Lu Li

Lu Li inquired about Veracyte's internal revenue targets for new product contributions, given they are not included in the 2026 guidance. She also asked if colorectal cancer (CRC) and lung cancer are expected to be the next indications for the MRD platform. Additionally, she sought clarification on the sequential Decipher Q4 volume increase of only 500 units, asking if there was anything specific to call out or if it was lower than Q4 2024.

Answer

CEO Marc Stapley stated that Veracyte is not yet providing a specific roadmap for future MRD indications, as it depends on factors like cohorts, channel reach, clinical evidence, and reimbursement, allowing for agility. CFO Rebecca Chambers explained that internal goals for MRD in 2026 are focused on customer experience rather than significant revenue contribution, with revenue becoming a factor in 2027 and beyond. For Prosigna, 2026 expectations are tied to the OPTIMA readout, with a focus on KOL engagement and building a foundation rather than immediate high volume. Regarding Decipher Q4 volume, Rebecca Chambers attributed the sequential change to typical quarterly volatility, such as a day or two of volume falling on either side of the quarter, and emphasized that it does not reflect an underlying trend, with Q4 being an outstanding quarter overall.

Lu Li inquired about Veracyte's internal revenue targets for new product contributions, specifically for 2026. She also asked if CRC and lung cancer are the next anticipated indications for TruMRD, and sought an explanation for Decipher's Q4 volume being only up by 500 units sequentially compared to Q4 2024.

Answer

CEO Marc Stapley stated that Veracyte does not have a specific roadmap for future TruMRD indications yet, emphasizing agility based on channel, evidence, and reimbursement. CFO Rebecca Chambers noted that 2026 internal goals for MRD focus on customer experience rather than significant revenue, while Prosigna's revenue will be highly tied to the OPTIMA readout and initial KOL engagement. Rebecca Chambers explained Decipher's Q4 sequential volume was due to typical quarterly volatility, with a day or two of volume falling on either side of the quarter, and not indicative of an underlying trend.

Lu Li from UBS asked for clarification on the Q4 2025 revenue guidance, noting it appears roughly flat compared to Q3, and inquired about potential impacts from prior-period collections, holidays, or French revenue. She also asked about the planned scale of breast investment for 2026, including the sales channel and spend for the Prosigna launch, and the realized and remaining cost-benefit from the Afirma v2 Transcriptome transition for 2026.

Answer

CFO Rebecca Chambers attributed the Q4 revenue outlook to the absence of $2.5 million in Q3 prior-period collections, a more challenging holiday calendar, and no repeat of French revenue from Q3. Chief Commercial Officer John Leite outlined a measured approach to building the Prosigna sales channel, mirroring the successful Decipher launch strategy by leveraging the GRID, KOL collaborations, and top-down demand generation. Rebecca Chambers clarified that the Q3 gross margin included about a month of v2 Transcriptome benefit for a third of Afirma volume, along with prior-period collections and a v1 reagent write-off. She stated that the v2 benefit is a lever for portfolio investments, and the company will manage its P&L to an approximate 25% adjusted EBITDA target in 2026 and beyond.

Lu Li inquired about the factors contributing to the Q4 2025 revenue guidance appearing flat compared to Q3, the planned investment and channel build-out for the Prosigna launch in 2026, and the realized and remaining margin benefits from the Afirma V2 Transcriptome transition.

Answer

CFO Rebecca Chambers attributed the Q4 revenue outlook to the absence of $2.5 million in Q3 prior-period collections, challenging holiday timing, and the non-recurrence of French revenue. Chief Commercial Officer John Leite outlined a measured approach to building a breast cancer oncologist sales channel for Prosigna's mid-2026 launch, mirroring the successful Decipher strategy. Rebecca Chambers clarified that Q3's testing gross margin included about one month of V2 Transcriptome benefit for a third of Afirma volume, with full benefits expected in 2026, and that these efficiencies will fuel investments while maintaining a 25% Adjusted EBITDA target.

Lu Li of UBS Group AG asked for the rationale behind the partnership with Helix for hereditary cancer testing and its potential benefits. She also inquired about the expected margin profile for 2026, considering new product launches like MRD and Prosigna, and their respective cost structures.

Answer

CCO John Leite explained the Helix partnership aligns with NCCN guidelines and is more efficient than building the capability internally. CFO Rebecca Chambers projected Prosigna's cost profile to be similar to Afirma's after the V2 transcriptome transition. For MRD, she noted that while costs are higher, the test's differentiation justifies it. She did not provide specific 2026 margin guidance but emphasized a balance between investment and profitability.

Lu Li from UBS sought clarification on the implied growth rate for Decipher in the 2025 guidance and the timeline for the MRD test's technical assessment submission to MolDx, including any potential risks from federal agency dynamics.

Answer

CEO Marc Stapley clarified the implied Decipher growth is in the low 20s, driven by volume, and confirmed the MRD tech assessment will be submitted this quarter. CFO Rebecca Chambers noted that while there's always tail risk, their engagement with MolDx remains active and unchanged, so they expect the process to proceed as planned.

Lu Li from UBS inquired about the quantifiable revenue benefit from Decipher's metastatic indication in late 2025 and the potential for initial ASP pressure. She also asked for more color on the product revenue decline and supply chain issues.

Answer

CEO Marc Stapley explained the metastatic market represents about 30,000 new incidences annually, with a revenue ramp expected in the second half of 2025. CFO Rebecca Chambers added that ASP should be consistent for Medicare and will ramp with commercial contracts over time, similar to prior launches, without creating initial pressure. Stapley described 2025 as a transition year for the product business, with demand being intentionally managed to mitigate supply risks.

Lu Li asked about Myriad Genetics' internal targets for early-stage MRD metrics, such as per-center utilization, and how success is measured for these metrics. She also inquired about the pacing of the Q1 EBITDA margin, which is expected to be near break-even, and any other factors impacting Q1 beyond prenatal volume headwinds.

Answer

Sam Raha, President and CEO, outlined four key MRD metrics: user experience (ordering, turnaround time, report quality, actionability), repeat orders, order volume (internal target), and operational efficiency (internal yield, turnaround time, targeted COGS). Ben Wheeler, CFO, explained Q1's impact from deductible resets, year-over-year prenatal decline, and a modest step-up in operating expenses (due to regular cadence of meetings, compensation adjustments, and commercial investments). He reaffirmed the full-year EBITDA guidance, noting that H2 revenue is typically stronger than H1.

Lu Li asked about Myriad Genetics' internal targets for Precise MRD early-stage metrics, such as per-center utilization, and how success is measured during this initial phase. She also inquired about the pacing of Q1 EBITDA margin, which is expected to be near break-even, and asked for any additional factors contributing to this outlook beyond prenatal volume headwinds.

Answer

Sam Raha, President and CEO, outlined four key metrics for tracking Precise MRD alpha launch success: user experience (ordering, turnaround time, report quality), repeat orders, order volume, and operational efficiency (internal yield, turnaround time, targeted COGS). Ben Wheeler, CFO, explained that the Q1 EBITDA margin outlook is influenced by the year-over-year decline in prenatal volume, typical Q1 deductible resets impacting ASP, and a modest step-up in operating expenses from Q4 to Q1 due to regular cadence of meetings and compensation adjustments, which will persist through the year.

Lu Li of UBS asked for more detail on the hereditary cancer EMR integration ramp, including how many accounts have been fully converted with new features and how the company is tracking the timeline to prevent further delays.

Answer

COO Mark Verratti noted that while thousands of accounts are integrated, the current challenge is adding critical workflow features, which is being done account-by-account with an expectation of positive momentum in Q2 and Q3. CEO Samraat Raha added that the company is now prioritizing the enhancement of workflows for high-volume customers over adding new integrations to more effectively drive testing volume.

Lu Li of UBS asked about the R&D pipeline, specifically regarding the new VITROS system launches being OUS opportunities, and inquired about plans for the U.S. market and the potential for assay menu expansion in coming years. She also asked how much of the Labs' 7% growth was driven by instrument sales and about any debt refinancing initiatives in 2026 to lower interest expense.

Answer

Brian Blaser, President and Chief Executive Officer, explained that OUS markets are a growing part of the business, and the new partnership strengthens the portfolio for those opportunities, with more details to be released soon. He noted that U.S. systems take longer to develop, and the near-term focus is on content and menu additions for current systems. Jonathan Siegrist, Chief Technology Officer, added that the High Sensitivity Troponin assay rounds out the U.S. menu, and OUS opportunities focus on tenders and lower-cost capital for lower-volume segments. Joe Busky, Chief Financial Officer, clarified that instrument revenue was relatively flat year-over-year in Q4, so it did not drive the Labs' growth. He also stated there are no plans for further debt refinancing at this point, following a recent extensive refinancing.

Lu Li of UBS asked about the R&D pipeline, specifically noting that new VITROS system launches are focused on OUS markets and inquired about plans for the US market and future assay opportunities. She also asked about the contribution of instrument sales to the 7% Labs growth and any plans for debt refinancing in 2026 to lower interest expense.

Answer

CEO Brian Blaser explained that OUS markets are a growing part of the business, and the new partnership (details to be released soon) provides high-quality solutions to quickly capitalize on OUS growth opportunities, including the VITROS 450. He noted that US-focused system development takes longer, with near-term US efforts focused on content and menu additions for current systems. CTO Jonathan Siegrist added that the high-sensitivity troponin assay rounds out the US menu, while OUS partnerships address tender gaps and higher throughput needs. CFO Joe Busky clarified that instrument revenue was relatively flat year-over-year in Q4 2025, so it did not drive the Labs growth. He stated that after a recent extensive debt refinancing, there are no current plans for further debt refinancing in 2026.

Lu Li of UBS asked whether QuidelOrtho had initiated any pre-commercialization marketing or manufacturing activities for the Lex platform. She also inquired about the company's new product pipeline for 2026 and beyond.

Answer

CEO Brian Blaser clarified that no external commercial activities for Lex have begun, as the acquisition is contingent on FDA approval, though internal infrastructure planning is underway. He noted that the near-term R&D pipeline is focused on menu expansion for lab platforms, with next-generation systems in the early concept phase.

Lu Li asked about the timing of tariff mitigation efforts on margin progression and whether the gross tariff impact would extend into 2026, potentially affecting the company's long-term EBITDA margin targets.

Answer

CFO Joe Busky stated that mitigation actions are well-aligned with tariff impacts, so no significant timing mismatch on margins is expected. He noted the only timing issue is a temporary slowdown in Q2 China shipments. Busky confirmed the $30M-$40M impact is for 2025, and that the larger annualized impact will also be fully offset, leading to no change in the company's 2026 margin targets.

Lu Li from UBS Group AG asked for an update on potential tariff impacts, sought more detail on the reduced VBP risk in China for 2025, and inquired about the long-term margin expansion trajectory beyond 2025.

Answer

Chief Executive Officer Brian Blaser stated that while the company is monitoring potential tariffs, it's too early to quantify the impact. He explained the lower VBP risk in China is due to the company's dry slide technology being exempt from actions that have targeted liquid chemistries. Chief Financial Officer Joe Busky reiterated the 2-3 year path to >25% EBITDA margins, noting that direct procurement savings, the U.S. Donor Screening exit, and the Savanna launch will be key drivers in 2026 and beyond.

Lu Li inquired if reimbursement pressure in China could extend beyond cardiac biomarkers and asked for an update on the Savanna platform's development and approval timeline.

Answer

CFO Joe Busky and CEO Brian Blaser stated they believe the pressure is limited to cardiac, noting their China business is heavily weighted to dry slide technology, which has not been a focus of VBP. Blaser confirmed Savanna is on track for clinical trials this season, with approval targeted for late 2025 and meaningful revenue not expected until 2026-2027.

Lu Li asked for commentary on the order book, observed order patterns during the quarter, and the company's visibility into the second half of the year.

Answer

CFO Adam Taich stated that visibility supports the Q3 guidance and that order patterns are a continuation of Q2 trends. This includes strong spatial consumables demand, solid Chromium reaction volume growth, and persistent CapEx pressures affecting both Xenium and Chromium instrument sales. He concluded the order book is consistent with the provided guidance.

Lu Li from UBS Group inquired about the drivers of the $10 million full-year revenue guidance increase, the specific sources of strength in Precision Diagnostics, whether the growth in Anatomic Pathology was due to one-time factors, and the underlying organic gross margin excluding adjustments.

Answer

Chief Commercial Officer Brandon Perthuis attributed the Precision Diagnostics strength to an expanding relationship with the VA and broad-based performance across the portfolio, noting the Foundation Medicine partnership was not yet material. He confirmed the Anatomic Pathology growth was purely organic, driven by sales team expansion. Chief Financial Officer Paul Kim clarified that about half of the gross margin upside was from a one-time adjustment, with the other half from business strength and operational efficiency.

Lu Li asked why Fulgent did not raise its full-year 2025 guidance despite a strong Q1 beat and momentum, questioned the source of Q1 Precision Diagnostics growth, and inquired about capital deployment plans for M&A and buybacks.

Answer

CEO Ming Hsieh stated the company prefers to wait for a more considerable adjustment to guidance, possibly in Q2, and noted that aggressive buybacks can negatively impact EPS during a loss period. CCO Brandon Perthuis attributed Precision Diagnostics' strength to new client wins in reproductive health, with some large clients still onboarding. Ming Hsieh confirmed the company is aggressively pursuing stock buybacks and actively evaluating M&A opportunities.

Lu Li asked about the potential for upside to the 10% core revenue growth guidance for 2025, given new wins with the VA and Foundation Medicine. She also requested an update on the VA contract's progress and inquired about the scalability and optimal sales force size for the Anatomic Pathology business.

Answer

CCO Brandon Perthuis explained that the 2025 guidance is a number they have high visibility into and conservatively includes $0 from the new Foundation Medicine partnership and a modest amount from the VA contract. He noted the VA launch is going 'extremely well' and that guidance could be adjusted as these new partnerships mature. He also confirmed the Anatomic Pathology sales team is still 'subscale' and the company plans to continue expanding it in 2025 to capitalize on market opportunities.

Lu Li of Scotiabank inquired about the growth momentum for Precision Diagnostics and Anatomic Pathology over the next 12 months, the expected revenue ramp from the $99 million VA contract, and the drivers for changes in operating expenses and gross margin sustainability.

Answer

Chief Commercial Officer Brandon Perthuis confirmed strong momentum heading into 2025, citing the 'sticky' nature of the business and a strong sales pipeline. He noted the VA contract revenue would scale over time rather than being linear. Chief Financial Officer Paul Kim explained that gross margins are expected to hold around 40% and that Q3 G&A was favorably impacted by a reversal of legal accruals. Executive Ming Hsieh added that R&D costs are expected to increase as more drug candidates move into clinical trials.

Lu Li asked about the timing and potential revenue contribution of the new test menu expansion for the Panther Fusion system and requested quantification of the China and HIV headwinds for fiscal 2026.

Answer

CFO Karleen Oberton stated the new Fusion assays would likely launch in late FY26 or early FY27 and are not expected to be major revenue contributors until FY27-28. She quantified the China headwind by noting the business is exiting FY25 at a ~$10M quarterly run rate, down from a previous ~$60-70M annual rate. CEO Stephen MacMillan added that HIV revenue is also expected to be minimal.

Lu Li questioned the drivers behind the forecasted sequential revenue growth from Q3 to Q4. She also asked about potential downside risks to the full-year guide, such as tariff retaliation from Europe.

Answer

CFO Karleen Oberton attributed the expected Q4 ramp to a recovery in Breast Health gantry sales, a full quarter's contribution from the Gynesonics acquisition, the full effect of taking Endomag direct in the U.S., and an easy comparison for the Skeletal business. Regarding future risks, she stated the guidance is based on what is known today and declined to speculate on hypothetical scenarios.