Veracyte, Inc.

Good afternoon, ladies and gentlemen, and welcome to Verisight's third quarter 2021 financial results conference call. As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to Tracy Morris, Verisight's vice president of corporate communications and investor relations. You may begin.

Thank you, Erica. Good afternoon, everyone, and thanks for joining us today for a discussion of our third quarter 2021 financial results. With me today are Mark Stapley, Verisight's chief executive officer, and Rebecca Chambers, our chief financial officer. Verisight issued a press release earlier this afternoon detailing our third quarter financial results. This news release, along with the business and financial presentation, is available in the investor relations section of our website at Verisight.com. 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 are subject to risks and uncertainties, and the company can give no assurance that they will prove to be correct. Further, we are not under any obligation to provide further updates on our business trends or our performance during the quarter. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Verisight filed with the Securities and Exchange Commission, including Verisight's most recent forms 10-Q and 10-K. I will now turn the call over to Mark Stapley, Verisight's CEO.

Thanks, Tracy, and thanks, everyone, for joining us today. It's a pleasure to be here to provide an update. We are pleased with our performance in the third quarter as we delivered revenue of $60.4 million representing growth of 94% over the prior year, despite some COVID-19 related headwinds. We have also executed on some key milestones since our last update, significantly advancing our strategy. In August, we completed the acquisition of Haleo DX, securing our future to develop and manufacture our own test kits for the NCounter system. This will provide physicians and their patients all around the world with access to our growing menu of tests, which we are in the process of transitioning to the instrument. Prior to considering the transfer of our tests onto the NCounter, they're developed as LDTs for the U.S. market in one of our CLEAR labs. We pursue reimbursement via a process of evidence development, publications, guideline inclusion, and KOL adoption. Our tests are designed from the ground up to answer very specific clinical unmet needs, while fitting into the physician's workflow. And they leverage not only our deep scientific expertise in whole transcript genomics, but also now our expertise in immuno-oncology, a rapidly growing field. With the addition of HaleoDx, we now address eight of the top ten cancers in the U.S. by indication. Our expanding menu of tests will improve outcomes for patients all over the world at every step of their journey by, for example, ruling out unnecessary surgeries, providing diagnostic clarity, helping physicians with treatment decisions, or helping to detect cancer early when it can be successfully treated. To further assist physicians with the treatment of patients, our menu of tests is bolstered by our partnerships with biopharma companies, to whom we provide our extensive genomic and clinical data and services to assist in the development of therapies and companion diagnostics. Turning now to the quarterly results, as always, I'll discuss our progress in the context of our strategic drivers of commercial growth, evidence development, pipeline advancement, and global expansion. beginning with commercial growth. The Decipher Prostate Genomic Classifier continued to gain strong traction in the market, further fueled by ongoing sales team expansion. You will recall that our prostate cancer business is less impacted by COVID-19 because many of our urologist customers practice in community settings as opposed to hospitals, and community settings in general have been more accessible to patients and our sales reps. We expanded coverage for Decipher Prostate making the test a covered benefit for an additional 5 million plan participants and bringing the total number of covered lives to more than 150 million people nationally in the U.S. We also signed a new contract with a large blues plan and a national government payer. In September, the National Comprehensive Cancer Network, or NCCN, published its 2022 guidelines, which specifically recommend treatment decisions based upon the patient's Decipher post-radical prostatectomy, or RP, score Ours is the only genomic prostate cancer test with this level of recommendation, which we believe will help to further drive adoption and reimbursement. Our Affirma Genomic Sequencing Classifier, or GSC, continues to be the new standard of care in thyroid cancer diagnosis. Affirma GSC revenue and volume increased over prior year, although both were slightly down sequentially, as we experienced summer seasonality with higher than typical rates of vacations, hospital staffing shortages, and challenges from the COVID-19 Delta variant. Approximately 70% of our Afirma samples come from procedures performed in a hospital setting, which have tended to be more impacted by COVID, limiting biopsy procedures and cells rep access, particularly in those areas where the case count and hospitalizations have been high. We're also pleased to welcome Dr. Joshua Klopper as our new Medical Director for Endocrinology. Dr. Klopper was an investigator on our original clinical utility study for the Afirma test, and he will play a key role in further establishing the test as standard of care and guiding our ongoing market development work in thyroid cancer. Our pulmonology business continued to be impacted by COVID as we saw in prior quarters. This stems from the ongoing reduction in the number of bronchoscopies, the procedure used to collect samples for both our perceptive GFC and Invisia tests. Despite limited access, We continue to build awareness of our pulmonology products by leveraging digital marketing to educate our customers and targets with KOL-led online educational events, peer-to-peer engagement tools, and other digital communications. Our Procigna breast cancer business gained momentum in Europe, where our ability to report molecular subtype information and enable laboratories to perform the test locally gives us key competitive advantages. Our next strategic growth driver is evidence development. We further boosted our library of clinical evidence across our urologic cancer, pulmonology, and endocrinology products with two published studies and six abstracts of major medical conferences, which we believe will help facilitate adoption and reimbursement for our tests. At the CHEST annual meeting in October, we unveiled expanded clinical validation data for our percepto-nasal swab, which further reinforced the test's ability to help physicians assess lung cancer risk in patients with lung nodules. The findings also showed that our test delivers strong clinical performance across different nodule sizes and cancer stages and for patients who have already had other cancers. Importantly, the data showed that when nasal swab identifies patients as low risk for cancer, its sensitivity was very high, 97%, meaning that it will miss very few cancers. Conversely, when the test identifies patients as high risk for cancer, its specificity was also high, 92%. meaning that it can help ensure that patients who are more likely to have lung cancer can be quickly guided to further diagnostic procedures and treatments if needed. Also at the CHESS meeting, researchers shared results of a new decision impact study for Invisia for interstitial lung disease, including idiopathic pulmonary fibrosis, or IPF. The findings showed that use of the test increased physician diagnosis of IPF and that when they did diagnose the disease, they were more confident in their decision and also more likely to initiate IPF therapy. Accurate, timely diagnosis is important for IPF patients because it can enable them to begin treatment with antifibrotics that can slow progression of their disease. Further, data shows that immunosuppressive agents, which are frequently used to treat many institutional lung diseases, can actually be harmful to patients with IPF. Data from two important studies for our prostate test were shared at the American Society for Radiation Oncology, or ASTRO, annual meeting in October. The first study, which examined our deciphered prostate test, was the first to validate the use of any genomic test in a prospective randomized cohort of prostate cancer patients with long-term follow-up, in this case, a median of 11 years. Results demonstrated that deciphered prostate test scores are independently associated with distant metastases prostate cancer-specific mortality, and overall survival in patients with clinically high-risk prostate cancer. The findings suggest that use of the test can help identify patients who may require treatment intensification beyond standard of care therapy. Additionally, findings from a multicenter randomized Phase III trial presented at ASTRO suggest that the Decipher Prostate RP test can guide timing and intensity of treatment for men experiencing prostate cancer progression following surgery. For the Decipher Bladder test, our tool that helps physicians manage treatment decisions for patients with bladder cancer, new data were published in the Journal of Urology showing that the test accurately identified patients whose bladder tumors were most likely to respond to chemotherapy prior to radical cystectomy. These findings suggest that the test could ultimately help physicians optimize treatment planning for their patients with bladder cancer based upon their tumor subtype biology. Until now, there has been no reliable way for physicians to distinguish these cancer types, resulting in overuse of neoadjuvant chemotherapy with little benefit for many patients. Additionally, results of a long-term clinical utility study for the Afirma GSC were published in the Journal of the Endocrine Society. These findings showed that use of the Afirma GSC resulted in 41% fewer surgeries among patients whose thyroid nodule fine needle aspiration results were indeterminate compared to patients who had no molecular testing. Additionally, when surgery was performed, Patients deemed suspicious for cancer by the ePherma GSC were nearly twice as likely to have cancer compared to those who had no molecular testing. Turning to pipeline advancement, which is our third strategic growth driver, we have recently achieved a number of key milestones. We were delighted to launch our perceptor nasal swab test for early lung cancer risk assessment in October. We believe the clinical need for this test is significant. because physicians today lack objective, accurate tools to determine which patients with lung nodules are likely benign and can therefore avoid unnecessary diagnostic procedures, and which patients likely have cancer and should be directed to further diagnostic workup and treatment if needed. With 15 million Americans currently eligible for annual lung cancer screening and 1.6 million lung nodules found incidentally, the ability to reliably determine next steps becomes increasingly important for patients, physicians, and the healthcare system, With the non-invasive percepto-nasal swab, we believe that more lung cancers will be detected early when they can be successfully treated. We are making the percepto-nasal swab test available to a limited number of sites as we assemble the clinical utility evidence to help secure reimbursement, working up to an initial 50 sites that we would plan to engage in our clinical utility study. Work on perceptogenomic atlas, our genomic profiling test for patients with confirmed lung cancer, is progressing. We now expect to launch the test in our CLIA lab in early 2022 and still anticipate 6 to 12 months post-launch to receive reimbursement. The test will round out our portfolio of three products serving the lung cancer patient from early detection to diagnosis and treatment. Another key product launch was our decipher bladder test. Our sales team has begun offering the test to our urology customers, the same physicians that we serve with our Decipher prostate test. The launch will be steady and measured to ensure that we maximize the long-term potential of this test, which could help in the treatment of up to 80,000 patients a year without disrupting our growing prostate business. As I mentioned earlier, we completed our acquisition of HelioDx on August 2nd, marking a key step in our strategic plan for global expansions. I've been delighted to welcome the company's talented team to Verisight and four of its leaders to my executive team, namely Vincent Ferre as EVP of Immuno-Oncology and EU Operations, Stéphane Devono as SVP and General Manager of Immunoscore and International Diagnostic Operations, Corinne Denan as SVP and General Manager of our new Biopharma BU, and Fabienne Ernit as SVP Global Quality and Regulatory Affairs. Our combined team is already collaborating on the move of our IVD test manufacturing from NanoString to our facility in France. This transition, which we estimate will take 24 months, will give us end-to-end control over our IVD product business. In parallel, we plan to port additional tests, including Invisia, Decipher Prostate, and the Perceptor Nasal Swab to the end-counter analysis system so that we can make them available to physicians and their patients in global markets. We have made great progress in finalizing the plans for these development projects, which will be an exciting collaboration between our experienced R&D teams in South San Francisco, San Diego, and Marseille. I look forward to updating you on the timing in due course. The HelioDx acquisition also expands our scientific expertise into the emerging area of immuno-oncology, offering a range of products and services for clinicians and biopharma partners that leverage novel insights into the tumor microenvironment. The impressive Immunogram platform gives our biopharma partners a multimodal 360-degree biomarker analysis of the tumor sites, helping them to understand and predict patient response to immunotherapy with the potential to help further inform patient care from treatment decisions to risk of recurrence. Additionally, the acquisition has brought us the Immunoscore Colon Cancer Test. This test is intended to guide treatment decision-making by giving physicians a clear and actionable measurement of how an individual patient's immune system is responding to their cancer. The integration has gone extremely well so far. I'd like to thank Bonnie and the Workstream leaders and teams from both Verisight and HelioDx who have worked tirelessly to ensure that we accomplished our integration goals while maintaining a strong focus on the respective businesses. In summary, we had a strong quarter in which we delivered solid revenue growth year over year and positioned our test for further physician adoption and reimbursement. We also made significant progress in transforming the company for long-term growth through the launches of key new products, and through the successful acquisition of HelioDX to achieve our global strategic vision. I'll now turn the call over to Rebecca to give a detailed overview of our results.