Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MRD revenue grew 36% year-over-year and 8% quarter-over-quarter, driven by both clinical and pharma segments.
- Total operating spend, excluding one-time costs, declined by 15% year-over-year and 8% sequentially.
- Sequencing gross margin increased by 5 percentage points compared to the previous quarter.
- Cash burn reduction of 32% in the first half of the year, ending with approximately $292 million in cash.
- Updated full-year guidance includes raising MRD revenue range and decreasing operating spend.
Negative Points
- Immune medicine revenue decreased by 66% year-over-year, driven by an 82% decrease in Genentech upfront amortization.
- Total company adjusted EBITDA was a loss of $21.4 million in the second quarter.
- Net loss for the quarter was $46.2 million, or $38.4 million excluding one-time asset impairment and restructuring charges.
- The company is still facing challenges with Medicare Advantage collections, impacting overall revenue.
- Some strategic initiatives, such as the LIMS overhaul, have been deprioritized, potentially delaying future efficiencies.
Q & A Highlights
Q: Can you clarify the unit economics for studies moving to primary endpoints?
A: The milestone revenue for studies using MRD as a primary endpoint can be roughly two times greater than for secondary endpoints. This will be a 2025 tailwind, with 2024 focused on executing bookings and growing the backlog. (Kyle Piskel, CFO)
Q: Are you involved in discussions with the FDA regarding MRD in additional disease states like CLL and DLBCL?
A: Our principal investigators are involved in these discussions, and we provide clonoSEQ data to support them. The timing is uncertain, but we hope the process will be faster following the multi-myeloma acceptance. (Chad Robins, CEO)
Q: Is there a risk that cost reductions could hurt top-line growth, particularly in the MRD business?
A: Sales and marketing were relatively untouched. We are adding resources in market access and focusing on coverage and collections to drive ASP growth. We are confident that we are making the right investments without hurting the top line. (Chad Robins, CEO)
Q: How are you progressing with cost reductions in clonoSEQ, and what are the long-term gross margin expectations?
A: We are gaining leverage through efficiency initiatives and increased volumes. We expect a 3% to 5% improvement in sequencing margin over the long term, with significant efficiencies from the planned launch of new initiatives in the back half of 2025. (Chad Robins, CEO)
Q: What is the impact of the ODAC vote on MRD endpoint adoption and clinical use?
A: The ODAC vote has positively impacted pharma partners, leading to new studies and discussions. Clinicians are increasingly aware of the vote, which lends credibility to MRD as a marker for individual patient response. (Chad Robins, CEO and Susan Bobulsky, Chief Medical Officer)
Q: Can you provide more details on the ASP increase plan and the impact of the preliminary CLFS rate?
A: The ASP increase plan involves coverage, contracting, and collections. We are seeking broader Medicare coverage, negotiating agreements with non-contracted payers, and improving claims management. The preliminary gap-fill rate provides leverage in payer negotiations. (Chad Robins, CEO)
Q: How are you progressing with community setting penetration, and are additional investments needed?
A: We have seen steady growth in the community segment and are focusing on peer-to-peer education and strategic account management. EMR integration, particularly with Flatiron, will also help increase our footprint in the community. (Susan Bobulsky, Chief Medical Officer)
Q: What went better in the quarter regarding burn and margin improvement, and what are the expectations for the back half of the year?
A: We have aligned our workforce and spend with business needs, leading to increased leverage. Significant collections and milestones contributed to the quarter's performance. We expect continued leverage and a slight increase in spend due to seasonality in the back half of the year. (Kyle Piskel, CFO)
Q: What is the progress and impact of the Epic integrations on utilization and test volumes?
A: We have seen double-digit increases in adoption and test volumes in integrated accounts. Larger accounts going live by the end of 2024 will provide more insights into the impact on the business. (Susan Bobulsky, Chief Medical Officer)
Q: What is the status of the LIMS overhaul initiative and its impact on cost savings?
A: The LIMS overhaul has been deprioritized in favor of initiatives with better near-term ROI, such as improving workflows in reimbursement and customer office space. (Chad Robins, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
