Veracyte, Inc.

Good day and thank you for standing by. Welcome to the Verisight second quarter 2022 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'll need to press star 1 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Shayla Gorman, Director of Investor Relations.

Good afternoon, everyone, and thanks for joining us today for a discussion of our second quarter 2022 financial results. With me today are Mark Stapley, Verisight's Chief Executive Officer, Rebecca Chambers, our Chief Financial Officer, Dr. Tina Nova, President of our U.S. CLIA business, and Dr. Julia Kennedy, Global Chief Scientific Officer and Chief Medical Officer. Verisight issued a press release earlier this afternoon detailing our second quarter 2022 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 the applicable securities laws. Forward-looking statements are subject to risks and uncertainties, and the company can give no assurance 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 files with the Security and Exchange Commission, including Verisight's most recent Forms 10-2 and 10-K. In addition, this call will include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable cap financial measures are included in today's earnings release, accessible from the IR section of Verisight's website. I will now turn the call over to Mark Stapley, Verisight's CEO.

Thanks, Shayla, and thanks, everyone, for joining us today. I'm pleased to provide an update on our second quarter financial results, as well as our key growth drivers. As you saw in today's earnings release, our strong execution during the quarter resulted in impressive Q2 growth of 32% versus the prior year, with revenue equaling $72.9 million. I was particularly proud of our endocrinology and pulmonology commercial teams who worked tirelessly in the wake of an unexpected supply chain issue to ensure that our patients were taken care of and had access to our tests. More on that later. The largest contributor to our second quarter revenue was our Decipher prostate product. With growth of close to 1,200 tests as compared to last quarter, we saw the largest sequential increase in this product to date. Adoption is growing nicely, yet we still estimate that market penetration for this class of tests is currently less than 30%. This gives us confidence that there remains ample room for growth and for penetration to continue to meaningfully increase for a number of years. Decipher Prostate's adoption has been propelled in part by the growing body of literature demonstrating the test's ability to guide treatment decisions for men with localized prostate cancer. Last month, we announced findings from a multi-center randomized Phase III trial, which were published online in Annals of Oncology. This study demonstrated that the Decipher Prostate test can help identify patients who are at highest risk of cancer progression following prostatectomy and who would benefit from earlier, more intensive treatments. In May, we were delighted the American Neurological Association and the American Society for Radiation Oncology issued an updated clinical guideline that is favorable towards genomic testing, including the deciphered prostate test, to help guide care for men with localized prostate cancer. The guideline authors specifically cited extensive evidence, including from multiple Phase III clinical trials, which demonstrated that the deciphered prostate genomic risk score is strongly associated with prostate cancer outcomes. We believe this additional clinical data, as well as bolstered guidelines, will augment the already extensive body of evidence we have generated in support of our prostate tests. Moving to Affirma, fortifying and building our endocrinology business remains a key strategic imperative. As a result, our investment in the product and associated clinical evidence continued during the quarter. A new meta-analysis presented at the Endo 2022 Annual Conference showed that the Affirma GSCs real-world performance is consistent with, and even stronger in some cases than, the test clinical validation study findings. Additionally, a new study published in Thyroid demonstrated the accuracy of our Affirma medullary thyroid cancer classifier in identifying MTC, a rare but aggressive form of thyroid cancer, in preoperative samples. This classifier is already part of our Affirma GSC test. We believe that clinical evidence such as this, combined with our continued investment in product enhancements and the customer experience, will support Affirma growth next year of mid to high single digits. Regarding Affirma's Q2 results, we saw slightly lower volume growth than we expected. During the quarter, we were surprised by a key vendor that underwent a flawed ERP transition, significantly impacting their ability to process our customer orders on a timely basis. Our team mobilized quickly to identify and prioritize critical orders, to locate and assemble key components, and to transact thousands of shipments in-house while working with the vendor to optimize their activities for our customers. Through what I would only describe as heroics of our team, we were able to meaningfully minimize the impact to those customers, and most importantly, their patients. We believe that in the end, very few patient procedures were delayed, and while the true in-quarter impact to a firmer is difficult to quantify, we estimate that this situation lowered volume by approximately 4% compared to the prior year and our expectations. At this point, the vendor's internal issues are now largely resolved, and we are back to a near normal level and timing of shipments from them, with our team continuing to supplement as needed. Another standout in the quarter was our biopharma business, which generated key data as well as strong quarterly revenue. An oral presentation at ASCO detailed that our Immunoscore Immune Checkpoint, or IC, assay can identify patients who are likely to benefit from immune checkpoint inhibitors or ICIs in metastatic non-small cell lung cancer. Further, a publication in the Lancet Oncology also demonstrated similar results in metastatic colorectal cancer. These findings are important because while immune checkpoint inhibitors have revolutionized therapeutic management of patients in a number of cancers, current biomarkers are limited for identifying the patients who will benefit. We believe that the Immunoscore IC assay could help biopharmaceutical companies select the right patients for their immune therapies and help improve the success rate of their clinical trials, notably in combination trials including ICIs. We look forward to additional future publications incorporating our immuno-oncology assays. These exciting findings reinforce our confidence that immuno-oncology will continue to be an important part of Verisight's long-term strategy. Going forward, we are particularly focused on our multi-omic biopharma offerings, as we believe we have a differentiated asset. At the same time, and after thorough analysis of our immuno-oncology portfolio, we have decided to pause our commercial efforts for the Immunoscore colon cancer diagnostic test. Given the breadth of investment opportunities in front of us, with early-stage products at various phases of being launched or developed, paired with our acute sense of fiscal responsibility, we are prioritizing our focus and resources accordingly. Moving now to our long-term growth drivers, we were pleased to share additional performance data on our perceptor nasal swab test at the recent ATS meeting. These data demonstrated that our test could accurately determine lung cancer risk across a range of tobacco-related exposures, ensuring that it can be used reliably in people whose lung nodules were found incidentally or through screening. With respect to broad commercialization of nasal swab, we remain focused on securing a clear path to reimbursement prior to driving high-volume growth and generating clinical utility data to ensure commercial success, including finalizing patient enrollment in our Nightingale study by the end of next year. Activation of sites is progressing well, and while patient enrollment is lagging our expectations by about a quarter, we are starting to see momentum build. Early signs from the test and treatment results that we have on a small number of patients are encouraging, as we're already seeing a positive impact on treatment decision-making. Of course, we don't yet have the ultimate patient diagnosis, but our robust clinical validity data, which we have already shared, gives us confidence in the outcomes that we expect to see when we do. We are monitoring the data as it is generated and plan to take advantage of opportunities to publish favorable interim clinical utility results in an effort to drive the earliest reimbursement decision possible. We are excited to witness the positive impact perceptor nasal swab will have on patients and providers. Another key long-term growth driver is the transition of our tests onto the NCounter analysis system to fuel our global expansion. We believe the menu of IBD tests in development are exclusive diagnostic rights to a best-in-class instrument, and the team's extensive track record of developing IBD tests positions us extremely well to succeed in global markets. We already offer the Prosigna breast cancer test and are on track with our development submission timelines for our broader menu as previously detailed. With that, I will now turn the call over to Rebecca to discuss our financial results in more detail.