Myriad Genetics, Inc.

And I'll please continue to stand by. Your Myriad Genetics call will begin shortly. We thank you for your patience. Please remain on the line. Your call will begin shortly. Thank you. Thank you. you

Okay, good afternoon, and welcome to the Myriad Genetics first quarter 2023 earnings call. During the call, we will review the financial results we released today, and afterwards, we will host a question and answer session. Our quarterly earnings release was issued this afternoon on Form 8K and can be found on our website at investor.myriad.com. I'm Matt Scalo, Senior Vice President of Investor Relations. And on the call with me today are Paul Diaz, our President and Chief Executive Officer, Brian Rigsby, our Chief Financial Officer, Nicole Lambert, our Chief Operating Officer, and Mark Barati, our Chief Commercial Officer. This call can be heard live via webcast at investor.meri.com, and a recording will be archived in the investor section of our website along with this slide presentation. Please note that some of the information presented today contains projections, or other forward-looking statements regarding future events or the future financial performance of the company. These statements are based on management's current expectations, and the actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's annual report on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-A. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. With that, I will now turn the call over to Paul.

Good afternoon, everyone, and thank you for joining us. On today's call, we will discuss highlights from the first quarter and provide updates on the strategic initiatives that are driving our long-term growth plan. So many positive changes happening across our organization. I want to take a minute to thank our myriad teammates and our provider partners for their continued commitment to advancing our mission and vision to make genetic testing and precision medicine more accessible, helping people take more control of their health, and to enable providers to better treat and prevent disease. Turn to slide four. Merogenetics had another strong quarter as we kicked off 2023 ahead of expectations. Total revenue grew 10% year-over-year, driven by another strong quarter of double-digit volume growth in both myRisk hereditary cancer testing and GeneSight. Total volume grew 21% year-over-year and 10% sequentially, excluding sneak peak. Hereditary cancer testing volume grew an impressive 24% year-over-year in Q1, after growing 16% year-over-year last quarter. For those who may have doubted our ability to sustain gene site growth, we processed 110,000 tests in the first quarter, a company record, and saw approximately 4,000 new clinicians ordering gene sites for the first time. We're also very excited about the progress we made in our prenatal business, which despite some interruptions in the state of California, grew test volumes 12% year-over-year in the quarter. excluding contributions from Gateway Genomics. This quarter gives us confidence in our ability to achieve our full-year financial guidance, as well as reach profitability and positive operating cash flow in the fourth quarter of this year. Additionally, we believe that our continued commercial execution, robust product pipeline, and top-tier talent will fuel our long-term growth even further. In the quarter, we announced several new exciting strategic partnerships, including an expanded partnership with Illumina to combine our unique diagnostic development and commercial capabilities to expand our emerging biopharma business and broaden access to HRD testing in the United States. We also announced a new collaboration with SimonMed Imaging, one of the largest independent outpatient imaging providers in the United States, to improve access to our MyRisk hereditary cancer test with RiskScore for women of all ancestors. Nicole will speak to these new partnerships in more detail, and we are excited about a number of other similar business development opportunities under discussion. At Myriad Genetics, we strive to provide best-in-class quality tests and scientific insights for our providers and their patients. From leading research and development in molecular and companion diagnostics to products helping to address our growing mental health crisis, we are working at the forefront of innovation in our space. We also want to ensure that we are actively removing friction points for our patients and healthcare providers to make it easier to do business with us. Nicole will talk about some of the progress we've made in improving the patient and provider experience with new tools like our unified order portal and EMR integrations later on this call. Finally, improving access to our tests for patients of all demographics is extremely important to us. Serving underrepresented populations and ethnicities through our patient outreach programs has proven to be very effective, and we are excited about our new point-of-care financial accessibility tools and payment programs to improve access for all patients. Transitioning to slide six, I'd like to outline exactly why we think and what it takes to be a winner in our sector. First, we strive to have the best science and products whose access and adoption are enabled by technology in our fields. For us, this means having products that deliver real-world results in clinical settings through high-quality, actionable, and differentiated tests that help support early detection and treatment decisions. Second, we believe we need automated, scalable, and cost-effective lab operations to deliver on our mission. Our Labs of the Future strategy, which Nicole will discuss later on the call, allows us to improve workflows, test turnaround times, and reduce costs to advance technology and automation. Similarly, the investments we've made over the last two years in modernizing our IT platform allow us to better serve our patients and provider partners at scale across all products and channels at lower cost. Third, a strong commercial platform ensures that our providers and patients benefit from partnering with MeriGenetics and that we can grow efficiently. And finally, to win, one needs best-in-class regulatory revenues and revenue cycle capabilities. Great science used to develop practical, high-quality diagnostic tests operating in state-of-the-art facilities that reduce costs with the ability to get paid for our efforts is key. Our payer markets team has deep industry experience and plays an integral role in the development of our product pipeline, as well as our commercial reimbursement strategy. We see this as a competitive advantage that does not often receive the credit it deserves. With that, I'll turn it over to our Chief Commercial Officer, Mark Barati, to speak towards our commercial capabilities in more detail.

Thanks, Paul. I'd like to start on slide eight and talk about our commercial team. We have made tremendous strides in our commercial execution over the past year with changes made across the organization that have enabled our sales force to effectively target and penetrate both new and existing accounts. The results speak for themselves with robust volume growth over the past two quarters. The vast but majority of which come from existing accounts. This gives us confidence in the changes that we have made in the commercial team because growth in existing accounts means that tailwinds like market dislocation have today not been the key drivers of our commercial performance. What is driving our continued volume growth is our skilled and focused sales force. With years of experience at Myriad, working alongside providers and their patients, equipped with new digital tools and scientific insights that help them better serve our customers, while simultaneously attracting new accounts to the franchise. Our sales force is motivated by these new capabilities because it makes their jobs easier, which is why we've seen turnover across our entire sales force drop down below 8%, something that we are incredibly proud of. I'll now turn to slide nine and talk about our core business units. Our oncology business delivered 77.6 million in revenue in the first quarter. Reported test volumes were roughly 50,000. Polaris, our market-leading prostate cancer test, continues to reach patients with diagnosed prostate cancer to revive them and their physicians with important information needed for better treatment decisions. In the first quarter, Polaris volumes grew 22% year-over-year after growing 17% year-over-year in the fourth quarter of 2022. Polaris is the only test with two validated thresholds at the time of diagnosis. One, to identify which patients can safely go on active surveillance, and the other to identify which patients need multimodal therapy who can safely avoid additional therapies like hormone therapy. In fact, third-party research shows that Polaris, using active surveillance threshold, identified almost twice as many patients who can safely go on active surveillance compared to our peers. Polaris is not the only highlight in the quarter for oncology business. Hereditary cancer testing volume in oncology grew 16% in the quarter year over year, and we added a number of experienced leaders to the group to help drive growth even further. With improved operational efficiencies, like 15% reduction in turnaround times for oncology tests compared to Q1 of last year, along with a net promoter score of 73% amongst oncology providers and a fully equipped sales force, we anticipate continued growth from our core oncology tests. Now we'll move to women's health on slide 10. The Myriad Genetics women's health business serves women of all ancestries by assessing the risk of cancer and offers prenatal testing solutions for those who are pregnant or planning a family. In the quarter, hereditary cancer testing volumes of women's health increased 32% year over year, making three consecutive quarters of positive volume growth. The strong momentum reflects a combination of deeper penetration of current accounts, new customer wins, and ongoing gains in addressing unaffected patients with a family history of cancer. We are also excited to announce that we have launched our unified ordering portal for the women's health business in a quarter to simplify the ordering process for our customers, especially for those ordering more than one Myriad product. We plan on converting all existing Myriad women's health customers to our new unified ordering portal by the end of the year. In prenatal, we are pleased to report a 12% increase in quarterly test volumes compared to Q1 of last year. This figure alludes to any contributions from our recent acquisition, Gateway Genomics, and features minimal contributions from the state of California due to ongoing disruption caused by the state's revised prenatal screening program. We are very excited about this growth and look forward to continued strong performance. Let's move now to slide 11 and talk about mental health and gene sites. Mental illness continues to have a lasting effect on patients and their families in the U.S. as those suffering fail to receive proper medical treatment. GeneSight helps physicians better understand how antidepressants and other drugs will affect their patients. Importantly for this patient group, the test can be performed, which is a single cheek swab sample that can be taken in the privacy of their own home. In the first quarter, GeneSight volumes grew 31% over the prior year as we've added approximately 4,000 new clinicians to the franchise, bringing Myriad to more than 26,000 active ordering physicians for the GeneSight test. We believe that the ongoing success of GeneSight further demonstrates the effectiveness of our new commercial capabilities, digital marketing strategies, and patient-centric engagement initiatives implemented over the past year. On that note, I want to turn to slide 12 and talk about our digital platform. I've spoken about our digital capabilities before, primarily as it relates to GeneSight, and I'll give another shout out to the GeneSight team for the success they've seen in developing these capabilities and transferring them to other parts of the business, specifically in women's health and urology. Now, let's look at this funnel, which should help visualize some of the examples of these digital capabilities. As you can see, last year, we increased our total website traffic by over 10%, and more importantly, we've learned how to convert that traffic into greater qualified leads. In other words, we've learned how to connect people who need GeneSight to our website. In 2022, we increased the number of qualified leads from website traffic by more than 50% compared to 2021 for both patients and healthcare providers. Then our inside sales, outside sales, and marketing teams equipped with new digital tools and automation technologies are better able to convert those leads into actual orders. In 2022, we increased the number of leads converted to order tasks by more than 30% compared to 2021. These results are outstanding. And I just want to thank the team again for doing such a great job developing and executing on this digital platform. As we look to 2023, we plan to leverage these proven digital capabilities and drive growth even further. I'll now pass the call over to our Chief Operating Officer, Nicole Lambert, to talk about our products and key initiatives.

Thanks, Mark. I'd like to start on slide 14 and speak about our products and priorities for 2023. While we have a full pipeline of new products in development, we want to make clear that our priority for 2023 is to maximize the full potential of our current products, like MyRisk, GeneSight, Prequel, CoreSight, MyChoiceCDX, PreciseTumor, and Polaris. Our strong and consistent performance, particularly over the last six months, is credited to the success of these four products. And our general organizational improvements made over the last two years have enabled us to focus on the markets where we have a right to win. Our core products are well supported by guidelines set by organizations such as NCCN and are widely viewed as standard of care. We are excited about ACMG's support of expanded carrier screening and look forward to any further announcements and support from ACOG that may follow suit. Because they are our key drivers of growth, we continue to prioritize and invest in our core products. So while we are very excited about our new product launches, We believe that it is important to focus on areas where we can take action and win now, given the low adoption rate and the competitive environment. On the next slide, I'll speak more about our operational initiative. Myriad's operational initiatives aim at improving the customer experience and creating an environment of innovation. We talk a lot about making it easier to do business with Myriad Genetics. This means listening to our patients and providers and taking actions to address their concerns and adapt however we can. Recently, we added more genes to our primary MIRIS test and announced a partnership with ClinVar because our providers asked us to. Not only have providers responded positively to changes like these, but they know that we are listening to them and we want to hear from them. We are pleased with the ongoing rollout of our new unified provider portal and our unified order management system, which not only ensure that we are getting the information required by payers, but they also make it much easier for providers to order our tests for their patients. It reduces the number of times we need to recontact our providers for this information. Our EMR integrations with the likes of Epic and others not only ensure that we are getting patient medical records from providers, but it also means that providers who are already in those EMR systems do not have to provide those documents to us outside of their normal workflow. On the next slide, we can see the tremendous progress that we have made working with clinics using EMR integrations to deliver more test results for our MI-RISC hereditary cancer tests. In January, we launched our new unified provider portal in Women's Health, and we are already seeing tremendous uptake from providers. We plan to convert all existing Myriad Women's Health customers to our new unified portal in the very near term. With that, let's turn to slide 17 and talk about our updates to Lab of the Future. Preparations for our new Labs of the Future are on track as both new facilities, one in West Salt Lake City and our new headquarters and central lab operations, and the other in South San Francisco, the Walter Gilbert Research and Innovation Center, which is named after one of our Nobel Prize-winning founders, Walter Gilbert, are both ready for move-in this June. In addition, we are taking steps to exit our current headquarters building in Salt Lake and are moving lab equipment to our new headquarters as we speak. These new facilities not only create a more cost-effective approach to running our tasks, but they foster an environment of innovation and collaboration amongst our commercial, support, and scientific team. Next, on slide 18, I'll talk more in depth about some strategic partnerships that we made in this quarter. As Paul mentioned, we announced several new and exciting strategic partnerships this quarter, including an expanded partnership with Illumina and a collaboration with Simon Med Imaging. As such, Illumina's TSO500 HRD test is now available in the U.S. for research only, and a unique companion diagnostic alliance has been established to enable more clinical research for gene-based targeted therapies. We look forward to working more closely with Illumina to broaden access to HRD testing in the United States. We are equally excited about our new collaboration with SimonMed Imaging, one of the largest independent outpatient medical imaging providers in the U.S. Together, we plan to launch a new hereditary cancer risk assessment program that combines diagnostic imaging with genetic risk assessment utilizing MyRisk with RiskFour to enable affordable access to genetic testing and deliver a personalized insight to better inform clinical care for millions of patients served at Simon Med. I'll now turn the call over to Brian to discuss financial highlights in the quarter.

Thanks, Nicole. I'd like to start by reviewing product volume trends on slide 20. We generated strong double-digit growth in both hereditary cancer testing and gene site volumes in the first quarter. Prolera saw an impressive 22% quarterly volume growth figure compared to Q1 of last year, and prenatal volumes, excluding contributions from sneak peeks, grew 12% year over year. Total first quarter volumes grew organically 21% over last year. Overall, the quarter reflected really positive broad-based volume growth across the portfolio. Turning to first quarter total revenue, we generated $181.2 million in revenue, or 10% growth over the year growth period. A second consecutive quarter of double-digit growth in total revenue. This growth rate reflects strong volume growth, which is partially offset by product mix and a challenging year-over-year comparison related to out-of-period cash collections. Recall that first quarter 2022 benefited from approximately $12 million in positive out-of-period adjustments, which were immaterial in the first quarter of 2023. In addition, sneak peeks price point creates significant product mix impacts. Taking these factors into consideration, underlying ASPs were in line with our long-term forecasted range of negative 3% to 5%. Healthy growth across our business units reflect a number of comments Paul, Mark, and Nicole have already mentioned, including improved execution by a strengthened and highly motivated commercial team, as well as investments in core infrastructure and improving customer experience. First quarter total adjusted operating expense of $144.5 million while above our prior commentary reflects higher than forecasted performance-based commissions and the timing of certain sales and marketing calls. We remain confident that these investments will continue to support our growth story and generate long-term shareholder value. We'll turn to slide 21 now to review our financial guidance. We are updating our 2023 guidance to reflect the strong Q1 performance. We are raising the low end of our revenue range by $10 million yielding a range of 730 to 750 million or 8 to 11% growth over 2022. Gross margin for 2023 remains unchanged at between 68 and 70% and is expected to fluctuate in any quarter given seasonality. While our first quarter adjusted OpEx spend was higher than anticipated, it is aligned with our revenue outperformance in the quarter. We are raising our 2023 adjusted OpEx guidance by $5 million to a range of $535 million to $555 million. We anticipate quarterly adjusted effects to decrease on the nominal dollar space through the remainder of the year. This will be accomplished through tighter cost controls across the organization and reflect some programs sunsetting throughout the year, including certain sales and marketing expenses that were incurred in the first quarter. Net-net, we are narrowing our 2023 non-GAAP EPS loss range to 24 to 36 cents. with the midpoint unchanged. In addition, we reiterate our previously disclosed target of generating positive adjusted operating cash flow and profitability in the fourth quarter. Moving on, in terms of the balance sheet, we ended the quarter with $109 million of cash, no debt, and continue to assess our capital position in the context of our overall forecast to be profitable and generate adjusted operating cash flow by Q4. Our existing credit facility expires July 31 and we intend to replace it with a new secured credit facility to provide additional financial flexibility. Note that Q1 and the first half of 2023 reflect an elevated level of capital expenditures associated with ongoing progress in our Labs of the Future strategy and facility build-out that Nicole reviewed. We expect CapEx to return to a more normal level in the second half of the year as the build-out of these facilities is completed. I'll now turn it back over to Paul for closing remarks on the next slide.

Thanks, Brian. As you've heard, we have a lot of exciting organizational change that is happening, but we remain focused and confident on reaching profitability in the fourth quarter of this year. Balancing growth and innovation while keeping an eye on profitability is an ongoing challenge and opportunity, but one we are committed to. In closing, I'd like to offer what we believe are our strengths and strategic advantages. First, we continue to grow volumes consistently every quarter across our businesses, and we know how to get paid for our tests. Second, pricing for our products remains stable, and we have visibility into pricing moving forward. Third, we have a disciplined cost management structure as we expect to maintain our strong gross margins and manage our op-ex responsibly. Fourth, we are committed to effective capital deployment in key areas that will provide the customer experience including new technical technology tools and capabilities, innovation, commercial strength, and our lab for the future to generate strong returns for our shareholders. Fifth, and finally, our growth catalysts are clear as we continue to elevate our products to their full potential and opportunistically look for tuck-in acquisitions like gateway genomics transactions. All of this reinforcing our position as a trusted, differentiated lab with specialized expertise. best-in-class quality, a strong, scalable commercial engine underpinned by data, research, and technology with industry-leading margins and business management. I also want to point out what a great job our teams have done in listening to our patients and providers. We have re-approached the way we engage with customers, and they are starting to notice. A great example of this, as Nicole spoke to, is our open-source data strategy with ClinVar, which is something that the genetic counselor community has been quite vocal about. Keeping patients and providers at the center of everything we do is starting to pay dividends, and we are excited about finding new ways to make it easier to do business with us. Everything from increased price transparency and affordability for patients to the rollout of initiatives like EMR integrations with Epic and our unified order portal, along with improvements to MiriComplete, our customized suite of services and workflow solutions. With that, I'll turn it back to Matt for Q&A.

Okay, thanks, Paul. And as a reminder, during today's call, we use certain non-GAAP financial measures. A reconciliation of the GAAP to non-GAAP financial results and a reconciliation of GAAP to non-GAAP financial guidance can be found in our earnings release and under the investor relations section of our website. Now we are ready to begin the Q&A session. To ensure broad participation, we are asking participants to please ask only one question and one follow-up. Operator, we are now ready for the Q&A portion of the call.

Thank you very much. If you would like to register a question, please press the 1 followed by the 4 on your telephone. You will hear a three-tone prompt that acknowledges that request. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3. Once again, to register for a question, it is 1-4 on your touch-tone phone. Your first question will come from the line of Andrew Cooper with Raymond James. Your line is open.

Hey, guys. Congrats on a nice quarter here on the top line, and thanks for the questions. Maybe just first, you didn't really necessarily touch in much depth on it in the call, so I just want to make sure in terms of timelines of some of the pipeline, what's working through, that everything's on track or if there's any updates to the different pieces of Precise as well as First Gene and the rollout of some of these additional tests.

Yeah, Andrew, we continue to look at our product management across the portfolio, including the new product launches. And so to enhance the current product, we don't see any material changes in our timeline. We still expect to launch first gene softly in Q4. What exactly that looks like, we have some enhancements to foresight that we want to do. in anticipation of expanded ACOG guidelines. So we've really instituted a product management approach across our current portfolio and the new product launches. And so, for example, we're learning and our new oncology team is working on the precise rollout, and we want to make sure that we've improved upon that before we roll out precise liquid. And as we've talked a little bit about, our biopharma business is really taking off. And that bodes well for the interest that we've seen in precise MRD on the research side. So, again, I think enhancements to foresight will improve the first gene launch, and it's foundational to that. But we don't have any material changes at all to kind of the pipeline or the timing that we're looking at at this point.

Okay, great. That's super helpful. And then maybe secondly, maybe for Brian or Paul, whoever kind of wants to answer it, but Just a little bit more color on the OPEX increase. You know, I think one of the questions investors have had has been on the ability to do some of these things without incrementally more spend. So just how much, you know, can you give us a little bit more color on what that is and then how much of the sunsetting that was mentioned and things like that was already planned through the year versus things that are coming in in an attempt to offset higher costs elsewhere? Just a little bit of kind of explanation or color around that would be super helpful.

Yeah, thanks, Andrew. I think, first of all, as we said, the Q1 had some incremental costs, especially as it relates to some of the selling functions, given that significantly the step up in volume from Q4 to Q1, there were some costs that went along with that. Obviously, we came in As you noted, much higher on the revenue line. Our plan for the year had always sort of been for some of the projects and initiatives that we had earlier in the year to start to sunset as we move through the year. And so we continue to not only expect that, but to also expect some of the cost control programs that we put in place to have an impact as we move through the year. And that's how we get to the update in our guidance.

Yeah, Andrew, I just want to reiterate. We had sales and marketing expenses, commissions that helped drive a lot of the growth that will sunset, some of which was the way that commissions were budgeted, quite frankly. Given seasonality, we expected volume to be down, not up to the level they were. But more importantly, to the other underlying question, the OPEX budget here reflects all of the investments that we anticipate that will be necessary to launch first gene, to advance clinical validation work for MRD, and to keep everything else on track that you asked about before. So investors should be confident that there won't be any surprises in the OpEx in terms of new product launches. In fact, it's all about scaling new products on the current commercial infrastructure and leveraging that. So that's what investors should count on.

Yeah, new product or new comp bogeys is a high-class problem to have to deal with. So I appreciate it. I'll stop there. Thanks.

And your next question comes from the line of Dave Delahunt with Goldman Sachs. Your line is open.

hey guys congrats on the quarter on the epic emr integration could you tell us a bit more about how you measure the productivity increase you expect there yeah thanks for the question um really we're looking at um those accounts and to say oh you know some of them are existing accounts for us to see okay if we make the process that much easier

what's the lift that we should expect in each of those accounts? And we're seeing, you know, a fairly wide variability, you know, in some clinics, the workflow just isn't all that established. And so the volume stays flat, but in a lot of these clinics, you know, the clinical buy-in is already there. The physician already believes in the product. It's just a matter of making it that much easier for the staff. And so we look in the early days, we've looked at those, right? Like customers that we already have, what's the uplift that we can see? But I think the real power of that epic agreement is in those clinics where we didn't already have existing customers, and we can get new customers based on the ease of which they can order and how we can just bring in a sales force to enforce the clinical utility and the value of our products. And then the uplift will be a lot faster in those clinics. So I would say we're measuring sort of new customers and speed to getting up to full potential, and then what's the lift in existing customers?

So just to add, what we have seen in the various EMR integrations, as Nicole spoke to, is about a 25% lift in volumes and wallet share. And I just want to reiterate that most of these solutions did not drive fourth quarter and Q1 results. Most of these solutions are coming into place now. So it really – It gives us a lot of confidence in our ability to grow, as we stated over the last year, our ability to grow in 23 and going into 24. So the other thing that's really an important enhancement here is getting paid, being able to pull medical necessity prior auth out of Epic or Cerner or the other EMRs that we're working on just creates less friction with the payers as well, and that enables us to reduce our no pay and get paid faster. So there's just a lot of benefits here, and obviously getting the reports back to the provider more quickly so they can treat the patient. So it's a winner across the board.

Great. Thanks.

Thank you.

And your next question comes from line of Derek DeBruin with Bank of America. Your line is open.

Hey, Paul and team. This is John on for Derek. Yeah, so congratulations. First of all, strong double-digit growth again this quarter. But I want to make sure, I wanted to ask how much of that growth is off perhaps easier comps from prior year due to COVID versus incremental growth Um, like, uh, like were there any catch up payments, perhaps from the new code going into effect or any, any one-time items?

No, as a matter of fact, as Brian spoke to, you know, we had to overcome the prior $12 million prior period collections, strong collections that we had in Q1 of last year. Um, so clearly the comps were easier to achieve given Omnicron last year. What I would point you to is the quarter over quarter 10% growth that we had sequentially in what is typically a 4% or 5% down quarter. So the momentum across all our products, my risk hereditary cancer, prenatal that grew 12% off of low performance last year, really performance across the board. And most of that, as Mark spoke to, coming from wallet share of existing customers, we're not even seeing yet the flow through of new customers that are just being onboarded. So we're feeling pretty good about the momentum here.

Appreciate that. So that means you still expect Genesight to grow upwards of 20% for the year. How do you see MyChoice and Prolaris and the prenatal products contributing to that growth, if you're able to break down those segments?

Well, we don't break down those segments, but I think what we've tried to focus everyone's attention on is over the last year, and Nicole spoke to this, it is about mature products with known reimbursement in guidelines. where our principal challenge was ease of use with providers. And you're seeing double-digit growth across all the product lines and still pretty low adoption rates. So when you think about Polaris, you know, that segment, that area is only 25% penetrated. Same number for hereditary cancer. So when people talk about hereditary cancer being commoditized or some melting ice cube on pricing, it's just not true. And we're demonstrating that. particularly with a 34% growth in women's health for unaffected patients with a family history that meet guidelines, the majority of which are 25 to 45, you know, there's just great opportunity for patients to access MyRisk with Riskor, which is by far the best hereditary cancer test in the marketplace.

Gotcha. I appreciate it.

And your next question will come from the line of Jack Meehan with Nefron Research.

Thanks. Good afternoon. Brian, I wanted to ask you about the gene site ASP, just how the coding change played out in the quarter. I'm calculating an ASP of about $290, so down 13% sequentially is my math. I know the Medicare rate came down 15%. It was my understanding that it was only, like, 25, 30% of the volume though. So can you just talk about what, you know, is my math right? And what was the remaining driver of the sequential decline?

Yeah. I mean, I think in a, in total, the, the, and I look at it potentially as well. I think, you know, that that's the right math. What I would say is that over half of that sequential change was really driven by the normal seasonality that we see as long as well as a, as a transitory billing issues. that we didn't resolve until late in the quarter, and that'll play out over the course of the next few quarters. So those two items were sort of over half of that change that you saw. We did see some, as we said, some downward pressure as it relates to the PLA code, but we still expect that over time, long term, You know, that's going to be a positive to have a code like that that's unique to Genesight and recognizes, you know, it's transparent for folks as it starts to come in and be a covered service. But, you know, that was some portion of it, but the majority were the first two items that I mentioned.

Unless we forget the revenue growth quarter over quarter in Genesight, but at the end of the day, it's what we're being judged by here. Yeah, you're over here, Lisa.

Sure. And then also wanted to ask just about the DSOs. I think accounts receivable increased 17.5 million sequentially. You know, last year it was 10 million. The prior year it was 5 million. Just maybe this is related to the billing you were referencing, but just like the increase was bigger than in the past. Can you comment on that?

Yeah, I think two things. One is, you know, when you think about the year-over-year increase that the revenue was up substantially year-over-year, especially when you back out the out-of-period cash collections out of last year that obviously would not have had an end-of-period AR effect. And March, typically the way the quarter falls, is the biggest month of the quarter, and there's not an opportunity to collect that. So, you know, I think the way we look at it, you know, DSOs are right in the range that we would have expected. Really, the increase in the AR balance is driven by the increase in revenue.

And we've seen that five-day pop and worked it down every year as well. So it's sort of seasonally consistent.

Okay, thank you, guys. Thank you, Jared.

As a brief reminder to all to register a question, it is 1-4 on your telephone keypad. Your next question comes from the line of Puneet Sutta with SVB. Your line is open.

Yeah, hi, Paul. Thanks for taking the question. So was there a research contribution on the MRD side in the quarter and, you know, wondering what the latest stuff did there? in terms of the product launch, and how are you thinking about the market overall? There's some new entrants into the market that are launching the assays prior to reimbursement, and so obviously the number is growing in the markets. I just wanted to get your latest as to how you're thinking about this market overall.

Yeah, we're still incredibly excited about how we stack up in terms of the MRD assay that we're standing up operationally in our existing labs with the technologies that we have with prequel and MyChoice. There were no MRD revenues in the quarter. As we talked about, you know, that we believe will happen in the back half of the year. A lot of interest, though, and discussions advancing with pharma on research MRD. So we do expect to see some of that go through, and I think that will, no pun intended, validate our assay. And importantly, in the quarter, we did see some nice growth in our biopharma research business, but it was not in MRD. But those relationships continue to expand. That's led to our companion diagnostic expansion. And again, as Nicole spoke to, we think the Illumina partnership will just open up more of those conversations. So we have a a growing biopharma business and are excited about the differentiation of our MRD assay. I would underscore that the differentiation is that when we come to market, A, we will generate revenues from research, so we're confident about that, and B, we can stand it up in our labs and commercialize it a lot quicker. And we'll be talking over the next couple of quarters, hopefully, about some of the clinical validation work that we're doing with some academic medical centers, and we hope to be talking about that here in the next several months. Got it.

And then as you look for the rest of the year, you acquired Sneak Peek later last year. Just wondering in terms of the focus, is it continuing to be on product launches? And once you have trimmed the portfolio a bit, Is it time, opportune time to start looking at, you know, more assets in the space? Obviously, valuations have come down. Just wanted to get your latest thoughts on M&A. Thank you.

Yeah. I'll answer that question and just give an observation to this sector. And I'm only two and a half years into this, but, you know, the focus on new product launches as opposed to getting the full potential of profitability on products that are leading in and that have margins, have margin expansion, I scratch my head about, quite frankly. So we have an exciting product portfolio. We've talked about that contributing to 24 and particularly 25. We're growing at 10% plus based on our existing portfolio, and we see growth on top of that. In terms of M&A, absolutely, we will continue to look for opportunistic tuck-ins, um in in the areas where we think we can win um but um yeah i'm just um i don't know if i have an investor hat on i'm really thinking about the opportunity to drive possibility and growth in core mature products where adoption rates are still low and the competitive environment's gotten a lot better that's not to say we're not excited about first sheen mrd expanding to precise liquid But we're very focused right now on gene site, my choice, Polaris, my risk in particular. And I guess I just underscore that from an investor standpoint and return on invested capital.

Got it. Makes sense. And congrats on this whole quarter. Thanks. Thank you.

Your next question comes from line of Mason Carrico with Stevens. Your line is.

Okay, this is Jacob Cranberry on for Mason. Thanks for taking our questions. So you guys have talked about the cross-selling opportunity for a number of your tests across channels, whether it's selling GeneSight into the Women's Health Channel, MyRisk into the Urology Channel. Could you just elaborate on where you've seen the most success so far with that and what you view as the most attractive opportunity on this front? And start if this has been addressed for jumping around a few tonight.

Yeah, Jason, this is Mark speaking. I think as Paul mentioned, we're really in the early innings of that. So I think what you're seeing now is you're seeing the fact that we do have commercial scale across those channels. So most importantly, they're all talking to one another. They're making sure that if a provider does want to get GeneSight, that we make sure that the GeneSight rep that's in the local area can certainly do that. I think what you're seeing is through our digital capabilities, and as Paul and Nicole talked about, we're now building unified ordering portals to where we're making it easier for providers to be able to do that. And that's starting within the women's health field, where we've got MyRisk, we have the prenatal products, and very soon we'll be able to expand to GeneSight and to our other product lines. So we're still in the early innings, but as you can imagine, we are seeing different providers from our different segments start to use all of our products across the portfolio.

And you can maybe just talk about EuroSuite because we just launched that.

Yeah, so when you think of EuroSuite, right, we do have the ability and we're the only company to be able to provide solutions for that provider. And in that case, we already have the capabilities. So I think when you think of EuroSuite, when you think of women's health, again, with MyRisk as well as prenatal products, we have those types of capabilities. And I think soon you're going to see capabilities to be able to think about gene sites The obvious choice that we've talked about previously is gene psych going into the women's health segment. And we'll talk more about that in future quarters.

Okay, thanks. That's helpful. And then so next on hereditary cancer, hereditary cancer volumes have been a bright spot recently. In terms of the organizational changes and commercial optimizations that you've made within this business, Could you maybe speak to what commercial initiatives are still in front of you and what your key priorities are going forward to ensure that you can make these market share and wallet share gains we've been seeing more recently?

Yeah, sure. So there's the basic blocking and tackling that I talked about last quarter, which is better targeting, better segmentation. I think there's the other pieces that we've talked about around goal setting, commissions, training, right? Those are all sort of the basics. But I think as we've talked about making us easier to work with, You know, I think you've heard Nicole today as well as last quarter talk about many customers always like the Myriad products, but for one reason or another, they decided to leave us. Now we're able to go back in there. We've got easier solutions. We've got better pricing. We've just got more options. And so I think as we look at the targeting across the space, there's driving depth within our existing accounts, which we talked about today, but there's also some of the new customers that we know exist, both large and small customers. And we'll start to give a little bit more color to that moving forward.

Okay. Got it. Thanks, guys.

And there are no further questions. I'll turn the call back to Matt Scallo for closing remarks. Thank you.

Okay. Thanks, operator. This concludes our earnings call. A replay will be available via webcast on our website for one week. Thank you again for joining us this afternoon. Thanks, everybody. Thank you. you you Thank you. Thank you. Okay, good afternoon and welcome to the Myriad Genetics First Quarter 2023 Earnings Call. During the call, we will review the financial results we released today, and afterwards, we will host a question and answer session. Our quarterly earnings release was issued this afternoon on Form 8K and can be found on our website at investor.myriad.com. I'm Matt Scalo, Senior Vice President of Investor Relations, and on the call with me today are Paul Diaz, our President and Chief Executive Officer, Brian Rigsby, our Chief Financial Officer, Nicole Lambert, our Chief Operating Officer, and Mark Berati, our Chief Commercial Officer. This call can be heard live via webcast at investor.meri.com, and a recording will be archived in the investor section of our website along with this slide presentation. Please note that some of the information presented today contains projections or other forward-looking statements regarding future events or the future financial performance of the company. These statements are based on management's current expectations and the actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's annual report on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 18-B. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statement. With that, I will now turn the call over to Paul.

Good afternoon, everyone, and thank you for joining us. On today's call, we'll discuss highlights from the first quarter and provide updates on the strategic initiatives that are driving our long-term growth plan. So many positive changes happening across our organization. I want to take a minute to thank our myriad teammates and our provider partners for their continued commitment to advancing our mission and vision to make genetic testing and precision medicine more accessible, helping people take more control of their health, and to enable providers to better treat and prevent disease. Turn to slide four. Myriad Genetics had another strong quarter as we kicked off 2023 ahead of expectations. Total revenue grew 10% year over year, driven by another strong quarter of double-digit volume growth in both MI-RISC hereditary cancer testing and gene site. Total volume grew 21% year-over-year and 10% sequentially, excluding sneak peak. Hereditary cancer testing volume grew an impressive 24% year-over-year in Q1, after growing 16% year-over-year last quarter. For those who may have doubted our ability to sustain gene site growth, we processed 110,000 tests in the first quarter, a company record, and saw approximately 4,000 new clinicians ordering GeneSight for the first time. We were also very excited about the progress we made in our prenatal business, which despite some interruptions in the state of California, grew test volumes 12% year-over-year in the quarter, excluding contributions from Gateway Genomics. This quarter gives us confidence in our ability to achieve our full-year financial guidance as well as reach profitability and positive operating cash flow in the fourth quarter of this year. Additionally, we believe that our continued commercial execution, robust product pipeline, and top-tier talent will fuel our long-term growth even further. In the quarter, we announced several new exciting strategic partnerships, including an expanded partnership with Illumina to combine our unique diagnostic development and commercial capabilities to expand our emerging biopharma business. and broaden access to HRD testing in the United States. We also announced a new collaboration with SimonMed Imaging, one of the largest independent outpatient imaging providers in the United States, to improve access to our MyRisk Hereditary Cancer Test with Risk Score for women of all ancestors. Nicole will speak to these new partnerships in more detail, and we are excited about a number of other similar business development opportunities under discussion. At Myriad Genetics, we strive to provide best-in-class quality tests and scientific insights for our providers and their patients. From leading research and development in molecular and companion diagnostics to products helping to address our growing mental health crisis, we are working at the forefront of innovation in our space. We also want to ensure that we are actively removing friction points for our patients and healthcare providers to make it easier to do business with us. Nicole will talk about some of the progress we've made in improving the patient and provider experience with new tools like our unified order portal and EMR integrations later on this call. Finally, improving access to our tests for patients of all demographics is extremely important to us. Serving underrepresented populations and ethnicities through our patient outreach programs has proven to be very effective, and we are excited about our new point-of-care financial accessibility tools and payment programs to improve access for all patients. Transitioning to slide six, I'd like to outline exactly why we think and what it takes to be a winner in our sector. First, we strive to have the best science and products whose access and adoption are enabled by technology in our field. For us, this means having products that deliver real-world results in clinical settings through high-quality, actionable, and differentiated tests. that help support early detection and treatment decisions. Second, we believe we need automated, scalable, and cost-effective lab operations to deliver on our mission. Our Labs of the Future strategy, which Nicole will discuss later on the call, allows us to improve workflows, test turnaround time, and reduce costs to advance technology and automation. Similarly, the investments we've made over the last two years in modernizing our IT platform allow us to better serve our patients and provider partners at scale across all products and channels at lower cost. Third, a strong commercial platform ensures that our providers and patients benefit from partnering with Mary Genetics and that we can grow efficiently. And finally, to win, one needs best-in-class regulatory revenues and revenue cycle capabilities. Great science used to develop practical, high-quality diagnostic tests Operating state-of-the-art facilities that reduce costs with the ability to get paid for our efforts is key. Our payer markets team has deep industry experience and plays an integral role in the development of our product pipeline, as well as our commercial reimbursement strategy. We see this as a competitive manage that does not often receive the credit it deserves. With that, I'll turn it over to our Chief Commercial Officer, Mark Berati, to speak towards our commercial capabilities in more detail.

Thanks, Paul. I'd like to start on slide eight and talk about our commercial team. We have made tremendous strides in our commercial execution over the past year with changes made across the organization that have enabled our sales force to effectively target and penetrate both new and existing accounts. The results speak for themselves with robust volume growth over the past two quarters, the vast majority of which come from existing accounts. This gives us confidence in the changes that we have made in the commercial team Because growth in existing accounts means that tailwinds like market dislocation have today not been the key drivers of our commercial performance. What is driving our continued volume growth is our skilled and focused Salesforce. With years of experience at Myriad, working alongside providers and their patients, equipped with new digital tools and scientific insights that help them better serve our customers while simultaneously attracting new accounts to the franchise. Our Salesforce is motivated by these new capabilities because it makes their jobs easier, which is why we've seen turnover across our entire Salesforce drop down below 8%, something that we are incredibly proud of. I'll now turn to slide 9 and talk about our core business units. Our oncology business delivered $77.6 million in revenue in the first quarter. Reported test volumes were roughly 50,000. Polaris, our market-leading prostate cancer test, continues to reach patients with diagnosed prostate cancer to revive them and their physicians with important information needed for better treatment decisions. In the first quarter, Polaris volumes grew 22% year-over-year after growing 17% year-over-year in the fourth quarter of 2022. Polaris is the only test with two validated thresholds at the time of diagnosis. One, to identify which patients can safely go on active surveillance, and the other to identify which patients need multimodal therapy who can safely avoid additional therapies like hormone therapy. In fact, third-party research shows that Polaris, using active surveillance threshold, identified almost twice as many patients who can safely go on active surveillance compared to our peers. Polaris is not the only highlight in the quarter for oncology business. Hereditary cancer testing volume in oncology grew 16% in the quarter year over year, and we added a number of experienced leaders to the group to help drive growth even further. With improved operational efficiencies, like 15% reduction in turnaround times for oncology tests compared to Q1 of last year, along with a net promoter score of 73% amongst oncology providers and a fully equipped sales force, we anticipate continued growth from our core oncology tests. Now we'll move to women's health on slide 10. The Myriad Genetics women's health business serves women of all ancestries by assessing the risk of cancer and offers prenatal testing solutions for those who are pregnant or planning a family. In the quarter, hereditary cancer testing volumes of women's health increased 32% year over year, making three consecutive quarters of positive volume growth. The strong momentum reflects a combination of deeper penetration of current accounts, new customer wins, and ongoing gains in addressing unaffected patients with a family history of cancer. We are also excited to announce that we have launched our unified ordering portal for the women's health business in a quarter to simplify the ordering process for our customers, especially for those ordering more than one Myriad product. We plan on converting all existing Myriad women's health customers to our new unified ordering portal by the end of the year. In prenatal, we are pleased to report a 12% increase in quarterly test volumes compared to Q1 of last year. This figure alludes to any contributions from our recent acquisition, Gateway Genomics, and features minimal contributions from the state of California due to ongoing disruption caused by the state's revised prenatal screening program. We are very excited about this growth and look forward to continued strong performance. Let's move now to slide 11 and talk about mental health and gene sites. Mental illness continues to have a lasting effect on patients and their families in the U.S. as those suffering fail to receive proper medical treatment. GeneSight helps physicians better understand how antidepressants and other drugs will affect their patients. Importantly for this patient group, the test can be performed, which is a single cheek swab sample that can be taken in the privacy of their own home. In the first quarter, GeneSight volumes grew 31% over the prior year as we've added approximately 4,000 new clinicians to the franchise, bringing myriad to more than 26,000 active ordering physicians for the GeneSight test. We believe that the ongoing success of GeneSight further demonstrates the effectiveness of our new commercial capabilities, digital marketing strategies, and patient-centric engagement initiatives implemented over the past year. On that note, I want to turn to slide 12 and talk about our digital platform. I've spoken about our digital capabilities before, primarily as it relates to GeneSight, and I'll give another shout out to the GeneSight team for the success they've seen in developing these capabilities and transferring them to other parts of the business, specifically in women's health and urology. Now, let's look at this funnel, which should help visualize some of the examples of these digital capabilities. As you can see, last year, we increased our total website traffic by over 10%, and more importantly, we've learned how to convert that traffic into greater qualified leads. In other words, we've learned how to connect people who need GeneSight to our website. In 2022, we increased the number of qualified leads from website traffic by more than 50% compared to 2021 for both patients and healthcare providers. Then our inside sales, outside sales, and marketing teams equipped with new digital tools and automation technologies are better able to convert those leads into actual orders. In 2022, we increased the number of leads converted to order tasks by more than 30% compared to 2021. These results are outstanding. And I just want to thank the team again for doing such a great job developing and executing on this digital platform. As we look to 2023, we plan to leverage these proven digital capabilities and drive growth even further. I'll now pass the call over to our Chief Operating Officer, Nicole Lambert, to talk about our products and key initiatives.

Thanks, Mark. I'd like to start on slide 14 and speak about our products and priorities for 2023. While we have a full pipeline of new products in development, we want to make clear that our priority for 2023 is to maximize the full potential of our current products, like MyRisk, GeneSight, Prequel, CoreSight, MyChoiceCDX, PreciseTumor, and Polaris. Our strong and consistent performance, particularly over the last six months, is credited to the success of these four products. And our general organizational improvements made over the last two years have enabled us to focus on the markets where we have a right to win. Our core products are well supported by guidelines set by organizations such as NCCN and are widely viewed as standard of care. We are excited about ACMG's support of expanded carrier screening and look forward to any further announcements and support from ACOG that may follow suit. Because they are our key drivers of growth, we continue to prioritize and invest in our core products. So while we are very excited about our new product launches, We believe that it is important to focus on areas where we can take action and win now, given the low adoption rate and the competitive environment. On the next slide, I'll speak more about our operational initiative. Myriad's operational initiatives aim at improving the customer experience and creating an environment of innovation. We talk a lot about making it easier to do business with Myriad Genetics. This means listening to our patients and providers and taking actions to address their concerns and adapt however we can. Recently, we added more genes to our primary MIRIS test and announced a partnership with ClinVar because our providers asked us to. Not only have providers responded positively to changes like these, but they know that we are listening to them and we want to hear from them. We are pleased with the ongoing rollout of our new unified provider portal and our unified order management system, which not only ensure that we are getting the information required by payers, but they also make it much easier for providers to order our tests for their patients. It reduces the number of times we need to recontact our providers for this information. Our EMR integrations with the likes of Epic and others not only ensure that we are getting patient medical records from providers, but it also means that providers who are already in those EMR systems do not have to provide those documents to us outside of their normal workflow. On the next slide, we can see the tremendous progress that we have made working with clinics using EMR integrations to deliver more test results for our MI-RISC hereditary cancer tests. In January, we launched our new unified provider portal in Women's Health, and we are already seeing tremendous uptake from providers. We plan to convert all existing Myriad Women's Health customers to our new unified portal in the very near term. With that, let's turn to slide 17 and talk about our updates to Lab of the Future. Preparations for our new Labs of the Future are on track as both new facilities, one in West Salt Lake City and our new headquarters and central lab operations, and the other in South San Francisco, the Walter Gilbert Research and Innovation Center, which is named after one of our Nobel Prize-winning founders, Walter Gilbert, are both ready for move-in this June. In addition, we are taking steps to exit our current headquarters building in Salt Lake and are moving lab equipment to our new headquarters as we speak. These new facilities not only create a more cost-effective approach to running our tasks, but they foster an environment of innovation and collaboration amongst our commercial, support, and scientific team. Next, on slide 18, I'll talk more in depth about some strategic partnerships that we made in this quarter. As Paul mentioned, we announced several new and exciting strategic partnerships this quarter, including an expanded partnership with Illumina and a collaboration with Simon Med Imaging. As such, Illumina's TSO500 HRD test is now available in the U.S. for research only, and a unique companion diagnostic alliance has been established to enable more clinical research for gene-based targeted therapies. We look forward to working more closely with Illumina to broaden access to HRD testing in the United States. We are equally excited about our new collaboration with SimonMed Imaging, one of the largest independent outpatient medical imaging providers in the U.S. Together, we plan to launch a new hereditary cancer risk assessment program that combines diagnostic imaging with genetic risk assessment utilizing MyRisk with RiskFour to enable affordable access to genetic testing and deliver a personalized insight to better inform clinical care for millions of patients served at SimonMed. I'll now turn the call over to Brian to discuss financial highlights in the quarter.

Thanks, Nicole. I'd like to start by reviewing product volume trends on slide 20. We generated strong double-digit growth in both hereditary cancer testing and gene site volumes in the first quarter. Prolera saw an impressive 22% quarterly volume growth figure compared to Q1 of last year, and prenatal volumes, excluding contributions from Sneak Peek, grew 12% year over year. Total first quarter volumes grew organically 21% over last year. Overall, the quarter reflected really positive broad-based volume growth across the portfolio. Turning to first quarter total revenue, we generated $181.2 million in revenue, or 10% growth over the year growth period. A second consecutive quarter of double-digit growth in total revenue. This growth rate reflects strong volume growth, which is partially offset by product mix and a challenging year-over-year comparison related to out-of-period cash collections. Recall that first quarter 2022 benefited from approximately $12 million in positive out-of-period adjustments, which were immaterial in the first quarter of 2023. In addition, Sneak Peek's price point creates significant product mix impacts. Taking these factors into consideration, underlying ASPs were in line with our long-term forecasted range of negative 3 to 5%. Healthy growth across our business units reflect a number of comments Paul, Mark, and Nicole have already mentioned, including improved execution by a strengthened and highly motivated commercial team, as well as investments in core infrastructure and improving customer experience. First quarter total adjusted operating expense of $144.5 million while above our prior commentary reflects higher than forecasted performance-based commissions and the timing of certain sales and marketing calls. We remain confident that these investments will continue to support our growth story and generate long-term shareholder value. We'll turn to slide 21 now to review our financial guidance. We are updating our 2023 guidance to reflect the strong Q1 performance. We are raising the low end of our revenue range by $10 million yielding a range of 730 to 750 million or 8 to 11% growth over 2022. Gross margin for 2023 remains unchanged at between 68 and 70% and is expected to fluctuate in any quarter given seasonality. While our first quarter adjusted OpEx spend was higher than anticipated, it is aligned with our revenue outperformance in the quarter. We are raising our 2023 adjusted OpEx guidance by $5 million to a range of $535 million to $555 million. We anticipate quarterly adjusted effects to decrease on the nominal dollar space through the remainder of the year. This will be accomplished through tighter cost controls across the organization and reflect some programs sunsetting throughout the year, including certain sales and marketing expenses that were incurred in the first quarter. Net-net, we are narrowing our 2023 non-GAAP EPS loss range to 24 to 36 cents. with the midpoint unchanged. In addition, we reiterate our previously disclosed target of generating positive adjusted operating cash flow and profitability in the fourth quarter. Moving on, in terms of the balance sheet, we ended the quarter with $109 million of cash, no debt, and continue to assess our capital position in the context of our overall forecast to be profitable and generate adjusted operating cash flow by Q4. Our existing credit facility expires July 31 and we intend to replace it with a new secured credit facility to provide additional financial flexibility. Note that Q1 and the first half of 2023 reflect an elevated level of capital expenditures associated with ongoing progress in our labs of the future strategy and facility build out that Nicole reviewed. We expect CapEx to return to a more normal level in the second half of the year as the build out of these facilities is completed. I'll now turn it back over to Paul for closing remarks on the next slide.

Thanks, Brian. As you've heard, we have a lot of exciting organizational change that is happening, but we remain focused and confident on reaching profitability in the fourth quarter of this year. Balancing growth and innovation while keeping an eye on profitability is an ongoing challenge and opportunity, but one we are committed to. In closing, I'd like to offer what we believe are our strengths and strategic advantages. First, we continue to grow volumes consistently every quarter across our businesses, and we know how to get paid for our tests. Second, pricing for our products remains stable, and we have visibility into pricing moving forward. Third, we have a disciplined cost management structure as we expect to maintain our strong gross margins and manage our op-ex responsibly. Fourth, we are committed to effective capital deployment in key areas that will provide the customer experience including new technical technology tools and capabilities, innovation, commercial strength, and our lab for the future to generate strong returns for our shareholders. Fifth, and finally, our growth catalysts are clear as we continue to elevate our products to their full potential and opportunistically look for tuck-in acquisitions like gateway genomics transactions. All of this reinforcing our position as a trusted, differentiated lab with specialized expertise. best-in-class quality, a strong, scalable commercial engine underpinned by data, research, and technology with industry-leading margins and business management. I also want to point out what a great job our teams have done in listening to our patients and providers. We have re-approached the way we engage with customers, and they are starting to notice. A great example of this, as Nicole spoke to, is our open-source data strategy with ClinVar, which is something that the genetic counselor community has been quite vocal about. Keeping patients and providers at the center of everything we do is starting to pay dividends, and we are excited about finding new ways to make it easier to do business with us. Everything from increased price transparency and affordability for patients to the rollout of initiatives like EMR integrations with Epic and our unified order portal, along with improvements to MiriComplete, our customized suite of services and workflow solutions. With that, I'll turn it back to Matt for Q&A.

Okay, thanks, Paul. And as a reminder, during today's call, we use certain non-GAAP financial measures. A reconciliation of the GAAP to non-GAAP financial results and a reconciliation of GAAP to non-GAAP financial guidance can be found in our earnings release and under the investor relations section of our website. Now we are ready to begin the Q&A session. To ensure broad participation, we are asking participants to please ask only one question and one follow-up. Operator, we are now ready for the Q&A portion of the call.

Thank you very much. If you would like to register a question, please press the 1 followed by the 4 on your telephone. You will hear a three-tone prompt that acknowledges that request. If your question has been answered and you would like to withdraw your registration, please press the 1 followed by the 3. Once again, to register for a question, it is 1-4 on your touch-home phone. Your first question will come from the line of Andrew Cooper with Raymond James. Your line is open.

Hey, guys. Congrats on a nice quarter here on the top line, and thanks for the questions. Maybe just first, you didn't really necessarily touch in much depth on it in the call, so I just want to make sure in terms of timelines of some of the pipeline, what's working through, that everything's on track or if there's any updates to the different pieces of Precise as well as First Gene and the rollout of some of these additional tests.

Yeah, Andrew, we continue to look at our product management across the portfolio, including the new product launches. And so to enhance the current product, we don't see any material changes in our timeline. We still expect to launch first gene softly in Q4. What exactly that looks like, we have some enhancements to foresight that we want to do. in anticipation of expanded ACOG guidelines. So we've really instituted a product management approach across our current portfolio and the new product launches. And so, for example, we're learning and our new oncology team is working on the precise rollout, and we want to make sure that we've improved upon that before we roll out precise liquid. And as we've talked a little bit about, our biopharma business is really taking off. And that bodes well for the interest that we've seen in precise MRD on the research side. So, again, I think enhancements to foresight will improve the first gene launch, and it's foundational to that. But we don't have any material changes at all to kind of the pipeline or the timing that we're looking at at this point.

Okay, great. That's super helpful. And then maybe secondly, maybe for Brian or Paul, whoever kind of wants to answer it, but just a little bit more color on the OPEX increase. You know, I think one of the questions investors have had has been on the ability to do some of these things without incrementally more spend. So just how much, you know, can you give us a little bit more color on what that is and then how much of the sunsetting that was mentioned and things like that was, was already planned through the year versus things that are coming in in an attempt to offset higher costs elsewhere. Just a little bit of kind of explanation or color around that would be, would be super helpful.

Yeah, thanks, Andrew. You know, I think, first of all, as we said, the Q1 had some incremental costs, especially as it relates to some of the selling functions, given that significantly the step up in volume from Q4 to Q1, there were some costs that went along with that. Obviously, we came in much higher on the revenue line. Our plan for the year had always sort of been for revenue. you know, some of the projects and initiatives that we had earlier in the year to start to sunset as we move through the year. And so we continue to not only expect that, but to also expect some of the cost control programs that we put in place to have an impact as we move through the year. And that's how we get to the update in our guidance.

Yeah. And I just want to reiterate, we had sales and marketing expenses, commissions, that helped drive a lot of the growth that will sunset, you know, some of which was the way that commissions were budgeted, quite frankly. Given seasonality, we expected to be down, not up to the level they worked. And, but more importantly to the other underlying question, the OPEX budget here reflects all of the investments that we anticipate that will be necessary to launch first sheen, to advance clinical validation work for MRD, and to keep everything else on track that you asked about before. So investors should be confident that there won't be any surprises in the OpEx in terms of new product launches. In fact, it's all about scaling new products on the current commercial infrastructure and leveraging that. So that's what investors should count on.

Great. Yeah, new product or new comp – bogeys is a high-class problem to have to deal with. So I appreciate it. I'll stop there. Thanks.

And your next question comes from the line of Dave Delahunt with Goldman Sachs. Your line is open.

Hey, guys. Congrats on the quarter. On the Epic EMR integration, could you tell us a bit more about how you measure the productivity increase you expect there?

Yeah, thanks for the question. Really, we're looking at those accounts to say, you know, some of them are existing accounts for us to see, okay, if we make the process that much easier, what's the lift that we should expect in each of those accounts? And we're seeing, you know, a fairly wide variability. You know, in some clinics, the workflow just isn't all that established, and so the volume stays flat. But in a lot of these clinics, you know, the clinical buy-in is already there. The physician already believes in the product. It's just a matter of making it that much easier for the staff. And so in the early days, we looked at those, right? Like customers that we already have, what's the uplift that we can see? But I think the real power of that epic agreement is in those clinics where we didn't already have existing customers, and we can get new customers based on the ease of which they can order and how we can just bring in a sales force to enforce the clinical utility and the value of our products. and then the uplift will be a lot faster in those clinics. So I would say we're measuring sort of new customers and speed to getting up to full potential, and then what's the lift in existing customers.

So just to add, what we have seen in the various EMR integrations, as Nicole spoke to, is about a 25% lift in volumes and wallet share. And I just want to reiterate that most of these solutions did not drive fourth quarter and Q1 results. Most of these solutions are coming into place now. So it really gives us a lot of confidence in our ability to grow, as we've stated over the last year, our ability to grow in 23 and going into 24. So the other thing that's really an important enhancement here is getting paid, being able to pull medical necessity prior off out of Epic or Cerner or the other EMRs that we're working on just creates less friction with the payers as well, and that enables us to reduce our no pay and get paid faster. So there's just a lot of benefits here, and obviously getting the reports back to the provider more quickly so they can treat the patient. So it's a winner across the board.

Great. Thanks.

Thank you.

And your next question comes from line of Derek DeBruin with Bank of America. Your line is open.

Hey, Paul and team. This is John on for Derek. Yeah, so congratulations. First of all, strong double-digit growth again this quarter. But I want to make sure, I wanted to ask how much of that growth is off perhaps easier comps from prior year due to COVID versus incremental growth Um, like, uh, like were there any catch up payments, perhaps from the new code going into effect or any, any one-time items?

No, as a matter of fact, as Brian spoke to, you know, we had to overcome the prior $12 million prior period collection, strong collections that we had in Q1 of last year. Um, so clearly the comps were easier to achieve given Omnicron last year. What I would point you to is the quarter-over-quarter 10% growth that we had sequentially in what is typically a 4% or 5% down quarter. So the momentum across all our products, my risk hereditary cancer, prenatal that grew 12% off of low performance last year, really performance across the board. And most of that, as Mark spoke to, coming from wallet share of existing customers, we're not even seeing yet the flow through of new customers that are just being onboarded. So we're feeling pretty good about the momentum here.

Appreciate that. So that means you still expect Genesight to grow upwards of 20% for the year, How do you see MyChoice and Prolaris and the prenatal products contributing to that growth, if you're able to break down those segments?

Well, we don't break down those segments, but I think what we've tried to focus everyone's attention on is over the last year, and Nicole spoke to this, it is about mature products with known reimbursement in guidelines. where our principal challenge was ease of use with providers, and you're seeing double-digit growth across all the product lines, and still pretty low adoption rates. So when you think about Polaris, you know, that segment, that area is only 25% penetrated, same number for hereditary cancer. So when people talk about hereditary cancer being commoditized or some melting ice cube on pricing, it's just not true, and we're demonstrating that. particularly with a 34% growth in women's health for unaffected patients with a family history that meet guidelines, the majority of which are 25 to 45. You know, there's just great opportunity for patients to access MyRisk with RiskScore, which is by far the best hereditary cancer test in the marketplace.

Gotcha. I appreciate it.

And your next question will come from the line of Jack Meehan with Nefron Research.

Thanks. Good afternoon. Brian, I wanted to ask you about the gene site ASP, just how the coding change played out in the quarter. I'm calculating an ASP of about $290, so down 13% sequentially is my math. I know the Medicare rate came down 15%. It was my understanding that was only, like, 25, 30% of the volume, though. So can you just talk about what, you know, is my math right, and what was the remaining driver of the sequential decline?

Yeah, I mean, I think in total, and I look at it sequentially as well, I think, you know, that's the right math. What I would say is that over half of that sequential change was really driven by the normal seasonality that we see, as well as a transitory billing issue that we didn't resolve until late in the quarter, and that'll play out over the course of the next few quarters. So those two items were sort of over half of that change that you saw. We did see some, as we said, some downward pressure as it relates to the PLA code, but we still expect that over time, long term, that's going to be a positive to have a code like that that's unique to GeneSight and recognizes You know, it's transparent for folks as it starts to come in and be a covered service. But, you know, that was some portion of it, but the majority were the first two items that I mentioned.

And lest we forget, the revenue grows quarter over quarter in Genesight. That, at the end of the day, is what we're being judged by here. Yeah, you're over here. Sure.

Sure. And then also wanted to ask just about the DSOs. I think accounts receivable increased 17.5 million sequentially. You know, last year it was 10 million. The prior year it was 5 million. Just maybe this is related to the billing you were referencing, but just like the increase was bigger than in the past. Can you comment on that?

Yeah, I think two things. One is, you know, when you think about the year-over-year increase that the revenue was up substantially year-over-year, especially when you back out the out-of-period cash collections out of last year that obviously would not have had an end-of-period AR effect. And March, typically the way the quarter falls, is the biggest month of the quarter, and there's not an opportunity to collect that. So, you know, I think the way we look at it, you know, DSOs are right in the range that we would have expected. Really, the increase in the AR balance is driven by the increase in revenue.

And we've seen that five-day pop and worked it down every year as well. So it's sort of seasonally consistent.

Okay, thank you, guys. Thank you, Jared.

As a brief reminder to all to register a question, it is 1-4 on your telephone keypad. Your next question comes from the line of Puneet Sutta with SVB. Your line is open.

Yeah, hi, Paul. Thanks for taking the question. So was there a research contribution on the MRD side in the quarter? And, you know, wondering what's the latest update there in terms of the product launch, and how are you thinking about the market overall? There's some new entrants into the market that are launching the assays prior to reimbursement, and so obviously the number is growing in the markets. I just wanted to get your latest as to how you're thinking about this market overall.

Yeah, we're still incredibly excited about how we stack up in terms of the MRD assay that we're standing up operationally in our existing labs with the technologies that we have with prequel and MyChoice. There were no MRD revenues in the quarter. As we talked about, you know, that we believe will happen in the back half of the year. A lot of interest, though, and discussions advancing with pharma on research MRD. So we do expect to see some of that go through, and I think that will, no pun intended, validate our assay. And importantly, in the quarter, we did see some nice growth in our biopharma research business, but it was not in MRD. But those relationships continue to expand. That's led to our companion diagnostic expansion. And again, as Nicole spoke to, we think the Illumina partnership will just open up more of those conversations. So we have a a growing biopharma business and are excited about the differentiation of our MRD assay. I would underscore that the differentiation is that when we come to market, A, we will generate revenues from research, so we're confident about that, and B, we can stand it up in our labs and commercialize it a lot quicker. And we'll be talking over the next couple of quarters, hopefully, about some of the clinical validation work that we're doing with some academic medical centers, and we hope to be talking about that here in the next several months. Got it.

And then, as you look, you know, for the rest of the year, you know, you acquired Sneak Peek later last year. Just wondering in terms of the focus, is it continuing to be on product launches? And, you know, once you have trimmed the portfolio a bit, Is it an opportune time to start looking at more assets in the space? Obviously, valuations have come down. Just wanted to get your latest thoughts on M&A. Thank you.

Yeah. I'll answer that question and just give an observation to this sector. And I'm only two and a half years into this, but the focus on new product launches as opposed to getting the full potential of profitability on products that are leading and that have margins, have margin expansion, I scratch my head about, quite frankly. So we have an exciting product portfolio. We've talked about that contributing to 24 and particularly 25. We're growing at 10% plus based on our existing portfolio, and we see growth on top of that. In terms of M&A, absolutely, we will continue to look for opportunistic tuck-ins. in the areas where we think we can win. But, yeah, I'm just, I don't know, if I have an investor hat on, I'm really thinking about the opportunity to drive profitability and growth in core mature products where adoption rates are still low and the competitive environment's gotten a lot better. That's not to say we're not excited about first sheen, MRD, expanding to precise liquids, But we're very focused right now on gene site, my choice, Polaris, my risk in particular. And I guess I just underscore that from an investor standpoint and return on invested capital.

Got it. Makes sense. And congrats on a solid quarter. Thanks. Thank you, Vinny.

Your next question comes from line of Mason Carrico with Stevens. Your line is.

Okay, this is Jacob Cranberry for Mason. Thanks for taking our questions. So you guys have talked about the cross-selling opportunity for a number of your tests across channels, whether it's selling GeneSight into the Women's Health Channel, MyRisk into the Urology Channel. Could you just elaborate on where you've seen the most success so far with that and what you view as the most attractive opportunity on this front? And start if this has been addressed for jumping around a few tonight.

Yeah, Jason, this is Mark speaking. I think as Paul mentioned, we're really in the early innings of that. So I think what you're seeing now is you're seeing the fact that we do have commercial scale across those channels. So most importantly, they're all talking to one another. They're making sure that if a provider does want to get GeneSight, that we make sure that the GeneSight rep that's in the local area can certainly do that. I think what you're seeing is through our digital capabilities, and as Paul and Nicole talked about, we're now building unified ordering portals to where we're making it easier for providers to be able to do that. And that's starting within the women's health field, where we've got MyRisk, we have the prenatal products, and very soon we'll be able to expand to Genesight and to our other product lines. So we're still in the early innings, but as you can imagine, we are seeing different providers from our different segments start to use all of our products across the portfolio.

And you can maybe just talk about EuroSuite because we just launched that.

Yeah, so when you think of EuroSuite, right, we do have the ability and we're the only company to be able to provide solutions for that provider. And in that case, we already have the capabilities. So I think when you think of EuroSuite, when you think of women's health, again, with MyRisk as well as your NATO products, we have those types of capabilities. And I think soon you're going to see capabilities to be able to think about gene sites The obvious choice that we've talked about previously is gene psych going into the women's health segment, and we'll talk more about that in future quarters.

Okay, thanks. That's helpful. And then so next on hereditary cancer, hereditary cancer volumes have been a bright spot recently. In terms of the organizational changes and commercial optimizations that you've made within this business, could you maybe speak to what commercial initiatives are still in front of you and what your key priorities are going forward to ensure that you continue to make these market share and wallet share gains we've been seeing more recently?

Yeah, sure. So there's the basic blocking and tackling that I talked about last quarter, which is better targeting, better segmentation. I think there's the other pieces that we've talked about around goal setting, commissions, training, right? Those are all sort of the basics, but I think as we've talked about making us easier to work with You know, I think you've heard Nicole today, as well as last quarter talk about many customers. Always liked the myriad products, but for one reason or another, they decided to leave us. Now we're able to go back in there. We've got easier solutions. We've got better pricing. We've just got more options. And so I think as we look at the targeting across the space, there's driving depth within our existing counts, which we talked about today, but there's also some of the new customers that we know exist, both large and small. And we'll start to give a little bit more color to that moving forward.

Okay. Got it. Thanks, guys.

And there are no further questions. I'll turn the call back to Matt Scallo for closing remarks. Thank you.

Okay. Thanks, operator. This concludes our earnings call. A replay will be available via webcast on our website for one week. Thank you again for joining us this afternoon. Thanks, everybody.