Personalis, Inc.

Good day, ladies and gentlemen, and welcome to the Personnelis fourth quarter and full year 2021 earnings conference call. At this time, all participants are in the listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require operator assistance, please press star, then zero key on your touchtone telephone. As a reminder, this call may be recorded. I would now like to hand the conference over to our first speaker today. That is Caroline Corner, Investor Relations. Please go ahead.

Thank you, Operator. Welcome to Person Analysis Fourth Quarter 2021 Earnings Call. Joining me on today's call are John West, President and Chief Executive Officer, and Aaron Tashibana, Chief Financial Officer. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements within the meaning of U.S. securities laws. For example, any statements regarding trends and expectations for our financial performance, new orders, products, services, and technology. 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-K for fiscal year 2021 to be filed today. Personalis undertakes no obligation to update these statements, except as required by applicable law. Our press release with our fourth quarter and full year 2021 results is available on our website, www.personalis.com, under the Investors section, and includes additional details about our financial results. Our website also has our latest SEC filings, which you're encouraged 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 fourth quarter business highlights.

Thank you, Carolyn. Personalis continues to grow, in particular, our oncology business. In Q4, revenue from our oncology business was $15.4 million and grew 102% over the same period of the prior year. In addition, new orders from customers in Q4 increased Once again, higher than the amount of revenue reported for the quarter, which gives us confidence that we can grow our oncology revenue by more than 50% in 2022 over 2021. Our pharmaceutical customers are increasingly seeing the value of our platform and incorporating it in their clinical trial designs right from the start. Our customer base has broadened substantially over the last year, and we're doing business with most of the top 10 global pharmaceutical companies which we define by their annual revenue level. Additionally, we have more than 60 customers that have ordered services for our Next platform. We recently also received our first customer order for Next Personal from our top global pharmaceutical customer and have started to receive samples as part of that pilot. Our partnership with Natera also continued to grow in Q4 and allowed us to process approximately $5 million of clinical samples in the quarter. We have continued to make progress in Asia. In Shanghai, China, we have now hired about 10 employees and we are working on our internal laboratory qualification protocols. To date, we have received a significant dollar value of orders from pharmaceutical customers who are pursuing local regulatory approvals. We expect to begin working with these customers within a few months and be in position to potentially recognize revenue from some of these customers by the second half of 2022. In Japan, we also have several large international pharmaceutical companies that are now ordering NEXT, further validating our opportunities in Asia. We believe our NEXT platform provides biopharmaceutical customers with the most comprehensive analysis of tumor burden and biomarker identification available today, and a better understanding of each cancer patient's genetic profile. We believe that both tissue and liquid biopsies together and provide a more complete view, leading to optimal therapy and treatment decisions. Both our tissue and liquid biopsy-based offerings provide data on all of the approximately 20,000 human genes. Tissue samples give us access to RNA and to the immune cells which have infiltrated a patient's tumor. By analyzing liquid biopsy samples, we're able to provide information about a patient's tumor across multiple time points from small blood samples. At Personalis, we've designed two liquid biopsy products for two different applications. Next Personal has been optimized for maximum sensitivity, particularly for when the amount of tumor DNA and blood plasma is very low, such as in early stage cancer, after surgical resection, or in patients with complete response to therapy. The largest segments of this population are those who have or have survived breast and prostate cancer. To detect potential cancer recurrence, we look in a patient's blood plasma for the mutational signature of their tumor. But these two cancer types have such low mutational burdens that they can be difficult to detect. We realized early on that we may be able to overcome this liquid biopsy sensitivity problem by leveraging our considerable high volume whole genome sequencing experience. Using tissue whole genome sequencing, we can identify 20 times more somatic variants to serve as the basis for personalized cancer assays. By looking for a tumor's known mutations at up to 1,800 positions spread over the genome and being able to select cancer variants that have a low level of background sequencing errors, we gain tremendous sensitivity. Our internal data now confirms this approach can result in analytical sensitivity down to approximately a few parts per million. This sensitivity advantage may translate into much earlier detection of a patient's cancer recurrence. Once residual disease or recurrence is detected, questions may arise about how best to treat a patient. Next Personal also provides DNA sequencing coverage of variants which may indicate drug therapy options, response to therapy, or emergent resistance to therapy. We consider this approach not just tumor-informed, but comprehensively tumor-informed. Our ultimate goal is not just to detect cancer, but to provide key information over the entire course of the patient's disease. We believe this can be better for patients, more informative for pharmaceutical customers, and a larger business opportunity. We believe Next Personal can be a leading technology for some very large market opportunities, and expect to have more to say about this, about customer wins in this area, in a few months. Next, liquid biopsy. Our whole exome liquid biopsy product is optimized for late stage cancers when the amount of tumor DNA and blood plasma is higher and tumors may be increasingly complex. For that application, we believe rich information from an exome can provide deeper insights. We believe that our liquid biopsy-based products will contribute increasingly to revenue in 2022 and beyond. Personnel's technological and scientific leadership has led to strong adoption by pharmaceutical companies who use our services to analyze the response of cancer patients in their clinical trials. We believe that these same advantages can be important for all cancer patients, not just those in clinical trials. As a result, we're taking steps to build the clinical diagnostic business for therapy selection and monitoring. We believe that the combined market potential of these opportunities is approximately $30 billion in the United States. I would now like to comment on our recent progress and some of our planned milestones regarding our clinical diagnostic efforts. First, we are continuing to build our regulatory, clinical, and reimbursement capabilities We have been hiring employees with clinical and medical experience within a diagnostic setting, and we will continue to hire and invest in this area. Also, in support of our new diagnostic business, we will be incorporating FDA-compliant protocols within our new facility, which we are targeting to move into during Q3 of this year. Second, we are completing a validation study for our next DX test, which is our tissue-based diagnostic offering, based on our next platform, to apply for New York State regulatory approval. We also plan to submit data to the MoldyX tech assessment process and hope to receive a favorable reimbursement ruling from MoldyX during the second half of 2022. Third, we believe it's essential to work with world-class medical institutions. To that end, we announced a collaboration with the Mayo Clinic in Q4 and recently announced one with the Moores Cancer Center at UC San Diego Health. In these collaborations, we provide clinical diagnostic testing and research sequencing and analysis services using our tissue-based NextDx test. We have begun to test clinical patient samples and are excited about the opportunity to work with these renowned cancer centers. If we achieve a favorable reimbursement decision for our NextDx test, from MoldeX, as discussed earlier, we may also recognize revenue in the future from some of these collaborations. Given the advanced nature of our next EX test, we believe it is a good fit for high-end cancer centers, which have a dual mandate for both clinical care and research. If these key opinion leaders have a positive experience using our tests, we are optimistic that this will also support broader use of our platform by other clinicians in the future. Although we still have work to do, we believe that we will be well positioned for entry into the clinical diagnostic market using our comprehensive tissue-based NextDx test by Q2 to Q3 of this year. In addition, we're also planning an LDT version of our liquid biopsy-based NextPersonal test. We expect clinicians who begin using our NextDx test may later also use our NextPersonal test since the two can provide complementary information. We expect that the path to reimbursement for our next personal LDT will also begin via assessment by the Palmetto and Moldy-X program. We will continue to provide updates about our clinical diagnostic progress as we go forward. Next, I would like to comment on our population sequencing business. In September 2021, we received a task order from the VA MVP of approximately $10 million, which was significantly less than in prior years. At that time, we expected the reduced order amount was to be followed by a formal RFP process and a potential new contract to be awarded sometime late in Q3 of 2022. However, recent discussions with our contacts at the VA MVP indicated that there will not be an RFP process in 2022. Accordingly, we are not planning to receive any new orders from the VA MVP this year, We're expecting to recognize any revenue beyond the current order and contract. Given the strong growth we have already experienced in our oncology business, though, and the large opportunity we see there, we plan to focus almost entirely on cancer as we go forward. We continue to add to our Board of Directors to complement our strategic direction and priorities. Olivia Bloom will join our Board of Directors effective March 1st. She currently serves as Geron's Corporation's Executive Vice President and Chief Financial Officer. Geron is a clinical stage biopharmaceutical company focused on hematologic myeloid malignancies. Welcome, Olivia. In summary, in Q4 and all of 2021, we continued to execute extremely well in growing our oncology business despite the ongoing pandemic, which has made things more challenging. Our team has done a terrific job in overcoming these challenges. Customer adoption of Next has been excellent, and our pipeline of compelling new products is rich for both the biopharma and clinical diagnostic test markets. We have a strong balance sheet with capital to invest in our growth initiatives and believe this puts us in a strong position for both near and long-term growth. With that, I will now hand it over to Aaron for our financial results.

Thank you, John, and good afternoon, everyone. We had another great quarter and continued to accelerate oncology revenue growth. During my prepared remarks, I will provide detail about our financial results for the fourth quarter and guidance for the full year of 2022. Total company revenue for the fourth quarter of 2021 was $20.7 million, up 3% from $20.2 million for the same period of the prior year. For oncology, BioPharma and all other customers accounted for revenue of $15.4 million in the fourth quarter, representing a 79% sequential increase from the prior quarter and a 102% increase over the same period of the prior year. The increase in oncology revenue was driven by strong adoption of our next platform, which accounted for approximately 85% of the oncology revenue in the quarter. Customer orders remained strong in the fourth quarter, and exceeded reported revenue levels, which gives us confidence that our biopharma revenue will continue to increase in the future. Also, as we ramp our MRD liquid biopsy offering for both biopharma customers and as a clinical diagnostic test in the future, we expect revenue growth to further accelerate due to the multiple time points, or in other words, the number of tests per patient. For the fourth quarter, the VAMVP revenue of $5.3 million was 58% lower compared with $12.6 million for the same period of the prior year. The VAMVP unfulfilled orders were $7.6 million at the end of the fourth quarter, and based upon current estimates, we expect the unfulfilled orders to convert to revenue during Q1 through Q3 of 2022. For the full year of 2021, total company revenue was $85.5 million, up 9% from $78.6 million in 2020. For oncology, BioPharma and all other customers, excluding the VAMVP, accounted for revenue of $39.8 million for the full year of 2021, representing a 77% increase from $22.5 million in 2020. The oncology revenue growth was driven by strong adoption of our next platform. And for the VAMVP, revenue was $45.7 million for the full year of 2021, which was 19% lower than in 2020. Gross margin was 38.7% for the fourth quarter, compared with 30.1% for the same period of the prior year. The year-over-year increase of 860 basis points was primarily due to operating leverage from the 102% increase in oncology test volume, customer mix, and lab efficiency improvement. Over the next couple of years, we do expect some gross margin variability due to headwinds from investments in new capabilities, such as dedicated production lines for FDA-approved offerings, providing diagnostic tests while we work to increasingly secure reimbursement, adding more capacity in our new facility, expanding in China, and others. And longer term, we expect our gross margins to increase as we achieve scale, and oncology revenue becomes a larger portion of total revenue. Operating expenses were $28.2 million in the fourth quarter, compared with $19.4 million for the same period of the prior year. R&D expense was $14.5 million in the fourth quarter, compared with $8.5 million for the same period last year, and SG&A expense was $13.7 million in the fourth quarter, compared with $10.9 million for the same period last year. The increase in R&D expense was for new product development, hiring employees to build our clinical and medical infrastructure, and sample test expenses for clinical validation work. Our R&D expense level will continue to increase over the next year as we expand collaboration work for clinical validation to secure reimbursement for our next DX and next personal test. The increase in SG&A was due to commercial expansion and continuing to enhance our infrastructure. Net loss for the fourth quarter was $20.2 million compared with the net loss of $13.3 million for the same period of the prior year. The net loss per share for the fourth quarter was $0.45, and the weighted average basic and diluted share count was $44.8 million, compared with the net loss per share of $0.34 and the weighted average basic and diluted share count of $39 million for the same period of the prior year. Now onto the balance sheet. We finished the fourth quarter with a strong balance sheet with cash and short-term investments of $287.1 million. In the fourth quarter, we used $18.2 million of cash due to the net loss, working capital needs, and capital equipment purchases. For the full year of 2021, our cash usage was approximately $78 million and increased from the $42 million in the prior year due to investments made for growth initiatives, such as new products, building our diagnostic test business, establishing our lab in China, and others. We expect our 2022 cash usage to increase to approximately $140 million, which includes a one-time investment of approximately $45 to $50 million for construction and fit-up of our new facility. And this amount is net of $15 million for tenant improvements from the landlord. We believe that we are in a healthy position with more than two years of cash on the balance sheet, which will allow us to invest in our growth initiatives that will enable long-term revenue growth. Now, I'd like to turn to guidance. With our recent revenue shift and focus weighted towards oncology and development of our clinical diagnostic test business, we believe it's time to focus on the longer-term revenue opportunity and therefore plan to move to annual guidance. However, I will provide some color into what we are seeing thus far in Q1. Similar to Q3 of 2021, when the Delta variant created some headwinds, we are experiencing similar delays with sample receipts from customers that we believe is related to Omicron. These headwinds may create some delays for the timing of revenue this quarter. However, we do not expect the revenue to be lost. In addition to sample delays, we have continued to experience supply chain tightening for some consumables. Our mitigation plans including adding buffer stock and multi-vendor sourcing when possible. Although the pandemic continues to make things a bit more challenging, we are extremely optimistic about our longer-term opportunities to drive oncology revenue growth. For the full year of 2022, we expect total company revenue to be approximately $67 million. and we expect oncology revenue from biopharma and other customers to be approximately $60 million, a year-over-year increase of 51%. Net loss is expected to be in the range of $110 to $115 million. Now, I will turn the call back over to the operator to begin the Q&A session.

Thank you. Ladies and gentlemen, if you have a question at this time, please press the star icon then the one key on your attached tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. We ask that you please limit yourself to one question and one follow-up. One moment for our questions. Our first question comes from Derek DeBruin of Bank of America. Your line is open.

Thank you for the question. Hey, this is John on for Derek. On the biopharma side, the long-term growth drivers are obviously your proprietary products, but in the shorter term, the partnerships like the one with Natera have proven incremental to say the least. Could you speak to the durability of the relationship? I've heard that Natera has commented on the quality of your work. But curious of the ramp in the durability of volume from Natera, given that the company has commented on its in-house capability.

After that, I haven't heard their comments on their in-house capability. I expect them. They've sequenced lots of things. Natera had come to Personalis some years ago and looked to leverage the capabilities, not just our ability to do sequencing, but the advantages of our next exome, which are substantially broader than a standard exome. Our expectation is that this could be a pretty long-term relationship with Natera, and we look forward to continue working with them. In time, I think investors should be looking at personnel's growth in our own products, including in particular our next personal product, which we've talked about some on the call today.

Gotcha. And then just one more for me. It's great to hear that you've hired 10 employees and you're making progress. I think you've commented in the past that the 5% of non-customer samples were processed in Shanghai versus the rest of California. Could you comment on that volume mix there?

I'm not sure I quite understood the question, but in general, we find that the advantage of us having initiated a lab inside China is not only the volume that we have inside China and the orders that we get there, but they're often part of international clinical trials where actually the majority of the samples are from outside China. And so we already see this in the orders we've received that the dollar value is of the samples that will actually be processed in Shanghai is significantly smaller than the dollar value of all the other samples that will be processed on the rest of the world from the same clinical trials. So it's kind of a halo effect, but the halo is actually pretty substantial.

Gotcha. Gotcha. We've seen some issues arise with the CDMOs and the CROs in China. Are there any political risks that you see with your business at all?

Certainly, the United States has an in-between relationship with China. Frankly, I'm optimistic. There are a lot of smart people in China wanting to do a lot of good things, and it's important for China to continue to advance with advanced pharmaceuticals, many of which have been developed in the West, but they're sensibly running clinical trials inside China to make sure that those drugs are well suited to people with a different genetic background, for example. So I think that there's an underlying motivation that makes sense for there to be continued adoption of Western pharmaceuticals in China, for there to be trials to you know, confirm that those are appropriate. And pharma companies will continue to need services like ours to support those clinical trials. So I think it's a, you know, it's sort of a macro level separate from this. There can be issues. I think there's a pretty substantial reason for the pharmaceutical business to continue to work there. And frankly, in the past, I've had great relationships with people in laboratories in China, great scientists there. And and the pharmaceutical people we've met there have also been super. Gotcha.

Thank you.

Our next question comes from Tejas Savant of Morgan Stanley.

Hey, John Aaron. Thanks for taking my question. This is Ed for Tejas. Just to start off, hey, on the MVP RFP process and not having one in 2022, I was wondering if you guys were able to get to the point of the conversation to have some visibility on 23?

Yeah, I'd say it's our understanding is that the MVP is unclear how they're going to go forward. They have a lot of samples, and it would be certainly there's an opportunity for them to sequence those samples, but I think they're doing some rethinking of things. I think in terms of personnel, us investors should be focused primarily on our oncology business. If there are opportunities with large-scale sequencing, we've certainly probably done more whole genome sequencing than almost anyone in the United States. And so if those opportunities come up, they may incrementally help us from sort of essentially a financing standpoint. But I think our focus will be on the oncology business, and particularly with the excitement we're seeing around the next personal platform and you know, that's where we're going to be putting a lot of our energy here. And I think that's what investors should focus on.

Understood. Um, and I guess, um, turning to a, um, kind of a regional perspective, uh, on COVID impacts. And, um, I guess, uh, what you're seeing in China, some of your peers have mentioned, uh, pockets of weakness in Asia and given your expansion efforts in Asia and particularly China's, uh, zero COVID tolerance policy. I was wondering if you can provide some color on, um, what you're seeing on the ground in terms of more recent impacts?

That's a good question. I'd say we're just beginning to get going with those folks. We're doing internal validation efforts at this point and working towards being able to begin processing samples from customers, but there's not yet the full set of regulatory authority approvals for the trials. Personnel isn't one of the applies. It's our customers who have to apply to the Chinese regulatory authority, HGRAC. And so as they get through that process, I expect that then we'll start to see sample flow and maybe get a better feeling for whether they're some of the issues that you brought up. Our sense is that we will probably be starting mostly with retrospective samples and retrospective clinical trials. So those samples would already exist. They'd still have to be shipped to us, but it's a little different from having to have enrollment in, you know, live clinical trials. Usually this kind of business starts on the retrospective side, and then as you kind of build up some working relationship, it can transition into more and more of the involvement in prospective clinical trials. I would think that retrospective trials would be less affected by, you know, COVID-related issues than prospective ones.

Understood. Thank you very much for the time.

Great. Thank you.

Our next question comes from Kevin Ukeler of Oppenheimer.

Hi.

Hey, thanks for taking my questions. Just following up on population sequencing more generally, you know, John, are you still interested in opportunities, you know, outside of the U.S. or beyond VA or, you know, a couple of points, you know, today? Should we really think about the company value? Okay. from a research standpoint, primarily focused on building new business relationships on the oncology and non-population sequencing stuff.

Yeah, I think it's a good question. We've certainly been interested in that up to this point. I think what we've been hearing is that the population sequencing projects that have been most advanced, and let's say if you looked at the UK, for example, the applications that they found tended to divide into people who had rare inherited diseases and people who had cancer. And what we found is that the, you know, I think for cases where there are rare inherited diseases, there certainly will be ongoing testing for that kind of thing. It's less of a population sequencing issue. It becomes more for people who are severely affected by those diseases, then it becomes more of a diagnostic test for them. I think the big opportunity that's been coming out of those, and we hear this out of the UK and other countries as well, is the interest in cancer. And as people look at cancer, when people started working on population sequencing, which is now almost a decade ago, a lot of it was germline sequencing and then began to be tumor sequencing, but generally of just one time point with a cancer patient. So if you had a tissue sample from a biopsy of a cancer patient, then that might be be sequenced. What we're seeing is with the capability to leverage cell-free DNA, and now in particular with the ability to use tumor-informed assays that are so much more sensitive, we're seeing a lot of interest in expanding the efforts, which maybe they came out of population sequencing to start with, but a lot of the same people are actually transitioning their efforts into cancer-related efforts. And so we've had people that we've spoken to initially on the, you know, pop seek front who said, well, actually, you know, maybe we're not going to do so much from a population sequencing standpoint, but could we talk about your cancer effort? And, and so actually some of those conversations that started on the pop seek dimension actually have ended up migrating into actually what looked like they could be pretty nice opportunities more in the oncology space. And particularly with the breakthrough kind of capability of, of next personal, the ability to look down to sort of, you know, part per million sort of sensitivity is exciting to a lot of people. And, you know, some of those, the people in those programs have a lot of samples and would like to move forward with some of those things. So I think there's, we'll have to see how that goes, but the, I don't think it's a loss of that area. What we're seeing is that the people who are in the POPC programs themselves are often looking for the most clinical relevance of And for many of them, that clinical relevance is turning out to be in cancer, which ends up then being pretty well aligned with what we're ending up focusing on. So a long-winded answer to your question, but hopefully it gives you an idea of where that's going. Very helpful.

Then just maybe a separate question as well. How do you think about, you know, explorating, you know, menu expansion, you know, given the question to... the clinical market, more into 2023, where there's some pretty obvious synergies with having a broader menu and more product in the back for a salesperson.

The sound on your phone is a little challenging, but if I understand it, you're asking about potential for menu expansion of our offerings, particularly including the clinical side through this year and also into 2023? That's correct. Right. Okay. So yeah, I'd say the, we see there being quite a bit of menu expansion. I mean, it's all, you know, pretty much in cancer, but what we were, you know, what personnel has been doing in cancer up to this point has been mostly sequencing tumor tissue samples. And for the majority of customers, Those are one time point per patient. We do have some customers who are doing multiple time point tissue samples per patient. That's probably not the most common thing. And we introduced the whole exome liquid biopsy a while ago. But again, where we're seeing the excitement is on the next personal side, particularly looking at very early stage cancers. And I'd say in the past, we had very little of our business in in early stage, but as a sort of a menu expansion, expanding from metastatic cancer into early stage cancer is a really substantial increase for us and expanding from one time point per patient to something, we have data that we're working with people on now where we've got 10 time points per patient and I think those numbers will go up. That becomes a pretty substantial expansion and it's not just about therapy selection at the beginning, but before that, if there's been surgical resection to detect that recurrence, but also once you see recurrence, very few MRD tests are actually in a position to be able to guide, once they see recurrence of the cancer, to say what to do about it. And so I think part of our expansion is not only to have an MRD capability in our next personal test, but to complement that also with something where out of the same test, you're also getting information that would guide what drug to choose. You know, if you are choosing a particular drug, do you see resistance mutations coming out? Ultimately, if that happens, then, you know, what would be the appropriate second line therapy? And to be simultaneously quantifying the ups and downs of the tumor so the physician has full information. So I think our footprint in cancer is broadening out a lot. And, you know, it's to earlier stage cancers and to many more time points per So it's maybe a little different from what you might call a menu expansion, but it's a very big expansion of the potential market that we're seeing.

Our next question comes from Patrick Donnelly of Seedy.

Hi.

Hi.

Hey, guys. Thanks for taking the question. John, maybe on next personal, nice to see that launch out there, getting your first order. Can you just talk about, I guess, the initial reception and then expectations as we get into 22, what we should be looking for in terms of the ramp there? Just curious in terms of what the construct of the guide is with that included.

So we're obviously not guiding separately for that product. I think that the With the initial reaction we're seeing from people, including people that I think we would consider as key opinion leaders, I think you'd see some pretty exciting involvement and programs there. These are things where the first thing people will do is a pilot. They may have samples. In fact, the first order we received from a large pharmaceutical company came actually quite rapidly after we talked to them about the product. And it turned out they had samples that were available that they wanted to use for a pilot so that those have already arrived and we're already doing the pilot. So that part is getting going. And I think we'll see that from other customers. I think in general, we don't have a lot of data on the mix of retrospective versus prospective uses here. I would say that five years ago, our sense was that not that many pharmaceutical companies had been routinely collecting cell-free DNA samples in their clinical trials, but I think that's changed pretty substantially now. There's been a lot of recognition of the potential there. And so I think there probably are a lot more banked samples. And so we may be able to see, I would expect that after the pilots, and it's kind of the same situation as I described in China, the first business I would expect to see would tend to be retrospective orders where people say, boy, I have this project I already ran. but I need more sensitivity. Could we do this with Next Personal? And once they get past the pilot, those could be retrospective orders. And then I think as people become more and more confident in the technology and come to appreciate what it can do, I think you'll see just like our next platform has ended up being increasingly ordered in prospective use in clinical trials where it gets written into the trial from the beginning. I think we'll see that kind of thing as the follow-on and the in the next personal sense. So certainly as we gain more experience over the quarters, we'll try to keep you filled in on that, but the sequence I would expect is sort of pilots first, pilots leading into retrospective trials, and then the prospective side. That's sort of the pharma part of it, and then as we develop the LDT version of next personal, then that broadens out into the you know, the potential for diagnostic revenue, and we'll have to talk about reimbursement, getting a multi-X decision there as well. That's probably more into, you know, by the time we look at reimbursement for an X personal, that's probably well out into 2023 somewhere.

Okay, that's helpful. And then, Aaron, you talked a little bit about, you know, sample receipts maybe from customers being a little delayed, supply chain tightening, you know, it seems like it could impact 1Q. encouraging to see you guys maintain that 50% plus pharma growth. Can you just talk about, I guess, a little bit of the cadence as we go through the year? It feels like anything lost in one queue will be recaptured throughout the year, obviously, by the full year guide. But just any cadence would be helpful in terms of how we think about modeling out the year.

Sure. So similar to what we saw in Q3 of last year, we are seeing Omicron slowing things down. It's harder for you know, our customers to get a hold of the samples from their CROs and then, you know, get them shipped because of, you know, employees or, you know, their subcontractor employees, you know, having some issues from an illness standpoint. And so we're seeing that type of slowness and, you know, our orders that we've received over the last 12 to 15 months have been phenomenal. And so we have the DAC log and, the orders or the revenue will not be lost. It's just going to be delayed, you know, a few months or so here. Everything is going to get pushed out to the right. And in terms of the cadence or the split here through the year, I would say, you know, more of the revenue is going to be in the second half of the year than the first half of the year. And so, you know, I'm not going to give numbers. These aren't numbers, but in terms of ranges here, we probably, you know, could have done 15 to maybe 20% more revenue here in Q1, you know, had we had the samples. And so, you know, that's the type of delay we're seeing. So things are just going to get pushed out to the right. Helpful. Thank you, guys. Okay. Thanks, Patrick.

Our next question comes from Max Nasucci of Cohen.

Hi, this is Stephanie on for Max. Thanks for taking the question. Just wanted to follow up on some of the comments you made for next personnel. So it's great to hear the traction that you've been getting. Do you expect next personnel to be used more to guide therapy decisions in the adjuvant setting or for cancer recurrence monitoring in patients that are one to two years out from surgery for the clinical version of the test?

Yeah. So I think our goal, um, with next personal has been a little different from some of the other MRD products where people will talk about trying to detect recurrence earlier than radiology. Um, I mean, it's good to do that, but it's not, it's not when you want it, when you want the answers right away. All right. I mean, so ideally you wouldn't be talking two years out and ideally you would know if you do a test a few weeks after the surgery, And if you have sensitivity down in the sort of, you know, part per million range, for most patients, we expect that we'll have a pretty definitive answer. It doesn't mean if you get a negative, you know, maybe it's worth checking again in the future, but it should be more definitive. We've seen data from some of the earlier technologies that's been published where you see time point after time point where the test result is that nothing is found. And then, you know, year and a half, two years, two and a half years out, recurrence is detected. And it turns out it is detected earlier than radiology, but it means the patient had cancer for maybe two years and the test just wasn't sensitive enough to pick it up. And so when we started working on this some time ago, we said that's really not where you want to be. You want to be in a position where you're sensitive enough that, you know, ideally you would have the answer really almost right after surgery. And so that actually changes the what the business looks like as well. Because if you have to test time point after time point after time point until you detect something, that's a lot of time points and a lot of testing. And that might sound better from a business point of view. It's not great for the patient. What you really want is something, if you can detect the recurrence very early because you have the sensitivity, then there's still a lot of time points that they have much more to do with managing the patient. Once you know that there is recurrence, if there is, or if there's residual disease, then there's a question of how do you manage that? And down at the part per million range, we estimate that in some cases, it may be because the surgeon has taken out the primary tumor and the surrounding sentinel lymph nodes, but there's a hesitancy by surgeons to go too far and take out too many lymph nodes because that has other problems for the patient later on because the lymph system is supposed to drain the tissue and take out all the lymph nodes, the drainage doesn't work very well anymore. So there's this sort of trade-off where the surgeons want to get all of the cancer, but they don't want to go too far further than necessary. And so what the residual disease we're talking about in some cases can be just, you know, maybe they should have gone one lymph node further. And if you can detect that early, then, you know, if you do a PET-CT, you may be able to see that. Residual disease, you may be able to have a second surgery and take that out and the patient may be finished. So that could be very positive. If the cancer is more, can't be localized that way or could spread further, then it's likely to be an issue of drug therapy. And for that, then you're going to want to have all the information of not only classic therapy selection, looking at driver mutations that could be addressed by a particular drug, but we now understand more that You know, many, many targeted therapies and also immunotherapies suffer from escape mechanisms where the tumor mutates in a way that lets it essentially go around the therapy. And you can wait to see that on radiology where the patient has progressed. But actually, what you'd like to do is see it from a molecular standpoint so you can detect it earlier. And that's been our strategy with NextPersonals, to build in the capability to see not only the driver mutations you might want to target, but also to be able to see fairly comprehensively the potential escape mutations. So you're not giving somebody a targeted drug when the tumor has already started to move on from that. So I think our view is that the market is likely to shift to being much more about managing these patients because we actually hope to be able to make decisions much earlier in the patient's trajectory about whether they have recurrence or not, and if they do, to get on with managing it rather than just continuing to do time point after time point where you're just not sensitive enough. So, sorry, a bit long-winded answer, but hopefully our perspective is that the sensitivity will make so much difference that it will actually change the market.

Got it. Thank you. That's really helpful. And as a follow-up, I just wanted to touch on your partnership with the Mayo Clinic. So could you provide us some color on how that partnership has been progressing, specifically in terms of generating clinical utility data. Did you experience any impact from the wave of Omicron cases?

Yeah, I think it's probably too early for us to talk about results from that. We do expect that. We're very happy with the relationship. Mayo Clinic is a fairly large institution, and they have a lot of people involved very actively in many aspects of oncology, so that takes a degree of coordination and planning. I think the scale of what we're going to see might be pretty encouraging. So I think that's taking some time, but we may want to defer the commentary until I think later this year we may have a lot more to say about the Mayo Clinic. We are thrilled with the relationship.

Got it. Understood. Thanks for taking the questions.

Yeah, great. Thank you. Appreciate your questions.

Our next question comes from Joseph Conway of Needham.

Hi, guys. It's Joseph from Mike. I guess, quick question around Natera. You know, is the company sending you, in terms of samples, you know, certain type of cancer, certain type of patient, as you highlighted earlier, maybe a certain type with a very low mutation frequency, or is it more or less just general overflow in terms of the samples that are being sent to you?

Just to be careful, I mean, Natera is an important customer for us, and I think generally if you want information about what Natera is doing, you probably have to ask Natera. We are generally our policy not to comment on what our customers are doing without their authorization. So certainly if notary wanted to speak about that, that'd be great. It's up to their, their product, but, but I think we have to be, um, you know, we can't really disclose things they haven't authorized us to disclose.

Sure. Okay. Absolutely. No worries. Um, and then maybe just a general one, just looking ahead towards the rest of the year, um, as you know, personalities tries to, uh, increase, increase awareness, awareness of the, uh, next platform, next personal, next DX. Um, You know, I guess, what do you guys have planned to, you know, drive awareness among KOLs? I guess, you know, some of the conferences coming up here in the next six months or any publications planned?

Yeah, we actually expect to be pretty active on that front. We are hopeful that they, you know, begin to transition out of a COVID period of time. That's certainly said with fingers crossed, but We have, there are conferences coming up that are currently scheduled to be hybrid where they're part in person and part, you know, online. And we have a team of people who are, they are gung ho to go to the conference in person and be there and say, doggone it, you know, two years, we haven't been able to have a booth. We're going to get out there and meet some customers and talk to clinicians. And so we are, we are definitely out to engage on that front. One of the things that's different from the past is that during this period of time, we've also been beginning to build up a medical affairs team. And so, you know, whereas in the past we would have had a commercial team staffing those kinds of things, and we certainly still would, but medical affairs, our group in medical affairs is also now increasingly active in that and looking ahead to the engagement with clinicians and key opinion leaders in addition to our commercial team, which is probably more focused on the folks in pharma that would be, you know, current customers. So I think it'll be a dual outreach to the people who we need to work with in pharma, but also kind of an advanced group beginning to work on engagement with clinicians and KOLs, but more out of our medical affairs team.

Okay, great. That's helpful. Thanks for taking our questions.

Actually, just maybe one more thing. On the clinical outreach side, I think we've commented on this, that Our commercial strategy there has a lot to do with focusing on high-end cancer centers. This is groups like the Mayo Clinic, and we talked about the UCSD work and so forth. These kinds of leaders and KLLs are a really good fit for our technology because often they have this dual mandate of clinical patient care, but also they have a second mandate for research. And our product is right at the intersection of those two things and can do a terrific job of both. And so that's very appealing to them. And they also typically have, you know, they can have cases that are quite a bit harder because many of them are what would be called tertiary referral centers. So if you're a physician working in a community practice and you've got a patient where this is just not going the way you kind of expect it to and it's getting more difficult, you said it's getting out of my league here, you may refer them to one of the top centers larger cancer centers. And so those cancer centers often have, they not only have a lot of patients, but they often have a lot more complicated patients. And so many of the things where the kind of the, I'll call them the corner cases of the oncology world, there tend to be a lot more of those specialized cases. And again, the comprehensiveness of our platform, you know, somebody may have an unusual gene fusion that isn't one of the standard ones. we will pick it up with the next personnel. We have a much better capability to do that because of our transcriptome capability and so forth. So I think when we think about how we commercialize, working with these large centers is important both because our product is such a good match there, but also we are looking for the KOL relationships. I think we're trying to create a new standard of cancer care by having really dramatically more information and that's actually what these KOLs often are excited about when working with us is to go beyond sort of the classic small cancer panel and have this broader information. So I think that'll be a good fit and it will feed right into where we want to go from a commercial standpoint.

Okay, great. Yeah, that makes a lot of sense. Thank you. Thank you.

Again, if you have a question, please press star and then one key on your touchtone telephone. Our next question comes from Arthur He of H.C. Wainwright.

Good. Hey, good afternoon, John and Aaron. This is Arthur in for RK. Thanks for taking my question. So basically I have two questions. So first, congratulations on the launch for the next personnel. So I just want to pick up your brainstorm. Regarding how is your strategy to push for the personal, for the diagnostic revenue on that front? Yeah.

So I understand you're asking about next personal and diagnostic revenue. If you can repeat, what's the core question about that?

So I just want to understand what's your strategy to try to push on that front.

The approach we're taking is that the product we brought out to start with is targeted at pharmaceutical companies. That gets us up and running with scale. We will be working on validation of that and ultimately looking for that to be run as an LDT. I think when we're prepared to describe that, it will be a little bit later, but That's the goal is for it to be a lab developed test. And, you know, we would look for then reimbursement. I think as I mentioned in the prepared remarks, we're expecting that our reimbursement path there, there's a pretty good foundation of there have been a reasonable number of other MRD tests that have been approved. And given the performance we have, we think that we would fit in with those kinds of things. So the expectation is that we would work with, again, probably the Palmetto Multi-X program because Where we're located in California, we're covered by the Medicare contractor, Neridian, but they typically defer significantly in their decisions to input from the Palmetto Multi-X program. So our plan would be to march down the road with developing the analytical validation data and the clinical dossier so that we can take the test to Multi-X and get a a positive reimbursement decision there. So I think those are probably the path to reimbursement. And then again, the kinds of groups that are likely to be early adopters will be the high-end cancer centers that we're talking about because, again, they tend to have interest in a combination of clinical care and research, and they often have very challenging patient cases. So I think that Next Personal, just like our NextDx test, will sort of pave the way in doing that. But then we expect that many of the same clinicians will be interested in Next Personal as it becomes an LDT, so they can also use that. Because the two tests are complementary. It would make sense for a physician to use both.

Okay, great. Thanks for that addition of color. My second question is regarding Natara. Could you remind us what's the current scope between the collaboration between you guys and Natara, and is there any possibility to expand those scope to the next platform and other products or future products you guys are working on?

I would say we enjoy working with Notera, and I think we find that the things we're doing are quite complementary, and so we certainly are interested in exploring whether there can be a broader set of products that get brought onto that. Right now, the business is going well with the two companies working together. I think most of these kinds of things, people want to get started with one product and see that it works well on both sides and make sure that the interaction between the companies goes well and the connection between from our LIMS system to their LIMS system and a lot of the practical laboratory connections. I feel like that's going quite well and I think there certainly is potential for a broader relationship because of the kinds of technologies that we're developing are somewhat different from what Natera is developing and some of them may be useful to Natera. But right now I'd say the focus there is on We provide front-end sequencing for the Signatera test, and right now that's what the business looks like today.

Okay, great. Thanks for answering my question. Great. Thank you.

All right. I'm not showing any further questions. Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone, have a great day.