Veracyte, Inc.

Good day and thank you for standing by. Welcome to the VeriSight Second Quarter 2023 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 this session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. 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, Investor Relations.

Good afternoon, everyone, and thanks for joining us today for a discussion of our second quarter 2023 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 second quarter 2023 financial results. This 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 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 Securities and Exchange Commission, including Verisight's most recent Forms 10-Q and 10-K. In addition, this call will include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP 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 Statley, Verisight's CEO.

Thanks, Shayla, and thanks, everyone, for joining us today. Our second quarter was incredibly strong, with revenue of over $90 million, representing growth of 24% compared to the prior year. This success was driven by our core testing business, which grew an impressive 37%, and is another clear demonstration of our proven framework of driving test adoption through robust clinical evidence, reimbursement, and guideline inclusion. Our performance in Q2 once again demonstrates our ability to consistently deliver strong top-line results as well as our commitment to enhancing our already differentiated financial profile. To this end, this quarter we generated approximately $17 million in cash from operations, a record for the company. We reported approximately 15,000 decisive prostate tests in the quarter, with our level one evidence status in the most recent NCCN guidelines, we believe now contributing to a meaningful step up in tests delivered to patients. This and the execution by our talented commercial team led to us recording the highest number of new physicians receiving a Decipher test result that we have experienced so far. We are proud to be empowering so many physicians with key insights to guide important treatment decisions for their patients with prostate cancer. We last updated our penetration estimates for the prostate market at year end. Given the outperformance of our Decipher franchise year to date, we now believe that the market for molecular diagnostics in prostate cancer is approximately 30% penetrated, with Decisive continuing to represent the majority of that penetration. While we've made significant progress in adoption, we believe that there is still ample opportunity for continued growth for many years to come as we work to make this test available to more patients facing a prostate cancer diagnosis. In line with our strategy of developing clinical evidence for our test, We continue to add to our impressive library of over 75 published studies supporting the performance and clinical utility of the Decipher Prostate Genomic Classifier. We were pleased to share a real-world study that published in JNCI Cancer Spectrum, which matched the data from our Decipher Prostate test with that from the National Cancer Institute's population-based SEER program. Results of the clinical utility study suggest that use of the decipher prostate test helps physicians personalize prostate cancer treatment approaches as intended. Specifically, the findings show that physicians treat patients with higher risk decipher scores more aggressively and patients with lower risk decipher scores more conservatively, demonstrating clear real-world utility for the test. Our dedication to evidence development extends to leveraging our testing capabilities and data sets to help advance scientific understanding in the disease areas that we address. A good example is our research use-only DecipherGrid offering in prostate cancer. This quarter, at the American Society of Clinical Oncology annual meeting, findings from three separate studies were shared demonstrating the ability of DecipherGrid to help provide new insights into specific molecular profiles that may predict individuals' response to certain treatments. In endocrinology, we delivered another record quarter with more than 13,000 affirmer tests performed, helping physicians make better diagnostic and personalized treatment decisions for their patients with thyroid nodules. This outstanding performance is due in part to continued enhancements we've made to the test, including the addition of promoter mutation testing, as well as ongoing customer experience improvements to our online physician portal, including online ordering. Our excellent commercial team leveraged these enhancements to add over 70 new accounts in the quarter and drive further penetration of existing accounts. Given this performance, we are now raising our Affirma revenue growth expectations to be in the low to mid teens for 2023. We are excited about the potential to leverage our testing capabilities and data sets to also help provide researchers with further insights into thyroid nodule biology, similar to how we are using Decipher Grid. This quarter, for example, in a study presented at the Endo2023 meeting, investigators developed and tested hundreds of genomic risk signatures based on a firm's whole transcriptome gene expression profiling. Interestingly, they were able to identify risk signatures that showed potential to differentiate indeterminate thyroid nodules that were low risk for tumor invasion and regional lymph node metastasis. such as these may help fuel product development efforts in the future as we continue to improve our tests and enhance our ability to help patients facing thyroid cancer. Turning to our biopharma business, like others in the space, we continue to face significant challenges this year given the current macro environment. As a result, we are seeing reductions in existing projects as well as lengthened timelines for signing new business. At this point, we have not yet seen a shift that would indicate this trend is reversing in the near term, and so we continue to expect declines in our biopharma and other revenue line and have updated our guidance accordingly. Moving to our long-term growth drivers, we made significant progress in the second quarter on site initiation for Nightingale, the clinical utility study for our perceptor nasal swab test. I'm extremely proud of our clinical and medical teams who have signed up almost 70 sites to be part of the study so far, with even more in the pipeline. This demonstrates, we believe, the strong support and enthusiasm for the nasal swab test from principal investigators, or PIs, and patients with the vast majority of lung module patients who are offered the test choosing to participate. However, the pace of individual site ramp-up and patient enrollment is lower than we and our PIs anticipated. driven largely, we believe, by ongoing staffing challenges at many of our investigator sites. Given that, we have conservatively adjusted our estimates for enrolling the last patient in the trial to now be during the second quarter of 2024. Our IBD strategy, which will enable us to deliver tests to physicians and their patients outside of the United States, is focused on our current IBD offering, the ProSigna breast cancer test, as well as the development of Invisia, Decipher, and Nasalsorb IBD products. Beginning with ProSigna, we had another solid quarter. Compelling clinical utility data for the test was presented at the ESMO Breast Cancer Congress from the EMIS study in Norway, a prospective multi-year population-based study, including data from over 2,100 participants. The results of these initial data demonstrated that ProSigna test results altered treatment decisions, including significantly reducing the use of chemotherapy among patients with clinically high-risk disease. Consequently, Prosigna has been adopted as a definitive breast cancer test in Norway and is now used routinely for patient care. On the development front, with Invisia already submitted for regulatory approval, we continue to make good progress on our Decipher Prostate and Perceptor Nasal Swab offerings with regulatory submissions slated for 2024 and 2025, respectively. In summary, Q2 was an exceptional quarter with strong execution in our core testing business and progress across our diagnostic long-term growth drivers. We're excited about our performance through the first half of the year and, as such, have meaningfully raised our expectations for the fall year. So with that, I will now turn to Rebecca to review our financial results for the quarter and updated guidance for 2022. Thanks, Mark.