Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sophia Genetics SA (SOPH, Financial) reported a 5% year-over-year revenue growth in Q2 2024, reaching $15.8 million.
- The company achieved a 12% year-over-year growth in platform analysis volume, excluding COVID-related volume.
- Sophia Genetics SA (SOPH) signed 20 new SOPHiA DDM customers in Q2, indicating strong new business growth.
- Gross margin improved to 68.2% in Q2 2024, up from 66.7% in Q2 2023.
- The company launched new applications, including a minimal residual disease (MRD) application for acute myeloid leukemia and announced collaborations with Microsoft and NVIDIA.
Negative Points
- Q2 2024 revenue came in below expectations due to challenges in the biopharma sector and EMEA region.
- The company faced budget constraints in the biopharma sector, leading to difficulties in signing large contracts and elongating sales cycles.
- Unexpected softness in EMEA, particularly in France, Italy, and Spain, impacted revenue growth.
- Sophia Genetics SA (SOPH) experienced higher-than-expected customer churn, particularly among smaller accounts.
- The company revised its full-year revenue guidance to $65 million to $67 million, down from previous expectations, due to ongoing macroeconomic challenges.
Q & A Highlights
Q: Can you provide more details on the biopharma business and its impact on the revenue guidance?
A: (Jurgi Camblong, CEO) The biopharma business accounted for 60% of the revenue delta this quarter. We faced budget constraints and elongated sales cycles, leading us to refocus on smaller, more repeatable deals. Despite these challenges, our pipeline remains strong, and we expect to correct this by 2025. (Ross Muken, CFO) Last year, biopharma was slightly below 10% of revenue and grew triple digits. This year, it will be down due to delays in contract finalizations.
Q: Can you discuss the traction with MSK-ACCESS and the whole genome sequencing product?
A: (Jurgi Camblong, CEO) We signed 10 customers for MSK-ACCESS, with a clinical pipeline above $10 million. The whole genome sequencing product, developed with NVIDIA and Microsoft, has seen significant commercial interest, especially in the US. (Ross Muken, CFO) The early adoption of MSK-ACCESS is promising, and we expect it to significantly impact 2025 revenue growth.
Q: How are you addressing the EMEA market challenges and pricing pressures?
A: (Jurgi Camblong, CEO) We faced unexpected softness in EMEA, particularly in France, Italy, and Spain, due to reimbursement uncertainties and competitive pricing pressures. We are focusing on strategic account management and leveraging our comprehensive application menu to win larger enterprise deals. (Ross Muken, CFO) We are also reallocating resources to high-growth markets like the US, UK, Germany, and the Middle East.
Q: What are your expectations for the impact of LDT legislation in the US and IVDR in Europe?
A: (Jurgi Camblong, CEO) The LDT legislation in the US is expected to benefit large academic centers and private labs, leading to increased volumes. In Europe, we are aligning with IVDR requirements, which will vary by country. We believe these regulatory changes will ultimately support our growth.
Q: Can you elaborate on the sustainability of growth in North America?
A: (Jurgi Camblong, CEO) Growth in North America is driven by increased sequencing capabilities and demand for comprehensive data analytics platforms. We are entering large enterprise discussions with academic centers and private labs, which are adopting new sequencing technologies. (Ross Muken, CFO) The US market is quick to adopt new platforms and systems, supporting robust volume growth.
Q: How are you managing the competitive pricing pressures in the market?
A: (Ross Muken, CFO) We are addressing competitive pricing pressures by bundling multiple applications and offering holistic solutions to labs, which helps lower their total cost of operation. This strategy allows us to grow our wallet share at customers and defend against aggressive pricing from smaller competitors.
Q: What are the key factors influencing the updated 2024 revenue guidance?
A: (Ross Muken, CFO) The updated guidance reflects challenges in biopharma and EMEA markets, with biopharma accounting for 60% of the reduction. We have also factored in FX headwinds and a softer-than-expected start in the clinical business. We expect Q4 to be stronger than Q3 as new business comes online.
Q: How are you ensuring the path to profitability despite the current challenges?
A: (Ross Muken, CFO) We are focused on cost management, scaling compute, and optimizing our public company costs. We have taken necessary actions to adapt our cost structure and remain committed to achieving adjusted operating profitability within the next two years.
Q: Can you provide more details on the strategic actions taken to address biopharma challenges?
A: (Jurgi Camblong, CEO) We restructured the biopharma business by separating data and diagnostics offerings and appointed new leaders for each. We also refocused sales efforts on smaller, more repeatable deals to avoid lengthy approval processes. These actions are driving more interest, and our pipeline remains robust.
Q: What are the key growth drivers for the second half of 2024 and beyond?
A: (Jurgi Camblong, CEO) Key growth drivers include the launch of new applications like MSK-IMPACT and MRD for acute myeloid leukemia, as well as the modernization of the SOPHiA DDM platform. We are also focusing on expanding our customer base and getting new customers into routine usage as quickly as possible.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
