ASP Increase to $1,300 in 2025
Q: What assumptions underlie the $1,300 ASP target for 2025?
A: The company is targeting an average selling price (ASP) of $1,300 in 2025, up from $1,050 in 2023, reflecting a $300 increase due to the new gapfill price. This increase is expected to enhance the long-term margin profile but will take time to fully realize. The impact will be immediate for new Medicare patients, comprising about 20% of fee-for-service Medicare. For commercial payers, the company plans to renegotiate contracts at higher rates, though timing is uncertain. Initiatives driving the $200 per test increase include expansion of payer coverage, closing contracts with large payers, operational enhancements, and shifting the test mix away from Medicaid. An additional $50+ per test is anticipated from the new gapfill rate in 2025. While there's potential for upside, management remains cautious about the pace of impacting remaining payers.

Guidance and Revenue Beat
Q: Why didn't you raise guidance despite beating revenue estimates?
A: Despite exceeding Q3 revenue expectations by about $6 million , the company chose not to raise the upper end of the MRD guidance due to several factors. An unexpected ASP charge in Q3, which wasn't previously forecasted, impacted results. Additionally, pharma revenues are volatile; delays in one or two studies can significantly affect quarterly outcomes. There is also potential softness due to hurricane impacts, which the company is still assessing. Management remains confident in their guidance but prefers to be prudent to ensure targets are met.

MRD Pharma Pipeline Growth
Q: What's the outlook for MRD pharma and milestone expectations?
A: The company has approximately $200 million in backlog for MRD pharma. Confidence in the pharma profile is strong, with expectations of decent growth into 2025 similar to this year's performance. Currently, there are 10 multiple myeloma studies using clonoSEQ as a primary endpoint, including 2 new studies and 3 converted from secondary to primary endpoints. The ODAC decision is catalyzing this backlog and accelerating milestones as companies pursue approvals via the new accelerated approval pathway . Management anticipates more studies will convert to primary endpoints, enhancing access to outstanding and new milestones.

Cost Savings Progress
Q: Where do you see further opportunities for cost savings?
A: Significant progress has been made in cost savings within G&A and R&D through restructurings and organizational flattening. In sales and marketing, the company is leveraging existing investments and focusing on targeted areas like reimbursement operations. Continued efforts to reduce overhead and drive additional leverage are ongoing, but there are no current plans for further targeted reductions. Future efficiency initiatives, such as the NovaSeq project, are expected to contribute to cost savings.

NovaSeq Rollout and Margin Impact
Q: What is the status of NovaSeq rollout and expected margin benefits?
A: The NovaSeq rollout is progressing well, with plans to launch in the third quarter of 2025, assuming all goes smoothly. The company anticipates an annualized 5% to 8% improvement in the margin profile within the first 12 months post-launch, depending on volumes. As volumes grow, margins are expected to expand further, supporting the long-term goal of achieving a 70% gross margin for the MRD business.

EMR Integration and Volume Growth
Q: How will EMR integrations impact volume growth in 2025?
A: With 11 Epic EMR integrations completed, the company has become more efficient and observed strong growth. Six accounts live since Q2 experienced 13% quarter-over-quarter growth in Q3. For five accounts that went live recently, strong month-over-month growth was seen in October. The company expects to have 20 integrations by year-end and aims for approximately 50% of total order volume to flow through integrated platforms like Epic and Flatiron by the end of 2025. These integrations are expected to drive volume growth through improved standardization and efficiency.

Mantle Cell Lymphoma Coverage
Q: What's the potential for testing volume in mantle cell lymphoma?
A: Mantle cell lymphoma has an annual incidence of about 4,200 patients and approximately 20,000 prevalent patients in the U.S., similar to ALL, which accounts for 35% of testing volume today. The aggressive and recurrent nature of the disease means patients may undergo multiple treatments and relapses, leading to numerous testing opportunities over their lifetime. While clinical guidelines are not yet established for this indication, there is significant potential for MRD testing both in response assessment and ongoing monitoring for disease recurrence over time.

Genentech Partnership amid Roche Pipeline Reduction
Q: How is the Genentech partnership affected by Roche's pipeline cut?
A: Despite Roche announcing a 25% reduction in their pipeline and reorganizing their oncology research division, they have assured the company that this does not impact their partnership with Genentech. No further details were provided on this matter.

Payer Landscape Challenges
Q: How might payer cost concerns affect genetic testing coverage?
A: The company acknowledges challenges in the payer landscape due to rising costs. For clonoSEQ, they emphasize the value it brings to patients and the healthcare system. By demonstrating significant cost savings—such as reducing expensive maintenance therapies in multiple myeloma, which cost over $100,000 per year, through a test costing $2,000 per year—they highlight economic benefits to payers. A strong focus on reimbursement contracting and operations is maintained to ensure appropriate payment and cash collection.