Veracyte (VCYT) 23 Oct 192019 Q3 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to Veracyte's Third Quarter 2019 Financial Results Conference Call.

As a reminder, today's conference call is being recorded.

I'd now like to turn the conference over to Keith Kennedy, Veracyte's Chief Operating Officer and Chief Financial Officer.

You may begin.

Thank you, Sidney. thanks third us quarter and discussion for everyone, our of XXXX afternoon, for today joining a Good financial results. are Kennedy, Officer today Executive Chief Commercial and me Bonnie Chairman our Veracyte's With and John Officer; Hanna, Giulia Chief our and Scientific Officer. Chief Medical Officer; Anderson, Chief

various securities will we statements include Before that as I'd laws. make we defined to like that begin, applicable forward-looking during you under remind statements this call

and that goals product Forward-looking regarding prospects historical those and pipeline, statements of attributes fact. regarding plans, drivers financial include and future reimbursement, our strategy, and are guidance, growth, expectations other statements not

statements, any Management's will to they do results, provide discussed on no achievements or unless the the opinions prove risk will reflected actual Company further quarter, to performance our guidance and forward-looking can not implied assumptions, that in give by uncertainties these public from forum. may cause and updates expectations to in forward-looking a future or subject during and performance any results or correct assurance statements and performance are so and/or be such in we materially differ

contained the for our included may XXXX Please the and factors and October in filings events or in actual Securities cause materially discussion Commission with those refer forward-looking the differ XXnd, press Exchange of from risk important Company's that to Company's the release factors to results statements.

quarter are XXXX this Relations Releases which on Investor third to website announced under results section. our at Press the Prior in call, we our available veracyte.com

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now Chairman CEO. the over Veracyte's to Anderson, and will Bonnie I call turn

XXXX call. Thank you, for our everyone quarter today for Keith, us third earnings thanks and joining

Conference cancer early CHEST points underscore announced New this in to our for and like from on new data We'd speaking regarding are the morning call. lung exciting we detection. Orleans, key today's Classifier We you to three address where Swab Nasal

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XX%, activities reiterate XXXX. of We $XX operating guidance will our full of activities million of $X.X in We third $XXX the on million, results. remain the to to quarter we generated reviewing revenue million reach of of flow net $XXX and cash and million, the XX% million We year before in year. genomic $X operating tests, At an net to our cash track prior X,XXX and increase of of over an same time, breakeven volume used million the third improvement to cash end start by revenue of year. of in operating $X of third improved the our quarter test increase last quarter an record over used XXXX, XX%

will performance XXXX, in now we I on with metrics first is the revenue share growth. which are measuring the updates key our

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need for Lung as is or Interstitial IPF an Diseases distinguish physicians without XXX help Over have Pulmonary Idiopathic its well, Classifier with from surgery. impressive the Envisia sites to to-date. other Our gaining Envisia Fibrosis traction or ordered ability test ILDs

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I the of turn quarter to XXXX. third will call Keith over to now the our for review results financial

Thank you, Bonnie.

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revenue of XX%. tests of services, increased X,XXX million basis of XX% million points. margins increased Genomic Gross $XX.X reported $X.X XXX of Excluding increased biopharmaceutical XX%. volume

million revenue points excluding cash $X.X XX% XX%. cost biopharma to from XX%. million of cash XX%. improved $XXX Operating had Excluding increased services, at expenses XXX increased equivalents of and activities And million. loss operating basis in gross Net of improved September XXth, of Net margins we $X.X XX%. used cash

presentation. the of X Page to Turning

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the to now turn I call over will Bonnie. back

Thanks, Keith.

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I Dr. will Medical through Chief now Giulia new turn the the Officer, call to and Scientific walk our over data. Kennedy, you to

Thanks, Bonnie.

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back I'll to turn call the Bonnie.

we To lung are against in Nasal truly fight think the Thanks, excited our progress the about with it cancer. game very Giulia. Classifier changer and conclude, can be Swab a

with on illustrated have nodules diagnosis non-invasive more will on we on work-up objective a procedures Swab be Classifier physicians and in As high-risk decision measures. care timely avoid to for invasive we Nasal making our treatment in while guide patients, guidelines this XX, believe benign we Slide tool believe can standardizing and with patient tremendous consistent

greatly reduce who will test today. this they of risk Additionally, pool course treatments as do standard follow patients the intermediate will the of

We coming test commercialize XXXX finalize the expect in to in over early and the year the it US.

In closing, with of are where is our we clinical where Veracyte thrilled and heading today indications. in all we are three

another XXXX year, when our We to as XXXX. volume we test next revenue expect look over services our exciting year. deliver and biopharma we financial genomic guidance to ahead should XXXX fourth excluding results, be to quarter but XX% growth provide report we It in of expect

to I now will the ask open questions. Sidney call for up

question Our [Operator Ji from Nam, Thank line you. Instructions] first the BTIG. Sung comes of

Your line is open.

Hi, thanks questions. taking for the

with earlier -- will when you out Swab but Is mentioned I available, you early -- clarification, require you versus a Classifier starting wouldn't recommend -- can think the so that results. detection okay. maybe correct, diagnosis, Nasal this work-up potentially So post additional

Yes, that's correct.

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-- too it might not way Percepta how but results sure So to it. guess, compared right if you I about the was wondering, this early, that do performance. to I'm is think presented -- how the be how does

Yes.

we're bronchoscopy and the and work-up XX% at population, Percepta, is those a to gone because about XX%, different up inconclusive today a capturing through group undergo that that patients measuring are with right, we XXX,XXX intended use the are it's we bronchoscopy patients Percepta. have of So work-up

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all we we acquired obtained course lever. Of a that when of

XXXX was in made was Percepta and think XXXX, along I far validated. it said the we very that and actually already we that script, acquisition,

smart even that and to believe to more take first the now today attention where able opportunities test are marketplace turn beyond we they presenting are do and and we market data the to in improving cancer one value what we we're So nose treatment. our were might for the the global that in diagnosis there this can to lung add

Great, lot you of sense. much. a so Thank that makes

you for us. joining Thank

you. Thank

Thomas Lake from Markets. question comes Flaten Our the next line with of Capital Street

Your line is now open.

Thank Congrats you. guys It looks nasal great. on data. swab the

that add looking Bonnie, color. future would XX, Slide That if great. and the -- I'm but you be fits some intermediate you Just in help at understand could was hoping, this of into us I'm Percepta could group, I if new paradigm. assuming it obviously

malignancy advance earlier, moderate of in intercepting But of XX% the were that invasive point, to population it of about will would XX% test after be work-up, we the intermediate patients patients grow. nodules and found very a the keep through the classification this to the mind of the being what Yes, nasal numbers And with of is about risk at malignancy. a a work-up which funnel little coming we risk less today, nasal is bit as and performed. this in because you expect have would talking to we that follow is has think group attractive I lower typically bronchoscopy the like would is risk they also test expect it's

work-up are go likely on that get will with to So bronch, the bucket risk still at moved lung to XXX,XXX the triple be patients patients as also while we or the million double that could cancer XX intermediate for bucket through believe screened. the

time today of grow the able to with should to diagnosis both everything Classifier, about have the the it advance that we going in who Xpression success we're is these dynamic test combination of and will actually and from to be GSC, Atlas excited diagnosis, Nasal the our made we believe eventually for pulmonologists The are Percepta to at with the franchise. over are inform early So And with change. really decisions. market what Swab the decisions, pulmonology on the partnership our and detection, we the making treatment that Percepta

with one million up above projected implied is you. you then we million pegged in there we're in be and had that you that's thank think revenue? of $X an the increase from, biopharma on what Keith, great, with quarter quarter $XX that is out from in coming you to of Can the second revenue might That's had as drop There the infer respect much guidance. as the beyond and I second testing guidance now top associated that. for an

We've been updating you quarterly.

quarter service where and now we that last and over come this made million this due test. advances Percepta this incremental the think out milestones we in is with I we quarter were as to of revenue nasal $X outcomes

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$X total. million on I total think in in million service -- up revenue $X the below we're in on probably revenue and classifiers

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great. Okay,

not a little [ph] margin bit difference. of difference, but is -- not it's There it's a

Okay, thanks for taking my questions.

you. Thank

next SVB with our comes line the question And from Leerink. you. Thank Souda of Puneet

open. is line Your

Hi, and Bonnie, Yes. Keith Giulia.

minute not sort even Maybe patients get because and risk that, asking sensitivity of on the risk. I'm could I but the end that ones is assays on we if is, just value to specificity after I'm missing more is, have still are group in cut what's what those you lower your aspect? here help your part trying high-risk place. if bit for view, is is it elaborate could the higher take you low still and -- that and first could which this data, either educate the in the the that the me classifier, that classifiers lower to Could us ask has one in and, rationale could risk going are if that, question you So you two the understand is a front of, bronch. group. that on on -- me understand of the or lower the I you And a know in help if help I the

and Giulia. much high there of is I -- to over to say, going But I'll few cloud. into true means malignant have very, with classify not improvement then benign XX% to when for and specificity, to them patients can be that. high put patients very start, that over I'll we it very is risk take hand better There as which nearly

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missing to that's is, first the clarify think I So important anything we're thing not here.

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kind Giulia, rationale do the you rationalization approach? about is realize and want this class but exciting. we this talk pretty sort of edge it's new, I -- two of to cutting for

done say, our the bit either what strengths to would is I play we've spectrum. of a an Yes, unconventional data the of of but ends at it's approach,

we the strength low those the hard bottom very BXB basically we're call cut-offs, at play by very highly the to with of a very, malignant on cut-off really sensitive with test. patients the very high and sensitivity, highly truly this high two to it's of specific. It's and adding at of low the bottom up cut-off, range involved the negatives of with specificity call playing high both strength second with very and at range top rates test positives risk just So the false the And the top. of then to sensitivity the get that's the these to false

is in Percepta. ask the some Okay, Afirma on and $XXX impact of Bonnie, the you range in created pricing? to that's to and very high What here New for that of England a up that for pricing helpful. you the you elaborate -- others Could If have of the to the that? published evidence know papers the what And is, follow $X,XXX. could get pathway and Medicine I clinical there benchmarks strong on test, are used was like past Journal

that more So do to hindback dosage and market? and or do you further think publication you at clinical data this have adequate publication evidence here studies an adequate you data to bring here, I -- mean, to need to point -- go

Yes.

a got many was we data the the of wouldn't the earlier Back was came developed So Afirma, high we publication it first the very was it was had publication done. then the some test launched first that all. in that out final referenced after early impact even that within an be product. all times released when time. was set And It it work though actually

our sure are out not this clinical if journal. be very profile investigators to get high test in want this obviously surprised would part So I'd all will our journey sign publication. a yes, I'm and be of that with data of in us, this

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ask if inputs years genomic the How performance. test the of of much the in the smoking the on related age other the I just that to pack cetera. could to And et is of evaluation characteristics, algorithm, patient, Okay. relative and nodule

how So much -- what contributing assay? is the that is to

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cohorts, As large part clinical we AEGIS machine these in the of factors use number and we collected clinical a features as of learning.

just any which used algorithm And genomic actually risk predictor genomic clinical When classifier is features. features, it's clinical compared so have of some is then commonly our doesn't and a factors. those combination a to clinical features

the substantial the there classifier Classifier. model is poster. that of is our performance For in have the what we We of over example, the improvement Gould Gould find

specificity as On the the well side. sensitivity as on low side

the it what what of high-risk Classifier to would will are Gould risk more by by the increases number the So over Gould and benigns than called XX% do. Classifier the itself do low malignant that XX% of

Anything Giulia. Puneet? Thank you, else,

Keith, margin quarters? -- that, gross can last of I miss it's this. flat sort three improvement want don't in one lined on last any expectations in Keith, the The for I If for to

to so the reimbursed products on we're the weighs margin. XX% a rate margin. We holding have Yes, the well lower obviously where at -- that yes on obviously right, that's is loan XX% are than Afirma

the XX% it XX% the as products. care trying to to go we're of for years first journey those range on we So at down couple hold managed

All great. guys. Thank right, you,

Thank for you joining very us for and much the questions.

you. Thank

from question comes next Montgomery. with Knight Paul Our Janney

Your line is open.

as pay Bonnie, you're thinking I'm dependent assuming the that approval, to think initial that's need start about starting private you're that of kind upon you and perhaps as XXXX, the of papers. the the would saying commercialization published days, product in we CMS

in when XXXX what approval you're sometime do thinking assuming as you and could well CMS develop? I'm commercial think So pay

will know time. little it few we've it how and Yes, would cetera. can quickly the done to required on year of assemble Paul, History take you're a take accepted into this a depending get But able evidence that we show et times. it a bit publication,

as the get clarity you pathway. over up keep much probably and we And next have try can I can as be. on we'll to updated quick we we that this So as think as be we'll more year, that can of coverage as lined to post-commercialization you expect any

at to And then million have above, I beginning in here think, going That to of so where the the Keith, you're about regarding second or year. you the service X of this, seems half. were be

within model? would in change a lower test? out the it -- started you is build what year. today ramp seems up like the with that So the the core, that than it's out regarding little franchise it give we What pricing? on of color Is -- diagnostic Is the on it us

XX% tests. about revenue on molecular we've done our Well, growth on year-to-date

Percepta Afirma, just that's and So Envisia.

about up the of that's $XX year. million months nine first So for the

business, being $X close terms important about an flat margin we've cytopathology always in to market million commercial and Afirma for but as a to year-over-year. of team Our business, the the talked about no which that's factor down

So quarter, We of this then molecular advantage revenue performed we periods. had growth the have that down that in about recognized didn't prior for prior period. test rate, reduction drag from the because the we testing And XX%. in X% XX% the probably to had on year in

XX%, of of sort $X,XXX XX% revenue accrued diluted on rate. and the quarter-over-quarter. that's growing test by that's large and is consistent around in around samples The we're recurring the So for Afirma been volume and growth and

So --

for we where the be year. predicted very to Afirma That's close

So that…

for quarter sort over year XX% quarter. months this nine Overall of, prior the nine and in months the the the XX% to genomic first volume, year, relative over prior

portfolio, And that so long is probably there if what about and to of now we reduction you XX% growth think in X% our is our the get embedded task. for test X%

on in factor test. $X,XXX We $X,XXX We're on be and really that patient average to to Afirma. get that those on commercial next increase two, $X,XXX that of leaving we And that in volume saw build the up three X% all we pays and getting So growth over table. you should the the to will X% we we're that. journey, tailwind getting years, and

growth exceed early growth product. our our revenue of years rate eventually So in volume rate the will the

is than business. the a volume that think higher rate, rate indicator long-term for Does actually of growth Our make we positive sense? the is very which growth revenue growth

Yes, very helpful.

great. Okay,

Thanks.

you, Paul. Thank

with Blair. Weinstein And you. question our Brian comes from William Thank next

Your open. is line

Hey product back just and classification current of guys, go more of sorry for sure you, and of standard can just the care background noise. model. make How nodules used part for believe which the your big that the understand little we describe a that based bit for I detail Giulia, you see is of performance in we this receive slides, compares didn't how I can that what and that poster in model that but the a is is the all today?

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a are these Our lack quite of clinical and actually, our variables models. themselves variable to generalizability these there and variables is --

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expression is standardized and terms What and gene the lack standardization, clinical the so of the is test interacted and generalizability. lack of more we've we've we've made done less objectivity. a And with classifier, we've there taken factors, them

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a standard this great think care of we is new is to So sort help, of seven really how risk actually tool of, pre-work-up. assessed

true last Talk to about you about the this for maybe $XX thank opportunity the clarification. move moving just then the further how is, that one are have to thinking screening -- to to opportunity the from me and billion And a Great, upstream referenced? with how you that contribute of there, guys and more technology you might that guys overall that market opportunity population.

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have will We market there. opportunities

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know the do but understood over clarify comment got Okay. I XXXX? sure was Can to and more growth. make some Actually talking about on I what here. that excluding. I specifically just sneak comments down, you referring one it were I want want whether just to I that you was XX% what don't you

you can reiterate that please? just So,

genomic about excluding Brian, she of is talking XX% growth topline and revenue biopharma.

in revenue But biopharmaceutical we those. the the a that going revenue play next revenue not I'll we revenue revenue. out service been about come about and million quarter biopharmaceutical our we forward call think XX% We've revenue, revenue -- left on clear fourth J&J service know, product million out lot the revenue top-line talk classifier $XX this product and will was and earn have year of you we on we're to -- to and will -- genomic $X just it's have As that on on the year. but service call where what not, [indiscernible] still that's not

for Great, that. you thank

you. Thank right. All

Thank Steve Needham. question you. with Unger next from And our comes

Your open. line is

Hi, thanks.

that's access other long plan bit expectation swab So to XXXX test, earlier than then you guys to with think a and nasal anybody program commercialize to nationwide? similar reimbursement Is prior go Medicare the quite tests the in to then an do I expected. the early

might have probably come and of up we on would on what sure and all forward, that we're that excellent execution align will that's evaluation make now us we take the to right under XXXX through all pieces certainly launch. to as process commercial I you Well, bring will say that timing as have and together that it clarity expect, plans our the an

to do avoid exactly will I a just trying answer. So think how not early I'm yet to claim we on the it's it. make little any

have the Envisia Percepta. doctors. I of XX% think [ph] are these lots we in -- suite We're with already pulmonologist options. [ph] also of using the pulm

build add be this more way test customers. the the a suite to So one in will with relationships pulmonology and our

that, it's that question, for exciting. probably all Medicare terms be before thanks a the the more us take of But commercial that of information part quarters couple laid and we have of certainly angle. So But in will out. versus

expand full then EU, in to the Got it. are pulmonology to expand or… particularly And the internationally, portfolio you planning that internationally

seed planning the planted and that once would markets, to now markets big, portfolio that simply right we do made that believed the are had that global that we of very products some at toward have We look sense and the it's global make we've right we effort tap always on. to complicated believe more

of as about that believe data, we a global part bring Nasal Classifier definitely pivotal of part could today And so the expansion. it Swab because this thinking be we up

that test great plenty everyone thinking outside you thoughtful will We on and but what like give think a ignore have a of opportunity notice be, we I are there's on very when can US have certainly will and will timing this big in a to as such the plan that impact care. always we be

if then, more. could, it. And one I Got just

Is average out As $XXX that far at of the it's low cost price the of of you're could end the on running 'XX? your a 'XX it's -- is same commercially test product, the as credit, and range? What or viable price be the the is cost that at per in sort RNA running platform. 'XX, given that

be in mean, enlighten end price the plans I we that I where Yes, obviously that range. market can We a will upper that of those and roll start good believe with think we will there we other forward. is you for as viable

as as costs processes. different nothing far for But the relative as running and example, as far test the to Percepta,

Not no. now, right

Got it, great.

thank Okay, you.

joining this concludes call Ladies today. us. our and gentlemen, you for Thank

You Everyone day. disconnect. have wonderful may now a