Mark Verratti: Yeah. I think some of the levers and we’ve talked about them I think during our Investor Day and previous, I think one of the challenges with the unaffected market is really the customer journey that patient is on. And quite honestly the awareness level, I think we’ve quoted before. And if you look at the market there’s over 13 million women who are seeing OBGYNs who are getting mammograms, but are not aware that they qualify for a hereditary test cancer, because they’re just not being asked the questions around their family risk and so on And so I think the challenge that a lot of health care systems have is how at time of intake when they’re collecting all the information how do they accurately in a very swift digital way that it has a great ease of use and a great customer experience ask those questions raise those flags so that those patients actually know that they do qualify.
So we have stood up a digital solution that we’re excited to share with different health systems. We’re in conversations with many health systems now, which I think is probably one of the biggest levers, which is how do we increase awareness level, how do we incorporate it into the current customer journey where patients are visiting imaging centers and they’re getting mammograms. So a lot — you’ll hear more from us on that as the year progresses.
Brandon Kramer: Great. Thanks. And then just one quick follow-up on the margin outlook. You said that the first quarter expect a bit of a step down then a ramp up in the second half. Is there anything strategically, you would point out in the second half like cost of goods sold per test or lab automation that you want us to focus on moving into the second half to help that margin boost.
Paul Diaz: I mean, we’re in the middle of our lab moves. So the fact that we are maintaining the volume and gross margins that we have while we’re flying the airplane and changing the engines on the airplane in the air, are a big testament to our team and that we continue to get through FDA approvals and CLIA certification. There’s a lot of moving parts here that Sam and the team are working through. So, I think as we go into 2025, as we finish these moves into the new facilities, as we continue to automate and our Archer [ph] system. And essentially, we’ve moved the robots or built robots and move them from South San Francisco, into campus West. For those of you that toured a few weeks ago got to see that. So, as we’re standing that up and as we continue to move to new sequencing technology like XPlus, we see a lot of opportunity with that to improve margins over the next couple of years.
But believe me, Sam has a supply chain $200 million target that he is responsible for going after. So, we do see near-term opportunities in supply chain that he and the team are going after today even while the automation and the new lab of the future stuff takes more time.
Brandon Kramer: Great. Thanks again.
Paul Diaz: Sure. Thank you.
Operator: Thank you. Our next question comes from Puneet Souda with SVB Securities Your line is open — I’m sorry with Leerink Partners.
Q – Puneet Souda: Paul – Thanks for taking the question. First, one just a clarification. Was there a contribution from the biomarker bills in the quarter? And wondering just sort of what line items actually had helped in the — I mean in the segments and the assays.
Paul Diaz: We saw a little bit of lift in a couple of states for GeneSight, but it’s early days. Remember many of these same biomarker laws are just going into effect in January. A bunch don’t go into effect until July. And believe me, it’s — the payers are like, what biomarker law. And then you have to go to the general office in the state to weigh into the GC of the payers. And then the payers say, “Well, we don’t think it’s covered”. So, — but the fact that we have for Oncology and for GeneSight in 11 of the 15 states and they’re big states Texas, New York and others in California just passed, the ability to put more pressure on the state Blues plans to cover, our genomic products. It’s an indication of a broader opportunity for adoption.
Again, it’s early days for genomic testing. This industry we’re still toddlers here, as compared to the rest of the health care system. And so I just think it creates a lot of opportunity to increase awareness, penetration and that’s the time that should lift all the boats in our sector quite frankly.
Q – Puneet Souda: Got it. And maybe, if I could ask about MRD. Could you just elaborate a bit on the indication path forward? I mean there’s obviously a leader in the space that has started out with CRC than breast the IO monitoring other indications and the more indications are coming on board. So just wondering, sort of what’s your strategy? Is there an indication that you’re pursuing that’s potentially maybe not mined just yet obviously very nascent to market still. Thank you.
Paul Diaz: Yes. No, I — look, our hats off to them. They’ve done a great job and they’ve paved away. So we were appreciative of the work they’ve done. We have a deeper test. We think that that’s going to matter, particularly when you’re talking about withholding treatment for patients. And so — but I think there’s room for more than one, two, three, four, five in a market as big as this opportunity could be. I think you’ll see us stay pretty disciplined to the cancers that as Mark described within precise oncology solutions that we’re known for breast, ovarian, endometrial, prostate and — but the studies are will enable us to look at the more complicated tumors and the ability to think about the different indications that we can express.
And we’re doing the same thing with our expansion of MyChoice HRD. Remember that’s ovarian only and we’re looking to expand that to breast and prostate as well. So, yes, we’re really excited about MRD for us as a company. I’m not sure if anybody is giving us credit for it on some of the parts basis or anything else. But we’re quite excited to be a fast follower and we think we’ll have a highly sensitive test with a building body of clinical evidence between Memorial Sloan Kettering, MD Anderson in the study we announced this morning.
Puneet Souda: Got it. Okay. Thank you.
Operator: Thank you. Our next question comes from Derik De Bruin with Bank of America. Your line is open.
John Kim: Hey good afternoon. This is John Kim on for Derek. A quick one. how are there — if there are how much opportunities are there left from improving authorizations or cash collections or working on RCM or reducing no pays? And looking at that medium-term plan, do you have the MRD launching this year in the second half. What sort of contribution can we expect? Thank you.
Paul Diaz: Yes. So MRD for our pharma partners, great news they pay. And so we’ll be doing MRD, running MRD assay for our partner, farm partners in the back half of this year, as that’s our expectation with hopefully a commercial launch with reimbursement in ’25 sometime. That’s the goal. Again plenty of runway I think for MRD as we as we just described. Look the broader rev cycle prior of ASP issue is hundreds of millions of dollars. We are not getting paid 46% of the time for our test. So we are very focused across the portfolio, whether it’s in GeneSight, where we have the biggest opportunity but even in some of our more mature products like myRisk our hereditary cancer test. So, across our products and it’s one of the things that we’re excited to Scott can join the team given his experiences.
We do think there’s a lot of upside over the next few years in engaging with Washington and policymakers about prior auth. And now there was an OIG report that talked about the Medicare Advantage plan not only for my [indiscernible] diagnostic providers and for others putting up undue barriers. But it’s kind of trench warfare with the payers, it’s payer-by-payer, state-by-state continuing to build clinical evidence and working through all the genetics. But our investments in EMR, which allow us to pull the prior off out of the record to pull the clinical necessity documentation out of the record. All of that enables us to do a better job and be a better partner for the payers. So – it is something that we’re very focused on and we think provides a lot of opportunity for the company over the next few years.
John Kim: Appreciate it. And talking about investments, you’re checking the guide in terms of the cash flow and you’re reducing the CapEx this year as you said you would. But any – are there any other organic.
Paul Diaz: It’s not everything we said we would by the way just for the record.
John Kim: Any assets that you see would complement the existing portfolio? Anything that you’re eyeing in the say like the MRD landscape. I know you have – you’re launching with the pharma partners in 3Q and going for that commercial launch next year. But yes, just wanted to ask come back.
Paul Diaz: Yes. We faced that question when I first came to the company and we were told we needed to spend $500 million in MRD and our team has built an MRD assay all in probably for $75 million by the time we launch commercially, so our return on invested capital for an assay that we know we can stand up in our labs that we know we can get through FDA approval. We think that was the right decision for shareholders. There’s a lot of great science out there and we’re going to keep our eyes open but be really judicious on their balance sheet and do tuck-ins like Intermountain that we did were something that we know we can put into the sales channel, it’s additive, but we’d always rather build than buy quite frankly because we – the probability of success is much higher there.
But there’s going to be a lot of assets coming to market and we’ll be – and we are looking at some really interesting things right now. What we’re not going to do is take on somebody else as big burn rate what we’re not going to do is take on people’s commercial issues and coding and those kind of things. So we’re going to be pretty careful about M&A.
John Kim: Thank you. Appreciate that.
Operator: Our last question comes from Brandon Collier with Jefferies. Your line is open.
Unidentified Analyst: Hi, guys. This is Kayla on for Brandon. Thanks for taking the question. I’ll start off with just some of the modern lab investments you guys are making, I know you talked about maybe around $12 million a year of savings starting in 2025. Is there any chance that we’ll see that start to come in a little bit in ’24? Or is that still more of a ’25 and beyond event?
Paul Diaz: I mean, it’s all in the mix, right? I mean, so we have product mix changes that affect gross margins the team has dropped our cost per test like 8% last year. I mean so there’s a lot of moving parts in there. But yes, I think every day, Shim and the team are working to stand up our new lab, get through CLIA certification, get through analytical validation. And there’s a lot of process improvement the team is looking at across each of our products as we move them into the new labs. So we actually see more opportunity than that 12 that we had originally identified, it’s just going to take time to get there. So you can assume what we have in the guide, though, that we’ve assumed that people are going to continue to work hard to get some of those savings as quickly as possible. Sam, I don’t know if you’d add anything.
Sam Raha: Paul, I think that’s comprehensive.
Unidentified Analyst: Awesome. Thanks. And then just quickly on precise liquid. Before the launch in 3Q, can you have through any steps you’re taking on the commercial side ahead of that/
Paul Diaz: Yeah. I don’t know if there’s anything unique about launching precise liquid, right? And we I think the good news is we are currently in almost all of the oncology offices today that are currently using tumor, both on the solid as well on the liquid side. I think something that we spoke to on this call is consistently when we talk to our customers, both large and small, to look for clinical utility, which Myriad has proven to do time and time again. But they do look for a comprehensive panel. And so now we have comprehensive offerings, both on germline as well as solid tumor as well as liquid. I think that puts us in a very unique position with customers where before Myriad wasn’t even considered. And then the other two points is obviously ease of use, which I think we’ve talked a lot about and then the third piece is affordability.
And so we’ve always met the customers in many of those, but in the one area where Myriad did not have, we didn’t have a comprehensive offering. And now we will. So we’ll make sure to share some of those details. But I think Myriad has got a success of launching products into the market. And I think the benefit is we’re already with most of those customers today.
Unidentified Analyst: Great. Thanks.
Paul Diaz: Great, well, thank you very much, Matt.
Matt Scalo: Yeah. Thank you very much. This concludes our earnings call. A replay will be available via webcast on our website for one week. Thanks again for joining us, and have a good afternoon.
Operator: Thank you for your participation. This does conclude the program. You may now disconnect.
