This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk06: Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Sophia Genetics second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you'll need to press star 1 on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Carrie Mendeville, Investor Relations. Please go ahead.
spk02: Thank you. Earlier today, Sophia Genetics released financial results for the quarter ended June 30, 2021. If you haven't received this news release, or if you'd like to be added to the company's distribution list, please send an email to ir at sophiagenetics.com. Joining me today from Sophia Genetics are Georgie Camblon, co-founder and CEO, and Ross Newkin, TFO. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking within the meanings of U.S. federal securities laws. These statements involve material risks and uncertainties, that could cause actual results or events to materially differ from those anticipated. Additional information regarding these risks and uncertainties appears in the section entitled Cautionary Statement Regarding Forward-Looking Statements in Exhibit 99.2 of the report on Form 6K on file with the SEC. Except as required by law, Sophia Genetics disclaims any intention or obligation to update or revise any financial or product pipeline projections or other forward-looking statements. whether because of new information, future events, or otherwise. This conference call contains time-sensitive information and is accurate only as of its broadcast, September 9th, 2021. With that, I'd like to turn the call over to Yerky.
spk07: Thank you, Carrie, and good morning, everyone. I'm excited to be here today and welcome you to our first earnings call as a public company. On today's call, I will start with a brief overview of our company for those who are not familiar with our story. Next, I will take you through the progress we have made during the second quarter and since our IPO at the end of July. Finally, I will discuss our goals and objectives as we look ahead to the second half of 2021 and beyond. I will then turn the call over to Ross for a more detailed look at our second quarter financial results and our outlook for the rest of 2021. As many of you know, we completed our initial public offering in July, raising approximately $217 million in net proceeds. Before I get started, I would like to take a moment to express my sincere thanks to the Sofia team for their continued hard work and execution. Without them, none of this would be possible. Additionally, I would like to extend my gratitude to our investors, old and new, for their ongoing support and enthusiasm for the work we are doing here at Sophia. We look forward to continuing to engage with all of you as we pursue our long-term goals. Before we get into the specifics of our progress, I want to give you a sense of the vision that is driving us at Sophia. Over the last decade, there has been an explosion in the amount of digital data generated by the healthcare industry. The ability to draw insights from this data has led to an acceleration in the understanding of biology and disease. However, this data has been generated primarily using non-standardized methods by clinicians and researchers across many health care institutions. And as a result, this data has largely remained siloed, preventing it from being fully leveraged for the benefit of patients. At SOFIA, we have set out to change this. We have created our SOFIA platform, which sits in the cloud and uses AI and machine learning to analyze data sets to enable precision medicine in any hospital, laboratory, or bio-pharma institution around the world. We operate in a decentralized model in which we supported our customers with their data analytics needs while ensuring that they keep custody of their samples and data but benefit from shared insights across our network. We refer to the practice of growing insights from complex data sets to improve diagnosis, treatment, and drug development as data-driven medicine. Using data-driven medicine, healthcare professionals supplement their own experience and intuition with data insights and shared knowledge from their peers to advise the best course of action for their patients or research. For our platform, we are unlocking data silos, leveraging AI to generate actionable insights from digital health data, and helping healthcare professionals work together as a community and deploy their collective expertise for the benefit of patients around the world. We believe the SOFIA platform will help drive the decentralization of healthcare industry over time. We're uniquely positioned to leverage this decentralization and serve hospitals that are transitioning their equipment to next-generation sequencing machines, as well as other diagnostic modalities into which we may expand in order to deliver precision medicine applications. Today, we're enabling the use of data-driven medicine for more than 780 client institutions across 72 countries. As these institutions produce data locally, our platform ingests their data into the cloud, where it is computed using our proprietary AI and machine learning algorithms. We then leverage the output against previously collected data analysis to provide insights to the customer. Our platform sits at the heart of a virtuous cycle of data generation, where data output is fed back into our database to generate even better insights. This approach uniquely aligns our interest with those of our customers and patients. Our platform is equipped to analyze data and generate insights from complex multimodal data sets and different diagnostic modalities. Today, most of the data we work with is genomic data. We analyze more than 20,000 genomic profiles per month, and we have computed over 770,000 genomic profiles on the SOFIA platform since 2014. To further expand and leverage the power of our platform, we are focused on five key objectives. First, expanding customer adoption with new clinical customers, especially in the United States. Second, increasing utilization within our existing clinical customer base. Third, further advancing our platform to continue the innovation to increase its capabilities and broader its applications. Fourth, developing partnerships and collaborations across the healthcare ecosystem. And fifth, leveraging our platform and database to continue to drive adoption with biopharmaceutical companies. We are making important progress across each of these dimensions of our business. Starting with new customer adoption, during the second quarter, we grew our total customer base to 780 customers up from 750 customers in the first quarter of this year. We are especially focused on growing the adoption of our platform in the U.S. market, which we view as our largest addressable market opportunity. To that end, we have recently began collaborating with Well Cornell Medicine, one of the nation's top-ranked medical and graduate schools, to help support comprehensive genomic research across their lab network. Our SOFIA platform will collaborate with the Wellcornell Medicine's next-generation sequencing laboratories to provide a management solution that we hope will streamline the vast amounts of related cloud data. Wellcornell Medicine researchers hope to leverage our intuitive SOFIA platform to assess fully comprehensive datasets. We believe our platform will help researchers quickly filter through genomic profiles for variants of interest to dissect and discover details that can potentially lead to new medical research discoveries. By advancing new technologies and data-driven approaches in medicine, we are very proud to support Weill Cornell's medicine continued research success and journey toward better care for all. I am excited by our growing partnerships with top tier institutions in the US and across the globe and I'm encouraged by our growing pipeline of potential customers with broad interest across our menu of applications. We're continuing to raise awareness of benefits of data-driven editing and expand use of our platform through our direct sales force, our distributors, and our collaborator network. As of the end of the second quarter, our direct sales team consisted of more than 80 field-based commercial representatives, including sales and business development managers, key account managers, and biopharma alliance managers. We also employ subject matter experts, clinical genomic experts, and biopharma operation specialists who provide customer-facing, technical, and scientific support. We are continuing to invest heavily in our direct sales force in North America to further scale the size of our network, both in terms of the number and types of new customers. Now, moving on to our second objective regarding the utilization of our platform, we employ a land and expand commercial model that is focused on winning new customers like Old Cornell Medicine and then driving greater utilization of our solution by those customers. Once we have secured the customer, we use our direct sales force to build further engagement and help that customer profitably increase testing operations. We also target additional clinician users and departments within each institution. During the second quarter, total recurring platform customers grew from 348 customers in the first quarter of this year to 367 customers. Total number of analyses grew 16% quarter over quarter, from 54,000 analyses in Q1 to 63,000 analyses in Q2. This sequential growth is underpinned by growing demand from new customers as well as existing customers broadening their usage to a growing number of applications. Now turning to our third objective related to menu expansion. We are continuing to invest in scientific innovation to land new customers and bring new high-impact content to our customers through regular updates to our platforms. This menu expansion includes new features, new applications, new data modalities, and new services. Furthermore, we intend to augment our offering across a multi-modality framework, generating novel insights, enabling by our expanding data sets, including genomic data, radiomic data, clinical data, and future additional data modalities. In early July, We announced the addition of new comprehensive genomic profiling workflow to our SOFIA platform. This new data-to-report workflow is designed to maximize the utility of the Illumina TSO500 assay by optimizing its data output for secondary analysis. The SOFIA platform facilitates highly accurate detection of single nucleotide variants, indels, gene fusions, and tumor mutational burden with expanded coverage of copinium variation in 495 genes and qualitative assessments of micro-satellite instability benchmarked to the PCR standard. The SOFIA platform for TSO500 offers an accelerated assessment of genomic data thanks to mutation pre-classification that is supported by advanced algorithms, customizable filters, and hotspot screening. We're also excited to share the progress we made on our novel NGS-based homologous recombination deficiency, or HRD solution. HRD is a complex biomarker, notably important for PARP inhibitors, that helps identify whether cancer patients may respond better to specific treatments, and its use could ultimately lead to personalized therapies that benefit the individual patient. Our proprietary smart and deep learning algorithms provide a unique approach for testing both HRD-causing mutations and HRD-induced genomic instability in a single NGS workflow. Powered by our cloud-based SOFIA platform, the whole genome profile is analyzed by our proprietary deep learning model, which produces a genomic integrity index score. Development data generated from hundreds of samples have demonstrated high analytical performance compared to a reference method. We intend to initiate an early access program next month and are on track to launch the REU version of our HRD solution in early 2022 to support clinical research activities. In oncology, we are moving beyond genomics to multimodal data. We're on track to launch our first SOFIA-sponsored clinical study, named Deep Lung 4, in Q3 this year. Deep Lung 4 is an international, multicentric, observational, retrospective, and prospective clinical study that will recruit 4,000 patients diagnosed with metastatic stage 4 non-small sanguine cancer in the first line of treatment settings. The overall objective of this study is to be able to predict individual patient response to therapy and prognosis with baseline data by combining genomics, radiomics, clinical and biological data using advanced machine learning models. Ahead of the study launch, we have recently completed an important regulatory step related to data privacy and security, having obtained the approval from one of the world's leading regulatory bodies. We look forward to sharing further details related to this study later this year. Moving on to our fourth objective of partnerships, we are committed to developing partnerships and collaborations across the healthcare ecosystem with companies who provide products and services to our customers. We believe that each new collaboration we develop helps facilitate further adoption of our platform. The evolution of the solution we provide to customers and the growth of our network and product capabilities. A large network enables us to continue to collaborate with customers to develop new solutions and to commercialize these solutions, benefiting all users across the Elsker ecosystem. To that end, we have recently announced the expansion of our partnership with DASA to include a first decentralized HRD solution in Latin America. DASA is the largest integrated healthcare network in Brazil, serving more than 20 million patients per year. This expanded partnership will allow DASA to offer local testing in accordance with regional laws and regulations while retaining control of samples and data for rapid results turned around to cancer patients across Latin America. Our work with DASA began five years ago when they chose Sophia Genetics to build the original workflow for their genomics lab. This partnership grew in 2020 when DASA implemented our SOFIA platform for radiomics and trial match solutions to create the first multimodal approach in the region. With the recently announced expansion of the SOFIA-DASA partnership, DASA will be able to offer the first decentralized HRD analytic solution in Latin America. In Q2, we have also embarked on a co-marketing agreement with Agilent to automate next-generation sequencing or NGS library preparation and analytics processes for cancer research. By combining Agilent's automated MAGNES NGS prep system and true select assets with the SOFIA platform's AI-powered analytical performance, this partnership broadens access to flexible oncology workflows and support a diverse array of applications. And finally, moving on to our biopharma opportunity. In this market, we currently serve pharmaceutical and biotechnology companies and clinical research organizations, or CRS. We continue to promote our current products and services, which we believe will strengthen existing collaborations with biopharmaceutical companies, as well as lead to new relationships. Additionally, we plan to develop new offerings for BioPharma as we expand the number and type of new applications and data modalities on our platform. For example, earlier in this call, I mentioned our recently launched NGS-based HRD solution. We're already seeing strong interest in this solution across our BioPharma customers. We have initially focused on developing our solution using our brain and breast cancer tissue types, but we believe other cancer types including prostate, pancreatic, bladder, and retro biliary tract and head and neck cancers will require HRD testing. Those are being investigated using PARP inhibitors across the continuum of care in over 150 actively recruiting clinical trials as reported on clinicaltrails.gov. Conceptually, Our approach could also be relevant for other targets that are part of the HRD pathway, and if mutated, could lead to genomic instability. I am pleased with our progress across the biopharma landscape, and we are now investing heavily to expand this team over the next 12 months to meet the growing demand for our services in this market segment, including our HRD offerings. As we look ahead in 2021, we're focused on continuing to grow across these five pillars, particularly in the U.S. Overall, I am very proud of the progress our team has made to date, and I am confident we're well positioned to execute our strategy going forward. I would now like to hand the call over to Ross to discuss our financial results. Ross?
spk00: Thanks, Yorgi. Total revenue for the second quarter of 2021 was $10.2 million, compared to $5.2 million for the second quarter of 2020, representing a 72% increase. As a reminder, our second quarter revenues for 2020 were impacted by the global effects related to the COVID-19 pandemic. The increase in revenue for the second quarter of 2021 was primarily driven by new customers onboarded onto our platform, and improved usage rates across our existing customers as COVID-19-related restrictions lessened. Our strong growth during the quarter was underpinned by three key Sophia-centric KPIs. They include platform analysis volume growth, recurring platform customers, and average revenue per platform customer. Our core platform customer base is comprised of those who access our platform through our bundle and dry lab offerings. During the second quarter, we saw significant growth as we onboarded new customers through our land strategy and grew usage rates through our expand strategy. Platform analysis volumes increased to approximately 63,000 analyses in the second quarter of 2021, compared to approximately 31,000 analyses in the second quarter of 2020. Recurring platform customers grew to 367 customers in Q2 of 2021 compared to 320 customers in Q2 of 2020. In addition, our average revenue per platform customer during the second quarter increased to 84,000 compared to 65,000 for the period prior. Additionally, as a software company, we also track a number of industry-specific KPIs, which we believe are also indicative of our underlying financial performance. These key software KPIs include net dollar retention, churn rates, and LTV to CAC ratio. Even with the impact of COVID headwinds in 2020, our net dollar retention remains above 125%. which is competitive with top tier SaaS companies. The metric indicates that we are growing our revenue generated from existing customers' net of churn, highlighting the effectiveness of our expand strategy. With respect to our churn rate, I would note it has returned to a historical low of less than 1% of total revenue for the first half of 2021. Furthermore, our LTV to CAC ratio remains above the industry coveted three times threshold, demonstrating our ability to efficiently generate additional value through investment in customer acquisition. Gross profit in the second quarter of 2021 was $6.2 million, an increase of 57% compared to a gross profit of $4 million in the second quarter of 2020. Gross profit margin was 61% in the second quarter of 2021 as compared to 67% in the second quarter of 2020. Adjusted gross margin was 62% in the second quarter of 2021 after accounting for the capitalization of our research and development expenses, which we expect to grow over time as we scale our R&D efforts. The decline in gross margin was primarily attributable to increase computational and storage-related costs and negative FX movements. Total operating expenses for the second quarter of 2021 were $22.2 million compared to $11 million in the second quarter of 2020. R&D expenses for the second quarter of 2021 were $6.4 million compared to $3.8 million in the second quarter of 2020. This increase was primarily driven by an increase in employee-related expenses for R&D initiatives related to the development of new products and applications. Sales and marketing expenses for the second quarter of 2021 were $7.6 million compared to $3.8 million in the second quarter of 2020. The increase was primarily driven by an increase in headcount-related expenses, commissions, and sales-related costs and higher variable expenses. General and administrative expenses for the second quarter of 2021 were $8.2 million, compared to $3.5 million in the second quarter of 2020. The increase was primarily driven by the continued scalable of our organization, the development of quality-related initiatives to support a potential expansion of our business into more regulated markets, and additional costs associated with becoming a public company. Operating loss in the second quarter of 2021 was $15.9 million compared to $7 million in the second quarter of 2020. Net loss in the second quarter of 2021 was $18.4 million or 38 cents per share compared to $7.9 million or 20 cents per share in the second quarter of 2020. Adjusted net loss in the second quarter of 2021 was $15 million, or 31 cents per share, compared to $7 million, or 18 cents per share in the second quarter of 2020. We ended the second quarter of 2021 with approximately $64 million in cash and cash equivalents and short-term deposits. After quarter end, we completed our IPO on July 23rd, raising approximately $243 million of gross proceeds, yielding approximately $217 million in net proceeds when taking into account our underwriter's partial exercise of the over-allotment option and after deducting for estimated underwriting expenses and transaction advisory fees. Concurrent with the IPO, we also raised an additional $20 million in gross proceeds upon the completion of our private placement investment from an affiliate of GE Healthcare. Turning to our outlook for 2021, we expect our full year revenue to be in excess of $39 million, representing growth of over 37% compared to 2020. With that, I'd like to turn the call back over to Yurgi for closing remarks.
spk07: Thanks, Ross. I'm so proud of what we have achieved at SOFIA and even more excited about what lies ahead. We strongly believe that our SOFIA tech platform will transform the precision medicine space, sitting on top of the data that is being produced to break data silos across institutions, instruments, and modalities. We're still at the onset of this journey, and look forward to updating you on our progress. With that, we'll now open up the call for questions. Operator?
spk06: Thank you. As a reminder, to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, press the pound key. And our first question comes from Doug Schenkel with Cowan. Your line is open.
spk01: Hi, good morning, and thank you for taking the questions. I was just wondering if you could provide a little more detail on the mix of new customers by customer type and by geography, and then also if you could comment on the mix of new folks that are using the full suite of offerings versus Alamut only.
spk07: Yes. Hello, Doug, and thank you for your question. So as you know, indeed, we have customers all around the world, right? and right now we have in total 780 customers, so moving from 750 in the previous quarter. So the new customers we added, Doug, are all platform customers, and in terms of category, these are really primarily tier one academic centers like Wellcorner Medicine in New York. And from now, what you could expect, I would say, in the future is that we continue experiencing the same type of adoption with customers all around the world, all being this kind of tier one academic centers using the platform. And as you know, primarily, we are focusing as well on getting more adoption in the U.S. market as well. is a market we see being the biggest for the future. And I think WorldCorner is really a nice example of the type of customers we can support in the U.S. market.
spk01: That's great, Yorgi. And then maybe building off of that, could you just talk about how things are progressing in terms of commercial and more broadly, you know, any hiring initiatives that you have underway in to really advance your footprint in the United States. That's obviously a key area of focus to try to replicate a lot of the success that you've had globally, especially in Europe, here in the United States. How's commercial and more broadly hiring progressing over the last few months?
spk07: Yes, thank you, Doug. Actually, we're very excited indeed about the U.S. opportunity We started significantly investing in the U.S. two years ago, and since then we've been able to attract very, I would say, high-quality customers such as Weill Cornell. And we are now definitively investing in the U.S. to grow our market penetration. To give you a sense, seven months ago we had 46 headcounts in the U.S. And right now we have 85 accounts, most of them being indeed commercial people, but we are now as well investing beyond our commercial activities in our technology teams, so basically engineers and data scientists. And along those lines, to welcome these new people, we are as well tripling our office space in Boston.
spk01: That's great. And maybe one last one for probably both you and Ross. If I'm doing what I think is simple math, but the coffee's still kicking in, but I think if I look at your guidance, it implies that you're expecting second half revenue that would be essentially kind of level with Q2 levels, essentially taking the Q2 level, and if you extrapolate to the second half, it's about flat. I'm just wondering what's the logic behind that, and keeping in mind that the street's looking for 2022 revenue growth of over 30%, which would translate into revenue of around $50 million. You know, what would you expect to be the key drivers to that type of growth, you know, if the annualized run rate coming out of Q4 is closer to $40 million? Thank you.
spk07: No, thank you to you for the question, Doug. So first taking a step back, Doug, I would like to say that I'm very excited about our Q2 performance. and our overall 2021 growth. When it comes to more details, let me have Ross give you some more guidance.
spk00: Hi, Doug. Thanks for the question. Just to clarify one element of what you said, in terms of our 2021 revenue guidance, I want to make sure everyone understands this is not a point estimate, right? This is a floor or a minimum. And so with that, I would also say and remind you that our model really is SaaS-like in nature from a revenue standpoint, so it's incredibly visible. So I think at this point, we found providing a minimum floor, given where we are in the year, more sensible as the approach is. And obviously, we'll be very focused on driving very strong momentum. In terms of future growth, obviously, I'm not going to comment in this point on 2022. I will say, you know, obviously, as we mentioned in the script, you know, our net dollar retention remains above 125%. That's excellent. And that's a very good forward-leading indicator. Additionally, I'm also very proud in the quarter of our commercial folks and what we did on new customers. And our new customer momentum overall remains robust. And so I think those two elements should give you some level of confidence for the second half of this year as well as beyond. I'll also just sort of conclude with our growth algorithm really has many levers. Rest assured, we're super focused on on delivering strong performance across all of the elements of our land and expand strategy. And we'll be back to you at a future date to update you on 22. Okay, helpful. Thank you again.
spk07: Thank you, Doug.
spk06: Thank you. Our next question comes from Tejas Savant with Morgan Stanley. Your line is open.
spk03: Hi, this is Yuko on the call for Tejas. Thank you for taking our questions. Would you elaborate on the recently announced GE Healthcare collaboration and what impact you envision near versus medium term from this collaboration?
spk07: Yes. Good morning, Yuko, and thank you for your question. So, indeed, as you remember, SOFIA intends to break data silos not only across institutions, right, so the 780 customers that are using our platform, but as well across modalities. And in particular, in oncology, we envision that it's going to be very important to break data silos across genomics and radiomics data to be able to characterize what is driving the cancer of the patient by computing genomics data and then by looking at the radiomics data, so the imaging data, longitudinally following those patients, right? in eventually clustering patients and have an idea of how future patients will be responding to a specific type of cancer treatment. And so in that context, the GE partnership for us is something that is pretty exciting. GE, I think, has about 4 million imaging devices around the world. And so this could be a kind of catalyzer in our movements to democratize data-driven imaging around the world.
spk03: Great. Thank you for the color. And then following up on the prior question on visibility, would you comment on the visibility built into the business model and specifically what time horizon would you say you have good visibility in terms of revenue projections?
spk07: Yes. No, thank you for the question, Yuko. That's a very good question. So as you remember, our model, it's almost like a SaaS-like recurring model, right? So we kind of get almost annuities and we are being paid on use. So hence the importance for us of landing into new customers, but as well, once we have landed into a customer like Well Cornell, about getting utilization. And we're being paid each time patient data are being added into the platform. And so in that context, this is why, as well, beyond, if you like, getting into one customer, adding more applications to this customer, and expanding our menu of product capabilities, it's extremely important. When it comes to the numbers, maybe, Ross, you can give some more color as well about our ability to predict forward-looking performance.
spk00: Yeah, I would note a majority of our revenue comes from our recurring platform customers, right? And those are using our platform day in and day out typically. So that tends to be on a trend basis quite visible in terms of predicting future growth. I would also say, you know, on average, in terms of our setup times, they can be three or six months, and obviously we are building a pipeline ahead of that, right? So our visibility overall on the customer funnel from opportunity through close and then into launch and then into routine, given that timeframe, it's quite good, right? So I would say certainly there are elements that can be challenging to predict, right, in terms of patient volumes, particularly in a time period when you have a pandemic at periods we saw last year. But overall, I would say it's quite a good degree of visibility. And overall, I think it's a really unique model relative to the traditional life science space.
spk03: Great. Thank you so much.
spk07: Thank you. Thank you, Yuko.
spk06: Thank you. Our next question comes from Katie. Trihane with Credit Suisse, your line is open.
spk04: Hi, thanks for taking my question. Maybe just moving to the gross margins. I mean, how should we be thinking about that over the balance of the year? And can you maybe parse out the impact of the cloud storage reservation system dynamics and how that works? And I mean, just how do you plan for that in the future? And where do you expect gross margins to go over time? Thanks.
spk07: Thank you for your question, Cathy, and good morning. So first, our gross margins are being pretty solid, right, over Q2 with 62%. And of course, as a company, we don't only want to grow our revenue, but we want as well to make best use of our resources. And the gross margin is indeed something that we consider being important. We're making a number of efforts to continue to improve or sustain our growth margin at that level. And maybe, Ross, you could give some more color there.
spk00: Thank you. So I think as you think about this quarter, right, the two most significant impacts for us were compute and storage costs and then FX, actually, so some of our cross-country dynamics. You know, the key thing to remember for us is, you know, we typically plan well ahead for our expected volumes in terms of our reservation with our cloud provider, right? And so when we exceed, right, our volume of analysis in a given period, that incremental volume will then come at spot pricing, which tends to be materially above our reserve pricing. And so I think you saw that dynamic obviously impact us in this quarter. I would also note From the prior year period, there was a comparable related to or a challenging comparable related to a biopharma contract we had in the prior year. But overall, you know, we can react relatively quickly to changes in demand. And so rest assured, as you think about our, you know, trajectory post-June, you know, we've already started to make some adjustments. relative to our reservations in the period. So, you know, we are striving to obviously move that number back up. You know, I think in terms of the long-term, you know, mix and some of our newer initiatives, particularly biopharma, will have a fairly significant impact on where that long-term trajectory leads. But suffice to say, given the software nature of our business model, we continue to have very nice opportunity to move that gross margin up over time, and that's going to be a focus, albeit in the near term. I think, you know, the degree of expansion will be very much determined by the pace of growth, right, and whether that fits within our plan or does not.
spk04: Okay, got it. That's helpful. And then maybe on the biopharma side of the business, can you just speak to on how those efforts are ramping up, what your customer pipeline looks like, and what sort of feedback you've been getting to date, particularly given, I think, you know, it is quite a competitive landscape on that front, and maybe any changes you're seeing, you know, from competitors there as well. That'd be helpful. Thanks.
spk07: Yes. Thank you, Cathy. So indeed, so we are in a quite unique position, right? With the network we've built, so these 780 connected hospitals, we gather over 20,000 genomic profiles, as you know, per month. And so this gives us a beautiful position when it comes to serve the biopharma industry for pre-approval efforts, drug pre-approval efforts. And so along those lines, in the last weeks and months, we've seen increased demand for our trial match solutions. But long-term, we do see now as well new opportunities, for example, around companion diagnostic assets. And along those lines, I think it's important as well to remind what we have announced regarding these HRV capabilities, right? eventually something significant considering that, as I was mentioning, there are already 150 clinical trials that are being ongoing around the world and that require HRV-related testing. And that this may grow in the future as PARP inhibitors, to take one example, might be used for cancers over ovarian and breast cancer. So I think all that, the position we've taken in the market, the data we gather, and the new capabilities we're building, such as the HRD or such as along the Diploma for Cancer study that we are anticipating to launch before end of the year, are bringing us a lot of visibility towards our biopharma targets.
spk04: Okay, great. Thanks.
spk07: Thank you, Cathy.
spk06: Our next question comes from Tycho Peterson with JP Morgan. Your line is open.
spk05: Hi, good morning. This is Julia for Tycho, and congrats on the quarter. Just a quick follow-up. Regarding the churn rate, it's certainly great to see that, you know, it has dropped to below 1% in the first half. Could you maybe comment on your confidence of, you know, how sustainable this churn rate improvement is going forward?
spk07: Yes, thank you for the question, Julia. So, indeed, as a tech player in the healthcare sector, there are multiple, I would say, key performance indicators we follow, right? So, one is how we expand the network of our customers. Two is how we grow these customers, and that's the importance of the net dollar retention, is pretty significant, right, at SOFIA with 125%. So this would place us really best in class in the SaaS world. The third one is the LTV CAC, right, the lifetime value of a customer divided by cost of acquisition, because this gives us as well an idea of our efficiency in basically winning new customers. And as people can read in our F1, our LTV CAC ratio is pretty optimal right now. And the last one is a churn. On the churn side, overall, we have been able to retain our customers with a very good retention rate. Over the last five years, the cumulative net retention was 85%. Basically, the churn on a yearly basis is about 2%. And considering we're growing quite significantly in terms of number of customers, just as a reminder, we have now 30 new customers in a single quarter. This turn is something that it's as well best in class for a SaaS company.
spk00: Yeah, I would just add, I would say sub 1% is exceptional, right? I think that would be a pretty challenging bar to maintain, but certainly we are seeing coming out of COVID very favorable I would say trend there. Obviously, we saw a bit of an uptick last year when hospitals were really challenged. But I would say to Yurgi's point overall, if you think about our, you know, point period churn so that sub-1 or even if you think about that 85%, that would be in the very highest tier of SaaS software performance. And so, again, I would say, you know, In any given period, some of these pieces can bump around, but the key is that trend over time. And I would say the metric I really want everyone to start to get more centered on is really that net dollar retention because that is probably the best indicator of kind of our forward momentum in the business. And it's something we are very focused on internally in terms of consistently driving top-line growth.
spk07: And just to make sure the point is well taken by everyone listening, I said that 85% we're talking about is on the period of five years, right? So, which means that between 2% and 3% on the early days.
spk05: Great. And then a follow-up on the GE partnership. Can you help us think about the magnitude of the opportunity in the long term? And is that kind of, you know, sufficient to support your multi-omics offering? or is there a broader multi-omics partnership strategy outside of GE? Thanks.
spk07: So on GE, I think Julia is too early, right? We have said that this is a partnership on progress. The final agreement is not yet being signed, but we are super excited about it. As you know, GE is one of the main healthcare players in the field of medical devices. And we know that, at least in cancer, to build the future of data-driven medicine and be able basically to kind of cluster patients to give a better perspective or guidance to oncologists on what type of treatments may eventually better work for specific patients. Imaging data, in particular longitudinal data, are very important. So it is in that sense that we are very excited about the potential GE partnership. Our teams have been working very closely over the last weeks, and we hope that we're going to be able to materialize this partnership with a final agreement in the next month.
spk00: I would say, obviously, we're not going to give any financial expectations around it, but I think You know, the name of GE speaks for itself in terms of its global commercial footprint, and obviously, for us, this is a terrific partner and one we're incredibly excited about.
spk07: And then, beyond that, Giulia, indeed, as you mentioned, partnerships are something that are very important for Sofia, right? as a SAS platform player in the field of data-driven precision medicine, we don't intend to do everything by ourselves. We rather intend to leverage on what the others have done. And along those lines, as well, the co-marketing agreement we announced with Agilent for the comprehensive genomic profiling is something that is very important because Those partnerships enable us as well to, if you like, cover more needs out there in the market and so better support the hospitals. And it is along those lines as well that we have announced the efforts we've made on the same type of applications on the Illumina TSO500 assay. And that's one where we are today indeed seeing as well a nice sales pipeline that is being growing up.
spk05: Great. Thank you.
spk07: Welcome. Thank you to you, Julia.
spk06: Thank you. And there are no further questions in the queue. I'd like to turn the call back to Yurgi Camblon for closing remarks.
spk07: So, I would like to thank you all very much. This was for us our first earning call and we're pretty excited to be in this journey being a public company. And with that said, I would like to wish you to have a great day. Thank you all.
spk06: This concludes today's conference call. Thank you for participating. You may now disconnect.
Disclaimer