Q4 2024 Earnings Summary
- Recontracting with commercial payers at higher rates, leveraging the higher Medicare reimbursement rate of $2,007 per test, is expected to drive increased average selling prices (ASPs) in 2025. The company is in late-stage discussions with several uncontracted payers, which could significantly boost revenues.
- Epic integration is leading to above-market growth in integrated accounts, with growth outpacing the rest of the business. The company expects to have 50% of test volume flowing through an EMR integration by year-end, potentially accelerating growth further.
- Expansion into new indications, such as T-cell ALL and cutaneous T-cell lymphoma (CTCL), with upcoming submissions for reimbursement, could open new markets and drive additional growth in the MRD business.
- The company's decision to keep operating expenses flat and not expand the sales force may limit its ability to capitalize on market opportunities, as low penetration rates and healthy volume growth suggest that further investment in sales could drive growth. Analysts have expressed concern that being too restrictive on the sales force could hinder the company's ability to push into the community market.
- There is uncertainty regarding the regulatory pathway for the new digital or in silico TCR antigen binding model, as the company is "not there yet" in understanding what additional data needs to be provided to the FDA. This could pose risks to the timeline and success of their cell therapy product development with Genentech.
- Revenue contributions from the partnership with NeoGenomics are not expected to be material until 2026 or 2027, meaning that near-term revenues may not benefit significantly from this collaboration. Additionally, the anticipated impact on volumes is expected to be only mid to high single-digit growth over time, which may be less than what investors are hoping for.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | Not explicitly provided YoY, with Q4 2024 at $47.4M | Total Revenue reached $47.4 million in Q4 2024, setting a strong revenue base that likely benefited from ongoing growth initiatives and improved market acceptance compared to earlier periods. |
Operating Income | Improved ~52% YoY (from –$71,068K in Q4 2023 to –$33,837K in Q4 2024) | The significant improvement in Operating Income was driven by enhanced cost efficiencies and lower operating expenses alongside revenue growth; targeted cost management and streamlined operations helped narrow the operating loss despite remaining in negative territory. |
Net Income | Improved ~51% YoY (from –$69,467K in Q4 2023 to –$33,717K in Q4 2024) | Net Income narrowed substantially largely due to similar drivers as Operating Income; a combination of higher revenue and reduced operating expenses contributed to a smaller net loss, reflecting better overall financial discipline compared to Q4 2023. |
Earnings Per Share (EPS) | Improved ~54% YoY (from –$0.48 in Q4 2023 to –$0.22 in Q4 2024) | The marked improvement in EPS resulted from the decline in overall losses per share, which was a direct outcome of operating efficiencies, cost reductions, and improved profitability metrics seen in net income. |
Net Change in Cash | Turned positive to +$9,755K in Q4 2024 from –$21,738K in Q3 2024 | The net change in cash improved dramatically as the company transitioned from a significant outflow in Q3 2024 to positive inflows in Q4 2024, reflecting better operational cash management, lower cash outflows from operations, and adjustments in working capital components. |
Cash and Cash Equivalents | Increased by 25% sequentially (from $38,084K in Q3 2024 to $47,920K in Q4 2024) | The sequential increase in Cash and Cash Equivalents is attributed to improved liquidity management, with inflows from financing or investing activities supplementing operating cash flows, thereby strengthening the company’s cash reserve profile in Q4 2024 compared to Q3 2024. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
MRD Revenue | FY 2025 | no prior guidance | $175 million to $185 million | no prior guidance |
MRD Revenue Weighting | FY 2025 | no prior guidance | 40–60 weighting (first half vs. second half) | no prior guidance |
Genentech Collaboration Amortization | FY 2025 | no prior guidance | $15 million | no prior guidance |
Operating Expenses | FY 2025 | no prior guidance | $340 million to $350 million | no prior guidance |
Cash Burn | FY 2025 | no prior guidance | $60 million to $70 million | no prior guidance |
Segment Expense Allocation | FY 2025 | no prior guidance | 69% MRD, 23% Immune Medicine, remainder corporate | no prior guidance |
Cash Utilization | FY 2025 | no prior guidance | Highest in Q1 2025 | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
MRD Revenue | FY 2024 | $143 – $145 million | $145.5 million (sum of Q1: 32.63+ Q2: 35.28+ Q3: 37.47+ Q4: 40.12) | Beat |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Increasing ASP for clonoSEQ through commercial recontracting and higher Medicare rates | Mentioned in Q1 , Q2 , Q3 with a focus on raising the Medicare gapfill rate and renegotiating commercial contracts; targeting ~ $1,300 by 2025. | Reiterated pursuit of a $1,300 ASP for 2025, highlighting commercial recontracting and higher Medicare rates as key growth drivers. | Consistent priority, with ongoing optimism around achieving pricing targets. |
Ongoing cost reductions and margin expansion with an EBITDA breakeven target in late 2025 | Discussed in Q1 (reducing OpEx, aiming for breakeven by late 2025) and Q2 (restructuring and confirming 2H 2025 target); no mention in Q3. | Reaffirmed adjusted EBITDA positivity by the second half of 2025; cited sequencing cost improvements and cost management. | Reaffirmed goals with stronger conviction in Q4. |
Pharma partnerships and milestone revenues (e.g., Genentech collaboration) | Q1 , Q2 , Q3 all noted strong MRD pharma growth and decreasing Genentech amortization. | Continued Genentech collaboration (though amortization declined) and recognized $12.5M in MRD milestones; multiple new studies signed. | Consistent focus on pharma collaborations as a growth driver; milestone revenues remain important. |
Regulatory acceptance of MRD as a primary endpoint and new uncertainties around the digital TCR model | Q1 , Q2 , Q3 highlight growing FDA acceptance of MRD endpoints and no major updates on the digital TCR model. | Emphasized ODAC vote boosting MRD as a key endpoint, but digital TCR model regulatory path remains uncertain under Genentech’s control. | Positive MRD adoption momentum continues; digital TCR regulatory steps still uncertain. |
EMR integration (including Epic) driving test volume growth | Reported in Q1 , Q2 , Q3 with double-digit growth in integrated accounts, expansions planned for Epic and other systems. | Accounts integrated with Epic outperformed in test orders; plan to reach 50% test volume via EMR integrations by late 2025. | Consistent expansions fueling increased ordering; remains a major driver of volume growth. |
Deprioritization of the LIMS overhaul | Mentioned in Q2 as deprioritized for higher-ROI initiatives. No mention in Q1, Q3, or Q4. | Not discussed in Q4. | No longer mentioned after Q2, implying sustained lower priority. |
Expansion into new indications (e.g., T-cell ALL, CTCL) | No specific mentions in Q1, Q2, or Q3. | Pursuing T-cell ALL and CTCL expansions; plan to submit T-cell ALL to MolDx and explore advanced CTCL testing. | New initiative discussed in Q4, could broaden clonoSEQ’s market. |
New partnership with NeoGenomics, limited near-term revenue impact | Not mentioned in Q1, Q2, or Q3. | Introduced collaboration with limited near-term impact; pilot accounts launch in late 2025, major contribution in 2026+. | New partnership, expected to help scale volumes but revenue ramp is delayed. |
Concerns over restricted sales force investment potentially limiting market penetration | Briefly addressed in Q2 , indicating minimal cuts to sales/marketing; not mentioned in Q1 or Q3. | Management feels “good” about current team size but remains cautious on spend; highlights NeoGenomics partnership as a workaround. | Revisited in Q4; company balancing top-line growth with cost discipline. |
NovaSeq launch in Q3 2025 to improve gross margins | Discussed in Q1 , Q2 , Q3 for a 5–8% initial margin lift; aiming for a long-term 70% MRD gross margin. | Still on track for 2H 2025 launch; anticipating a 5–8 percentage point margin boost in the first year, with more upside longer-term. | Consistent plan for margin expansion; remains a major operational focus. |
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Achieving EBITDA Positivity in 2025
Q: How will you achieve EBITDA positivity in 2025?
A: The company is confident in achieving EBITDA positivity in the second half of 2025, driven by improved margins from the NovaSeq X transition, increasing ASPs, and maintaining flat operating expenses. Initiatives like the NeoGenomics partnership and Epic integrations are expected to contribute to revenue growth, supporting this profitability goal. -
ASP Improvement to $1,300
Q: What drives the assumed $1,300 ASP for MRD in 2025?
A: Four key drivers will increase the ASP: full-year impact of the Medicare gap fill rate implemented in late 2024, recontracting with existing commercial payers at higher rates and contracting with new ones, improved revenue cycle management leveraging the gap fill pricing to win appeals at higher prices, and gaining traction with Medicaid reimbursements as states adopt the gap fill reference rate. -
Impact of NovaSeq X on Margins
Q: How will the NovaSeq X transition affect margins and timing?
A: The NovaSeq X transition is expected to add 5 to 8 percentage points to margins over 12 months, starting in the second half of the year. In the longer term, it will drive about 10 percentage points in margin improvement. This transition won't impact turnaround times due to efficient daily sample loading, allowing for scalability without increasing costs. -
NeoGenomics Partnership Impact
Q: What's the expected impact of the NeoGenomics partnership?
A: While the 2025 guidance doesn't include material volume from NeoGenomics, the partnership is expected to have a material impact starting in 2026 and 2027. It could potentially contribute mid- to high single-digit percentage growth to volumes over time. The collaboration allows both companies to jointly implement best practices for long-term success. -
Medicaid Reimbursement Impact
Q: How will Medicaid reimbursement affect the $1,300 ASP?
A: With state approvals, Medicaid can now contribute to ASPs. Although traditionally lower payers, Medicaid rates—often 50-60% of the gap fill rate—can establish reimbursement baselines. Significant improvements are expected in states like California and New York as coverage expands, positively impacting the ASP. -
MRD Pipeline Expansion
Q: What are the next indications in the MRD pipeline?
A: The company plans to submit additional indications such as T-cell ALL and advanced cutaneous T-cell lymphoma (CTCL) for reimbursement. Active efforts are underway utilizing data from the updated T-cell assay launched in Q4 2024. Expanding coverage to these indications aims to meet unmet needs and drive growth in the coming years. -
Epic Integration Growth Impact
Q: How will Epic integration affect volumes in 2025?
A: Epic integration is expected to accelerate growth, with integrated accounts showing higher order volumes and increased numbers of ordering providers. The company plans to have 8 of the top 10 accounts integrated and 50% of business flowing through EMR integrations by year-end, enhancing workflow efficiency and access to the test. -
Sales Force Expansion Plan
Q: Will you expand the sales force to drive growth?
A: The company currently feels the sales team size is adequate, focusing on managing spend to achieve profitability goals. The NeoGenomics partnership is a strategic way to expand access without directly increasing the sales force. However, future expansion isn't off the table if it aligns with growth objectives. -
Genentech Partnership and Digital Approach
Q: What's the potential upside of the digital approach with Genentech?
A: Transitioning to a digital or in silico model can massively reduce time and cost in personalized cell therapy. Processes that currently take weeks could be reduced to a day or two, eliminating the need for patient-specific reagents and lab assays. This innovation has broad applications, including personalized cancer vaccines and immune monitoring, offering significant potential benefits. -
NCCN Guidelines Update
Q: How does the updated NCCN guideline affect you?
A: The inclusion of MRD in NCCN guidelines for B-cell lymphoma is a positive development aligned with the company's strategy. While the recommendation is Level 2 and narrow in scope, ongoing data generation aims to expand these guidelines. This progress also supports efforts in contracting with commercial payers for indications like diffuse large B-cell lymphoma.