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spk11: Good afternoon, ladies and gentlemen, and welcome to Verisight's fourth quarter and full year 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.
spk12: Thank you, Lee. Good afternoon, everyone, and thanks for joining us today for a discussion of our fourth quarter and full year 2021 financial results. With me today are Mark Stapley, Verisight's Chief Executive Officer, Rebecca Chambers, our Chief Financial Officer, and Dr. Tina Nova, President of our U.S. CLIA business. Verisight issued a press release earlier this afternoon detailing our fourth quarter and full year 2021 financial results. This news release, along with a 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, 10Q and 10K. I will now turn the call over to Mark Stapley, Verisight's CEO.
spk08: Thank you, Tracy, and thanks, everyone, for joining us today. I am very pleased to share an update on our strong Q4 and 2021 results. We delivered fourth quarter revenue of $67.3 million, an increase of 95% over prior year, despite headwinds from the sudden and rapid onset of the COVID-19 Omicron variant. We closed out the year with revenue of $219.5 million, an increase of 87% over the prior year. Importantly, Behind these numbers are thousands of individuals who benefited from Verisight's tests and are at the heart of our vision to improve outcomes for patients all over the world at every step of their journey. This vision inspires us to come to work every day, helping patients to avoid unnecessary and often risky procedures and interventions, while also reducing their time to appropriate treatment. As many of us know from personal experience, any patient going through a diagnosis of cancer or facing the potential prospect of such a diagnosis is already faces unimaginable anxiety. Few things motivate our team more than being able to quickly help that patient and their family achieve an accurate diagnosis, prognosis, or treatment decision. I am incredibly proud of the entire VeriSight team for helping make this vision a reality. Through their efforts, we delivered strong results in 2021 while also integrating two acquisitions, Decipher and HelioDx, and advancing a number of important product development projects. With our augmented leadership team and recent key promotions, our business is now aligned to set us up for long-term success. To start, I would like to remind everyone of the strategy of our newly combined organization. We believe we are uniquely positioned, given our broad menu of advanced novel diagnostic tests, to serve patients in the U.S. through our ClearLabs and patients in the rest of the world through our IVD products on our Encounter platform. we believe that our cycle of innovation, commercialization, and data creation produces a flywheel effect that will propel our long-term growth, enabling us to deliver on the promise of becoming a leading global diagnostics company. We start by identifying the unmet clinical needs that could be addressed by Verisight to help physicians make better informed decisions for their patients. From here, we deploy our world-class global scientific team, led by Dr. Julia Kennedy, our global chief scientific and chief medical officer, to develop robust clinical assays. With a technology agnostic mindset and advanced capabilities in whole transcriptome genomics, immuno-oncology, and machine learning, we have tremendous flexibility to employ the best approach to answer challenging clinical questions. It is this approach that led, for example, to the development of our Perceptor Nasal Swab, a unique non-invasive test intended for the many patients who undergo evaluation for a potentially cancerous lung nodule. In parallel, our business teams assess the market size, reimbursement dynamics, and competitive landscape before developing and launching our tests in the U.S. market through our Clear Labs. Dr. Tina Nova, a renowned diagnostics industry leader, drives this process as president of our Clear U.S. business. Together with our scientific, clinical, and medical team, we build a library of clinical evidence to help us gain reimbursement, KOL support, and ultimately guideline inclusion. This enables our experienced sales team to work with their physician customers to secure broad adoption for our tests. Our Decipher prostate test is a wonderful example of how well this works as we continue to build the library of clinical evidence that is driving the market share gains that we are seeing. Outside of the United States, we develop tests to be run locally, closer to the patient, on our end-counter diagnostic instrument, leveraging the clinical expertise that we've generated to drive adoption market by market. Stéphane Devono, who has deep experience developing, manufacturing, and commercializing such products, leads our IVD business and our EMEA region. Our IVD development team in France, collaborating with our San Francisco and San Diego scientists, is working hard to bring the next wave of products to the end counter, building menu that will enable our experienced commercial team in EMEA to drive market access and reimbursement, and to secure our test inclusion in clinical guidelines, and to educate stakeholders on the clinical value of our product. A good example of our IVD market potential comes from ProSigna, our breast cancer test, which is growing nicely outside the U.S., with coverage decisions now in a number of countries. Finally, we partner with biopharmaceutical companies to provide valuable whole transcriptome and immuno-oncology data, utilizing our unique biorepositories of over 350,000 patient samples. We believe these data assets, combined with our ability to reach patients globally and will be of great value to Biopharma Company's precision medicine programs. Corinne Danan, a co-founder of HelioDx, leads our global Biopharma business unit. Our work with J&J, AstraZeneca, and Kite, a Gilead company, are great examples of our Biopharma collaborations. Turning now to our product portfolio, our first and most mature test, as you know, is a firmer for patients who are facing the uncertainty of a thyroid cancer diagnosis and treatment. We gained Medicare coverage for this test in 2012, and to date, Affirma has provided key clinical information for over 225,000 patients, and we estimate has helped eliminate over 130,000 unnecessary surgeries. Last year, the outreach performed by our endocrinology sales and marketing team resulted in approximately 6,500 ordering physicians, the most we have ever served. Given the penetration of the market, we are focused on gaining traction with the long tail of endocrinologists who are not currently utilizing our test. On the product development side, while Affirma is mature in the life cycle, we have some exciting projects underway which we believe will drive further adoption and enhance the physician experience. Our pulmonology tests continue to be impacted by COVID in the fourth quarter. These tests are largely performed in hospital settings which have more restricted access for patients and our reps. A lack of access for our sales team has been the theme of our lung portfolio since the beginning of the pandemic. In Q4 and January, this continued as we struggled with the surge of the Omicron variant. We have seen an improvement in February, though we believe that procedures and access still trail 2019 levels. As we look towards the next few years, we do expect to see further adoption of our lung portfolio, which we believe will be advanced by additional data publication and our tests' inclusion in clinical guidelines. Additionally, work on the perceptogenomic atlas has progressed. We are finalizing our launch strategy and will provide an update in the coming months. Our urology portfolio continued to perform well in the fourth quarter as we reached record levels of tests ordered and reported. Contributing to our test momentum is the expanded recommendation in the 2022 NCCN Clinical Practice Guidelines for Oncology, which now recommend treatment decisions based specifically on the patient's deciphered prostate score. Decipher is currently a covered benefit for over 150 million people in the U.S. Our urology products are in the early stages of penetration, and as a result, we believe will be a driver of our near and long-term growth through a steady cadence of new clinical utility data and reimbursement contracts. We are particularly excited about study findings that were presented at the ASCO GU meeting earlier this month. This data from a Phase III trial showed that the Decipher prostate test is a prognostic biomarker that helps physicians personalize treatment for men with intermediate-risk prostate cancer. We also recently commercially launched the Decipher Bladder Test, which helps to determine which patients with muscle-invasive bladder cancer will benefit from chemotherapy prior to cystectomy. We believe our test is the first molecular test of its kind and will require comprehensive physician education to drive commercial adoption over the course of the coming years. While one of our key focuses in 2022 is executing upon our near-term revenue growth opportunities, primarily in Affirma and Decipher, we are also building the foundation for long-term growth. There are three key projects in which we are investing to that end. Our perceptor nasal swab test, our IVD menu development, and the end counter kit manufacturing transfer. Beginning with our perceptor nasal swab, we believe this test is going to be a game changer in lung cancer early detection. It provides physicians with key information to determine the appropriate next step for patients with lung nodules that have been found through standard of care CT screening or incidentally. Today, we believe that there are approximately 1 million patients annually in the U.S. with detected lung nodules for whom our nasal swab test could help determine whether they are at low risk for cancer and so can avoid unnecessary workup or at high risk and should be accelerated to more aggressive diagnosis and potential treatments. Our novel perceptor nasal swab has been validated with findings from a multi-center clinical validation study presented last year at ASCO and with expanded data presented at the CHESS meeting in October. We believe the nasal swab's ability to augment the current screening paradigm of highly sensitive but not very specific low-cost CT imaging will go a long way toward improving lung cancer screening. Today, among the estimated 15 million people in the U.S. who are at high risk of lung cancer and thus eligible for annual CT screening, Only about 1 in 15 are actually getting screened. Knowing that there is a non-invasive test that can give physicians and their patients greater confidence in the classification of lung nodules should help funnel more patients into screening, saving many more lives through earlier detection of lung cancer when it can be more effectively treated. We expect our clinical validation study to be published this year. Looking forward, we have already started testing patients with perceptor nasal swab and returning results as part of our clinical utility efforts. We believe this growing body of evidence will enable KOL support, reimbursement, and guideline inclusion for the test. We anticipate that Medicare reimbursement will likely take up to two years. As we consider future opportunities in lung cancer, beyond the nasal swab, we continue to advance the NOBL trial, which we initiated in late 2020 with the Lung Cancer Initiative at J&J. This multicenter prospective trial is expected to enroll over 9,000 individuals with lung nodules detected incidentally or through screening, and will include patients who are benign at initial diagnosis but subsequently develop lung cancer. Through Noble, we aim to further enhance the early detection of lung cancer, reducing many more deaths. Moving to our second major investment this year, driving menu for the NCounter platform, the development work is progressing very well, and we expect to launch Invisia for interstitial lung disease next year. followed by Decipher Prostate and then Perceptor Nasal Swab. Our goal is to launch a test annually over the course of 2023 to 2025, thereby driving demand for and use of the NCounter instrument. I'm extremely encouraged by the collaboration across our global teams in three sites to advance these programs and to accelerate time to market. Our IVD commercial team that is already successfully driving Prosigna sales growth throughout Europe and beyond is poised to develop the international markets for these additional tests. Finally, with respect to our third major investment, we are on track to transition the manufacturing of our IVD kits, beginning with Prosigna, to our facilities in Marseille, which will give us end-to-end control over our IVD testing business. By the end of this year, we expect to be handling inventory management and global customer fulfillment, and by the end of next year, we expect to be fully manufacturing the kits in Marseille. In closing, 2021 was a monumental year for Verisight, and the outlook for 2022 is encouraging. I've now been here nine months and couldn't be more inspired by the impact we're having on patients' lives, where we're headed as a company, and the world-class group of employees that is going to get us there. With that, I will turn the call over to Rebecca to review our financial results for the quarter and expectations for 2022.
spk13: Thanks, Mark. As Mark mentioned, we are pleased with our fourth quarter performance despite headwinds from COVID-19. Our total revenue for the quarter was $67.3 million, an increase of 95% over the prior year, including $6.8 million of revenue from HaleoDx. We grew our volume to 22,300 tests reported during the quarter, a 70% increase over the same period in 2020. Testing revenue equaled $53.4 million, with an AST of approximately $2,625 per test, down slightly sequentially, primarily due to billed tests and commercial payer mix. Over 12,000 Affirma, Invisia, and Percepta GSC tests were reported in the quarter, and Decipher contributed approximately 7,700 tests. Product revenue was $2.8 million, reflecting 2% growth year-over-year, with proscena volume of approximately 2,000 tests, down slightly sequentially given COVID-related challenges. Biopharmaceutical and other revenue equaled $11.2 million, benefiting from a full quarter of PaleoDx and a $4 million milestone payment tied to the availability of the Percepta nasal swab and Arcleolab. Excluding the impact of intangible asset amortization, Gross margin was 66%, an increase of 200 basis points sequentially. Testing gross margin was 69%, slightly higher sequentially, and product gross margin was 43%, lower sequentially driven by startup costs for the manufacturing transfer of our IBD kits. Biopharmaceutical and other gross margin was 56%, higher sequentially primarily due to the nasal swab milestone payment. Operating expenses, excluding cost of revenue, increased $1.4 million sequentially to $56.8 million. R&D expenses grew $2.2 million to $10.3 million, driven primarily by the full-quarter impact of the HaleoDx R&D organization. Sales and marketing expenses grew $500,000 to approximately $22.2 million, driven in part by continued investment in the urology commercial team and the full quarter impact of the HaleoDx organization. G&A expenses were $18.8 million, down $1.9 million, primarily due to acquisition-related costs recognized in the third quarter. Total operating expenses included $6.5 million of stock-based compensation. We recorded a net loss of $10.5 million. Net cash provided by operating activities was $8.4 million, and we ended the quarter with $173.2 million of cash and cash equivalent. Turning now to our 2022 guidance, we project total revenue of $260 million to $275 million, or 18% to 25% growth compared to 2021. The low end of this range takes into account some uncertainty around the trajectory of the COVID-19 pandemic. Additionally, our guidance reflects strong year-over-year growth in the urology business and a firma growth that is reflective of its penetration. For the pulmonology portfolio, the impact of the Omicron variant in Q1 and the lingering effects of a prolonged period without access to providers is expected to mute growth in 2022. Biopharma revenue is expected to grow driven by the full-year impact of HaleoDx, partially offset by the nasal swab milestone in the prior year. For the first quarter, we expect a sequential decline in revenue given the milestone payment, typical seasonality, and the impact of the Omicron variant. We expect gross margin, excluding the impact of intangible amortization, to be in the low to mid-60s for 2022, approximately flat to the fourth quarter when adjusting for the impact of the nasal swab milestone payment. We are fortunate to have a strong business and portfolio of products with levers to achieve profitability in any given year. With that said, we are focused on investing to ensure the continued growth of our business and therefore we expect cash flow from operations to result in a slight use of cash. Notwithstanding potential M&A, we are confident in our position and believe we have the foundation necessary to take the business to profitability with cash on hand. In closing, we are excited about the catalyst we will deliver in 2022 and beyond, and are focused on continued execution to deliver strong financial results. I will now turn the call back to Tracy.
spk12: Thanks, Rebecca. We'll now go into the Q&A section of the call, and Tina Nova, President of our CLIA U.S. business, will join us. Operator, please open the lines.
spk11: Thank you. At this time, if you would like to ask a question, please press star 1 on your telephone keypad. Again, to ask a question, simply press star 1 on your telephone keypad. Your first question comes from the line that Brian Weinstein from William Blair. Your line is now open. Hey, guys.
spk07: How are you doing? Thanks for taking the question.
spk08: Hey, Brian.
spk07: Hey, I guess we'll just start with Decipher. I know you just gave a little bit on the guidance there, but anything else that you can provide in terms of the growth expectations there? And I'm also curious about some of the drivers there. You've been talking a lot about the Salesforce expansion and Salesforce effectiveness that's gone on there. What I'd like to try and get a little better understanding of is the growth profile broken down a little bit between kind of Salesforce investment versus kind of going deeper in the accounts. Can you give us any idea about how, you know, truly effective these Salesforce members are being versus kind of just adding brute force there?
spk08: Yeah, maybe I'll start and then turn over to Tina to add more color here. But if you think about the leaders that we have for growth in Decipher, you know, just reiterating some of the things you mentioned, but adding one is – You know, firstly, coverage decisions, right? There's 150 million covered lives, so there's more room to go there, and that is driven by the vast array of publications and getting included in guidelines. Tina can talk to some of that stuff. Another is, you know, the blocking and tackling of working with physicians to sell, and that's adding, you know, Salesforce, which we're doing. And then, you know, obviously, over time, there's also broader indications, which kind of goes a little bit hand-in-hand with coverage, but, you know, We're already covering something like over 90% of the prostate cancer patients potentially, and that's been through a process of adding indication after indication, and then there's a little bit more to go there. But, Tina, do you want to add anything to that?
spk02: Sure. So, hi, Brian. It's Tina. I think that there's still only about 20% of the market is penetrated at this time, and we believe that we have a majority of the share penetrated. And I really think that, number one, we have a fabulous sales team who does a great job of getting in there and selling. And since we don't have to go to hospitals and we can go directly to urologists that are out in the community for the most part, we've been able to access our customer even through COVID. So that's given us a great advantage. The other thing is I think a lot of our growth is really driven by the number of clinical studies that we have done and are in the process of continuing to work on, which is quite a few. And the data that keeps coming out of those, the presentations that are done by KOLs at very important meetings, and the fact that we just recently had another addition expanding the recommendation in NCCN guidelines to use Decipher, I think all of that has really put us in a great position on top of the increase in the sales reps. So I still feel very good about the growth and prospects for Decipher.
spk13: And then, Brian, to address your question on how much is implied in guidance with regard to growth, we're not going to be going into, you know, quantifying each of the puts and takes. I will share that Decipher is the largest contributor to the growth implied in guidance.
spk07: Okay. Thank you for that. And then on the IVD menu that you guys are developing in the pace of one test per year, and you mentioned Invisia, I think in 23, Decipher, Prostate 24, and Percepta, NasalSwap in 25. Why is that the right cadence? Can you just kind of talk about what it takes to kind of get those products ready for encounter? And, you know, could you potentially do something faster than that one per year cadence? What would that take?
spk08: Yeah, it's a great question. You can imagine we spend an inordinate amount of time across our team since we acquired HelioDx in August. asking that question. And consequently, the timeline has come down very, very significantly as a result of that. Bear in mind, these are not serial. They're happening in parallel. And some of the tests are more advanced than others. So Invisio, for example, we already did the code set generation and then the validation of the code set conformance with our existing tests. And that same process has to be gone through for any other tests that we're going to bring up on the platform. And then once you do that, you've obviously got to go through, as I said, the validation, the studies, the design of the assay itself to be able to do that. And then don't forget the IBDR part of it, the regulatory part of it as well, which also takes time. And some of that's within our control and some of it's outside of our control. So we squeezed this timeline as much as is, I think, humanly possible to squeeze the timeline with some incredibly experienced people across both our Marseille, or all of our Marseille, San Diego, and San Francisco teams. So we've had the best scientists on this, and we've gone as far as we can in terms of squeezing it. The goal is to come out with very strong tests, well-validated, good data supporting them, work the reimbursement and market access you know, challenges in parallel for these other OUS markets, which we're already doing for ProCigna, of course, and then, you know, really drive that cadence of one test per year and potentially go beyond that. So that's the focus, Brian. I think that is absolutely for – if you think about IBD development under an IBDR framework, and if you talk to other companies who are doing this, that is a very accelerated timeframe.
spk07: Great. Thank you for the cover on that. Thanks, guys.
spk08: Okay.
spk11: Thank you. Your next question comes from the line of Tejas Savant from Morgan Stanley. Your line is now open.
spk06: Hi, this is Yuko on the call for Tejas. Thank you for taking our questions. You mentioned in the opening comments about Omicron impact in this quarter and some encouraging trends as you head into February. Could you elaborate on what you saw during the quarter, particularly on the firma volumes? When does your guide start to bake in that return to normalcy?
spk08: I'll start and then Rebecca jump in here. Omicron came upon us all rapidly and surprisingly, and I think it started to drop off at a similar gradient in some ways. We dealt with it a lot during the back end of the fourth quarter and the early part of this quarter. And I think, you know, the effect on our businesses is consistent with the way we've always talked about it. And in the script, I talked about pomenology being most and, of course, decipher least. Rebecca, do you want to add anything?
spk13: Yeah, no, I would say I would echo Mark and effectively say that on the Affirma volumes, you know, I think in general across the broader portfolio, as Mark cited, January was light and we did see a bit of a return to, you know, the new norm, if you will. in February. What our guide contemplates is that is at the low end that we will have, you know, some meaningful business impact from COVID over the course of 2022. We aren't necessarily expecting that per se, but we are, we did feel it prudent to try and bracket that for the broader community if that was to occur. Obviously, if we had meaningful shutdowns, that wouldn't necessarily be impacted in the low end, but if we had kind of a Q3, Q4 type impact, that would be. If you look to the mid to high end, what you can effectively take in there is that the February trends that we have seen continue. I think that would be a fair expectation. And that is, you know, we haven't necessarily said the world is going to be perfect at the high end and really challenging at the low end and, you know, February is in the middle. That's not the case here. I would take the low end as a challenging environment and then, you know, mid to high being more in the lines of what we've seen of late.
spk08: Maybe I'll just add two quick things. One on our firmer, you know, I think As we've said before, a firmer hits us in those hotspot areas, and there is access, you know, physician, sorry, cell rep access and patient access issues in those hotspot areas. But, you know, generally across the board, the procedures are less impacted as a result of that than they are, for example, in lungs. In terms of a new normal, I don't know when we'll be in a new normal as far as the pandemic is concerned. We'll be out of – there'll be these variant spikes like there were with Omicron, and let's hope we don't see another one of those in the future. But we've talked before about second- and third-order effects. So, for example, the effect the pandemic is now having on staffing within our customers – is pretty clear, and I think, you know, none of us knows when those are going to abate. So, you know, that's one of the cautions I would always have is, you know, there are these other effects that so far we've been able to manage through, but, you know, they could impact our business. And I think to Rebecca's point, that's really contemplated. You know, those negative effects are contemplated in the low end to some degree.
spk06: Great. That was super helpful. And then just a quick model question. Could you help us think about quarterly cadence of OPEX through the year?
spk13: Yeah, why don't we handle that on the post-call?
spk06: Okay, thank you.
spk11: Thank you. Your next question comes from the line of Mott Sykes from Goldman Sachs. Your line is now open.
spk03: Hey, everybody. Thanks for taking my questions. Appreciate it. Hey, maybe just... Mark, high-level question for you. Kind of capital allocation, but also kind of present state of the business as you've kind of been in the seat for a little while now. Just given the number of acquisitions you made last year and some of the sales force you acquired but also invested in, how are you thinking about, from a capital allocation standpoint, my assumption would be a lot of it would shift kind of internal versus sort of external or organic versus inorganic. But I just would love to get kind of the state of the way you see the sales force and any pockets of opportunity that you see that you might want to bring in and just how you see the year playing out in terms of how you're going to allocate capital?
spk08: Well, I think of it in terms of really two phases. One is, you know, our catalyst for the coming year. So the things we've talked about, like driving Decipher growth through adding sales team to that. Some of the projects that we're doing around, you know, Affirma as well to continue to enhance that product. You know, continuing to support and fund studies that help drive our pulmonology portfolio in addition to the other assets in our portfolio. Remember, we're in eight of the tens of cancers now, so we're really taking a portfolio approach to our investments. The second, oh, by the way, I probably should add one, which is building the infrastructure. We're a much different company than we were before we acquired Decipher and Helio DX. We're a company of 750 or more employees now with complexities that we didn't have before and locations in multiple countries. And for that reason, we need to invest in the infrastructure as well to support the scaling and being ready for when these other major products, which I'm gonna talk about in a moment, hit. So that's an investment over the next couple of years. And then that second phase was the longer-term investment. So the three that I talked about, investing in the nasal swab, investing in the encounter portfolio, and then bringing our manufacturing to Marseille.
spk13: And just one thing to add. We don't have, at this point in time, any M&A activities to cite. Obviously, with the asset dislocations that you have seen of late, there are – opportunities out there. But, you know, we have a great portfolio that we will invest in, as Mark said, and, you know, we will be available for any M&A conversations that we feel prudent, but aren't necessarily going to be out there proactively.
spk08: Yeah, never say never, but, you know, we've got a lot to do right now, and we're handling it well.
spk03: Got it. Thank you for that helpful color. Then maybe, I know it's a smaller portion of your business, but When you look at the BioPharm revenue, I know you've included HaleyDX in there, and there was a milestone payment in Q4. But if I were to kind of look at the underlying trends in your ability to leverage that biorepository, that 350,000 patient samples, how do you feel in terms of your progress? You mentioned a couple partners that you've got, but just would love to hear, you know, what you think that business could be, understanding you're not going to guide on a segment basis, but just would love to hear the momentum there. in that biopharma-specific business and perhaps some of the leverage you can apply to that large biorepository you have?
spk08: Yeah, I think over time, I've always said the biopharma business could be a significant growth driver for us. I mean, that data asset set that we have, we're already able to leverage a large part of that in these deals that we're doing, but there's clearly opportunity to do more. We only put this global EU together in August. And Kevin is very focused on driving that business across, you know, all of Verisight globally and leveraging all of the assets that we have got. So, you know, whether it's in translational research and kind of looking at the drug effects on the tumor microenvironment, which is one of the things that we got from the Haleo business, whether it be kind of clinical development and, you know, clinical trial selection and optimization, looking at biomarker work, the kind of things that we've done with Kite, for example. And then commercial and market access, companion diagnostics, I think is an opportunity across all of our businesses, all three that we put together. And so there's multiple different ways that we could leverage our skills and capabilities in addition to the data set. And Corinne's very focused on kind of building the data assets, the atlas that we need to really help to give biopharma what they're looking for to help grow that business. So I think we'll probably talk about this a little bit more in the future because I do see it, as I mentioned, a good growth driver for us, but very happy with the progress so far in putting the businesses together.
spk03: Great. Thank you very much.
spk11: Thank you. And your next question comes from the line of Sunji Nam from BTIG. Your line is now open.
spk14: Hi, thanks for taking my questions. Mark and Rebecca, could you talk about any early feedback you're getting on the nasal swab as you're delivering some of these tests to the early access sites?
spk08: Yeah, it's early days at this stage, but we have obviously initiated sites and returned results to patients And I'd say the first thing is we're getting a lot of interest in becoming one of the sites here. It's not going to be available to everybody. Sites have to qualify for that and be the right kind of site. But the interest level is high. And then the desire to get through the necessary stages of contracting and initiation and training are very much there. So we've been seeing a lot of response. And so far the feedback we're getting from those that have used it is very good. So I think that's helping to really drive momentum, and we'll continue to build those sites up. We're looking at up to 50 sites. We can go further if we want to. We can do less if we need to. We're trying to get to a certain number of patients here, and we're making good progress on that.
spk14: Great. And then for the IDD strategy, you know, as you talk about launching a product a year, you know, after obviously Invisia and Decipher, et cetera, I think in the past you guys had some products under development with partners or partners developing products for use on Encounter, and I was wondering if they're still, you know, part of the strategy and if that one per test, I mean one per year launch includes potential tests from partners as well.
spk09: Yeah, I'm actually glad you asked that because that's a good clarification. That one per year over that 23 to 25 timeframe does not include those.
spk08: We're talking specifically about our own tests there. But you're absolutely right. Those other tests, there have been a couple in development there and We haven't talked about the timeframes. That's really up to them to talk about those timeframes, not us, but we're continuing to work and support them. And, you know, looking forward to adding more of those. That is certainly part of the business model that we're very interested in.
spk14: Gotcha. And then lastly from me, maybe one for Rebecca, thank you so much for the growth margin guidance for this year. As we think about next year, if you guys transition the manufacturing, the encounter manufacturing to France and, you know, launch some of the new IVD products. How should we think about growth margin, you know, growth margin, you know, even if you can comment on it kind of directionally, being impacted with those, yeah, activities?
spk13: Yeah, it's a great question, Sanjeev. Thank you for it. But I'm going to broaden it a little bit and start both on the coverable testing and product growth margin, if that suits you. On the testing side, we do think as we bring the three companies together that there are efficiencies that we can gain through the CLIA lab operations in particular. And while we're not necessarily ready to quantify those today, I think in the future years we'll be happy to chat about that. It is something that the team is focused on and we're working through. On the product side, I see the benefit to gross margin really coming in that first full year when we have both the logistics as well as the manufacturing. So think about that as less of a 23 impact and more of a 24 impact. And then as we have volume absorption over the course of 24, 25, 26, you'll see even more of a benefit for it. So again, not willing to quantify it today, but that will definitely drive some significant efficiencies through that line.
spk08: Maybe one punctuation on the ClearLab operations and the efficiencies. To be real clear, I mean, that's efficiency as we scale versus synergy of putting the businesses together. Agreed. Yeah.
spk14: Great. Super helpful. Thank you so much. Thank you.
spk11: Thank you. And your next question comes from the line of Puneet Fuda from SBB Lira, and your line is now open. Thank you.
spk10: Yeah, hi, Mark, Rebecca, thanks for taking the question. So the first one is really, and I don't know if this was covered already, but in terms of the organic, you know, guide that you have for the full year, can you just remind us how much of that is, you know, sort of organic versus the new additions, including Helio DX and others that you're baking in for the full year guide?
spk13: Yeah, Puneet, we haven't separated the pieces beyond the commentary and the script at this point in time. I think you can back into it based on the commentary on Affirma and Lung, as well as Decipher. And Haleo, obviously, we have a full-year benefit of that. I will say their business tends to be back-end weighted, so I wouldn't necessarily just run right that when doing your calculations.
spk08: Yeah, and I think just one thing for us and how we look at the business going forward, obviously, you know, the capital deployment for those acquisitions was a key part of our strategy in putting the pieces together. And so now, I totally understand why you're asking the question, but we really think of that as that's now part of our organic business. And our resource allocation decisions have been made for 22 and beyond across the entire portfolio at this point. So it's become inextricably blended, if you like. And that's probably how we're going to talk about it going forward.
spk10: Okay, got it. And in terms of, you know, I believe at one point, and I don't know if you covered it already, but in terms of J&J, there was an expectation for a payment in biopharma in the fourth quarter. Can you just remind me if that came through this year?
spk13: Yes, Puneet, it did come through in the fourth quarter of this year. It was $4 million in the biopharma line.
spk10: Okay. Okay. And then the last one for me, in terms of commercial Salesforce, can you just maybe remind us further investments and expectations to increase Salesforce and sort of what are you expecting in terms of overall expansion or do you have enough adequate Salesforce coverage on all the products now?
spk08: Maybe break that into two parts. As you know, we reorganized in January to really focus our commercial efforts on our US clear business and then our IBD business because they're very different businesses with very different commercial needs. I'll ask Tina to talk to her thoughts around scaling and growing the commercial activities for the clear business and then I'll talk about the IBD.
spk02: So I actually think that we're in a really good position starting off the year with our sales reps in all of our indications. And what I truly believe in is finding the best people, not just a lot of people, and making sure that they have the depth and the knowledge to go in and really sell. And I think that's really the key to success. And we're at 39 with Decipher, and I think that team is really well-versed in urology. And they get to go in and actually speak to the doctors because they don't go to hospitals. They go to where the urologists are. And so we haven't been as affected by COVID as some of the other divisions like the pulmonology division where you can't get into hospitals. And so it's a little unfair to compare them because some of them were more affected by that than others. But I feel really good with where we are with our teams right now. And I don't think we need to make huge additions to any of the teams at this point as far as the rest of the year goes.
spk08: Thanks, Tina. I couldn't agree more. And then outside the U.S., you know, obviously, you've got to go country by country. And right now, our focus is very much on where the pro-signore opportunities are. Our team has been very successful in driving those. That starts with building, you know, the structure of a country manager and then the reimbursement of market access capabilities. And then, you know, that's all now part of Stefan's organization and still being driven by Morton across all of EMEA. And then, you know, as we launch new menu, then, of course, you know, we're going to make sure we're prepared for where the opportunities are, kind of meet the customers where the needs are. And so as we come out with Invisia and Decipher, and by the way, there's a lot of pent-up demand for Decipher, we'll make sure that we're appropriately staffed in each of the countries to be able to launch those products as quickly as the excitement level grows.
spk10: Got it. Okay.
spk08: Hopefully, guys, I'll back into the queue. Thanks. Thanks.
spk11: Thank you. Your next question comes from the line of Mike Mattson from Needham and Company, your line is now open.
spk04: Yeah, thanks. So I wanted to ask about the nasal swab test. I think, Mark, you said something along the lines of that it might actually drive more screening, which I thought was interesting because, you know, I kind of thought, well, more screening will lead to more nasal swab, you know, opportunity. But maybe you could just talk about that and is there some way you can kind of, you know, market the product with that? you know, to your customers on that basis?
spk08: Yeah, it's a great question. Thanks for picking up on that. I think, you know, let's break it down. Today, under the USPSTF guidelines, there are 15 million people who are high risk for lung cancer, smokers, former smokers, current smokers, et cetera, who should be getting screened on an annual basis. We currently believe one in 15, so a million people are currently getting the screening that they should be And I think there's a lot of reasons why it's not being driven. You know, access to screening, people's reticence, whatever. When you do get screened and a lung nodule is found, so many of those nodules are actually benign. And so you go through this whole journey of, you know, could it be lung cancer? And in the majority of cases, of course, it turns out that it isn't. Low-dose CT for screening is very sensitive but not very specific. It's also very low cost. So it's accessible in that regard to a large degree. But, you know, having a test like nasal swab, which is clearly, I mean, first of its kind, very non-invasive. I mean, we've all gotten used to having, you know, swabs stuck up our noses over the last few years, and it's truly non-invasive. Having a test like that that can actually help kind of figure out if a lung nodule in a patient is at low risk for cancer and you know, can avoid unnecessary procedures or is at high risk and should get accelerated diagnosis or treatment, that ability to do that without having to do a bronchoscopy necessarily in and of itself might encourage more screening. So, just one of those effects that, you know, in opinion I think could happen and would potentially position the nasal swab in the future to help achieve that. Any time, that in and of itself would result, as you quite rightly say, in more lung nodules being found. And every time a lung nodule is found, we believe, you know, if it's, you know, imaging alone can't assess it, which in many cases it can't, we believe a nasal swab should be used.
spk04: Okay. Got it. Thanks. And then just on the other pulmonary tests, lung cancer tests, you know, I hear the comments on the, you know, lack of access to the physicians or clinicians. But, you know, I've heard other companies talking about, you know, things like virtual training or, you know, maybe capturing them at, you know, medical conferences or things like that. I mean, are there places, are there ways to, you know, get in front of these physicians and educate them about the the tests, you know, outside of the kind of hospital setting? And are you pursuing any of that?
spk02: Hi, Mike. It's Tina. I mean, absolutely. We do do that ourselves. The COVID has put us all in a different training realm than we used to be in, and so we actually do a lot of virtual. I mean, recently there was a very large pulmonology meeting. I think there were – it was an audience that would fit about 500 people, and there were about five in the audience. But there were thousands of people that had called in for the meeting. So we're still seeing that. And virtual plays a very big role in training and a big role in dispersion of data and what people are seeing. And there's also a lot of communities online where docs talk together, where just pulmonologists talk or just endos talk together and communicate that way. But you're absolutely right. It plays a very important role today.
spk08: And that can do a great job of continuing that cadence of awareness and education, but what it won't do is replace the bronchoscopies that aren't getting done and the procedures that aren't getting done, and that will continue to be a challenge as long as we're in either a situation of variants, shutting down locations, or staffing shortages resulting in these procedures not being able to get done.
spk04: Okay, got it. Thank you.
spk11: Thank you. Your next question comes from the line of Mason Carrico from Stephens Inc. Your line is now open.
spk05: Hey, guys. Thanks for taking the questions. Just one or two quick ones from me. Appreciate the detail on the rollout of the additional encounter tests. I think you may have previously mentioned this, but could you provide any color on how many encounter platforms are currently installed in Europe and Are there any specific geographies that you guys plan on targeting initially?
spk08: Well, yeah, again, we're back to, we're very much focused on right now the ProSigna that's on the market. Of course, as we've said before, we need menu in order to drive more installations and placements. So these additional tests will help drive more of the same. And, you know, it's important that the sites, the labs that are purchasing the encounters are able to utilize those in multiple different tests and amortize that cost across the I don't know if we've talked publicly about the number of sites. We can always follow that up, a number of install dates. We can follow that up. But, you know, clearly over the next couple of years, we're getting ready to launch first Invisio and then Decide for prostate and then NasalSwab. That will enable us, the impending launch will enable us to place more instruments as well.
spk05: Got it. That's it for me. Thanks again.
spk08: Thank you.
spk11: Thank you. Your next question comes from the line of Thomas Ladin from Lake Street Capital. Your line is now open.
spk10: Hi, guys. This is Travis filling in for Thomas. Congrats on the quarter. You said that you were covering eight out of the ten top cancer indications. Should it be our expectation that you'll try to get the other two, or are you good with the eight?
spk08: No, not necessarily. I mean, again, never say never. And we might go beyond the 10 top, but the eight is a very significant part of, from a patient standpoint, the main causes of mortality in the U.S. And so we're very focused on those. Not only, I mean, we actually have, within our portfolio, we have a portfolio approach. I mean, if you think about it, you know, we have a lung portfolio of multiple tests. We have a urology portfolio of multiple tests. And so, you know, we'll continue to broaden within those indications and continue to make those tests accessible to more patients with more, you know, different types of disease within the indication and continue to broaden geographically and across the care continuum. So you'll see us continue this portfolio approach. But again, we never say never. I mean, we'll continue to add indications. That's one of the things as we grow our business we look to do. But right now we're very much focused on executing on the opportunities that are ahead of us with what we've got, which is very substantial thanks to all the great strategic work that's been put in place over the last six years to build that.
spk10: Very helpful. And then my final question is, can you just tell us on any publications that are coming out or any kind of presentations that you guys are getting ready for?
spk08: I mean, there's a lot. I think just keep an eye on those big markets, those indications that we're in, but there's a lot coming up.
spk02: We've got ASCO meetings. We have ESMO meetings. We have CHESS meetings. We have LUNG meetings. That's the problem with having all eight cancers. There's a meeting every time you turn around. So, yes, of course, we plan to have publications continue to roll out. That should never stop results from clinical trials, and we will participate in meetings. It's very important.
spk10: All right, very good. Thank you for answering my question.
spk11: Thank you. And your last question comes from the line of Andrew Cooper from Raymond James. Your line is now open.
spk01: Hey, everybody. Thanks for the question. A lot's been covered. So maybe just to drill in a little bit more on a prior question in terms of the nasal swab, you know, and low-dose CT compliance. When you think about the potential of driving that higher, it seems like it might be a nice place to partner with some other players and maybe go through some different channels you know, a little bit further removed from sort of your core, how do you think about whether there's a partnership opportunity that can kind of be that rising tide for Loto CT and the nasal swab or kind of what's the openness to working with, with other players out in the field?
spk08: Yeah, I mean, when you're developing a new market, you're always looking at different ways to, you know, address that market. And I think partnerships are one. I mean, there's a lot of people that not just, I mean, actually way more. There are people outside of us, a lot of them who are trying to drive more screening. It's better for the nation. It's better for all the patients who are being missed, who aren't getting diagnosed early with lung cancer. And so we're just, you know, part of that. But there's a lot of other people who are focused on that as well. So that may present opportunities. in the future and something that we might consider. And we have an organization, a business development, corporate development organization that spends their time literally looking at that kind of stuff, as you can imagine, not to mention the focus from the business units.
spk01: Okay, great. Like I said, a lot's been covered, so I'll stop there. I appreciate the time.
spk11: And there are no further questions at this time. I would now like to hand the call back over to Mark Stapley to make any closing remarks.
spk08: Great. Thank you, Leah. Appreciate it. Before closing, I'd like to reiterate how pleased we are with our Q4 and full year 2021 results. In 2022, we expect Affirma and Decipher to be the primary drivers of our business, with new clinical data continuing to drive reimbursement and guideline inclusion across our broad suite of products, resulting in greater adoption. We're also investing this year in our key long-term growth drivers, which again are our percepto-nasal swab, expanding our IBD test menu, and transferring manufacturing of our IBD kits to Marseille. I truly believe we have the strategy and people we need to advance our ambitious plans to become a global diagnostics leader. I also know that we cannot underestimate the power of culture in driving our success. To that end, one of my top priorities for 2022 is to ensure that we have a strong culture that draws from the best of our legacy organizations and enables us to move forward as one VeriSite to achieve our ambitious goals. I look forward to updating you on our progress in our Q1 earnings call. Thank you.
spk11: Ladies and gentlemen, this concludes our call today. Thank you for joining us. You may now disconnect.
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