Personalis - Q1 2024

Transcript

Operator (participant)

Good day and welcome to the Personalis First Quarter 2024 Earnings Conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Aaron Tachibana. Please go ahead.

Aaron Tachibana (CFO and COO)

Thank you, operator. Welcome to Personalis's First Quarter 2024 Earnings call. Joining today's call are Chris Hall, Chief Executive Officer and President, and I am Aaron Tachibana, Chief Financial Officer and Chief Operating Officer, and Rich Chen, Chief Medical Officer and EVP of R&D. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements within the meaning of the U.S. securities laws. For example, any statements regarding trends and expectations for our financial performance this year and longer term, cash runway, revenue expectations and timing, reimbursement goals, size and booking of orders, products, services, technology, clinical milestones, the outcome and timing of reimbursement decisions, expectations for our existing and future collaboration activities, cost expectations, our market opportunity and business outlook. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations.

We encourage you to review our most recent filings with the SEC, including the risk factors described in our most recent filings. Personalis undertakes no obligation to update these statements except as required by applicable law. Our press release with our First Quarter 2024 results is available on our website, www.personalis.com, under the Investors section and includes additional details about our financial results. Our website also has our latest SEC filings, which we encourage you to review. A recording of today's call will be available on our website by 5:00 P.M. Pacific Time today. Now, I would like to turn the call over to Chris for his comments and First Quarter business highlights.

Christopher Hall (CEO and President)

Thank you, Aaron. Good afternoon, everyone, and thank you for joining us. I'm very proud of our team at Personalis as we continue to fight cancer with our novel technologies. For those of you joining one of our calls for the first time, welcome. Personalis is one of the leaders in the fast-growing MRD testing market. MRD stands for Minimal Residual Disease. With our first-of-its-kind ultra-sensitive MRD test, we're able to spot cancer when it's only one fragment of tumor DNA circulating in 1 million DNA fragments in the blood. Our technologies are used by many of the world's top biopharma companies to improve clinical trial results, find new ways to personalize treatment, and power a new generation of more effective therapies. Last quarter, we laid out a strategy to drive Personalis to $100 million in revenue in 2025.

This aspirational milestone with three underlying growth engines is our lodestar as we are accelerating Personalis into a higher growth mode. In the first quarter, we achieved revenue of $19.5 million, exceeding the upper end of our guidance of $18 million to $19 million. Our biopharma business grew 55% compared to the first quarter of 2023, driven by strong demand for our core ImmunoID platform to support the individualized neoantigen therapy market, as well as increasing demand for our MRD product NeXT Personal. With this increased demand, we have the confidence to increase our full-year revenue guidance to $76 million to $78 million from $73 million to $75 million. I'll now review progress this quarter on the three growth engines driving us towards our $100 million in 2025 goal and our progress on each. The first growth engine is the most important as we focus on turning Personalis into a clinical diagnostic powerhouse.

In order to do that, we're executing on our Win in MRD strategy. The MRD market involves using liquid biopsy to find evidence of minimal residual disease or cancer recurrence and subsequently monitoring therapy effectiveness. It's estimated that this market will mature into a $20 billion opportunity over the coming years, and we are establishing Personalis as a leader in the space. Our Win in MRD strategy has four pillars. First, to focus and launch our test in cancer types where an ultra-sensitive liquid biopsy test can unlock significant value for patients, payers, and partners. Second, to drive reimbursement by developing robust clinical evidence and partnering with the top global collaborators. Third, leverage our deep relationships to accelerate adoption by biopharma partners and power our revenue growth by the use of NeXT Personal in clinical trials. And lastly, to commercialize NeXT Personal with a partner-centric model.

To delve into the first pillar, we've previously explained how we're developing evidence to support NeXT Personal's clinical usage and reimbursement in early-stage lung cancer, breast cancer, and immunotherapy monitoring. We believe our ultra-sensitive technology allows us to see cancer earlier, which may provide the information to de-escalate patients from unnecessary therapies and procedures, potentially sparing patients from toxicity and saving healthcare dollars. Just as importantly, we believe we can identify and get recurrent patients to treatment earlier with potentially better outcomes. Our focus on these indications is intentional, and our data has demonstrated that NeXT Personal can win in these markets. To elaborate a bit on our approach, early-stage lung cancer and breast cancer shed very little DNA into the blood, which are difficult to detect without an ultra-sensitive approach. Early detection is critical in these indications.

For patients on IO therapy, we believe the potential decision to switch treatment requires the insights from monitoring that are provided by our ultra-sensitive test. Now, you might recall that last October we launched our MRD test, NeXT Personal, and today we are enrolling physicians in an early access program, or EAP. We are the first ultra-sensitive MRD test to commercially enter the market, and with that launch, we now have two laboratory-developed tests, or LDTs, on the market, the other being our Medicare-reimbursed test, NeXT Dx, which is used by physicians to put a patient on targeted therapy. The adoption of these tests has been rapid and is exceeding our initial target. We delivered 338 clinical tests in the first quarter, a solid uptick from the 126 results delivered in the fourth quarter of last year.

We're pleased with this traction as the number of physicians that were ordering in Q1 remained fixed at 10 through the quarter. There are two key metrics that I want to talk about and dive into. First, all 10 of our early access physicians are ordering, and uptick has been strong across the entire cohort. The second metric involves the actionability of our NeXT Personal MRD test for the clinic. If you remember, we report circulating tumor DNA in the blood down to one part per million, which means if there is just one fragment of tumor DNA circulating in a million DNA fragments in the blood, we expect to see and quantify it. This is a leap forward for the field.

The extra sensitivity we report on with our NeXT Personal assay, which are values between 1-100 parts per million, impacts a region that has previously been hard to see consistently. We call that region the ultra-sensitive MRD range. Until NeXT Personal, clinicians could not routinely detect cancer recurrence at that level, and today they can. About 40% of the ctDNA-positive samples thus far in our clinical testing have been in this ultra-sensitive range. That's a significant jump in the performance of MRD testing. It means that physicians can see cancer recurrence earlier, have more discrimination in monitoring therapy, and have more confidence that ctDNA patients that are negative are likely cancer-free. Indeed, we've had many anecdotes relayed from our 10 early access doctors that the ultra-sensitive range is allowing them to see cancer earlier with their patients and intervene to get them the management they need.

We believe it is the ultra-sensitive range that allows a doctor to see cancer sooner, and seeing it sooner is the cornerstone of our Win in MRD strategy. Now, moving to the second pillar. We're focused on building and publishing clinical evidence to gain reimbursement and are working with many of the top thought leaders in the world. In previous calls, we've talked about the importance of our work with Royal Marsden in breast cancer and VHIO and immunotherapy monitoring. Both of these collaborators have provided access to studies that are broad and comprehensive. In the case of Royal Marsden, one of the leading global institutions in breast cancer, we're focusing on patients with early-stage disease for several subtypes, including ER-positive, HER2-positive, and triple-negative breast cancer. For VHIO, the work is pan-cancer across many cancer types and stages.

These studies are anchor studies in that they will be the backbone of our efforts to gain Medicare reimbursement: Royal Marsden for early-stage breast cancer and VHIO for immunotherapy monitoring. We're excited that at the upcoming ASCO conference, the work with both of these collaborators will be featured as oral podium presentations. We'll also have three other studies featured at ASCO, one with Dana-Farber on HER2-positive patients, another with Duke for immunotherapy monitoring for gastric patients, and lastly, one in colorectal cancer patients. Having this breadth of data should underscore our commitment at Personalis to developing rich data to support the use of NeXT Personal in the clinic and to gain reimbursement quickly. At the AACR conference in April, some compelling data was presented.

Our collaborators from the UKE gave an oral podium presentation on late-stage melanoma patients where they use NeXT Personal to monitor and detect immunotherapy response, highlighting the importance of detection of ctDNA in the ultra-sensitive range. In addition, our work in collaboration with AstraZeneca on their MATRIX study was presented. The MATRIX abstract showed NeXT Personal achieve very strong sensitivity and specificity on blinded test samples provided by AZ down to the lowest levels at two parts per million. Subsequently, we were selected as a partner by AstraZeneca for MRD testing in their upcoming trials. We've also presented data from collaborators with a personalized cancer vaccine company, and our analytical validation data for NeXT Personal that was recently published was also at the AACR conference. The third pillar of our NeXT Personal strategy is to leverage our biopharma relationships to drive the use of NeXT Personal in clinical trials.

We're engaged with most of the world's top biopharma companies and have continued to generate excitement around our NeXT Personal test, most recently from discussions at AACR. Customers want and need an ultra-sensitive approach to ensure that the most appropriate patients enter into a clinical trial. For example, we believe that our ultra-sensitive assay means that patients testing negative are much less likely to have a recurrence. Our biopharma customers can then expect that these patients are less likely to benefit from a therapeutic intervention, holding out the promise that NeXT Personal could be an excellent approach to optimize biopharma trials. Indeed, here in the first quarter, we've booked record new orders for NeXT Personal. The product helped to drive our strong Q1 financial performance, and we believe it will be a driver of revenue moving forward, an important way for us to deepen the clinical utility of NeXT Personal.

Now I'll move on to the fourth and final pillar, commercializing NeXT Personal using a partner-centric model. In December, we announced our key partnership with Tempus to commercialize NeXT Personal in the clinic with oncologists. To quickly review, we expect to leverage Tempus's up to approximately 200-person sales channel to co-commercialize NeXT Personal and accelerate growth. Personalis will be responsible for processing samples in our lab, obtaining reimbursement, and invoicing health insurance payers and patients under the arrangement while paying Tempus fair market value for the commercial services they provide to us. Overall, the deal is worth approximately $30 million for Personalis should all the milestone payments be triggered and if Tempus fully exercises their warrants. We expect this to allow us to ramp up commercial efforts quickly with minimal additional cash investments.

We plan to launch with Tempus this quarter by expanding our early access program to include some of Tempus's clients. The goal is to learn how to work together as partners, integrating our business systems, refining our message to oncologists, so we're set to drive accelerated growth together on the backside of reimbursement improvement. Now, while we've made strides with our first growth engine, our Win in MRD strategy to establish NeXT Personal as a leading MRD test, we also made progress with our second growth engine, leveraging our ImmunoID NeXT platform to deepen relationships with biopharma customers who use the offering to pioneer new therapies. Our biopharma segment grew 55% year-over-year, and we had solid performance across our product portfolio. Customers primarily use our immunoID NeXT platform in two ways.

First, they use our platforms to power translational research and find new biomarkers and new insights that can power their drug discovery efforts. Second, companies in the personalized cancer vaccine market use our platform to create a molecular fingerprint of a patient's tumor to power a personalized therapy. We've previously told you about our partnership with Moderna, in which Moderna is utilizing our platform in their mRNA cancer program. Moderna and its partner, Merck, are enrolling patients, and our collaboration with Moderna is an important driver of revenue for us in 2024 and 2025. We have several other partners that work in the space as well. The third growth engine of our growth strategy is growing our Personalis Inside approach as we service enterprise customers. In these relationships, partners adopt our platforms and technologies to power their solutions and provide new insights to their customers.

Our work with Natera involves leveraging our sequencing platform to analyze the exome as a part of their MRD product. We believe our relationship is strong and mutually beneficial, and are optimistic that it'll extend into 2025. A second important enterprise relationship is the VA. The VA utilizes our whole genome sequencing capabilities to power the Million Veteran Program, a national research program looking at how genes and lifestyle affect the health of veterans. We've helped power this program with the VA for years. Both of these relationships are examples of how our platforms drive value for partners and, importantly, provide sequencing scale for Personalis. Now, before I turn it over to Aaron to go deeper on the financials, I have a few exciting corporate updates. First, we continue to innovate and deepen our strong intellectual property position.

We had two new patents recently issued by the USPTO, in fact, one just yesterday, relating to the use of two of our core technologies, tumor-informed personalized assays in the first patent and boosted exome panels in the second patent, each to inform cancer vaccine treatments. This latest patent is the fourth U.S. patent to issue in 2024, and today our number of issued U.S. patents is over 30. We believe we have a deep set of IP protecting our pioneering work in both MRD and PCV. We are engaged in litigation with Foresight Diagnostics to enforce and protect some of our IP relating to MRD. As is often the case, there'll be ups and downs along the way in that journey.

However, we are confident we're set up for long-term success to establish an industry-leading position around the use of Whole Genome Sequencing for MRD, and are optimistic about the path forward. Second, we crossed two milestones this quarter. We processed our 400th sample since our company's inception, and importantly, we completed our 175th Whole Genome Sequencing sample. Whole Genome Sequencing is the foundation of our NeXT Personal MRD test, and these milestones underline both our sequencing scale and unique operational capabilities. With that, I will now turn it over to Aaron to review our financial results.

Aaron Tachibana (CFO and COO)

Thank you, Chris. Our strong first quarter 2024 financial results demonstrate our ongoing commitment to execution against our milestones and scaling revenue. I will be providing details about the first quarter financial results and guidance for the second quarter and full year of 2024. Total company revenue for the first quarter of 2024 was $19.5 million and increased 4% compared with $18.9 million for the same period of the prior year. The increase in revenue was driven by higher volume from biopharma and personalized cancer vaccine customers, which was partially offset by declines from Natera and the VA MVP. Biopharma revenue grew 55% as compared to the same period last year, and the growth was from immunoID NeXT and also from our MRD test, NeXT Personal, which is beginning to ramp up with many customers.

In addition, we achieved a significant milestone and recognized our first clinical revenue in the amount of $0.2 million from NeXT Dx, for which we received Medicare reimbursement coverage in January of this year. Gross margin was 28.1% for the first quarter compared with 25.1% for the same period of the prior year. The year-over-year increase of three percentage points was primarily due to favorable customer mix from the increase in biopharma revenue and also operating leverage from the increase in total company revenue. Operating expenses were $24.4 million in the first quarter compared with $34.6 million for the same period of the prior year. Most of the year-over-year decrease was attributed to the actions taken to reduce headcount in 2023.

R&D expense was $12.8 million in the first quarter compared with $16.6 million for the same period of last year, and SG&A expense was $11.6 million compared with $14.1 million for the same period last year. Net loss for the first quarter was $13 million compared with $28.7 million for the same period of the prior year. The first quarter net loss included a $4.8 million non-cash gain related to fair value accounting of the outstanding warrants issued to Tempus. This non-standard income was a result of the decrease in fair market value of the warrants at March 31st, 2024, compared with the fair market value at the end of last quarter. For clarification, the accounting implications for the warrants will have no bearing on the cash value if they are exercised in the future. Now onto the balance sheet.

We finished the first quarter with a strong balance sheet with cash and short-term investments of $95.4 million. During the quarter, we used $18.8 million to fund operations, and we have approximately two years of cash on the balance sheet, which is expected to last through the first quarter of 2026. Now I'd like to turn to guidance. For the second quarter of 2024, we expect total company revenue in the range of $19.5 million to $20.5 million, revenue from pharma tests, enterprise sales, and other customers in the range of $18-$19 million, and revenue from population sequencing of approximately $1.5 million.

For the full year of 2024, we now expect total company revenue in the range of $76 million to $78 million, an increase from the prior estimate of $73 million to $75 million, revenue from pharma tests, enterprise sales, and other customers in the range of $68million to $70 million, which increased from the prior estimate of $65 million to $67 million, population sequencing revenue to be approximately $8 million, non-GAAP net loss of approximately $77 million, which decreased from the prior estimate of $80 million, and it does not include any income or expense related to the outstanding warrants issued to Tempus. Cash usage is expected to be approximately $62 million. We look forward to updating you on our progress during the next conference call in a few months. With that, I will turn the call back over to the operator to begin the Q&A session.

Operator (participant)

Thank you.

Aaron Tachibana (CFO and COO)

Operator?

Operator (participant)

We will now begin the question and answer session. To ask a question, you may press star, then one, on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. Please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble our roster. The first question comes from Yuko Oku with Morgan Stanley. Please go ahead.

Madison Pasterchick (Equity Research Analyst)

Hi, team. This is Madison on for Yuko. Congrats on the quarter. Thanks for taking the questions. Just want to start out with the finalization of the FDA's LDT regulation. I was just wondering if you could speak to your strategy in adhering to the requirements and what kind of implications for Personalis you're expecting with respect to NeXT Dx and NeXT Personal.

Christopher Hall (CEO and President)

Yeah. Awesome. Great. Thanks for being on, Madison. Yes, the FDA issued their final guidance for regulations, and overall, we perceived it to be good for the industry, certainly good for Personalis. We have a quality management system here that we think is super robust. We're regularly inspected by most of all the large biopharma companies. We've been operating with ISO certification, New York, etc. And we think that what we're doing sort of fits in well with what the agency expects based on the guidance. And so we feel like we're set up well, and we think ultimately it's good for us. We'll note that there was a grandfathering section around having an LDT live. We have both of those tests, our laboratory-developed tests, and are both on the market as of the effective date of the FDA guidance. And so we think that's good.

Secondarily, because of our long relationship with New York and having New York certification, we submitted both of the tests for New York approval. Ultimately, we expect to have New York approval for both of the tests also. We think it's net a positive for Personalis and puts us in a good position.

Madison Pasterchick (Equity Research Analyst)

Got it. Okay. That's good to hear. And then just one follow-up one. With following the recent AdCom meeting to evaluate MRD as an endpoint in multiple melanoma trials, just wondering if you see any read-throughs to the solid tumor space and specifically with a panel emphasizing sensitivity, how do you see NeXT Personal positioned for capturing clinical trial opportunity?

Christopher Hall (CEO and President)

Yeah. Yeah. And I would just note, I mean, one of the things I think these two dovetail together, there is, I mean, clearly what the agency did with the unanimous approval of using it and multiple myeloma as blood-based, we expect this to continue the march in solid tumor. And I think that the guidance and having the LDT and the quality management systems, etc., it's going to make it harder for companies that aren't well-funded ultimately to build and get the kind of position in the space that you would need to do. So I think it sort of works together well, especially if you appreciate that the FDA is going to integrate, we believe, at some point, ctDNA as a monitoring metric for these clinical trials. Doing that could allow biopharma companies to have results sooner and ultimately speed up access to drugs for patients.

But we're engaged with most of the top biopharma companies right now that are either using the technology, assessing the technology, or doing pilots or bake-offs. I mean, there's always a long sales cycle with biopharma with these products, but the ultra-sensitive nature allows them, we believe, and what we're starting to see in the data that we're both talking about at industry scientific gatherings and what we're starting to see in our early testing data is that we're seeing almost 40% of the positive results are in the ultra-sensitive range, and those are real patients that we're identifying cancer sooner.

That insight and that discrimination is appealing to biopharma companies that want to have that discrimination in their clinical trials, and they want to make sure if they use a test as an entry point to actually take the drug and go in the two arms, they want to make sure that the patients that are most likely to recur ultimately enter the trial. So we're getting really positive feedback on the assay in that way too.

Madison Pasterchick (Equity Research Analyst)

Got it. That's good to hear. Thanks so much for taking the questions.

Christopher Hall (CEO and President)

Awesome. Thanks for being on, Madison.

Operator (participant)

The next question comes from Mark Massaro with BTIG. Please go ahead.

Vivian Bais (VP and Equity Research Analyst)

Hey, guys. This is Vivian on for Mark. Thanks for taking the questions. So just as far as the ways to the guidance beyond the BEAT, you have a number of offerings, some of which are newer, like NeXT Personal, which might not be driving revenue yet versus some more mature partnerships like Moderna. So looking to 2024, just curious if there's any area in particular where you're expecting to see strength versus some product lines that might be softer. Thanks.

Aaron Tachibana (CFO and COO)

Hi, Vivian. This is Aaron. Thank you for the question and being on the call. In terms of the guidance, so we raised guidance primarily because of the strength of biopharma demand in terms of where that strength is coming from. So immunoID NeXT is holding its own. It's doing very, very well. We have a lot of pharma headwinds today, but in terms of the opportunity, it's really with NeXT Personal, right? We've done really well in the first quarter with NeXT Personal. We have a tremendous funnel that's building, and we see that the growth is going to accelerate as we head through the back half of 2024 with NeXT Personal. In addition, Chris mentioned in the prepared remarks that we are seeing strength from the personalized cancer vaccine side of the business as well. And that's, again, off of our immunoID NeXT platform.

Vivian Bais (VP and Equity Research Analyst)

Okay. Perfect. Yeah. And that kind of dovetails into my next question. So the 338 NeXT Personal test was great to see. Just how you're expecting that to ramp throughout the year after Tempus starts marketing it as well? And just wanted to get a sense if reimbursement on that test would be more of a 2025 event or if there was any updated timing there. Thanks.

Christopher Hall (CEO and President)

No. I mean, our goal this year is to submit the share for all three cancer indications and stitch it together. We think that the data is coming together to allow us to do that. We talked in the prepared remarks that the VHIO and the Royal Marsden data would be featured at ASCO as a podium presentation, which we think is great. We're tracking to be able to get the data ultimately submitted for publication, published, and to be able to be able to submit across the three indications for coverage in 2024, which is our stated goal. Now, that's aggressive, and we'll continue to grow the number of doctors that are in the EAP through our own efforts, slowly through our own efforts, and then with Tempus.

We'll see the number of patients referred to us for NeXT Personal testing continue to grow through the year.

Aaron Tachibana (CFO and COO)

Maybe just an add-on to what Chris just articulated, Vivian. So we're seeing great strength. We have a lot of demand with doctors wanting to participate in the program. Number of tests are continuing to grow. But there's a balance. We're going to be a little bit careful with how much we take and perform tests on, primarily because of reimbursement, right? We don't want to just burn a lot of cash. We want to make sure we learn. We want to ramp, but also there's a cash component of it.

Vivian Bais (VP and Equity Research Analyst)

Perfect. Thank you.

Christopher Hall (CEO and President)

One of the.

Vivian Bais (VP and Equity Research Analyst)

Questions.

Christopher Hall (CEO and President)

Yeah. One of the neat things about this relative to volume growth from an investor standpoint, what's always been appealing about the MRD market is there's always an annuity, right? As you build the first baseline test, you repeat test over time as those patients sort of go through their cancer journey. There's continued testing off of personalized genetic fingerprint that you created for the patient. And so we're seeing that happen. We're seeing nice growth in the repeat test of the patients that were referred to us previously, which is a really great dynamic in the space.

Vivian Bais (VP and Equity Research Analyst)

Awesome. Thanks, guys.

Aaron Tachibana (CFO and COO)

Thanks, Vivian.

Operator (participant)

The next question comes from Dan Brennan with TD Cowen. Please go ahead.

Speaker 9

Hey, it's Joel for Dan. Thanks for taking them. I just got a little bit more on the NeXT MRD test. What do you need to see to open that way for stuff to the 250 docs that you mentioned in Q4? Is that more capacity or demand, or is it really just holding back tests until you get more widespread reimbursement? And maybe is there some sort of cap you're thinking about for annual volumes before you get coverage on the three tests?

Christopher Hall (CEO and President)

Yeah. The latter. We're moving really slow because of reimbursement. And one of the things I think it's obvious by looking at all the progress that we made through 2023 and bringing down the burn rate of the company, extending the cash out of the company, is that we're being very thoughtful about where and how we spend the resources that we have. And so it's really important through this journey that we build advocates for the products, that we continue to build clinical evidence, that we continue to learn the right way to position, talk about the products, and that we test the relationship with Tempus. And we really get to the point where we feel confident that once we get reimbursement, we can pull the trigger and go super fast.

But until we get reimbursement, we're not planning on going super fast because we don't get paid for those samples. We want to make sure that we're really thoughtful and doing the right thing with investors' money.

Speaker 9

Got it. And then on the burn, does the two years of cash assume a revenue level at or around $100 million now that you've implemented your $100 million in 2025 framework, or is it closer to consensus levels and start a bit lower?

Aaron Tachibana (CFO and COO)

Hi, Joe. Yeah. So in terms of the burn, we've mentioned the cash will last through the end of the first quarter of 2026. So it does contemplate something that's close to that $100 million range in 2025.

Speaker 9

Got it. And then just last on the patents, is the core IP that you're enforcing specific to whole genome sequencing in solid tumor, or are there other key aspects of IP that you're planning on?

Christopher Hall (CEO and President)

I mean, relative to MRD, very broad. Both MRD and PCV, very broad, both around whole genome and then the way in which we and the way in which we do the process. And then there's IP that was mentioned around the exome and the way we boost the exome relative to its use in PCV. And the point I've mentioned, right, is to underline because we spend a lot of time, significant energy building the protections around what we're doing. And we continue to make progress. And we've been mostly focused on driving the business really aggressively towards MRD, but we wanted to make sure we underline that there's a deep amount of IP here that we think is building, getting stronger, and that we continue to work on evolving and extending as we invest in R&D.

So we had some success this quarter, and we wanted to underline that as a part of our ongoing journey.

Speaker 9

Got it. Thanks.

Aaron Tachibana (CFO and COO)

Thanks, Joe.

Operator (participant)

The next question comes from Thomas Flaten with Lake Street. Please go ahead.

Thomas Flaten (Senior Research Analyst)

Hey. Good afternoon, guys. I appreciate you taking the questions. I just want to clarify something with the TRACERx collaboration. The publication that you'll use for your reimbursement dossier, will that be the initial ESMO cohort, or will that be a publication covering the full cohort, which we expect to see a readout on later this year?

Christopher Hall (CEO and President)

Yeah. Thomas Rich is with us, so he's going to take that one.

Richard Chen (CMO and EVP of R&D)

Hi, Thomas. Thanks for the question. Yeah. So the publication that will support our reimbursement will be the second publication that entails the entire cohort. So that we're targeting for kind of later this year. And the first publication will come out, but it's only a subset of the data that we need.

Thomas Flaten (Senior Research Analyst)

Got it. And then, Chris, I want to make sure I didn't misunderstand what you said, but did you say that the Natera relationship would persist into 2025, or did I misunderstand that?

Christopher Hall (CEO and President)

No. No. I just said that we have a great working relationship, and we're optimistic that we will continue to work with them through the end of 2025. We have not done anything for them over the past year.

Thomas Flaten (Senior Research Analyst)

Got it. And if I could just add a third one, have you discussed with Tempus and maybe they have an alternate solution of adding NeXT Dx? It strikes me that being able to order both tests through one sales channel would make sense. But how are you thinking about those two tests working in synergy with each other long-term?

Christopher Hall (CEO and President)

Yeah. So we are seeing NeXT Dx being ordered with NeXT Personal and our early access clients, and that demand is strong. What we're seeing in the marketplace, and I think everyone has seen in the marketplace, is that the power of the MRD testing is unique, differentiated, and the CGP testing physicians are seen more in a way that they're more interchangeable. And so they're ordering the CGP test paired with the MRD as a convenience play, same patient, same tissues, same, etc. And so we're certainly seeing that. Tempus has their own MRD test, and so through the samples not MRD test, their own CGP test, excuse me. And so they will be providing that now, like they do with their customers. And so we expect the NeXT Dx, our approach, to only come through with the doctors that we sell ourselves.

Thomas Flaten (Senior Research Analyst)

Got it. Appreciate you taking the question. Thank you.

Operator (participant)

The next question comes from Mike Matson with Needham. Please go ahead.

Joseph Vaughn (Analyst)

Hey, Chris here, and this is Joseph Vaughn from Mike. Maybe just one on pharma demand. Obviously, as you guys said, seeing increasing demand there. Is that mainly coming from, I guess, new customers coming back in, or is more existing customers kind of expanding their order books?

Aaron Tachibana (CFO and COO)

Mainly the similar customers that we've had up to now. So it's not really new customers. It's just the expansion of the order book and the opportunity. In addition, the Moderna relationship has been strong, and that business has started to increase as well.

Christopher Hall (CEO and President)

Yeah. I mean, and the NeXT Personal. I mean, we basically have the use of immunoID and PCV is really starting to accelerate as Merck and Moderna enroll the patients in their clinical trials, and then NeXT Personal being a new product and the biopharma starting to grow. And so those two things are really starting to put winds to our sales relative to financial performance.

Joseph Vaughn (Analyst)

Yeah. Okay. Gotcha. And then maybe just for the early access program for NeXT Personal, I guess, do you have, I guess, an engagement rate for those using NeXT Dx? And then, I guess, was that a full quarter that you guys kind of launched NeXT Dx?

Christopher Hall (CEO and President)

Yeah.

Aaron Tachibana (CFO and COO)

Yeah.

Christopher Hall (CEO and President)

Yeah. So NeXT Dx, we launched, I want to say, a year and a half ago. And we kept it very, very, very small, and it was used by a few physicians. When we launched NeXT Personal as an LDT laboratory-developed test in October, that's when we started to see NeXT Personal be used side by side with or the NeXT Dx, the CGP product, be used with the MRD product side by side. And I think I mean, I'll have to check, but the adoption's been wide across the entire 10 people in the EAP program. I don't know if I can say they've all done that, but certainly, the significant majority, most of them, have been using NeXT Dx the same time that they use NeXT Personal.

Joseph Vaughn (Analyst)

Okay. And then just maybe one last one. For the molecular or I guess for the physicians in the quarter, I guess for the tests, is there an average test per patient that you guys are seeing?

Christopher Hall (CEO and President)

I don't think we have enough time. I think we need more time to pass about an average test per patient because I think a lot of these people are new. But we are starting to see the repeat testing. In fact, because when you're fixed at 10 physicians, a lot of times in these hyper-growth modes in these companies' launches, you're starting to really sign up a lot of new doctors. So your V1s are always growing at a dramatic rate because you're growing the number of our doctors. In the world where we fixed the doctors, we've launched into a rhythm and beat of getting the clinical samples coming from those doctors. Now, we've hit the point where the repeat testing is starting to outpace the weekly new tests coming in, right, just because it's starting to accelerate.

So we'll come up with a way that we ultimately talk about that metric, but I don't think we have any insight right now relative to the number of tests per patient. But I think as we get a year, two years in the rearview mirror, it'd be a good way to start to look at it.

Joseph Vaughn (Analyst)

Gotcha. Okay. Yeah. Thank you very much for taking our questions, and congrats on the quarter.

Aaron Tachibana (CFO and COO)

Thanks, Joe.

Christopher Hall (CEO and President)

Thanks. Thanks for being on.

Operator (participant)

The next question comes from Arthur He with H.C. Wainwright. Please go ahead.

Arthur He (Senior Equity Research Analyst)

Hi. Good afternoon, Chris and Aaron. This is Arthur for H.C. Wainwright. So I guess I just want to get a quick question regarding the early access program for the NeXT Personal. For this program, I know you mentioned there's a doctor on the waiting list at the beginning. I'm just curious, is there any more doctors getting on the waiting list? Is it getting longer, or?

Christopher Hall (CEO and President)

Yeah. There was growth. Yeah. There's been growth and, quote, "the waiting list." We just decided we're not going to track that quarter-over-quarter. We thought that the reported test was the best way to sort of provide insight. But we do have a wait list. And then Tempus is starting their discussions, and so we expect there to be a pent-up demand that they're creating, too, separately as they engage with customers and discussions.

Arthur He (Senior Equity Research Analyst)

Gotcha. Thanks for the addition, Color. Regarding the reimbursement application, you guys mentioned the aim for trying to get to the 403 indication done this year. Besides the data package you prepared for that, what are other things you guys prepared to can increase the chance for getting the reimbursement approved?

Christopher Hall (CEO and President)

Yeah. Great question. So the key thing is the data package. Now, one of the things that happened to us earlier in this quarter is that the analytical validation data, which looked really, really strong, was published. And that is the backbone of every one of the submissions that the test gives an answer across multiple cancer types, now the 1 part per million. It does that with really high specificity. And so that's the backbone of every submission whenever you do this, the analytic validation data. And this was really strong, really robust, and a lot of studies, a lot of work that went into it. And we're really proud of it and super excited that it got published so quickly. So that's sort of the backbone of all three. And then we have to get clinical data in each one of these three.

So for lung cancer, early-stage lung cancer, the work with TRACERx is key there. With breast cancer, the work with Royal Marsden is key there because that's multiple subtypes. But we're also working with Dana-Farber. We're working with Kundari, triple-negative breast cancer patients. We have our own clinical trial we're doing ourselves called Be Stronger. In immunotherapy, we've got the UKE data with melanoma. We've got the Duke data with gastric patients. And then we've got the large VHIO data. And so we continue to make progress running those samples. The key thing there is that collaborators will need to write the articles, and they have to submit those articles. And those articles have to ultimately be accepted for us to drive the submissions.

And so the one piece of this that is always difficult to predict is how long it takes collaborators to write articles and to submit articles and ultimately for those articles to get accepted. But we've been very focused on driving this so that all that comes together this year, and that's been our goal. And right now, we're on plan to accomplish that.

Arthur He (Senior Equity Research Analyst)

Awesome. Thanks for taking my question, and congrats on the progress.

Christopher Hall (CEO and President)

Awesome.

Aaron Tachibana (CFO and COO)

Thanks, Arthur.

Christopher Hall (CEO and President)

Thanks a lot.

This concludes our question-and-answer session as well as conference. Thank you for attending today's presentation. You may now disconnect.

Awesome. Thanks.