

Speaker Change: Got it another question going back to the AP. So you mentioned that you're feeling a lot of new okay. That's all very long term long time and that appears to be a good opportunity for yeah, I wonder how like how fast we can capture like all the accounts and the NHL.

Brandon Perthuis: And then another question going back to the AP. So you mentioned that you found a lot of new accounts with a very long turnaround time and that appears to be a good opportunity for you. I wonder how fast you can capture all the accounts and do you need to keep increasing the sales representative in order to maintain the momentum, i.e. eventually what will be the size of the sales rep in the AP business? Yeah, that's a great question. I will say that the sales team is still subscale. I think we have an exceptionally good sales team.

Speaker Change: Kept increasing the south about the Sunday times in order to maintain the kind of like the momentum like IV like eventually what will be the optimal size up the sales drop in the ATM business.

Speaker Change: Yeah. That's a great question I will say that the sales team is still subscale.

Speaker Change: I think we have an exceptionally good sales team and I think we have exceptionally good sales leadership.

Brandon Perthuis: And I think we have exceptionally good sales leadership. But it is subscale. Like our goal is to go capture as much of this market as we can. You know, it does take some time to find good salespeople to train good salespeople. So I mean, that's why we scaled the team in 2024. That's why we can plan to continue to scale the team in 2025. You know, I think our facility that our AP facility that we built in Capell, Texas, is absolutely state of the art. It is amazing. It is built from the ground up. Designed from the ground up to be efficient, high capacity.

Speaker Change: But it is subscale look our goal is to go capture as much of this market as we can you know it does take some time to find good salespeople to train good salespeople. So I mean, that's why we're that's why we scaled the team in 2024, that's why we plan to continue to scale the team in 2025.

Speaker Change: I think our facility.

Speaker Change: Our a P facility that we built the Capella, Texas.

Speaker Change: Absolutely state of the art you didn't make it.

Speaker Change: It is built from the ground up.

Speaker Change: Designed from the ground up to be efficient.

Speaker Change: High capacity.

Brandon Perthuis: It is just a really good operation. So our sales team is out there selling that, right? They're selling our quality. They're selling our turnaround time. We have the capacity. So I think when you bundle an exceptionally well-run pathology lab with great pathologists, with a really good sales team, it's just been a recipe for success. So we wanna continue to scale that team. We want to continue to capture more of that market. And that's going to be in the cards for 2025. Got it.

Speaker Change: It is just you know it.

Speaker Change: Really good operation So our sales team is out there.

Speaker Change: Selling that alright, just telling our quality or selling our turnaround time, we have the capacity. So I think when you bundle an exceptionally well run pathology lab with great pathologists with a really good sales team. It's just been a recipe for success. So we want to continue to scale that team. We want to continue to capture more of that market and that's going to be in the cards for 2000.

Speaker Change: 25.

Speaker Change: Got it thank you.

Lu Li: Thank you.

Speaker Change: You bet. Thank you. Thank you. Your next question is coming from Andrew Cooper from Raymond James Your line is now live.

Andrew Cooper: Next question is coming from Andrew Cooper from Raymond James. Your line is now live. Hey, everybody, thanks for the questions. Maybe just first, you mentioned precision diagnostics having a being a little bit light of where you had hoped on some slip out of new customer wins into the first quarter of 25. Can you give a little more context on the size of that? And, you know, how that plays out as you think about sort of low double digit growth in the guide and precision diagnostics, especially in context of things like the VA and foundation and NOVA launch?

Andrew Cooper: Hi, everybody thanks for the questions.

Speaker Change: Maybe just first you mentioned.

Speaker Change: Precision diagnostics, having or being a little bit light of where you had hoped on some slip out of.

Speaker Change: New customer wins into the first quarter of 'twenty five can you give a little more context on the size of that and how.

Speaker Change: How that plays out as you think about.

Speaker Change: Sort of low double digit growth in the guide in precision diagnostics, especially in context of things like the VA and foundation and Novo launch that.

Paul Kim: That presumably could drive additional growth there. Yeah, thanks for the question, Andrew. I think you're spot on. I mean, what you mentioned there are potential growth levers that we have not built into this guide. I've already said zero dollars from Foundation Medicine, a modest amount for the VA, a very modest amount for NOVA that's currently built into the guide. So, you know, I don't want to give too much color for competitive reasons on the, you know, accounts that have slid a little bit into this quarter from the quarter. But these are just these are large accounts, Andrew, with lots of locations.

Speaker Change: Presumably could drive additional growth there.

Speaker Change: Yeah. Thanks for the question, Andrew I think you're spot on I mean, what you mentioned narrow our potential growth levers that we have not built into this guide I've already said zero dollars for Foundation medicine.

Speaker Change: A modest amount for the V. A a very modest amount for Nova that's currently built into the guide so.

Speaker Change: I don't want to get too much color.

Speaker Change: For competitive reasons on the accounts that have slid a little bit into this quarter from the fourth quarter. But these are just these are large accounts Andrew.

Andrew Cooper: Lots of locations.

Paul Kim: And onboarding lots of doctors, lots of locations, it's just taken us a little bit longer than we thought. It's going well. We have a lot of these locations already onboarded with a lot left, but the locations that are onboarded are very happy with our turnaround time, quality, support we're giving them. It's just taken a little bit longer than we had hoped to get every location onboarded for some of these big wins.

Speaker Change: And on boarding lots of doctors.

Speaker Change: Lots of locations, it's just taken us a little bit longer than we thought.

Speaker Change: It's going well.

Speaker Change: We have a lot of these locations already on boarded with a lot left but the locations that are on boarded I'm very happy with our turnaround time quality support we're giving them.

Speaker Change: It's just taken a little bit longer than we had hoped to get every every location on board for some of these from some of these big wins, but.

Paul Kim: But it should be happening here pretty soon in the... for the first quarter and maybe a little bit into the second.

Speaker Change: It should be happening here pretty soon and in the.

Speaker Change: Fourth first quarter, and maybe a little bit into the second.

Ming Hsieh: Hey, Andrew. If you remember a year or two ago, the split between anatomic pathology and precision diagnostics, it was about half half. And, you know, as Brandon, you know, has indicated comprehensively, you know, the success of the precision diagnostics, that's been, you know, absolutely wonderful for the company. You know, when you take a look at, you know, how we ended 2024, you know, we posted, you know, and, you know, precision diagnostics was $70 million higher than what we achieved in anatomic pathology. So those numbers are large. And when we take a look at 2025, with our initial guide of 310, you know, what we're anticipating in precision diagnostics in each of those quarters, although it might be a low, you know, percentage number, it's higher than what we achieved in Q4.

Andrew Cooper: Hey, Andrew.

Andrew Cooper: If you remember a year or two ago the split between anatomic pathology in precision diagnostics. So it's about half half.

Andrew Cooper: And.

Andrew Cooper: As Brandon has indicated comprehensively.

Speaker Change: The success of our precision diagnostics, that's been absolutely wonderful for their company.

Speaker Change: When you take a look at how we ended 2024.

Speaker Change: We posted.

Speaker Change: Precision diagnostics was $70 million higher than what we achieved in anatomical pathology. So those numbers are large and when we take a look at 2025, what our initial guide of 310.

Speaker Change: What we're anticipating in precision diagnostics and each of those quarters, although it might be a low percentage number it's higher than what we achieved in Q4 and the other thing that you also see is the tremendous increase in the gross margins right. As a result, largely from the growth that we see in precision diagnostics about a year ago or so we had our gross.

Paul Kim: The other thing that you also see is the tremendous increase in the gross margins, right, as a result, largely from the growth that we see in precision diagnostics. About a year ago or so, we had our gross margin target at, you know, close to 40%. And we ended the fourth quarter with the gross margins, you know, higher than 40%. So, you know, the overall business and what, you know, precision diagnostics is doing for our company, it's very, very important. And, you know, we always reserve the option to increase the guidance as we see more progress in color in some of these programs that Brandon mentioned.

Speaker Change: Margin target at.

Speaker Change: Close to 40% and we ended the fourth quarter with the gross margins.

Speaker Change: Higher than 40%. So you know the overall business and what precision diagnostics is doing for a company that's very very important.

Speaker Change: And we always reserve the option to increase the guidance as we see more progress in color in some of these programs that Brendan mentioned.

Andrew Cooper: Okay, super helpful.

Speaker Change: Okay Super helpful.

Brandon Perthuis: Maybe shifting gears a little bit to that AP business. You mentioned some of the wins really stemming from the DERM side of things. Is that where you had felt a little bit of pain when that business was kind of underperforming a little bit? And I ask that meaning, is this recapture of share that had maybe gone away? Or is it, you know, capture of incremental and some of the other parts of the business continue to be maybe a little bit shy of where they had been a few years ago? And what do you need to do if the latter is the case to recapture that and get those other pieces of the business growing better as well?

Speaker Change: Maybe shifting gears, a little bit to that business.

Speaker Change: You mentioned some of the wins really stemming from the <unk> side of things is that where you had felt a little bit of pain when that business was kind of underperforming a little bit and I ask that meaning is this recapture of share that had maybe gone away or is it capture of incremental.

Speaker Change: And some of the other parts of the business continue to be maybe a little bit shy of where they had been.

Speaker Change: A few years ago, and what do you need to do if the latter is the case to recapture that and get those other pieces of the business growing better as well.

Brandon Perthuis: Yeah, that's a good question. Good question, Andrew. You know, I think we have two dynamics as it relates to our AP business. It's a large, what we call baked book of business, right? Our existing client. And from the time we acquired the laboratory, our base book of business was going the wrong direction, right? So as the sales team would close the deal, we'd lose a base account. It was sort of one step forward, one step back. And we've made a lot of improvements around our account management, our client health score, monitoring it proactively. And I can say in 2024, we did a really good job keeping and maintaining our base book of business.

Speaker Change: Yeah. Good question.

Andrew Cooper: Yeah. That's a good question good question Andrew.

Andrew Cooper: I think we have two dynamic as it relates to our AP business. It's a large what we call base book of business right are our existing clients.

Andrew Cooper: And from the time, we acquired the laboratory our base book of business was going the wrong direction right. So as the sales team would close the deal we would lose a base count you were sort of one step forward one step back and we've made a lot of improvement around our account management.

Our client health score monitoring it proactively and I can say in 'twenty 'twenty four we did a really good job keeping and maintaining our base book of business. So now it's not one step forward one step back anymore.

Ming Hsieh: So now it's not one step forward, one step back anymore. Our base book is solid. So now we're growing the sales team, layering on new wins, and that's how we've taken that business and returned it to growth. I've mentioned DERM a couple of times, yes, I mean, DERM was a big factor for us in 2024. But you know, we've done well in GI, we've done well in GU, been well in, you know, breast and general surgical pathology. I just think overall, it's been a really successful turnaround story. We still think there's a lot of market out there to capture.

Andrew Cooper: Book is solid so now we're growing the sales team layering on new wins and that's how we've taken that business and returned it to growth.

Andrew Cooper: I've missed it during a couple of times, yes, I mean, <unk> was a big factor for us in 2024.

Andrew Cooper: But we've done well in Gi LNG, you Didnt Whelan breath in general surgical pathology I just think overall, it's been a really successful turnaround story, we still think there's a lot of market out there to capture our again our sales team is frankly, just scratched the surface of the opportunities and we we.

Brandon Perthuis: Again, our sales team has frankly just scratched the surface of the opportunities and we can't really scale this team quick enough. And the reason is we want to take advantage of that state-of-the-art operation we've built and the fantastic services we have there. They're great products to sell. So we're trying to scale the sales team as quickly as we can, but I think we've just scratched the surface on the opportunities across the entire AP division.

Andrew Cooper: Can't really scale. This team quick enough and the reason is we wanted to take advantage of that state of the art operation. We built in the fantastic services, we have there they're great products to sell.

Andrew Cooper: So we're trying to scale the sales team as quickly as we can but I think we've just scratched the surface on on all the opportunities across the entire AP Division.

Ming Hsieh: Yeah, I think adding Brandon's point, we made a heavy technology investment in that AP business. We're making pretty much the digitization or using the advanced technology to make the entire business more efficient. That's what you can see what Brandon mentioned. The other labs have a total turnaround time of more than two weeks, and we are achieving in a few days. We liked our position, and that's where we do see the growth. Instead, we bought a business that was in a decline mode. I think we believe we find the bottom and start to find growth from the bottom.

Brendan: Yeah, I think the adding Brendan's point.

Andrew Cooper: We made a heavy technology investment in that.

Andrew Cooper: Isn't it.

Andrew Cooper: We're making the pretty much at the.

Andrew Cooper: The digitization or using the other ones the technology.

Andrew Cooper: To make it.

Andrew Cooper: <unk> business some more efficient does award that you can see.

Speaker Change: Brendan mentioned.

Speaker Change: Other labs will have a total turnaround times around the more than two weeks and we are achieving in few days.

Speaker Change: We like our position and does what we do see the boroughs.

Speaker Change: We bought the business it wasn't in the decline mode.

Speaker Change: We believe we found the bottom and the startup.

Speaker Change: <unk>.

Speaker Change: To find the growth from the bottom.

Andrew Cooper: Okay, helpful.

Speaker Change: Okay helpful. And then maybe just one last one.

Ming Hsieh: And then maybe just one last one. I know you gave the color around the cost of some of the clinical trials in the pharma efforts. How should we think about the overall cash utilization from those efforts in 2025? And potentially beyond as you continue to push that that pipeline forward ahead of, you know, any any FDA approval or anything like that? Yeah, this is a very good question. Actually, we, from Paul's financial disclosure, we expect the burn rate for that unit, for the pharma therapeutic development in the year 2025, that include R&D and clinical studies, around the $25 million.

Speaker Change: I know you gave the color around the cost of some of the clinical trials in.

Speaker Change: The pharma efforts.

Speaker Change: How should we think about the overall cash utilization from those efforts in <unk>.

Speaker Change: 2025.

Speaker Change: And potentially beyond as you continue to push that that pipeline forward.

Speaker Change: Ahead of.

Speaker Change: Any any FDA approval or anything like that.

Speaker Change: Yeah. This is the worst of the question actually we all love the formal pulses of financial disclosure, we expect the burn rate for that unit for the farmer.

Speaker Change: Therapeutically pretty well in the year 2025 does include the R&D and the clean coal.

Speaker Change: Ah studies around the $25 million.

Ming Hsieh: So this is very, very efficient to use our money and to develop two of the most critical drugs to treat the patients with not much of the options with the current drugs. So we think we have very efficient R&D team and we'll see the populous results in June at ASCO about our findings in our FID-07 in terms of phase two trials. And also we expect to enroll the patients for the FID-022 in the second quarter. We are very excited about this opportunity and we do believe support this nominal investment we're doing will be rewarded.

Speaker Change: So this is a very efficient to use their own money and that would be what.

Speaker Change: Two one of the two of the most critical.

Speaker Change: Critical drugs to treat the patients with the with another much at the auctions with Carnival.

Speaker Change: Drugs. So we think we're efficient.

Speaker Change: The R&D team and we will see the we will publish the results.

Speaker Change: In June at ESCO above our findings in the RFID.

Speaker Change: Oh seven in terms of phase two trials and also we expect to enroll the patients.

Speaker Change: For the <unk>.

Speaker Change: <unk> in the second quarter, we are we're excited about this opportunity.

Speaker Change: <unk> will support this nominal investment that we're doing will be will be rewarded.

Andrew Cooper: Perfect.

Andrew Cooper: I will stop there.

Speaker Change: Perfect I will stop there thanks everybody.

Operator: Thanks, everybody.

Operator: Thank you.

Speaker Change: Thank you.

Operator: We reached the end of our question and answer session.

Speaker Change: Thank you we reached end of our question and answer session I'd like to turn the floor back over for any further or closing comments.

Ming Hsieh: I'd like to turn the floor back over for any further closing comments. Thank you everyone for your continued interest at Fulgent, and we will be talking to you on our first quarter 2025 earnings call. Thank you very much. Thank you.

Speaker Change: Okay.

Speaker Change: Alright. Thank you everyone for your continued interest.

Speaker Change: Old yet and we won't be talking to you on our first quarter 2025 earnings call. Thank you very much.

Speaker Change: Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.

Operator: That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. for your participation.