Personalis, Inc.

Good day and welcome to the Personale's second quarter 2024 earnings conference call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the call over to Caroline Corner, Investor Relations. Please go ahead.

Thank you, Operator. Welcome to PersonAlyssa's second quarter 2024 earnings call. Joining today's call are Chris Hall, Chief Executive Officer and President, Erin Toshibana, Chief Financial and Chief Operating Officer, and Rich Chen, Chief Medical Officer and EVP R&D. 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. 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 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 SEC including the risk factors described in our most recent filings. Personnelist undertakes no obligation to update these statements, except as required by applicable law. Our press release with our second quarter 2024 results is available on our website, www.personnelist.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 what our business highlights.

Thank you, Caroline. Good afternoon, everyone, and thank you for joining us. I'm very proud of our team at Personalis as we continue to fight cancer and help patients 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, and involves using blood, which is commonly called a liquid biopsy, instead of imaging or invasive biopsies to monitor therapy and to detect cancer recurrence after treatment. The MRD market is expected to mature into a $20 billion market, and with our first-of-its-kind, ultra-sensitive MRD test, Personalis has emerged as a leader in this space. Our technologies are able to spot cancer when there's only about one fragment of tumor DNA circulating in a million DNA fragments in the blood. Our platforms are used by many of the world's top biopharma companies to improve clinical trial results, find new ways to personalize treatment, empower a new generation of therapies. Earlier this year, we laid out our strategy to drive personnel as to $100 million in revenue in 2025. Now, this aspirational milestone has at its core three growth engines, and its effect has been to shift us into a higher growth mode. In the second quarter, we achieved revenue of $22.6 million, up 35% year-over-year. This growth was driven by our biopharma business, which grew 117% year-over-year, led by strong demand for our tumor profiling product that is used to create personalized cancer vaccines for patients, as well as increasing demand for our MRD product, Next Personal. Our strong Q2 revenue also helped us to increase our guidance for the full year by $3 million, and we now expect full-year revenue in the range of $79 to $81 million. We're particularly pleased to have been able to deliver this top-line growth while also making improvements to both our costs and margins, as Aaron will cover shortly. I'll now review progress this quarter on our three growth engines. First, the first growth engine, winning MRD, is the most important as we focus on turning personalis into a clinical diagnostic powerhouse. As I noted, MRD testing uses a liquid biopsy to find evidence of minimal residual disease or cancer recurrence and to monitor therapy effectiveness. We laid out our win in MRD strategy six quarters ago, and we've been executing on its four pillars. One, focus on cancer types where an ultra-sensitive approach can unlock significant value for patients, payers, and partners. Drive reimbursement by developing robust clinical evidence and partnering with the top global collaborators. Three, leverage our deep relationships to accelerate adoption by biopharm partners and power our revenue growth by the use of Next Personal and clinical trials. And four, commercialize Next Personal with a partner-centric model. Now, to delve into the first pillar, we've previously explained how we're developing evidence to support Next Personal's clinical usage and reimbursement in lung cancer and breast cancer, and IO therapy monitoring. The data across multiple studies now indicate we're able to see cancer recurrence earlier, and this holds out the promise that those patients can seek treatment sooner with potentially better outcomes. The clinical studies that have been done to date indicate we can detect cancer many months ahead of imaging. The data also suggests that patients who are classified as MRD negative, meaning our test doesn't detect circulating DNA from the tumor, largely do not experience recurrence. Having more confidence in a negative result may allow a doctor to deescalate patients from unnecessary therapies and procedures, potentially avoiding toxicities and ultimately saving the healthcare system money. Our focus on these indications is intentional, and our data has demonstrated that NexPersonal can win in these markets. To elaborate a bit on our approach, lung cancer and breast cancer shed very little DNA in the blood, so cancer is difficult to detect without an ultra-sensitive approach. Lung and breast cancers can be aggressive when they recur, so early detection is critical. 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. These factors make breast cancer, lung cancer, and therapy monitoring the ideal indications for us. In October of 2023, we launched the first commercial ultra-sensitive MRD test into the clinic. Next Personal is being marketed alongside our Medicare-reimbursed tumor profiling test, NextDx, which is used to help put patients on appropriate therapy. We started our commercial journey with just 10 doctors in an early access program, and we've been adding incrementally. As we previously stated, our intention is to gradually add more doctors into the program until we receive reimbursement. Our quarter-over-quarter growth continues to be healthy as we delivered 561 clinical tests in the second quarter, a 66% increase from the 338 results delivered in the first quarter of this year. In addition, Tempest commenced their commercial launch of Next Personal late in the second quarter, and we expect this to fuel additional growth. Early feedback has been that clinicians are seeing a leap in actionability from our approach. If you remember, we report circulating tumor DNA in the blood down to one part per million, which means that if there is just one fragment of tumor DNA circulating in about a million DNA fragments in the blood, we expect to see it and quantify it. This is a leap forward in the field. The extra analytic sensitivity we report on with our next personal test unmask a region that has previously been hard to see consistently. We call that region the ultra-sensitive MRD range. About 30% of the ctDNA positive samples in our clinical testing have been in this ultra-sensitive range. That is a jump in the actionability of MRD testing and means physicians can see cancer recurrence earlier, have more discrimination in monitoring therapy, and have more confidence that patients with negative ctDNA results are, in fact, cancer-free. Indeed, we've had many anecdotes relayed from our early access doctors that the ultra-sensitive range is allowing them to see cancer sooner, and intervene with a patient to get them the management they need, and also to consider de-escalating therapy when our test determines patients are negative for ctDNA. For example, a female patient from the Northeast receiving therapy for breast cancer tested positive with our next personal test. Her position saw low traces of cancer in the ultra-sensitive range for over several months. And luckily for this patient, the detected levels trended downwards until the patient's cancer finally became undetectable. Continued monitoring can potentially help inform taking patients like this off therapy in the future and provide reassurance to both the doctor and the patient. Moving to our second pillar, we're focused on building and publishing clinical evidence to gain reimbursement and continue to work with many of the top thought leaders around the world. In previous calls and during the ASCO webinar, we've talked about the importance of our work with two of the leading cancer centers in Europe, Royal Marston in breast cancer and Valdehebron in immunotherapy monitoring. Both of these collaborators have provided access to studies that are broad and comprehensive. In the case of Royal Marston and the Institute of Cancer Research in the UK, which are one of the leading global institutions in breast cancer, the study included patients across the major breast cancer subtypes, including HER positive, HER2 positive, and triple negative breast cancer, and patients were followed in this study for a medium of six years. The study results were highlighted at ASCO during a podium presentation, and the results were compelling. NextPersonal detected early-stage breast cancer, a medium of 15 months before imaging scans for patients. For valdehebrone or VHIO, the work is in pan-cancer and included greater than 120 patients across 18 different cancer subtypes. The study showed that NextPersonal could be potentially used to predict immunotherapy response for patients. Similar to what we are seeing with our breast cancer studies, our test is detecting traces of cancer well ahead of imaging scans. These Royal Marston results in the VHIO studies for immunotherapy monitoring join our TracerX working lung cancer to form the backbone of our efforts to gain Medicare reimbursement. Investigators in all three of these studies, Royal Marston, VHIO, and TracerX, are working to submit manuscripts to peer-reviewed journals which is a key step for us ultimately to submit for Medicare reimbursement. Once those manuscripts are published, we can then submit the individual dossiers for each of the indications to Medicare. There were two other data sets at ASCO that highlighted NexPersonal that are also worth noting. One was a study with Dana Farber for her two positive patients that showed NexPersonal was correlated with outcomes in patients receiving neoadjuvant therapy. Neoadjuvant therapy is given to these patients before surgery to try to shrink the tumor before the cancer is removed. In a second study, this one with Duke, deepened the data indicating Next Personal could be used to predict immunotherapy response. The third pillar of our Next Personal strategy is to leverage our biopharma relationships to drive the use of Next Personal in clinical trials.