Q1 2025 GeneDx Holdings Corp Earnings Call
Good day and thank you for standing by welcome to the Cindi ex first quarter 2025 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during this session.
You'll need to press star one on your telephone you will then hear an automated message advising her hands raised.
Speaker Change: Draw. Your question. Please press Star one one again please be advised this today's conference is being recorded I would now like to hand, the conference Howard of your Speaker today, Sabrina Dunbar Investor Relations. Please go ahead.
Sabrina Dunbar: Thank you operator, and thank you everyone for joining us today.
Speaker Change: On the call we are talking to Chilean President and Chief Executive Officer, and Kevin Daly Chief Financial Officer.
Speaker Change: Earlier today <unk> released financial results for the first quarter ended March 31st frankly five.
Speaker Change: Before we begin please take note.
Speaker Change: Any statements we may make forward looking statements on today's call, including about our business plan and updated guidance.
Speaker Change: Guidance and outlook.
Looking statements inherently involve risks and uncertainties and only reflect our view as of today April 30th.
Speaker Change: No obligation to update.
Speaker Change: When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results.
Speaker Change: Please refer to our first quarter.
Speaker Change: Earnings release, and slides available on our IR dot <unk> dot com for definitions and reconciliations of non-GAAP measures.
Speaker Change: More information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward looking statements.
Speaker Change: And with that I will turn the call over to Katherine.
Katherine: Thank you Sabrina and good morning, everyone. Our teams worked surpassed our expectations and delivered a strong first quarter with revenues exceeding $87 million.
Speaker Change: Our third consecutive quarter of profitability.
Speaker Change: We're raising guidance for the year to $360 million to $375 million.
Speaker Change: That's the only building on last year's momentum and strengthening our industry, leading position centered on diagnosing any genetic disease.
Speaker Change: The earliest possible with whole exome and genome sequencing.
Speaker Change: Our health care system today is broken or waiting for children to get sick and letting their disease continue to progress for far too long severely limiting their chances of living longer and healthier lives.
Speaker Change: It still takes on average five years for a child with a genetic disease to get an accurate diagnosis. That's unconscionable given what we can do today. Our tests are not just diagnostic tools, they're proactive solutions that can transform how we approach genetic diseases.
Speaker Change: For patients that means less time, and diagnostic purgatory and more time on the right path to cure.
Speaker Change: For the health care system, it means fewer unnecessary procedures.
Speaker Change: Reduced misdiagnosis and a significant decrease in cost.
Speaker Change: We believe that integrating an exome and genome testing more proactively as the standard of care isn't just better medicine, it's smarter policy, particularly at a time when valuable health care dollars is a national priority.
Speaker Change: Technology enabled the shift from reactive to proactive care benefiting both the individual patient and the health care system as a whole.
Speaker Change: And the outpatient setting and we've expanded into new clinical indications and in the NICU. We've laid the foundational infrastructure to translate our leadership into that critically important setting or fewer than 5% of babies, even get a genetic test.
Speaker Change: Our sights are set on helping adults to our growth strategy ties directly to guidelines reimbursement and Biopharma solutions.
Speaker Change: Youll always hear us talk about volume growth in average reimbursement rate hand in hand.
Speaker Change: Not all exome and genome tests are created equal and there's a reason to eight out of 10, clinicians who order exome testing choose G&A yet.
Speaker Change: Fueled by more than 800000, exome and genome a rapidly growing data asset and clinical expertise sat in G&A ex apart.
Speaker Change: We continue to deploy innovative technologies at scale to enhance our products and create the best in class patient and clinician experience at J D.
Speaker Change: Our winning growth strategy continued to support our commercial success in the outpatient setting where we grew our market penetration of pediatric neurologists to 14%.
Speaker Change: Our business remains best positioned to capture the opportunities ahead, and we're seizing our advantage to accelerate market development.
Speaker Change: In the inpatient setting and we continue to build upon the foundational infrastructure, we began putting in place in Q4 2024, we recently launched our ultra Robyn genome sequencing product, which delivers results and as soon as 48 hours.
Speaker Change: Our integration with epic continues to progress enhancing our ability to provide rapid and accurate diagnosis at the bedside.
Speaker Change: Our collaboration with the University of Washington, and Seattle Children's called Zeek first published data in the first quarter that demonstrated up to 60% of babies and level for Nick you should receive a rapid genome tests.
Speaker Change: Clinical research collaboration in product innovation Prime commercial market.
Speaker Change: We anticipate that the combination of these factors will support a NICU volume ramp in the second half of the year.
Speaker Change: We're setting the standard for genomic interpretation and analysis, while ushering in the next phase of genomic medicine.
Speaker Change: By generating critical early evidence through the Guardian study <unk> champion championing one of the largest long term opportunities in diagnostics genomic newborn screening.
Speaker Change: Our leadership in both the science and the implementation of this technology across multiple sites is proving that not only is it feasible, but it's also scalable.
Speaker Change: And we're sharing this knowledge with flagship programs across the country at strategic advisors.
Speaker Change: Our approach to newborn screening enables standardized interpretation are key to ensuring consistency in both access and quality across geographies.
Speaker Change: Our first mover advantage is real and we're already seeing that impact for growing interest among policymakers.
Speaker Change: Mentum building across states and clear signs that genomic newborn screening is becoming a reality.
Speaker Change: With the continued momentum and growth in our core exome and genome testing business, we announced our plans to acquire fabric genomic a pioneer and AI powered genomic interpretation.
Speaker Change: With the addition of fabric genomics, we will open a supplemental channel to extend the clinical excellence and <unk> data analysis and interpretation.
Speaker Change: Delivering decentralized interpretation and formed by our centralized intelligence.
Speaker Change: We are optimistic about the strategic fit of this acquisition, which will also unlock scalable platform economics for Gtx is bottom line.
Speaker Change: Recurring software based revenue stream to our existing high margin testing business.
Speaker Change: As genomic testing adoption grows worldwide fabric genomics cloud native platform will expand <unk> ability to serve a global market with tailored commercial models aligned with foreign regulations.
Speaker Change: And with fabric genomics decentralized interpretation architecture, we will layer on any incremental offerings for the NICU with the interpretation of the service product plug in for in House testing.
Speaker Change: These supplemental opportunities support our mission of offering genetic diagnoses to all patients who could benefit with additional flexibility in how we reach those patients both domestically and internationally.
Speaker Change: Beyond the fabric genomics acquisition, Jean Dx is integrating AI across our business with a focus on making our enterprise as efficient as possible scaling our interpretation part permit data asset, while ensuring accuracy and leveraging the totality of our data to drive health care innovation more broadly.
Speaker Change: <unk>, 5% of rare diseases have an approved therapy available and its more biopharma companies invest in genetic based care. Our rich data is critical to inform drug discovery and we will be the partner of choice to leverage genomic data for therapeutic development for.
Speaker Change: For the families every patient deserves a care plan upon diagnosis and AI can help us deliver on that whether the path forward for a newly diagnosed patient as a drug physical or cognitive therapy dietary change or other changes in medical management, our AI technology will help us route patients on the right care path.
Speaker Change: Immediately at diagnosis.
Speaker Change: Central to our success is the value that we create for families and for the health care system as a whole we have the rare ability to drive better clinical outcomes for those with genetic disease. While also relieving the health care system of unnecessary costs.
Speaker Change: Further strengthening our model is that we can do this as a profitable company ensuring that we can purposefully reinvest in our technology.
Speaker Change: Continued to deliver the highest quality product we.
Speaker Change: We can do it better faster and more cost effectively than any other law, but our space.
Speaker Change: With that I'll turn it over to Kevin Good morning, everyone and thanks for your time.
Kevin Daly: First quarter 2025 revenues were $87 $1 million exome and genome revenues grew 62% year over year contributing $71 $4 million this quarter.
Kevin Daly: Thanks, So much genome accounted for 40% of all tests in the first quarter with volumes from these flagship products up 24% year over year.
Kevin Daly: As a standalone month saw an acceleration in volumes relative to the first two months of the year and exited the quarter ahead of expectations, bringing us into Q2 with a strong foundation to continue momentum.
Kevin Daly: In fact, if not for the effects of a brutal January February climate change disruption volumes would have been slightly up compared to Q4, despite typical seasonality, which usually results in Q4 being the strongest and Q1, the lightest of any quarter of the year.
Kevin Daly: Should also note that the calendar calendar wise Q1 had one less sales day compared to the fourth quarter.
Kevin Daly: In addition to grow off that base, we delivered to start the year, we'll be layering on what will effectively be new growth curves across multiple fronts, including the NICU.
Kevin Daly: And with new indications in both the pediatric and adult outpatient settings.
Kevin Daly: We've continued to balanced demand from a clinical standpoint with discipline.
Kevin Daly: We're getting volume with a high propensity to get paid rather than taking in volume for volume sake.
Kevin Daly: That said, we've launched into some new focus areas for our commercial team. Most recently immune deficiency disorders in April which is a new call point that the pediatric immunologist.
Kevin Daly: Compare that to cerebral palsy launched earlier in March would you consider another indication in the bag at an existing call points the pediatric neurologists.
Kevin Daly: We closely monitoring uptick in reimbursement performance is adjudication experience a few months.
Kevin Daly: Nicky remains mostly untapped our ultra rapid became orders in April.
Kevin Daly: And it's being well received in terms of its two day turnaround time and price points will be exiting the pilot phase of Evercore and Meg and also bringing new compelling health economic data to the field in the coming weeks to drive this market.
Kevin Daly: We're addressing a large unmet medical need here and the progress to expand access to testing across a widening spectrum of conditions is underpinned by our ability to provide valuable service to biopharma, leveraging our unique data assets to enable faster cheaper more effective therapeutic development.
What has been a nascent biopharma business for US is still in the very early innings, but it is beginning to gain traction we're demonstrating to partners that rare diseases are rare in that GBS is in a unique position to find patients reduce development time and cost and improved probability of success.
Kevin Daly: In terms of reimbursement the hard work to reduce denials continues to bear fruit and you see that in the underlying rates and continued positive beats on past estimates.
Kevin Daly: In the first quarter average reimbursement rate for exome and genome. After all denials was approximately $3400 up from approximately $2600 in the same quarter last year.
Kevin Daly: On the Medicaid front, there are 14 states that cover rapid genome inpatient and now 33 states covering exome and genome outpatient with new Mexico, the new adds this quarter.
Kevin Daly: Adjusted gross profit from continuing operations in the first quarter was $59 $7 million, which is up 56% year over year.
Kevin Daly: That translates to an adjusted gross margin of 69% in the first quarter up from 61% a year ago.
Kevin Daly: We entered this year focused on extracting the next leg of scalability and cost effectiveness through the introduction of automation and AI across the dry lab processes.
Kevin Daly: While the team is making steady organic development progress here, our optimism regarding further cost efficiency is only enhanced with the pending acquisition of fabric.
Kevin Daly: Over time, we envision taking the best of features and technology between our homegrown platform and fabrics in order to create the most powerful AI driven interpretation platform possible to lower costs and turnaround times.
Kevin Daly: Impact of these synergies should be considered more of a 2026 into 2027 events commercial integration and support will be our focus for the balance of the year.
Kevin Daly: And down to the bottom line adjusted net income for the first quarter 2025 was $7 7 million, our third consecutive quarter profitability as we continue to drive increased leverage in operating expense to service the business.
Kevin Daly: On the balance sheet cash cash equivalents marketable securities and restricted cash totaled $162 million as of March 31 2025.
Kevin Daly: Cash flow for the first quarter included $4 1 million and net cash generated from ordinary operations and $13 9 million in proceeds net of fees from the issuance of 150000 shares of common stock in connection with ATM Sir.
Kevin Daly: Now turning to guidance, we're raising our top line guidance to now expect total revenues between $360 million to $375 million for full year 2025, inclusive of $3 million to $5 million.
Kevin Daly: Postpose revenue contribution from the acquired fabric business.
Kevin Daly: Assuming a second quarter 2025.
Kevin Daly: We reaffirm our expectation to deliver at least 30% growth in exome and genome volume and revenues for full year 2045.
Kevin Daly: We're raising our expectation for full year 2025 of adjusted gross margin to between 66 and 68%.
Kevin Daly: And we reaffirm our expectation to maintain profitability each quarter and for the full year 2025 on an adjusted net income basis.
Catherine: I'll hand, you back to Catherine for any closing remarks.
Catherine: Q1 marked our third consecutive quarter of profitability reinforcing the strength and scalability of our business model through disciplined execution and strategic investment we are growing with purpose accelerating our impactful extending our lead this quarter also marked our 25th anniversary offering a powerful moment to reflect on the 800000.
Catherine: And genome sequence.
Catherine: <unk> held in the scientific breakthroughs, we've delivered but the real story is what's ahead for turning decades of progress into a foundation for what comes next.
Catherine: The future of health care is about preventing illness that means knowing as early as possible. If you have a genetic disease.
Catherine: The genome future and we are leading the way.
Catherine: With that we look forward to your questions.
Catherine: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again, please stand by while we compile the Q&A roster.
Speaker Change: And our first question comes from Bill Bonello of Craig Hallum Capital Group. Your line is open.
Bill Bonello: Hey, good morning, guys and thanks, a lot for taking my questions.
Speaker Change: Not to take away from what was.
Bill Bonello: In our opinion it overall very good quarter.
Speaker Change: This morning's obviously going to be end of the <unk>.
Bill Bonello: Volume growth.
Bill Bonello: Around the weather and the days in the quarter It was super helpful.
Bill Bonello: I'm just curious.
Bill Bonello: We've absolutely seen overtime.
Bill Bonello: Q1 is the toughest quarter for almost every.
Bill Bonello: Wow.
Bill Bonello: Central trend is pretty normal, but we haven't necessarily seen it.
Bill Bonello: For Gtx before and we've never seen this.
Bill Bonello: Central decline before I'm, just curious do you think that's kind of a function of the fact that you were just growing really rapidly be awful low a low base.
Bill Bonello: Has to be why and then maybe kind of masked the normal trend would be why why do we see the trend now when we laid out a bit in the past couple of hours.
Bill Bonello: Yeah look historically.
Bill Bonello: As a reminder, I've been with the company eight years, there absolutely is a historic pattern.
Bill Bonello: Q4 into Q1, a step down in volumes, what you typically see absent any weather events as patients and their physicians trying to get appointment squeezed into the month of December before Copays and deductibles naturally reset for most patients on January 1st and so that.
Bill Bonello: It has a pull through effect into January and February despite weather.
Bill Bonello: There's no doubt the way the calendar plays out this year, there's actually just one less day available to it and there is no doubt.
Bill Bonello: That's early in the year January into mid February.
Speaker Change: Tough setup in terms of the wildfires in California is no storms throughout the mid East Midwest.
Speaker Change: And all over the country I think there is something too of course.
Speaker Change: The fact that we're coming off a smaller base in the prior year, we obviously blew past seasonality then.
Speaker Change: The way, we look at the first quarter as it played out exactly as we expected our guide we reaffirmed the plus 30% in terms of volume absolutely maintains and is intact.
Speaker Change: Consistent with discussions last quarter I'll remind everyone that the plan was purposely built to say the second half of the year will be stronger than the first really just timing of new initiatives and launches. We have planned. So we spoke to some of those in terms of color in the commentary.
Speaker Change: Good progress in setting all the foundational pieces for the NICU, whether it was the buccal swab launch in Q4 ultra rapid.
Speaker Change: Which really just became order bowl in April after this first quarter.
Speaker Change: So it's got the two day turnaround time, and a great price point to it.
Speaker Change: And that really is just an April event.
Speaker Change: And we're making great progress with the epic or implementation sort of exiting pilot phase here and so ready to launch and tackle but Nick you had always signaled that the second half of the year ramp and we will see some volumes.
Speaker Change: Late in the second quarter, but it's really a ramp in the second half of the year and beyond.
Speaker Change: And that absolutely remains right on track.
Speaker Change: Okay.
Speaker Change: That's super helpful. And then just a completely different question follow up.
Speaker Change: There was kind of a big bump in G&A expense.
Speaker Change: And you guys had been signaling that operating expense, we should look for it to increase a little bit but.
Speaker Change: Anything in particular on the on the G&A front, they don't do it.
Speaker Change: Related to <unk>.
Speaker Change: If there is any unusual items et cetera that we should know about.
Speaker Change: Yes, a good portion is is epic as well as general support costs.
Speaker Change: Considering the pace in which we're growing and looking at the percentages of total Opex and then the components absolutely comfortable that.
Speaker Change: We've always viewed this as a highly leveraged business in terms of Opex and with the introduction of new team members and importantly tools and automation across the organization fully expect that will continue.
Speaker Change: Drive down Opex as a percent of revenue in a meaningful way.
Speaker Change: For quite a long period to come.
Speaker Change: Overall, the epic infrastructure.
Speaker Change: We've always signaled that about $5 million of.
Speaker Change: Plus cost in the G&A line alone on an annual basis.
Speaker Change: Okay, that's really helpful.
Speaker Change: I'll hop back in the queue. Thank you guys.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Dan Brennan of TD Cowen Your line is open.
Speaker Change: Great. Thank you. Thanks for the questions, maybe just starting on the NICU for the back half of the year, Kevin and Katherine could you speak to a little bit like what the visibility is it supports the second half acceleration, whether a backlog or sales feedback anything of that sort and if you can include some early feedback from epic Aurora So far.
Speaker Change: Since it's already been out I guess in the pilot stage.
Speaker Change: Yeah. So far again everything is on track with epic where.
Speaker Change: We're really pleased with our initial integration.
Speaker Change: And the sales team has been.
Speaker Change: We've talked about this in the past, we had kind of a waiting room of clients that are lined up so.
Speaker Change: We've got.
Speaker Change: Really solid approach to being able to make sure that we can continue to bring.
Speaker Change: Additional clients online and start driving volume in.
Speaker Change: The first integration has gone on track.
Speaker Change: And it's been we've had a lot of good learnings that we can apply into the others to ensure that they can move rapidly as well.
Speaker Change: Okay.
Speaker Change: Maybe on pricing.
Speaker Change: So Kevin almost 3500 in the first quarter extra prior period, maybe closer to like 31 3200, how should we think about pricing playing out like in Q2 and for the rest of the year and can you discuss potential.
Speaker Change: For upside.
Speaker Change: Yeah, and I think it's important to note.
Speaker Change: Maybe that's the distinction between those true up estimates versus anything that might be considered one time or discrete go back to the fourth quarter. We had what we signaled was a discrete benefit in the fourth quarter.
Speaker Change: That being a bit of a special multi year.
Speaker Change: <unk> very material appeal win from one of the large national payers.
Speaker Change: Our view that very differently than ordinary course true ups in estimates frankly, the GAAP calculations take a six month look back.
Speaker Change: This aggregating to really get through an estimated cash collection position and what that what that means. The reality is every month, we're dropping off older months from six months ago in that calculation and picking up a newer model and so those calculations will pick up.
Speaker Change: Estimate changes or true ups, or frankly true downs in periods, where.
Speaker Change: Collections are not meeting previous estimates what you've now seen from US is I think it's six quarters.
Speaker Change: Around there of positive true up adjustments running through any quarter. This quarter was no difference roughly $6 million and I don't consider that to be discrete or nonrecurring, which is why we didn't call it out as such but more so.
Speaker Change: An indication that we remain in a prevailing period of improving the revenue cycle to reduce denials and every months dropping off in older months, where we were collecting less than we are today and so consistent with maybe some past comments on where to take that reimbursement rate from an outlook.
Speaker Change: Perspective, moving forward I think it's the new floor in which we're going to continue to build off of versus expecting.
Speaker Change: Something lower to hit next quarter in terms of <unk>.
Speaker Change: Sharp drop off not being able to rely on those true ups, we've had been pretty consistently in this range of.
Speaker Change: Call it $3 million to $7 million every quarter and I think we're still in the.
Speaker Change: Mid mid to early innings of it.
Speaker Change: Proving the overall revenue cycle still getting paid.
Speaker Change: Only about half of the time, a little bit more than half of the time now on insurance adjudicated claims and we think that's nowhere near optimized than normal with the vast majority of denial still coming in as administrative or procedural denials and so things that I would call within our control to rectified and fixed.
Speaker Change: Through engaging with payers and so that hard work is going to continue which should further lead to a reduction in denials and overall improvements in that average reimbursement rate going forward.
Speaker Change: Great. Thank you, maybe if I can sneak in one or two quick ones you talked about a strong March and a good start to the quarter any color on how April has gone.
Speaker Change: Yes momentum is carried forward.
Speaker Change: April.
Speaker Change: March and April playing out as expected which is <unk>.
Speaker Change: Certainly plays into the expectations seasonally that we're now through the bad weather months were through that carryover effect of people.
Speaker Change: People pulling appointments into December before Copays and deductibles.
Speaker Change: Volume playing out as expected, which led us to the conviction that we should reaffirm our guide, which was a full year plus 30% or higher on on volumes.
Speaker Change: Great and then just final one you talked about newborn screening and farm. It in the prepared remarks, when could those become kind of part of the revenue stream here is a $25 26, if any any visibility on that thank you.
Speaker Change: Yeah, I think for newborn screening were saying legislation and Florida that has been.
Speaker Change: Introduced and has made it I think through the house, but.
Speaker Change: From a broader perspective, we see newborn screening is being a contributor to revenue streams less likely in that and then 27 time frame.
Speaker Change: Unlikely before that.
Speaker Change: There could be some possibilities as we think about it.
Speaker Change: The buyback opportunity and how we might be able to bring on some revenue through those sorts of efforts, but those are going to be smaller efforts in the beginning I think we're just really encouraged to.
Speaker Change: Disease States, taking action like Florida, they are really trying to set the model.
Speaker Change: They get a hold of disease manifestation. So.
Speaker Change: Keep expectations Super modest on newborn screening until we really start to see some traction out there.
Speaker Change: Great. Thanks, a lot.
Speaker Change: Thank you.
Mark Massaro: And our next question comes from Mark Massaro of BTG. Your line is open.
Mark Massaro: Hey, guys. Thank you for taking the questions.
Speaker Change: But wanted to start on fabric genomics so.
Speaker Change: My understanding is that this provides another revenue opportunity for you with interpretation as a service can you just give us a sense for how youre thinking about pricing. These services or are these interpretations can.
Speaker Change: You speak to the gross margin profile, if they might be accretive to where you are today and then I saw that you maintained the profitability on an adjusted net income basis each quarter this year, which is great.
Speaker Change: Just wanted to get a sense for what the potential cash burn might look like for fabric. This year.
Speaker Change: Sure. So I'll start and then hand, it over to Kevin. So I think part of what excites us about <unk> is it's.
Speaker Change: The ability to really help us.
Speaker Change: <unk> continue to provide a valuable service, putting our data into their interpretation platform for any health system that wants to do.
Speaker Change: Their own in house sequencing and.
Speaker Change: And we've seen that over the past few years.
Speaker Change: And we continue to see it as an opportunity moving forward. So it enables us to really play a part in that and our service and from an economic standpoint.
Speaker Change: Furthermore, helped us on the international capability.
Speaker Change: We can essentially expand into international markets.
Speaker Change: Cost effectively and in a way that complies with with foreign regulation.
Speaker Change: But then again as we see newborn screening coming coming on board as well.
Speaker Change: Florida opportunity that I mentioned that gives us the opportunity to be able to help them accelerate and have standardized interpretation. So.
Speaker Change: We're really excited about what the.
Speaker Change: The acquisition of this asset can mean to accelerate the business.
Speaker Change: Have any comment on that the economics of it yeah from an overall profile perspective.
Speaker Change: Very different model of course than the full service gene Dx lab.
Speaker Change: Today that fabric business operates at near 70% gross margin and Thats through either interpretation as a service or software as a service so.
Speaker Change: Think of highly recurring.
Speaker Change: Sticky revenue streams, certainly at a lower dollar point then.
Speaker Change: A full diagnostic tests that we offer but with that lower price point also comes the fact that that business is not bearing the cost of running our facility operating a wet lab reagent costs really just providing.
Speaker Change: Click services from a software perspective, <unk> dry side interpretation and analysis to deliver a report.
Speaker Change: So high margin but of course.
Speaker Change: The model to be a bit more recurring.
Speaker Change: High volume from a burn profile a couple of million dollars a quarter.
Speaker Change: It's 22 people in terms of the overall size of the workforce.
Speaker Change: We will begin integration activities once we close on the deal, which we expect in the second quarter.
Speaker Change: I think where we see immediate opportunity is there really has not been.
Speaker Change: Any meaningful commercial investments into selling the product and so the team has accumulated a great set of clients and logos. If you look at the existing customer base.
Speaker Change: Very impressive client base, but very much.
Speaker Change: Undersized with respect to commercial Mike and we're optimistic that the.
Speaker Change: Jean Dx capabilities with respect to commercialization can pull through.
Speaker Change: Into certainly a higher revenue base, but also have expanding effect on gross margins and confident that the deal is accretive to us on the bottom line in 2026.
Speaker Change: Excellent that's very helpful and then.
Speaker Change: I wanted to ask it sounds like you've got ultra rapid order Bowl.
Speaker Change: Here in April.
Speaker Change: Either you just launched that or I would assume you just launched it but bottom line here what are you factoring in ultra rapid into your guidance. When you provided the guide on the Q4 call or do you think there could be upside from ultra rapid.
Speaker Change: In the back half of this year to the guidance.
Speaker Change: We contemplated it in the original guide, but of course always with the back half of the year. So so nothing contemplated in the original guide for Q1 or Q2, Theres a bit of an education process out in the field.
Speaker Change: We've now worked through that that's been wearable here just for a few weeks.
Speaker Change: The upside would come in what we see as the ultimate mix between the ultra rapid for today I'll call rapid and so we have two product lines now for the NICU. One is the two day turnaround time at a premium price point. The other is a five day turnaround time at <unk>.
Speaker Change: The lower price points.
Speaker Change: We actually believe that the price point there on both products as best in class in terms of offering cost back to clients and so the upside would be if we see ultra rapid <unk>.
Speaker Change: Take more than expected.
Speaker Change: Sure over the five day turnaround time, there'll be some pricing benefits there.
Speaker Change: Yeah, Alright this thing.
Speaker Change: On the NICU opportunity and it is all of the product attributes in addition to ethical Laura so.
Speaker Change: I think Laura is an enabler, but being able to have that five day turnaround a 48 hour turnaround being able to ensure that.
Speaker Change: But the reports coming out are coming with a very clear.
Speaker Change: Care plan for the Neonatologist in the family.
Speaker Change: Full suite of services that is going to be the reason that we're winning in the NICU.
Speaker Change: So epic is one piece turnaround times another piece, but it's that full end to end service.
Speaker Change: That is going to enable us.
Speaker Change: I have to realize that opportunity and again fewer than 5% of babies today are getting a genetic test so.
Speaker Change: It's a huge area of focus for us and it is that all in service and product.
Speaker Change: The strategy that we've got that's going to ensure that we're able to really deliver.
Speaker Change: Sally U and not setting.
Speaker Change: Okay, Great and then maybe one last one for me.
Kevin Daly: I guess, Kevin do you have a sense.
Speaker Change: Apologies, if I missed it but do you have a sense for roughly.
Kevin Daly: What the weather impact was.
Speaker Change: From the snow storms, and the wildfires and one less day.
Speaker Change: Yeah, I mean, the one less day is just tangible.
Speaker Change: So one day's worth of reports is a few hundred.
Speaker Change: From a weather perspective look I don't want to over or understate. It absolutely was a reality do we plan on certainly terrible weather in January and February we view this year happened to be extraordinary in terms of actual logistical disruption.
Speaker Change: Probably worth a day or two in terms of.
Speaker Change: Tangible carryover for the quarter.
Speaker Change: Okay.
Speaker Change: Thanks, very much guys.
Thank you.
Speaker Change: And our next question comes from Tycho Peterson of Jefferies. Your line is open.
Tycho Peterson: Hey, thanks.
Tycho Peterson: I'm wondering if you're able to kind of break out what you're expecting for new indications. This year, you mentioned new immune deficiencies, you've got cerebral palsy, you've got hearing loss and then are you able to quantify where you think mix will go for ultra rapid as well.
Tycho Peterson: So the blend of the new indications versus what I'll call the existing base.
Tycho Peterson: Just all contemplated in the basket to get us to the 30% or higher.
Tycho Peterson: Guide that we just reaffirmed which would of course call for something greater than the 24%. We just posted in the first quarter.
Tycho Peterson: In the second half of the year I think it's a bit early to tell what the impact is like we just launched immune deficiency disorders. A couple of weeks ago. So the team is out in the field.
Tycho Peterson: Either case, we're talking about is changing standard of care entrenched behaviors of physicians who've been ordering.
Tycho Peterson: Multi gene panels things like CMA.
Tycho Peterson: So a bit too early to tell but absolutely. It gives us confidence that that will be supplemental growth beyond what we've already been accumulating which is.
Tycho Peterson: <unk> been primarily over the past 18 months two years and introduction of the new call point of pediatric neurologists.
Tycho Peterson: Still very much a long runway of growth there so.
Tycho Peterson: Of course don't want to overlook. The fact that we are going to continue to farm that call point activating new docs and driving more same store sales from that.
Speaker Change: Im really consider things like immune.
Speaker Change: Immunologists and cerebral palsy, and there'll be more throughout the year in coming years.
Speaker Change: As supplemental.
Speaker Change: To that existing base, which still has a lot of opportunity to go for them.
Speaker Change: And as a reminder, 10000 rare diseases.
Speaker Change: We're able to diagnose so it.
Speaker Change: It will continue to be just that one.
Speaker Change: <unk> set of indications as they think about where we're going one of the things that I mentioned on the call is and me.
Speaker Change: We're going to focus on adult as well.
Speaker Change: There are many children, who grew up having a couple epic seizures, who did not get a diagnosis who are now adults.
Speaker Change: There are adults who are starting to see here. So we want to make sure that we can also start helping those patients as well and with a clear tied to reimbursement. We think that's another great opportunity that we're focused on as well.
Speaker Change: And on the ultra rapid mix question.
Speaker Change:
Speaker Change: Look we see a place in the market for both product lines.
Speaker Change: Obviously, the two day turnaround time offers benefit forward.
Speaker Change: Those kids that are in acute need.
Speaker Change: But there is a economic reality I think we actually believe that the health economic argument and savings is actually greater.
Speaker Change: With the premium priced two day product, but it is incumbent on us to now get that health economic data out into the field.
Speaker Change: The team now has everything they need to be equipped to go have those conversations with hospital administrators and in the C suite of hospitals, and we will be busy with that over the coming months.
Speaker Change: So too early to tell what the actual mix between the five day in the two day products will be with of course, the more of that drives into the two day time.
Speaker Change: <unk>.
Speaker Change: Provides uplift in terms of revenue at that higher price points.
Speaker Change: And at the same time, we think offers hospital systems, even greater value with respect to both the clinical and economic benefit.
Speaker Change: Yes, that's kind of what I was getting at because it kind of be the majority over time.
Speaker Change: For ultra rapid.
Speaker Change: Kevin can you maybe just on gross margin guidance.
Speaker Change: You were 69% in the first quarter of getting 66 to 68, maybe just talk about some of the gives and takes there, especially given that you're launching higher priced products here with ultra.
Speaker Change: Yeah look it was it was a race. So we wanted to raise guidance because ultimately feel really comfortable with both the reimbursement profile as well as the trajectory on Cogs.
Speaker Change: I think we remain absolutely optimistic that we can further drive down Cogs per test, but as we talked about in the past feel fairly well optimized from a wet lab perspective, the dry side lab is where we see opportunity for cost reductions that takes the deployment of some technology.
Speaker Change: And so on.
Speaker Change: All things that we provide from a guidance perspective tend to take a prudent conservative view and don't want to over promise until we actually see some of those technologies deployed into production.
Speaker Change: And so you can read it as fairly conservative while at the same time, we bumped up.
Speaker Change: The range of gross margin we think.
Speaker Change: In a meaningful way want to see some experience accumulated on those new indications to see if we're getting as well.
Speaker Change: Reimbursed and we won't know that until we go through a natural cycle.
Speaker Change: Producing the tests submitting to insurance and then seeing that the claims come back and it's too early to tell even on that first launch of of CP.
Speaker Change: Just not mature enough to have the data to know whether or not.
Speaker Change: Reimbursement will be as high so left some room.
Speaker Change: To be able to continually come back in.
Speaker Change: <unk> beat and raise on that component throughout the year.
Speaker Change: And then any kind of guess on where you might end the year on denial rates you know because I guess, you've got the epic integration can that help and then the.
Speaker Change: Mark or bill as you flagged as well I mean, how important are those in kind of improving the denial rate.
Speaker Change: Yeah.
Speaker Change: Driving down denials and improving that that reimbursement rate.
Speaker Change: Is multifactorial.
Speaker Change: Progress on state Medicaid programs absolutely helpful. We're serving all 50 states, whether they have coverage or not.
Speaker Change: Running through Cogs, and taking zeroes for the states without coverage. So any state that picks up policy coverage. We think is great for patients it's great for our business and we think we're saving the Medicaid program dollars.
Speaker Change: Through the utilization of these tests so.
Speaker Change: <unk> picked up another.
Speaker Change: State this quarter in new Mexico.
Speaker Change: It's not the biggest population center in the country, but they're all important.
Speaker Change: And I think also would note that the first quarter is not fully baked with respect to states in the past that I picked up coverage.
Speaker Change: So go back to my comments that every month, we're taking a six month look back.
Speaker Change: And dropping off in older month, and picking up a newer month and so even those states that have enacted coverage in the fourth quarter or to start on January one have yet in our calculations to reach full maturity and so we're still contemplating in those estimates periods, where we might've been taking zeroes and are no longer.
It's what gives me the confidence to say that we just posted well yes. It has some quote true up adjustments those adjustments or more so ordinary course.
Speaker Change: And should stay with us rather than something discrete or one off.
Speaker Change: Ultimately, we've been able to improve the denial rate a few hundred basis points each quarter in that underlying rate and I'd expect that to continue for a few quarters.
Speaker Change: For the remaining quarters of the year, we're nowhere near optimized.
Speaker Change: With the denial right now probably in the mid <unk> across all volume and.
Speaker Change: We absolutely think we should be getting paid something closer to 80% of the time over time.
Speaker Change: Okay, and then just last one for Katherine on pharma, you flagged, making progress there what should we be watching for over the remainder of this year.
Speaker Change: Yeah, I think it's a it's a steady drumbeat of additional partnerships and the nature of those partnerships.
Speaker Change: Sure.
Speaker Change: Essentially doing patient matching.
Speaker Change: Eligibility for clinical trials, we have a new tool called D and he has discovered that we introduced late last year.
Speaker Change: That's actually helping pharma companies when we take a look at the true prevalence of some of these diseases and it's been really rewarding.
Speaker Change: Take care back from them that they are indeed thing that the prevalent.
Speaker Change: For diseases are higher than what they anticipated that fundamentally changing the way that they're thinking about their businesses. So can you.
Speaker Change: <unk> partnerships.
Speaker Change: The course of this year, what we're not going to change the outlook on contribution to revenue I think we continue to see it as.
Speaker Change: As Kevin said on the call early innings, but and it's great to continue to see that the the contracts coming through Doctor sign on the regular set where we're happy with that momentum.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Matt <unk> of Goldman Sachs. Your line is open.
Speaker Change: Good morning, Thank you for taking our questions. This is well on for Matt just wanted to build on the Sunshine Genetics Act commentary earlier well its early days. It seems like support is growing for the whole genome approach. So have you seen any signs of a shift towards whole genome versus exome testing and what are the differences in Cogs.
Speaker Change: Those two tests.
Speaker Change: Yeah, So you're reading that correctly when we first started talking it says can Florida, it really was about inpatient and outpatient.
Speaker Change: And then the gentleman, who is sponsoring the bell had lost has been to a rare disease. So.
Speaker Change: When we started talking about the Guardian study it really kind of captivated.
Speaker Change: His vision for or being able to accelerate that as I said in my commentary, we're waiting for these kids to get sick newborn screening and the.
Speaker Change: The Guardian study identify them a positive diagnosis and three 2% of these babies, who otherwise would not have been diagnosed until they were.
Speaker Change: At least five years old so.
Speaker Change:
Speaker Change: So we're excited about the momentum that is building there and we do think that you know as.
Speaker Change: As we have been testifying in the state of Florida related to that legislation.
Speaker Change: We think that there's an important opportunity I know, they're kind of putting themselves fourth as being the standard in other states should be paying attention to that.
Speaker Change: And the federal government should be paying attention to it as well so.
Speaker Change: We hope that other states will follow and we think in our state by state conversations that we have with Medicaid and policymakers.
Speaker Change: We will continue to talk about Guardian animal continue to point to Florida as being the.
Speaker Change: The model for what excellence looks like in terms of putting genomics at the forefront and getting ahead of these kids getting really sick.
Speaker Change: Yes, the overall cost to produce genome is slightly higher today most of that actually you just pass through costs on reagents. So could use some help from.
Speaker Change: Our partners, there and bringing down consumable.
Speaker Change: Costs.
Speaker Change: If you look at Exxon Bruce do you know about the gross margin profile between the two product lines.
Speaker Change: Fairly similar.
Speaker Change: We are at this point relatively agnostic on whether it's an exome words, you know coming in both are good for our business. Both are good answers for physicians and their patients.
Speaker Change: Hum.
Speaker Change: A majority of that Exxon genome line for us today is Exxon, but that's frankly just where.
Speaker Change: Payers have been in terms of overall reimbursement do we expect that to change towards <unk>.
Speaker Change: Parity and ultimately the majority being whole genome we do.
Speaker Change: Our ticker symbol should.
Speaker Change: Should be reflective of.
Speaker Change: Of that we certainly see a world where.
Speaker Change: All hereditary diseases diagnosed off a whole genome and we're well prepared to lead that market, we lead the excellent market today with.
Speaker Change: 80% or higher market share of clinical exome and genome with the majority being exome and are well positioned to.
Speaker Change: Lead the market as it makes its transition to a whole genome, which we fully expect.
Speaker Change: And our data assets and capabilities and interpretation platform, all very much geared to service that market.
Speaker Change: That's super helpful. Thank you both and then just acknowledging there's a lot of uncertainty around policy changes now, but given your exposure to Medicaid just wanted to get your thoughts on any risks around potential Medicaid cuts to your business. Thank you.
Speaker Change: Yeah.
Speaker Change: Honestly continues to be an acute focus on reconciliation and in D. C has been spending a lot of time, there I will say.
Speaker Change: But the health of children in the United States continues to be something that everyone can agree on the.
Speaker Change: Despite all the noise that's out there so as we continue to work through I think the the coming week and likely months on them on the government getting to reconciliation.
We continue to believe that that remains exactly how Medicaid was designed for.
Speaker Change: Ensuring that the most vulnerable Americans young children, who are sick will have access to good health care.
Speaker Change: That's helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: And our next question comes from Brandon <unk> of Wells Fargo. Your line is open.
Brandon: Hey, Thanks, Good morning, Kevin and certainly the weather impact in the quarter, what do you expect to actually recouped those.
Speaker Change: Tests in <unk> or are you just assuming that.
Brandon: Sure.
Brandon: Forgone at this point in time.
Speaker Change: Terry cancer line will there still be some residual contribution into the second half as you wind that down.
Brandon: On the latter I would expect.
Brandon: Correct, Terry cancer to be zero or near zero in the second half of the year.
Brandon: So only some residual effect here for the remainder of the second quarter.
Brandon: Yes, it's a great point in terms of the weather impacts on appointments different than a routine.
Brandon: Clinical lab, where people might Miss things like annual Physicals, and then I'll get back to it. These kids are symptomatic and sick and so.
Brandon: Any missed appointment you would expect to see that recover the issue here, though is with the scarcity of expert geneticists and pediatric specialists to order. These test today.
Brandon: I E a pediatric neurologist or geneticist.
Brandon: Long wait times to get back into the office and so if you happen to Miss an appointment it may be weeks or even months before you can get back into the office.
Brandon: Frankly that scarcity of docs, who can order. These tests is something we're working hard to solve for.
Brandon: A major move we think ultimately would be to open up the PD attrition is in order for exome and genome.
To do that we've got to drive down complexity, we've got to make the user experience.
Brandon: Seamless drive down costs and speed and that's what <unk> has been working a decade to do.
Brandon: So yes, we would expect all those appointments to come back.
Brandon: But in this particular setting sometimes it takes.
Brandon: Weeks or even months to get back into a specialist.
Brandon: Very good thank you.
Brandon: Thank you I'm showing no further questions at this time I would like to turn it back to Catherine <unk> for closing remarks.
Catherine: Excellent well. Thank you so much for joining us today, we look forward to seeing you in the coming weeks and then coming months at conferences.
Brandon: We will talk to you soon.
Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.
Brandon: Okay.
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Brandon: Okay.
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Brandon: Yes.
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Brandon: Yes.
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Brandon: <unk>.
Brandon: Okay.