Veracyte, Inc.

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.

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.

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.