Sema4 Holdings Corp.

Good day, and thank you for standing by. Welcome to the Semaphore Third Quarter 2021 Earnings Conference Call. At this time, all participants are now listening on remote. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you need to press star one on your telephone. If you require any further assistance, please press star zero. I want to ask to have the conference over to speaker today, Joel Hoffman. Please go ahead.

Good afternoon, everyone. Thank you all for participating in today's conference call. Participating for the company today will be Eric Schott, founder and chief executive officer, and Isaac Rowe, chief financial officer. Earlier today, Semaphore released financial results for the third quarter ending September 30th, 2021. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities law which are made pursuant to the safe harbor provisions of the Private Security Litigation Reform Act of 1995. Any statements contained in this call that relate to expectations or predictions of future events, results, or performance are forward-looking statements. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. Additionally, these forward-looking statements particularly our 2021 financial guidance, involve a number of risks, uncertainties, and assumptions. For a list and description of risks and uncertainties associated with Semaphore's business, please refer to the risk factor section of our S-1 filed with the Securities and Exchange Commission on August 4th, 2021. We urge you to consider these factors, and you should be aware that these statements should be considered estimates only and are not a guarantee of future performance. During the call, we may discuss certain non-GAAP financial measures. For reconciliations of non-GAAP measures to GAAP financial measures, as well as other information regarding these measures, please refer to our earnings release and other materials in the investor relations section of our website. This conference call contains time-sensitive information and is accurate only as the live broadcast today, November 15, 2021. Semaphore disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements whether because of new information, future events, or otherwise. And with that, I will turn the call over to Eric.

Great. Thanks, Joel. And thanks, everyone, for joining us this afternoon. We are pleased to be here with you today to discuss our third quarter results and progress against our long-term strategic goals. I will start today's call with an overview of our operating results, including our growth, our growing health intelligence information platform, health system partnerships, and new product offerings before I pass the call over to Isaac for a financial update. We will then open the call for questions. Overall, I'm very excited by our organizational progress in the third quarter, which was largely a quarter of investment in our operational foundation for growth across all facets of our organization. As you can see from slide eight of our earnings presentation, exiting the quarter, we have started to see these investments translate to a notable acceleration in volumes and patient and provider engagement with our platform, accelerating our momentum as we progress into 2022. We are building a unique company focused on delivering clinically actionable insights based on individual longitudinal data analyses that will help inform clinical decision-making across a broad spectrum of diseases and health conditions. Since we became a public company in July, we have ramped up our investment in technology, infrastructure, and people. The strategic roadmap for Semaphore is anchored in high-dimensional, large-scale patient data, active clinical engagement with patients and their physicians, and collaboration with our clinical and research partners and patients. We fundamentally believe that genomic data, combined with clinical patient records and other multiomic and lifestyle data, can deliver differentiated insights that drive clinical decisions to help ensure the best outcomes for patients. Our success is underpinned by our access to expansive data and by Temafor's proprietary health intelligence platform, Centralis, among the largest, most comprehensive, and fastest growing integrated health information platforms in existence. At the end of the third quarter, our platform was managing 39 petabytes of data, that's 39 million gigabytes, gathered from approximately 20 million patients. Of these patients, roughly 12 million give us access to high-quality, high-dimensional longitudinal electronic medical record information. Meanwhile, our testing capacity continues to ramp to support our data platform and our health system partners. Our current capacity for next-gen sequencing can now support more than 50% growth of our genomic data set in the coming year. In addition, we continue to invest in the infrastructure required to derive clinically relevant insights from the data. We continue to believe that our strategy to build a platform of algorithms is resonating in the marketplace. As an example, patient consent remains very high, with greater than 80% of patients that engage with our Semaphore portal consenting to allow us to help acquire and manage their personal health information and to leverage those data to improve health outcomes for all. In the majority of cases, this partnership with patients provides us access to any and all medical record information ever generated for that patient. This includes advanced genomic testing results, longitudinal patient electronic medical records, physician notes, hospital records, population health data, and many other large-scale sets of data. The unrivaled level of access to information in partnership with patients and health systems allows Semaphore to develop deep, and information-based relationships that continuously drive improved knowledge and understanding within the Semaphore platform. It is this patient-informed knowledge that we believe is a competitive differentiator for Semaphore. It will drive our business and long-term value proposition to patients, providers, and pharmaceutical partners. Most importantly, we continue to engage with all of the health system partners, and the feedback is very encouraging. As the breadth and scale of our data advances, our value proposition to health systems also becomes increasingly attractive. During the third quarter, we added a fourth health system partnership, Avera Health. As an example of the traction we are getting with our health system partners, let me provide an overview of our North Shore partnership. North Shore is a large health system in the greater Chicagoland area where we have had tremendous success to date. Earlier this year, we launched a system-wide data-driven precision medicine program to help North Shore's clinicians and patients prevent, detect, and treat diseases at earlier stages. In just six months, North Shore has increasingly leveraged our platform and their patients, many in underserved, culturally diverse communities, to deliver an improved genomic medicine standard of care. As summarized in slide seven of our earnings presentation, More than 90% of primary care physicians at North Shore have had patients complete testing through the genetic wellness and assessment process, which starts with a questionnaire covering a personal and family history of select medical conditions. Roughly 42,000 North Shore patients have completed this guideline-based questionnaire and have been advised whether to take a general genomic health screening test or a more comprehensive hereditary cancer genomic test. From this 42,000 patient group, over 6,400 have had the genomic health screen test ordered. And through the first six months after launch, nearly 1,000 patients were identified as meeting NCCN guidelines for being at high risk of heritable cancer and successfully tested. This represents a 54% increase from the prior six-month period before our launch and an 88% increase versus the same six-month period in 2020. a remarkable increase in improvement in the standard of care in the North Shore system. In summary, we believe our early success with North Shore is evidence that our platform and go-to-market strategy can quickly and significantly improve the standard of care. Our deep partnership with North Shore has also enabled us to take a nontraditional and innovative approach to providing an evidence-based program expanding the heritable cancer screening program beyond primary care. This concept is exemplified by the introduction of a heritable cancer screening pilot program and a sample of North Shore's mammography clinics. The program targeted females scheduled for their annual mammography screening starting with an August pilot performed at North Shore's innovative mammography facility located at the clothing retailer Nordstrom in Skokie, Illinois. The pilot was quickly extended to three additional mammography screening facilities in the North Shore network. The results thus far are very encouraging, with more than 90% of women having genetic screening orders placed in these facilities, then following through with returning their saliva samples for testing. We are greatly encouraged by the differential success we have seen in this setting. The heritable cancer testing increase Semaphore has achieved in partnership with North Shore is substantial when compared to other heritable cancer testing partners. Both the affected patients and their families are receiving levels of medical support and counseling that generally exceed all guidelines. Earlier assessment of cancer risk of detection and care all have a significant positive impact on treatment and survival. Thus, in the process of growing the Centralis engine, Semaphore can help provide an enhanced standard of care to patients in their communities. Lastly, as part of a separate research project called the Genomic Health Initiative, Semaphore has already sequenced more than 9,000 samples in a six-month span of time. And we are now embarking on the process of data structuring and curation to pair these genomic profiles with deep longitudinal electronic medical record data at North Shore. All in all, we are pleased with the growing adoption at North Shore, as well as with the rest of our partnerships. which include launching several somatic tumor profiling protocols with Avera Health to ultimately profile all cancer patients in the Avera system as the standard of care, integrating the expansive molecular profiling data with longitudinal electronic medical record data collected on patients through the Avera system to provide more personalized, actionable clinical guidance. We believe these many types of engagements will be mutually beneficial for our health system partners and for Semaphore. It is the combined level of dedication from both organizations that is leading to improved access and treatment in the geography spanned by our partners. As we continue to gain traction with existing partners, we look to establish a limited number of new learning-based health system partnerships to expand our patient and clinician engagement strategy. Then, longer term, new health system partnerships will focus on scaling the types of solutions developed with the first learning-based partnerships. Although it takes time to develop these relationships, we believe that our distinguishing feature of integrating ourselves within health systems to provide state-of-the-art care as a collaborative partner will ultimately position us as the preferred partner of choice to an increasing number of systems who are driving precision medicine as a standard of care. In addition to the health systems, Our sophisticated platform draws upon information from many sources that provide unique advantages to pharmaceutical companies looking to leverage big data insights to support more progressive research from drug development to clinical trials and real-world evidence studies. We have a growing level of engagement with pharmaceutical companies that span the spectrum of drug discovery to post-marketing surveillance. We expect pharma contributions to grow significantly in 2022. Similar to our health system partners, We look to partner with pharmaceutical innovators as they seek to improve the efficiency and accuracy of drug development and the delivery of the right therapeutics to the right patient at the right time. Our goal is to understand what a biopharma partner needs in order to provide the insights from data to help them make better informed decisions. The connectivity of Semaphore to the hospital systems and patients is what we believe can bring highly accurate and clinically actionable data to pharmaceutical partners. On the new product front, we are working diligently to broaden our offering. In September, we launched Semaphore Elements. This is our portfolio of data science-driven products and services to support reproductive and generational health. These genomic solutions, digital tools for patients and providers and services, enable providers to treat patients holistically during their reproductive, cancer, and generational health journey. The portfolio encompasses solutions for the diagnosis, prevention, treatment, and management of reproductive and heritable disease conditions for more holistic family care, to include a newly enhanced version of Semaphore's expanded carrier screening for pregnancy planning, which includes a molecular ancestry component to more accurately assess high-risk haplotypes derived from specific population groups, even at the locus-specific level, to provide superior risk prediction. Alongside our non-invasive prenatal testing, Natalis newborn screening, and heritable cancer testing. For those of you who don't know the IVF market, it is a highly concentrated market comprised of sophisticated and science-driven prescribing physicians. We are proud that the upgraded version of our ECS product is resonating well and has allowed us to take market share in key national IVF accounts. While the volumes associated with these account wins are not part of our third quarter results due to timing, we are encouraged by the ordering trends we are seeing out of these accounts in the fourth quarter thus far, as highlighted in our earnings call deck. Shifting back to our longer-term mission and vision of developing and monetizing a platform of health insights and algorithms, I'd like to highlight a pair of published studies conducted in collaboration with our founding health system partner, the Mount Sinai Health System, demonstrating the utility of our health intelligence platform to predict more accurately clinically meaningful outcomes. In this case, we're improving the prediction of risk of postpartum hemorrhage over current standard care assessments. The studies were featured in a special Informatics for Sex and Gender-Related Health issue of the Journal of the American Medical Informatics Society. Postpartum hemorrhage is the leading cause of maternal mortality globally, accounting for roughly 35% of maternal death, and often occurs in patients with no known risk factors for hemorrhage. U.S. health systems are not immune to this high mortality rate, especially in underserved communities. These two new papers are among the first to use large-scale, comprehensive, real-world data to both accurately digitally phenotype patients and then predict clinically meaningful outcomes in pregnant women. By implementing our predictive model into the clinical standard of care, healthcare providers may be able to improve postpartum hemorrhage risk assessment and medical management for their pregnant patients, resulting in better health outcomes. To support our partnerships and increase adoption of our growing database, we have expanded our Semaphore team to 1,150 employees as of the end of the third quarter. This includes commercial headcount growth of 32% during the third quarter, and 47% since the beginning of the second quarter. We believe we are adequately staffed for our growth objectives, and as we marched through the third quarter, we began to see improvements in sales cycle and Salesforce productivity as our new reps were ramping toward full productivity. Turning to the lab, we have made a number of key hires and are working toward improving operating efficiency and our overall margin profile. We have outlined a number of initiatives, including portfolio optimization, a new LIMS implementation, and automation initiatives. These internal initiatives, combined with an improving reimbursement dynamic in oncology, our fastest-growing segment, will help us pace toward more normalized margins as we pace through 2022. Additionally, in September, we hired a world-renowned expert in computational biology, Dr. Gustavo Stolovitsky, as chief scientific officer. His expertise is key to accelerating the development of our platform of algorithms to help researchers, health systems, providers, and patients translate the information contained in health data into actionable knowledge. We also lead the translation of our top-notch research into future semaphore products and further solidify our collaborative partnerships with health systems and the biopharmaceutical industry. In summary, we have made substantial progress on core business objectives as we grow our proprietary health intelligence platforms. Coupled with our software, machine learning, and other advanced artificial intelligence learning capabilities, our team is building one of the most sophisticated platforms in the world and setting the bar for high-value patient engagement. We continue to be incredibly confident in our ability to drive differentiated insights in real time that can dramatically improve the standard of care for all. As we scale up our commercial activities, invest in strategic collaborations, and actively explore opportunities for inorganic growth, The future of Semaphore remains very bright. And now I'll turn it over to Isaac for the financials and guidance. Thanks, Eric.