Personalis, Inc.

Good day and welcome to the Personalis first quarter 2024 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Aaron Tachibana. Please go ahead.

Thank you, Operator. Welcome to PersonAlysis' first quarter 2024 earnings call. Joining today's call are Chris Hall, Chief Executive Officer and President, and I am Aaron Tachibana, Chief Financial and Chief Operating Officer, and Rich Chen, Chief Medical Officer and EVP of R&D. 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 this year and longer term, cash runway, revenue expectations and timing, reimbursement goals, size and booking of orders, products, services, technology, clinical milestones, the outcome and timing of reimbursement decisions, expectations for our existing and future collaboration activities, cost expectations, our market opportunity, 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, including the risk factors described in our most recent filings. Personalis undertakes no obligation to update these statements except as required by applicable law. Our press release with our first quarter 2024 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 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 would like to turn the call over to Chris for his comments and first quarter business highlights.

Thank you, Aaron. Good afternoon, everyone, and thank you for joining us. I'm very proud of our team at Personalis as we continue to fight cancer with our novel technologies. For those of you joining one of our calls for the first time, welcome. Personalis is one of the leaders in the fast-growing MRD testing market. MRD stands for minimal residual disease. With our first-of-its-kind, ultra-sensitive MRD test, we're able to spot cancer when it's only one fragment of tumor DNA circulating in a million DNA fragments in the blood. Our technologies are used by many of the world's top biopharma companies to improve clinical trial results, find new ways to personalize treatment, and power a new generation of more effective therapies. Last quarter, we laid out a strategy to drive Personalis to $100 million in revenue in 2025. This aspirational milestone with three underlining growth engines is our lodestar as we are accelerating Personalis into a higher growth mode. In the first quarter, we achieved revenue of $19.5 million, exceeding the upper end of our guidance of $18 to $19 million. Our biopharma business grew 55% compared to the first quarter of 2023, driven by strong demand for our core ImmunoID platform to support the individualized neoantigen therapy market, as well as increasing demand for our MRD product, Next Personal. With this increased demand, We have the confidence to increase our full year revenue guidance to 76 to 78 million from 73 to 75 million. I'll now review progress this quarter on the three growth engines driving us towards our 100 million in 2025 goal and our progress on each. The first growth engine is the most important as we focus on turning Personnelis into a clinical diagnostic powerhouse. In order to do that, We're executing on our win and MRD strategy. The MRD market involves using liquid biopsy to find evidence of minimal residual disease or cancer recurrence and subsequently monitoring therapy effectiveness. It's estimated that this market will mature into a $20 billion opportunity over the coming years, and we are establishing personnel as a leader in this space. Our win and MRD strategy has four pillars. to focus and launch our test in cancer types where an ultra-sensitive liquid biopsy test can unlock significant value for patients, payers, and partners. Second, to drive reimbursement by developing robust clinical evidence and partnering with the top global collaborators. Third, leverage our deep relationships to accelerate adoption by biopharma partners and power our revenue growth by the use of next personal and clinical trials. And lastly, to commercialize next personal with a partner-centric model. To delve into the first pillar, we previously explained how we're developing evidence to support NextPersonal's clinical usage and reimbursement in early-stage lung cancer, breast cancer, and immunotherapy monitoring. We believe our ultra-sensitive technology allows us to see cancer earlier, which may provide the information to de-escalate patients from unnecessary therapies and procedures, potentially sparing patients from toxicity and saving healthcare dollars. Just as importantly, we believe we can identify and get recurrent patients to treatment earlier with potentially better outcomes. Our focus on these indications is intentional, and our data has demonstrated that Next Personal can win in these markets. To elaborate a bit on our approach, early stage lung cancer and breast cancer shed very little DNA into the blood, which are difficult to detect without an ultra-sensitive approach. Early detection is critical in these indications. For patients on IO therapy, we believe the potential decision to switch treatment requires the insights from monitoring that are provided by our ultra-sensitive test. Now, you might recall that last October we launched our MRD test, Next Personal, and today we are enrolling physicians in an early access program, or EAP. We are the first ultra-sensitive MRD test to commercially enter the market, And with that launch, we now have two laboratory-developed tests, or LDTs, on the market, the other being our Medicare reimbursed test, NextDx, which is used by physicians to put a patient on targeted therapy. The adoption of these tests has been rapid and is exceeding our initial target. We delivered 338 clinical tests in the first quarter, a solid uptick from the 126 results delivered in the fourth quarter of last year. We're pleased with this traction as the number of physicians that were ordering in Q1 remain fixed at 10 through the quarter. There are two key metrics that I want to talk about and dive into. First, all 10 of our early access physicians are ordering and uptick has been strong across the entire cohort. The second metric involves the actionability of our next personal MRD test for the clinic. If you remember, we report circulating tumor DNA in the blood down to one part per million, which means If there is just one fragment of tumor DNA circulating in a million DNA fragments in the blood, we expect to see and quantify it. This is a leap forward for the field. The extrasensitivity we report on with our next personal assay, which are values between 1 and 100 parts per million, unmask a region that has previously been hard to see consistently. We call that region the ultrasensitive MRD range. Until next personal, clinicians could not routinely detect cancer recurrence at that level, and today they can. About 40% of the ctDNA positive samples thus far in our clinical testing have been in this ultra sensitive range. That's a significant jump in the performance of MRT testing. It means that physicians can see cancer recurrence earlier, have more discrimination in monitoring therapy, and have more confidence that ctDNA patients that are negative are likely cancer-free. Indeed, we've had many antidotes relay from our 10 early access doctors that the ultra-sensitive range is allowing them to see cancer earlier with their patients and intervene to get them the management they need. We believe it is the ultra-sensitive range that allows a doctor to see cancer sooner, and seeing it sooner is the cornerstone of our win in MRD strategy. Now moving to the second pillar. We're focused on building and publishing clinical evidence to gain reimbursement and are working with many of the top thought leaders in the world. In previous calls, we've talked about the importance of our work with Royal Marston and breast cancer and VHIO and immunotherapy monitors. Both of these collaborators have provided access to studies that are broad and comprehensive. In the case of Royal Marston, one of the leading global institutions in breast cancer, we're focusing on patients with early stage disease for several subtypes, including ER positive, HER2 positive, and triple negative breast cancer. For VHIO, the work is pan-cancer across many cancer types and stages. These studies are anchor studies in that they will be the backbone of our efforts to gain Medicare reimbursement. Royal Marston for early-stage breast cancer and VHIO for immunotherapy monitoring. We're excited that at the upcoming ASCO conference, the work with both of these collaborators will be featured as oral podium presentations. We'll also have three other studies featured at ASCO, one with Dana Farber on HER2 positive patients, another with Duke for immunotherapy monitoring for gastric patients, and lastly, one in colorectal cancer patients. Having this breadth of data should underscore our commitment at Personalis to developing rich data to support the use of NexPersonal in the clinic and to gain reimbursement quickly. At the AACR conference in April, some compelling data was presented. Our collaborators from the UKE gave an oral podium presentation on late-stage melanoma patients where they used Next Personal to monitor and detect immunotherapy response, highlighting the importance of detection of ctDNA and the ultra-sensitive range. In addition, our work in collaboration with AstraZeneca on their matrix study was presented. The matrix abstract showed Next Personal achieved very strong sensitivity and specificity on blinded test samples provided by AZ down to the lowest levels at two parts per million. Subsequently, we were selected as a partner by AstraZeneca for MRD testing in their upcoming trials. We've also presented data from collaborators with a personalized cancer vaccine company, and our analytical validation data for NextPersonal that was recently published was also at the ADCR conference. The third pillar of our NextPersonal strategy is to leverage our biopharma relationships to drive the use of NextPersonal in clinical trials. We're engaged with most of the world's top biopharma companies and have continued to generate excitement around our next personal test, most recently from discussions at AACR. Customers want and need an ultra-sensitive approach to ensure that the most appropriate patients enter into a clinical trial. For example, we believe that our ultra-sensitive assay means that patients testing negative are much less likely to have a recurrence. Our biopharma customers can then expect that these patients are less likely to benefit from a therapeutic intervention, holding out the promise that Next Personal could be an excellent approach to optimize biopharma trials. Indeed, here in the first quarter, we booked record new orders for Next Personal. The product helped to drive our strong Q1 financial performance, and we believe it will be a driver of revenue moving forward and an important way for us to deepen the clinical utility of Next Personal. Now I'll move on to the fourth and final pillar, commercializing ex-personal using a partner-centric model. In December, we announced our key partnership with Tempus to commercialize an ex-personal in the clinic with oncologists. To quickly review, we expect to leverage Tempus' up to approximately 200-person sales channel to co-commercialize an ex-personal and accelerate growth. Personalists will be responsible for processing samples in our lab, obtaining reimbursement and invoicing health insurance payers and patients under the arrangement while paying Tempest fair market value for the commercial services they provide to us. Overall, the deal is worth approximately $30 million for personnel should all the milestone payments be triggered and if Tempest fully exercises their warrants. We expect this to allow us to ramp up commercial efforts quickly with minimal additional cash investments. We plan to launch with Tempest this quarter. by expanding our early access program to include some of Tempest's clients. The goal is to learn how to work together as partners, integrating our business systems, refining our message to oncologists so we're set to drive accelerated growth together on the backside of reimbursement approval. Now, while we've made strides with our first growth engine, our win in MRD strategy to establish NexPersonal as a leading MRD test, we also made progress with our second growth engine, leveraging our ImmunoID Next platform to deepen relationships with biopharma customers who use the offering to pioneer new therapies. Our biopharma segment grew 55% year over year, and we had solid performance across our product portfolio. Customers primarily use our ImmunoID Next platform in two ways. First, they use our platforms to power translational research and find new biomarkers and new insights that can power their drug discovery efforts. Second, companies in the personalized cancer vaccine market use our platform to create a molecular fingerprint of a patient's tumor to power a personalized therapy. We previously told you about our partnership with Moderna, in which Moderna is utilizing our platform in their mRNA cancer program. Moderna and its partner Merck are enrolling patients, and our collaboration with Moderna is an important driver of revenue for us in 2024 and 2025. We have several other partners that work in the space as well. The third engine of our growth strategy is growing our personnel-as-inside approach as we service enterprise customers. In these relationships, partners adopt our platforms and technologies to power their solutions and provide new insights to their customers. Our work with Netera involves leveraging our sequencing platform to analyze the exome as a part of their MRD product. We believe our relationship is strong and mutually beneficial and are optimistic that it will extend into 2025. A second important enterprise relationship is the VA. The VA utilizes our whole genome sequencing capabilities to power the Million Veteran Program, a national research program looking at how genes and lifestyle affect the health of veterans. We've helped power this program with the VA for years. Both of these relationships are examples of how our platforms drive value for partners and, importantly, provide sequencing scale for personnel. Now, before I turn it over to Aaron to go deeper on the financials, I have a few exciting corporate updates. First, we continue to innovate and deepen our strong intellectual property position. We had two new patents recently issued by the USPTO. In fact, one just yesterday relating to the use of two of our core technologies, tumor-informed personalized assays in the first patent and boosted exome panels in the second patent, each to inform cancer vaccine treatment. This latest patent is the fourth U.S. patent to issue in 2024, and today our number of issued U.S. patents is over 30. We believe we have a deep set of IP protecting our pioneering work in both MRD and PCV. We are engaged in litigation with Foresight Diagnostics to enforce and protect some of our IP relating to MRD. As often the case, there will be ups and downs along the way in that journey. However, we are confident we're set up for long-term success to establish an industry-leading position around the use of whole genome sequencing for MRD and are optimistic about the path forward. And second, we crossed two milestones this quarter. We processed our 400,000 samples since our company's inception, and importantly, we completed our 175,000 whole genome sequencing sample. Whole genome is the foundation of our next personal MRD test, and these milestones underline both our sequencing scale and unique operational capabilities. With that, I will now turn it over to Aaron to review our financial results.