Personalis, Inc.

Greetings. Welcome to the PersonAlysis first quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the call over to Caroline Corner. Please go ahead. Thank you, operator. Welcome to PersonAlysis First Quarter 2025 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 that do not relate to matters of historical fact should be considered forward-looking statements within the meaning of the U.S. securities laws. For example, any statements regarding trends and expectations for our financial performance this year and longer term, cash runway and liquidity position, revenue expectations and timing, reimbursement goals, size and booking of orders, products, services, technology, expansion of clinical volume, future publications, the outcome and timing of reimbursement decisions, expectations for existing and future collaboration activities, cost expectations, market size, and 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 of the first quarter 2025 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'd like to turn the call over to Chris for his comments on our first quarter.

Thank you, Caroline. Good afternoon, everyone, and thank you for joining us today. We had a great first quarter here at Personalis, and I'm excited to update you on our progress. We achieved revenues of over $20 million this quarter and also delivered over 2,000 molecular tests. I can't express how proud I am of the entire Personalis team for hitting those milestone numbers. I'm thrilled with our progress, and the whole organization is geared up to win an MRD. Let me back up a bit for those of you new to our story to explain what we're doing to improve outcomes for cancer patients. Personalis is a leader in the fast-growing MRD, or minimal residual disease testing market, which uses a blood draw instead of imaging or invasive biopsies to monitor therapy effectiveness and to detect cancer recurrence. The MRD market is expected to mature into a $20 billion market And with our ultra-sensitive MRD test, Next Personal, we believe Earth's analysis position for success. Our technology is able to detect cancer when there's only about one fragment of tumor DNA circulating in a million DNA fragments in blood. Our tumor profiling platforms and tests are cutting edge. We're able to see more with high sensitivity, and as a consequence, our platforms and tests are used by many of the world's top biopharma companies to improve clinical trial results, personalized treatment, and power a new generation of therapies. We're pushing hard this year on our win and MRD strategy, and our first quarter continued the strong momentum established in 2024. Our revenue was $20.6 million in the first quarter and resulted from solid progress across all three sectors of our business. Our biopharma revenue grew to $13.6 million, driven by strong growth in the use of Next Personal. Our enterprise and VA revenues were also robust, and our clinical diagnostic business had its highest quarterly revenue to date. Our cash and cash equivalents at the end of the quarter are $185.7 million, which gives us a comfortable runway to drive our growth objectives. We are reiterating our guidance of 80 to 90 million in revenue for 2025, 30 to 40% quarter over quarter growth in molecular results, and achievement of reimbursement at least two indications in 2025. Now, let's dive into the business by outlining progress metrics key to our win and MRD strategy. First is clinical usage. We are making great strides in driving NexPersonal into the nation's oncology community. We're following a unique partner-centric strategy to commercialize NexPersonal by working with Tempus, one of the country's leading labs, leveraging their approximately 200-person sales force to bring our assay to market. We delivered 2,184 molecular tests this past quarter, which is an increase of 52% compared with 1,441 molecular tests delivered in the fourth quarter of last year. Now, to underscore this progress further, we've grown our molecular test usage approximately 650% over Q1 of 2024. We believe this performance is very encouraging evidence that our WinMRD strategy is working. As physicians order the test on patients and use the results to direct patient care, feedback has been positive and retention is high. Approximately 40% of our MRD positive results are in the ultra-sensitive range, and our physicians are telling us this is an important differentiator. This allows for a leap forward in earlier detection of cancer recurrence, more discrimination in monitoring therapy, and importantly, the ability to have more confidence in a negative MRD result. We believe that our win in MRD strategy will be powered by combining better data with a strong experience, and we're spending time in this phase of our win in MRD strategy on being best in class in terms of customer care and a robust experience. The second dimension of our strategy is deepening clinical evidence and achieving reimbursement. Our early evidence generation is focused on three indications, breast cancer, lung cancer, and IO therapy monitoring. We've previously summarized the findings from investigators at Royal Marston for breast cancer, VHIO for IO therapy monitoring, and TracerX for lung cancer. These three indications and their results are powering three different Medicare submissions. In March, the Royal Marston paper was published and we submitted to Medicare for breast cancer reimbursement. When the VHIO and TracerX papers are accepted for publication, we plan to submit for Medicare for reimbursement for immunotherapy monitoring and lung cancer, respectively. We continue to be confident that we will achieve reimbursement at least two of the indications in 2025, and I look forward to updating you as the year progresses. We were excited this quarter to unveil our first data in colorectal cancer, or CRC. Now, this indication is important within the oncology community, as the lion's share of MRD clinical data and significant reimbursement to date has been developed in this indication. Our work is in response to feedback from physicians that there is an unmet need for a more sensitive approach in CRC. Now, what that means is that doctors want to identify more patients right after surgery that are going to recur because that is a critical time to make treatment decisions. They also want a test that can spot the cancer even when it recurs in a distant organ, such as the lung. And lastly, they tell us they want to be more confident in a negative MRD result. Delivering on these needs will better guide patient management in the post-surgical CRC setting. At the AACR meeting this past week in Chicago, our collaborators at British Columbia Cancer showed early analysis from a prospective study called VICTORY. The BC Cancer dataset included 71 patients with a median follow-up of 15 months and showed Next Personal was able to detect 100% of recurrences prior to imaging. Importantly, 87% of the cancer relapses were detected in the early landmark window of two to eight weeks post-surgery, with the majority of those detections in the ultra-sensitive range that we unlock with our assay. Additionally, 100% of metastatic relapses were detected by the assay, including all distant lung metastasis. The improved performance from our approach, we believe, could enable a better way to manage CRC patients in the future. Now, during the last call, I discussed how a physician using NextPersonal was able to spot a recurrence of breast cancer and their patient was able to access therapy ahead of imaging and the impact this had on the patient's life. Today, I'd like to spotlight a patient that has stage 3 colorectal cancer that was diagnosed last summer. His physician treated him with neoadjuvant chemotherapy and then surgically removed the tumor. At that point, The physician had the option to either observe or treat the patient with adjuvant chemotherapy based on clinical guidelines. To help make that decision, the oncologist ordered a next personal test approximately four weeks after surgery. The test was positive and it was in the ultra-sensitive range, which suggested the patient was at a high cancer recurrence risk, prompting the physician to immediately start adjuvant chemotherapy for the patient. The physician then used the next personal test to monitor response to therapy. Reassuringly, Subsequent tests showed clearance of circulating tumor DNA after starting chemotherapy, suggesting a good response to treatment for the patient. It's in examples like this where ultra-sensitive tests can positively impact a patient's journey that motivates our work. Now, while the CRC data is preliminary, the results are encouraging and put us on a path to potentially submit for publication over the next year. Working to mature the data, We'll begin our drive towards reimbursement for our fourth indication, and we expect success in the large CRC market to be a significant driver of revenue in the next few years. As a reminder, we expect our collaborators within our first three indications, breast, lung, and IO therapy monitoring, to be presenting results in future conferences and these studies to continue to fuel a robust publications roadmap. In breast cancer, we're working with Vanderbilt, John Hopkins, and other institutions on the PREDICT study, which is an approximately 180-patient study in early triple-negative breast cancer and HER2-positive breast cancer. And we have an ongoing prospective study called Be Stronger 1 in triple-negative breast cancer that's now enrolled approximately 100 patients from approximately 30 sites. We also have ongoing studies with Dana-Farber on HER2-positive patients the Institute career on an approximately 100-patient early-stage triple-negative breast cancer, and with MD Anderson. In iotherapy monitoring, we're working with UKE at two different melanoma studies, with Duke in a study of gastric cancer patients, and with UCSD in a pan-cancer iotherapy study across eight different cancer types. In early-stage lung cancer, we're continuing our work with the TRACERx team, and we're pushing forward on an additional study called DARWIN2. As the data from these studies begin to enter the public domain, we expect it to highlight the importance of our ultra-sensitive approach to detecting CT DNA and allow physicians to better manage and treat patients with cancer. The third area we are tracking is progress with our biopharma customers. The ultra-sensitive approach we are pioneering provides biopharma customers the ability to accelerate clinical trials with greater accuracy and can translate to significant savings for our biopharma customers by getting answers sooner. The past quarter, our revenue from this segment was 13.6 million. This was 39% growth over the first quarter of 2024 and is driven by increasing adoption of our MRD platform, both by existing and new biopharma customers. We saw record revenue in MRD and we are tracking to generate year-over-year growth of three to 400% in MRD revenue from biopharma customers. Importantly, We've landed two large additional customers and expect each of them to generate annual revenue in the $5 million range this year. Those wins are attributed to the decision by those clients to adopt Next Personal. Our second platform, ImmunoID Next, remains the platform of choice for biopharma companies developing immunotherapies and is also utilized by Moderna in its individualized neoantigen therapy programs. Market demand for ImmunoID remains strong, And we continue efforts to broaden our tumor profiling product portfolio with new versions developed to capture additional business from biopharma that have grown to trust Personalis as a partner. The year is off to a strong start at Personalis, and we are laser focused on our strategy to win an MRD. Our employees, collaborators, and partners are working hard to improve the journey for cancer patients with an ultra-sensitive MRD approach. And in the process, we're creating a special company. We're grateful for all of our investors that are part of our journey to pioneer this ultra-sensitive MRD testing market. We're running fast towards multiple milestones in 2025, and it's shaping up to be a significant year for the company as we execute on our growth drivers, and most importantly, a significant year for patients with cancer as we redefine the way cancer is managed. With that, I will now turn it over to Erin to review our financial results.

Thank you, Chris. I will discuss our first quarter 2025 results and then cover our guidance for the second quarter and the full year. Total company revenue for the first quarter of 2025 was $20.6 million, representing a 6% increase compared with $19.5 million for the same period of the prior year. The increase in revenue was driven by higher volume from biopharma customers and the VAMVP which more than offset the expected decline in enterprise sales from Natera. BioPharma revenue was $13.6 million in the first quarter, representing a 39% increase compared with $9.8 million for the same period of the prior year. The accelerated growth from BioPharma was due to the adoption and ramp-up of Next Personal with several customers and the higher volume for ImmunoID Next, which is used for Moderna and other BioPharma customers. An important note about next personal tests sold to biopharma customers is that we get paid for all tests delivered since we are not subject to reimbursement from insurance companies, like with our clinical business. We are tracking well to deliver year-over-year biopharma growth of 24% at the midpoint of our biopharma estimate, despite the headwinds from Moderna revenue declining year-over-year. In addition, we recognize $0.3 million of revenue from our clinical tests NextDX, and NextPersonal. Gross margin was 35% in the first quarter compared to 28.1% for the same period of the prior year. The year-over-year increase of 690 basis points was primarily due to favorable customer mix from the increase in biopharma volume. In the first quarter, we saw an impact of approximately 8 percentage points to our gross margin due to unreimbursed clinical test costs. Excluding those costs, gross margin would have been approximately 43%, and highlights our ability to expand margins further once we obtained reimbursement coverage and achieved scale. Operating expenses were $24.9 million in the first quarter, compared with $24.4 million for the same period of the prior year. Most of the year-over-year increase was attributed to selling expenses related to our clinical test volume growth. The first quarter R&D expense was 12.6 million compared to 12.8 million for the same period of the prior year, and SG&A expense was 12.3 million compared with 11.6 million for the same period of the prior year. Net loss for the first quarter was 15.8 million compared with 13 million for the same period of the prior year. The prior year's net loss included a $4.6 million gain related to the warrants issued to Tempest and were outstanding as of the first quarter of the prior year. Excluding the non-cash gain, the prior year net loss would have been $17.6 million for comparative purposes. Now on to the balance sheet. We finished the first quarter with a strong balance sheet with cash and short-term investments of $185.7 million. During the quarter, we raised approximately $17.8 million net of fees selling common stock at an average price of $5.89 using our at-the-market offering or ATM that is in place. The cash usage for the first quarter was $20.5 million. We continue to operate cost-effectively, and as mentioned during our last conference call, we expect cash usage for the full year of 2025 to increase by approximately $30 million compared with the amount used in 2024, primarily to invest in clinical test volumes in advance of reimbursement, expanding clinical evidence for Next Personal by conducting new studies, and adding to our clinical sales team. We expect these investments to help drive Next Personal revenue growth post-reimbursement later this year and into 2026. Now I'd like to turn to guidance. For the second quarter of 2025, we expect total company revenue in the range of $19.5 to $20.5 million, revenue from pharma tests and services and all other customers in the range of $13 to $14 million, and revenue from population sequencing plus enterprise customers of approximately 6.5 million. And for the full year of 2025, our revenue guidance remains the same, and we expect total company revenue in the range of 80 to 90 million. This range encompasses the variability of reimbursement timing and prices. Revenue from pharma tests and services and all other customers in the range of 62 to 64 million. Population sequencing plus enterprise customers in the range of 15 to 16 million. Clinical revenue in the range of 3 to 10 million. Gross margin in the range of 22% to 24%, which increased from our prior range of 21 to 23%. Our gross margin guidance for the full year is expected to be lower than the 32% for the full year of 2024, due to the impact of investing in clinical test volume ahead of reimbursement. That loss of approximately $83 million, which decreased from $85 million last quarter, and includes approximately $20 million of unreimbursed test costs, and cash usage of approximately $75 million, which decreased from the prior range of $75 to $80 million. The majority of the increase in cash usage compared with the full year of 2024 is for investing in clinical test volume, clinical studies, and commercial capabilities for ramping up our clinical test volume before and after reimbursement. We look forward to updating you on our progress during the next conference call in a few months. And with that, I will turn the call back over to the operator to begin the Q&A session. Operator?