Personalis, Inc.

Good day, ladies and gentlemen, and welcome to the Personalis first quarter 2022 earnings conference call. At this time, all participants are in a 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 on your touchtone telephone. As a reminder, this call may be recorded. I would now like to hand the conference over to your first speaker today, that is Caroline Corner, Investor Relations. Please go ahead.

Thank you, Operator. Welcome to Person Analysis First Quarter 2022 Earnings Call. Joining me on today's call are John West, President and Chief Executive Officer, and Erin Tachibana, Chief Financial Officer. All statements made on this call do not relate to matters of historical fact should be considered forward-looking statements within the meaning of U.S. security laws. For example, any statements regarding trends and expectations for our financial performance, 2022 cash use, cash runway, new orders, products, services, technology, milestones, and business outlook. 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 10Q for the first quarter of 2022 to be filed today. Personnels undertake no obligation to update these statements except as required by applicable law. Our press release with our first quarter 2022 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 continues to make progress on our strategic priorities with the aim of becoming a leading provider of the most comprehensive and actionable cancer genomic tests and ultimately enabling a new standard of oncology care that could help patients live better and longer lives. In Q1, we grew our oncology revenue by 53% over the same period of the prior year. Customer demand for our next offerings continued to be strong and new orders were again higher than the amount of revenue reported for the quarter. Our pharmaceutical customers are increasingly seeing the value of our platform and incorporating it in their clinical trial designs right from the start. And approximately two-thirds of our backlog is for prospective clinical trials. In addition, we're making great strides in preparing our company for success in the clinical diagnostic market, which I will highlight later. Our customer base continues to broaden as it has over the last year and a half with more than 60 customers that have ordered services for our next platform, including most of the top 10 global pharmaceutical companies, which we define by their annual revenue level. In Q1, we received and began processing samples for our first customer order for our comprehensively tumor-informed liquid biopsy assay, Next Personal, from a large global pharmaceutical customer. As part of that pilot, the analysis of the assay's sensitivity, among other capabilities, is very favorable. In addition, we are in discussions with several potential pharmaceutical customers about Next Personal's features, and feedback about our offering has been extremely positive. We expect new orders for Next Personal to ramp throughout the year, with a few million dollars or so converting to revenue this year, with the potential for significant acceleration in 2023 and beyond. 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 also believe that tissue and liquid biopsies together can provide a more complete view, leading to optimal therapy and treatment decisions, and our tissue and liquid biopsy-based offerings provide data on all of the approximately 20,000 human genes, a breadth and depth that notably differentiates us from competitive offerings. 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 can provide information about a patient's tumor across multiple time points from small blood samples. Next, personal, for example, has been optimized for maximum sensitivity, particularly for when the amount of tumor DNA in the 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 who have survived breast and prostate cancer. To detect potential cancer recurrence, we can look at 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. And to date, we have processed more than 150,000 whole human genomes in our laboratory. 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 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. Our objective is to provide oncologists with information needed for them to advise on the optimal course of action for patient treatment. Next Personal, therefore, provides DNA sequencing coverage of variants which may indicate drug therapy options, response to therapy, and emergent resistance to therapy. We consider this approach not just tumor-informed, but comprehensive tumor-informed. And we have recently been issued a U.S. patent for our novel methods in this area. In addition, we have initiated several study collaborations with one of Europe's leading cancer research centers, to utilize Next Personal to better understand treatment response and resistance in patients with ovarian cancer and other cancer indications. 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 represents a larger business opportunity. Personnel's technological and scientific leadership has driven strong adoption of our offerings 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 are taking steps to build a clinical diagnostic business for therapy selection and monitoring. We believe that the combined market potential of these opportunities may become approximately $30 billion in the US over time. 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've been hiring employees with clinical and medical experience within a diagnostic setting, and we will continue to hire and invest in this area. In support of our new diagnostic business, we will incorporate FDA-compliant protocols within our new facility, and we remain on target to begin moving in during Q3 of this year. Second, we are making progress to complete 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 are also on track to submit data to the Palmetto Mold DX technology assessment process and hope to receive a favorable reimbursement ruling from Multiex later in the second half of 2022. Third, we believe that it's essential to work with world-class medical institutions. We have begun to test clinical patient samples using our NextDx test and are very excited about the opportunity to work with these renowned cancer centers, including the Mayo Clinic and the Moores Cancer Center at UC San Diego Health. If we achieve a favorable reimbursement decision for our NextDx test from MoldyX, as discussed earlier, we may also recognize revenue in the future from some of these collaborations. Given the advanced nature of our NextDx test, we believe it is a good fit for high-end cancer centers, which have a dual mandate for both clinical care and research. We believe these collaborations also will provide us with access to a large number of cancer patients which could be approximately 20% of the U.S. market. If these key opinion leaders have a positive experience using our tests, we are optimistic that this will create an intended halo effect, motivating broader use of our platform by other clinicians in the future. Fourth, we hired James Zaro to lead our clinical commercial efforts to pursue business with healthcare systems and oncologists in the United States. which is our initial market focus. James has more than 20 years of successful commercial experience with companies selling oncology genomic tests to clinics, including Myriad Genetics and Gardens Health. Over the next 12 months, he will focus on growing our clinical test volume as we also work to secure a reimbursement for both NextDx this year and Next Personal in 2023. In addition, Personalis was recently accepted into the blood pack consortium, which indicates additional support for our ability to help lead and accelerate the development of liquid biopsy assays that can help cancer patients. 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 in Q3 of this year. In addition, We're also planning a laboratory-developed test, or LDT, version of our liquid biopsy-based next personal test. We expect clinicians who begin using our next DX test may later also use our next personal 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 Mold DX program. We will continue to provide updates on our clinical diagnostic progress as we go forward. In summary, our team has done a terrific job executing on our strategic priorities and growing our oncology business despite the challenges from the ongoing pandemic. Customer adoption of our next products has been excellent, and we continue to drive further adoption and increase penetration with existing customers. We have compelling products for both the biopharma and clinical diagnostic test marks. And 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.