Kick it off. Good morning. I'm Tycho Peterson from the Life Science Team. It's my pleasure to introduce Rebecca from Verisite. Welcome.

Thank you, Tycho.

Maybe just a quick recap on the first quarter. You know, as we think about you raise testing revenue by $10 million at the midpoint. Just talk a little bit about, you know, confidence and durability of, you know, what you're seeing right now.

Yeah, absolutely. Morning, everybody. Thanks for being here. Before we get started, I would like to remind you of our safe harbor, which can be found at Verisite.com. and that the goal of that is to cover anything we say today but with that let's move on. So yes we had an incredibly strong first quarter and the fundamentals of the business as you can see by the guidance that we raised after those results it remain incredibly strong. In the first quarter we delivered double digit revenue growth for Affirma benefiting from our new transcriptome which I'm sure we'll get into, and also incredibly strong decipher growth growing in the high 20s. And so those results are really fundamentals to the kind of the data strategy of Verisite and the differentiation of our assets, which I know we'll also get into. Additionally, we delivered a 31% EBITDA number, and that came through both because of prior period collections, no result rate underspend and really when it comes down to it just an amazing demonstration of the profitability of our organization and our underlying business so as we look to the rest of the year we're quite excited not just because of the great results of the Optima study which we'll get into here shortly but also just because of the core franchises are performing incredibly well and we will benefit from the affirma no result rate 200 to 300 basis points for the rest of the over the course of the year as well as we've and as a result we updated our guidance for that to hide a low double digit growth and we also expect to cipher to grow just around over 20 percent and that is revenue growth because there is a headwind on the prior period collection from a from a from a ASP comp perspective so volume will be higher than revenue So all in all, I mean, where we are today is we have two great franchises growing incredibly nicely. We have an incredibly profitable business, and we have two new growth drivers that are, you know, ready to get going here. One launched three days ago now, and one will launch next Monday, and so I'm sure we'll get into those. But we're in an incredibly fortunate position with an incredibly strong balance sheet, and so, yeah, life's good.

One or two financial ones, and we'll jump into the launches. But just on the EBITDA margins, 31% you talked about, I guess, how are you thinking about balancing, you know, reinvestment of these profits, you know, into the upcoming, upcoming launches? You know, the long-term target have been 25, so you're obviously well above that.

Yeah, so our guide for the year is that we'll deliver more than 26, and we obviously delivered an incredibly strong Q1 figure. And we banked some of that in the raise guide, and some of it will be reinvested throughout the rest of the year. Philosophically, we managed to do that 25% and budget to that 25% in any given year. And given the incrementals of this business, that really allows us a nice investment portfolio to reinvest into the organic business and deliver things like the ProSignal launch and deliver the true MRD asset. So I think we have the ability to have our cake and eat it too. And that's really a unique differentiation in this industry. And so I think it's an and in my mind, right? We have the, again, we have the ability to invest in these new product launches. We have a long tail of incredibly interesting projects beyond just these new two product launches. And given the incrementals of the business, we have the ability to deliver that 25% EBITDA in any given year. And so we managed to it. And that has been the result of, you know, from day one, Mark just hit his five-year anniversary earlier this week. We have very strategically and actively managed the portfolio. And that has put us in this position. And, you know, it took a couple of years to play out, but we shut down five different tests, an entire channel, and an entire country. And that is what has allowed us to be here today. And those weren't necessarily easy decisions, but they were decisions that, you know, were done with math in mind and the level of investment and the return on that investment. And so, you know, I think we are in a very fortunate profitability perspective today, and it hasn't come at the expense of growth.

And strong cash position, just under $440 million. I mean, suffice to say, you're not looking at M&A right now. You're happy with the portfolio? Or how do you think about inorganic?

Yeah, I find it to be a huge call option that we have available to us. We are investing organically in the business as much as we feel like we can manage. And so, you know, even with that investment, we are dropping an immense amount of cash. We generated $120 million last year. And that allows us to be incredibly disciplined and active on the M&A front. You wouldn't know it because we've only done one acquisition over the last four years or five years. But each and every year, we probably take six or seven, you know, actively to further conversations. And they either fail because of, you know, we are very diligent about maintaining our investment thesis. And if it doesn't hit one of the investment thesis, you know, kind of bullets, if you will, then we pull back. And so we've looked at a number of different things. We have a team that I run that is actively doing so that looks at things across three vectors, the first being indications, the second being the continuum, and the third being both geography and technology platforms, maybe four. Can't add this morning or count. And so when it comes down to it, there's a lot out there. There's a lot of interesting things out there, but, you know, there's often an evaluation gap and or there is a – and or it's just not core to our data strategy. And that's so – it also has to fit that kind of portion of the story as well. And what I mean by that is effectively it needs to be a whole transcriptome, whole genome, whole something, you know, that could add to the layer of data that we've been creating. And that's obviously very, has been very impactful in getting our products to where they are.

Last one on the quarter, just ASP improvement up, you know, 3%. You mentioned prior period collection. Just remind us, you know, the ASP outlook for the year and, you know, how much of this is mixed versus, you know, pricing improvements.

Yeah, it's the 3% is organic pricing improvements. So Decipher was up 400 basis points, XPPCs, and Affirma was up 200 basis points, XPPCs. And then we had 4 million equally split on top of that. So we did a number of different projects last year behind the scenes to really enhance our ASP performance. And so those levels, not necessarily the growth, but the levels that we saw in the first quarter, we believe are sustainable. On the decipher side, there is material room to go. But, you know, I think I don't necessarily count on that in any given year, nor do we necessarily guide to it in any given year. And we definitely don't guide to PPC's ex what's already been booked. But we have a good long-term tailwind on ASP, on Decipher. We're at around 215 million covered lives right now. On Affirma, we're at 275, so there is a lot of room between here and there. It's just a bit of a slog. And so we won't commit in any given year to ASP improvement, but when it comes down to it, we expect to get that higher rate over a three- to five-year period, and you'll see increments you know in any given period as they come in it's just hard to tell the timing let's uh let's shift over to asco you know you had the obviously the optimum data for for prosigna i guess how's that been received how do we think about the path to nccn you know guidelines yeah so i i haven't really had i wasn't actually at the conference a number of our colleagues were um but i haven't seen the team this excited about anything in an incredibly long time i mean we're a relatively even keel team um but you get a british man excited and it's something to be seen uh so i would say um i would say you know we all had high hopes for optima um we you know we had high hopes for the data and i would say this easily has surpassed the best hope um you know investors came up to us at the blair conference over the last couple of days saying you know i talked to this kol and he says this is practice changing and so um and that was folks coming to us as opposed to us necessarily saying it back. And so we obviously heard similar things. The headline that two out of three women don't need chemo in the ER positive, HR negative, post premenopausal space is insane. The challenges that women face who do go through the chemo regimen and doing something to them like that unnecessarily just, you know, I think is practice changing. And we expect the publication to be submitted here shortly. It's not necessarily the timing isn't in our control because it's not our study, it's UCL's study. But once that is published, we are hopeful that the guideline body will meet shortly thereafter off cycle and put guidelines out. We can't control it. So, you know, it's probably the guideline bodies meet in July. So it would probably have to be off cycle. But, you know, at this time next year, if we don't have guidelines or over the summer next year, if we don't have guidelines, I think we would be surprised.

And I guess, do you believe level one evidence is sufficient for preferred status recommendation?

Yeah, I think we'll see. I don't want to promise anything. I think we'll have, you know, we believe that is level, we've already had prognostic level 1A guidance in the guidelines. This is the predictive claim. And so we've just put up Simon criteria level 1A guidance. And so we would hope that we are at least on par with the other competing tests, but that's at their discretion. And then I think you've mentioned a measured approach to building a dedicated breast cancer sales channel um given the readout just talk about you know targeted head count yeah so we were saying 10 to 12 heads um from the over the course of this year and we'll play it by year if there are if the if the demand is there we'll we'll add to that faster um we can easily absorb and reallocate investment to maintain our ebitda guidance and and still do so in a way that allows us to bring on additional heads but well we have an active course of a kpis we're tracking and if the demand is there and we can hire the talent, we're not going to compromise on talent. We will go a little bit faster. But I think at this point, 10 is a fair assumption for exiting the year.

And just how do you think about market penetration, U.S. breast cancer, genomic testing, I think it's 85, 90 percent penetrated. So how do you think about displacing incumbents?

Yeah. So we're taking a top-down approach from KOL. So I think a lot of that volume is actually done in the community center and so you know we were we're going to be using the decipher playbook here and that decipher playbook effectively says lead with the data um and the data is is obviously great from optima but with you have a grid assay as well to continuously develop and deliver incremental information um and incremental studies and understanding and elucidation of the disease of breast cancer you're going to eventually win the entirety of the market right um that's exactly what we've done from just with decipher decipher was third to market and today's has the leading share because of the over 125 publications that were all not all but many um enabled by doing the whole transcriptome uh and developing grid and and delivering that whole transcriptomic information via grid um this is going to be no different right so i i think when it comes down to it it's the error bars are wide at this point um we will you know by the end of the second quarter have three to four weeks of data. By the end of the third quarter we'll have, you know, obviously a couple of months of data, but, you know, I think we have shown the ability to come from behind and we've also shown the ability to put out data that allows us to take share. And so what the slope of that curve is, I think it's too early to say, but I think we're confident over a multi-year period that we'll be able to be successful here. And, you know, I think from a competitive standpoint, there's distractions in the market as well, and that's, you know, something that we're cognizant of.

And, you know, the trial included premenopausal women in, you know, more diverse ethnic populations than you've seen in prior landmark studies. I guess, how do these, you know, specific patient, you know, sub-cohorts feature in the marketing and clinical adoption?

Yeah, we believe the 225 is the market and is the product, is the patient population appropriate appropriate for our test and so we will not be kind of going in with a beachhead and then trying to expand from there we're going in with the listen prosigna is is absolutely the best patient the best test for all of your patients from the kol approach down um and so that is um incredible that will be the message from a pre-menopausal perspective i have we have to give the investigators credit i was floored when i learned this i i assumed that they had come up with the chemo suppression angle of the trial post taylor rx and what i learned was they actually came up with it in like early 2009 so the trial design was in it like just it was forward thinking to say the least and the fact that um we have elucidated or they have elucidated the impact of ovarian suppression versus chemo in this trial i think is is incredibly groundbreaking and for premenopausal women and And, you know, obviously that's going to be part of the talking points, but it won't necessarily be, you know, a beachhead, quote-unquote. We'll be going after the entirety of the market. And, you know, I think there are plenty of studies about the strength of ProSigno across each of the subcategories that will be able to be successful over a multi-year period doing so.

And then maybe just rounding it out on ASCO, you had the Enzimet, you know, for Decipher, you know, to predict treatment benefits with chemo and metastatic hormone-sensitive, you Just talk a little bit about, you know, the data you had there.

Yeah, so Enzimet was for the metastatic population. It was another strong result. You may recall that for Decipher, we have been growing quite nicely in the high-risk RP metastatic and biochemical reoccurrence population. This is another data point for that. Enzimet is effectively the third study that we have in the metastatic population, all of which are 1B in nature. necessarily some they're different necessarily prediction algorithms if you will for different drug combinations we don't necessarily have metastatic guidelines we are hopeful that you know between these three studies we'll get there that's up to the committee but Enzamed is just another study effectively talking about triplet therapy and ensuring that you know decipher elucidates whether or not triplet therapy is beneficial to certain patients, and that is the most common treatment regimen at this point in time in metastatic, and we didn't necessarily have that triplet therapy conversation or elucidation previously. And so this is an important study for the way patients are treated today in the United States versus Stampede, which was much more kind of a European-focused treatment paradigm.

And do you see this impacting volumes, you know, in the metastatic hormone-sensitive population? Yeah.

So, I mean, in general, this is a flywheel. And that flywheel, every little piece of data helps. There's nothing that is, with the exception of maybe an active surveillance level 1A type study, these are incremental in nature. And, you know, we've seen 30-ish percent growth in that kind of high-risk BCR-RP metastatic population for the last couple of quarters, really since Astro of last year. And so I think this is just another piece of incremental data that will allow us to continue to have really nice growth in that population, which is meaningfully underserved with the Decipher test today.

And maybe just stepping back and thinking about, you know, Decipher overall, I think you've noted it's about a third penetrated in the market. Where do you see the significant near-term, you know, headroom in capturing the remaining two-thirds of the market?

Yeah, I mean, I think it's high-risk, that high-risk category inclusive of the others, as well as low-risk. Intermediate is about 60 percent of our tests today, and the other two categories are around 20. And the penetration is highest in intermediate and lowest in those other two. And so with this data and other data that will be presented later throughout the year, I think we have a great continued ability to grow in that high-risk health bucket, hopefully more meaningfully than the average of decipher growth. And we have been enrolling clinical studies on the active surveillance slash low-risk side now for, I don't know, 8, 9, 10 years, which we'll read out in 28, 29, and that's going to be exciting and hopefully level 1A to get more active in the low-risk population. And so, you know, I think our whole strategy here that, you know, the data comes out and expands the market for us and really allows us to penetrate, will be playing out over the next three to five years. And I think we'll continue to penetrate intermediate, high risk. There's a ton of low-hanging fruit and low risk. There's a good opportunity. It's more crowded of the areas with other competitors. But again, we're doing great in that area. And we have data coming that will just kind of really put us another leg above the pure set.

And can you maybe just touch on Decipher Grid, how you're using kind of real-world data and digital pathology? I think you've got over 350,000 images, you know, how are these kind of, you know, being embedded and moving beyond just purely transcriptomic signatures?

Yeah, so in general, our strategy with GRID is to do a whole X, right, whole transcriptome in the case of Decipher, and report out on the classifier, but that classifier in the case of Decipher, again, only uses 22 genes of the entirety of the transcriptome. Other signatures are being delivered on an RUO basis, and when those other signatures have enough clinical data and clinical utility behind them, we move them from the grid report, again, RUO in nature, to the clinical report. We are doing that right now with Portose, PAM50, and P10. And effectively, this is the exact same strategy that we will use with DPAI. You're absolutely right. We actually have 365 today images scanned, which is an incredible wealth of data. um we can uh through tokening effectively get real world data into that and come up with a number of different um interesting uh use cases for that but from the dpi front we are effectively you know going to follow the same path as what we did with p10 portos and pam 50 deliver it right now it's being delivered um in bulk grid to a certain kols it'll eventually get on the report Once it's on the report, there'll be signatures, and then we will get it into the clinical factors proper report. I think when it comes down to it on DPAI, what we're seeing either through the competitive tests or even our own efforts is really that this is enhancing the accuracy of clinical factors more so than really driving incremental information around the risk classification of disease, right? And so, I think one of the unique items about Decipher is that it doesn't take into account clinical factors, and so the lack of clinical factors effectively is important because it gives you a true nature of the genomic classification of disease, which is why with Decipher, we up-categorize, risk-categorize patients a third of the time from the lowest category. And so, when you get to something like an improved cribriform or improved Gleason score, That's helpful, but it's not necessarily predictive or prognostic. And so, you know, I think when it comes down to it, the science still needs to play out pretty actively on the DPAI front, such that, you know, it will help elucidate those clinical factors. But I think it's a really long time, if ever, to actually impact the classification of disease above and beyond the clinical factors.

And then maybe just, can you touch on bladder?

It's been, you know, featured in some recent clinical presentations. penetration still lags behind prostate so what what does it take to you know turn around the commercial fraction there it's a really nice way to say it lags behind there is no penetration and that's kind of by design because again we've been waiting for the the science to play out and the science started playing out really over the last four to six quarters and will become incrementally more important over the next uh four quarters i think when we get to 2028 um we'll be talking a lot more about bladder um because the it's such an active space um but it is you know there's 65,000 non-muscle invasive 20,000 muscle invasive this is a non-muscle invasive classifier there are many critical clinical questions that are not necessarily being answered today in bladder um and those clinical questions again we're elucidating through the the data strategy and you know i'm pretty i'm i i'm known as like the one who's constantly pushing for bladder internally, and so I'm pretty excited about it. It can be leveraging our current channel, and I think it really helps us with MRD as well, right? And so, you know, we're going to own the care continuum across the board here in Bladder, and, you know, this is one of the pieces to that puzzle, and we're on our way, but it's not 27. It's more of a 28 factor.

And then maybe just Shifting over to Affirma, you grew 12%, right? And that's, you know, pretty impressive for a product that's been on the market 15 years. Just talk a little bit about, you know, where are these continued share gains coming from in the thyroid nodule market? And, you know, what are you guiding for growth for the remainder of the year?

Yeah, to take the latter part, we're guiding eight, I'm sorry, high single to low double digits. And that includes 200 to 300 basis points of benefit from the no result rate. And that is something that we saw 400 basis points of benefit from in the first quarter. And the reason why there's a delta there between those two figures is twofold. First is there's a Q4 comp. We saw some benefit in Q4 of last year, not a full 400 basis points, but low single digits. And RNA degrades more in the summer as these samples can sit in hot temperatures. And so we're hopeful that we can maintain the 400 basis points throughout the next two quarters, but probably unlikely. And so I think when it comes down to it, we're seeing the benefit of the transcriptome. and we're seeing incidence growth in kind of the low single digits, and the delta between that and what we're putting up is share gains. And those share gains have come from a couple of different things. One, a couple of years ago, we launched Grid for Affirma, and that has really changed our positioning with the academic customers to be much more research-friendly, and that positioning and the benefit of the information being provided to the research community through the research RUO-only report and furthering the understanding of thyroid disease management or thyroid nodule management has really helped our conversations with customers. And again, grid isn't necessarily driving the volume. I don't want to say that. I'm just saying that the interest in the academics, the academic piece of the research is. So I think when it comes down to it, we are gaining share from the other two players in the market. One has more of a challenging financial situation, and then the other, I think, you know, is being run by Sonic at this point. We're also in litigation with them around IP. And so I think, you know, today we have a pretty good position via kind of continuous improvement with grid, et cetera. But it's really a combination of share from those two players that's making up that delta.

And I guess with V2 transcriptome, I mean, you talked about, you know, the no result rate. and I think that adds two to three percent to the growth, but maybe just talk about how that translates to the bottom line.

Nicely. Yeah, so I think before we get to the bottom line, it translates to a result for patients, right? So this is two to three percent of our volume that we weren't necessarily able to give a result back on for patients, and I can't imagine how frustrating that would have been. And so I think the first and foremost, we're excited about trying to get that critical information to more patients secondarily it's benefited revenue the costs were already in the cogs line and so effectively that flows down a hundred percent and so you've seen a meaningful gross margin benefit not only from the no result rate but even more because we have lowered our sequencing costs materially from the old transcriptome to the new we were on the old next seek so you're taking a 2015 sequencing cost structure to a 2026 sequencing cost structure so that's been fun. And it's allowed us, and we've talked about active portfolio management when we started, that's one of the levers that we pulled to allow us to deliver that 26% adjusted EBITDA while investing heavily, you know, in these other growth drivers.

And then maybe just hitting on true MRD in the launch, you know, you launched with Moldex coverage, you know, for recurrence monitoring. Just break down the portion of your targeted urology channel you focused on initially.

Yeah, so our Decipher channel serves radiation oncologists and neurologists primarily. In the recurrent setting, we believe about 70% of the patients are being managed by that channel and will be effectively available to us. They aren't necessarily physicians that are actively using MRD, though, so there's a lot of education that will be had. And we believe the whole genome approach will prove out over time to be the most interesting in many diseases, MIBC being one. And so, you know, again, 70% of patients that have undergone curative intent and need to be monitored are in the urology setting. And so, again, this is something we'll be putting into the bag for this Decipher team to really go after and I think will be successful. And there is competition in bladder, and the competition is amazing and does a great job, not trying to say anything. But they're being seen in the med-onc portion of the market, which is that other 30%.

And you've talked about, you know, owning the tissue block is a real advantage. You know, how much friction does this remove from the ordering process for the urologists? And does it create like a lock-in effect against competition?

I wouldn't call it a lock-in effect. I think there are things that we can do over the next three to five years to own the tissue block from the get-go. And those are things that we will continue to do and focus on. But I think owning the channel and having those relationships with a pathologist in that channel to make sure we're easily gaining access to the tissue is critical.

And then, you know, just thinking on the competitive front, Natera has obviously built, you know, a presence in MIBC at the Invigor 11 data that, you know, paved the way for a companion diagnostic label. So how do you think about, you know, the commercial weight of a competitor with an FDA CDX label?

I mean, hats off to them. They've done a fabulous job. But again, they're in that medical oncology channel, and they aren't necessarily seen as frequently in the urology channel. And the InVigor study is absolutely for, you know, monitoring or surveillance of treatment effect. And so right now it's apples and oranges between the two tests in terms of where we are and where they are. But I think the InVigor study is really a rising tide for all boats because it has elevated the use of MRD in this population. And so, you know, I think we're excited for them. I think this can be a multiple player category given the size of it. And so hats off to them, and I think we'll also be quite successful.

And for you guys, is it all about capturing newly diagnosed patients, or is there any clinical reason for physicians to switch existing patients that may be on Signatera over to TrueMRD?

Yeah, I would actually turn it around a little bit and say if we're there from the get-go, you know, at the point of diagnosis and owning the tissue block from that point to your earlier point, we can own it across. And so that patient is managed for the vast majority of time in the urology setting. They only go to the med-onc setting for actually when they're delivering a chemo or adjuvant treatment. And so I think it's actually more like why would you go from having a decipher-slash-vericyte-based engagement to a Natera-based engagement in the back, right? And so I think that this is why the whole care continuum strategy is so critical across NIBC and MIBC. And MIBC, I couldn't get it out. uh but when it comes down to it i think you know we will own channels and will in my mind and so you know the role of the medonc especially in the urology channel is going to be more why would you switch and then switch back if you will as we get through time i mean we're just starting the launch here and we are handling this launch with kid gloves so you know this is more of a three to five year conversation in my mind in terms of owning that entirety of the continuum and we we talked about you know margins at a corporate level but how do you think about you know, the COGS profile here with whole genome and, you know, serial plasma draws, and maybe just in the interest of time, also comments on expectations for Medicare crosswalk

pricing?

Yeah, so on the Medicare crosswalk pricing, or I would say in the Medicare, so effectively the equitable pricing model, we aren't expecting anything incremental. Obviously, if it came through, it would be great. But, you know, I think when it comes down to it, sequencing costs are a large part of our cost basis for MRD, but that's okay because sequencing costs are going one direction, and we have an entire cost down roadmap over the next three to five years that gets us to a place where we think we can hit the 25% adjusted EBITDA for this business. It's not going to be from the get-go, and it's something we're going to have to manage in that 25% budget target each and every year, but given 85% of this population is Medicare in nature. We feel relatively confident, unless expectations vastly exceed our plans, that we'll be able to manage that 25% EBITDA. And in time, as we execute that cost on roadmap, gain commercial coverage, and especially because this is all going through the urology channel, we will absolutely get there.

Great. I think we're out of time. We'll leave it at that. Thank you all.

Thanks, Saiko.