Personalis, Inc.

of the prior year. It's vital to understand that this margin compression is both intentional and temporary. We foresee this margin dilution to continue throughout 2026 with the lowest point expected to be in the first two quarters of the year but begins to improve when we receive reimbursement coverage for I.O.

unreimbursed test costs, diluted lung cancer come online, that volume run rate converts to higher margin revenue.

We expect to realize the benefits from investments to gain market share over the next two to three years as our clinical revenue gets to scale. Operating expenses were $32.4 million in the first quarter, compared to $24.9 million for the same period of the prior year. Our expense base is increasing as we are forging ahead with key investments in order to win market share. We are investing in commercial resources to drive volume, investing in new and existing studies to support reimbursement, and we are investing in our technology like our variant tracker feature in order to maintain and increase our ultra-sensitive leadership position. The first quarter R&D expense was $14.5 million compared with $12.6 million for the same period of the prior year. And SG&A expense was $17.9 million compared with $12.3 million for the same period of the prior year. Net loss for the first quarter was $30 million, compared with $15.8 million for the same period of the prior year. The increase in net loss stemmed from all of the investments previously discussed. Now let's review the balance sheet and our strong cash position. We finished the first quarter with cash and short-term investments of $233.2 million and no debt, other than some small equipment loans. We used approximately $28 million of cash in the first quarter, which included approximately $5 million of incentive compensation that do not repeat throughout the rest of the year. Now let's review our 2026 outlook. Our full year 2026 guidance is unchanged. As a reminder, our guidance only assumes paid tests from reimbursement coverage decisions received to date. Upsides may be realized from faster coverage expansion, accelerated payer adoption, additional volume growth for clinical tests, and increased strength in biopharma MRD demand. We expect total company revenue to be in the range of $78 to $80 million, and this assumes clinical revenue of $10 to $11 million, specifically from breast and lung cancer surveillance tests recently covered by Medicare. Revenue from pharma tests and services and all of the customers to be in the range of 55 to 56 million. MRD revenue from these customers is expected to grow rapidly and be in the range of 20 to 21 million. Population sequencing plus enterprise customers of approximately 13 million Gross margin is expected to be in the range of 15% to 20%, with the first two quarters being the lowest points of the year. Net loss of approximately $105 million, and we expect our cash usage to be approximately $100 million as we continue to invest in our win-and-MRD strategy in order to gain market share fund pivotal clinical studies to support Medicare reimbursement and help change medical guidelines in our favor. With $233 million of cash on a balance sheet, we have the ability to invest this year and drive scale. We are leading the ultra-sensitive MRD market with our technology, and a proof point is our ramping clinical test volume. The market is expanding rapidly, and is expected to grow to $20 billion or more, and we are positioned to win. 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?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then two if you would like to remove your question from the queue. If I may just ask if you could please limit your questions to one question and one follow-up question. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment please while we poll for questions. The first question comes from Subbu Nambi from Guggenheim. Please proceed with your questions, Subbu.

Hey, guys. Thank you for taking my question. You ungated volumes mainly for share gains and to push growth. What did you see in 1Q from like a competitive win perspective to reinforce that strategy is working?

In terms of the volume, Subbu, You know, we achieved 26% growth quarter over quarter, 7,800 tests. In terms of the first and third quarters are typically the lighter quarters because of seasonality. In terms of competitive dynamics, we're seeing that we're doing really, really well in the marketplace. We're winning with our ultra-sensitive capability, and we couldn't be happier with where we're at today.

Yeah, I would just note, Subbu, you know, we set the overall annual target of 43,000 to 45,000. clinical tests, you know, with this idea that we'd be pursuing disciplined land grab with our partner, Tempus. And so, you know, we really feel like kind of nailed it this quarter in terms of tracking and trending exactly where we need to be. And we really have been focusing on depth inside of existing clients. So we crossed 1,000 physicians ordering this quarter. So that was tremendous progress. But at the same point in time, you know, within the accounts that it has adopted next personal and they stay with us because they see the clinical utility of what we're providing.

Perfect. Super helpful, Chris. And then any color on how to model 2Q should be expected similar volume step up and When you are onboarding new physicians, can you talk a bit about the arc of volume growth? How long does it take for a new doctor to ramp on ordering to steady state? And today, is there a mature ordering number you're seeing from any of the early adopters?

Yeah. I mean, I think we see physicians, you know, in general, you know, jumping in in many different ways. You know, there's obviously physicians that we are selling to that are jumping in and using MRD testing for the first time. There are people that have experience with MRD testing and they want to experience the ultra sensitivity that we provide. And then there are people that have some experience but don't often use it. And so we see those people starting to work with the technology. And I've always felt like the way to make this standard of care is to really sell into that group and really push usage significantly deeper on the back of an ultra sensitive which is what we've been focused on. You know, some physicians jump in and have a lot of experience and order a lot out of the gate. Others try a few and see what happens, et cetera. I think there's always a desire to test us operationally to see whether we hit the lead time goals that we commit to, which we've been largely able to do across the board now month after month. So, you know, we feel like we survived those tests pretty quickly. But in general, and we've got physicians who, continue to order more every quarter. I think that's pretty common as new technologies are adopting and people feel confidence with it. They tend to pick up the pace. And in general, in all these accounts, across anybody using MRD, there's significant opportunity to go deeper. But I don't think in very many accounts, probably any of us that are working in this space probably could say that 100% of the patients that are eligible are getting access to the test. So there's always ways to go deeper into the patients.

and continue to build business and market. Perfect. Thank you so much. Thank you. Thank you.

The next question comes from Mark Macero from BTIG. Please proceed with your questions, Mark.

Hey, guys. Thanks for taking the questions. I know some of us have been hopping various calls, so pardon me if any of these have been asked before. I wanted to get a sense for how strong the lung versus breast volumes are in the quarter. And can you also just speak to, you know, IO monitoring as well? Any color on those indications would be helpful.

Yes. Hey, Mark. This is Aaron. In terms of the breast volume, so it's in the ballpark of what we've been expecting and seeing. It's roughly 20%. give or take a point or two there, either way. Lung is between, you know, 15 and 20%. It's closer to 15% in terms of what we saw in Q1. So it's trend, you know, in terms of the trends that we've been seeing and the expectations, the volumes by cancer type have been, you know, in the ranges we've been expecting. In terms of IO coverage, the IO coverage, I'll let, you know, Rich and Chris maybe take that.

Well, there's two questions, which is the samples we're getting there, and no change there, you know, which is in a similar percentage. But the actual, you know, coverage journey, we feel confident that we're making progress there. You know, we only submitted in August, so this process is always variable. But we feel like, you know, the data, the strength of the evidence that we have.

That's helpful. I was wondering if you could speak to, I know that the abstracts are embargoed, but speak to the importance of ASCO coming up here. Should we expect any releases of data? And it would be helpful if you could discuss any areas of focus.

Yeah, it's always tricky because of embargoes and things like that, but Rich will take this, Mark.

Hey, Mark. Hey, it's Rich. Yeah, so, you know, we have an exciting ASCO coming up. I think, you know, one of the things that you can look for is more colorectal data, which has been a focus of ours as sort of a next step in terms of coverage and also evidence generation. So, we're excited about that data, and it will build on the data that you saw last year. at the initial data that was presented last year around this time. And then there's also an expansion to additional cancer types. As you can imagine, we're not sitting still. You know, we did a lot with breast and lung and focused there for a few years, but now we're starting to expand into other cancer types. So I think you can look to see that we'll have additional data there.

But that's coming off a really, you know, A really great AACR where we showed 15,000 real-world patients and a consistent limited detection across those patients, almost 40% of the results, the ultra-sensitive zone. Some really great data on some colorectal neoadjuvant usage and the power of an ultra-sensitive approach there. And then we debuted data for our new product extension, the real-time variant tracker. So we got a lot of, we also at AACR had a lot of, a lot of, I think, really impactful data that's moving the needle in the field of physicians.

Okay, great. And then my last question, you know, your large commercial partner recently disclosed that your tumor-informed test is, you know, well over 90% of their MRD volumes. That is a, you know, it speaks to the value of your test. But it's interesting because, you know, Garden just disclosed that Reveal is you know, a very rapidly growing product as well on the tumor naive side. So I want to get a sense, you know, for how long do you think your tumor-informed test will sort of be that lead pole position horse in the Tempest portfolio versus, you know, their tumor naive, you know, somehow, you know, becoming more balanced as they think about promoting MRD?

Yeah, I mean, we've always felt, I mean, you certainly can ask them their perspective on this. You know, we've always felt like sensitivity was what was key in these indications and MRD testing. That's always been our guiding principle. That's what's fueled the innovation of the ultra-sensitive approach that we've had in all of our R&D efforts. And our hypothesis and our belief has been that, you know, the tumor-informed, approach is what will carry the day in terms of sensitivity, and that's what most physicians demand. And so, we think the market will continue to be very much focused on the power of a tumor-informed approach.

Understood. All right. Thanks for the time, guys. Thank you, Mark.

Thank you. The next question comes from Thomas Flatton from Lake Street Capital Markets. Please proceed with your questions, Thomas.

Hey, good afternoon, guys. Aaron, just a quick question on gross margin. So you mentioned the second quarter was also going to be a bit of a low point. Does that mean another 2% gross margin quarter or something significantly better than that? And then following on from that, I guess question two is, as you look to maximize the reimbursed indications, are you disproportionately incentivizing the sales team to push for those indications that are reimbursed today and maybe additional indications as we roll through the year to help boost those margins? Or how are you thinking about that?

Yeah, so thanks for the questions, Thomas. So, in terms of the full year guide for gross margins, we said 15 to 20%, right? So, obviously, the back half of the year, we'll have higher margins as our MyoPharma MRD revenue and clinical revenue actually increases in terms of the first quarter. So, we were just shy of 2% in Q2. We see that maybe ticking up a little bit. The first half of the year is definitely going to be the lowest point for the full year comparatively. In terms of 2026, the margins of 15 to 20%, our expectations are that this is going to be a low point for the company as well. As we get through the end of 26, heading to 27 and beyond, we see that reimbursement is going to continue to catch up. We've got a lot of things in the hopper. We're doing really, really well in terms of collecting on claims. So the ASPs are expected to increase as well. And that's going to help with not only the top line growing, margin expansion, and also, you know, we'll start to subside or reduce the cash usage as we go forward. Okay, so that was the first part of the question. The second is, are we disincentivizing or metering in any way some of the non-paid tests? And so, it's hard to do that, Thomas, when we're selling to community oncologists. You know, they have patients with all different cancer types. And we don't want to discourage any physician from bringing in this cancer type versus that. We want all comers because, you know, at some point in time, we know that we have to go get reimbursement for other cancer types. And we have a lot of progress that's being made at this point in time. It's not showing up just yet, but it's to come. And so, you know, I hope that answers your questions about incoming volume and what we're doing with the commercial field and how physicians are treated as well. We want to make sure that physicians are treated really, really well.

I appreciate that. Thanks, guys. Thanks, Thomas.

Thank you. Ladies and gentlemen, just a reminder, if you'd like to ask a question, please press star and then one. If you'd like to ask a question, please press star and then one. The next question comes from Mike Madsen from Needham & Co. Please proceed with your questions, Mike.

Hi, guys. Thanks so much. This is Joseph on for Mike. One question around the ordering positions, the 1,000 positions. Just want to confirm, is that in the quarter or, you know, more like to date? And then just wondering if you could maybe segment those 1,000 positions, if you have any color on, you know, what percentage of those are reordering? after having using a competitor or maybe reordering or maybe, you know, new to MRD and maybe just that second part new to MRD, depending on how big that bucket is, what is that really telling you about how fast this market is growing?

Yeah.

Well, when we report, whenever I talk in the script about the number of physicians or we mean in the order, We don't mean cumulative that have ever ordered from us. So in this quarter, there were more than 1,000 physicians that ordered from us. I think that's a more meaningful way to talk about it than, you know, mentioning some physician who may have ordered something several months ago. It's kind of an irrelevant sort of thing. So that's how we think about it and talk about it internally. Most of the physicians are physicians who have some experience ordering MRD. Quite frankly, I mean, I think that's the simplest way to commercialize these tests are physicians who have some experience, but we wanted to make sure that we didn't limit to that because, you know, that's the, almost half of the physicians probably don't have a lot of experience ordering it. And so we hit those positions, but a good chunk of our physicians, the vast majority have had some experience at some point using MRD testing. And they're probably, you know, using us in some cases exclusively or using other providers all collectively in their offices. I mean, people, I think physicians often use different approaches simultaneously within their office. I don't think that's uncommon. But, you know, I think we're seeing the market just continue to grow. There's a lot of energy and excitement around using these blood tests as a way to better monitor cancer progression, both to see whether the therapy is working immunotherapy or whether to see whether the cancers come back and And I think the power of this ultra-sensitive approach is that you are able to give a lot more confidence to a patient that they're truly cancer-free. And at the end of the day, that's what a lot of patients are looking for. And so we're helping to deliver on that. I think that's helping to grow the market, and you're seeing that in the numbers.

Okay, great. And then just on the backlog, you guys mentioned a contracted pharma business. I'm just wondering if there's any way – whether it's quantifying it or maybe just comparing it to this quarter a year ago, how much has that grown? And, you know, how long of a stretch of visibility does that PAC log give you, just I guess your average trial or your average project with a pharma partner? Thanks so much, and congrats on the strong test volume in the quarter. Appreciate it.

Thanks. Yeah, I mean, we – Yeah, I don't know if I can compare everything, you know, year over year. But what we really are focused on was this year and what are the clinical trials that we see both kicking off and starting and trials that we plan on characterizing for biopharma companies, both in MRD and for the tumor profiling product. And, you know, when we kicked off, guidance kicked off here, we had a good sense of that as the year's gone on. You know, that's only gotten firmer, and those are committed, in most cases, contracted now. And so, you know, we feel like we're in a good position at this point to deliver on it. You know, from the very beginning, you know, and we talked about this beginning of the year, we saw that the second half of the year would be a bigger part of our revenue number in BioPharma than the front half of the year. that it was better solidified and circled as we've gone through the year. Typically, and that's what's happened this quarter, typically what happens in this business is that most of the business that you end up doing for the year, you have pretty good visibility to by the middle to the end of the second quarter in general. And we feel like at this point in the year, we have good visibility and have affirmed where we are guidance-wise. And being able to hit that 20 to 22, million in MRD, and then the overall biopharma revenue.

Maybe just to piggyback off of what Chris just said, so in terms of the biopharma MRD backlog, it has continued to grow. The funnel of opportunities as well is continuing to grow. It's really, really robust. We're happy about it. I think the customers are seeing the value of the ultra-sensitive test that we provide and can clearly see that we can detect recurrence before other technologies, which is important. In terms of the backlog, so we have a mixture of different types of projects in the backlog. We have retrospective projects as well as prospective. Some of the prospective projects will go out past 12 months, right? So it's great to have some of that because it gives you clarity beyond just 12 months. But in terms of what we rely on financially is we look at backlog inside of 12 months because that's what's going to potentially convert to revenue and We need to get samples in, right? Even if the backlog is growing, we still need to get samples in so we can run them and, you know, record revenue.

Okay. Got you. Thanks very much. Thanks, Joe.

Thank you. The next question comes from Dan Brennan from TD Cohen. Please proceed with your questions, Dan.

Great, thank you. Maybe just kind of zooming out for a minute on a high level. I know there's a question asked on ASCO already, but when you zoom out and you think of the ultra-sensitive approach versus maybe first-generation approach, is there anything on ASCO to speak to that or just, you know, anything you'd say from a high level about, you know, the interest in the market, kind of where it resides today, and how you think, you know, what the message will be coming up at ASCO?

Yeah, Rich is going to take this one, Dan.

Hey, Dan. Yeah, no, thanks for the question. You know, I think, you know, what's great is if you go to these conferences, you know, it really has changed over the last few years and the increasing recognition that the ultra-sensitivity is critical for patients. I think it's really something that is seen as, you know, not just a nice to have, but it must have at this point for patients. And it's on the back heels of a lot of the data that's come And I think what you'll see at ASCO is, you know, that continued message and it's really the data speaks for itself. I think, you know, for example, in colorectal cancer last year, you know, preliminary data, we showed that it made a big difference for the patients in terms of sensitivity, recognizing the cancer recurrence risk very, very early for the patients. And so you'll see some of those things being kind reinforced with the data that is being presented at ASCO this year. That's true in colorectal cancer, but it's also going to be seen in some of the other cancers that we present data for.

Okay, great. And then in terms of the updated guidance, I mean, I joined a little late, but just on the molecular volumes, was there any change in your thought there? I mean, you know, the first quarter was a little bit unexpected. Just wondering how we think about the sequential path as we go through the year there.

We just reaffirmed guidance, Dan. We haven't changed anything at this point, right?

We had a super strong Q1, but, you know, we continue to, you know, I think we have an aggressive plan to go from 16,000 samples last year, 43,000 to 45,000 this year, but doing that in a really disciplined way. the number of resources that we apply. And so that's both our partner, Tempus, and both the number of sales reps that we put in the field. And we feel like we're on plan to do that. We're managing in a really responsible way, but yet a way that seizes the opportunity and pushes us closer towards realizing the goals of our win and MRT strategy.

That's great, Chris. And is there a typical, I know in the past you've given some color around typical mold x turns and how many times back and forth it requires and again no submission is i'm sure consistent but between neoadjuvant breasts and il like given when you submitted those is there a framework by which you know that it'd be logical to think we could get an answer no i mean it's always a 60-day turnaround time from the time that you respond to those questions i mean that's pretty typical but the you know i think the back and forth here i think it's variable

always and I think they do a great job. We really respect and admire the work that they do and we feel like we're sitting well relative to how those processes typically go. We did think it would take a while to get through the breast cancer process just because it was the first time we went through it and they had to both assess the test, understand it, et cetera. But, you know, it always takes some time to work through it. And I think it's going to be variable based on the indication, based on the evidence, et cetera. So we kind of expect that at this point.

And I think most all the companies would tell you the same thing. Terrific. Okay. Thank you both.

Thank you. The next question comes from Bo Bonillo from Craig Hellam. Please proceed with your questions, Bo.

Hey, guys. Thanks a lot. So I think you said to Mark that about 35% of your testing is in covered or in reimbursed indications. And I know you're not specifically targeting or incenting people to... focus on reimbursement versus non-reimbursed indications. But just as you think about the opportunity, you look forward over the end of the year, how do you think about that shaking out? Will you be satisfied if we're at sort of a similar mix of indications by the end of the year? Is there any strategy to try and maybe grow the reimbursed indications a little more aggressively than the other indications?

Yeah, no, I think there is, Bill. I mean, I think always, you know, trying to push more aggressively into physicians who treat breast cancer or treat lung cancer is what we're trying to do strategically. But I think what Aaron meant, but what Aaron had referred to, you know, is when you walk into an account and the doctor is an oncologist who sees patients across the board, we don't tell them to send us breast cancer patients and send everything else to a competitor. You know, that's just not been typically our talk track. We've been there to serve and work with them. And I think in doing so, they'll build the evidence. And that's been the strategy to date. I think what we'll see as we go, go ahead.

No, finish up, sir.

No, I think the goal as we go through the year will be continue to grow the sequential growth, continue to push into the leading physicians in some of these areas. Same point in time, continue to drive the reimbursement so the reimbursement is picking up steam as we go across, you know, an ever-broadening set of indications and spots within these cancer types.

Okay. That's helpful. Just, it looks like, and we may have this wrong, but Tempus, you know, gave some numbers on their call. And if we just sort of do the math on that, it looks like maybe the number of tests that weren't, you know, that were sold by you, I guess, or not by Tempus, maybe actually went down sequentially. Can you just talk a little bit about what you're, you know, I mean, I thought that maybe you were also building up your internal sales force a bit and just how you're thinking about that right now.

Yeah, we are. We are building side by side with them, you know, and both, you know, to continue to build capability, et cetera. But we don't compete with them in the field, Bill. And, you know, we work synergistically. And, you know, Tempest has a pretty deep and comprehensive team. infrastructure to serve customers. And sometimes, quite frankly, it's probably better for customers to work through them or we'll sell something. And Tempest is there. And Tempest also has a way to offer a comprehensive product snapshot. And we've not, you know, we don't want to be competing in the field. So if it's easier, better, or more conducive to the way the business is built to flow through Tempest, then that's ultimately the way it'll go. So I would look at the total number, not so much how much is coming from each one of the companies, because that's not how we're driving it in the field. Okay.

Yeah, it's really helpful. In terms of the total volume bills, total volume grew by 26% quarter to quarter. Tempest was a little over 80% of the volume. The volume from the internal commercial team did not really decrease. It was flattish. Again, Q1 is typically seasonally a little slower than Q2 or Q4. So I wouldn't read anything really into that.

Yeah.

And then some of our internal team is helping some of the Tempest reps as well from a marketing.

We work together. What we've learned and having done these relationships over my career is that you just don't want reps fighting in the field over this stuff. And, you know, one of the main, we parted with Tempest for so many reasons, but one of the couple of the key reasons were the deep EMR linkages, infrastructure and build out with the nuts and bolts of the business. that we just quite simply haven't had with portals, et cetera. And then the second, you know, is the ability to offer comprehensive one-stop shop. And that's worked really well for us with them.

Okay. That's really helpful. I appreciate that.

Okay. Thank you so much. There are no further questions. And this does conclude the question and answer session as well as today's teleconference. Ladies and gentlemen, thank you very much for joining us, and you may now disconnect your lines.