Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MRD revenue increased by 52% year-over-year, driven by both clinical and pharma sectors.
- Medicare set a new gapfill rate of $2,007 for the clonoSEQ test, a 17% increase from the previous rate.
- Operating expenses declined by 11% compared to the previous year, showcasing effective cost management.
- Sequencing gross margin improved by 6 percentage points due to workflow efficiencies.
- The company raised the lower end of its MRD revenue guidance due to strong year-to-date performance.
Negative Points
- Immune medicine revenue decreased by 32% from the previous year, primarily due to a decrease in Genentech upfront amortization.
- The company took a $1.8 million reserve charge related to aged claims from 2023, impacting ASP growth.
- Despite strong MRD growth, the upper end of the MRD revenue guidance was not increased, indicating potential uncertainties.
- There is potential for volatility in pharma revenue due to the timing of study completions and regulatory milestones.
- The company reported a net loss of $32.1 million for the quarter, highlighting ongoing financial challenges.
Q & A Highlights
Q: Can you explain the impact of the new gapfill price on your 2025 pricing strategy?
A: Chad Robins, CEO, explained that the new gapfill price of $2,007 per test will positively impact the long-term margin profile. The company expects the average selling price (ASP) to increase to $1,300 per test in 2025, driven by expanded payer coverage and operational enhancements. The impact will be seen more immediately for new Medicare patients, while commercial payer negotiations will take more time.
Q: What is the outlook for MRD pharma revenue growth and milestones in 2024?
A: Kyle Piskel, CFO, stated that the company has a risk-adjusted assumption for milestones in Q4, with no significant dollar amount expected. The pharma business has a backlog of around $200 million, and the ODAC recommendation is expected to catalyze this backlog and new bookings. The company anticipates a growth rate similar to this year for 2025.
Q: Why didn't you increase the upper end of the MRD guidance despite a strong Q3 performance?
A: Kyle Piskel, CFO, explained that the MRD milestone in Q3 allowed them to de-risk the low end of the range. However, they are cautious due to potential quarter-to-quarter volatility in pharma and possible impacts from recent hurricanes. The company aims to be prudent to ensure they meet their guidance.
Q: How is the EMR integration progressing, and what impact do you expect on volume growth in 2025?
A: The company has completed 11 Epic integrations and expects to have 20 by year-end. They anticipate that 50% of total order volume will flow through integrated platforms by the end of 2025. The integrations have shown consistent growth patterns, with accounts experiencing faster growth post-integration.
Q: What are the cost-saving opportunities in G&A, R&D, and other areas?
A: Kyle Piskel, CFO, mentioned that sales and marketing will focus on leverage, while G&A has been flattened to drive savings. R&D investments are targeted, with some larger initiatives remaining in MRD. The company continues to seek additional savings opportunities but has no plans for further reductions at this time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
