SOPHiA GENETICS SA

Good morning and welcome to Sophia Genetics' fourth quarter fiscal 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Catherine Bailon, Head of Investor Relations at Sophia Genetics. Please go ahead.

Good morning and thank you for joining us on Sophia Genetics Q4 fiscal 2022 earnings call. My name is Catherine Bailon, and I am head of investor relations at Sophia Genetics. Joining me today are Dr. Yergi Camblon, our co-founder and chief executive officer, and Ross Muecken, our chief financial officer. Before we get started, I'd like to remind you that the management team will make statements during this call that are forward-looking within the meaning 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 appear in the section entitled Cautionary Statement Regarding Forward Looking Statements in Form 20F 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, March 7, 2023. This presentation includes non-IFRS financial measures. These measures are calculated by management. and do not have any standardized meaning under IFRS. These non-IFRS measures supplement IFRS measures, but should not be viewed as substitutes for IFRS measures. We have included a reconciliation of IFRS measures to non-IFRS measures in our press release issued this morning, which is available on our website. Please note, both the replay of this call and the earnings release will be available on our website in the Investors section. And with that, I'll now turn it over to Yurgi.

Thank you, Catherine, and good morning, everyone. 2022 was a tremendous year for Sophia Genetics, and I am pleased to share with you today the momentum that we built in the period, including a strong finish to our fourth quarter. On today's call, I will review our 2022 year as a whole and the organic growth acceleration we experienced throughout the year and into Q4. Next, I will share my thoughts about the key deliverables we executed upon as a company in 2022 and tie our focus areas back to a discussion with you about fiscal discipline at Sophia Genetics, as demonstrated by our third consecutive quarter of improved operating leverage. Then, I will touch on our partnership that fuel our ecosystem and wrap up with our six strategic pillars, guiding Sophia's long-term trajectory towards being the preferred cloud-native software analytics platform for healthcare participants globally. I will then turn it over to our Chief Financial Officer, Ross McCann, who will provide a more detailed look into financial results for the period and our outlook for 2023. And we will end by taking your questions. Please join me in congratulating Ross, who, in addition to being our ever-capable CFO, is being promoted as of March 15, 2023, to Chief Operating Officer. Congratulations, Ross. Let me start by reminding you that when Sophia Genetics went public, investors had one expectation and three questions for us as a company. The major expectation was for Sophia to deliver on its top-line growth commitments. Well, the three questions were, one, while successful so far in Europe, is SOPHIA Genetics decentralized model compatible with the U.S. market? Two, would SOPHIA Genetics be able to demonstrate that their anonymized genomic profile data collected in the course of their clinical business would have value beyond clinical, especially to biopharma? Good Sophia Genetics showed that their AI and machine learning algorithms would be applicable across multiple modalities beyond just genomics. I would suggest today that given the momentum we have demonstrated this year, we have not only delivered on our growth commitments, but can also confidently answer yes to all three questions, all while having to overcome the unexpected challenges associated with both a volatile macro environment and a constrained capital marketplace. So we at Sophia have taken on these lofty expectations and challenges in stride and are committed both on finding efficiencies and to achieving our growth in a sustainable fashion without incurring significant incremental costs. Let me start by acknowledging the strongest evidence of our success. In 2022, we delivered robust full-year revenue growth of 39% on a constant currency basis after adjusting for COVID-related headwinds. I am incredibly proud of this achievement. Full-year 2022 constant currency revenue growth was 32%, in line with our long-term constant currency growth guidance of 30% to 35%. I should remind you that we introduced our COVID-19 solution in Q4 2020 in response to the global pandemic impacting our customers. Given this, COVID analysis had a reasonable impact on our 2021 results, as some of our customers shifted efforts within their laboratories to address global testing initiatives, which we were able to help accommodate, thereby demonstrating the versatility of our platform. Early in 2022, we decided to shift our focus back towards our core of oncology and rare disease applications, so we are quite pleased that, adjusting for the impact of COVID-19 related headwinds in 2022, our growth in 2022 was, as I stated, a robust 39%. Why are we having such a strong market adoption during a period many would consider challenging? Healthcare institutions continue to choose Sophia Genetics as their trusted cloud-based analytics platform for establishing data-driven medicine as their standard of care. In 2022, we served more than 750 customers across 72 countries. Of our more than 750 customers, 390 are recurring Sophia DDM platform customers. I am also thrilled to announce that we signed 58 new customers in 2022. During the year, we continue to improve positioning of the SOFIA platform in the markets where it can have the greatest impact, helping inform clinicians in their determination of cancer and rare disease. This happens through our ability to handle complex raw data sets produced from next-generation sequencers. Our customers are producing locally what are incredibly large, noisy raw data sets that can be up to two terabytes in size. The production lab at our customers is often a heterogeneous environment using multiple types of sequencers and potentially using chemistry from many different suppliers. From their labs, our customers upload those files from the sequencer onto our decentralized SOPHIA-DVM Cloud Platform. We then apply our disease-specific machine learning and artificial intelligence-based algorithms, which in essence is proprietary codes that we have built up and trained meticulously over the 12 years since our founding. It is with this code, our secret sauce, if you will, that we find and harmonize signals in the huge and noisy genomic file and identify and annotate the relevant biomarkers which the pathologist or the geneticist will have access to through Sophia Didion. With each genomic profile we analyze, over 1.2 million as of December 31st, 2022, our algorithms become incrementally more robust, and because our global network is cloud-based, the benefits to cancer and rare disease patients are realizable nearly instantaneously. Our cloud design was a foundational decision. It underpins our platform's ability to become the network to democratize cancer care because in real time, It provides back each incremental learning to our community of customers. This direct network effect was intentional, allowing the value of the SOFIA platform to increase as the number of users who leverage it does. A cancer patient in Brazil can benefit from learnings extracted from the cancer journey of a patient in Australia. Turning to platform usage, the full year 2022, analysis volume was 264,000, an all-time high and up 9% year-over-year. When excluding our COVID-related volumes, analysis volume was 246,000, up 18% year-over-year. Importantly, I want to highlight for you that to date, the SOFIA DDM platform has supported the analysis of more than 1.2 million genomics profiles, recently growing by more than 24,000 new profiles per month. This, we think, makes us the industry leader. We're excited with the momentum we see as users continue to increase their utilization after experiencing the value of the SOFIA DDM platform. As our focus shifts towards more complex disease areas where the benefits from our technology are high, it's no surprise that in 2022, we saw an expected and desired lift in overall ASPs. This is above and beyond the expected price increase we took mid-year in 2022. HRD is one example of a product that is helping mix with a notably higher ASP. So to carry this idea through, the strategic focus on oncology and rare diseases is evident in our reported revenue growth outpacing our analysis volume growth. This is an important phenomenon, as we expect mix or the value of each analysis patient to increase at a healthy cadence over time. While I discussed how we delivered on our guidance for 2022, I want to also draw for you the picture of how that played out over the year. We are pleased to share that constant currency ex-COVID revenue growth accelerated each quarter in 2022, finishing the year with 44% year-over-year growth in the fourth quarter. And adjusted growth margin ended the year at a high of 75%, for the fourth quarter of 2022 compared with 65% for the fourth quarter of 2021, bringing our full-year result increasingly closer to our long-term target of 70%. These figures, analysis, volume, gross margin, and accelerating revenue growth suggest to us that our strategic path is strong. While our top-line performance has of course been a keen focus of equally keen focus as being our desire to solve the new challenge of optimizing capital efficiency reducing operating expenses is a muscle we learned to flex in 2022 we reduced our operating expenses in each of the last three quarters of the year and intend to continue to advance our fiscal discipline and ability to make the best use of our cash balance We have been very precise intending to control our indirect costs. We also targeted projects, maintaining sponsorship of key programs, but not all. So in summary, I am proud to say we have delivered on our commitment of revenue execution with the material added benefit of cost discipline. So as I suggested in my opening remarks, when we went public, there were several outstanding questions. With respect to the first question, let me expand on the compatibility of SOPHIA Genetics decentralized model in the US market. A major proof point in 2022 and one that we are super proud of is our new relationship with Memorandum on Kettering MSK Cancer Center. Considered one of the most prominent cancer centers in the United States, we entered into an agreement where we will commercialize the first comprehensive liquid biopsy test powered by the SOFIA DDM platform. By combining our predictive algorithms and the power of global SOFIA genetics network with the clinical expertise of MSK in cancer genomics, we jointly envision that advanced precision oncology tools will reach a more diverse global population of cancer patients. Next, Turning to U.S. customer momentum, I would like to highlight a recent win at the University of Arkansas. They will be implementing SOFIA DDM to gain deeper insights into hematological malignancies. University of Arkansas for Medical Sciences, UAMS, is the state's only health science university. SOFIA DDM will enable them to synthesize NGS data in-house building on local expertise and allowing for materially improved data turnaround time, which is crucial given the fast-moving nature of hematological malignancies such as leukemia, lymphoma, or multiple myeloma. Cancers that together as a group are the fourth most frequent type of cancer globally. Beyond University of Arkansas, I would also highlight Synergy Labs, a US full-service diagnostic lab based in Mobile, Alabama, which we signed in the fourth quarter. They will be using Sophia DDM for hereditary cancer solutions. They decided to use our platform because they felt we could help them accelerate their money offering to the forefront of hereditary cancer patient outcomes. is also typical of many of our central lab clients as they have NGS sequencers from multiple leading suppliers in the lab. The NGS data coming off each machine is a bit unique. Normally, a lab would either use the shelf software sold by each manufacturer specialized for that specific machine or homegrown solutions that are expensive to scale and difficult to maintain. The code for the software programs typically struggles in such a heterogeneous environment, as oftentimes this software has limited compatibility with respect to the output files of various competitors' regions, automation, or library prep tools. We at Sophia solve this heterogeneous environment challenge in the customer's lab through our platform's innovative and unique capability to harmonize signals in the data regardless of the source of the region's sequencer. It is a key differentiator for SOFIA DDM. So, if I may tie this back to the US market and Synergy, after 12 years of code development and refinement, we are able to confidently digest genomic data from heterogeneous environments like at Synergy, and in doing so, help Synergy deliver the most accurate results in a secure manner at the lowest cost. This is a winning solution for both us and them. In total, I am pleased with our progress in North America and look forward to updating you in 2023 on our continued progress. And for our second question, could we show that our anonymized genomic profile data produced locally at the source and not purchased, as some of our competition do, have value beyond clinical? especially to biopharma customers. When we thought about this, we felt that pharmaceutical companies faced similar challenges to the clinical space regarding data and silo when reconciling their clinical trial data with disparate real-world data sources. These challenges result in high variability in the quality of insight. We serve our biopharma customers by helping them solve bottlenecks across the biopharma value chain allowing our products, services and applications to address the drug development continuum from discovery to development and ultimately deployment. We call this the 3Ds, all of which are powered by SOFIA DDM data generated in real time and in the real world. We launched our initial applications for the biopharma market in 2019 and we currently have four branded applications for Biopharma customers. So back to the question, is SOFIA able to show value to Biopharma? I would tell you my opinion on this is a resounding yes, and the proof point that demonstrates that is our February announcement expanding our AstraZeneca partnership. We started working with AZ in the deployment phase. This was taking HRD testing worldwide with AstraZeneca support. Then, from there, we built on our relationship and are now working with them on discovery. Now we will be collaborating on how SOFIA's multimodal technology and expertise could be applied to AstraZeneca's global leading oncology portfolio. Beyond Astra, we are today in conversation with over half of the top 20 pharma companies in the world, as well as many leading CROs, because we would argue they understand the benefit of our network our platform and the data we have with new biopharma customers we expect they may have different start points with sophia but they will follow the same land and expand behavior we see in the clinical space Beyond those traditional biopharma players, we announced in September that we are working with Bondes Bio regarding a very exciting technology in ECDNA. Bondes Bio is a next-generation precision oncology biotech company developing innovative therapeutics directed against extra-chromosomal DNA, or ECDNA, in oncogene-amplified cancer. Extra-chromosomal DNA involves release of DNA outside of the chromosome and is found in around 40% of metastatic cancers. Boundless Bio is developing the first therapies along with a precision diagnostic method to detect ECDNA from a patient's routine to more sequencing data. Our partnership will further develop this diagnostic method for use in clinical trials. Our decentralized global genomic solution combines with bounded bio drug development capabilities to unlock value by breaking the barriers inherent to a traditional central lab approach. This should lead to optimized patient selection and clinical trial design and enable our global collective network of major hospitals and academic centers to effectively deliver new treatment options to patients with oncogene-amplified cancers. And beyond that, As we always say, data is important. Now with Memorandum on Catering, SOFIA DDM will have incremental access to over 75,000 curated clinical genomic profiles across cancer types. Together, we are going to democratize the use of precision medicine applications around the globe. Now, let me address the third question. the viability of our platform when applied to other modalities beyond genomics. From early on, we have felt that, over time, our insights should be generated not just from genomic data, but also from imaging, clinical, and laboratory data. Intuitively, we have felt that data gathered from data modalities beyond genomics out to further improve the predictive capabilities of our algorithms for the benefit of patients. I would tell you, for us, multimodal ability has delivered strong proof of concept across a range of cancer types. The flagship example of the promise of such multimodal approaches is our DeepLung4 multimodal clinical study, which we launched in December 2021. The DeepLung4 study focuses on the treatment of metastatic non-small cell lung cancer patients with immunotherapy And in this context, we aggregate real-world multimodal data, including genomic data, radiomic data, clinical data, and biological data. Our technology then leverages deep learning-enabled analysis of the aggregation of this real-world multimodal data to identify and validate predictive signatures of response to therapy, progression-free survival, or overall survival. These predictive signatures are being validated at the individual patient level with full transparency on the drivers of the prediction with the aim of ultimately supporting clinicians to make informed decisions for their patients and supporting biopharma to ensure the right patients are selected for clinical trials. We reported at ASCO 2022 a first set of preliminary results suggesting a predictive power of around 80%, which for us validates the potential of our multimodal approach in an international, multicentric, and decentralized setting. This is highly important, as similar multimodal studies are typically done at the single center level today, with strong limitations regarding the applicability and scalability of these models outside of that particular institution. In this context, we are very happy to report that we continue to expand our DeepLog4 footprint with our multimodal algorithms now also being exposed to data from Latin America through our collaboration with Dada Za in Brazil, who is in the process of activating several sites. There are currently 25 participating sites across the US, France, Italy, Spain, Germany, Canada, Israel, and now Brazil, that have already signed up for participation in the study with around 1,500 patients recruited to date. Through this intentional global footprint, we aim to maximize exposure of our machine learning algorithms to a wide range of diverse real-world data. Additionally, this footprint exposes us to a diverse set of technologies that produce that data. For example, in the imaging data modality, our SOFIA DDM platform is exposed to thousands of medical images generated through different CT MRI and PET scanners from different manufacturers. This gives us the unique capability to offer harmonized and standardized analytics in imaging as well in a decentralized setting, further demonstrating our technology agnostic market positioning as a data analytics platform. We are notably working with our partner GE Healthcare in the context of the Deep Lung Force study, where GE's imaging fabric services are used to visualize, segment, and annotate lung lesions for medical imaging visualization and annotation purposes. This allows Sophia Genetics to further accelerate proprietary radiomics analytics workflows in the context of the study, in particular to move towards automatic wall-body tumor identification, segmentation, and quantification. Insights from the DeepLung4 study will power one of the applications of our multimodal curve path module of the SOFIA DDM platform, offering advanced multimodal data visualization, quoting, and predictive capabilities in a single solution. We feel that the DeepLung4 study has the potential to usher in a new generation of precision medicine that would enable predictions at the individual patient level. We look forward to further validating our vision of building a multimodal decentralized collective intelligence leveraging on real-world data to generate novel insights at the individual patient level. So, in total, I am happy to share that we continue to deliver on our commitments and make progress across all of our key growth drivers. As I touched on earlier, reducing operating expenses is a key muscle we learned to flex in 2022. What became apparent to us as the global environment deteriorated since our IPO is how paramount our fiscal discipline is. With the intention to minimize any impact on our growth, we set at this challenge of operating expense reduction with a precision mindset. I am pleased to report that in each subsequent quarter of 2022, we were able to reduce our operating expenses, accumulating in the most significant improvement in the fourth quarter. Our headcount stands at 466 as of December 31st, 2022, down from a high of over 530. This reduction has occurred primarily through planned accretion and selective actions aimed at improving productivity. We intend to continue furthering our fiscal discipline and related abilities regarding making the best use of our cash balance. Based on our current trajectory, We remain confident in our capital position and continue to see sufficient runway to execute our ambitious growth plan. We continue to be responsive to the current operating and macro environment and remain laser-focused on delivering sustainable growth. Layered into our thinking on capital efficiency has been capitalizing on the commercial leverage of partners. Our mindset was rather than doing everything ourselves, with this partnership now in place, we felt we could leverage others to help us grow. I already spoke about MSK, and you can understand how thrilled we are to have a cancer center of their caliber trusting us with our technology and intellectual property. In 2022, we continued strengthening our partnership with AstraZeneca, Gelscare, QIAGEN, and other existing collaborators. Through strategic collaborations, we spark innovation more quickly, increase the size and scale of our network, connect with a large volume of data, and offer more capabilities than we could provide individually. I would like to take a moment to highlight one of these partnerships for you in detail, Microsoft. Microsoft brings to SOFIA several intersecting points of leverage. We all understand that scale in the cloud is very important. And on that concept, Microsoft will serve us well as we demonstrate multimodal capabilities. Caling, the capture of multimodal data, is no small feat. But with Microsoft as a partner, we will enjoy their support and significant infrastructure and capabilities. Let me walk you through our first four months since announcing it in November. We have held strategic alignment meetings at high levels between the two companies, including operational steering committee meetings on commercial and innovation workstreams. These meetings included Microsoft general manager of healthcare and strategy lead, Microsoft industry lead for healthcare in the US, as well as the Microsoft Senior Vice President for Strategy and Business Incubation. The focus of our strategic collaboration with Microsoft is currently threefold and includes CRPA scaled by Nuance Microsoft to accelerate our Diplom IV program, expanding our commercial reach, and supporting our scaling the environment program. I am pleased to report over 40 Microsoft salesperson have been trained on Sophia DDM, and ultimately we'll be selling to our target market. This is meaningful as Microsoft Salesforce will help amplify our presence in the market. I would like to wrap up by reminding you of our six strategic pillars, which remain our focus for driving long-term growth and value creation for our customers, partners, and shareholders at Sophia Genetics. They are as follows. accelerating customer adoption and network expansion with new clinical customers with a focus on the U.S. market. On this measure, we have discussed today our attraction, highlighting recent wins with Synergy and University of Arkansas. I would also note of our Diploma for Study, six of 25 current participating sites being in the U.S. Two increasing utilization within our existing customer base. Currently, 50% of our customers use only one SOFIA application, 37% use two or three applications, and only 13% use four or more applications. Regarding utilization, I would also share that our top customers see growth faster than our smaller customers. It appears to us that adopting our technology enables our customers to take share in their respective markets. Three, further innovating our platform to increase our capabilities and house a growing portfolio of applications and modules. We highlighted Memorandum on Catering for you in today's call. Four, developing key partnerships and collaborations to foster our ecosystem. On the topic of getting leverage from our ecosystem, we have highlighted to you our burgeoning Microsoft relationship. Five, leveraging our platform to further drive adoption with biopharmaceutical companies. Here, we have highlighted our existing developments with AstraZeneca. Six, and lastly, excelling operationally within Sophia, which we displayed through our improved operating loss trajectory, despite hitting our top-line goals. Regarding our execution against these pillars, paired with the momentum building with our partners, be that Microsoft, MSK, QIAgen, and AstraZeneca, I feel more than excited today that these are the elements that will enable SOFIA to do what we set out to do 11 years ago. to harness data from the global community to generate actionable insights that contribute meaningfully to patient care and patient outcomes, that contribute meaningfully towards our customer success, and that deliver outstanding performance for Sophia Genetics in 2023 and beyond. With that, I will now turn the call over to Ross to discuss our financial performance in more detail. Thank you, Yurgi.