Good afternoon, everyone, and welcome to the CARES Life Sciences Third Quarter 2025 Earnings Call. My name is Shannon, and I will be your coordinator today. 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 star-11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star-11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Russ Denton at CARIS. Please go ahead.

Earlier today, CARIS Life Sciences released financial results for the quarter ended September 30, 2025. Joining from CARIS today, David Dean Halbert, our founder, chairman, and CEO. David Spetzler, our president. Brian Brilli, our vice chairman and EVP. And Luke Power, our CFO. Before we begin, I'd like to remind you that during this call, management will make forward-looking statements within the meeting of federal securities laws. These statements involve material risk and uncertainty that could cause actual results or events to materially differ from those anticipated. These risks are discussed in our SEC filings, including our perspectives to file the SEC in connection with our IPO, and our quarterly report on Form 10-Q to be filed the SEC. Accept as required by law, CARESIS claims any intention or obligation to update or revise financial projections and forward-looking statements whether because of new information future events or otherwise the information this conference call is accurate only as of the live broadcast this call also included discussion of non-GAAP financial measures which are adjusted to exclude certain specified items the reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available in the press release CARES issue today a copy of today's presentation materials can be found on our investor relations website I will now turn the call over to David Dean Hallberg thanks for us good afternoon everyone before the team

walks through our exceptional financial results for the third quarter I want to take a moment to speak about something even more important the foundation that makes these results possible and the vision that continues to drive Karis forward when I founded Karis my goal was simple to make a precision medicine a reality. Our only purpose is to help patients live longer and have a better quality of life by applying personalized medicine to disease. In 2018, I made the decision to move CARES to whole exome and whole transcriptome sequencing. It was a bold move at the time, but I believed it was the only path forward. That decision put us at the forefront of precision medicine, where we've remained ever since. 17 years in, I can say with confidence that the mission has only grown stronger. The power of our whole axome and whole transcriptome platforms across both tissue and blood has exceeded my expectations. The data that we have generated from these platforms, utilizing the cloud and AI, lays the groundwork for what comes next. The next step is what excites me most. I believe that in the not-so-distant future, the work we're doing today will move medicine beyond diagnostics and treatment into true prediction and prevention. We'll be entering a world where we can anticipate disease before it begins and intervene before it ever has a chance to form. I refer to this concept as the cleanse, or personalized disease prevention, where we can one day identify and eliminate pathogenic mutations before they ever become disease. In pursuit of this vision and to expand our current platform, I made the decision to incorporate whole genome sequencing into our early detection test. It's another step forward as you consider whole exome to be the highlight reel, whole genome is the full movie. And now, as we stand at the intersection of biology and technology, the possibilities are accelerating faster than I imagined. The rapid advancements in artificial intelligence, the explosion of data and sequencing, and the evolution of how data is analyzed and consumed are transforming what's possible. What began as a vision to make precision medicine a reality is happening, including a platform that we believe will redefine how we understand, predict, and ultimately prevent disease. This is the future we've built toward from the very beginning, and I'm excited to continue on this incredible mission.

Thanks, David, and thank you all for joining our third quarter 2025 earnings call. This is our second call as a public company following our June IPO, and as David mentioned, we're pleased to report another record-breaking quarter, one that marks the significant milestone in CARES' history in terms of continued growth and underlying profitability. We've had an outstanding third quarter with total revenues increasing 113% year-over-year to $216.8 million. As shown on slide three, this result was driven primarily by strong performance from clinical profiling. Molecular profiling services revenues increased to $207.6 million, representing an increase of over 121% year-over-year. And pharma R&D services revenues increased to $9.2 million, an increase of 18.3% year-over-year. On slide four, with respect to molecular profiling revenue, you can see the remarkable increase of 121%, which was driven by consistent growth in clinical case volumes, as well as very strong growth in clinical ASP. Clinical case volumes were slightly less than 51,000 individual profiles, representing growth of 18.2% year-over-year, in line with our expectations. CareSassure, for therapy selection continues to gain market share and produced 66% year-over-year case volume growth in the third quarter, which is an increase from the 56% year-over-year growth in the second quarter of this year. In addition, ASP increased to $4,089 per profile for growth of 87% year-over-year. This represents important sequential improvement from the $3,256 per profile in the second quarter. As you may recall, this is primarily due to the new CMS rate of $8,455, which took effect retroactively through November 5th last year, the date of MI CancerSeq's FDA approval. This mixed shift to MI CancerSeq has driven the increase, and we've also made further progress with private payors. It also includes some over-collections and true-ups relating to prior period cases, which Luke will discuss in more detail later. In summary, across the board, we've had a very productive third quarter, illustrated by the highlights on slide five. The strong revenue performance combined with the operating leverage inherent in our business model has produced significant margin improvement. and specifically, gross margins improved significantly to 68%, up from 43.7% in the third quarter of last year. It also represents a significant sequential move up from the 62.7% in the second quarter. This is driven by several factors, including strong overall revenue growth, as well as lab and other operational efficiencies. In fact, with this gross margin improvement, we have successfully achieved another major milestone in our path to profitability. In this quarter, we generated positive adjusted EBITDA of $51.2 million and net income of $24.3 million, as well as positive free cash flow of $55.3 million. Together, this strong profitability profile provides valuable flexibility for ongoing investment in our technology platform for new products, as well as the ability to develop new channels, such as multi-cancer early detection. Luke will expand further on these important developments and our philosophy for strategic investment. In addition, our balance sheet continues to strengthen, and due to our cash flow performance, our cash on hand grew to a little under $760 million, an increase of 4.7% sequentially. This continues to provide us with important strategic flexibility for ongoing investment to develop Keras' extraordinary opportunities in MRD, monitoring, early detection, and other markets as well. Slide six illustrates the consistent and systematic growth that our team has generated in clinical profiling over many years. We've grown clinical case volumes at a CAGR of 28% over the past five years, and this growth rate has continued in the first nine months of 2025 at 23.4% growth year after year. The sustained case volume growth reflects several factors. First, the unparalleled breadth and depth of our whole axiom, whole transcriptome assay technology, 23,000 genes, DNA, and RNA, continues to resonate with oncologists, KOLs, and cancer center leadership. In addition, our differentiated coverage strategy, as well as research orientation, and the KERIS Precision Oncology Alliance provides us a competitive edge in the market. Finally, we believe that the therapy selection TAM continues to expand with new indications as well as ASP growth, and most importantly, we believe that the penetration rate for comprehensive genomic profiling remains relatively low at about 30% or so, providing us with growth opportunities to serve more physicians and patients with superior technology over many years. We also benefit from strong operating leverage associated with our established distribution channel, seasoned Salesforce, and strategic relationships at both the institutional and the individual oncologist level. We are now consistently reaching approximately 6,000 oncologists across the country. In addition, there are other technological efficiencies such as EHR integration, which have further enhanced the pipe connectivity with our clinical client base and have facilitated case volumes. For instance, we are now EHR integrated with approximately 2,800 clinical sites, and over 65% of our orders come in electronically. As you can see on slide 7, the CARES data set has continued to grow with our clinical profiling activity and now exceeds 959,000 genomic profiles, and 660,000 matched profiles. Since every profile has been generated with our whole exome whole transcriptome technology for many years, our dataset features 577,000 exomes and 628,000 transcriptomes. This gives our dataset tremendous power for our own internal product development and continues to enhance our attractiveness as a preferred research partner for academic medical centers as well as biopharma. We continue to work with potential new partners for the Precision Oncology Alliance and given the size and breadth that we currently cover, we're being very strategic about adding additional We have important opportunities across the existing 97 sites for deepening relationship penetration and adding new modalities across the continuum of care. As communicated previously, the POA members benefit from access to our Code AI genomic dataset as well as the opportunity to publish with us, and the POA collaboration has produced a cumulative total of over 1,150 peer-reviewed publications reflected on slide 8. In conclusion, we are very pleased with this latest quarter's performance and the demonstration of sustainable growth, profitable business model, and a very exciting future. I'll now turn the presentation over to Dr. Spetzler to discuss our progress on our product Thanks, Brian.

I will begin by giving a quick update on our MRD CRC solution on slide 9. We are working to obtain reimbursement on Keras Assure MRD colorectal. The data we submitted includes over 100 patient samples evaluated on the whole exome and whole Transcript Zone CARES Assure platform, incorporating our PPM gene expression and AI-based signature. As part of our submission, we also compared our performance to that of a commonly used third-party MRD assay in colorectal cancer, samples tested within 60 days of one another. Among these cases, we demonstrated 96.3% positive percent agreement and 100% negative percent The disease-free survival curve on the right shows that patients identified as likely to recur experienced shorter disease-free survival while those predicted as no event remained disease-free for extended periods. The separation between these groups with the p-value less than 0.005 supports the test's ability to accurately distinguish recurrence risk. Using the ABCDAI, MNMAI, and PPMOT scores, we demonstrated consistent signal detection and strong correlation with known molecular and clinical features. This data supports our belief that MRD detection grounded in whole exome and transcriptome data can capture a broader molecular landscape and offer deeper insights into tumor biology. In addition to our MRD colorectal, we continue to make progress on other solutions in our pipeline and expect to finalize these additional solutions for submission shortly. These are reflected on slide 10. The first is Keras Chromosec, which is our therapy selection offering within the hematological malignancies cancer space, including AML, MDS, and MPN, as well as suspected myeloid malignancies where other causes have been ruled out. As communicated previously, this approach utilizes both whole genome and whole transcriptome sequencing, and the solution provides more than 200x depth of coverage of the genome and approximately 1.6 billion reads per patient, enabling detection of mutations, fusion, copy number changes, expression, and ploidy across the genome. The second submission expected is for MI Clarity, which focuses on patients with breast cancer who are ER positive and HER2 negative, typically lymph node negative or with limited nodal involvement, primarily in stage 1 or stage 2 disease. MI Clarity combines our tissue platform and digital AI analytics to produce both early and late-return scores designed to inform individualized treatment and monitoring strategies, and we believe this will offer superior performance to existing third-party offerings. MI Clarity was developed and validated on samples from two large randomized controlled trials and results will be shared at a large upcoming international conference. We are very excited for these solutions and believe that they can continue to expand our unique approach to building out our suite of solutions in an efficient manner. Like our MRD colorectal submission, and as stated on previous calls, we will hold off on providing potential launch dates until we have made it through the expected rounds of feedback. And then finally, I will give a brief update on our current study's progress. As reflected on slide 11, on the early detection slide, our Achieve I study is complete with enrollment of 3,000 subjects. Achieve 2, which is targeting 25,000 subjects, is well underway with over 15,600 patients already enrolled. That brings our combined total to more than 18,600 subjects across more than 40 different cancer types and normal controls. The Achieve program remains the cornerstone of our early detection platform with particularly strong representation across normal and pre-malignant populations. Over 14,000 normal subjects and more than 2,500 with advanced adenomas. This gives us a powerful dataset to refine our assay performance and validate early signals across multiple tumor types. Dave had already touched on this, but we are incorporating whole genome into early detection, and we will be utilizing the dataset to provide readouts and achieve one in the first half of 2026, utilizing the whole genome. On the right side of the slide, you can see our MRD and monitoring portfolio, which now includes more than 3,300 subjects across a range of indications, which are currently undergoing contracting and enrollment. Enrollment is balanced across key solid tumors with the largest cohorts in non-small cell lung cancer, rectal, and esophageal gastric cancers. The data generated from these efforts will feed directly into our development pipeline and commercial readiness planning. As Brian mentioned earlier, we continue to believe that we are in the early innings of the potential for precision medicine and remain very excited for the impact that this will have, not just on patients of today, but also those in the future. I will stop there and now pass it over to Luke for the financial updates.

Luke? Thanks, David. Brian mentioned some of these already within the highlights, and as you can see within our earnings release, we'll continue to provide a summary metric table, so I'll go through the next few slides relatively quickly. Turning to slide 12, you can see we delivered another outstanding quarter with total revenue increasing 113% year over year, reflecting exceptional organic performance across the business. The main driver, as expected, was our molecular profiling business, which grew 121% compared to Q3 of last year. Our molecular profiling business continues to perform at a high level, and therapy selection volumes were up 18% for a quarter, 23% year to date, right in line with our expectations for mid to high teens growth in the second half of the year. And this is separate from any potential new solutions that David mentioned earlier around MRD, CARES ChromaSeq, MI Clarity, and early detection. More importantly, this growth is showing up in the bottom line. We are seeing continued improved commercial reimbursement following our FDA approval for tissue and stronger-than-expected contracting for blood. These tailwinds drove gains in cash flow and adjusted EBITDA, and have also delivered better-than-expected ASP across both tissue and blood solutions. As Brian mentioned earlier, we also saw stronger-than-expected collections, both on current and prior cases, and this resulted in a $37.9 million revenue true-up for the quarter. That true-up reflects increased payment activity from commercial payers and highlights a continued positive trend we have seen in reimbursement. And as we've said before, as payer history continues to build, we expect these true-ups to become smaller over time, particularly post 9 to 12 months of launch. So even excluding that benefit, our underlying base ASP improved ahead of our expectations. For tissue, we're now 10 months into the launch of our FDA-approved solution and are beginning to see steady, predictable patterns. And this is reflected in the 3,500 base ASP for the third quarter and a little under 4,300 with the true-ups. We also still expect Q4 base ASP for tissue to be around 3,600. and with the third-quarter performance, including the true-up, expect the full-year tissue ASP to be trending slightly above 3,400 for the year. Within tissue, My Cancer Seek continues to remain 78% of the total tissue volume, and we surpassed the major milestone of 200 million covered lives for My Cancer Seek, which includes governmental and commercial payers, and that's a direct result of the excellent execution by our market access team. Switching to blood, blood space ASP reached $2,377 per case, and with true-ups, that exceeded $3,000 per case. Improved tissue contracting continues to have a positive impact on our blood ASP, so we're raising Q4 guidance to be in the $2,300 to $2,400 per case range, which, along with the Q3 performance, would put us close to $2,500 for blood ASP for the full year. Within blood, another great market trend continues to play out, and we saw that for Q3, where 40% of our blood cases also had a tissue case performed, which was up from the mid-30% range last quarter. Turning briefly to pharma revenue, as expected, revenue declined sequentially this quarter as several projects and associated customer spend shifted into Q4, which is a similar pattern we experienced last year. That said, pharma revenue was still up 18% year-over-year, reaching $9.2 million. Pharma continues to remain a smaller part of our overall mix, but it's strategically important, and our focus remains on building longer-term partnerships and multi-year agreements rather than one-off projects. Similar to prior year, we do expect sequential improvement as we move into the four-quarter versus Q3 performance. These revenue numbers obviously had a very positive impact on our gross margin for the quarter, which was 68% and up from the 43.7% in the third quarter of 2024, and was the result of the continued excellent work by our lab teams in maintaining operating efficiencies with the increased volume, along with that ASP improvement. In fact, one of the key milestones we achieved in Q3 was being able to get our turnaround time for tissue down to eight days and blood at seven days. Considering the sequencing requirements for our whole exome and whole transcriptome solutions, this demonstrates the significant progress we are making on lab efficiencies and the excellent work by our teams. You'll also see this great trend on slide 14, and we believe with the continued improvement in ASP and our updated revenue guidance, which I'll discuss in a little bit, that we should be getting to a 62% gross margin for the full year 2025, which would be an increase from the 43.4% that we had in 2024. Moving down from an operating expense standpoint, we continue to demonstrate excellent operating leverage, and the 9% ramp year-over-year was primarily driven by an increase in stock-based compensation. We continue to look for efficiencies, not just with the emergence of AI and the potential impact that has on business processes, but also on our R&D efforts, in which our efficiency efforts are supported by having one platform across the care continuum. In fact, due to the improved performance, we actually hit the milestone of not just having positive adjusted EBITDA, but also net income, which is a first in our 17-year history. The last item I will comment on from this slide before jumping to the guidance slide is free cash flow. Q3 was obviously great in this regard as we achieved positive free cash flow for the quarter in the amount of $55.3 million. This performance continues to strengthen our balance sheet and allows us to build up some dry powder ahead of the new solutions David discussed earlier. With regards to our investment approach, and as I've stated before, this continues to be opportunistic, and we're currently assessing opportunities for expansion in marketing and sales, along with assessing any external opportunities that may arise. The main goal for us financially continues to be not to hoard profits, but to focus on our mission, as David Halbert discussed at the start of the call. And finally, jumping to slide 15, I'll give a brief update on guidance. As previously communicated, we'll continue to provide guidance on a total revenue and expected clinical therapy selection volume basis. And with regards to these, given the excellent performance of Q3, we're upping our total revenue to be within the range of $720 to $730 million for FY25, which would be a 75% to 77% increase over 2024, and increasing our expectations for clinical therapy selection volume to be within and 21% to 22% growth for the year. We'll wrap up there, and we'll now turn it back over to the operator. Operator?

Thank you. As a reminder to ask a question at this time, please press star-11 on your telephone and wait for your name to be announced. To withdraw your question, please press star-11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Vijay Kumar with Evercore ISI. Your line is now open.

Hi, guys. Thanks for taking my question, and congrats on the next sprint here. Maybe my first question on the performance here in the quarter, ASPs clearly came in a bow. What is your implied Q4 assuming, Luke? I think revenues are down, I think, sequentially. So does it include any true ups? And what was underlying gross margins in CQ excluding the true ups?

Yeah, BJ. So yeah, as I stated in Q2, we'll never forecast any potential true-ups because again, we don't know those until the end of each quarter. So it's not assuming anything there. So for total revenue for Q4, our assumption in the guidance we put out is the $200 million to $210 million range for total revenue. So to answer your other question then, what was our underlying gross margin without the true-ups in Q3, that was about 61%, excluding that true-up that we had in Q3.

Understood. And then maybe one on the clinical side here, this colorectal MRD data that you're showing. Is this enough for you guys to submit to CMS or what kind of data is needed? If there's additional data that's required? Could you update us on when we could expect the data?

Yes, I'll take that one.

It is enough data for us to submit. We don't know how they'll necessarily respond and what additional data that they will want, but we do have additional data ready, and some of the studies that we listed will be reported out soon.

Sorry, when you say this is enough to submit, have you submitted, or are you planning to submit to the CMS?

We like to only talk about that after it's been approved, because the process is complex and long. Thanks, guys.

Thank you. Our next question comes from the line of Dan Brennan with TD Cowan. Your line is now open.

Great. Thanks for the questions. Congrats on the quarter. Maybe just one more on price, if you don't mind. Just could you walk through a little bit of kind of the success on the underlying price, you know, X to True Ups, how you saw the progression in terms of payment rates, you know, against the 84-55 rate for on the tissue side? Like, how are you doing versus expectations? Maybe just give a little color on the commercial success there in Q3 versus Q2, and same thing on Medicare, and then kind of how are you thinking about it? I think you said kind a price in that same zip code, the underlying price for 4Q. So, just kind of what's assumed in 4Q as we think about that underlying price and across Medicare and commercial.

Yeah, Dan. So, effectively, what we're assuming for a base, and it's what I said in the presentation, is about a base for tissue of 3,600 for Q4. Now, we obviously think there's a possibility it might come in a little bit higher than that, but I'm being cautious in the guidance I'm putting out there until I get a little bit more history of the payment. by the time we get to the end of the year, we'll have about nine months of payment histories from payers. And based on our historical experience, you're probably in that nine to 12 months where you have like a very established trend. So what we saw on Q3 happen and what we've seen throughout the year is actually the response we're seeing from commercial payers been very, very, very good. So that's what's kind of driving it. And when we discussed, I think it was in Q2 as well, We have an underlying goal for ourselves, too, that we should be getting to an overall percentage of what the Medicare rate is for our overall ASP, and I think we're probably about a quarter ahead of where we thought we were going to be at the start of the year, and again, that's due to the great work of the market access team and the billing team. So I think what we'll see going forward is trying to get above my next goal for the company and the next goal for, obviously, the market access team in the first half of next year is to try and get above a $4,000 ASP for tissue, and I think we can deliver on that.

Great. And then maybe just on the pipeline, just on early detection, you gave a lot of cover, David, in terms of the Achieve study. There's a lot of excitement in that space right now. Can you just kind of walk us through a little bit more of timelines? lines. I think you said, what, Achieve 2, $16,000 enrolled. Achieve 1, like, just kind of walk us through kind of how we think about the cadence of publications, go to market. Like, would you guys consider launching an LVT? Just how does that work and kind of the spending associated with that? Thank you.

Yeah, we'll read out Achieve 1 in the first half of next year. The accrual rate on Achieve 2 is pretty strong, so it's probably late next year or early in 27 when we'll read that one out. And we would consider an LDT launch for sure. And that would be after Achieve 2 you consider the LDT launch? No, before. I think Achieve 1 gets us where we need to be on that. Okay, great.

Thank you. Our next question comes from the line of Michael Reiskin with Bank of America. your line is now open.

Great. Thanks for taking the question, guys. I want to dig into your volume guidance for the year. You bumped that up a little bit. You're looking at, I think, 21 to 22 percent for the year. Pretty good cadence throughout the year. It is a little bit of a conservative assumption for 4Q, but if I just look at the total volumes on a patient basis, you're kind of trending in that 50 to 51,000, you know, 2Q, 3Q, 4Q. So as we think forward to next year and just sort of beyond, what gives you confidence you can kind of re-accelerate that and take a step function? Maybe just talk about the sequential versus the year-over-year growth and how do we think about volumes progressing beyond the next couple quarters? And I've got to follow up.

Yeah. Thanks, Mike. So, yeah, so for Q3, obviously the 80% came in kind of in line with what we were expecting and kind of the reason for that guide and kind of the actual results and we were actually pretty cognizant about this coming into the year is that q3 last year was actually probably one of our highest quarters at 35 so it was a very tough comp coming into the year and we wanted to be careful setting expectations against that now as you mentioned what we did with the updated guidance is we're increasing the higher range on that volume based on what we've seen play out later in the quarter. So we feel very good about being in that total 197,500 cases to 198,500 cases for the year, as we sit here today. So then that would obviously get you in that kind of 22%. Now you asked about what we think for next year. We're not going to release a guide right now because of what Brian mentioned on the call, and I'll leave Brian jump in in a minute about the commercial pipe. We've seen a kind of an uptick after the summer months, especially among ordering physicians and obviously especially with our blood volume. So one of the key things that we're working towards now for blood for Q4 is we got to 7,500 cases, probably a quarter than we were anticipating earlier. So our expectation now is, okay, can we get above 8,000 cases for a quarter in Q4? And then once we have that, one of the other key catalysts for blood that we've obviously mentioned on a previous call, too, is getting the New York State approval, since we're not selling in New York right now. And I think that will obviously give another additional kick to the volume from blood.

So I think what we'll do at the end of the year, especially when we report epilimory numbers, and probably for JP Morgan, we'll put out a guide around what we expect our therapy selection logins to be okay all right and then um if i can get a follow-up um on the on the strong even a number in the quarter the free cash flow um i mean even if a good chunk of this was attributed to the to the true of clearly you're moving to profitability and cash flow positive earlier than you expected can you talk about incremental spend priorities and just Again, how do you balance the profitability versus the opportunity to reinvest back in the business? Just trying to get a sense of if things come through again on the top end, on the higher end, where that extra money will go. Thanks.

Yeah, yeah. So, and it's a great question because obviously we're in a fantastic position financially right now. And obviously that's why David Halpert said what he said at the start of the call. Like we're going on to our next phase. And one of those phases is obviously doing whole genome for early detection. So there is going to be an increase in spend there. Now for Q3, we did have kind of on the lower end of the previous range I put out for OPEX was like $114 million. Now, I do expect for Q4, based on obviously starting the Achieve One study and running Whole Genome for that, to be kind of in the higher $120 million for OPEX for Q4. So that's going to be some of the investment, too, of those kind of additional free cash flow that we have for Q3. Then the other thing that I mentioned on the call, we're also assessing opportunities for the sales and marketing teams with additional spend there. We spend kind of a lot of time in Q3 just thinking about, okay, how do we want to be structured as we go forward with the new solutions that we have in our pipeline along with our therapy selection. So there's going to be an increase in spend there as well. And then there's also external opportunities that we'll continue to assess.

But Mike hates Brian. You know, the business model that we built has a tremendous amount of flexibility and that's being driven by the tech platform, which is set up in sort of this one assay format that's very, very powerful, as well as the chance for many years. So as you've mentioned before, it's really flat. So we benefit from chip as well as individual physicians. 6,000 or so now ordering physicians. So it's a very efficient business model that we think is well-suited for ongoing profitable growth. So I think it gives us, David Holbert directing us as well as Luke from a financial perspective to invest in a business. Salesforce, as Luke was talking about, but also, you know, really leaning into what we think is a tremendous opportunity in early detection. So, you know, it's not like we're going to have to make really tough decisions either way. I think this business model is going to support what is, we think, just historic market opportunities for our information landscape.

Thank you. Our next question comes from Doug Schenkel with Wolf Research. Your line is now open.

Good afternoon, and thank you for taking my questions, guys. Starting on MRD, once you have MALDEX coverage, what's the commercialization strategy to scale that business? And specifically what I'm getting at is can you go after it, get after it with your existing oncology sales force without material headcount expansion? And then, relatedly, how should we think about initial pricing? Will that align with currently reimbursed tumor-naive levels, or do you think MALDEX will actually allow for premium pricing, given the breadth and depth of your assay?

Well, listen, I'll take the first. They love our time, and they want additionally into that. So there's really a pull from the marketplace. You know, we're not going to need to force the same.

Yeah, I can take that. Yeah. So, Doug, so obviously we're going to be talking with MOLLE-X, so we don't know. Obviously, we think there should be a premium to it based on what we're doing, because it's obviously the exact same assay that we got covered for therapy selection. But obviously, it's a different indication now for MRD. We'll have those discussions. But given the position we're in, we're obviously not price sensitive. I think once we actually get to the stage of getting that approval, we'll be ready to launch it. even if it's not at, like, a very high price, even if it's at something similar today.

Okay. Super helpful. And, Luke, I think it's another one for you, but just on a different topic. You know, you got to a really robust 68% gross margin, and I think it was 24% adjusted EBIT margin this quarter. You know, as we think about new products and, you know, the mixed shift towards liquid biopsy over time, And, you know, I'm not sure it's going to be a straight line, but I can easily see in Excel how, you know, the gross margins move into the low 70s, the EBITDA margin gets into the high 20s.

Anything you think we should be thinking about, you know, as we're updating our models for the next couple of years, given, you know, in Excel, it looks like, you know, things can move up pretty quickly, but there are definitely a lot of opportunities for you to invest in pipeline products. yeah yeah so there there is a lot and i i know we've kind of discussed this as a company before like we we don't want to be in a very high kind of positive even dot margin level we want to reinvest this and obviously brian mentioned like the early detection and that's david's vision and that's kind of going to be one of the key things we're going to focus on going into next year along with mrd i think for us doug like being in the position we're in being in that 68 gross margin And then without the true ups being in that low 60s is a great spot for us because even without the true up, and this was pointed out earlier, we're still in that kind of, we got the neutral EBITDA, like positive adjusted EBITDA, even without the true up. So we're being very efficient there. So I think for us going forward, MRD, you probably know this, Doug, like so MRD, obviously there's a Medicare reimbursement. commercial is starting to pick up but it like it'll take a little longer for us when we switch that on so mrd is probably not going to be like a high gross margin product right off the bat we're going to have to work on that similar to what we've done with therapy selection over the years so i think that's going to kind of compress it a little bit but for early detection and we discussed this we're going to launch that at self-pay so that's going to be a positive gross margin for us. So we're going to be in a great position either way with the addition of the pipeline. But from a forecasting modeling standpoint, I do want to cap that we're not going above 30% adjusted EBITDA numbers. We want to reinvest. And that's the whole point of the company is to think about the future.

Yep. Totally makes sense. All right. Thank you again.

Thank you. Our next question comes from the line of Casey Woodring with JP Morgan. Your line is now open.

Thank you for taking my questions and congrats on the quarter. You know, so you guys called out strong Keras Assure volumes this quarter. Another liquid biopsy competitor has also called out an acceleration in blood-based therapy selection volumes. Just kind of curious how you guys are seeing the market movement towards blood and has it accelerated in the past few quarters and expectations for that in the future year.

Do you want me to take that, Brian, or do you want to take that one? Yeah, so Casey, so, like, it was great for Qtree, We obviously seen that acceleration in the growth rate from Q2, especially knowing that we've only probably been like a little over a year since we launched Carish Assure now. I think what we're seeing in the market and kind of what I called out in the presentation, what we're seeing is more concurrent testing, which is definitely benefiting us. So last quarter, like about 35% of our blood cases also had a tissue case performed, and that went up to 40% for Q3. So I think that's playing out. I think there's more indications. And I think physicians are obviously getting more and more comfortable in what we're offering with the whole eczema, whole transcriptome along with our tissue and seeing kind of the benefits of that. And obviously the chip subtraction, which is unique to us and the sequencing that we do on that, I think they're starting to see that play out a little bit more.

Got it. That's helpful. And then maybe just a quick follow-up, you know, by our estimation, It looks like the guide implies a pretty sizable sequential step-up in pharma R&D services in 4Q. Can you just provide any color on visibility into that, how you're thinking about the 4Q ramp in pharma R&D? And then what percentage of that growth is going to be driven by the data licensing piece? Thank you.

Yes. So, 4Q4, effectively, like the $200 million to $210 million of total revenue that's in the guide, effectively our molecular profiling the guide is showing 180 million and then we're showing 20 to 30 million pharma because you asked the question how much is known we have a lot of contracts working through the pipeline right now and similar to what we saw in q4 of last year where we did have a pretty big step up we do think there's going to be a step up from q3 but again what we would put in the guide for pharma for q4 would be that 20 million to 30 million range because again, it's going to depend on timing. And obviously, what we're trying to do as a company is not do a one-time deal and get into longer-term partnerships. Now, you asked about the data component. There will be an element of that, but we're not going to start breaking out kind of the three pillars in pharma until we actually start getting kind of that pharma revenue greater than 10%, 20% of our mix. We've always been clinically focused. We're always going to be clinically focused, but we do think there's strategic importance within pharma, and we will build it up. But for now, for Q4, it's in that $20 to $30 million for pharma range.

Got it. That's helpful. Thank you, guys.

Our next question comes from the line of Patrick Donnelly with Citi. Your line is now open.

Hi, this is Albert on for Patrick here. Thanks for taking the question. So going off Doug's earlier question, obviously the EBITDA this quarter was very impressive. And you also mentioned that the cap is around 30%. So just making sure our expectations are in line here, would you say that Q4 is going to see around similar EBITDA margins as this quarter? and then perhaps into the next couple quarters it ramps up a bit before getting capped at around slightly below 30%. Is that the right way to think about it, or would you say kicks?

Yeah, I would actually think of what we're putting in the guide because, again, we're not assuming any true-ups. We have the kind of true-ups reflected for Q3, so that $200 million to $210 million, and obviously with the mid-60s gross margin and then your OPEX in 120, you kind of get into that kind of somewhat similar to Qtree, a little less than Qtree, though, is what I would guide to.

All right, perfect. Thank you. And then as a follow-up, on another similar question earlier, on early detection, what would you guys say is your consideration for pricing strategy there? Obviously, there are only a couple of tests on the market today, But I'm curious what you guys are thinking in terms of where to go in terms of pricing strategy and what are in the considerations that are fixed for our lead detection. Yeah, I don't think we're – sorry, go ahead, Luke.

Yeah, no, you go, Brian.

No, I was just saying, that's not – we think our capability is very – Thanks so much.

Thank you. Our next question comes from the line of Sabu Nambi with Guggenheim. Your line is now open.

Hey, guys. Thank you for taking my questions. You mentioned 43% of your blood test has tissue attached. Do you expect any momentum here in the coming 12 months, and where could this go long term?

Yeah, so it's a great question. Like, I can't predict where it will go long term. Now, we have seen that percentage obviously increase throughout the year, so I definitely think that's a positive. Now, obviously, lung is kind of a key indication, especially for blood. So that's a big portion of it. And as more and more indications or more and more approvals for drugs comes out related to that, I think you might see that. But for Q4, what I would estimate would be in that 40% right now, based on what I'm seeing. Obviously, we do expect it to increase a little bit. But I don't know whether that will, you're probably asking the question, will that get to like 50%, 60% over the next year. It's a possibility. But until we actually see it play out with our kind of ordering physicians, I don't want to guide to anything there.

Luke, always including, which is great. You opened the call with the announcement that your early detection test will have a whole genome backbone. What does your addition of whole genome to early detection mean for MRD? Would you adopt a similar strategy for MRD?

Pretty happy with the current sensitivity of MRD on the exome transcriptome platform. So I don't know that that's necessary. There are aspects of whole genome that are particularly well-suited to early detection that are not necessarily directly translatable to MRD.

Thank you for that, guys.

Thank you. Our next question is on the line of Mark Massaro with BTIG. Your line is now open.

Hey, guys. Thanks for taking the questions, and congrats on the strong quarter. So, I wanted to ask a question about data and pharma. So, you know, other companies have talked about sort of, you know, challenging pharma environment, yet you guys leverage, you know, a massive data set with over 950,000 genomic profiles, both whole exome, whole transcriptome. I would just be curious if you could give us a sense for the types of conversations you're having with pharma. To what extent is, you know, a companion diagnostic pathway part of your strategic roadmap? And just can you give us a sense for any multimodal model conversations you might be having with some pharma companies?

Sure, I'll take that.

Yeah, so we can definitely see a shift in attitude towards utilization of the data and development of foundational models and application of AI. So there's definitely a trend in that, and incorporation of both image data and molecular data is emerging as something that becomes very, very important. with the end goal, of course, those companion diagnostic components. So the value of the data at the end of the day is bringing new drugs to market, and a CDX strategy is very important to that.

Great. And then I'll ask one other. I know you were asked about just what percentage of your tissue test can be accompanied by a blood test already. I wanted to just ask, you know, you're seeing a nice sequential increase in your Karis Assure volume. And I think it's probably too early to ask a question like this. But, you know, one of the larger competitors just reported a really huge liquid number in their Q3. I just wanted to get a sense if you're seeing any change in competitive environment, or do you think it's just too early and it's just a matter of attaching blood to your tissue?

Remember, this market is still very, the therapy selection alone, given the differentiation that KERIS offers.

Awesome. Congrats again.

Thank you. Our next question comes from the line of Jack Meehan with Nephron Research. Your line is now open.

Thank you. Good afternoon, everyone. I wanted to start by asking about Carish Assure. If I look at the underlying ASP and strip out the true ups in the quarter, it looks like it stepped up still almost $500 relative to 2Q. I was just curious what is pulling that up. You talked about contracting with commercial payers on the tissue side. I'm wondering if that traction might be pulling blood along with it.

Yes. Yes. So, Jack, Exactly right. So, obviously, having the FDA approved for a tissue, when we're actually going to payers, we are asking them to include Assure in it. The other key component of Assure this year that's helping us drive up the ASP is, if you recall, we got a PLA code for Carous Assure in Q4 of last year. So, we've been going through gap fill this year, and obviously, it's the PLA codes on the clinical lab fee schedule, but it's not priced right now. So, we've been getting priced at the local rate of $36.49. Now, what we do know next year will be added to the clinical lab fee schedule at $36.49. So, that's helping, too, is having that PLA code. So, right now, both of our solutions for therapy selection have individual PLA codes that are effectively priced on the clinical lab fee schedule. And that's helping because a lot of the commercial medical policies hold from that kind of fee schedule.

Okay, that makes sense. And then I just had a kind of bigger picture question around, you know, whole genome for early cancer detection. I was curious, like, what do you think you get beyond what you get with whole exome transcriptome today? and from a workflow perspective, just how do you incorporate this and not add additional complexity relative to what you're doing for Assure Today? I guess it just kind of boils down to, do you think the juice is worth the squeeze?

Yeah, so in many ways, whole genome is a simpler assay than a whole exome and whole transcriptome because you don't have hybridization and you don't have dates. So, operationally, there are advantages to whole genome. And then for the first part of the question, aneuploidy changes are one of the first things that happens in cancer. And you can see that early on, especially in precancerous lesions. And whole genome gives us more resolution there.

Thank you. And I'm currently showing no further questions at this time. I'd like to hand the call back over to management for any closing remarks.

Super excited about this market. Very, very strong.

This concludes today's conference. Thank you for your participation. You may now disconnect.