Personalis, Inc.

Thank you for standing by. Welcome to the Personalis First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would like to hand the conference over to your first speaker today, Ms. Caroline Corner, Investor Relations. Please go ahead.

Thank you, Operator. Welcome to PersonAlysis' first quarter 2021 earnings call. Joining me on today's call are John West, President and Chief Executive Officer, and Erin Toshibana, Chief Financial Officer. This call will include forward-looking statements, including statements regarding the markets in which we operate, including potential market sizes, trends and expectations for products, services, and technology, trends and demand for our products, personnel's expected financial performance expenses and position in the market, and the impact of the COVID-19 pandemic on our operations and our customers' operations. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. We encourage you to review our most recent filings with the SEC, particularly the risk factors described in our 10-Q for the first quarter of fiscal year 2021, to be filed today under 10-K for fiscal year 2020. The forward-looking statements we provide during this call, including expectations for future performance, are based on our reasonable beliefs and expectations as of today. Personalis undertakes no obligation to update these statements except as required by applicable law. Please note that in these prepared remarks, Personalis management will refer to the company's oncology business. This represents a category of customers. It reflects all biopharma and all other customers excluding the VA MVP, most of whom use personnel services for applications in oncology. And when referring to population sequencing, we are referring to the VA MVP or other potential customers within this market. Our press release with our first quarter 2021 results is available on our website, www.personals.com, under the investor section, and includes additional details about our financial results. Our website also has our latest SEC filings, which we encourage you to review. A recording of today's call will be available on our website by 5 p.m. Pacific time today. Now I'd like to turn the call over to John for his comments on first quarter business highlights.

Thank you, Carolyn. Personnel has continued to grow. We achieved another overall revenue record during Q1, and it was our 19th consecutive quarter of growth. Our oncology business, which has received orders well above revenue levels, since Q3 of 2019 has increasingly seen the resulting backlog turn to revenue. In Q1, our revenue from this business grew 74% over the same period of the prior year. In Q1, new orders again significantly exceeded revenue. And so far in Q2, we expect that yet again. The strategy of our oncology business has been to support drug development at the leading edge of cancer biology. That strategy is working. In our population sequencing business, we have now received all of the samples required to complete our current orders, putting us in a great position through Q3. We have also engaged with the VA MVP about options for a further order under our existing contract with them, which expires in August of this year. We are optimistic that our relationship with the VA MVP will not only continue, but broaden in part by leveraging capabilities initially developed the oncology side of our business. Given all of this progress, we will now resume giving full year guidance, reflecting our improved visibility. Our mission is to help cancer patients live better and longer lives. and we developed our ImmunoID Next platform with this objective in mind. The Next platform provides our pharmaceutical customers with the capability to better understand a cancer patient's genetic profile, which can help with drug development, therapy selection, and ongoing monitoring of the tumor to help detect recurrence. We believe that in order to better understand a cancer patient's tumor, both tissue and liquid biopsies together can provide the most comprehensive view, leading to the optimal therapy and treatment decisions being made. Both our tissue and liquid biopsy-based offerings have been designed specifically to meet the needs of our pharmaceutical customers and provide data on all of the approximately 20,000 human genes. We expect our oncology revenue to become a larger part of our total mix in the future as we leverage our ability to analyze both tissue and liquid biopsy samples with these platforms. Tissue samples give us access to RNA and to the immune cells which have infiltrated a patient's tumor. Also, by analyzing liquid biopsy samples, we're able to provide information about a patient's tumor across multiple time points. Used together, we believe our oncology platforms provide our customers with the most comprehensive analysis of tumor burden and biomarker identification available today. We continue to execute well to our strategy, and later this year, we plan to expand our liquid biopsy offering with the launch of Next Personal, our minimal residual disease, or MRD, offering that will be designed to track changes in a specific patient's tumor. We have begun to process customer-provided samples to ensure our product development meets customer requirements and are very encouraged by those initial results. We believe that with the ability to monitor over 1,000 mutations, Next Personal will compare favorably in terms of sensitivity and information content with panels from competitors that can identify and track only dozens or hundreds of mutations. We also believe that Next Personal will be applicable to both pharmaceutical research and clinical diagnostic markets in the future. Now I would like to provide six recent highlights and accomplishments from Q1. First, we continue to make encouraging progress with our Exome Scale Next Liquid Biopsy product. As you recall, we launched this product in August 2020 and have received orders from several customers. We have now delivered our first customer order and based on that data, the customer is already asking us to process additional samples. We have our first publication, authored jointly with one of our customers, showing the utility of our Next Liquid Biopsy together with our ImmunoID Next analysis of tissue from the same patients. We also presented posters showcasing the state-of-the-art results using Next Liquid Biopsy at the recent AACR conference. We believe that Next Liquid Biopsy will also work synergistically with Next Personal when it is released and that liquid biopsy-based products will contribute increasingly to revenue as we enter 2022. Second, we announced a collaboration with Natera to provide front-end tissue sequencing services based on our advanced Next Exome to help them identify variants they will use to design their Signatera personalized liquid biopsy test. Additionally, Personalis provides expert tumor tissue sequencing services to multiple liquid biopsy companies, leveraging our deep know-how in the processing of formalin-fixed paraffin-embedded, or FFE, tissue for many different cancer types. We expect our long-term growth to be based on our own products, including our own liquid biopsy products. But these partnerships show how Personalis has come to be respected as a technological leader in our field, and they supplement our revenue as we build our business. Third, we announced a collaboration with Mapcure LLC, a company jointly owned by Beijing Limited and Springworks Therapeutics Incorporated. We plan to use our next platform for their clinical trials and companion diagnostic development. We believe our work with companies such as Mapcure is a strong testament to our technology and capabilities. It will also allow us to showcase our genomic profiling platform within a clinical setting which we expect to assist us with future regulatory approvals for our next platform of products and services. Fourth, our customer base has broadened substantially over the last year. We have now received orders from a majority of the top 10 oncology-focused pharmaceutical companies. Since we introduced the next platform in 2019, as of the end of Q1, we have received next orders from 50 different customers. In Q1, we added another large global pharmaceutical company as a customer, starting with an order of almost a million dollars. We believe this growing adoption of Next further highlights the power of our platform and the comprehensiveness is important to our customers. Fifth, over the past few quarters, we highlighted some of our initial plans to establish a lab and commercial operations in the People's Republic of China and to partner with Berry Genomics. Our team continues building our laboratory in Shanghai, and we are hiring additional employees. Customer engagement is very good. For a pharmaceutical company to include personnel analysis of biopsy samples from clinical trial patients in China, they need to apply to the Chinese regulatory authority, HGRAC, for permission. We are supporting preparation of a number of these applications, and anticipate that HGRAC decisions could be received as early as Q3 this year. In a number of these cases, these are international clinical trials for which Personalis has already received multi-million dollar orders to process samples using our Next platform from the portions of the trial outside China. We're also in discussions with a number of Chinese pharmaceutical companies about their potential use of our Next platform in their clinical trials in China. We continue to expect that our operations in China will begin in 2021 with moderate revenues and begin ramping in 2022. While this project will take some time to meaningfully contribute to our top line, we believe this is an important investment. We look forward to updating you on our progress. Sixth and finally, in addition to the achievements just mentioned, We also recently announced the addition of Dr. Woody Myers to our board of directors. Dr. Myers has extensive healthcare industry experience and most recently served as the chief medical officer and chief healthcare strategist at Blue Cross and Blue Shield of Arizona. In addition, he has been active in government, having served as physician health advisor to the United States Senate Committee on Labor and Human Resources, as Health Commissioner for his home state of Indiana, and as Commissioner of Health for the City of New York. Dr. Myers received his MD degree from Harvard and subsequently his MBA from Stanford. Dr. Myers will be instrumental in helping personnel grow and scale in the future. I'd now like to update you on the population sequencing part of our business, which is sometimes referred to in the field as population genomics. We continue to build a funnel of commercial opportunities, and we are in early discussions with several of these prospects. Initial discussions are going well and are encouraging. We expect that we will have additional customers and revenue from these new commercial opportunities in 2022. Our work with the VA MVP program represents the largest population sequencing effort within the United States. The VA now targets enrollment of 2 million veterans, and over 825,000 veterans have enrolled so far. Personalis has been contracted so far to sequence over 146,000 VA MVP samples with approximately 29,000 currently remaining to be sequenced. We have been the sole provider for the VA MVP's whole genome sequencing project over the last eight plus years and have been awarded multiple contracts by the VA MVP during this time. Our existing contract with the VA MVP ends in August 2021. However, the VA MVP can place additional orders with personnel under our existing contract, and we are now in active discussions with the VA about that. On our last earnings call, we were cautious due to the ongoing pandemic, but as we've had more discussions with the VA MVP, we have become quite optimistic that we will receive an order between now and the end of summer. We are also encouraged by the long-term prospects for VA MVP. In early April, the White House released their fiscal year 2022 top-level budget proposal, which we believe is a positive sign relative to continued funding for the VA MVP. The White House noted that their request includes $882 million for VA R&D and referred to it as, quote, the largest year-over-year increase in recent history, unquote. It headlined that this proposed budget, quote, invests in research critical to veterans' health needs, unquote. Their proposal represents a 12% increase in funding, specifically for VA research. In December, we announced we had become the first for-profit company to sequence more than 100,000 whole human genomes in the United States. which was an important milestone for us. We expect that total to grow to more than 150,000 whole human genomes by the end of 2021. Some will be for population sequencing and others will be cancer genomes. We expect our unparalleled experience and scale with the VA and BP to position us well for new population sequencing opportunities. Given our clinical experience and work with pharma, We also see future opportunities to help transition population research to population health and to involve pharma in the future. I would now like to expand on the synergy between the population sequencing and oncology parts of our business, in particular those that go beyond the more obvious operational and cost synergies. Our extensive experience with whole genome sequencing combined with our deep expertise in cancer, has allowed us to launch whole genome sequencing from cancer samples. We believe that this will be increasingly important in the future, particularly in cancers such as breast and prostate, which have relatively low mutational burdens. Using our cancer whole genome technology can identify up to 20 times more somatic variants to serve as the basis for personalized cancer assays. We believe this will let us achieve high sensitivity, even in cancers which have low mutational rates, which have been surgically resected, or which shed relatively low amounts of cell-free DNA into the blood. We believe this can be a leading technology and some very large market opportunities, and we'll have more to say about this as these product developments progress. In summary, I'm very proud we have continued to show strong growth. particularly in our oncology business. Customer interest and adoption of Next has been excellent, and our pipeline of compelling new products is rich. We have the capital required to invest in our growth initiatives, such as new products like Next Personal, enhancing our clinical and regulatory capabilities, expanding collaborations that further highlight the utility of our Next platform, expanding our operations in foreign locations, and expanding capacity to support our revenue growth. We believe this puts us in a strong position for near and long-term growth. With that, I will now hand it over to Aaron for our financial results.