Veracyte (VCYT) 4 May 222022 Q1 Earnings call transcript

Good afternoon, ladies and gentlemen, and welcome to Veracyte's First Quarter 2022, 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 the session, you will need to press [Operator's Instruction] on your touch tone telephone. If anyone should require assistance during the conference, please press [Operator Instructions].

conference being today's reminder, a call recorded. is As the to Investor Sheila now like their over turn to of I'd Goldman, conference sites Relations. Director

begin. may You

Good Chambers, me of business, today for Marc us Nova, Stapley, first afternoon, President Executive for our Financial are XXXX discussion and Officer. Officer, Chief Rebecca Tina quarter With of CLIA our Chief Dr. everyone. today results. financial Veracyte's thanks our Giulia issued and financial in Officer and And release Chief U.S. a release, Scientific a joining Chief our Veracyte our XXXX press is the this Officer. quarter along Global of section results. website detailing afternoon available Kennedy, Relations financial presentation, business earlier Veracyte.com. Medical at news Investor with first Dr. a This

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

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patients cancer We potential Percepta very lung our facing optimistic are longer-term remain our to test growth Swab about drivers. who Moving Nasal for diagnosis. a

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our making expansion menu testing system our for the We fuel to come. to global efforts IVD years on in progress our to analysis are also encounter solid expand

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advancing Masai. facilities Finally, transition manufacturing our our IVD are beginning with to of we the in Prosigna, kits,

financial manufacturing of ahead of goal fulfillment. and we handling of and our in end by own and France, quarter, turn our expectations year, great management benefit chain to to to strong Rebecca our execution kits. we the the the for global customer In where to us excited our the for are expect the We from quarter next progress summary, fully about call will QX By marked be was review that, kits inventory for I our end-to-end team. are of by We're these results With a over management the heading. tracking year-end XXXX. supply enabling

Thanks, Marc.

Due performance increase X% Decipher our We last grew close of Marc test, XX,XXX year total slightly fourth first mentioned, over ASP versus increase XX% urology sequentially. XX% total code to mentioned. year. as XX% revenue in increase of and exceeded tests over up a Afirma of over the impacted over revenue quarter in prior testing exceeded strong period approximately approximately change XXXX, to As to to of tests, we have our was including XXXX same quarter. collections in with of in for increase in an the the quarter $XX delays $XX.X year. that tests, to our Marc prior expectations, almost volume an tests leading the in million, part Afirma $X,XXX volume ASP XXXX, expectations the the had XX,XXX billing of XX% We million, Testing Testing per the was XX,XXX delivered quarter. year-over-year, which of some compared

compared X,XXX was added million, quarter forecasted slightly timing immuno-oncology decline well $X growth cash of million, $X than other million revenue collections than the resulting as offering first-quarter to approximately of revenue results. and as $X.X by to growth as in activities. IVD contract biopharma volume tests, a equaled and more in of our by First bolstered in offset milestones QX volume product Biopharmaceutical Europe. approximately revenue our with XXXX urology better timing the was as This impact, down

non-GAAP non-GAAP and call financial measures enable amortization information chosen certain non-GAAP where GAAP Non-GAAP between compensation. routines, of website. the I performance. independent J&J was supplemental today's margin the our But of about available useful quarter, results include performance other margin items gross review business which XX%, to of gross select Nasal points be highlight on financial a may to exclude assets can milestone. sequentially XXX Moving which comparison and to intangible by measures, periods decrease these the fourth you of of and of acquisition-related stock-based business expenses, acquired will operating vary $X to driven in million basis encourage Swab found release do I the out, expenses. provide reconciliation We've our results primarily

merit Non-GAAP in revenue, expenses of startup margin $XX.X excluding points recorded We sequentially lower equivalents. quarter. of in due and driven included stock-based and used was cost Accordingly, to sequentially of and impact, million, Excluding $X.X million, of revenue was XX%, and and Non-GAAP approximately IVD XX% compensation-related was Other higher approximately quarter. timing product were taxes. sales million spend. to the gross transfer activities and to million the by by prior expenses margin expenses clinical revenue, and milestone the by trial G&A higher given the Net compensation. development cash $X.X $XX expectations the up of a grew with we $X.X million, prior and million $XX.X increases $XXX sequentially marketing quarter higher XX% driven cash associated gross of Research timing timing the the of to expenses million $X.X $X.X million. exceeding gross manufacturing and million. $XX.X recorded ended was milestone XXX loss net sequentially from of million cost with primarily $X.X sequentially. Testing operating declined revenue development million the expenses, operating payroll kits increased of and Biopharmaceutical $X.X annual approximately margin to basis this by a for cash and our lower compared flat was gross costs to million, the and project GAAP margin expenses driven IBD operating

versus This previous to XXXX or $XXX our expect year. million $XXX first to performance to XX% guidance. of million, the range, million prior compared in our our XX% guidance Turning of quarter. now growth $XXX $XXX to We million, reflects to revenue strong the

followed slightly closing, summer was are we very QX year, finishing QX the decline we with QX financial before in projecting of are a quarter-over-quarter remainder XXXX and the this pleased to sequential In given higher and For holidays we in revenue, so beyond. by I have in on remain performance our far XXXX the Sheila. confidence continue our year, focused now turn to execution position back will growth. call

Nova, lines. Please Officer Operator. into go join call. Thank Global Chief Medical Chief the of the of Rebecca. open Officer President And Q&A our U.S. the CLIA We'll us. Scientific you, will Tina business, Giulia now and and section Kennedy,

[Operator Weinstein Blair. first Brian from William Instructions] Our question comes with

open. line Your is

for question. Excuse Hey, the Thanks taking afternoon. me. guys. Good

afternoon. Good

hoping the better? great. new Just seems inside question of around little good to better that's bit on expectations. Hey, that better there. more into jump up just I performance were the get a about of And what's metric or drive thinking accounts? Decipher utilization sort bit insights and Afirma maybe any is, Is information would continuing be deeper also a then growth little like Tina was see than me that's some could to your of you guys for maybe some Is it it penetration second a decide somebody that than XX% about to

a a little were the through we talk be maybe just how you high-single-digits can that, about the trends thinking think to thinking as for for above so I growth about year if the well? year should bit mid Afirma went things we rate well Thanks. XX%,

into the very at of a last continued really Yeah, you that and lot you out the and and and field. market. reps about it's quarter, performance grow extensive this improve very to And bring to all-time in have continue said, for penetration training productivity an you so of know, making headwinds we're Sure, was we excited team do Brian. high. very, sales Decipher in just the And as and sales Thank we're as increase much.

only The time of is and data from. have makes a time a very makes other team clinical nice physicians it we from again to we we thing is grow big to exciting out makes They that soon. And ASCO Marc as a to which our lot sales the the like generated of penetrated, an to that XX% that that. for And so in build lot future, we the difference. and at coming room reminder, still data mentioned, abstract a as And just the studies evidence it which continue really really a have share new still product. have market go really very

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normal to back so Afirma. we're that to almost great So in see there, increase it's

clarification. Brian, one

volume so we're headwind getting a did which that. go focus our to Just think Rebecca some going I is the comments, continuing we mentioned saw on growth, new a job long continue and -- of there the so that to side XX% We doing is ASP tail see her and off on in physicians there. to team great, nice to really and

with roughly of when change net line revenue rest in expectations, a for really little growth, perspective all it say, the our doesn't maybe year. but out, our was So the it I'd bit lower, you the

of you what rest expecting this that think or saw I is minus bit the a year. quarter And we're the plus the for trend

single-digits, are high say the slightly the an So on way basis, all in XX, expectation some because we to of but the the we're volume that basis. in revenue on the that not high expecting single-digits, biased a but be items improving of volume ASP would maybe to down I

high you to in mentioned. So that more as mid the

from from Sykes comes Sachs. next Goldman Our Matt question

Your line is open.

you Hey, guys. is Dave. This doing? How are

Dave. Hey,

beating for give can into factored a contribution idea had? you into that color clear the the Halio additional rate solid Decipher you from of Any

and about happy give organic business are being this the Yeah. require there, I'd happy the as before disclosure drivers get that inorganic we -- from to be you But requested. and and managing a that think across you the to make resource of portfolio portfolio business perspective we the accordingly. decisions one, Decipher --

it pluses respective in their of has you life different them cycle. the and and We did the what the the happens have products, a have quarter was effectively board. portfolio assets, And stack Decipher when are of those exactly is in each growth you business that across here. Halio company portions And they effectively, given and and by offering that foreshadowing why are gain any the minuses that's

Decipher over majority, growth majority, year-over-year when but on contributed comes to the a majority it, down it not $XX So of the basis, million. vast the vast just

actually see in number the million. Q just over the quarterly numbers not total full-year $X.X the You can I'm in is number, Q full-year the was sorry, the Halio and

the So But bits us our strategy with our contribution will and company recognized on and quarter out pleased to the going their and we the the them pieces you very and that parse in for aid forward. are end, acquisitions there. expectations of point the this and can was purposeful

I is test talked XX% about believe life like back as add that Afirma we the markets Maybe Afirma. before you by mean, something the maybe thanks a know, to this for penetrated mature, cycle we or on comment. over very

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coverage all growth return products those the in a across to the And business. portfolio So maximize various to in good here. stages opportunity continuing pretty product. different we're we've got as invest

Percepta good to Nasal ATMs? color new helpful, to that's really swab. be generation us about presented on Dan, for data additional at Could give thanks. the And, Great, the hear the any continued you evidence

don't because Julie, doing any we've get provided to provide that but what and evidence development as teaser going detail been we've approach know the to want able on And on ATS philosophy more a go. spend far to obviously it's I the presented, our and you so then than how time be there. and any already if can't We studies we're

Sure. Sure.

work I say the and the that been provide for clinically can't data and how continue specifically, be at used and has populations. people the various with in some to Swab, test to that we're burden. Nasal varying detailed speak validated going to presenting be of in more to can And how we look the information tests swab more at ATS performs going Percepta So the is nasal smoking the about

we So developing the factor an confidence that at the with look in forward important And that's I you in test. ATS. sharing to think

Giulia. Thanks,

Our is next Stephens, open. with line Mason your question Carrico comes from

Hey, guys.

On that footprint, and be ahead would into that as need the closer about that launch. of be to the sales XXXX on whether and Swab What to through to how potentially Nasal still your XXXX any that made investments Percepta get think expanding equipment, lab of progress we helpful. launch, incremental some color are stuff, commercial it's broader reps,

people one take for opportunity of here. Thanks about Swab is of really Nasal million method. in a the I findings. back terms should -- but screened effective a the just the well-proven first-of-its-kind it in mentioned using remarks, who of incidental very is And a for cancer then test people for it XX Yeah. year a U.S. test the a be are Mason. facing are that, cancer it is really step long-term and in who Maybe diagnosis. a I'll noninvasive there's talk lung and million alone about lung potential X.X There

has And people market a Julia or been former this smokers the And mentioned, as are nodule who have so for lung for who that's this test. validated test target smokers.

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and this doing. do that's want way exactly So thoughtful we're and and it's so what we the right to

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as ultimate period And test out the so really the is as goal. that's to next patients the which what many possible, we've got to over focus get on

me could more Got this there you sure if color decipher it. one have not provide here. prostate. Thank level you. any Maybe of I'm for but granularity, On on is you to growth share from utilizing from out from taking converting a versus there? from test maybe methods this of the that's proportion expanding traditional doctors tests the market, genomic competitor test coming

are -- data terms a actually hard There's And significant growing using of who majority doing urologists who the very diagnostics. we molecular number Decipher. in job share using mean, using the number is is Its gaining the the just after think itself share, market. share, that overall market of the but a said. we are them I -- XX% is of increasing docs of question penetrated, as of Yeah. to it's we get importantly in but also good the Decipher terms at believe prostate no

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honest. I to about little bit So a it's be think

for Mark. Got it. it That's that Thanks me. for Thanks, guys.

you. Thank

with Savant Morgan Tejas question Stanley. comes from Next

Your line is open.

to Envisia Hey, hand, Percepta? the contributions the there's lung thanks screening about therapeutic guys. think relatively we remains with things off, time adherence from Maybe the On But hand, low. now should lung us, can relative cancer limited and but your Good relatively you the on as here. updated IPF. for just Envisia, you about think we one share for evening the other versus portfolio, clinical options kick have practice the guidelines, how

nasal So versus think relative you here, Envisia the medium-term as Percepta. the on you share any of color sizes risk. course And of eventually about could then

the revenue from point, stage, the and years, s One procedures. there of the both reasons. is that and because they impacted relative the terms early relatively of this physician both at we're by given two, for targeting contribution COVID At small two there couple of were the in last Yes. of them severely

mentioned I quarter. really remarks, grew in As nicely Envisia the this

starting guidelines a Envisia think such getting encouraging those respondents then say would really I So and is recommending product. out much with sign And show a Envisia, significant to Envisia around of for I so of use that's that the extensive good discussion traction. actually number

market that the Swab, lung about order largest grow it, and that's to COVID be bulk early So you perform. a it's say the our And, putting time a far investment that's of decent in in entire as by Envisia going to tackling with if portfolio, I Percepta of our to portfolio. think we're post Nasal grower little - this course, is And GSC terms how of going that's think goes where to on. pulmonology we're

important versus something of the just is needle margin plus geopolitical with then, three for so even generating your revenue given enough. as on question two-and-a-half for perhaps plans going like a market years a let's think are on your years? that backdrop Got you revisiting etc., opportunities you near-term is which the and Fair concerns say, move well near-term. you to the or for, as broader optimizing uncertainty, of And similar recession, the it. perhaps And focus the Marc, any about a potentially not side expansion here

very hard me with XXXX of first came but answer Let and around team year coming margin, and the in together the the I middle of part can the the worked put you then to plan. last you're Rebecca, here part in. answer

the went years multi-year. because for of we have business that of course, growth multiple we a vectors the some out large Of

in doesn't those s say by the we've we But of So vectors our -- accordingly. say itself more macroeconomic of products lot is not now. you also this which of point do. at revisit majority the resources make in invest a and we decisions expect far investment, us any right already investment current what would the of on-market we a we're those what wouldn't us environment going would because allocated done. I'd around and on not of starving of longer-term I already those growth is to ask what the would our made

there. get to I is our long-term I so products those we believe goal the whether the available quickly think Swab, goal,-- to them our bring going to U.S., can take move as to opportunities outside market, to know to And Nasal what those make all patients, it's grow, to as IVD it's we products

products do So I revisiting to our us Meanwhile, to really sure don't the continuing of catastrophic. see get of those the and short are Afirma, making level that I we're Decipher of investment appropriate plans rest that. something

Tejas, on answer. And side, a margin similar the not just

outside undertaking are efficiency as on our the well our wages of impact actively we on seen to we as And process which So script. collections necessarily have increased large haven't obviously and do I increase the opportunities efficiency cost a lab, which goods. of commented of of we

nice basis things a ourselves in two activities we're we So based a will the working margin up profile hand. are having go-forward accordingly, on those setting and benefit really on for on

that capitalized. is, factor very also well are important we decently Another

amount burn a down But business of plus breakeven will the small did down and it to we some or year be minus, of consideration And quarter. we when a it, we to managing contingent So is this the we're to of comes through burn but Halio as acquisition. little in the cash when comes cash go of it very bit this it.

invest products to business and shareholders. profitability. in the this run where capitalized and deliver to we in this have And are We very patients we excited well cash to for see we're to our business hand need

Got I the guys, it, very helpful. Thanks appreciate time.

Thank you.

from KeyBanc. comes Paul question Knight with Next

Your line open. is

should was in assume post-January, on some March, trending? commented volume February, testing growth XQ, volume increasing earlier that You we the sequential XQ? year how And

So Paul, that. I maybe can take

from growth script, we of then quarter, summer where comes we access third that's it quarter of the do So holidays COVID, the franchise. the business, the but first the gangbusters see we scope really of we seasonality. to we my pulmonology. challenge typical sequential our the second for pulmonology Afirma, it's impact perhaps step we the quarter growing see our did -- made within of that impacted and by is experienced where throughout and by portion when effectively in in to did whether a the it, reps end see up. it COVID back we the comment are guidance the associated was a expect saw in as January and our as The And area improved quarter, The most to range. down where access in

by growth this being seasonality to in COVID time. So typical related I more would think driven Afirma about at than point really

you in of guide on then growth Decipher? would organic what test us And Decipher, at volume to terms the

Yeah.

is we've I given I disclosure beyond very to product want and to the to lot but think We're line-by-product. not habit rate, Decipher Decipher guiding would on the overall in of of each get nicely is go total going contributing I of that. additive it franchise our the and portfolio. say a growth company wouldn't the components to

Thanks. Okay.

Needham Matson Mike comes & question next with from Company. Our

open. Your line is

just up -- whether remarks. adding bit the in from any than or Hi, are but year biopharma guys. for your mentioned about that, more services, be the be prepared offerings? little IVD into then you off this little the out is you tied obviously a will for Joseph a a And - services new have of the can the that oncology that You is from guys maybe or are now about it'd Mike. you during This all? talk that different building Is there guys transition services at? expanding development bit guys down for ramping at pharma there or and year One immuno purely year transition. immunogram, more there on test looking Obviously, Thanks. -- anything question manufacturing these biopharma Or a a is than interest that is countries kit? more else manufacturing with right maybe services

end a many able for offerings. things The for question. our would in counter couple own in at it break we're going our from make actually doing manufacturing in I to system very that's work in Masai France very great that of biopharma services That's respects we're are be kits transition several A to the separate. the They Start apart facility starters. transition the the with the manufacturing that's doing and work really, well stages.

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that So service Envisia. get is whatever business, to Prosigna, We're primarily that. need year which next will point we be IVD able to is

together one On business, the organization. talking companies about global about hand, biopharma thinking put what's organizations -- other now is the we've three biopharma into great the biopharma of really

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some about We're great going on So relationships look is that future. the out there. some are this the we'll on going more can point for in talk too about about there. lots interesting publications. think of excited work potential that at Nothing thing of things those we'll I I in future much, And opportunities really great we the is of and our comes one in -- but biopharma things business, of one talk really actually think, that the

you're Okay. is Great. tests that in And the inclusion of guidelines. I for bigger there the year next the you clinical you. already Decipher guidelines. certain NCCN be guideline or, inclusion, Envisia mentioned there. hoping, those more. so, also Thank one believe guidelines? or just one, included has looking guideline Obviously, expecting whether any Maybe announced of the future, then the into ATS it'd towards in they're Afirma guys I club maybe the guess, know is I your

in the improve dramatically So could future test adoption? awareness any or yeah, maybe that

formula has the Yes, in good think what kind support, to and worked that physician, me is we're I with the mean, as in of that to let with educate approach to development end past. and illustration in this well about KOL very we do invest then, you the of for gain want guidelines with macro I maybe of evidence the up us trying well start a Decipher, pointed talk but power typically is Tina, really which the

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taking our makes Absolutely you. sense. Well, for Thank All right. thanks questions.

Thank you.

you. Thank

with Securities. from Puneet question SVB Our last comes Souda

Your line open. is

expectations we're inflation in guys. in a labor Hey, happening but wondering, the I this margin seeing But covered Is if first that sure of for the was already, make labor know that that one, first. to obviously I I the with All cover right. just don't you you costs, are this number terms questions. that Thanks Maybe seeing into is wanted something of labs. year? and reflecting

in delivered margins basis is the any just on depending on to blended in question, revenue quarter everyone the say to however. Thanks are are for like seeing industry. and the extent, period. some for mix Puneet. in We gross managing we full-year Yes, we our would Yeah. it, given obviously else that low-XXs great a just that the mid-XXs the in outlook is I

at we biasing really its that time. our While to margin necessarily this point to see current it's state, are continue at expectations expecting not in

lab our on our in honing really in efficiencies as the we're well We it are those and optimizing ensuring offsetting of collections business. components as with

manageable, it's So but it's there.

Okay.

Thanks. helpful. Okay. That's

In I but have to provided just am on of I Swab, you Nasal understand. provided details -- some terms you wanted -- sure

the in how terms the we seen or have its just understand performance Nasal a have dataset help datasets you where different terms from and what it data presented, of understand; help Swab just us stand here. in meaningful could us data versus think how inception. on of should We the Maybe be, of upcoming this from -- we about

I that's that Julia the wouldn't at on one, a great Pretty dataset looks data data already mean, isn't going the that -- it's on, little earlier smoking recently replace I been burden. bit cut presented that talked but this about to another of

do to so when like on. done of in performance prior that we So set the of launched people a That's why second you will continue data took with of it data test into produced past. cuts the that have the we showed cancers and the account

rolling the it's use test patient we're test which who I the attractive want lung make diagnosis it there. any to for we're the So highly and of I to LDC, has had earlier, mentioned is situation. as this sensitive is is sensitivity finding the continuing I at see nodules. and we found way tests, utilized a able good it We'll for, script. to I that going in And be sensitive think build nodule for in and is and It's very in for in very market mentioned lung to Because performance bio specificity it look confidence is that. mean, out, being in remember, the this rolling specific. of that overall the as But the a terms of highly

did. that to the And enables that that the incredible they So do the way by team built our us work it. classifier

I that's think it. about way to so the And right think

And new that necessarily data anticipate changes so that perspective. don't I

that's is well, about And helpful. obviously Afirma. Decipher continues but do more then this to Okay, question maybe

out of this you very guys think is that have I now product. maturing pointed a number times

magnitude about should of the longer-term it So how to elaborate, just revenue. Thank sort can contributes thinking of you given this, your maybe on you. of we sort be the the Afirma, rate growth

Puneet. Thanks,

stated shared bit in from address revenue a we the I than albeit in quarter, perspective, to for that that a little XX% perspective did grew volume where a we earlier best the close reasons that think question script. Afirma on I less our to the slightly

XXXX, portfolio the does overall there. is to high having about curve growth a That look successful later are cycle of our does therefore late throwing and stage that the at excited the we out there throughout I point diagnostics one we're unreasonable. contribution the to product some being are And products said, obviously most forward the think the estimate not of start we there. it perspective. As out the we to flatten life provide from in is of that course be and the all obviously This mid its was single-digit in of

fund product some an with is the though well think of long of news it I Afirma it as that profitable really end to good do help as is Decipher also in as incredibly to work and and well. are overall innovation team organizations and the then offering to offering really portfolio team R&D great the Tina her broader her commercialize the to Giulia so that and

Afirma and So And that. the of I profile has overall for think every side. product its financial place its we not just revenue love

we'd here last anything And I squeeze the have know it. optimally ASCO? and just in Got that behind or that for watching to you data be one, you. anything But need if can out Tina. performance in Decipher. or just at to terms see of the we DW Okay. Thank momentum Great

Yeah.

really Obviously, meeting and we will major years. at demonstrates do has we increases to is utilization active that And and definitely go As but try in have details to an that be can to surveillance. data can't at to hard presenting Decipher will that showing we area be every Marc be show been the certainly of that, a presentation. we over I into area ASCO, mentioned, of the everything that the

that combination doing with SEER excited we're in program. Dr. very Spratt the study the NCI from and we're about Case Western So with

you. guys. Great, Okay. Thank

Puneet. Thanks,

concludes for return call over back the question-and-answer any the Marc This Stapley to session. I'll remarks. closing

in we're accountability geographies corporate collective to Thank want a I'd for to our drive you their and by reflected shape and levels really work, long-term culture the collaboration, bright dedication, our of driven on our define execution. excited in focus performance company's imperatives all exciting Appreciate desire employees that of culture at been where see world very ambitious we updating passion to the important of and it. you. our lines we my team optimizing opportunity future. tests. we for opportunities my in of Keith suite Paul to our organizational our and during next talked leadership hard headed, enable really new our We're and It's quarter us from to have team's important the all like our benefits, our work is seeing all of completed be already their our continue near and and some progress across diagnostics Veracyte closing, to clear like and and and introduced appreciation in express families the those that We the to Michelle. our to couldn't achieve In company. our the you goal see look enthusiastically global help Thank proud strong that January patients brand over much, this investing or Great. to leader. throughout team benefit also embraced collective all through Veracyte today. on diagnostic becoming the we about culture, Employees I I QX forward structure are delivering earnings strategic are The about team more call. ensuring term while the

This you. concludes the conference Thank call.

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