Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Personalis Inc (PSNL, Financial) achieved a 35% year-over-year revenue growth, reaching $22.6 million in Q2 2024.
- Biopharma business grew 117% year-over-year, driven by strong demand for tumor profiling and MRD products.
- Gross margin expanded to 35.6%, up from 28.7% in the same period last year, due to product cost reduction and operating leverage.
- Personalis Inc (PSNL) increased its full-year revenue guidance to $79-$81 million, up from the previous $76-$78 million.
- The company has a strong balance sheet with $87 million in cash and short-term investments, expected to last through Q1 2026.
Negative Points
- Operating expenses were $24.9 million, though reduced from $30.1 million in the prior year, still represent a significant cost.
- Net loss for Q2 2024 was $12.8 million, although an improvement from $24 million in the prior year, it remains a substantial deficit.
- The company faces risks and uncertainties that could cause actual results to differ materially from current expectations.
- Personalis Inc (PSNL) is still awaiting Medicare reimbursement for its NeXT Personnel test, which could impact future revenue.
- The company’s enterprise relationship with Natera is expected to wind down by the end of 2024, potentially affecting future revenue streams.
Q & A Highlights
Q: Should Moderna's PCV eventually secure FDA approval, what is the potential upside for Personalis, and could another sequencing vendor start to sequence for Moderna once approved?
A: Christopher Hall, President, Chief Executive Officer, Director: We are very optimistic about our relationship with Moderna, which has been strong since 2016-2017. While we can't speak to the specifics of the upside or the opportunity, we believe our platform is highly valued by Moderna. Currently, we profile patient samples and send back data to Moderna for personalized vaccine development. We feel confident about the long-term prospects of this partnership.
Q: With Tempus launching their own MRD solution, how do you ensure they are incentivized to market NeXT Personnel equally?
A: Christopher Hall, President, Chief Executive Officer, Director: Tempus' product is a blood-based, tumor-naive product, while ours is a tumor-normal product positioned for lung, breast, and IO therapy monitoring. Both products complement each other well, and Tempus is uniquely positioned to accelerate growth with a comprehensive offering. We are growing the number of Tempus reps selling the product incrementally to manage volume and ensure effective marketing.
Q: Could you touch on NeXT Personnel reimbursement and potential pricing?
A: Christopher Hall, President, Chief Executive Officer, Director: We expect reimbursement similar to other players in the market, but our test is more resource-intensive, which could justify higher pricing. Additionally, there is a possibility of achieving ADLT status. Even without these, we are tracking to have gross margins greater than 60%, with sales and marketing costs in the 20-25% range.
Q: Can you provide an update on the publications for key data sets in breast, IO, and lung cancer, and the submission of dossiers to CMS?
A: Christopher Hall, President, Chief Executive Officer, Director: The data has been run and publicly discussed, showing great results. Investigators are working on the papers, which are in different phases but nearing completion. We will submit to Medicare as soon as these studies are published, as peer-reviewed studies are required for Medicare consideration.
Q: How are you managing the Tempus efforts to avoid overburdening the system with too much volume when not getting paid?
A: Christopher Hall, President, Chief Executive Officer, Director: We are gradually increasing the number of Tempus reps trained to market the product. There are volume gates built into the agreement to manage this. The goal is to show increasing clinical traction while managing the burn rate, ensuring a running start when reimbursement is achieved.
Q: Regarding the 4% revenue headwind from unreimbursed clinical tests, are these tests you plan to seek reimbursement for in the future?
A: Christopher Hall, President, Chief Executive Officer, Director: We bill insurance companies for these tests but do not expect payment as they are not deemed medically necessary. These costs weigh down gross margins, but we are making significant progress in improving margins overall.
Q: What is driving the raised revenue guidance, particularly in the pharma testing business?
A: Aaron Tachibana, Chief Financial Officer, Senior Vice President, Principal Accounting Officer: The increase is driven by strong performance in the biopharma business, particularly from ImmunoID NeXT and growing interest in NeXT Personnel. The pipeline for NeXT Personnel with biopharma customers is expanding rapidly.
Q: What are the plans for NeXT Personnel beyond breast cancer, lung cancer, and IO therapy monitoring?
A: Aaron Tachibana, Chief Financial Officer, Senior Vice President, Principal Accounting Officer: Currently, we are focused on these cancer types, which represent a significant portion of the market. We have not stated plans beyond these indications yet, as they will keep us busy for the next few years.
Q: Can you share thoughts on achieving the $100 million revenue milestone in 2025, especially with the Natera business rolling off?
A: Aaron Tachibana, Chief Financial Officer, Senior Vice President, Principal Accounting Officer: We expect biopharma revenue to offset the $22 million from Natera, driven by ImmunoID NeXT and NeXT Personnel. The VA MVP is expected to remain flat at $7-8 million. Most growth will come from biopharma, and we are optimistic about additional enterprise work.
Q: Can you provide more details on the Myriad deal and the shift in IP strategy?
A: Christopher Hall, President, Chief Executive Officer, Director: The cross-license deal with Myriad ensures both companies have freedom to operate, benefiting patients, doctors, and shareholders. The settlement with Foresight also demonstrates the value of our IP, and we will continue to find ways to create value from it.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
