Q2 2025 Veracyte Inc Earnings Call
Good day, and thank you for standing by. Welcome to the vericite. Second quarter, 2025 Financial results webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, they will be a question and answer session to ask a question during the session. You'll need to press Start 1, 1 on your telephone, you will then hear an automated message, advising. Your hand is raised.
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Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your first speaker for today uh Shayla Gorman. Please go ahead.
Good afternoon, everyone, and thank you for joining us today for a discussion of our second quarter, 2025 Financial results.
With me today are Marc Stapley, Veracyte's Chief Executive Officer, and Rebecca Chambers, our Chief Financial Officer.
Dr. John light, our chief commercial officer and Dr. Phil fibo our chief medical and scientific officer will join us for Q&A.
Verify issued a press release earlier. This afternoon detailing, our second quarter, 2025 Financial results.
This release and a copy of the presentation, we will review during the call. Today are available in the investor section of our website at fairside cam.
Before we begin, I'd like to remind you that the statements we make during this, call will include forward-looking statements as defined under applicable Securities laws.
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.
To better understand the risks and uncertainties, that could cause actual results to differ. We refer you to the documents that fericite files with the Securities and Exchange Commission, including the most recent forms, 10, q, and 10K.
In addition, this call will include certain non-gaap Financial measures.
Reconciliation of these measures to the most directly comparable. Gaap, Financial measures are included in today's earnings release accessible, from the investors section of verify, its website.
I will now turn the call over to Mark, Stapley fericite CEO.
Thank you Shayla and thanks everyone for joining us today.
I'm pleased to share details of our second quarter performance and updates on our key growth drivers.
At verify patients are our purpose. Our work is grounded in bringing meaningful actionable insights to clinicians so that we can drive better health outcomes for patients, which in turn results in Greater economic value, to Global Health Systems,
I couldn't be more pleased with our Q2 performance.
We delivered 14% Revenue, growth year-over-year with total revenue of 130 million.
This outstanding result was driven by testing Revenue which also grew 14% year-over-year or 16% after adjusting for invisia.
Decipher and Affirm continued to advance market share and delivered another strong quarter of impressive volume growth. This further bolsters our confidence in the ongoing durability of our core testing business while also delivering our groundbreaking adjusted evida margin of 27.5%, vastly exceeding our expectations.
Our vision is to transform Cancer Care for patients all over the world, and I couldn't be more proud of our team and their commitment to serving. Our Advanced genomic tests to over 700 patients today.
We all focused on a number of strategic initiatives to fuel sustained growth at a differentiated level by creating layers of short-term, mid-term, and long-term drivers.
Today, I'm excited to share our progress across these initiatives.
Starting with the cipher, we delivered approximately 25,500 tests, putting us on a trajectory to exceed, 100,000 tests annually, for the first time representing a truly remarkable milestone.
This resulted in year-over-year, volume growth of 28%, our 13th consecutive quarter of over, 25% year-over-year, volume growth.
It was also our second highest ever sequential increase in volume to proceeded only by Q2 last year, which benefited from the timing of pivotal, nccn, guideline updates.
This performance reflects pristine execution by our commercial and operational teams and a continuation of the strong trends that we saw in March and April.
We first established our strong foothold with clinicians in Q2.
Bordering providers up over 20% from the prior year.
And increased orders proposition.
Clearly, our robust science, vast array of publications, operational quality, turnaround time, and comprehensive offering are resonating with physicians.
The Accelerated penetration of our decipher test continues to surpass, our internal expectations with broad-based expansion across each biopsy, nccn risk categories.
We have progressed across the care continuum, with the broad launch in June of our Decipher Prostate Test for use in the metastatic population.
the clinical validity and utility of decisive, prostate, metastatic has been demonstrated with 4 prospective phase 3 clinical studies
Stampede arms, GNC Titan and charted.
These Studies have shown that benefit from therapy, intensification is greatest in patients with a decipher higher risk score, meaning Physicians can confidently, use decipher prostate metastatic to help determine if treatment should be intensified by adding additional therapy to ADT such as Androgen receptor pathway, Inhibitors or dose of taxol.
we expect critical studies to be published this year, that will make a strong case for guideline, inclusion in the coming year or 2,
Recently we have observed a noticeable. Uptick in interest from Physicians for nccn, high-risk patients, estimated to be approximately 25% of the incidence population, which we believe reflects a halo effect from the test expansion into the metastatic setting.
In these conversations, physicians are looking to adapt their treatment plans for these patients, based on the cipher score, to prevent metastatic progression as effectively as possible.
Additionally to better, serve patients, with metastatic and high-risk localized disease, we have entered into a partnership with Helix to offer the option for Physicians to conveniently order the Helix whole EXO and based hereditary cancer test when ordering decipher
Nccn guidelines include the evaluation of specific hereditary Journal line variants. That may influence therapeutic choices for these patients, including the addition of parp inhibitors.
Further germline data can be added to our growing grid database and becomes yet. 1 more valuable biomarker to be considered in future research.
We continue to build on our strong and growing body of clinical evidence for decipher across all risk categories with 29 abstracts and 9 Publications in the second quarter.
Bringing the total to more than 225 Publications.
Each of these clinical studies further demonstrates the differentiated performance of Decipher, as well as the power of Grid.
This expanding Foundation of high-quality data is a key competitive advantage and plays a critical role in supporting increased clinical adoption in this underpenetrated market.
I'll quickly highlight a notable paper from the quarter.
Focal therapy is a modality for management of intermediate risk disease. That is gaining traction as an alternative to radical therapy.
New data from the first clinical trial to evaluate the association between decipher scores and focal therapy. Outcomes was recently published in the Journal of the National Cancer Center.
This analysis, which pulled data from a Phase 2 trial and a prospective registry.
Highlights deciphers role in guiding focal therapy decisions as patients with lower decipher risk. And aluminum, differentiated subtype may be ideal candidates for focal therapy.
While those with intermediate or high disease risk, or the basal subtype, may be better suited for radical treatment or require closer post-treatment surveillance if they opt for focal therapy.
We remain committed to enabling research in digital pathology.
And we believe that this technology, combined with AI, may complement molecular analysis by offering additional data points and biological feature interpretation.
As we shared last quarter, we recently made our digital pathology services and Associated AI models, available to research, collaborators to advance the science in this field.
We have now scanned over 90,000 slides from over 50,000 deified patients with outcomes data.
And we are planning to implement slides scanning as a standard production. Workflow to support ongoing Research into this interesting and emerging technology.
Looking ahead, we are more confident in disciples long-term growth trajectories than ever before.
We believe We Are The Number 1 prostate. Testing brand amongst clinicians with 65% market share.
and decide if it is the only test that can be used across the entire risk, spectrum of Prostate Cancer Care,
We believe we have everything. We need to remain a clear market leader, and execute on the multiple drivers of position, decipher for sustained, double-digit growth.
Moving to a firmer.
Volume growth continues to be strong and increased 8% year-over-year resulting in approximately 16,950 tests.
We continue to add new accounts and drive depth into our existing accounts with Q2 marking another quarter of higher year-over-year utilization per account.
This gives us confidence that a thermal will continue to gain both share and penetration moving forward.
We are pleased to see increased traction with our research use only grid offering
Which provides Physicians with additional data to advance thyroid nodule and cancer research.
at aaes in May Cleveland Clinic presented, the First Independent analysis leveraging, the grid database,
Which received very positive feedback from Ko's and has driven higher awareness and interesting grid data from other academic institutions?
In just a few weeks ago, we were pleased to see the first publication in the journal frontiers of Endocrinology on the development of validation of Novel classifiers, to pre-operatively predict low-risk thyroid tumors that are available on a firmer grid.
With continued evidence generation, these classifiers could eventually help physicians personalize the extent of surgery and reduce overtreatment for low-risk thyroid tumors, thus decreasing the threat of surgical complications and post-operative hypothyroidism.
Additionally, 3 abstracts with data derived from a firmer grid were presented at Endo 2025 the annual meeting of the endocrine Society in mid July.
The growing body of research and clinical evidence around affirmer continues to build on momentum.
And gives us confidence in the continued. Availability for affirmative gain. Share in this more mature Market.
As we shared last quarter, we are planning to transition a further onto V2 of our verasight transcriptions running on the latest and most cost effective. Next Generation sequencing technology later this summer.
This launch is part of our effort to reduce our cogs and improve the efficiency of our testing business.
In the near term. We expect this to offset normal reagent list, price increases help, mitigate tariff impacts and enable us to reinvest in opportunities to serve more patients.
Moving now to prosigna.
Last quarter, we shared our decision to launch Pro Signet as an ldt for the US press cancer Market given the tremendous prospects. We see ahead.
We believe this test has the opportunity to gain share in a large and well penetrated Market.
With approximately 225,000 breast cancer, patients diagnosed annually in the US with early stage hormone receptor positive disease.
Prosigna which is based on the well-known well researched and scientifically respected pan. 50 signature can provide Physicians and their patients with additional data around. The biological classification of the cancer and the 10-year risk of distant recurrence to help inform treatment decisions.
We remain committed to making our Pro signate. Ldt commercially available in mid 2026 and our clear lab on our new V2, vericite, transcript terminal.
The clinical outcomes of the 10-year Optima Prelim study were presented at the ESMO Breast Cancer Annual Congress in May.
And was well, received by kols.
The finding suggests that prosigna had higher prognostic accuracy in high-risk patients compared to the test. Initially, used to assign patients to treatment groups.
These results are consistent with the clinical and health economic performance of prosigna, but contributed to its selection for the ongoing. 4500 patient, prospective Optima trial that is now nearing completion of the endpoints needed for a successful readout.
Optimum represents 1 of only 4, prospective randomized, trials, globally. Evaluating genomic testing in early stage breast, cancer.
And it is the first to specifically assess Pro-signals ability to predict chemotherapy benefit with Level 1A evidence and is expected to be completed in mid-2026.
We are focused on generating additional evidence for pro signal through our Vitae Diagnostics platform with data readouts, expected over the near term that will help us drive adoption and revenue growth.
Moving to our commitment to serve more of the patient journey through mrd and recurrence testing.
Our MIT approach is 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.
This approach is backed by our fundamental belief that more data drives more insights, more clinical evidence, more pair coverage and therefore more durable adoption.
The platform for our first indication, muscle invasive bladder, cancer, or mibc.
We recently received feedback on the tech assessment, we submitted to moldex in March and continue to make good progress towards launching in the first half of 26.
As a reminder, this indication will leverage our strong decipher channel. That serves urologists and radiation oncologists, as we estimate, 70% of mibc patients are treated in this setting.
Additionally, we are excited to share that our test will be used in the Neo blast prospective trial to determine whether mrd negative status. Can support the deintensification of treatment for mibc patients.
This trial through investigators at the University of British Columbia, Djoser mrd platform together with MRI and standard screening to identify patients with mibc who can be safely managed with bladder sparing approaches
while our published data shows, significantly poorer prognosis, for patients, who are MD positive.
This trial helps address the clinical utility and confidence in those patients, who are mrd negative.
We are continuing to invest in generating, the clinical evidence needed to expand our mrd platform Beyond and my mibc.
Beginning in 2027, we plan to deliver indication expansion annually, in order to serve more patients across more indications.
Next, turning to our Geographic expansion, strategic growth driver where we are committed to launching our tests with ivds to address patient needs outside. The US, I would like to update you on the ongoing process with our French subsidiary, parasite, SAS or SAS
Maintaining access to the Prosigna test for patients and the physicians who serve them was an important goal of this process.
I'm pleased to announce that the French Commercial Court recently published a decision approving the sale of the contract manufacturing portion of the business.
The sale closed on August, the 1st and enables us to maintain continuity of supply for the prosigna ivd on encounter through a contract manufacturer.
The remaining assets of SAS will be managed by the existing court appointed, administrator until such time as the court progresses with formal liquidation.
With the sale behind us, we are in the final stages of concluding this restructuring process.
We now expect a meaningful increase in our investment in our U.S. research and development IVD team in the second half of this year to finalize the development of our next two IBS: Decipher on qPCR and Prosigna on NGS.
We are still on track to complete. The ibdr submissions for both tests by the end of 2026 and anticipate, subsequent commercial launches thereafter as we go country, by country to secure reimbursement, post approval,
Our next growth driver is solving new cancer challenges with Innovative products. Like our perception nasal swab.
Lung cancer is the leading cause of cancer related deaths, worldwide and early detection, and management is key to reducing mortality and improving outcomes.
Perception. Nasal swab is a simple non-invasive test that assesses lung cancer risk in patients with a detective, lung nodule and smoking history so that the right patients get the right intervention at the right time.
With only a few handful of patients, remaining, we are on track to reach the enrollment Target of 2400 for our pivotal Nightingale study in the next few weeks.
Once completed, we will then conduct the follow-up and data analysis which we hope will lead to publication and ultimately reimbursement.
I'm proud of our progress in Q2 as we work to improve patient lives all over the world.
We saw another quarter of very strong testing volume growth and demonstrated solid progress across our long-term growth drivers.
These results exhibit that we're just beginning to deliver on the promise of our powerful diagnostic platform to fundamentally transform healthcare.
As we enter into the second half of the year, we are accelerating our investments in these critical projects and have even more confidence in our ability to deliver long-term sustained growth.
With the best in-class financial profile. We've consistently achieved.
With that, I will now turn to Rebecca to review our financial results for the second quarter as well as our updated outlook for 2025.
Thanks Mark.
with 130.2 million in revenue and increase of
14% over the prior year period, we grew total volume to approximately 44,950. Tests of 15% increase over the same period in 2024.
And 5% respectively.
Total testing volume was approximately 42,400, tests? An increase of 18% over the prior year period testing ASP was 2,881.
Down 3%, compared to the prior year, primarily driven by the impact of higher prior period, collections in Q2 2024, as well, as the afirma laboratory benefit manager impact. Discussed last quarter,
Adjusting for the impact of 1.9 million of Prior period collections. In the quarter testing, ASP would have been
Approximately 2,825 roughly flat to the prior year, period.
Second quarter product volume was approximately 2500 tests and product Revenue was 3.6 million down 8% year-over-year, biofarm and other Revenue was 4.3 million up 21%, year-over-year higher than our forecast, given the benefit of a US decipher, biofarma Revenue project that completed during the quarter.
Moving to gross margin and operating expenses. I will highlight our non-gaap results.
Non-gaap gross margin was 71.5% off approximately 30 basis points. Compared to the prior year period.
Testing gross margin of 73.9%. Exceeded our expectations driven by improved lab efficiency
Compared to the prior year, gross margin was slightly lower. Given the benefit of Prior period's cash Collections and Q2 2024 product margin was 20 basis points higher from the prior year at 52.3%
With the sale of the vericite staff, manufacturing business and our transition to a contract. Manufacturing model, we expect product growth margins to decline in the second half.
Biofarm and other gross margin was 18.5%, a decrease from 23% year-over-year, due to revenue mix and higher cost absorption.
Non-gaap operating expenses were up 2% year-over-year and 60.3 million compared to the prior year. Research and development expenses decreased by dollars to 14.3 million driven by the timing of clinical trial, expenses and project spends sales and marketing expenses, increased by 1.2 million to 23.1 million, given higher Personnel costs,
DNA expenses. We're up for those to 22.9 million.
Moving to profitability metrics, we recorded a gaap. Net loss of $1 million inclusive of 20.5 million of non-cash impairments related to verify facts.
Due to the impact of this impairment in the quarter, our gaap tax rate was 178%.
Looking to the full year. We are expecting our gaap tax rate to be in the high single digits.
We delivered, a dock of 35.8 million or 27.5% of Revenue. Well, above, our expectations, given the timing of our investments, which are now forecasted to incur in the second half.
While we are while we plan our profitability, on an annual basis hitting this quarterly, level is a great data point that validates our sustained, 25% adjusted Eva goal and provides us the flexibility to further invest in our growth drivers.
With 5 products launching in a major clinical study, completing in the next 18 months, we will invest as needed to drive these projects forward, which as always will be balanced with our goal of delivering enhanced profitability. Each year until we achieve our 25% adjusted even our goal.
we generated 33.6 million of cash from operations and we ended the quarter with 320.7 million of cash and cash equivalents
Before moving to guidance, I would like to share the positive Financial impact. We expect moving forward. Now that the sale of the verified staff manufacturing business is behind us
While we no longer will be recognizing biofarma and other Revenue related to verify SAS activities, we expect 2 to 2 and a half million dollars. Of quarterly product Revenue supported by our new contract manufacturer.
We remain on track to generate approximately 13 million dollars of savings compared to 2024 results. After accounting for the additional 7 million dollars of investment to rebuild our IBD development capabilities here in the United States.
In the interest of serving patients globally.
And are updated 2025, adjusted Eva doc guidance.
The remaining funds will be used to invest in our key growth drivers and also further enhance our profitability.
The total cash outlay for the SAS program remains at approximately 15 million dollars, which was, or will be expense over the course of Q4. 2024 through year end 2025, importantly, most of the remaining expense will occur in the third quarter, while only a small amount is expected in Q4.
Lastly, with the decisions, we do expect a relatively immaterial non-cash gain loss on Deck, consolidation of a few million dollars in the third quarter.
turning now, to our 2025 Outlook now that we have line of sight to for Sigma Supply continuity and the path forward for verified SAS, we are excited to initiate our 2025 total revenue, guidance of 496 million to 54 million
Due to our strong performance in the first half of the year, we are raising testing revenue guidance for the full year to $477 million to $483 million, from our prior guidance of $470 million to $480 million.
This reflects a raised decipher Outlook as well as a Firma ASP expectations for the remainder of the year which are now projected to result in a form of Revenue, growth of 6 to 7%.
Importantly, given the Catalyst, Mark outlined, our firm of volume growth, expectations of high single digits has not changed.
As a result. Testing Revenue, growth is now estimated to be 14 to 15% as compared to the prior guidance of approximately 12 to 15%.
We are also raising adjusted evida margin guidance for the full year to 23 and a half percent from 22 and a half percent previously, which was already meaningfully higher than our original 21.6% 2025 guide.
This reflects our year-to-date profitability outperformance.
Expectations for Accelerated investment in the second half in support of our strategic growth drivers. And as previously, mentioned the deck consolidation of vericite staff from our financials as of August 1st 2025,
Moving to the third quarter, we are forecasting. The decline in total revenue given we will no longer be recognizing staff by far more Revenue.
We expect testing Revenue to be roughly flat. Sequentially driven by a slight uptick in decipher revenue and offset by typical affirms seasonality and lower prior period collections. Additionally, we expect our non-gaap operating expense to grow up to 5 million sequentially, given the timing of clinical and project spend,
New hires and incremental investments in our robust pipeline.
In closing, I am thrilled with our strong, start to 2025 and our commitment to driving Revenue growth with a focus on profitability and continued cash generation. We've made significant progress on our Catalyst for the year achieving, the launch of decipher for metastatic patients. Last quarter and the sale of the SAS Contracting manufacturing business this month.
All of this progress is a testament to the outstanding team here at vericite and I am grateful for their contributions towards our vision of helping cancer patients globally. We'll now go into the Q&A portion of the call operator, please open the line.
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 Start 1 1 on your telephone and wait for your name to be announced to withdraw your question. Please press star. 1 1 1 again we ask that you please limit your questions to 1 question and 1 follow-up. If you have additional questions, you may enter the re-enter the queue
Please stand by will be compiled. The Q&A roster.
Our first question comes from the line of Doug Shankle of wolf research. Your line is now open,
Hey, good afternoon and thank you for taking my questions. So um, Rebecca you may have kind of just run through this as you um, went through your guidance comments. So sorry if uh if I'm if I'm kind of saying something that you already ran through but you know based on Mark's earlier comments, um you know and and you tracking above 100,000 decipher tests this year.
Um, is it, is it further Market penetration? Is it share? Gains is it digital? Pathology integration? How should we be thinking about that? And and if indeed, and this is my second question,
If if we can, you know, have some confidence that decipher keeps growing at these levels for the next few years.
If we assume a continued, moderation in a firmer Revenue growth down to Mid single digit levels over time. Um, that's still should be enough to maintain double digit growth for the business over time at the Top Line and that's an advance of getting any additional pipeline contributions, is that a fair way of thinking about it? Thank you.
Yeah. Happy. Happy to do so Doug, thank you. Um, and uh, I'm going to take part and I think Mark's going to help on on some of this as well. But, um, you're, you're absolutely right. Decipher is, uh, just doing a, the team is just doing a phenomenal job with an absolutely, um, critical tests, uh, for that patient population. Our guide actually implies slightly lower Revenue numbers. I think you're thinking more on a volume basis, um, and that volume number does make more sense to me than than a revenue number. So, the guide, um, implies 22 and a half to just over 24%, um, Revenue growth, um, for decipher. So, so that's 1 thing to take into account. Um, so that's I think the, the drivers of that growth here are, are multi-, uh, multiple, uh, different different opportunities. The first, uh, obviously the metastatic population.
Um, that Mark referred to and, and kind of the, um, halo effect that that has brought into conversations with docs, on the high-risk side, which is a lot about, you know, a large portion of the population and the most underpenetrated of the populations, uh, under under penetrated of the risk categories. Um, additionally, uh, we are always, um, going with our vericite Diagnostics platform with more data and more use cases, more, uh, predictive and prognostic capabilities. Um, and then the sales team is just executing really well. Um, so I would say those are the drivers for decipher growth over a multi-year period. Um, you know, I think I don't want to guide to Future years, but I would say, you know, we are very confident and I'll turn this part over to mark. But uh, you know, effectively between affirm and decipher we are absolutely confident in our ability to demonstrate double digit, Revenue growth, um until those longer term growth drivers, come in. We've been pretty um,
Much of a broken record on that for the last couple of years. And actually, I think we've delivered even beyond that. Um, as you look at the updated revenue guide, here are 14 to 15 percent.
For testing, yeah, yeah, thanks Rebecca, and, and Doug. Thanks for the question. I, I totally agree. I mean, we, we guided that we think these tests can get to 80% Market penetration. And, you know, we started this year with the decipher Market, the prostate market around 40. Uh and you know, we think we have what we need in terms of the product set to to drive to that 80 and its its market share.
Gains and penetration. And uh, and you know, obviously there's some incidents growth as well there that helps uh, helps Drive the growth. If you think about the second part of your question. I, you know I talked about it in the script around layers of short-term medium-term and long-term uh growth drivers, right? So you you pointed out very clearly decipher continuing to grow. We got multiple years ahead there. A firmer is, you know, later in its life cycle. But we've talked about Pro signal and launching that in the middle of next year, muscle invasive, bladder, cancer for mrd and launching that in the first half of the next year, and then mrd indications every year after that in 2027 and Beyond, we will get to completion on Nightingale, and with good results, and we, we should be able to launch nasal swab. Um, and we're not done there, we've got a rich and exciting portfolio and a financial profile that gives us an opportunity to continue to invest in new indications, new products, new expansions across the care. Continuum new studies um more clinical evidence driving more guidelines and so on. So
To your point around the double digit growth, you know? Yeah, I it it's, it's certainly, you know, something that we think a lot about and we're we've set up our company to deliver that. Uh and as long as we continue to make the right Investments, uh, you know, you would, you would expect it to do so.
1 moment for our next question.
Our next question comes from the line of Andrew brackman of William. Blair your line is now open.
Yeah. I mean I'm gonna ask John to talk a little bit about the successful launch so far and of course, you know, we're only a couple months soon as you point out of the metastatic and and also an interesting Trend that we're starting to see in high-risk and then Rebecca can kind of, you know, uh, triangulate that back to you for you to the guide.
Yeah, thanks for the question. Um, so far what we've seen is we've seen really good response and interest from Physicians who are uh, in these large practices and uh, it's taking, uh, 1 of the Lessons Learned is that it's taking a multi-disciplinary approach towards managing these patients, so we have to call on urologists. We have to call on the meds. We have to call on the red ones, uh, in a line, all of them around the um, operational, uh, impact of implementing the decipher metastatic test, uh, how they think about, uh, the operationalization of that test. Uh, but the discussions around, uh, the CMP data have been extremely, uh, um, impactful and the response so far is good. So we we see good upside, uh, for the test in the future.
and just to,
oh, high risk. Oh, uh, yes. So with regards to the high risk discussion, you know, uh, 1 of the arms of the CMP trial RMG, uh, dealt with the, um, investigation as to whether the addition of apparatus, which is a Next Generation arpi, uh, to uh, Androgen depletion therapy would have a sustained effect towards patients.
Who tested the cipher high-risk? Uh, and uh, the answer was yes, uh, patients who test decipher high-risk both in localized high-risk disease, as well as the metastatic setting, uh, both saw benefit from the addition of the arpi and in the sense that reinvigorated, the interest in the conversation again, on on high risk and then overall there's just a, a growing awareness of the robustness of the cipher as a prognostic signature across. All these very different indications, uh, and it's speaks to um, just how well designed that the assay has been and how well validated. It's, it's demonstrating to be
And then on guidance. Um, so thank you, thank you for the question. I wouldn't say that metastatic is a meaningful contributor to the guide this year. Um, in and of itself, I would say the the, um, there's, you know, we're expecting a a launch here that is successful, but not, um, overly impactful, given the large denominator and lending itself to a multi-year adoption curve, that, you know, we would expect similar to that. We saw with decipher out of the gate, once it also got a biopsy Medicare reimbursement. Um, so in 25, not a huge impact. Um, I would say more of the halo effect, John mentioned on high risk uh is is more uh, impactful in the guide. Um, but going into 26 and Beyond, you know, this is uh 10% of the incidence population uh for high-risk that does require uh this critical information and and so as we, you know, have stampeded and
Have we hopefully get guidelines over the coming years. We'll, we'll it'll continue to be a contributing factor to decipher Revenue growth and absolutely. As part of the reason why we have the confidence, we do in delivering, um, double digit, Revenue growth on a, on a total company basis here for the foreseeable future.
Great, thank you for that. And then, just, maybe for my follow-up.
1. So
appreciate some of the efforts.
Prepared remarks but can you share what some of the key Milestones you will be focused on particularly as it relates to drive greater adoption and revenue growth for Prisma. After launch be that guidelines additional utility studies or reimbursement. Thanks,
Yeah, I mean, I'll I'll first Milestone which we talk about is the launch in mid 26, and the course also the, um, the outcome of some pivotal study results and early data from which we saw as my recently. Um, beyond that we haven't said specifically, uh, what additional clinical studies will support the the tests. But you can imagine, I mean, we're going to just going to follow the very same formula that we've we've applied with the cipher. And remember, this is a whole transcript and based tests as well. So, you know, we will be able to drive research around the whole transcript home here and and they'll be plenty more clinical studies. I don't know if any of the team wants to add anything specific. No more to come. Yeah, the only other thing I would add is that, you know, obviously, for a new product to launch, we'll be having to put in a tech assessment and get pricing and all that fun stuff. So that would be 1. Um,
1 data point along the goal post of of getting the product launch, and of course, the building of the, uh, the sales team for that as well, which will do gradually. As we've always said, we will do.
So, thank you for the question. I appreciate it.
Great. Thank you.
1 moment for our next question.
Our next question comes from the line of Punnett, suda of lyric Partners. Your line is now open.
Uh, yeah. Hi guys. Um, thanks for the question. And, um, I'll ask my questions and 1, um, on a Pharma, um, obviously um, solid growth there still, um, are you seeing any changes in the, you know, the share Dynamics or ordering patterns and endocrinologist at the current penetration level? Um, just trying to sort of understand how, should we think about that growth trajectory as we head into 26? And how should we think about the ASP stability? There with the LCD and the V2, uh, transition and then, secondly, on mrd, can you just, um, you know, just remind me in, in terms of your commercial approach there, um, on cross training, the Reps or hiring more, uh, and, and how are you targeting that in academic versus Community oncology. Uh, when you launch this in the first half 26, and if you could just remind us on the mold DX um, timing as well.
Thank you.
Alright, don't go ahead on on both of those. Sure, I can, I can take both of those. So um, we've not noticed specifically any meaningful changes in the ordering patterns of customers on a Firma. Uh, it's it's obviously a much more mature, uh, product. It's a more penetrated, uh, Market. We have the Lion Share of, uh, of, uh, share. I think overall growth is going to come from uh, share Dynamics. Uh, and so the the bulk of what we need to do better is to um, service those
Customers, uh, in in improving our service levels overall, uh, continuously, uh, continue to improve on, uh, clinical evidence to demonstrate the clinical utility of the test and, uh, differentiate uh, via, uh, our grid offering, which invites more collaborators to do that research, uh, that drives that clinically utility that ultimately drives, uh, more demands and market adoption. Um, regarding your second question on mrd. Uh, We've, we've mentioned this before our commercial approach for muscle invasive, bladder cancer, which is the first indication that we plan to launch. Uh, is absolutely to leverage our current, uh, decipher channel. Uh, these uh, bladder patients are managed by the same neurologist that we call on for, uh, decipher prostate. Uh, and the goal there is to cross train, our sales reps to have that conversation, uh, about bladder, and to continue to service the same channel that we do today. Um, and then regarding academic versus Community, uh, we we have contacts across, uh,
All uh, institutions. Uh, remember we have a, a very uh, healthy network of key opinion, leaders who work with us on decipher prostate and grid. Uh, we plan on leveraging, the same for mrd, and then a couple of uh uh, cleanup items. The multi,
Ex timing. We've said, we will have reimbursement prior to launch as Mark mentioned that ta, um, was submitted back in March. And we're, you know, in the midst of doing the dance with multi X on that and then, um, with regard to the affirm of growth trajectory and your ASP stability question. Um, so the implied guide this, uh, updated guide for a firm of 6 to 7% Revenue growth and volume of high single digits, um, given the lbm impact that we had, uh, back in 24 that has been cleaned up. Since November of 2014, we will start to lapse that Pune, um, here in November of of 25. And so as we enter into 26, um, with the exception of of very small prior period collections here in 25, we won't have, uh, the same headwind that we had going through this year. So that's good news. Um, hopefully we will get to more, uh, ASP growth over, a multi-year period, for both, the decipher and the Pharma, there's no reason why we shouldn't. Um, but we are excited. I mean, we are continuing at high single digit. Uh,
Volume growth for a permanent 2025. We're we're excited that that is we're still seeing the strength there. We do have the next version of grid coming, um, here later this year, um, and that, you know, we are expecting. We'll we'll set us up very nicely for 2026 volume and revenue, growth for our Pharma. Uh, so I would say, you know, with the Nuance, um, or nuisance is a better way to say it of of the ASP lbm issue, uh, for a Firma that, you know, we're now just working through our financials because it's been clean.
Uh behind us. I I think this is going to be a really, a 26, can be a really great affirm a year.
Thanks B.
1 moment for our next question.
Our next question comes from the line of subu nambi of Guggenheim. Your line is now open.
Had a Prestige about decipher frosted GSC data. Being integrated with a new ncic database, could you provide some added color on this as well. Is this more for a general physician support or any incremental adoption driver? Is it something that we could potentially see, um, any benefit tangibly in the decipher results? Thank you guys.
So uh hi sweetie, thank you on the first 1, the MDX uh submission Tech assessment, you know it's it's I'd say it's in the normal process. Rebecca mentioned we're going back and forth with mold DX you know, there's nothing specific to call out there. Um, you know, importantly the the whole pricing discussion is a key component of that, the tech assessment is the first Milestone and then you get into, uh, you know, the the pricing decisions. I don't know if you have anything, you want to add to that chance. Yeah. Um, I didn't understand that. I didn't understand the second question. Oh well, so no, the second part of of that was, um, are you getting feedback from a neurologist on whole genome based the desire for a whole genome based mrd test?
Do you want to take this bill? So...
what I can say, um,
Subu is that in general as we've engaged different, uh, physician populations. There's incredible enthusiasm. Growing enthusiasm for mrd and incredible. Enthusiasm for the additional data that comes with the whole genome approach.
Um, as we know as you engage with sequential therapy in bladder cancer as it goes through Neo, adjuvant definitive local therapy and and then post-operative care. There's uh a lot of changes that the disease can go through and whereas you know mrds that are focused on a panel and detecting disease can detect the disease. They can't monitor the clonal evolution.
That can happen in the selection that go on and help some agility with the managing of the care. And so people are really looking at that. And with a whole genome approach, you can look at Broad genomic signatures and how those are changing, uh, of the tumor while under care. I see that as super important, especially as we think about, you know, the benefit of our whole genome platform is that it serves multiple Cancers, and you can dial in different capabilities based on the needs of that cancer. And when we engage with folks, and they talk about whole genome, they see the, the, the rule reports that'll become part of our vericite diagnostic platform. They get very excited about that additional information.
And this is just, you know, obviously a continuation of our standard philosophy here of more data, uh, leads to more insights. You know, we we think it makes complete sense to, you know, sequence whole genomes, uh, to be able to have that data for for future research and then you'll your last question was regarding the fear, uh, data combination? I don't know. Uh, Philip, you want to take that as well? No, The Seer data was
You know, that was an important collaboration we had with the NCI and their Seer database and we felt it was responsible after the, you know, gluing the analysis in the publication to to make that data available and so that opens up the opportunity for investigators to dive into that integration of the the decipher data together with some of the outcomes available through this year database, in a way that protects patient confidentiality and privacy.
And I think as we've seen the more investigators get comfortable with decipher data with the Vitae Diagnostics platform. You know, that's all research. But I I certainly think it raises the the visibility of our company, vases the visibility and the confidence in our diagnostic clinical tests that they're ordering to manage patient care. So, second derivative impact. Yeah.
Great thanks. So thank you for
thank you.
1 moment for our next question.
Our next question comes from the line of Yuko oku of Morgan Stanley. Your line is now open
Hello, thank you for taking my questions. Um, I wanted to touch on digital pathology acknowledging, it's only available on a limited basis to research. Collaborators could you share early feedback on that offering so far? And uh would you also provide updated thoughts on whether you may offer it more broadly, either in the clinic or perhaps to biofarma customers?
You work with kols, you do very robust science and research a number of studies. Um, that then can be relied upon for, you know, treating patients clinically which is at the end of the day we've all got to be thinking about. At the end of every 1 of these tests is a patient who you know, who is dealing with a very um difficult situation. Probably the most difficult situation in their lives and and we got to have robust tests. Um, and so you know, the our decision to launch this as part of grid is to enable that research. Uh, and so, you know, our feedback so far from cosas is, is that's the right approach. We're on the right track with that. Uh, they'll support research. I expect to see some interesting things coming out in the future. And as I've always said, if we wanted to, you know, launched our own product with DPI either alongside or or, or with decipher, we could do that. But we wouldn't do that without the the robust science behind it.
You want to add on things? No, I think that's well said, Mark. Um, we, we have a proven process and and strategy of working very closely with key opinion, leaders who, um, contribute a large part, uh, in the advancement of the science and the clinical insights, that ultimately translate into demand, for our products, through continuous Improvement to our product. Um, we see no reason for why that should be different as we apply this new. Uh, very exciting. And and potentially uh uh transformational omics.
But the process is the same. It's it's working through our collaborators developing the evidence that arms us with the confidence, then to, uh, improve our test. And and, you know, back to the data, we have incredible amounts of data. Um, you know, as I mentioned in the call 90,000 sample, scanned, we're going to implement scanning as part of our production capability. So, you know, you can find that with whole transcriptomes. Uh, it's just, you know, it's it's uh exciting. What what we could potentially do with that data.
No, I just going to double down on.
Yeah, it's we're going to take the rigorous approach that it requires to bring a test to Market, but because of our grid offering and because of our, you know, aggressive approach to operationalize the scanning and then cover, um, you know, our our historical, um, uh, volume. Uh, we're very, we can move very quickly to get to a data set that no other company is positioned to do. So we're very bullish as far as our ability to move quickly through a rigorous clinical um, program and bring that to Market better than anyone.
Great. That, that was great color, thank you. Um, and then, while you're focused initially in launching mrd platform and muscle invasive, bladder cancer. You're also broadening scope in other cancer types, starting in 27. So given the unique approach, you're taking in mrd as you touched on earlier in the call which indications are cancer types. Do you see your mrd platform?
Form, delivering the best value.
Um, great question. We've said, consistently that, you know, you can imagine us launching mrd in indications, where we have a presence. Um, and so, you know, you think about where we are today, you know, we're covering Urology, broadly, including prostate, bladder and, and that could be even more expanded. Uh, we're going to be launching our breasts test. We're going to be launching our our lung based test. So, you know, those would be obvious indications, but it doesn't mean they're the ones, and the only ones we're going to launch. Um, and then there are different, you know, modalities within each of those indications, like, you know, we're starting with muscle invasive Cloud accounts but, um, but there's other modalities. So, you know, more more more to come on that. I, I wouldn't like to, you know, speculate yet
Thank you.
Our next question comes from the line of Lou Lee of UBS. Your line is now open.
Great. Thank you. Um, and I wanted to go back to the Cyber as well. So you talked about the partnership with Haley's to offer the option to order. Uh, her hereditary cancer test. I wonder, can you get us a little bit more kind of like detailed in terms of Supply, why? And then what kind of like core filing benefit that you can have from this partnership?
Proficiency for us. And it would take us some time and possibly even distract us from doing other things. So we thought that partnership route, uh, was perfect and he looks revealed itself as a uh, uh, very exceptional and uh, um, very collaborative partner and um, that will, uh, kick off in the fall. Um, we'll start accepting, uh, samples and supporting customers and we look forward to reporting on the on further results on that.
Thank you.
Got it. Um, and then my next question, uh, for with backup, so great margin in the quarter and then you also raising the guy, but I was wondering, what will be kind of like good starting point for 2026 given that you have a new product launches coming out? Um, what will be kind of like The Balancing Act that you have for it and then it will be great if you can refresh us about like the cost profile for both the mrd and the push and not thank you.
Absolutely. Um, so that I'll take the second part first on the cross profile for a Cigna. Think about that. Exactly as the cost profile of what afirma will be. Um, maybe a little bit higher, but but less than 10% higher. Um, given the histo, uh, pathology component. Uh, but effectively a firmer would be a great proxy for once. Once we have the V2, transcript them out there on mrd. Um, we are doing 3 whole genomes up front and then subsequent whole genomes we haven't discussed specifically, uh, exactly what that's going to look at. Uh, look, like we have multiple R&D projects ongoing, um, and Phil gets after
That exact question often from me. Um, so all jokes aside, uh, we, we are making good progress on the cost of whole genome sequencing, but that the margin profile of that is going to be as much tied to the Medicare reimbursement, um, percentage of the population as as, you know, our cost uh, for indication by indication. So, um, good progress there. We're, we're not ready to necessarily share what it is. But we do think that the benefit of what whole genome sequencing provides Us in the mrd, in terms of differentiation is more than, um, more than, uh, enough to offset the incremental costs. Um, you know, similarly, on the decipher front. If we were doing a qpcr assay, our our margin profile would be immensely better, but we wouldn't be the number 1 leading um, test provider here, right? Because we effectively have the incremental data. So this is a fundamental part of our strategy and, and the costs end up, uh, being a good return for, for us. Um, in terms of incremental, uh, sales and, and less R&D, and and sales and marketing expense.
Um going to 2026, um, you know, you are ahead of us, um, in terms of our budget planning process. So I'm not ready to sign up for a number here today. Um, obviously, we've made great strides in our um, ability to deliver incremental profitability, but we also don't want to box ourselves in. You are seeing a, a decent pickup in spend in the back half of this year implied in the guide. Um some of that is timing from the first half but some of that is is projects that we were really Keen to do that. Uh with the outperformance both
Both of the core business as well as the outperformance on the timing of the SAS, um, Decon consolidation. We have more dry powder to go after. So, you know, I think if we, um, you know, if we deliver
a solid year or profitability in 25 to do that, you know, again in 26, albeit, you know, in any given year, we we do hold ourselves. Uh, we do request the, the option to invest in incremental projects that obviously, if that changed the profile of our profitability, we would explain to you why. And and when you would see a return from that investment. So, um, dancing around answering your question a bit. Just, uh, but it's not because, um, it is because effectively, we are, we are still in the planning process and more will come with the appropriate time, but huge opportunity ahead of us. Um, across these 5 new products, a lot of, uh, a lot of good opportunity between having a full year of sass to fund some of those projects as well as having a full year of the, uh, new transcript, um, to fund those projects. So, um, you know, we'll see you where everything shakes out, but we have every, you know, we're going all signs are headed in the right direction.
Thank you.
1 moment for our next question.
Our next question comes from the line of Mason carrico of Stevens. Inc, your line is now open.
Hey guys.
Here. So hopefully this is not been asked, but has the metastatic indication improved. The marketability marketability of decipher to new urologists. Who
Maybe hadn't used, decipher previously has exceler, has it accelerated new account winds in any way.
I think is valuable. We're starting to see some interesting Trends, you might have missed it, but John mentioned earlier, the trend of high-risk, uh, interests growing. As a result, we think of having the metastatic product available. So it's you know it's difficult to quantify it. Exactly. But but it's a it's also early stages since the the full launch. Um but uh you know we're we're so far very happy with what we're seeing is.
Got it. Okay. I mean, could you talk a bit about the commercial payer landscape for metastatic patients? I mean, do you have coverage in place? Could you speak to the, maybe the number of covered lives that you you have today. Um, and potentially the opportunity before nccn.
Uh, so yes on the coverage policy. There is an LCD in place for the sector for metastatic. Um, we have two-thirds of which. Yeah, so the Medicare population is, you know, closer to about two-thirds of the total population. So we'll be in good shape out of the gate. We will have to go through and update contracts over time. Um, and so that will be a...
You know, kind of a long tale if you will to get to the same 200 million covered lives. Um, but the good news is with such a high Medicare population. We'll have a slightly different ASP uh, for decipher metastatic but you know, here shortly I would think those 2 things start to converge. Yeah. And we think there's a strong evidence drill as well, Mason, um, supporting the use of decipher, uh, in the metastatic indication
So, we expect data to emerge here, very, very soon and Publications, Phil can go into those a little bit further, but we, we expect those to make their way into guidelines. And then again, guidelines will drive, uh, both demand and adoption as well as the uh, improve the payer landscape and updating their own coverage policies.
Yeah, and don't forget Mason the, you know, if you think about deciphering the localized setting, we made tremendous traction with before guidelines. Right before being in guidelines, the guidelines certainly provide a step up, but, you know, they're very helpful but not necessary to start that ramp. And so, you know, I wouldn't see that as a gating factor.
Agreed agreed.
Fair Point. Thanks guys.
Hey, one moment for our next question.
Our next question comes from the line of Mike Matson of Neiman company. Your line is now open.
Yeah, thanks, uh, so just 1 on on per sign now. Um,
Can you just talk about the the market opportunity there? You know, it sounds like it's an established Market here in the US. So, you know, how big do you think that is in terms of dollars? And, you know, is this, I assume it's fairly mature at this point. But is there a room for, for more penetration of the testing, within the targeted? You know, group of patients.
Yeah. Uh, thanks for the question. Uh, it it is absolutely a very mature Market, um, primarily. Um, um, I would say, dominated by 1 participant. Uh, nevertheless, I think there are opportunities, in a sense that the, um, data coming from the Optima trial will highlight, uh, where per Cigna has a distinct value proposition in. Uh, predicting patients. That absolutely will benefit from chemotherapy, uh, in terms of overall size. Um, just over 200,000 patients or so are indicated for uh, for testing. Um, a good number of those are going to be Medicare patients. Uh, we're going to leverage our Network um to uh update our Contracting with figures where we can. And, as Rebecca mentioned earlier, it's going to, it's going to require us to build a, a brand new channel. But, um, we're we're confident in the upside that makes and, uh, Mike in terms of, um, ASP. You know, that's part of what we will be resolving between
Now, and the launch in the middle of next year.
um, but, you know, you, you can kind of, uh, you can book end it between where it's currently, uh, reimbursed from all the X and where the, um, you know, where our firm or another test like that are
Okay. Got it. And then um here just a financial 1. So you you've got 320 million of cash. I think that's about 70% of your market cap. You have no debt, your positive free cash flow. Now, um, your your adjusted EPS is positive. So your shares look pretty undervalued here. So would you consider sharing purchases with some of that cash? Why will I not? Thanks,
We're investing in the right things to to grow and uh, you know, allow us to Target even more and more patients. So no no specific commentary around, you know, uses of that cash at this point. Yeah.
Wholeheartedly agree. I would just say, you know, I think your mouth is appropriate on the valuation. Um, the other thing I would add is, is the, um, landscape of opportunities is is pretty ripe right now. Um, you know, we continue to have a very high bar for m&a but um you know I think with we're now in year 3, perhaps of of some of the valuation. Um,
Disconnect, uh, across the industry. And so I think there are there are there are a number of different assay assets that could be interesting. Um, and so, you know, we always are looking um, that hasn't stopped. We don't always do deals, uh, because the bar is so high, but but we're, we're absolutely Keen to continue continuously assess and and bring to bear, you know, what makes sense for for our shareholders and for patients and employees.
Okay, got it. Thank you.
1 moment for our next question.
Our next question.
Of Scotia Bank, your line is now open.
Hey, this is Corey Rosen ballman for G. Thanks for taking my question.
Um, so specifically for the affirmative transition to V2 transcripts, appreciate the commentary, you've provided thus far. Uh, but would you be able to break out the gross margin benefit? That could be expected by the time that is fully rolled out.
Yeah, I I would like to uh I'm happy to talk about a qualitatively. Um we will be using that to reinvest in the business and so I I don't want folks to get too far ahead of their skis on the profitability side. Um, but qualitatively, um, around a third of our costs are sequencing and Library prep and in nature, we're currently on the next week, 500. And we'll be moving to the Novac X. Um, and so for the portion of of that 30% that is sequencing related, we will in time see the um, a meaningful reduction in our cost structure and 1 of the things. I really like about this transition, other than the obvious, you know, cogs Financial impact of it is, you know, it gives us a unified platform that we can use for other tests and as we've already said, we're going to be launching Pro signal on that platform next. Uh and you can imagine it's extensible and scalable even more broadly than that.
Concludes the question and answer session. Thank you for your participation. In today's conference, this concludes the program. You may now disconnect.