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spk08: Good afternoon, and welcome to Myriad Genetics' third 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 Scalzo, Senior Vice President of Investor Relations. On the call with me today are Paul Diaz, our president and chief executive officer, Brian Rigsby, our chief financial officer, and Mark Verratti, our chief commercial officer. This call can be heard live via webcast at investor.mary.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 8K. 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'll now turn the call over to Paul.
spk10: Thanks, Matt. Good afternoon, everyone, and thank you for joining us. On today's call, we will discuss highlights from our strong third quarter performance and provide an update on the progress we continue to make accelerating revenue growth on our path to profitability. First, I'd like to take a moment to reflect on the great work that the team has done to reposition the company over the last three years. Like many early entrants to a new market, Myriad Genetics relied on its early successes but failed to adapt to evolving market conditions. This created overhangs in the business and complexity that inhibited growth and innovation. Unfortunately, misguided product development, the poor integration of acquisitions, Outdated technologies, deteriorating facilities, and litigation also eroded the brand. To return Myriad to a leadership position, we embarked on a multi-year transformation journey with four key objectives. First, to build and re-energize the team and refocus us on the patients and providers we serve and the mission we committed to. Second, to modernize and expand our lab, IT, and support center capabilities. Third, to restore organic growth and profitability. And fourth, to build the company's R&D and product management strengths. While this hard work continues today, we can confidently say that we have made great progress on all four of these objectives, as well as advancing our mission of Envision to empower patients with the opportunity for better health, wellness through genetic testing and precision medicine. Now on slide four, I want to highlight certain key performance indicators and operational activities that are fueling our growth. First, we have continued to build an experienced and engaged team as demonstrated by our low turnover of just 9.3% and best places to work designation. Enabling our teammates to perform at their highest level by putting tools and resources where they are needed most. as we invested to upgrade our labs, IT infrastructure, and support center capabilities. Driving our double-digit growth has been our focus on the patient and provider experience. Our net promoter scores are strong at 69%. Provider retention is up to 70%. Turnaround times are down to just 6.3 days, and we've added 5,000 new ordering providers to the franchise this quarter. Making it easier to do business with Myriad is starting to pay dividends. as we see market share gains across all our product lines and make progress on large account wins and new strategic partnerships. Our payer markets and revenue cycle teams have been hard at work making sure we get paid for delivering on our mission. Recent highlights included a four-year contract extension and Polaris coverage expansion with United Healthcare, as well as gene site coverage determinations among a number of Medicaid and commercial payers. The team made great progress this quarter on improving ASPs, cash collections, and DSOs. We talk a lot about the company increasing teammate productivity that we see across the entire business. Excluding Sneak Peek, our COGS shrank to $179 per test in Q3 of this year as compared to $196 in Q3 of last year. Our adjusted growth margins improved to 70.4%. And operating expenses, a percentage of revenue shrank from 80% in Q1 of this year to 72% in Q3. And we resolved several legacy litigation matters, which provides more legal and financial visibility and operating focus moving forward. Lastly, we've made significant progress advancing our clinical validation efforts and pre-launch commercial and operational activities for Foresight Universal Plus, First Gene, and Precise MRD for Biopharma Partners. Turning to slide five, Muir Genetics drove significant volume growth in the third quarter across the portfolio as our commercial and lab operations team continued to execute. We are gaining share in the hereditary cancer market, growing volumes 18% year over year in the third quarter, driven by competitive account wins and increased adoption by providers of MyRisk. We continue to see momentum in our prenatal business as well. excluding contributions from Sneak Peek, prenatal testing volumes grew 20% in the third quarter. This third consecutive quarter of double-digit prenatal volume growth reflects ongoing commercial execution from our women's health team as we strive to make it easier for providers to partner with Myriad. Other products like Genesight and Polaris also contributed to our fourth consecutive quarter of double-digit revenue growth. We continue to see our gross margins have been, and we've been diligent in our cost management activities as our operating, as our adjusted operating loss of 2.2 million was reduced significantly from an operating loss of 20.6 million in Q3 of last year. Other highlights from Q3 included a raise in our full-year revenue guidance, which Brian will speak to later, a new four-year agreement with United Healthcare, and a settlement of the RavGen litigation, which now puts that legacy litigation firmly behind us so we can focus on running the business. Lastly, I'm pleased to announce that Sam Raha, our new chief operating officer, will be joining the company shortly. Sam brings over 25 years of general management, commercial, and operations experience to the business, and will hit the ground running on December 11th, building on Nicole Lambert's success in our lab operations, customer service, product innovations as well. Sam's initial focus areas will include improving the patient provider journey and overall customer experience, executing on our labs of the future strategy, and identifying opportunities to strengthen supply chain management and procurement, and helping us to grow our emerging biopharma business. I look forward to introducing Sam to the investor community in the near future, and would like to again thank Nicole Lambert for 22 years of serving Myriad Genetics, its patients, and providers. And with that, I'll turn it over to our Chief Commercial Officer, Mark Verratti.
spk06: Thanks, Paul. I'd like to start on slide seven and talk about our core business units. In the third quarter, hereditary cancer testing volumes from our oncology sales team grew 15% year over year, well above the estimated industry growth, which speaks to our enduring franchise and improving brand reputations. Prolaris, our prostate cancer test, continues its momentum with third quarter revenues up 18% year over year. We are pleased to share that UnitedHealthcare has issued a positive medical policy covering Prolaris in the biopsy setting for all risk groups. This policy will take effect on January 1st of 2024 and represents another win for the urology teams that continue to reach patients with diagnosed prostate cancer to provide them and their physicians with important information needed for better treatment decisions. This aligns with several other positive pro-laris policies that were released in the third quarter. Now we'll move to women's health on slide eight. Mary 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 22% year over year. making five consecutive quarters of positive volume growth. Prenatal volumes, excluding sneak peak, grew 20% in the quarter, with quarterly Salesforce productivity up 25% in women's health and leading turnaround times. It's no surprise that this team continues to outperform and grow our share of these markets. Recently, much attention has been placed on 22Q microdeletion syndrome in prenatal screening tests. We want to highlight that our internal data on Prequel's positive predictive value for microdeletion syndrome is significantly higher, nearly two times that of our leading competitor. Lastly, I want to give a shout-out to the Sneak Peek team for reaching 1 million tests to date, and now that the test is stocked in over 4,000 Walgreens stores, we are optimistic on future test growth. Let's move now to slide 9 and talk about Genesight. 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 with a single cheek swab sample that can be taken in the privacy of their own home. In the third quarter, GeneSight volumes increased 19% year over year and 24% year to date, as we've added approximately 4,000 new clinicians to the franchise during the quarter. Myriad continues to build on GeneSight's solid foundation of clinical data, including a collaboration with Optum Genomics to create a multi-phase study designed to better understand GeneSight's ability to improve clinical outcomes and reduce overall healthcare costs. As mentioned at our investor day in September, we are pleased with the positive phase one readout from our real-world study with Optum. I would also like to point out a couple of new partnerships and collaborations on the next slide. We recently announced the collaboration between Myriad and QIAGEN to develop kit-based companion diagnostic tests. Combining our strengths in assay development, clinical testing, and regulatory approvals, we are excited to offer a comprehensive global companion diagnostic solution based on a wide range of testing platforms to our pharma partners. Not only are we excited about the opportunity to better serve pharma partners, but we hope that this collaboration sets the stage for advanced analysis and accessibility of MRD and HRD assays to potentially improve cancer treatment decision-making. Additionally, in the quarter, we announced a new partnership with Onsite Women's Health to launch a new breast cancer risk assessment program to help more women understand their breast cancer risk. Combining myriad strengths in hereditary breast cancer risk assessment with Onsite's expertise in breast health services, This new partnership is expected to deliver personalized breast cancer risk insights to more than 400,000 patients that Onsite currently serves nationwide. I'll now pass the call over to our Chief Financial Officer, Brian Rigsby, to discuss the financial highlights in further detail.
spk11: Thanks, Mark. I'd like to start by reviewing product volume trends on slide 12. Overall, hereditary cancer test volumes in the quarter grew 18% year-over-year, marking five consecutive quarters of volume growth for hereditary cancer testing. Combined quarterly volumes for prenatal and carrier screen grew 20% year-over-year, excluding contributions from sneak peak. Our pharmacogenomic test gene site experienced healthy growth of 19% in test volumes year-over-year, and Prolaris Q3 volumes grew 9% year-over-year. We credit the ongoing commercial momentum of the business to competitive account wins as well as disciplined execution from our tenured sales force. While Q3 has historically been a seasonally weaker quarter impacted by fewer patient-provider interactions and general summer travel, on a year-to-date basis, hereditary cancer and gene site test volumes have grown at or above 20% year-over-year, and prenatal and prolaris have grown at 14% year-over-year. Now on slide 13, we will discuss quarterly revenue trends. Excluding contributions from change of revenue estimates in both Q3 of last year and Q3 of this year, quarterly revenue grew 14%, marking four consecutive quarters of double-digit revenue growth. For the nine months ending September 30, 2023, total revenue excluding the contribution from change of estimates grew 15% over the nine months ending September 30, 2022. I would mention our third quarter 2023 revenue growth rate includes the negative headwind and tumor profiling revenue of approximately $3 million due to the completion of a commercial arrangement with one of our European biopharma clients, which ended in Q3 of last year. You may recall commentary from our second quarter earnings call of this year that we, along with many peers in our industry, experienced a negative impact to our revenue cycle process from the transition of multiple health plans to a new claims administrative process. During Q3, we made substantial progress in resolving these issues and ultimately collected more cash than we expected, which drove the majority of the $7 million change of estimates that we experienced in this quarter. Excluding the impact of change of estimates from third quarter revenue, we expect sequential revenue growth of 3% to 6% from Q3 to our implied Q4 revenue guidance range, which is in line with historical seasonal trends. Moving down the P&L, adjusted gross margin was approximately 70% compared to 68% in Q3 of last year and approximately 69% last quarter, reflecting the impact of the positive change in estimates as well as the impact of positive volume leverage. We'll now turn to slide 14 and discuss quarterly progression through the year. We have seen nice improvement through the year on our path to profitability, with first quarter showing an adjusted loss of 21 cents, second quarter at an adjusted loss of 8 cents, and third quarter at an adjusted loss of 3 cents. We remain confident in our ability to achieve our goal of reaching adjusted profitability and generating positive adjusted operating cash flow in the fourth quarter of this year. For the full year, we have narrowed the adjusted EPS guidance range to a loss of between $0.33 and $0.28. I'll now turn to slide 15 to review our liquidity and cash flow. Looking at the balance sheet, we ended the quarter with $86.3 million of cash and marketable investment securities and expanded our asset-based credit facility from $90 to $115 million. With the capital needs for the construction of our new lab substantially behind us, we anticipate total liquidity of approximately $107.5 million at the end of 2023. We believe that this, along with our continued business momentum, gives us financial flexibility as we enter 2024. Note that we have not made a final decision on funding the remainder of the shareholder lawsuit settlement. As you may recall, we have given ourselves the flexibility to use shares for the final payment, and as we make our final determination on whether to use cash, stocks, or a mixture of both for the final payment, we will continue to review our capital structure, funding requirements, and alternatives available to us. As stated in the earnings release, the RavGen litigation refers to a settlement of which $5 million was paid on October 31, 2023, $5 million is payable on or before October 31, 2024, and $2.75 million is payable on or before October 31, 2025. Any final payment of the $21.25 million is contingent on whether Ravgen is successful in resolving all outstanding patent reexaminations and litigation. If Ravgen is successful, contingent payments would be payable over a five-year period beginning no earlier than 2026. Now on slide 16, we are updating our full-year financial guidance. We raised the midpoint of our 2023 revenue guidance by $10 million representing 10 to 11% year-over-year revenue growth from 2022, which is in line with our long-term estimates. Adjusted gross margins are expected to be at the high end of our prior guidance. We increased our full-year GAAP OpEx guidance primarily to include expected costs associated with the settlement of the Ravagen litigation, and we narrowed our full-year adjusted OpEx range with one quarter remaining in the year. Adjusted operating expense in the current quarter reflected the impact of normal expense fluctuations based on timing. We expect Q4 expenses to decline from Q3 levels and be approximately $134 million at the midpoint of our guidance range. On slide 17, we also want to take this opportunity to introduce our 2024 revenue guidance of between $815 and $835 million. or 9% to 11% growth over the midpoint of our 2023 revenue guidance range. This range is consistent with our longer-term revenue growth target of 10 plus percent discussed at our September investor event and reflects the performance we've demonstrated over the last year. In addition, we reiterate our other long-term financial targets discussed in September, which include gross margins over 70%, annual growth in SG&A spend of approximately 5% to 6%, and positive adjusted operating income and adjusted cash flow. I'll now turn it back over to Paul for closing remarks on the next slide.
spk10: Thanks, Brian. As I mentioned in my introduction, we continue to build on the pillars required for long-term growth and profitability. top-tier science and products whose clinical differentiation and adoption are enabled by technology that deliver value in real-world clinical settings and enable early detection and better treatment decisions. A commitment to continuous quality improvement and customer satisfaction, powered by a modernized lab and commercial platform to improve workflows, test turnaround times, and reduce costs through advanced technology and automation. together with best-in-class regulatory reimbursement and revenue cycle capabilities. GreatScience used to develop practical, high-quality diagnostic tests operated in efficient, state-of-the-art facilities with the ability to get paid for our efforts. As discussed, excluding contributions from SeekPeak, total test volumes year-to-date in 2023 have grown 18% compared to last year, and total year-to-date revenue, excluding out-of-period adjustments, is up 15% compared to 2022. We believe these results demonstrate our ability to execute on our long-term growth strategy as the investments we have made across the enterprise take hold. 2023 has been a foundational year, and we are confident in our balance sheet as well as our forward-looking financial guidance and are pleased to put the rest of the litigation that has been an overhang for investors behind us. We continue to re-energize the enterprise around our shared 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. I'll turn it back to Matt now for Q&A. Thank you.
spk08: Thank you, Paul. And as a reminder, during today's call, we used certain non-GAAP financial measures, reconciliation of the GAAP and non-GAAP financial results, and reconciliation of GAAP non-GAAP financial guidance can be found in our earnings release and under the investor relations section of our website. Now we're going to begin with the Q&A session to ensure broad participation. We're asking participants to please ask only one question and one follow-up. Operator, we're now ready for the Q&A portion of the call.
spk07: Thank you. 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 to acknowledge 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 telephone keypad. And your first question comes from the line of Matt Sykes with Goldman Sachs. Your line is open.
spk00: Hi, this is Evie Kozlowski on for Matt. Thanks for taking my questions. So first, can you walk us through any progress you've made on addressing zero pays and what type of positive impact that could have on margins as we move into next year?
spk10: Yeah, I think a lot of progress in the quarter. As you can see, year-to-date, $6.2 million of net out-of-period cash collections, DSOs are down. Gross margins are up, which reflects ASP improvement. And starting to feel more optimistic about the progress we've made, beginning to follow the state biomarker laws. There are 14 states now, including California, that have passed them. Ten, 11 of those states, including California, should cover gene sites. So, we're beginning to engage state by state. And this quarter, we saw two different payers under the biomarker laws, pick up coverage. Now, these are, you know, bunts and singles, so it's not going to be huge overnight successes, but we think the momentum there and the general recognition on things like prior authorizations within the Medicare program and other places give us a lot of opportunity to continue to improve ASP. And so, good cost management, and ASP improvement or what gives us the confidence that we can grow gross margins above 70% going into next year.
spk00: Great. That's super helpful. Thank you. And then great to see you're still getting share within hereditary cancer testing. Could you talk through the market penetration within MyRisk? I think in the past you've said the market is only 15% penetrated. Has there been any progress in recent months, and what actions are you taking to further drive that?
spk06: Yeah, just to clarify, the 15% market penetration was in the unaffected market, which is where our women's health team focuses. And so we see a great opportunity there, but quite honestly, for the hereditary cancer growth, we've seen it both in our affected population on the oncology side, where we continue to drive depth within our core customers, but we're also winning back customers from the competition. And then we also see the same amount of growth on our women's health side in the unaffected population, where, again, we see a huge blue ocean opportunity there. And that speaks to the collaborations that we talked about on the call as well and being able to penetrate larger accounts and, quite honestly, just increase the adoption of both providers and patients.
spk09: Great. Thank you.
spk07: Your next question comes from the line of Andrew Cooper with Raymond James. Your line is open.
spk13: Hey, everybody. Thanks for the question. Maybe first diving in a little bit just on the gross margin, you know, you had that 7 million sort of makeup looking at the sequential gross margin movement. Just wondering if you could give a little commentary. It seems like makes maybe a little bit of an impact, but just what are some of the key things we should think about as we think about, you know, for a few and then heading into that 70 plus number for next year?
spk10: Well, thanks, Andrew. I mean, you know, as I mentioned, the operational highlights, you know, we're just seeing productivity in the sales force, as Mark said, 25% cost per test drop year over year. I mean, that's net of inflationary increases. And as Brian mentioned, just starting to see the leverage in the P&L. So we think opportunities continue to affect sequencing costs. opportunities to leverage our new labs, both in South San Francisco and in Salt Lake. You know, we're just beginning to start seeing some of that, and the automation hasn't even taken hold yet. We haven't moved our Arches project over yet. So, I would just say we're increasingly optimistic about our ability to grow gross margins over the next couple years as we see Lab of the Future automation, as well as the other productivity things that we're focusing on take hold. And as we talked about at the investor day, we've just identified a lot more opportunities to reduce no pays. And we think over the next year, that can be meaningful as well.
spk13: Okay, great. Super helpful. And then maybe just one on the guidance that you're giving for 24 already, obviously early to give that, but Just was hoping you could give us a little bit more flavor for maybe some of the underlying kind of pieces where maybe there's wider error bars verse verse more narrow as we think about that initial guide for 2024 already here in November.
spk11: Yeah, Andrew, this is Brian. I'll start and let Paul chime in. But, you know, I think that, you know, where we started is just in really looking at what we've laid out over the last four plus quarters. Now we've seen, you know, double digit top line revenue growth. And, you know, our stated long term goal is for 10 plus percent. You know, we just feel very confident that when you look at the midpoint of the current year guide, based on what we're seeing today in the business, you know, that it adds up to something that's, you know, in that, in that range. So we felt like, you know, that was something that, you know, we wanted to, we wanted to, you know, make sure that people understood that that's not an aspirational, you know, that's, that's kind of what the business is doing today. Yeah.
spk10: I mean, let me just underscore this. We grew 15% year to day, excluding out of periods and we continue to produce net positives there. And there's just a clearly of some folks still doubt we can do that. And we see a lot of momentum going into 24. So the midpoint of the revenue guide is consistent with our long-term it's 10% over the stated midpoint of the guidance this year. And we felt that it was important for investors and for shareholders to see that we have great confidence in that 10% plus. particularly based on the 15% year-to-date and the momentum in the business. It's just that clearly there are people out there that don't think we can do that, and we believe we clearly have demonstrated that and are just sort of now bringing things together here with our new labs and stuff. So it's just an expression of our confidence and the visibility that we see in the business going forward.
spk11: And I would say the only thing I would add, Andrew, is just that, you know, getting the United renewal behind us, you know, in October is obviously another thing that was incremental relative to where we sat, you know, back in the industry. That was a positive.
spk13: Okay, great. I will stop there and let others ask. Thanks.
spk09: Thanks, Andrew.
spk07: And your next question comes from the line of Rachel Vattenstall with JP Morgan. Your line is open.
spk02: Hi, this is Nolan for Ritual. Congrats on the quarter. Just digging into the 2024 guidance just a little bit more, can you give us any incremental color on that 815 to 835 guidance? You know, it's significantly above the street. Is that mainly due to that United contract renewal as you just referenced? Can you give us any sort of updated volume or price expectations heading into 2024 or anything that you can sort of do to sort of frame the 2024 year would be super helpful. Thanks.
spk10: So volumes are up 18%. Revenue year to date is up 15%. We see acceleration in customer acquisitions and wallet share. We see acceleration in market adoption. And ASP visibility with the United contract and other recent wins. So those are the component pieces that would drive us to a high degree of confidence of that midpoint and that longer-term guidance. It's not a really big numerical jump to get from our guidance this year to 825 next year.
spk09: It's 10% off the midpoint of this year's guidance. You have a follow-up? The margin profile.
spk02: So it seems like you might also be tracking ahead of the margins. Is that mainly driven by the increased payer traction, or is that something that we can think of as – go ahead.
spk10: I mean, margins are a function of everything going down the P&L. So as we talked about, it's increased productivity. It's just a function of our fixed cost versus variable cost. And the ASP progress all play into that. And I think incrementally, as Brian spoke to, as we think going into next year, now that we've have moved along in terms of opening both of our new labs as we're seeing turnover down to 9.6%, 9.3%. All of that operationally is what plays into our opportunity to continue to grow its margins beyond the adjusted 70.4 going into next year. There's a lot of leverage in this P&L.
spk09: Great. Thanks so much. Sure. Thank you.
spk07: And your next question comes from the line of Daniel Brennan with TD Callen. Your line is open.
spk03: Hi, Paul and Brian. Thanks for taking questions. This is Dan Simarco on for Dan Brennan tonight. Just a question on, and apologies if we missed this in the call, but on Gene's site, can you provide any timeline for additional publications supporting its utilities?
spk10: So we, we go ahead more.
spk06: Yeah. The only thing I would add is, so we, at the investor day, we talked about the prelim results from phase one of the opt-in trial. And we also talked about investor day phase two of the opt-in trial, which will be coming later this year where we've got some control groups and we'll also be looking deeper into the economic utility as well as the clinical utility. There are several other publications that are going on and you'll see those published sometime next year.
spk03: All right, great. Thank you. And then on the pipeline, um, Do you have any updates on timing for product concluding first gene? You previously expected soft launch in fourth quarter this year. And then when should we expect to hear any updates on your MRD offering?
spk10: So no updates to the pipeline since our investor day in September. Everything is sort of tracking consistent with that. Still got a lot of work to do, but as we mentioned in the call, continue to make great progress on our clinical validation work. We're excited about, you know, the new studies with MD Anderson and others. And so that's all tracking well. And the new partnership with QIAGEN is really exciting in terms of the ability. And those are additional discussions we're having with QIAGEN about MRD and different offerings there. So progress continues, but nothing substantive since our investor day.
spk03: All right. Thank you. Have a good night. Thanks. You too.
spk07: And your next question comes from the line of Jack Meehan with Nefron Research. Your line is open.
spk04: Thank you. Good afternoon. The cash bridge that you laid out in the press release landing at $107.5 million at your end, just wanted to clarify, are the payments to Ravgen incremental to that, or is there a reason that the $5 million from October 31st was excluded?
spk11: We didn't exclude the $5 million. It's in there. It's in the expectation. So the 107 has that, and then the other payment would be a year from now, October 31 of next year.
spk04: Okay, just because I see it says end of the third quarter, $86.3 million, then the amount available under the facility, $28 million, and then it has the fourth quarter CapEx, but I didn't see the Ravgen payment, but it's included in one of those first three numbers?
spk11: Yeah, it says to break it out, Jack, but it just says end cash flow from operations, so it would be in that cash flow from operations number for the fourth quarter.
spk04: Okay.
spk12: As a reduction of approved liabilities.
spk04: Got it. Okay. And then, Paul, I wanted to follow up on LDT regulations. I was just curious, after you had a chance to review the FDA's proposed rule from the end of September, I was curious if your opinions changed at all about potential future regulation of gene site or just how you were preparing for an LDT environment.
spk10: I remain quite confident in our ability to navigate those regulatory changes. We're obviously engaged with our associations on a comment period with respect to that. I would just remind everyone that we're running FDA-like labs already, so many of our quality assurance processes are already in existence, and we've been contemplating FDA regulation across our products through this whole Lab of the Future planning process. And I would stand again behind the comments that I've made before Jack with respect to gene site. There has been no, under its enforcement authority, any inquiries about gene site from the FDA. And the comments in the proposed regulations were stated about the broad issues that have been raised by investors as evidenced by the New York Times article and the litigation that has now been resolved. So I think you took that out of context in your note.
spk07: And your next question comes from the line of Puneet Suda with SVB Securities. Your line is open.
spk01: Hi. Yes, this is Isabella. I'm for Puneet. Thanks for taking the question. Just on the $40 million REV opportunity that you highlighted during the Investor Day, would you mind just talking us through how much of the benefit will be assumed in the 2024 guide?
spk10: I'm sorry. You were talking about the ASP opportunity we talked about at Investor Day, the no-pay opportunity? Yeah. I mean, we didn't put a specific timeline on that. But as you can see from this quarter's results, you know, we made progress on ASP, cash collections, and quite frankly, we're incrementally see more visibility, again, under the context of the United contract that's been signed for four years, the progress that we've been making with different payers for Genesight and other products, and the continued growth of these biomarker laws that are not only for oncology tests, but also extend the gene site in the majority of these states. So, again, the first half of the year and some of the ASP challenges just gave us a refreshed view, and so we've really doubled down on our efforts there. And, again, as we talked about earlier, we think it can contribute to margin expansion as we go into 24 and beyond.
spk01: Sure, great. No, that makes sense. And for gene sites specifically, would you mind walking us through what the 2023 and 2023 guide is contemplating in terms of whether that sustained volume growth versus those ASP improvements?
spk10: We don't break that out separately. I think we've talked about and we've done it this year. Gene sites grown 24% year-to-date. We have said that we think we continue to grow gene site at 20%, and that's one of our biggest no-pay issues. And so we continue to work and, as I just mentioned, incrementally see opportunities to reduce no-pays for gene site and increase ASP for gene site. So, again, a lot of progress, particularly in this quarter, with respect to that.
spk01: Okay, great. Thanks for that.
spk07: And as a brief reminder to all to register for a question, it is 1-4 on your telephone keypad. Your next question comes from the line of Derek DeBruin with Bank of America. Your line is open.
spk12: Hi, this is Wolf Chan. I'll phone for Derek. Thanks for taking the questions and congrats on the quarter. I just wanted to start by digging into some of the top line drivers here. As you guys talked about, a fair amount of the beat was due to period adjustments. I was just looking for some clarity on them. how do we should be thinking about the impact of adjustments going forward and kind of a normalized rate given the dynamics that you've laid out that you're currently experiencing? And I have a follow-up.
spk10: Can I just underscore that when we've given you the 14 and 15% revenue numbers, it's excluding the out-of-period collections. We've gone to great lengths to separate that out. It was actually a 23% increase when you look at the out-of-period collections. And year-to-date, Again, you're going to have some quarterly volatility, particularly given what happened with the third-party payers last quarter. But the revenue trends and the stability of ASP are coming through the P&L. And so, anyway, I hope that's responsive. But there's nothing else in terms of the pieces there.
spk11: But, Brian, would you add anything? Yeah, I would just say that, you know, if you exclude the out-of-period change in estimate and you get more like a 185 number, that would be the adjusted number. I think that's still a fair amount ahead of, you know, where the expectation was, which was 179 to 180 range. And really what we've tried to do over the course of the year is to really get the out-of-period to be an immaterial amount. However, we did have the issue with a payer, an administrative claims processing agent last quarter that we talked about on our last call, and we were able to significantly recover a lot of that this quarter. So that's a dynamic that's a little bit unique to the current quarter. But I would think – I would say all in all, even if you exclude that, it's still a fair amount ahead of kind of where our expectation was.
spk10: And which is why we try to point everyone's attention, understanding there's been some quarterly volatility that year-to-date, it's all ahead of our long-term growth rates.
spk12: So anyway. Yep, thank you. And that was certainly clear in the PR. And then you also – you guys also did a great job of kind of laying out the – what's at hand here during the prepared remark itself, but I was wondering if you could give us a little bit more color on the puts and takes around the options for how you could pay for the litigation expenses, both in the near term and going forward, just what would drive you towards different mechanisms. Thanks.
spk11: Sure. Yeah, I would just say that, you know, as we highlighted on the last quarterly call and on this call, and we're tracking right to the cash and liquidity estimate that we gave at the investor day, so we feel really good about the momentum of the business and where we are from reaching an adjusted cash flow. adjusted positive operating cash flow perspective in Q4. And we believe that gives us lots of flexibility, not only from an operating standpoint, but also based on the fact that we had negotiated the ability to settle the shareholder suit in either cash or shares. And so we're not at the point where we have to make that determination yet. But, you know, when we do, we'll consider where we, you know, what our future liquidity looks like, you know, where we are from a capital standpoint, and we'll make the best call at that time.
spk09: Much appreciated. Thanks. And there are no further questions.
spk07: I'll turn the call back to Matt Scallo for closing remarks. Thank you very much.
spk08: Okay. Thanks, Dave. 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 and have a good night.
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