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.