Q1 2025 Veracyte Inc Earnings Call
Good day and thank you for standing by. Welcome to the Veracyte First Quarter 2025 Financial Results webcast.
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Speaker Change: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Shayla Gorman, Senior Director and Master Relations.
Please go ahead.
Speaker Change: Good afternoon, everyone, and thank you for joining us today for a discussion of our first quarter 2025 financial results. With me today, our Marc Stapley, Veracyte's Chief Executive Officer, Rebecca Chambers, our Chief Financial Officer, and John Light, our Chief Commercial Officer, who will join us for Q&A.
Speaker Change: Veracyte issued a press release earlier this afternoon detailing our first quarter 2025 financial result.
Speaker Change: Before we begin, I'd like to remind you that statements we make during this call will include forward-looking statements as defined under applicable securities laws.
Speaker Change: Forward-looking statements are subject to risks and uncertainties, and the company can give no assurance they will prove to be correct Additionally, we are not under any obligation to provide further updates on our business trends or our performance during the quarter
Speaker Change: To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Veracyte files with the Securities and Exchange Commission, including the most recent forms 10Q and 10K.
In addition, this call will include certain non-GAAP financial measures.
Speaker Change: Reconciliation of these measures to the most directly comparable GAAP financial measures are included in today's earnings release accessible from the investor section of Veracyte's website.
Speaker Change: I will now turn the call over to Marc Stapley, Veracyte CEA.
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Speaker Change: Thank you, Shayla and thanks everyone for joining us today. I am pleased to share our Q1 results as well as updates on our growth drivers and other key initiatives, all of which are the results of our team's daily focus on serving patients globally.
Speaker Change: Q1 total revenue of $114.5 million or 18% year-over-year growth was fueled by testing revenue which grew 19% year-over-year or 21% after adjusting for imbibia.
Speaker Change: With both decisive and a firm are delivering another strong quarter of double digit volume growth, 37% and 10% respectively. We are encouraged by the ongoing durability of our core testing business.
Speaker Change: and are confident in delivering on our expectations for this year and beyond despite the challenging macro environment.
Speaker Change: We delivered a healthy adjusted EBITDA margin of 21.6%, meaningfully higher than we expected, and ended the quarter with a strong balance sheet comprising $287 million of cash and short-term investments.
Speaker Change: As you know, we are focused on a number of strategic initiatives.
Speaker Change: including growing our existing tests, deciphering a firmer, expanding across the care continuum with our minimal residual disease platform, expanding internationally, and solving novel cancer challenges with innovative products like upper septa nasal swab. [inaudible]
Speaker Change: Today I am excited to share our progress and some new initiatives.
Speaker Change: Starting with this item, the impressive 37% year of year volume growth resulted in approximately 22,600 tests and revenue growth of 33% with the driver of this difference being higher prior period collections last year.
Speaker Change: Encouragingly, we continue to see broad-based expansion across each biopsy and CCN risk category, with roughly similar growth in low, intermediate and high risk.
Speaker Change: Further this quarter, we saw both a record number of ordering providers up over 20% from the prior year and increased orders per physician.
Speaker Change: While January and February were, as previously shared, seasonally lower months, Mars was exceptional, and that strong momentum continued in April .
Speaker Change: We believe these positive trends are a testament to the recent NCC and guideline update, as well as the excellent execution of our commercial laboratory teams.
Speaker Change: Looking ahead, there are a number of activities that position us for sustained, strong, double digit
Speaker Change: with meaningfully differentiated performance and an incredible body of clinical evidence, decipher is already in a field of its own.
Speaker Change: At the recent AUA annual meeting in April , there were no less than 18 new abstracts presented across both the site for prostate and bladder, including new data from the use of deciphering clinical trials, as well as insights derived from the research use only grid platform.
Speaker Change: We are also progressing across the care continuum with our decipher prostate metastatic launch.
Speaker Change: As of late April , decided the prostate is available for use in the metastatic population on a limited basis.
Speaker Change: and will be available, broadly in June , meeting our expected launch timeline.
Speaker Change: The clinical validity and clinical utility for use in the patient population has been demonstrated in multiple prospective phase three clinical studies, including the results from the Stampede trial presented at ESMO Congress 2024.
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Speaker Change: Importantly, the test will provide information to help clinicians determine which patients will likely benefit from chemotherapy and which will not thereby avoid unnecessary toxic side effects.
Speaker Change: One such case involves an older man who was diagnosed with metastatic disease.
Speaker Change: His Doctor ordered the test to help guide treatment selection between doublet therapy, that is ADT plus ARPI.
and Triple Therapy, with the edition of Dosa Taxel.
Speaker Change: Although the patient is fit, active and fully independent, his physician was concerned about adding the chemotherapy.
Speaker Change: The disciple prostate metastatic tests will provide an additional data point for the physician and patient as they make the treatment decisions necessary this critical phase of the disease balancing the likely benefit with the impact on quality of life.
Speaker Change: This launch meaning to expand the population appropriate for this type of testing, serving an incremental 30,000 patients diagnosed annually, and now addressing the entire risk spectrum of prostate cancer. Further strengthening our confidence in the test long-term growth trajectory.
Speaker Change: We have also continued our investment in digital pathology studies to assess the complementary benefits of the technology as well as to ensure research collaborators have been necessary tools to further our collective understanding of prostate cancer.
Speaker Change: In addition to the data presented at the 2025 ASCO GU earlier in the year, we have now scanned over 70,000 slides from over 40,000 de-identified patients with outcomes data.
Speaker Change: solidifying our digital pathology capabilities with advanced AI models that incorporate long-term outcomes, and may ultimately complement with prognostic power by the site's attest.
Speaker Change: Further, we have recently made our digital pathology services and associated AI models available to research collaborators to advance the science in the field to combine AI-based imaging and molecular analysis.
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Speaker Change: Looking ahead with the most prolific and growing body of real-world evidence, NCCN guideline recommendation, and now the expansion into the metastatic patient, disciples' opportunity to significantly penetrate the nascent and growing prostate cancer market is even clearer. We're looking forward to continuing to drive meaningful growth for the deciphered franchise for years to come.
Speaker Change: Moving to a firmer, volume growth continues to be strong and increased as I mentioned previously, 10% year over year, resulting in approximately 15,500 tests.
Speaker Change: We were encouraged to see higher year-of-year utilization per account again this quarter, which gives us confidence in the go-forward durability of the Affirmative franchise.
Speaker Change: Revenue growth was lower than volume growth driven by the prior period collection benefit in 2024, as well as the negative impact of a lab benefit manager's mistaken coverage policy change last year.
Speaker Change: While the mistake was quickly corrected, it took longer than anticipated to be worked through the respective pair systems.
Speaker Change: and therefore reduced collections below the amount estimated over the course of 2024.
Speaker Change: This has been fully resolved. However, we are still adjudicating some of these claims and the full return to normal rates may take another quarter or two to be reflected.
Speaker Change: With the volume strength we're seeing, as well as indication expansion on the product enhancements we've delivered, our confidence remains strong that a firmer will continue to gain in both share and penetration.
Speaker Change: We expect the first presentation of independent analysis leveraging the grid database later this month at AES, and look forward to sharing additional publications and post-opresentations that advanced thyroid, nodule, and cancer research.
Speaker Change: As with this site, the flywheel of research in evidence around the test is representative of the power of the Veracyte Diagnostics Platform and will enable efficient evidence generation and insights that will help expand patient treatment and ultimately we expect will drive continued growth.
Speaker Change: While on the topic of a firmer, I'm excited to share key advancements that we are making and I'll clear it up.
Speaker Change: Over the past two years, we have invested in improving the efficiency of our testing business.
Speaker Change: As part of our overall contour reduction roadmap, we have been working to transition a firmer onto V2 of our Veracyte transcriptome running on the latest and most cost effective sequencing technology.
Speaker Change: We will first launch a firmware on the updated assay this summer.
Speaker Change: This transition enables cost reductions that are designed to offset normal reagent-less price increases we might experience in 2026 and beyond, while also helping to mitigate unpredictable tariff impacts, and to potentially enable us to reinvest the organic opportunities to serve more patients.
Speaker Change: I'm also excited to be able to announce today that we have decided to launch Prosigna as an LVT for the US press press cancer market, given the tremendous opportunity we see ahead.
Speaker Change: There are over 300,000 patients diagnosed annually with breast cancer in the US, and approximately 225,000 of those have early stage hormone receptor positive disease, and would be eligible for the test.
Speaker Change: Prosegnor, which is based on the well-known, well-researched and scientificly respected PAM-50 signature, can provide physicians and their patients with additional data around the biological classification of the cancer and the risk of recurrent to help inform treatment decisions.
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Speaker Change: While Prasignar is currently available only as an IVD on the end-counter platform, the Prasignar LDP will be run out of a clear lab using our brand new V2 Garaflight Transcript on.
Speaker Change: Commercial availability will begin in mid-2026, when we believe key data readouts, some of which we'll see in the next few months, will support adoption of prosignor, augmenting the cipher and a firmer growth in the near-to-mid-term.
Speaker Change: As always, we are focused on driving evidence for the test through the Veracyte Diagnostic Platform to support continued research for patients navigating the stressful diagnosis with this and associated treatment paths.
Speaker Change: Moving to the other growth drivers mentioned previously, I would like to start with our commitment to serve more of the patient journey through MRD in recurrence testing.
Speaker Change: RMID approaches differentiated in that it is whole genome every step of the way including the initial baseline sequencing followed by the sequencing of serial testing samples.
Speaker Change: This approach is backed by our fundamental beliefs that more data drives more insight, more clinical evidence, more pair coverage and therefore more durable adoption.
Speaker Change: We have made good progress in advancing our MRD platform for our first indication muscle-invasive bladder cancer.
Speaker Change: This indication will leverage our strong disciple channel that serves urologists and radiation oncologists.
Speaker Change: In March, we submitted our tech assessment to Moldiex and remain on track for commercial launch in the first half of 2026, once we have reimbursement in place.
Speaker Change: While we are initially focused on MIBC, beginning in 2027, we plan to deliver indication expansion annually, serving more patients across more indications.
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Speaker Change: Building out the clinical evidence behind our platform is key to our go-to-market approach.
Speaker Change: We're excited to share the IMRD platform with selectors for the important umbrella trial being run out of Institute Gustav Bracy on approximately 700 patients with non-small cell lung cancer, colorectal cancer, soft tissue sarcoma and pancreatic cancer
Speaker Change: as well as leveraging MRD positive status to direct IO therapy.
Speaker Change: Umbrella Investigators chose RMRD platform given its Tissue Agnostic Analyst Validation, which enables a trial to include multiple tumor types
Speaker Change: The data from some of these indications will be pivotal as we look to expand our test beyond M.I.B.C. in the future.
Speaker Change: Further, strong performance data from the multi-center, interventional Tom Bolas clinical trial was presented at the annual European Association of Eurology, EAU Congress in March 2025, supporting the accuracy of our whole genome sequencing based MRD platform for MIVC.
Speaker Change: This data shows that all tests had a higher specificity, equivalent in outstanding negative predictive value, when compared to a DDPCR approach, and was able to detect cancer occurrence, a median of 93 days soon of standard imaging.
Speaker Change: Next, turning to our Geographic Expansion Strategic Growth Driver, where we are committed to launching our Tesla's IVDs to address patient needs outside the US, I would like to update you on the ongoing process with our French subsidiary, Veracyte SAS or SAS.
Speaker Change: As I had previously shared, Veracyte Inc. notified Sass that we were considering no longer funding their operations.
Speaker Change: As a result, staff engaged in consultation proceedings with the Works Council in France, while also seeking to identify one or more buyers for all our parts of the staff's activities.
Speaker Change: In late April , Veracyte Inc. notified SAS that Inc. definitively decided to no longer fund the entity, and accordingly, SAS filed a bankruptcy petition shortly thereafter.
Speaker Change: We remain confident in a full resolution of staff proceedings by the end of the year, for which time Veracyte include no longer own or operate the Marseille facility.
Speaker Change: We are focused on maintaining per sickness supply to help minimize patient impact as much as we can.
Speaker Change: Daphneck's financial advisers are working to identify potential bias for portions of the business, and any cell would be handled by the commercial court as part of the proceedings.
Speaker Change: I decision to no longer fund staff does not reflect to change of strategy or our commitment to global expansion.
Speaker Change: But this process does inevitably impact our IBD product development timelines as previously shared.
Importantly, we have made significant progress on these products.
Speaker Change: For example, our disciple PCR-IVD product is bridged and partially validated with a single pilot log, thereby meaningfully reducing technical risk.
Speaker Change: We are now in the process of re-initiating that development program in the US, working with a US-based contract manufacturer, and expect a complete joint development and manufacturing work by the end of next year.
Speaker Change: Similarly, we now expect to complete our Prosigment in GSI-VD product development work by the end of 2026 as well, working with a different third-party contract manufacturer.
Speaker Change: We continue to work with TUV Rhineland on notified body and are in the process of recent emitting pro-signal and counter to the North America division.
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Speaker Change: These steps will all be necessary to launch our AVD products in Europe , along with gaining reimbursement in the country by country, which as always will take some time.
Speaker Change: Importantly, we don't believe this change in development and certification timelines meaningfully impacts our revenue models for the next five years.
Speaker Change: And in fact, we expect that any delay of IVD product revenue will be more than offset by the launch in the U.S. next year of our Pro-Signal DT.
Speaker Change: A last-growth driver is solving new catfish challenges with innovative products like half-percepts and nasal swabs.
Speaker Change: To which we remain very committed as evidenced by our major investment in clinical evidence.
Speaker Change: lung cancer is the leading cause of death worldwide and early detection of management is key to reducing mortality and improving outcomes.
Speaker Change: The Satsa nasal swab is a simple, non-invasive test that assesses lung cancer risk in patients with a detected lung nodule and smoking history, so that the right patients get the right intervention at the right time.
Speaker Change: In the first quarter, we were pleased to publish nasal swab analytical validity data in BMC Cancer, demonstrating the robustness of the test.
Speaker Change: This publication, as well as completion of the prospective Nightingale study, are key steps in our effort to bring this important test to patients.
Speaker Change: With a target of 2400 patients, Nightingale is now close to 95% enrolled, and with just over 100 patients left to register, we are now confident in predicting completion of enrollment in the third quarter.
Speaker Change: Then we will be able to commence the important follow-up and data analysis leading to publication and ultimately reimbursement.
Speaker Change: To summarize, a verify everything we do is to advance our vision of transforming cancer care to improve patient lives all over the world.
Speaker Change: Leveraging our unique Veracyte Diagnostics platform, we deliver the deep insights that physicians can rely on today while continuously fueling the flywheel of evidence needed to solve new cancer challenges tomorrow.
Speaker Change: Q-on was another amazing quarter, demonstrating our capabilities to this end.
We saw incredible volume growth across our core testing business.
Speaker Change: Meaningful Straits in our Contre Reduction Roadmap, Progress on our Commitment to Launch Nuclear Test Starting with Procognit LDT, and Great Progress across all of our long-term growth drivers during the quarter.
Speaker Change: We have a rich and exciting portfolio of products in development over the next few years and beyond, and I'm confident these activities as well as others we're working on will enable us to serve even more patients facing cancer, ensuring we are living our ethos of patients as our purpose.
Speaker Change: With that, I will now turn to Rebecca to review our financial results for the first quarter, as well as our outlook for 2025.
Thank you very much.
Rebecca Chambers: Thanks, Marc. As mentioned, Q1 was a strong start to the year as we delivered revenue of $114.5 million in increase of 18% over the prior year period.
Rebecca Chambers: Further, total volume grew to approximately 40,650 tons, a 22% increase over the same period in 2024.
Rebecca Chambers: Testing revenue during the quarter was $107.3 million, an increase of 19% year-over-year driven by decipher and a firm on revenue growth of 33% and 6% respectively.
Total Testing Volume was approximately 38,000 tests.
Rebecca Chambers: Testing ASP was $2,818, down 3% compared to the prior year, and includes approximately $600,000 of prior period collections or PPC.
Rebecca Chambers: Adjusting for the impact of PPC, testing ASP would have been approximately $2800 roughly flat compared to Q1 2024.
Rebecca Chambers: Turning to the product line, first quarter volume was approximately 2,570 tests and revenue was $3.6 million, up 1% year-over-year as our actions to maintain continuity of supply over the quarter were more successful than anticipated.
Rebecca Chambers: Biopharmaceutical and other revenue with $3.6 million, up 19% year-over-year, as Sav's customers accelerated programs, given Veracyte Inc's impending financing decision.
Rebecca Chambers: Moving to Gross Margin and operating expenses, I will highlight our non-GAAP results.
Rebecca Chambers: non-GAAP Gross Margin with 72%, up approximately 400 basis points compared to the prior year period.
Rebecca Chambers: Testing Rose Margin with 74%, up approximately 200 basis points giving timing of material spend as well as the benefit of automation and lab efficiency programs that we launched late last year.
Rebecca Chambers: Product margin was 60 percent, up materially from the prior year period given higher cost absorption. Biopharmaceutical and other gross margin was 27 percent, up 18 percent year over year.
Rebecca Chambers: non-GAAP operating expenses were up 14 percent year-over-year at $60.5 million. Research and development expenses increased by $2.1 million to $15.7 million given increased development spend in one additional month of personnel expense from our C2I acquisition as compared to the prior year period.
Rebecca Chambers: Sales and marketing expenses increased by $0.8 million to $22.5 million.
Rebecca Chambers: GNA expenses were up $4.5 million to $22.3 million partially driven by billing and customer service hiring to support our scaling testing business and IT support for product development project.
Rebecca Chambers: Moving to profitability metrics, our financial profile continues to be best in class.
driven by our disciplined approach.
Rebecca Chambers: In the first quarter, we recorded gap net income of $7 million and delivered adjusted EBITDA of $24.7 million or $21.6% of revenue.
Rebecca Chambers: Well ahead of expectations as we've benefited from our lab efficiency projects as well as the timing of project spent.
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Rebecca Chambers: Turning to our second quarter outlook, we expect testing revenue to step up sequentially. For Gross Margin, we're expecting a modest step down sequentially given lower fixed cost absorption at our Marseille site, and the timing of considerable spend in our testing
Rebecca Chambers: Based on the current fast dynamic, we expect product revenue of approximately $2.5 million while biopharma and other revenues expected to be approximately $1.5 million.
Rebecca Chambers: Going forward, product revenue should remain flat sequentially as long as we are able to maintain continuity of supply for pro-figma unencounter and minimize customer disruption.
Rebecca Chambers: For Bio-Farman, other once-ass process concludes, most of this revenue will go away.
Rebecca Chambers: Given our solid Q1 results, we are reiterating our 2025 testing revenue guidance of $470 million to $480 million.
Rebecca Chambers: Due to our strong Q1 performance and the gross margin improvement projects, we expect to benefit from in the second half, we are raising adjusted even a margin guidance for the year to 22 and a half percent from 21.6 percent previously. [inaudible]
Rebecca Chambers: Also, we are estimating our 2025 gap and non-GAAP tax rate to be in the mid-single digit.
Rebecca Chambers: In closing, we were encouraged by the performance of both a firma and a cipher in the first quarter, and the value we're delivering to both patience and clinician.
Rebecca Chambers: with a robust set of growth drivers, including the recent launch of decipher in the medisatic population and the upcoming launch of our Prosigna LDT, we are well-positioned to deliver sustained growth in our business.
Rebecca Chambers: Above all, we remain deeply committed to our mission of transforming cancer care and improving patient lives all over the world. We'll now turn to the Q&A portion of the call.
Speaker Change: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
Speaker Change: We ask that you please limit your questions to one question plus one follow-up question. Please stand by while we compile the Q&A roster.
Thank you. Thank you.
Thank you.
Speaker Change: Our first question comes from the line of Subhalaxmi Nambi, of Guggenheim Securities, your line is now open.
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Thank you. Thank you for taking my question.
Speaker Change: There are two topics that I would like to cover first. [inaudible]
Speaker Change: You are a management team that has not been timid in pursuit of portfolio optimization whether it's moving out of businesses.
Speaker Change: or adding new products via M&A. How do you feel about the portfolio as it stands today? And is there a desire to round out the portfolio in a way that would give you broader manual similar to other companies in this area?
Speaker Change: Second, one question we get a lot is how to think about the pipeline value of airside, MRD and Navel's swab especially. How would you respond to those who believe the value assigned to those initiatives are limited? Thank you guys.
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Speaker Change: Yeah, thanks Sue, we appreciate the question and you're absolutely right. We've been very focused on portfolio management, making sure that things that we are investing in have both the appropriate evidence reimbursement and are launched at the right time.
Speaker Change: We're not investing in things that don't have the ROI and then adding to our portfolio, for example, by acquiring an MRD asset.
Speaker Change: If I kind of just remind everybody where we were, we started out as a company with a single product and a single indication, so a firm of thyroid in determinate thyroid and then we've added not just new products but also broadened and lengthened
Speaker Change: The indications of those products cover, for example, in a firmer, with a firmer we've added to it, and we're now working on the third to five.
Speaker Change: with Discycle, which is an even better example of the expansion, it started out in RP, expanded to biopsy.
and now it's expanding to metastatic.
Speaker Change: and so now decipher covers the entire spectrum of patients with prostate cancer. So I'd say number one is expand within the indication.
Speaker Change: as much as you can, given the leverage. Number two is expand the channel, and so you've seen us, you know, take a urology channel and expand that with a bladder test and soon to be MRD.
And then the third would be indications.
Speaker Change: and you've heard us talk a lot about adding long as an indication, which we're very, very, very...
Speaker Change: Significantly working on and then as we announce today really adding breasters and indication in the US next year as well.
Speaker Change: and so, and then, you know, taking our MRD platform, and as we mentioned today, expanding the indication there, one a year, starting in 2027, and a half till we can approve this out, with our launch in muscle-invasive bladder cancer.
Speaker Change: So, as I think about that portfolio, I think it's incredibly broad.
Speaker Change: with a rich pipeline of new products to come, and I couldn't be more excited about it. Now, could we continue to add more menu short, and as you can imagine, we work a lot on things like that both organically and organically and if they were great opportunities.
Speaker Change: We would certainly perceive them, which is why we just announce what we're doing in breast, for example.
Speaker Change: The second part of your question on the pipeline value, I agree with you, I think the...
Speaker Change: The MRD and nasal swab are not much in there today and we're proving both of those out and we've got milestones. We've told you what the milestones are and MRD is a muscle-invasive bladder launch next year.
Speaker Change: First half in nasal swab is completing the nightingale study and ultimately getting that product reimbursed and launched.
Speaker Change: and those are massive markets. And if you think about it in both cases, growing from zero in significant markets across multiple indications in the case of MRD. And so, you know, we've got different differentiated products in both cases.
Speaker Change: and we've proven our execution capability. So I think investors should look at that track record and evaluate those markets and verify the quality.
Speaker Change: Yeah and he just the only thing to add is you know I think historically those have been longer dated growth drivers right so as we look at where we are today. Okay.
Speaker Change: here in May of 25. We have multiple product launches coming up over, you know, the next 12 to 18 months here at ID&T.
Speaker Change: I agree wholeheartedly with Marc on everything he said. The only thing I would add is, you know, the time is coming where these things are going to be super exciting and launched and will be able to demonstrate our execution in multiple areas besides just a firm and a decipher.
Speaker Change: Hey guys, thank you so much for articulating that. I'll hop back in the queue.
Thank you very much.
Thank you.
Speaker Change: Our next question comes from the line of Andrew Brackmann, a William Blair, your line is now open.
Speaker Change: Good afternoon. Maybe I actually pick up on the last question there. You know, you obviously do have these product catalysts and launches over the next coming quarters and years. Maybe just big picture, can you talk about how you're ensuring organizational readiness, both commercially and operationally for these launches? And how do you sort of think about investment into some of the areas that you still need? What are those areas and how much are you sort of willing to spend? Thanks. Thank you.
Speaker Change: Yeah, it's a great question. Our first step is obviously to get these products to market and go through the product development and we talk about how much we invest in that.
Speaker Change: as well as generating the evidence, which is a key part of our, you know, our engine, our Veracyte Diagnostics platform, to make sure that, you know, we don't just launch markets on products on the market that don't have the evidence to support adoption and reimbursement and ultimately guidelines.
Speaker Change: So all of this is coming together and then it's you know at the end of it there's a obviously a launch plan.
Speaker Change: with the commercial activities, all planned out around that. And it's a very thoughtful launch plan. I'll let John discuss a little bit more of it. It's on the call with us today.
Speaker Change: But you know, we make sure that we don't, you know, we don't invest ahead of the opportunity growing. So we add, when you saw us do this with the site of the firm, we add sales teams and commercial capabilities as we need it, as we grow, John Wona.
John Light: Scott and Bitmo. Yeah, thanks, Marc. I'll add to that just by saying you'll see that there's been great thoughtfulness in how we think about the analytical platform first. We mentioned today version two of our transcriptome. That's the underpinning of a variety of products that we're developing and launching.
John Light: Number two with C2Y, acquisition we mentioned from the very beginning. We really saw that as a platform play from which we became leverage and launch new indications rather quickly.
Speaker Change: So it all starts in the lab. And then from there I would say channel synergies are what we look at very very carefully with the muscle invasive bladder cancer. One of the selection criteria for that was that through the market where we have a leadership. We have very strong relationships with those ordering positions. [inaudible]
Taking on a big investment up front, but looking to scale that over time as we see proportionate [inaudible]
Speaker Change: And just on the investment front, perhaps Andrew, is both Marc and John Allude mentioned, obviously the lab is a critical cornerstone of us being able from an organizational perspective to be ready here.
Speaker Change: and I think we've previously mentioned, I know it's in our filings that we have renewed the release for both San Diego and San Francisco and are in the process of...
Speaker Change: Building out capacity in both locations that allow us to operate for the next five to seven years and so you know from that standpoint the lab is ready to go for all these things once they're finalized in development. And obviously both John and Marc both cited that we you know we parse into these commercial channels if they're they're not new, you know we will have some incremental investment on the R&D front to get all of these to mark market over the next 18 months.
Speaker Change: That being said, we all are obviously always looking at our financial profile and ensuring that it is, you know, delivering upon what we have shared with you all. And also,
Speaker Change: You know in any given year things can swing a little bit one way or the other as we look for the next 18 months though you know obviously we're expanding our Adjusted EBITDA margin guidance today and that's a great it's going in the right direction and and obviously we we think about balancing all these things as we structure our PNL in any given year.
Speaker Change: That's great color. Thanks for all that. And then maybe just on decipher today, Marc, I think you caught out a 20% increase in the ordering position based in the quarter. Thank you very much.
Speaker Change: Can you maybe just tell us a little bit more about that 20% increase? Who are those doctors that sort of came on board? Are they competitive wins? Or are they new to testing in sort of general? And then as you sort of think about the...
Speaker Change: and the potential for additional doctors to come on board. Where are we in terms of penetration into the overall board, ordering based
Thank you.
Speaker Change: Yeah, thanks Andrew. The commercial execution of this call and decipher has been yet again exceptional setting new records and you know John Lee's that organization I'm going to ask John to share a little bit about the makeup of that 20% growth. Yes, it's a bit of a mixed bag, Andrew. Thanks for the question. We're.
Constantly running initiatives within our...
John Light: Commercial Strategy that focus on a new physician that are new to the test.
John Light: or their formerly ordering physicians that for some reason or another has kind of fallen off that are familiar with the test but maybe their ordering rate has fallen off and we've reactivated them.
John Light: and we see great gains there. Some are entirely new to the business and have never ordered a genomic test before so that would be pure penetration into the space and then as you alluded a good number or a market share gain.
and on the penetration.
John Light: from an ordering perspective. I think, you know, the key there is obviously we're penetrating the larger accounts and there's always going to be a long tell of smaller accounts.
John Light: But the penetration into the position base, which is an extremely difficult number to measure actually in terms of who are the hatch and ordering position. But the penetration is very strong. Obviously we've forgiven that long tail as a percentage. You'd expect it to be a little smaller than our overall penetration.
John Light: which is, I remind everybody, again, you know, about market, about 40% penetrated and deciphered about 65% share, but still very strong.
Alright, thank you.
Our next question.
Speaker Change: comes from the line of Puneet Souda of Learing Partners, your line is no open.
Puneet Suda: Yeah, guys, thanks for the questions here. So maybe first on the guide, I just wanted to clarify the moving parts there.
Puneet Suda: In terms of the number you delivered me, you came in, I think, 4 million ahead of the street, but you're not brazing your guy, there's Envisia, some impact in there, there's some of that, there is...
Speaker Change: Impact, maybe from Marstay, and the Biopharma is getting pulled out.
Speaker Change: So can you maybe walk us through those and then beyond that, how are you, how should we expect the format growth rate, it looks like it's been low single digit growth, is that the right way to think about a format and then you know decipher as well within the context of the guide. Thank you very much.
Speaker Change: on the timing of the Marseille operation, which then impacts the total revenue of that all made sense.
Speaker Change: I'm going to pause there and just make sure, do you have any follow-ups on that before I move to Affirma? Yes.
Speaker Change: No, that's helpful, yeah, I know Farma. Okay, great. For a Farma, we delivered 10% volume growth, 6% revenue growth.
Speaker Change: About two-thirds of the delta between the two was tied to prior period collection in the prior year. A third was tied to the LVM impact that Marc mentioned.
Speaker Change: So, 6% revenue growth in Q1, we are still contemplating high single-digit revenue growth for the year. I think you might be looking at it with cytology, which we have set on the last call cytology, typically is pretty flat. So, we don't think about...
Speaker Change: Scytology in the same way. Scytology is a mechanism of getting samples not necessarily a growth driver for us. So we think what we think about a firm award, giving just the firm a number or not including Scytology.
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Speaker Change: Got it. Okay, that's helpful. And then on the Marseille side, can you just, you, you, you talked about gross margin impact.
Speaker Change: because of the fixed cost, but can you just clarify how should we think about the was there an off-ex impact as you continue to run this facility into 2025 and and then what are the scenarios there could this is their scenario in which it could take longer than the year end of 25.
Thank you for tuning in. Have a great day.
Speaker Change: Yeah, I'm happy to take that and kind of have Marco Pine. Yes, we had our typical run rate of OpEx in Marseille. We said with revenue that was about a $20 million loss on an annualized basis.
Speaker Change: if you just take that impact. And then with regard to the process itself, we have confidence that we will be done by the end of this year. Obviously, you know...
Speaker Change: These things could take longer. I wouldn't say that's a 0% probability, but are all of our expectations, all of our...
Rebecca Chambers, Shayla Gorman
Speaker Change: Yeah, and don't forget there's some more so if you think about it Puneet, there's some one-time cults associated with this as well that we talked about last but on our estimates around that of a similar of 15 million. And that's a cash number, there'll be non-cash impacts as well. Thanks for that reminder, Marc. Yep.
Speaker Change: Ok, thank you, and then if I could just ask one last one on on pro-signal, you're launching that in U.S., I just want to understand, is there?
Um...
Speaker Change: Something differentiating about the test because it is launching in a market that is well penetrated.
Speaker Change: Ongotide DX has been in the breast market, well established for a long time, you've got Mammapurne there too. So, just trying to understand, you know, how are you thinking about the US market and the growth expectation for Prasigna. [inaudible]
Speaker Change: Yeah, thanks, Puneet. We actually, yes, we do believe that the test is differentiated. I mean, as we always do, you know, we base our business models on evidence generation. And, you know, we alluded to the fact that we're expecting some data that supports the use of the test, that's going to be utility in the differentiation of the test. [inaudible]
Speaker Change: and so now it's the right time for us to launch that into what you correctly stated as a penetrated market, starting from zero, we're effectively zero for us in the US and gaining some share there. John , do you want to add something?
John Light: Yeah, it's obviously something that took a good bit of consideration from us. In Europe it is a tech that has gained some traction, especially amongst the key opinion leaders. It is in fact those thought leaders who have been driving much of the more recent evidence. [inaudible]
John Light: It is on the backbone of that evidence that we are looking to gain share within the US with RLDT test.
John Light: So, evidence is one layer of differentiation. The second is the playbook. It's not entirely unlike how we ran the cipher. The cipher was also a late entrance into the space.
John Light: and based on our product design, based on our philosophy towards evidence developments in collaboration with key opinion leaders.
John Light: based on our commitment towards evidence generation and guideline inclusion. The cipher has come up very quickly in terms of market leadership. That's what we're hoping to rerun with this for signals. Thank you very much.
Ok, thank you guys. Thank you.
Thank you, Puneet Souda.
Speaker Change: Thank you. Our next question comes from the line of Doug Schenkel of Wolf Research,
Speaker Change: Hi, thank you. This is Colleen on Frick Doug. We just had a question on this site for a ram for the balance of the year. It looks like ASPs came in around...
Speaker Change: 2950 and Q1. And our understanding is that the metastatic test will have similar ASPs as the biopsy based test. And with that in mind, should we keep ASPs flat throughout the balance of the year? And how should we be thinking about the volume growth to directory this year and into 2026?
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Speaker Change: Colleen, I'm happy to take that. Recall slightly more of the population for metastatic is Medicare, and therefore the ASP I would think is very slightly higher, but not materially so. But on the counter side to that, we will not necessarily have coverage or contracting for the non-medicare population, and so those two things probably net out, I would love to be able to give you more details behind that, and all honesty.
Speaker Change: having around the same ASP maybe drifting up very, very slightly over the rest of the years reasonable.
Speaker Change: from a growth rate perspective, our full year guide implies 19-22% revenue growth.
Speaker Change: Volumes. We are, as we saw in the first quarter, experiencing a prior period collection headwind versus a prior year. And so as we think about the rest of the year, we are contemplating that the comps get harder for volume, but obviously we have great expectations.
Speaker Change: for the decipher franchise for the rest of this year in inter-perpetuity, especially given the nasancy of the market at 40% penetrated. We have 65% share, we just grew volume 37% this quarter, we've seen some other numbers out there that are less than 37% for our competitors and so I think we're well on our way to continuing to deliver really strong growth from the decipher franchise.
thereby bridging the gap into our other growth drivers that are now very much in the... in the...
Speaker Change: very much on the come in the next couple of year or two.
Speaker Change: All right, thank you, and then we just want to follow up on MRD.
Speaker Change: So can you help us better understand how the data shared from Tumbola positions your test as differentiated in bladder relative to currently marketed assays?
Speaker Change: and also given higher cogs associated with sequencing the whole genome at every time point. What optionality do you have on sequencing to ensure that your MRD test is it meaningfully margined dilutive at launch? And then finally, I believe in the prepared remarks that Marc indicated that you submitted your tax assessment to MDX last month or in March rather.
Speaker Change: Should we assume that you'll have reimbursement at the time of launch? [inaudible]
Speaker Change: Yeah, so let's let's cover each of those and Rebecca and John Fruida-Jump in here but Tom Bowler differentiated the test relative to DDPCR and compared the performance of the whole genome approach and the ARG looked at that publication or that presentation.
Hello, how the investigators tackled that.
Speaker Change: If you think about relative to other tests on the market and how to penetrate the MRD market, we have consistently maintained that the most important measure is how much sooner than imaging, which is the standard of care you are detecting recurrence.
Speaker Change: It reinforced data that we've already presented and published in MRD, which is in this case, it was 93 days.
Thanks for tuning in.
Speaker Change: which is a great lead time and so you know that and then of course the whole genome approach is what we really believe every step of the way is differentiating.
Rebecca Chambers: and it goes to our underlying philosophy. I'll come to the kind of large further part of your question, I'll never come back to the conflict of that, but it is, if you think about deciphering how we've approached that, I said before, we could have run a 22G in assay for every single test and we would not have, you know, close to a hundred publications.
Rebecca Chambers: The supporting use of deciphering, we have done that. It is the ability to have all that rich data. So as long as we can make sure to your point, we can manage the cogs of that and the margin of that. It is a very worthwhile investment in creating the richness of that data.
Rebecca Chambers: for every single sample and the ability to use that in the future to advance our test into other indications and into, you know, human naive and what else? I mean, there are things we could do with it, you know, we can't even contemplate today.
Rebecca Chambers: But it's hard to imagine a world where five to ten years from now everybody's not talking about the richness of whole genome data in this space.
Speaker Change: Yeah, of course. And on the clogs side of the equation, in muscle invasive bladder cancer, we absolutely are excited about that indication because
Speaker Change: Proximately 85% of the population is Medicare and therefore from an ASP perspective it should be a relatively nice ASP out of the gate. We have multiple projects ongoing on the COGS reduction front for MRD, just similar to those that we talked about today with regard to a firma. And so, you know, over a multi-year period we have a lot of confidence in our ability to drive down sequencing costs. Thank you very much.
Speaker Change: Excuse me, as well as obviously there are many different sequencing platforms that are currently at play that may or may not be influencing our costs on roadmap. So we're excited about the potential for...
Speaker Change: Having a very data-rich MRD platform with cost that is more expensive admittedly but, you know, similar to the reasons that Marc cited from the decipher standpoint, you know, we think that's a worthwhile trade. We're really focused on...
Speaker Change: Making sure that's on an adjusted EBITDA basis. This is a product and a project and a product platform. I couldn't get the right P word out. Sorry. A platform that is able to be, you know, a creative to our adjusted EBITDA over a multi-year period. And so I think that's kind of the way we're thinking about it more so than on a gross margin. So, I think that's the way we're thinking about it.
Rebecca Chambers, Shayla Gorman
All right. Thank you so much.
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Thank you
Speaker Change: Our next question comes from the line of Tejas Savant of Morgan Stanley , your line is now open.
Tejas Savant: Hey guys, good evening and thanks for the time here. Just one quick clean up for you back on the guide. I think you called out sort of mitigating tariffs as one of the rationale for your B2 transcriptome switch for a format. Is that a meaningful dynamic for you? Is this just really you guys expecting your vendors including your super thick vendor to likely add tariffs for charges here shortly? Okay.
Speaker Change: Yeah, I'm going to actually have that one hand that it went over to Mark Taylor. We were working on this as part of our lab optimization process as you expect us to for a long time and you know the point around tariffs was
Speaker Change: The fact that we're doing this helps us mitigate or should help us mitigate the impacts of the terrorist. There's some exception. There's a lot of uncertainty around there. None of us knows how impactful this is all going to be. [inaudible]
Rebecca Chambers: But, you know, as we've always done, we're very focused on clubs to mitigate whatever the supply chain risks are, whether it be tariffs or just price increases at the same time as Rebecca mentioned earlier. We expect price decreases on terms.
C.A. Jones, as well.
Um...
Rebecca Chambers: So, you know, as we've always said, we don't really see first or second order, we don't really see first order effects for us, but we do get second and third order effects. Our supply chain is impacted by tariffs. And in fact, you know, we've already had one vendor talk about raising surcharges on us as well, you know, in the future. And you know, that's something that we've contemplated in the guide that we've given here. So, you know, we're managing for that. Thank you very much.
Rebecca Chambers: But it's there's some uncertainty around that and we'll continue to track it but we'll respond accordingly as we as we always do and we've got a lot of
Got it.
Speaker Change: and then a couple of quick follow-ups on the MRD side mark if I may.
Rebecca Chambers: First of all, I mean, on the Tambola results that you guys have shown at ACR even earlier this year.
Rebecca Chambers: I guess my question is, you know, the investigator found that DDPCR was more sensitive, but your assay was more specific.
Rebecca Chambers: So are you guys exploring any opportunities to further boost sensitivity, or you don't think you really need that? And then second, what sort of data should we expect to see at Asco Shortlier?
Speaker Change: Limiter Detection, you're missing the broader picture, right? The broader picture is how much sooner can you...
Speaker Change: Pick up the detection and standard of care, and you could tune any one of those other metrics of the detriment of another metric and...
Speaker Change: and if it doesn't help the lead time to detection, then you're going in the wrong direction. So we look at it as a collection of these factors and studies that show that the test is effective in taking out detection early, and so that's one of the metrics that came out of the study.
Speaker Change: So we really like. What should we see in terms of Assa, Assa, anything John , you want to refer to on that?
John Light: No, nothing, nothing that we're expecting at this point. I don't know, we're expecting anything on, on MRD in particular.
Speaker Change: So we'll keep you posted and we'll give you our perspectives on things that do come out.
Speaker Change: Got it. And then one last one here for me on the decipher side of things, Marc. You know, you flat, you know, your digital pathology efforts. Could you just share some color on this view that there's a decent amount of physicians out there who value the complimentary data provided by a combo approach? You ring some of that from one of your competitors recently and they're planning to launch their version of the combo test in, I guess, by your end this year. So curious as to, you know, how you're thinking about...
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Speaker Change: Yeah, I think, you know, I think if you ask positions, and of course you can imagine that we haven't I'm sure others have to, if you ask positions then of course the more data the better and they don't tend to take one data set and take it at the, you know, at the substitution of another data set, more data is better.
Speaker Change: The question that we're still trying to answer is, you know, is the data set complementary? We think it can be complementary but it can also be contradictory and that can cause confusion.
Speaker Change: You know perform better than that's one way to do it but you know as we've always said decipher has so much evidence behind it.
performs really well across the entire spectrum.
Speaker Change: that we don't see that that necessarily is needed to enhance this cycle. If there's a market opportunity for that then given the we've. [inaudible] there's a market,
You know, scan 70,000 images with across 40,000 patients with outcomes.
Speaker Change: Plus we have home transcript home for every single one of those.
Speaker Change: You can imagine that we could make that information available, and we're actually, we have made it available for collaborators today, so...
Speaker Change: The research, this is interesting for a research perspective, we don't see the commercial opportunity yet but we're continuing to drive the research and if there's commercial opportunity then you can imagine we've jumped on that.
Got it. Fair enough. Appreciate the color. Thanks guys.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Thomas DeBourcy of Neffron Research. Your line is now open.
Speaker Change: So, question on the cipher related to your ability to expand coverage now with I guess
Thomas Deborsey: Level 1, I guess, being in NCC at Guidelines, relative to other tests. Have you seen, I guess, an expansion of coverage over the last several quarters and have payers maybe changed also their position on some of the other tests as well that maybe also help share gain.
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Thomas Deborsey: Yeah, don't allow me to say that. Thanks for the question, Thomas. Yes, this is obviously an ongoing set of activities here.
Thomas Deborsey: We do see traction in our discussions and very active engagement with payers, with the coverage setters, with the lab benefit managers.
Thomas Deborsey: We are in an active exchange of the latest evidence as well as the latest guidelines.
As you can imagine, these are generally long term conversations.
Thomas Deborsey: that's coincide with an annual review of the evidence and so when we believe we're closer to gaining traction or when we believe that a release on coverage policies is looking to expand we'll be sure to note those.
Thomas Deborsey: And Tom, one thing I would add obviously, you know, having a conversation with payers and showing the level one guideline, the NCTN guidelines with the level one evidence that we have really helps bolster our conversation. Now, it doesn't get you over the line in every case. It's really hard sometimes, but it certainly helps.
Thomas Deborsey: Thank you for watching. I'm your host, Rebecca Stapley. See you next time.
Speaker Change: Thanks, and just maybe just a follow-up question on, you know, I guess the slide, you know, talking about 2026 to 2028 targets, and I guess
Speaker Change: You know, profitability, targets still, you know, about 25% of adjusted EBITDA.
and so just in the context of new product launches.
Speaker Change: Would you also kind of be considering your spending relative to, I guess, you know, targeting that 25% adjusted EBITDA goal?
Speaker Change: We will be building a Metanchannel for Prosignum. It will take multiple, you know, quarters and years to really get to the point where it's...
Speaker Change: at Scale, similarly to how we're investing in deciphering a firma. We put a handful of heads in that in any given period, and so we'll be able to meet our that in in a way that's tied to revenue growth, and we're super excited about...
Speaker Change: Our ability to continue to derive differentiated profitability, profile and do all of these things at the same time.
Great. Thank you.
Thank you, Tom.
Speaker Change: Alright, thank you. Our next question comes from the line of Sung Nam, of Scotiabank, your line is now open.
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Speaker Change: Hi, thanks for taking the questions. Maybe on the umbrella study with the 700 patients, is that enough for at least some of the indications that you mentioned for you to submit to Medicare for reimbursement, or you know, should be anticipating a few more studies of this size?
might be needed for you to do that.
Speaker Change: Well, first let me answer by saying that you're probably always going to see more studies coming.
Speaker Change: and from us, given our track record. The second is, yes, we do believe that the study is being appropriately designed in its prospective manner, and it will be sufficiently powered per indication to yield a positive coverage from Medicare.
Speaker Change: and Rebecca, you mentioned your guidance raised for Adjusted EBITDA margins for 2025. You attributed to laboratory efficiency projects and timing of project spend. Could you elaborate a bit on the project spend, what that's entailed?
Speaker Change: Yeah, actually, so one is a good guy, one is a bad guy, right? So Q1, we all performed by call it around 150 basis points.
Speaker Change: Gross Margin Projects is what we're relating to and project spend. Think of that, Sung Ji is really R&D getting that we thought was going to be spending Q1 getting pushed throughout the rest of the year. Just timing.
Tatya, thank you so much.
Thank you.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Matt Sykes, Goldman Sachs, your line is now open.
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Speaker Change: Hey guys, thanks for taking our questions. This is Will on for Matt. Can you talk about the initial response to the early launch of the cipher in the metastatic population and remind us of the potential contribution in the back half of the year following the broader launch? Thank you.
Speaker Change: Yeah, the initial launch, as you can imagine, the reason we did an initial launch is because we had physicians jumping at a bit to start to use this in patients and I cited an example in the prepared remarks of an existing case.
Speaker Change: and that particular position is very excited to be able to have that information and so it's early days we just launched this at the end of April but so far we're quite excited about the reaction.
Speaker Change: Yeah, we just came back from the AUA and they're already the conversation was very strong around metastatic disease and we expect the trend to continue at the ASCO.
where we will be in full launch mode.
But appreciate the question, thanks. And the ramp in the second floor. It's implied in the guide effectively. You know, we are. Thank you very much.
Speaker Change: Expecting this to be not dissimilar, post the biopsy, launch when it received Medicare in 2019. Obviously, it will change the trajectory when we have guidelines, but we're not expecting that in the guide this year. So...
Speaker Change: I think it's a contributing factor, but the vast majority of the growth this year will come from penetrating and sharing gains in the biopsy portion of the market.
Speaker Change: Understood. That's helpful. Thank you. And then switching over to a firma, how should we think about the components of growth for the rest of the year? I guess excluding prior period collection impacts, including any potential benefits from the updated grid offering. Thank you very much.
Speaker Change: Yeah, again, I take the updated grid offering as kind of being, you know, table stakes for us at this point in time. I went, it's needed to to demonstrate the growth that we talked about more so than driving, you know, a specific component of growth. It's just part of our overall strategy. We can't really challenging to parse out things like that. But in general, you know, we saw great volume growth in the first quarter. We would expect that volume, you know, pretty strong volume growth. Prior to peer collections for a firm, a made end up to be a headwind for the rest of the year. We'll have to wait and see.
Speaker Change: and so between those two things, we're expecting high single digit revenue growth. How one nets out versus the other in any given quarter, I would love to be able to tell you, but you know, that's not perfect, my crystal ball is not that clean.
Got it. Thank you.
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Thank you for tuning in.
Thank you.
Speaker Change: Our last question comes from the line of Mason Carrico of Stephen's Inc. Your line is now open.
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Speaker Change: Good afternoon, this has been on formation here, thanks for taking the question, I'll just keep it to one here.
Um...
Could you talk about the...
Speaker Change: Training that you've done with your sales force for the Medicatic Indication for Disciper.
Speaker Change: What are your thoughts on when these wraps are going to be fully productive? [inaudible]
Speaker Change: for that indication, and then talking about the synergistic call point here, when you think about MRD coming online next year, how do you see reps prioritizing their time between MRD, decipher and localized, and then decipher metastatic?
Speaker Change: Yeah, excellent question Ben, so on part one we've started the training and those discussions
Speaker Change: at our National Sales Meeting in January . We just held an advanced training here in the last couple of weeks.
That was full day.
Speaker Change: of both content and tactical training. These are in general the call points that they are already calling on. So these are, for the most part, are large.
Speaker Change: Eurology Group Practices, they routinely handle and manage patients with metastatic disease. So this is a natural extension of the discussions that they're having with those physicians in those group practices.
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Speaker Change: For part two of your question and how we're managing and balancing our time, it is again, it is an extension of the call point. We pride ourselves in training ourselves reps to have meaningful and educational discussions in those practices. This would be a topic that they would rotate in as part of one of their visits into those practices. [inaudible]
Got it. Thank you.
Thank you.
Thank you.
This concludes the question and answer session.