Veracyte, Inc. (NASDAQ:VCYT) Q1 2024 Earnings Call Transcript

Veracyte, Inc. (NASDAQ:VCYT) Q1 2024 Earnings Call Transcript May 7, 2024

Veracyte, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and thank you for standing by and welcome to the Veracyte First Quarter 2024 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your first speaker today, Shayla Gorman Senior Director Investor Relations. Please go ahead.

Shayla Gorman: Good afternoon everyone, and thank you for joining us today for a discussion of our first quarter 2024 financial results. With me today are Marc Stapley, Veracyte’s Chief Executive Officer; and Rebecca Chambers, our Chief Financial Officer. Veracyte issued a press release earlier this afternoon detailing our first quarter 2024 financial results. This release along with the business and financial presentation is available in the Investor Relations section of our website at veracyte.com. Before we begin, I’d like to remind you that various statements that we may make during this call will include forward looking statements as defined under applicable securities laws. Forward-looking statements are subject to risks and uncertainties and the company can give no assurance they will prove to be correct.

We are not under any obligation to provide further updates on our business trends or our performance during the quarter. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Veracyte files with the Securities and Exchange Commission, including Veracyte’s most recent Forms 10-Q and 10-K. In addition, this call will include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures are included in today’s earnings release accessible from the IR section of Veracyte’s website. I will now turn the call over to Marc Stapley, Veracyte’s CEO.

Marc Stapley : Thanks Shayla, and thanks everyone for joining us today. Following a very robust end to 2023, I am excited to share that we have continued our positive momentum with a very strong start to this year. We delivered first quarter revenue of $96.8 million, growing 17% compared to the prior year period. This strength was driven by our testing business, which grew 25% meaningfully exceeding our expectations. The performance of the Decipher Prostate and Afirma tests again demonstrated the incredible power of the Veracyte diagnostics platform to drive market penetration. This unique approach relies on broad set of genomic and clinical data deep bioinformatic and AI capabilities and a powerful evidence generation engine, which ultimately drives guidelines.

Guideline inclusion and combined with our proven commercial and managed care excellence is designed to ensure durable adoption and reimbursement for our on-market diagnostics. In the first quarter we delivered 16,500 Decipher Prostate test hitting a new quarterly volume record with growth coming from both new and existing providers. Our incredibly productive urology sales force continues to drive adoption through awareness of the test utility and associated clinical evidence as well as strong guideline representation. In February updated NCCN guidelines were published with Decipher Prostate receiving a level 1b evidence rating the highest rating of all gene expression tests for prostate cancer. Additionally, because of this classification the Decipher Prostate test is the only gene expression test for which the guidelines include a separate table that summarizes treatment implications for patients based on both the NCCN risk classification and the Decipher score.

These updated guidelines are proving to be a meaningful resource to provide physicians with clear summarized evidence from clinical trials on how Decipher Prostate can inform treatment decisions. On the reimbursement front, we also made significant progress in the quarter, signing a contract with a major commercial payer to make Decipher Prostate and in network offering bridge close to 30 million members. We are thrilled to see this payer’s patient population obtain more seamless access to the Decipher Prostate test enabling that treating physicians to more efficiently optimize day care. Generating additional clinical evidence for Decipher remains a priority for us to drive further guideline inclusion for durable reimbursement I mentioned previously and increased awareness in the significantly under-penetrated prostate cancer market.

Last month a publication in JCO precision oncology showed that among patients undergoing active surveillance for prostate cancer, the Decipher test is prognostic for identifying those whose disease is likely to progress. Pinpointing the optimal candidates for Active Surveillance, which can help patients delay or avoid interventions such as Surgery, Radiation or Hormonal Therapy is challenging given the potential harm of these treatments weighed against the risks of cancer progression and missed opportunities to cure. These significant findings make the site for the only Prostate Gene Expression test to have treatment outcome data from a Prospective, Multicenter, Phase 2 randomized trial in the Active Surveillance population. Providing a tool like Decipher that could help to identify those whose disease is likely to progress, to give physicians important insights to help them with this critical decision, while also aiding in the further penetration of this portion of the market.

Moving to Afirma, we reported approximately 14,000 test results and 14% revenue growth compared with the prior year, in line with our expectations. With Afirma, we continue to illustrate our differentiation, resulting in market share gains due to broaden awareness of previously published evidence demonstrating the quality and performance of our test. Another point of differentiation has been the launch of Afirma GRID RUO tool designed to advance the science around Fibroid Nodules and cancer. This quarter we saw a high level of interest in grade with approximately 50% of physicians requesting a report on their test order forms in March. The addition of the Afirma, TERT Promoter Mutation Test enhances the clinical utility of our BioD offering, also reinforcing our competitive position.

This quarter, following publication of analytical validity data for the test in the Journal of Endocrinology and Metabolism, TERT Testing received Medicare coverage. While TERT represents a small portion of our total Afirma volume, the limited revenue impact, this is yet another indicator of the strides we are making to provide the most complete offering possible for physicians and their patients facing a potential Thyroid Cancer diagnosis. Looking ahead to our growth drivers over the coming years, we believe that Decipher Prostate and Afirma will continue to grow meaningfully, as we drive towards 80% penetration for both Prostate and Fibroid Cancer Molecular Tests, while continuing to gain market share and bolster ASPs. For Decipher, we believe the updated NCCN guidelines will be a meaningful catalyst to broaden awareness and change physician behavior.

We recently conducted a voice of customer survey on this update, which clearly urologists as well as medical radiation and urologic oncologists across the academic community in large urology group practice or blood processing. Not surprisingly, 82% of respondents were aware of the updated NCCN guidelines and 75% of respondents utilized the principles of risk stratification section, which details treatment implications based on the NCCN classification and Decipher score. As a result of ordering trends since the publication as well as the survey feedback our confidence in our outlook on Decipher growth over a multiyear period has been further solidified. In addition, we continue to anticipate the draft of Medicare Local Coverage Determination or LCD, for patients with Metastatic Prostate Cancer to become final later this year or early next.

We estimate that there are an additional 30,000 patients annually who could benefit from the prognostic and predictive information Decipher delivers to their clinicians, our pivotal moments in their cancer journey. Meanwhile, we unfortunately continue to see growth in the incidence of Prostate Cancer with the American Cancer Society estimating there will be approximately 300,000 new cases in 2024, up again from 2023 making Decipher even more important for more patients. For Afirma, in addition to the market dynamics previously highlighted, we are beginning to see standard of care changes of physician adoption in rural areas, where we see a long tail of clinicians who are currently utilizing genetic testing for this patient population. Additionally, we are engaging with MolDX on a draft LCD to cover thyroid nodules who will testify cytology, expanding access to patients who can also benefit from Afirma.

Now turning to our longer-term growth drivers, we are focused on three vectors. Global expansion through our robust IVD strategy, solving new cancer challenges through the utilization of our platform. For example our Percepta Nasal Swab test and with the acquisition of C2i genomics serving more of the patient care journey through Minimal Residual Disease or MRD and recurrence testing. As we often do and as we committed to do following the C2i acquisition, during the quarter we continued our portfolio prioritization to rationalize our investments outside of these three key areas. As a result, we downsized the commercial support for our InvisioTest. While we will continue to offer this important test to those patients facing interstitial lung disease, we will no longer maintain a separate InvisioTest sales force.

Now shifting to our focus on global expansion, we are on track with the key product and market development activities from multi-platform IVD approach, developing our deciphered prostate test on qPCR and our Prosigna and nasal swab tests on NGS. Recall that once these tests are made available, we will still need to go country by country to drive adoption and reimbursement, utilizing the clinical evidence that we already have and are continuing to generate with our CLIA-based tests. This is yet another example of the leverage we get from the Veracyte Diagnostics platform where our CLIA strategy built around data, insights, proof, and utility will fuel our AVD strategy outside the US. On our second growth driver, solving new cancer challenges via Percepta Nasal Swab, we have made good progress with our Nightingale trial and have patients enrolling across our almost 100 sites.

While we remain excited about our progress to date, the current pace of enrollment per site is tracking below our updated expectations. We’ve designed this study with a high degree of scientific and clinical rigor, endorsed by the cancer community, and we believe the slower rate of enrollment is consistent with typical challenges currently faced by large, multi-site pulmonology trials and isn’t related to physician interest or market potential of the nasal swab test. While the pace of a call in April would be indicative of enrollment completion around the end of the year, our internal modeling has wide error bars, and this pace may or may not continue over the coming months. Given that, we will update you next when the study is nearing completion.

Our last long-term growth driver is serving more of the patient journey. Now that we have integrated the C2i Genomics team into Veracyte, our excitement for the technology potential has only grown. We kicked off the development of our first MRD test for muscle-invasive bladder cancer in our ClearLab, which we intend to launch in the first half of 2026. As we mentioned last quarter, C2i’s novel whole genome sequencing approach to MRD fits well into the Veracyte Diagnostics platform, making it the ideal solution for us to expand our test offering throughout the patient journey. As a testament to the strength of this approach, we are continuing many of the collaborations with academia and industry that C2i initiated and have seen strong interest from potential partners and collaborators as we present the technology and begin to build clinical evidence for the test.

Between the inbound interest we have received since announcing the acquisition and the momentum in our development activities, we are confident in the strength and extensibility of our new MRD platform and the market potential. We believe this will prove to be a pivotal acquisition for Veracyte across numerous indications over time. With that, I will now turn to Rebecca to review our financial results for the quarter and expectations for 2024.

Rebecca Chambers: Thanks, Marc. Q1 was a strong start to the year with $96.8 million in revenue, an increase of 17% over the prior year period. We grew total volume to approximately 33,500 tests, a 16% increase over the same period in 2023. Testing revenue during the quarter was $90.3 million, an increase of 25% year-over-year, driven by decipher and a form of volume, along with ASP growth, driven by payer contracting and prior period collection. Total testing volume was approximately 31,000 tests. Testing ASP was approximately $2,900 as we resolved and collected approximately $3 million of out-of-period payments. Adjusting for this impact, testing ASP would have been approximately $2,800. We began to see some benefit of coverage for the deciphered prostate from the payer mark described over the second half of 2023, and a larger benefit with the contract now in place as of the middle of Q1.

Looking ahead to the remainder of 2024, this incremental contract is now forecasted to benefit testing ASB. First quarter product volume was approximately 2,500 tests and product revenue was $3.5 million, down 9% year-over-year as Prosigna demand was impacted by supplier issues seen previously. Biopharmaceutical and other revenue was $3 million in line with our expectations and down 51% year-over-year given overall spending constraints across the industry. Moving to gross margin and operating expenses, I will highlight non-GAAP results, which exclude the amortization of acquired intangible assets, other acquisition-related expenses, and restructuring costs that does include routine stock-based compensation. Non-GAAP gross margin was 68%, down approximately 70 basis points compared to the prior year period.

Taxing gross margin was 71%, down 160 basis points compared to the prior year period as we have invested in our footprint and equipment expansion to meet increased decipher demand. We expect to leverage these investments as volume continues to grow. Product margin was 25%, down versus the prior year period driven by startup costs associated with the full-scale ProSigna manufacturing. Biopharmaceutical and other growth margin was 6%, down year-over-year due to lower fixed cost absorption. We have taken steps to address the cost structure of this business that we expect to begin to see play out in the second half of the year. Non-GAAP operating expenses, excluding cost of revenue, were up 6% year-over-year at $61.6 million. Research and development expenses increased by $2.5 million to $15.2 million, given personnel additions due to the C2i acquisition and increased costs related to our NIGHTINGALE Clinical Study.

Sales and marketing expenses declined by $1.2 million to $24 million. G&A expenses were up $2.3 million to $22.4 million, driven by higher personnel costs. We reported a GAAP net loss of $1.9 million, which included $8 million of stock-based compensation, $5.6 million of depreciation and amortization and $4.6 million of C2i acquisition-related expenses. As expected, we used $9 million of cash in operations and ended the quarter with $209.2 million of cash-in-cash equivalents, including the benefit of approximately $4 million of acquired cash. Turning now to our 2024 outlook, we are excited to raise our total revenue guidance to $402 million to $410 million, from our prior guidance of $394 million to $402 million. This reflects an improved outlook for our testing business, with revenue growth of 15% to 18%.

A meaningful increase as compared to the prior guidance of 13% to 15%. We are also raising cash guidance and expect to end 2024 with between $236 million to $240 million in cash-in-cash equivalents and short-term investments. Moving to the second quarter, we are forecasting a sequential increase in total revenue, given typical seasonality and the impact of reimbursement decisions on Decipher ASP. We expect Q3 to be roughly flat to Q2, with a sequential step-up in revenue in Q4. I am thrilled with our strong start to the year and our commitment to driving revenue growth with a focus on profitability and continued cash generation. We’ll now go into the Q&A portion of the call. Operator, please open the line.

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Q&A Session

Operator: Thank you. At this time, we will conduct the question-and-answer session. [Operator Instructions] Our first question comes from the line of Andrew Brackmann with William Blair. Your line is now open.

Andrew Brackmann: Hi. Good afternoon. Thanks for taking the question. Maybe just first on Decipher, obviously, continued nice growth there and sort of a lot of tailwinds, which you talked about in the scripts, but can you maybe parse out the growth rate there for us a little bit? How should we be sort of thinking about market penetration impact versus sort of share wins or incidence growth here moving forward? Thanks.

Marc Stapley: Yeah. It’s a great question, and thanks for that. You should think of it as being all of the above. It’s pretty clear that we’re both penetrating the market, growing the overall market for molecular diagnostics and gaining a significant proportion of the share there and, I’d say, taking share in particular. When you look at Decipher, I mean, you can do the math on the volume numbers we’ve given. The volumes grew roughly 30% year-over-year, and then ASP gains drove a total growth rate of about 36% in Decipher revenue year-over-year. So if you compare that to how the market is growing, you can get to those statements I just made regarding share. And I think, obviously, it’s driven by a lot of things we’ve talked about, the NCCN guidelines that really only come from the extremely high volume of studies that support Decipher.

And then going forward, of course, we talked about on the prepared remarks the commercial contract, which certainly helps bolster ASP a little bit. And then going forward into later this year, early next year, metastatic as well, adding another 30,000 potential patients. So as I think about it, I don’t really see anything that affects our ability to continue to that great trend that we’re seeing in both market share and market penetration, and that’s why we’re confident in saying that we see multi-year growth opportunity for Decipher here as we drive this total market to a place where hopefully 80% of patients are getting treated with a molecular diagnostic and most likely given all the trends the Decipher test.

Rebecca Chambers: Absolutely. The only anything to add to that really quickly Andrew is we’ll be updating our penetration assumptions annually. We did so most recently on the JPMorgan in the Q4 call. And so I think those are — that’s a triangulation exercise that does take some data that’s only released annually and stuff like that and obviously going through other disclosure. So it’s challenging to update that quarterly for those reasons, but I concur with Mark wholeheartedly, we have nothing but white space to go after here and the sales team is doing a fabulous job to do so, and our confidence has only been furthered over the last quarter to that end of having Decipher continue to grow handily over the next number of years.

Andrew Brackmann: That’s great color. Thank you. And then maybe I guess on Nightingale, can you maybe just be a little bit more specific on what might be driving that slowdown in enrollment? And I guess as you think about the scenarios of outcomes here. Can you maybe just sort of talk about your level of investment into that channel ahead of a formal readout whenever that maybe? Thank you.

Marc Stapley: Yeah, thanks for the question. Is that you — actually that’s part of the problem is it’s very difficult to be specific because as the proportion of situations that are affecting, I’d say clinical trials in general but particularly in pulmonology. I think we all understand how challenging it is to — how much of some trial enrollment you don’t control how much is controlled by the site. What we can control is how quickly we signed the sites up and how many we go after. And I feel really good about the work we’ve done there, having almost 100 sites actively enrolling and then it’s very much within their own internal process of bringing those patients in now. What’s really important to us at Veracyte is a robust trial and good science and that is more important priority than velocity of enrollment, of course, we want to make sure that the trial is done the right way.

And so we have limitations around the customers or the patients actually that are eligible for the trial. Of course not every patient who’s eligible wants to be part of the trial until you have that factor. And then you have resource challenges at individual sites and that can cause trial activity to increase or slow down. And that makes it very difficult to predict. So trying not to get into having now a change that again trying not to get into the process of trying to predict win that will finish. But I will tell you that based on current rates that we saw in April not that April is not an outlier. And so it’s only I’m not suggesting that the April rate is the rate to apply going forward but that would take us towards the end of the year.

But we’re doing everything that we can within the bounds of as I said the good science and a robust trial to make sure that we get the trial completed as soon as we can and we’ll update you when we when we’re nearing that point.

Rebecca Chambers: And maybe you just want to talk about and what we said in the prepared remarks regarding our commercial level commercial excitement?

Marc Stapley: Yeah. I mean, I think yes and that’s the real question that I think comes from a slowdown in the enrollment is the design affect our view of the commercial interest in the product and also the market and the answer to that is clearly not. We don’t see that at all. There’s nothing that gives us any signal other than the at this point the opposite, which is getting 100 sites signed up with the level of enthusiasm that we saw from those sites. It certainly continues to give us a lot of confidence and excitement about getting test to market and addressing a very significant market. So no change in our expectations around the market, the ultimate market for nasal swab.

Andrew Brackmann: Okay. Thank you.

Marc Stapley: Yeah, thank you.

Operator: Thank you. One moment for our next question. Our next question comes from Sung Ji Nam with Scotiabank. Your line is now open.

Sung Ji Nam: Hi. Thanks for taking the questions and congrats on the quarter. Maybe on the MRD for muscle-invasive bladder cancer. I was wondering if you might be able to kind of comment on your development strategy there given there is some competition out there. I’m curious if you have a sense of — how large the trial or if you’re running your own internal trial, or do you have plans to partner with biopharma companies running clinical trials and things like that. Just curious if you’re looking for partners or ursuing the partnership strategy or if you might be going at it on your own?

Marc Stapley: Yeah, it’s a great question. Actually one of the reasons that we are launching first in bladder in muscle invasive bladder cancers because we see a clear pathway to getting our tests on the market and getting it reimbursed. So we’re able to leverage an existing LCD. We are ingesting the test into our lab. As you can imagine, it’s going through the development process. We’ve already kicked off that program, core teams on, and they’re working very hard on that. We will do the tech assessment that we need to do in order to get that reimbursement. We will do the automation steps that we need to do within our lab to be able to scale and so we see it very much within our control. The work that we have to do for the tech assessment is not a significant number of samples to demonstrate the necessary concordance that we need to be able to demonstrate.

So that’s already in progress. So yes, very confident in our ability to get this test launched as we said, which is the early part of 2026 and get it on the market and reimbursed. It opens up a potential market, an important one of about 18,000 patients. And while muscle-invasive bladder cancer was the indication where we see the earliest path to a product. As you can imagine, this is a platform. It’s not a single test. And so we’re excited to think about and determine which indications and which conditions we go after next with our MRD platform.

Rebecca Chambers: And just one thing to add to that, Sung Ji. Obviously, one of the reasons we’ve highlighted for really in the C2i acquisition was effectively the whole genome sequencing approach that is taken, well, maybe slightly more expensive, the amount of clinical data, we believe that will give us over time, just like in Decipher and now with Afirma GRID also just like Afirma, will allow us to just have a body of evidence that we think will help us gain commercial traction above and beyond just what is in the tech assessment. So I think we have a number of different levers to pull to compete in this market. And obviously, MRD is a really large market. And so we’re super excited to get our products and test on the market to go after first muscle-invasive bladder cancer, but then thereafter, other indications to follow.

Marc Stapley: Yes. And well, I think that’s a great point. Just to add to that. The — if you look back at Decipher, Decipher wasn’t the first test on the market and certainly didn’t have the greatest traction initially. And — the way that we’ve been able to get to the point where we’re at now is through that evidence development and that incremental data that we’re able to generate, what we call the Veracyte Diagnostics Platform, that pieces all that together. And so I do think while it’s a competitive space, there’s plenty of opportunity here.

Sung Ji Nam: Got you. That’s super helpful. And then just on biopharma, obviously, a very small part of your business now, but just kind of curious, given others are starting to see some green shoots in that state. And so I was wondering, especially with grid Afirma and for Decipher kind of gaining a lot of traction, things like that. Do you think they’re — just as we — as you look ahead to kind of later this year and into next year, there could be some more activity around biopharma-related activities?

Marc Stapley: I think you said it well. I mean, green shoots for sure, you start to see those soon. It can take a while for those green shoots to really flourish. But — and we’ve got a pipeline. I’ve said this before, we have a pipeline of new customers with new projects. The time to get those projects from early indication to decision to contract is longer than it used to be. And so that’s part of the challenge is taking time Yes, I do think you’re right to point to the data that we have for grid, particularly on the prostate side. And now with MRD, we’re actually really starting to see some, I’d say, potentially more than green shoots of interest in our MRD platform. So I’m optimistic that at some point, these green shoots should come to fruition.

I’m not sure exactly when. I’m not willing to try and put a time frame on that. But of course, as you can imagine, scenario we’re watching very closely. And to your point, the biopharma and other revenue is now a small percentage as the rest of the business has grown, and that has declined, but we continue to maintain a presence and a team and a capability around that in both the clear side, supported by the clear side as well as our immunohistochemistry products.

Sung Ji Nam: Great. Thank you for taking the questions.

Marc Stapley: Thanks.

Operator: Thank you. One moment for our next question. Our next question comes from Mason Carrico with Stephens. Your line is now open.

Q – Mason Carrico: Hi, Marc. Hi, Rebecca, congrats on a solid start to the year here. Maybe a higher level question on the prostate cancer market. What types of patients make up the majority of the 35% or so of the penetrated market. And then for the remainder of the market, I realize that metastatic patients make up a portion of it but what type of patients make up the unpenetrated portion of this testing opportunity? Are there material differences between the two? What’s the strategy to continue to grow share and expand the market from here?

Marc Stapley: Yes. I mean there’s opportunities to expand and grow in all the indications, as I’m sure that you can imagine. By far, I’d say, at this point, the penetration is mostly going to be in the intermediate space. We can expand into the high, in particular, with Medicare as well as you can imagine. And active surveillance as well is an area of potential growth. So — but I’d say no area is particularly an outlier across every part of biopsy as well as RP there’s opportunities for further expansion in that white space that Rebecca referred to earlier.

Rebecca Chambers: And we just had a really important study published on active surveillance, perhaps you want to talk about, Marc?

Marc Stapley: Yes. I mean I mentioned that a little bit in the prepared remarks but it demonstrated that the programs, the capability of deciphering any active surveillance space. And helping to reclassify which patients should be on active surveillance and which have not, which I think is really important because, as I said in the earlier remarks, you don’t want to under or overtreat those patients if you can avoid it. And there’s not a great deal of molecular information help there, obviously, when these tests aren’t being used for two-thirds of patients to help ascertain what’s the right approach. And I think with the evidence that we’ve now got behind decipher you’re going to start to see more utilization there. And especially with the NCCN guidelines, and particularly that table as well that talks about how to apply decipher and how to change treatment based on the decipher score as well as the risk category, you can clearly see how we’re going to see more penetration across the entire spectrum of patients.

I mean ultimately, making our goal, as I many times before, I mean, I don’t think you ever get to 100% for a whole bunch of inertia reasons. But frankly, most patients with prostate cancer should be having a molecular diagnostic. And of course, we strongly believe that decipher is the right one.

Q – Mason Carrico: Got it. That’s helpful. And then on the Afirma Grid offering, where are you seeing the most demand from a clinician standpoint and have you seen any increased traction or higher demand from the academic hospital setting now that you’ve launched that offering?

Marc Stapley: I feel like we’re seeing — yes, especially, I think there’s a lot of interest coming from the academic setting around grid as we’ve seen on the decipher side for many years. We’re now seeing on the Afirma side for research purposes. And roughly 50% of physicians are interested in grid. But also we’re seeing greater penetration, whether driven by grid or not, and it’s not always possible to correlate all those good things we’ve done around Afirma to the outcome, I think it’s actually the collection of all the things we’ve done, including grid and TERT and the portal and everything else associated with that. But we’re also seeing better penetration in the rural communities as well, which is, I think, a positive sign for me because it says that one of the challenges you have with any test like this is getting out to that long tail of physicians who haven’t adopted either a molecular test or Afirma and so I think that’s a good indication that we’re really making good traction there as well.

Q – Mason Carrico: Got it. Thanks, guys.

Operator: Thank you. One moment for our next question. The next question comes from Tejas Savant with Morgan Stanley. Your line is now open.

Tejas Savant: Hey, guys. Good evening. Marc or Rebecca perhaps a quick one for you here on the Afirma side of things. So following Medicare reimbursement, over what time frame do you expect the promoter testing to provide an ASP uplift to Afirma, especially as reimbursement broadens out there beyond the CMS coverage you now have in place?

Rebecca Chambers: Yes, Tejas. It’s a fair question. Effectively, with the test being reimbursed at $185, it’s not going to provide a meaningful uplift, especially since only about 50% of patients select to have — I’m sorry, clinicians select to have TERT run and then you have to have a suspicious finding before TERT is actually ran and that’s another 50% rate. And so talking about small dollar figures on an ASP perspective and not a huge number of patients. And so I think when we think about it, it’s one less barrier to drive penetration more so than an ASP uplift, specifically for Afirma. I think more importantly than TERT is the vast majority of work that our managed care business has been doing to drive ASP uplifts across both our products.

Obviously, today’s news on the Decipher side is huge. And we’re very excited and I think the team did a fabulous job negotiating that contract. And on the Afirma side, we have — we still have some room to go albeit really do have good coverage and contracting on there as well. So, I think with the big payer behind us today, there’s nice room to grow. But today, it’s probably a decently sized impact and from there it will be smaller including TERT.

Marc Stapley: I just want to point out one agreements, for instance, I totally agree ID to meet TERT is dry helping drive Afirma because we have a more complete offering. It’s important to have it for physicians. So it’s driving a firmer. It’s not necessarily driving revenue for revenue’s sake.

Tejas Savant: Got it. That’s fair. And then, one on just the data monetization strategy, Marc on a go-forward basis, including that C2i data, which I’m sure you’ve not had a chance to get better acquainted with. And my question is less so about the reimbursement angle, which you already alluded to earlier but more so from other ways to monetize it perhaps on the Biopharma side.

Marc Stapley: Yes. And that — well, I think we talked about that before. There is — there’s always a challenge with monetizing data for data’s sake. I think what the way we think about it is that data really supports the flywheel that we talk about that drives the testing. It drives further research. It drives further evidence and then continues to drive more testing. Now to the extent that from a Biopharma perspective of interest in that data, we, of course, capitalize on that. And those are great projects, because typically what you find is the Biopharma customer reaches out to you because of the tremendous success that you have and the amount of data you have versus having to go and build a team to go and try and drive that funnel.

And so you can imagine on the prostate side we get interest. And as I said earlier, what’s really exciting is on the MRD side, particularly driven by the fact that this whole genome, we get and the performance of the test, we’re getting interest there as well. So, we’ll continue to fill those inbounds and see what opportunities come out of that. But it’s not, at the point where it’s a put a line on the spreadsheet for monetization of data at this point is fueling the rest of our business.

Tejas Savant: Fair enough. And one final one for me and just M&A strategy. The balance sheet is in good shape. You took up the year end cash guide a little bit over here. Just following C2i, the asset is clearly a strategically important technology. You talked about MIBC and broadening out to other indications over time but the revenue contributions will take a little bit of time, right? And then you’ve got the Percepta Nasal Swab, which are the NIGHTINGALE delays that you — enrollment delays that you cited. So as you consider the landscape here and your balance sheet, just remind us again sort of what are the priorities for tuck-ins and how much of, I guess, the revenue bridge plays into it. In the sense that a focus on near-term revenue generation, is that fair to assume as a priority for other tuck-ins you may do here in the next year or so?