Veracyte, Inc.

Good afternoon, ladies and gentlemen, and welcome to Verisight's Fourth Quarter 2020 Financial Results 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 the session, you will need to press star 1 on your telephone. As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to C.D. Morris, Verisight's Vice President of Corporate Communications and Investor Relations. You may begin.

Thank you, Alex. Good afternoon, everyone, and thanks for joining us today for a discussion of our fourth quarter and full year 2020 financial results. With me today are Bonnie Anderson, Verisight's Chairman and Chief Executive Officer, and Keith Kennedy, our Chief Operating Officer and Chief Financial Officer. Before we begin, I'd like to remind you that various statements that we may make during this call will include forward-looking statements as defined under applicable securities laws. Forward-looking statements include, among others, statements regarding Verisight's anticipated timing of launches of new products in 2021, Verisight's plans, objectives, expectations, financial and otherwise, or intentions with respect to the anticipated acquisition of Decipher, the expected timing for Verisight's completion of the Decipher acquisition, and its expected benefits. Availability of Verisight's testing internationally, Verisight's total addressable market, the current and future impacts of COVID-19 on Verisight's business actions Verisight has taken or will take in response to COVID-19, potential timing for recovery of Verisight's business, the catalyst to drive momentum through 2021, and Verisight's long-term outlook. Management's assumptions, expectations, and opinions reflected in these forward-looking statements are subject to risks and uncertainties that may cause actual results and or performance to differ materially from any future results, performance, or achievements discussed in or implied by such forward-looking statements. And the company can give no assurance that they will prove to be correct and will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. Please refer to the company's February 17, 2021 press release and the risk factors included in the company's filings with the Securities and Exchange Commission for discussion of important factors that may cause actual events or results to differ materially from those contained in our forward-looking statements. Prior to this call, we announced our fourth quarter and full year 2020 results, which are available on our website at Verisite.com under Press Releases in the Investor Relations section. We also published a business and financial presentation, which we will reference during our remarks. This presentation is also available on our website under Events and Presentations in the Investor Relations section. I will now turn the call over to Bonnie Anderson, Fair Sites Chairman and CEO.

Thanks, Tracy, and thanks, everyone, for joining us today. Despite the pandemic headwinds, we closed 2020 with strong momentum across the business and are on track to launch multiple products in 2021, including our non-invasive nasal swab test and perceptogenomic atlas in lung cancer. And we now have a new general manager-based structure in place to drive our business forward. Earlier this month, we hit the accelerator with our agreement to acquire Decipher Biosciences, a world-class precision oncology diagnostics company whose market-leading tests in urologic cancers will expand our presence into seven of the 10 most common cancers, further solidifying our global genomic diagnostics leadership and significantly accelerating our revenue growth. We delivered strong revenue of $34.5 million in the fourth quarter, an increase of 11% over the prior sequential quarter and 16% over the fourth quarter of 2019, reflecting a strong rebound from the pandemic. Our genomic testing and product volume was 13,130 tests in the quarter, an increase of 12% over the third quarter of 2020, and 14% over the prior year. Pending the final acquisition of Decipher, which is assumed to occur by April 1, 2021, we are guiding a 2021 combined revenue target of approximately $190 to $200 million, which represents approximately 65% growth over 2020 at the midpoint of the range. We anticipate this growth will be fueled by the increased adoption of our four revenue-generating products in lung cancer, breast cancer, thyroid cancer, and interstitial lung diseases, as well as by Decipher's tests in prostate cancer. While relatively new to the market, Decipher's tests have gained rapid commercial traction. Now let's cover the highlights of the fourth quarter and the full year 2020 results. I'll start with commercial growth, our first measure of success. Our business has continued to rebound faster than we anticipated. Our fourth quarter 2020 genomic testing and product revenue was $34.2 million, more than double that of the second quarter when the business hit its pandemic low. Our Affirma business continues to lead the recovery with Affirma testing volume up 9% over the prior year quarter and 10% over the sequential or third quarter. Our pulmonology business, although improving, is rebounding at a slower pace as we had expected. We continue to be very pleased with our Persigna momentum where we exceeded our revenue goal for the year and delivered volume in the fourth quarter of 2020 that was nearly triple that of the prior year. We had several key reimbursement wins during the year, our second success metric. These included receiving an advanced diagnostic laboratory test, or ADLT designation, and a new Medicare reimbursement rate of $5,500 for our Invisia classifier, which improves diagnosis of interstitial lung disease. including idiopathic pulmonary fibrosis. The new rate went into effect on October 1, 2020, and will apply to the approximately 70% of our amnesia patients who are covered by Medicare. Additionally, we secured our first Blues Plan coverage policy for the Afirma Expression Atlas, which uses comprehensive genomic profiling to inform treatment decisions in thyroid cancer. Physician demand for Affirma XA testing continues to rise with the growing number of targeted therapies for thyroid cancer that are available or in development. The XA rounds out our comprehensive Affirma offering in which we guide care throughout the patient journey in thyroid cancer diagnosis and treatment. We also achieved a significant milestone for Persigna with the German government approving reimbursement for the test for all breast cancer patients with hormone receptor positive HER2 negative early stage disease. This is important because each year approximately 70,000 women in Germany develop breast cancer and in many cases physicians are challenged to determine which women will benefit from adjuvant chemotherapy based on clinical pathological factors alone. We are poised to accelerate growth in Germany through our NCANNER instruments that are already in place to support local pathology testing for patients. We strengthened our library of clinical evidence, our next metric of success for our genomic tests across all of our indications, including 10 studies published in peer-reviewed journals in 2020. Among these was a study published in the journal CHEST showing that the Percepta Genomic Sequencing Classifier reduced unnecessary invasive procedures in lung cancer diagnosis. Another study published in the American Journal of Respiratory and Clinical Care Medicine demonstrated that the Invisia Classifier improves physicians' ability to diagnose idiopathic pulmonary fibrosis without the need for surgery. We believe these publications will be key to our reimbursements efforts with commercial payers. In breast cancer, a landmark study published in the Journal of Clinical Oncology by leading breast cancer researchers suggested that the foundational biology upon which our PROSIGNA test was built may explain the test's increased ability to predict long-term risk of recurrence among certain breast cancer patients compared to other breast cancer tests. These findings will be among those evaluated as part of the PROCURE study in Europe, which we announced in September 2020. The PROCURE study has brought together top breast cancer researchers and clinicians to achieve consensus on the evidence and the clinical utility of the most frequently used genomic breast cancer tests, including PROSIGNA. The study, which is expected to complete in about a year, is led by an independent scientific steering committee of world-renowned breast cancer experts and is gauging about 180 clinicians throughout Europe. The study utilizes Delphi methodology, a well-known technique for generating consensus on complex issues. In Decipher's business, we were delighted to see that last week JAMA Oncology published an important study validating the Decipher Prostate RP test as the first independent predictor of overall survival. The study also shows how predicting metastatic risk with the Decipher test can be utilized to better guide treatment decisions in men with prostate-specific antigen or PSA recurrence. We believe this is a significant milestone for Decipher's development of evidence for the test. In fact, the author of an accompanying commentary in JAMA Oncology stated that the findings should, quote, lead to reconsideration of ASCO guidelines that recommend the use of the Decipher test on the basis of the strength of the evidence and its adoption into routine clinical use should become commonplace, unquote. it's hard to get more positive endorsement than that. Our final success metric is pipeline development and biopharmaceutical partnerships. And here too, we made significant advances throughout the year. Most notably, we unveiled preliminary performance data at our R&D day event in December for our first of its kind non-invasive nasal swab test for early lung cancer detection and our perceptive genomic atlas for informing treatment decisions in lung cancer. We shared nasal swab classifier cross-validation data for four candidate genomic test models, which demonstrated that when lung nodules are initially detected, our test will be able to identify which patients to work up and how aggressively to work them up. Today, physicians do not have a reliable way to do this. which leads to unnecessary invasive procedures in benign cases and delayed treatment in a disease that is the leading cause of cancer death worldwide. We also shared preliminary data for our Percepta Atlas showing that the in-development test could accurately detect known gene alterations in lung cancer, including early stage disease, using tiny samples from the initial biopsy used to diagnose the cancer. We believe the Percepta Atlas will provide physicians with the information they need to make informed, targeted treatment decisions at the time of diagnosis and build what could be the first large-scale lung cancer biorepository across all stages of lung cancer. Both tests are on track to launch in the second half of this year. Also in lung cancer, we expanded our collaboration with the Lung Cancer Initiative at Johnson & Johnson to include the NOBLE trial, a 9,000 patient prospective multicenter clinical study designed to distinguish genomic and other differences in lung cancer development and progression among patients with lung nodules detected by CT imaging. The trial will provide a robust biorepository of genomic, clinical, and other data which we plan to use in the development of future tests, including those that can help diagnose or predict lung cancer at its earliest stages. The Lung Cancer Initiative at Johnson & Johnson has stated that one of its key goals is to intercept lung cancer before it can even develop, and through the NOBL trial, we are excited to help advance this vision. Also in pulmonology, we are on track to commercially launch our Invisia classifier on the NCounter analysis system so that we can make it available to physicians and their patients in global markets through laboratories that will run the test locally. This will be the first of our advanced genomic tests that we add to the NCounter as we advance our vision of offering a comprehensive menu on the fully automated instrument. We plan to complete development of our nasal swab test on the encounter in 2022 following its launch in our CLIA lab in the United States this year, and we'll begin to transition it as part of a broader portfolio to the instrument shortly afterwards. Pending the close of our acquisition of Decipher, a key priority will be for us to secure a final Medicare coverage policy for the Decipher bladder test and then expand its commercialization into the 320 million bladder cancer market. The test is intended to provide physicians with previously unavailable information about which patients with localized breast bladder cancer may benefit from more intensive treatment. For example, in patients with muscle-invasive bladder cancer, it will help determine which patients will better respond to neoadjuvant chemotherapy prior to bladder removal surgery. The test is the only genomic subtyping tool that we are aware of for physicians in the United States treating patients with locally advanced bladder cancer and has been issued at draft local coverage determination, or LCD, by CMS for Medicare reimbursement. I will now turn the call over to Keith for a more detailed review of our fourth quarter and full year 2020 financials.