Personalis - Q4 2025

Transcript

Operator (participant)

Greetings, welcome to the Personalis fourth quarter 2025 earnings conference. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Caroline Corner. Thank you. You may begin.

Caroline Corner (Investor Relations Contact)

Thank you, operator. Welcome to Personalis' fourth quarter 2025 earnings call. Joining today's call are Chris Hall, Chief Executive Officer and President, Aaron Tachibana, Chief Financial and Chief Operating Officer, and Rich Chen, Chief Medical Officer and EVP 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 U.S. security laws, including any statements regarding trends and expectations for our financial performance this year and longer term, cash runway and liquidity position, revenue expectations and timing, size and booking of orders, product services, technology, expansions of clinical volume, reimbursement goals, the outcome and timing of reimbursement decisions, expectations for existing and future collaboration activities, cost expectations, market size, and 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 recent filings, 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 fourth quarter and full year 2025 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. With that, I would like to turn the call over to Chris.

Chris Hall (CEO and President)

Good afternoon, everyone. Thank you for joining us to discuss our fourth quarter and full year 2025 results. As we stand here at the beginning of 2026, I'm incredibly proud of the progress our team made over the past year and the momentum that we have today. 2025 was the year we validated our Win-in-MRD strategy. 2026 is the year we expect to scale. Physicians increasingly trust our NeXT Personal test. Our clinical volumes are building, and our strategic roadmap is being validated by the medical community. For those listening in for the first time, Personalis is a leader in MRD testing services, and we're helping patients, partners and doctors see more in cancer samples. We operate at the leading edge of MRD sensitivity. Our ultra-sensitive NeXT Personal test is capable of detecting approximately one single fragment of tumor DNA in a million.

This is not merely a technical improvement, it's a clinical necessity. This level of sensitivity allows physicians to detect cancer recurrence months ahead of standard imaging and provides them with far greater confidence in a negative result. The clinical market for these types of tests, known as minimal residual disease or MRD test, is growing rapidly and is expected to mature into a $20+ billion opportunity, and Personalis is exceptionally well-positioned to command a significant share of that opportunity. Beyond clinical testing, we remain a leader in supporting biopharma companies through clinical trials and drug development. Our platforms are used by our partner companies to analyze tumors and identify new biomarkers, serving as the foundation for the next generation of personalized therapies. We are the engine that supports researchers as they explore new treatments and allow physicians to personalize treatment for every cancer patient.

Now, turning to our results, the headline of our performance is our explosive clinical growth and our achievement of two Medicare coverage decisions. In the fourth quarter, we delivered 6,183 clinical tests. This represents a 41% sequential growth over the third quarter of 2025 and a 329% increase year-over-year. Now, to put that into context, in Q4 of 2024, we delivered just 1,441 tests. Our performance this quarter reflects the strong uptake of NeXT Personal in the marketplace. For the full year of 2025, we delivered more than 16,000 clinical tests, growing 394% over 2024. We achieved $17.3 million of revenue in the fourth quarter, in line with our preliminary announcement last month.

Our full year revenue of $69.6 million reflects a transitional period for our top line. As we previously discussed, we've shifted our commercial focus from lower value project work to higher value MRD partnerships, which meant that we experienced a nearly $20 million year-over-year decline in revenue from Natera while we set the stage for growth with our MRD engine. The uneven biopharma spending environment we discussed last year has persisted, creating variability in the timing of large project-based translational research. However, it is critical to note that the underlying demand for our strategic MRD offering remains exceptionally strong. We grew our MRD biopharma revenue by nearly 240% over 2024.

We believe we are the partner of choice for biopharma companies who need to, quote, "see what others cannot." We expect penetration of our MRD testing into biopharma companies to be a growth driver for years to come. NeXT Personal has the potential to help these partners fail in early clinical trials sooner, succeed in these trials quicker. Enroll the right patients into their studies. Innovation is the heartbeat of Personalis. Just as we've led the way in pioneering ultra-sensitive MRD detection down to one part per million, we recently announced the next evolution of our NeXT Personal MRD test, our Real-Time Variant Tracker report. Cancer changes over time. It can change in reaction to treatment. The Real-Time Variant Tracker allows for the detection of mutations targetable with therapy. The identification of resistance mutations during MRD surveillance with NeXT Personal.

In metastatic HR-positive breast cancer patients, the ESR1 gene can acquire mutations over time that cause resistance to the hormone therapy patients may be receiving. Knowing when these mutations can happen allows physicians to adjust therapy proactively. The addition of this opt-in report is intended to give clinicians a dynamic window into how a patient's cancer is evolving in real time. We announced the early access program for this module for clinical and academic leaders in January of this year. The feedback from early discussions with doctors has been positive, we believe this provides a powerful new tool for physicians as they seek the best possible outcome for their patients. This new addition to NeXT Personal underlines our continued innovation MRD, most importantly, our commitment to innovate for patients.

Looking ahead to 2026, we expect total revenue to be in the range of $78 million-$80 million. To understand the velocity of the business, you must look at our strategic growth engines. That is, our clinical revenue and our biopharma MRD revenue. We expect our strategic revenue to grow from approximately $14 million in 2025 to a range of $30 million-$32 million in 2026, which would be roughly 121% growth, driven by the expectation that clinical volumes will quadruple. I will now dig deeper into the three pillars of our Win-in-MRD strategy that are driving us forward. The first pillar is clinical adoptions. The numbers speak for themselves. Last quarter, we had more than 900 oncologists ordering our test, and we're seeing strong retention among those who adopt NeXT Personal.

We're scaling our commercial footprint to onboard more oncologists and drive testing volumes. We now have more than 10 dedicated reps in the field working in close coordination with our partner, Tempus. In 2025, we expanded our relationship with Tempus to include colorectal cancer, and our commercial efforts are fully aligned to champion the market shift towards ultrasensitive MRD testing. We're setting our initial 2026 annual volume guidance at 43,000-45,000 tests, which would be about 170% growth year-over-year. This underscores the tremendous momentum we are seeing and our confidence in our commercial team and our physician partners. Our second pillar is building clinical evidence and the data we need to support continued positive reimbursement decisions. We made massive strides here in 2025. We submitted three dossiers for coverage to Medicare, backed by industry-leading clinical data.

In the fourth quarter, we successfully achieved Medicare coverage for breast cancer with favorable pricing. Just a few weeks ago, we received Medicare coverage for lung cancer. These coverage decisions validate the value of our technology in changing patient lives, and I'm proud of our team for these accomplishments. Both reimbursement frameworks are for ongoing cancer surveillance for patients, so our tests can be used at multiple time points along the patient's cancer journey and across many years. We currently have an additional dossier under review with MolDx for the use of NeXT Personal to monitor immunotherapy in metastatic cancer patients. Though exact timing remains subject to MolDx review, we remain confident in our data. Our drive towards coverage has been powered by data and the strong performance of our NeXT Personal test.

These last several months, we continue to build upon our foundation to transform Personalis from a high-growth testing company into a high-margin reimbursed clinical powerhouse. The landmark studies with TRACERx, Royal Marsden, and VHIO, published in Cell, Annals of Oncology, and Clinical Cancer Research, respectively, are the anchors of our evidence base. The TRACERx lung cancer study is one of the largest, longest, and most rigorous lung cancer MRD studies to date, with over 400 patients. In this study, NeXT Personal showed exceptional sensitivity and specificity throughout the patient journey from diagnosis to surveillance, even in lung adenocarcinoma, the most common yet difficult to detect subtype. Our Royal Marsden breast cancer study also showed exceptional sensitivity and specificity across HR-positive, HER2-positive, and triple-negative breast cancers, with 15-month+ medium lead time ahead of imaging.

The VHIO study across 24 cancer types showed that advanced cancer patients receiving immunotherapy who achieved durable molecular clearance had 100% overall survival. The PAM Cancer UCSD I-PREDICT study was just published in npj Precision Oncology, it showed that NeXT Personal identified molecular progression a medium of 161 days, over five months before imaging in late-stage cancer patients receiving immunotherapy. Yale University is leading a case study to demonstrate the utility of NeXT Personal in breast cancer. Furthermore, our prospective B-STRONGER-I trial in triple-negative breast cancer is well underway, having now enrolled more than 200 patients. Overall, we're now involved in 35+ additional studies that are powering the next generation of evidence, that number just continues to grow. In 2026, we're focused on neoadjuvant breast cancer and colorectal cancer submitting for coverage there.

As a reminder, we've presented data earlier from PREDICT and SCANDARE. Those studies show the power of NeXT Personal in neoadjuvant breast cancer. The British Columbia Cancer Study showed the power of the technology in colorectal cancer. The third pillar is leading in the biopharma sector. MRD, or our NeXT Personal biopharma revenue, grew nearly 240% this past year. Biopharma companies are realizing that to prove the efficacy of their next-generation therapies, they need the most sensitive detection tools available, and this has led to our success in driving their adoption of NeXT Personal. We made tremendous strides this last year with biopharma companies in terms of their adoption of NeXT Personal.

As a part of that progress, our business has been evolving towards more prospective work, where revenue from a project is spread out over several years, compared with retrospective analysis, where an entire study is analyzed in one batch. In 2026, we expect our biopharma revenue to be in the range of $20 million-$21 million. This growth in our core MRD offering is expected to propel our entire biopharma segment, providing a stable and high-value revenue stream that complements our clinical expansion. In closing, Personalis is a different company than it was just a year ago. We've proven that we can build world-class clinical evidence and win Medicare coverage. We've proven that our technology is the gold standard for sensitivity. We're starting 2026 with the winds at our backs and the confidence that we are winning in MRD.

Changing the way medicine is practiced is never easy. Progress like we've seen over the past year shows our efforts have been worthwhile. I want to thank our employees and collaborators for a great year, thank our biopharma partners, physician champions, and their patients for trusting us to provide results that truly matter. Thank you. I'll now turn it over to Aaron to dig deeper into our financial results.

Aaron Tachibana (CFO and COO)

Thank you, Chris. I will be discussing our fourth quarter and full year 2025 results, then cover guidance for 2026. Total company revenue was $17.3 million for the fourth quarter of 2025. While this is a modest 3% increase year-over-year compared with $16.8 million for the same period last year, the headline number masks a positive rotation in the quality of our revenue. We are successfully replacing low margin and sporadic legacy revenue with high-velocity clinical volume. For the full year 2025, total company revenue was $69.6 million.

As Chris mentioned, we navigated a planned $19.5 million decline in revenue from Natera during the year and also the conclusion of the Moderna melanoma trial enrollment, which was a $10 million decline from 2024. Despite these headwinds of nearly $29 million, we delivered 239% growth in biopharma MRD revenue over the prior year. We are no longer dependent on a single legacy contract. We are building a diversified and sustainable high-growth engine, which is centered around our Win-in-MRD strategy. Moving to our core revenue, biopharma was $10.9 million in the fourth quarter, compared with $12.2 million for the same period of the prior year. For the full year 2025, biopharma revenue was $49 million, compared with $51 million for 2024.

Both the fourth quarter and the full-year declines were due to the expected decrease in the Moderna volume mentioned earlier. For clinical revenue, we recognized $0.9 million in the fourth quarter and $2 million for the full year of 2025, compared with $0.2 million for the fourth quarter and $0.8 million for the full year 2024. The fourth quarter 2025 includes initial breast cancer surveillance revenue, which was covered by Medicare in the fourth quarter. I want to address gross margin directly as it's a critical indicator of our MRD investment strategy. Gross margin was 11% in the fourth quarter and 22.7% for the full year. It's vital to understand that this margin compression is intentional but temporary.

We foresee margin dilution to continue into 2026, with the lowest point expected to be in the first quarter of the year until the time when our third reimbursement coverage, which is expected to be IO, begins to convert to revenue. The margin dynamic is driven by the strong growth in volume of NeXT Personal tests ahead of reimbursement revenue. In the fourth quarter alone, unreimbursed costs diluted margins by approximately 1,900 basis points. We are securing the oncologists and the volume now, so when coverage decisions like the recent wins in breast and lung cancer come online, that volume run rate begins to convert to higher margin revenue.

We expect to realize benefits from investments to gain market share over the next two to three years as our clinical revenue gets to scale. Operating expenses were $27.2 million in the fourth quarter, compared with $22.7 million for the same period of the prior year. For the full year 2025, operating expenses were $103.8 million, compared with $95.1 million for the full year 2024. Our clinical business is thriving and we are investing for future growth. Most of the year-over-year increase was related to commercial expenses for ramping up test volume and also R&D investments for clinical evidence to support reimbursement initiatives and technology development.

The fourth quarter R&D expense was $13.1 million, compared with $11.5 million for the same period of the prior year, SG&A expense was $14.1 million compared with $11.2 million for the same period of the prior year. Net loss for the fourth quarter was $23.8 million, compared with $16.4 million for the same period of the prior year. For the full year 2025, net loss was $81.3 million, which was the same as 2024. Let's review the balance sheet. We finished the fourth quarter with a strong balance sheet with cash and short-term investments of $240 million and no debt other than some small equipment loans.

For the full year of 2025, we used approximately $74 million, just below our $75 million guidance. We operated with discipline throughout the year and even as revenue fluctuated, we managed more than $12 million in downward spending adjustments to protect our cash runway. Now, looking into 2026, we enter the year with a focus on scaling volume. Our guidance reflects reimbursement coverage decisions received to date. Any upside may be realized from faster coverage expansion, payer adoption, faster volume growth for clinical tests, and continued strength in biopharma MRD demand. Additionally, we are guiding annually this year and not providing detailed quarterly ranges due to the variability and seasonality that may occur throughout the year.

Our 2026 guidance is as follows: Total company revenue in the range of $78 million-$80 million. This assumes clinical revenue of $10 million-$11 million, specifically from breast and lung cancer surveillance tests recently covered by Medicare. Revenue from pharma tests and services and all other customers in the range of $55 million-$56 million. MRD revenue from these customers is expected to grow rapidly and to be in the range of $20 million-$21 million. Population sequencing plus enterprise customers of approximately $13 million. Gross margin is expected to be in the range of 15%-20%, with the first quarter potentially being the lowest point of the year. Net loss of approximately $105 million. We expect our cash usage to be approximately $100 million as we continue to invest in our Win-in-MRD strategy.

This estimate reflects our decision to accelerate volume and gain market share. With $240 million of cash on hand, we expect to have the capital to execute our plans. Additionally, our success is opening up additional clinical studies that may be able to influence guidelines and therefore we are stepping up investments in this area too. What you are hearing from both Chris and I is unwavering confidence in our ability to execute our Win-in-MRD strategy and plans. We have proven that our ultra-sensitive technology can help change patient care. The market is expanding fast towards the $20+ billion estimate. We have growing test volume and we are turning on the reimbursement engine to drive revenue growth this year and beyond. 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?

Operator (participant)

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star and then one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star and then two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. The first question we have is from Subbu Nambi of Guggenheim. Please go ahead.

Subbu Nambi (Managing Director and Equity Research Analyst)

Hey, guys. Thank you for taking my question. Moving in a short period of time from no reimbursement to now two indications, potentially more here early in 2026, how does that affect the focus of reps internally, externally with Tempus for clinical and also your eye for still building the pharma business longer term?

Chris Hall (CEO and President)

Thanks, Subbu. Appreciate the question. I think there's a couple of ways to think about it. I mean, what we're starting to do is, you know, increasingly ungate the business, increasingly to pick up steam. We had the number this year, guided $43 million-$45 million that we think represents a good mix between, you know, investing aggressively, but at the same time making sure that we manage the cash in a prudent way. As we go through the year and we continue to make more progress, potentially with reimbursement, either getting more decisions, we've got IO in front of us. You know, we're find ways to collect more, et cetera. You know, we could continue to invest more in the area as we go, and we'll play it as we go.

Right now, this is the way that we see it. We're continuing to push hard on biopharma companies. I mean, those relationships and those are growth. That's a big growth driver, and we've spent a significant amount of time over the last two to three years establishing ourselves and growing that business. I think we're having a lot of success there.

Subbu Nambi (Managing Director and Equity Research Analyst)

Thank you for that, Chris. Chris, how has reimbursement changed receptivity from clinicians compared to other competitors in the field? Have you seen an acceleration in ordering since the reimbursement announcement?

Chris Hall (CEO and President)

I think overall, getting reimbursement gives you legitimacy in the conversations. I think being able to say that you passed through the process and the rigors of Medicare gives you legitimacy when you're having discussions with physicians and certainly key opinion leaders. I think there's a wide recognition among people who are in the know that MolDx does a particularly phenomenal job reviewing the evidence and looking at it deeply. I think it does help to reinforce the power of what you're doing when you've got Medicare coverage, and it does put winds to your back field.

Subbu Nambi (Managing Director and Equity Research Analyst)

Super helpful. Thank you so much, Chris.

Chris Hall (CEO and President)

Sure.

Operator (participant)

The next question we have is from Mark Massaro of BTIG. Please go ahead.

Vidyun Bais (VP of Equity Research)

Hey, guys. This is Vidyun on for Mark. Thanks for taking the question. I just wanted to ask one on the biopharma outlook. Are you seeing pushouts or cancellation of contracts there? Just at a higher level, you're investing into NeXT Personal MRD and focusing more on the clinical side of our portfolio. Just how material do you think MRD side of biopharma is versus other areas that you've done historically, like PCV, is longer term? Thanks.

Chris Hall (CEO and President)

Yeah, thanks. I mean, I think we're seeing the sector stabilize right now. We haven't seen any pushouts or any big jolts to the business. I mean, last year was certainly more challenging. We're not seeing biopharma companies come rushing back in a major way for translational purposes. We reflected. You know, I think what we see right now is what we've reflected in the guide. I think things are stable right now, and that sector's overall is what we're seeing. I think we are making progress in MRD. We feel like we've been accelerating our progress there. I mean, those customers are some of the most discriminating buyers. They often do head-to-head trials with the data.

When you, when you win there and you see the revenue growth that we're showing in that sector, which I think was nearly 240% year-over-year, that came off a particularly strong year, the year prior, and we see it continuing to grow this year, that reflects the decision of large companies who do really detailed analysis to choose Personalis, and we feel like we're well-positioned there. We're, you know, investing heavily overall to win the space, both biopharma and also clinical. We've always thought that those two work synergistically and that the evidence that we built in biopharma helps drive the clinical business, and that's been one of the key vectors.

As you know, with our relationship with Moderna, we've been focused on supporting them through their journey of their INT program, and that's been a potential driver of our revenue over the out years.

Vidyun Bais (VP of Equity Research)

Okay. Thanks so much for that color. NeXT Personal, can you share any detail on the mix of volumes you expect to run in 2026 in your reimbursed indications versus your not reimbursed indications?

Chris Hall (CEO and President)

Yeah.

Vidyun Bais (VP of Equity Research)

in rev guide you. Yeah, go ahead.

Chris Hall (CEO and President)

Yeah, go ahead. I mean, yeah, go ahead and finish the question if you want.

Vidyun Bais (VP of Equity Research)

Okay, sure. I was just gonna say, I think the volume in rev guide implies that a good chunk of the volumes you're running today are not lung and breast. Just wanna understand what indications you're seeing there?

Chris Hall (CEO and President)

Sure. Aaron will take this one.

Aaron Tachibana (CFO and COO)

If you just look at the volume at the top level, the 43,000-45,000 tests, roughly 20% or so is coming from breast, 15%-20% is coming from lung. IO is somewhere between 20%-25%. CRC is around 20%, and all other is the remaining 20% or so. It's true, there's a fair amount that we're running for zeros, right? We're not getting paid. We're only getting covered for breast and lung at this point in time. It's less than half of the tests, right? Medicare is roughly half of the volume, and the fee for service is half of that half. Again, we are running a lot of tests with zeros.

When you're dealing with a physician, you have to accept samples of all different cancer types, and that's what we're doing. We're doing really, really well, and we're finding that our ultrasensitive test is really sticky with physicians. Now as we want to go forward here to drive more growth, we're gonna be adding more physicians, right? We're adding more commercial heft on the Tempus side and internally. You know, we're gonna add, you know, another, 10 or so reps. We ended the year with 10 reps. We're gonna double it at this point in time. That's our current plan, we could invest even further depending on how things go here the first couple of quarters, right? Things are going really, really well.

Chris Hall (CEO and President)

Yeah. Note the guide didn't assume IO yet, but that's clearly out there, and we've got a significant amount of revenue. You know, we expanded the relationship this past year with Tempus to include CRC, and we've gotten tremendous uptick and energy around that from doctors. The data that we had at AACR last year showed that if you apply an ultrasensitive approach onto the testing paradigm, you can get a dramatic leap in performance at Landmark. That really raised a lot of eyebrows and a significant number of physicians who have been starting to adopt in the CRC. We have been investing because that's been a historically strong space, and we've looked out at the end that we're making investments in growing that market and our presence in CRC market, and we've had a lot of progress.

When Aaron talks about 20% of the samples coming from that group of physicians, that's been. Or that, you know, 20% of our samples coming from CRC, that's been a really nice growth engine. I think over the arc of time, progress we're making there is really gonna pay off.

Vidyun Bais (VP of Equity Research)

Okay, perfect. That's super helpful. Thank you.

Chris Hall (CEO and President)

Absolutely.

Aaron Tachibana (CFO and COO)

Thanks.

Chris Hall (CEO and President)

Thanks for the questions.

Operator (participant)

The next question we have is from Thomas Flaten of Lake Street. Please go ahead.

Thomas Flaten (Senior Research Analyst)

Hey, good afternoon. Thanks for taking the questions. Hey, Aaron, just to follow up on your last prepared comment about having the cash to execute your plan. Should I read that as having cash to break even, or should I not read that far into it?

Aaron Tachibana (CFO and COO)

Yeah. We haven't said anything about cash to break even or cash to profitability or anything like that, so that's probably reading a little bit more into it. What we meant by that statement, Thomas, is that we had $240 million of cash at the end of the year. We're gonna use approximately $100 million in 2026. You can see just by the simple math, it's 2.5 years or so of cash on the balance sheet, which means we have plenty of capital here for the next couple of years to go and drive to go get market share. That's the focus right now, really investing for market share.

Thomas Flaten (Senior Research Analyst)

Got it. Got it. Just a question on the Real-Time Variant Tracker. I think, Chris, in your prepared comments, you mentioned that was an opt-in test. Are people ordering it? I mean, of the physicians you went out to with the early access program, are they ordering it? Do they literally have to click a box or just mechanically, how does that work and how do you drive the stickiness on that?

Chris Hall (CEO and President)

Yeah, I mean, Rich is with me and can add any color to it, but it's an opt-in module. It's not something that just everybody gets by default.

Rich Chen (Chief Medical Officer and EVP of R&D)

Yeah. We're getting geared up for the early access program as we speak, so, but we expect that physicians will opt in, and a lot of them will, and there's been a lot of excitement about it.

Thomas Flaten (Senior Research Analyst)

Yeah.

Rich Chen (Chief Medical Officer and EVP of R&D)

One of the feedbacks has been, you know, it's not just being able to quantify the tumor, you know, in the blood, but being able to track how the tumor is changing is really one of the key unmet needs in cancer. Starting to superimpose this longitudinally, really is, I think, exciting and I think is the next big innovation in MRD and quite frankly, sort of underlines our ability to lead the space in innovating. I mean, having started with the ultrasensitive push that we've been pioneering and now starting to add this, I think is a great positioning for where we are and the impact that we're making for patients.

Thomas Flaten (Senior Research Analyst)

Yeah. Just one quick last one. Of the clinical volume you're expecting this year, you mentioned that you had 900 oncologists ordering last year. Do you have a sense, you know, of how many docs are gonna be responsible for that 43,000-45,000? Just again, big ranges are fine. I'm just curious about depth versus breadth.

Chris Hall (CEO and President)

Yeah. I mean, I think we're gonna. Well, I mean, this year we'll keep focusing on driving deeper within existing accounts. You know, the 900 doctors ordering from us will continue to grow, and will continue to go to broader. We're focusing always on going deeper, as is our partner, Tempus. Because I mean, I think people start to use the technology, they see the power of it, our experience has been that the customers who have been with us the longer tend to be the customers that order the most. We're focused on continuing to tell the story, underline the value, and driving deeper within existing relationships.

Thomas Flaten (Senior Research Analyst)

That's great. Thank you.

Chris Hall (CEO and President)

Thanks, Thomas.

Operator (participant)

The next question we have is from Kallum Titchmarsh of Morgan Stanley. Please go ahead.

Jason Kritzer (Managing Director and Co-Head of Value Team)

Hi. This is Jason on for Kallum. Thank you for taking our questions. Maybe just a question on 2026 guidance. How should we think about the QoQ clinical volume growth? You delivered 6,200 clinical tests in the fourth quarter. Is that a good jumping off point for you guys from which you guys could grow 24%, 25% QoQ to get to the midpoint of your-

Chris Hall (CEO and President)

Yeah.

Jason Kritzer (Managing Director and Co-Head of Value Team)

volume guide?

Aaron Tachibana (CFO and COO)

Yeah. We haven't given quarterly guidance, but if you take the $6,183 exiting 2025 in the fourth quarter and just maybe linearize it, that probably gets you close. There would be a little bit of seasonality.

Jason Kritzer (Managing Director and Co-Head of Value Team)

Right.

Aaron Tachibana (CFO and COO)

The second and the fourth quarters are gonna be the strongest, where the first and the third will have a little bit of seasonality.

Chris Hall (CEO and President)

Yeah. I mean, Q1's always and Q3 are always, you know, the slower growth quarters in this kind of an environment versus Q2 and Q4 because of the combination of vacations, holidays, and then Q1 weather and we've always seen that. You know, right now we're still learning exactly how the seasonality works. We saw that in our numbers last year, and I think that's, you know, I've spent years in this business, that's pretty common.

Jason Kritzer (Managing Director and Co-Head of Value Team)

Thank you. That was helpful. Maybe just as a follow-up, a question on the competitive landscape. There's a lot of new entrants in the MRD space, and there's been some consolidation to space as well, with one of the large MRD players recently making a large acquisition of another large MRD player in December and potentially integrating their IP to enhance the sensitivity of their assay. Could you just share your thoughts on the current competitive landscape and why you think you can gain share against arguably larger players with deeper pockets? Thank you.

Chris Hall (CEO and President)

Yeah, I mean, I think we've proven this over the last couple of years that we can execute. We've been focused on pioneering this story. I think a lot of, you know, a lot of people are trying to either get to or debut ultrasensitive products. Our intention is to stay ahead and continue to push forward. We're aligned with one of the biggest partners in the space, Tempus, which is providing the commercial infrastructure, which gives us the ability to move quickly and make progress. We've gotten traction now with, you know, like we talked about in the script, 30+ ongoing studies, and that continues to grow. You know, we're investing heavily in R&D and driving forward.

You know, I think if you look at where we've been, where we are, we've emerged as one of the large players in the space. I think we've stitched together. There's only three companies with more than two coverages now in MRD, and we're there. I think just in terms of test volume, we've emerged as a major player, and we've got momentum, and we're still leaders in data and, you know, in terms of where it is. We feel like we're positioned well, and we're continuing to make the investments necessary to keep that position in the industry.

Jason Kritzer (Managing Director and Co-Head of Value Team)

Great. Appreciate the answers, guys.

Operator (participant)

The next question we have is from Bill Bonello of Craig-Hallum. Please go ahead.

Bill Bonello (Senior Research Analyst)

Hey, guys. Thanks a lot. You know, the volume expectations obviously look great, well above, I think, what people had been expecting. You know, the Tempus comments last night were incredibly bullish. I think what might, you know, surprise people is sort of where you're ending up on the clinical revenue, the gross margin, and the cash flow guide. You kind of talked about, you know, your philosophy, but maybe you can just give a little bit more color on what's prompting that. I mean, historically, your approach had kind of, as you said, been, you know, to sort of be a bit gated with the sales. I think there were some restrictions to Tempus in terms of kind of what you were encouraging them to do.

You know, you knew all along you'd be getting reimbursement. You know, is it response you're getting from the field or, you know, what is it that's made you decide to sort of put on the gas at this point of time and maybe move away a little bit from that, you know, capital light strategy you've talked about in the past?

Aaron Tachibana (CFO and COO)

Hi, Bill. This is Aaron. Thanks for the question. Exiting 2024, getting into 2025, we did meter things a little bit, primarily because we had not received any coverage at all just at that point in time. Our balance sheet did not have $240 million back then either, right? Those two items there have changed, you know, over the past few months.

Having coverage now for breast cancer and lung cancer, having a healthy price that we're really, really pleased with, that's gonna give us the right unit economics and help us get our gross margins into the low 60s and show us a path to eventually 70%, but again, at full reimbursement, gives us now the confidence that we should step on the gas and go fast because this market's gonna turn into $20+ billion, $30+ billion over time. There's only a few players in the market today. There's only two real tumor-informed players that have, you know, a really robust test. We are the leader in the ultrasensitive marketplace, it behooves us to go fast right now while the window is open, and there's very little competition in the ultrasensitive space.

We see it as an opportunity to go get market share over the next year or two. In doing so, we would have to sacrifice a little bit on cash burn as well as on gross margin, primarily because until we get a few more coverages, right, it's gonna be dilutive to our gross margins. Does that make sense?

Bill Bonello (Senior Research Analyst)

Yeah. No, it does. I get the capital and the reimbursement. I was just curious if you were seeing things in the market that were saying, "Hey, we should really step up as well too." It sounds like it's more the other factor.

Aaron Tachibana (CFO and COO)

The adoption, yeah.

Chris Hall (CEO and President)

Yeah. Well, Bill, I mean, we see strong demand, I mean, I think you're hearing that from people talking about it. You know, and we're here to meet the demands of the physicians, and we're still managing this carefully. I mean, the step up from 74 to 100, it's not like a crazy, you know, a crazy drive forward. We're also investing heavily in R&D, both in the studies, the evidence development, pushing forward in multiple different ways to accelerate coverage. You know, and then, and the guide at its current level doesn't have any more progress in coverage or in reimbursement. You know, we feel like there's a lot of upside there, and that'll continue to be helpful as we go forward.

You know, we feel like this is the right spot. The guide, I think, hit a good cadence of investment versus, You know, or, and, you know, weighed up against expansion. I think the investments that we do make now will pay dividends in the future, and we could probably ungate and go ever faster, but, you know, that would spend even more money. We feel like we've hit the right balance here.

Bill Bonello (Senior Research Analyst)

Sure. Just a couple follow-ups then. You know, to the extent that you're allowed to talk about this, have you sort of given Tempus also the green light, maybe not to go full throttle, but do they have a little more freedom in what they can do with sales as well?

Chris Hall (CEO and President)

Well, we're focused on going deeper within accounts, and we're focused on we've added some more reps ourselves. You know, I feel like we're in a good position, and we work really well right now, and we're driving forward with the idea that, you know, we're building demand for this ultra-sensitive approach and making progress.

Bill Bonello (Senior Research Analyst)

Okay. That was a good non-answer. The last thing is just cash burn for the year. I think you just in your comment. There was no cash flow statement, but I think in your comment, you just said it was about $70 million for this year. Is that right?

Aaron Tachibana (CFO and COO)

Yeah. We used about $74 million, and that was in our prepared remarks, Bill, and we expect.

Bill Bonello (Senior Research Analyst)

Oh, sorry.

Aaron Tachibana (CFO and COO)

to use million dollars in 2026.

Chris Hall (CEO and President)

Yeah. 74 to 100.

Aaron Tachibana (CFO and COO)

Yeah.

Bill Bonello (Senior Research Analyst)

Okay. Perfect. Thank you so much.

Aaron Tachibana (CFO and COO)

Thank you, Bill.

Operator (participant)

The next question we have is from Mike Matson of Needham & Company. Please go ahead.

Speaker 11

Hey, Chris, Aaron, Rich. Thank you very much for taking our questions. This is Joseph on for Mike. Just a couple here. In your prepared remarks, you called out, I guess a heightened focus on CRC and neoadjuvant breast moving forward. Just wondering, should we expect maybe a submission at least for reimbursement in 2026 for those two? I have a couple more after that. Thank you.

Chris Hall (CEO and President)

No, absolutely. I mean, we're not sort of laying out exact timelines because everything is dependent upon when we can get publications both submitted with investigators and then accepted because we can't submit until those things happen. We're driving hard in order to be able to submit for coverage for both of those this year. There's a lot of variability as to when and how that might happen. That's not, quote, in the guide, if you will. I mean, we're moving fast because we see a big demand for use of the technology for those indications for patients.

Speaker 11

Okay. I guess just building on that, in terms of, I guess, evidence generation, you guys' strategy around evidence generation for additional cancer indications, I'm just wondering is there any difference now in strategy compared to breast and lung in terms of, you know, is the focus or, you know, at least part of the focus looking at trying to get into these very large, almost, you know, landmark studies? Is now that you have reimbursement in two indications, do you think smaller studies can, you know, can pass the bar for Medicare? You know, you called out 35 clinical trials, is the idea here now in the quant, you know, quantity of trials rather than, you know, number of patients in the trial? I'm just trying to get, you know, some broad color on that.

Chris Hall (CEO and President)

Yeah. Rich will provide his thoughts on this one.

Rich Chen (Chief Medical Officer and EVP of R&D)

Yeah. Thanks for your question. Yeah. You know, we've done taken a strategy of working with the top KOLs in the world in establishing some baseline evidence for these indications as we expand out our reimbursement coverage. We're gonna continue to do that. It's really paid off for us. You know, you know, we debuted, you know, very, very strong data in neoadjuvant breast at conferences last year and then also colorectal cancer as well with top KOLs. We think that helps us in the Medicare coverage process. We'll continue to do that not only for those indications, but for others.

In addition to that, we are also, you know, we've had a lot of inbound interest, from KOLs wanting to expand into clinical utility studies, you know, using our assay to make decisions for patients and then show that it actually makes a difference in outcomes. This is really important for long term, not just for the field, but also getting into guidelines and things like that. You'll begin to see more of that as well.

Speaker 11

Okay, great. Yeah, that's helpful. Maybe just a one last one. You know, to get to that high gross margin target you guys have laid out, obviously, reimbursed test volume is the biggest factor there. But I'm just wondering in terms of other things like lab optimization, automation, what have you, I'm just wondering, have those steps all been completed? Are there more planned? You know, what inning would you say you guys are in terms of, you know, really getting ready to ramp up reimbursed, clinical volume?

Rich Chen (Chief Medical Officer and EVP of R&D)

Yeah, good question. We haven't said specifically what % of completion are we on all of our operational aspects or projects. We continue to automate the workflow, which means as we add capacity. You know, all the capacity for this year isn't all in place at one point in time, right? Because you have to buy equipment, hire people, and that's gonna weigh even further on margins if you get too far ahead of your skis. We take it one step at a time. Having said that, you know, we are continuing to automate, streamline the workflows, strip out costs from labor or overhead wherever we possibly can, right, as we go forward to be efficient. You know, over the last couple of years as we launched the product, we've done a good job with getting ready, and so we believe we're in a good position sitting here today.

In terms of getting to the upper end of the range on margins, right? Some of that is dependent upon what happens with biopharma as well, because biopharma is a fee for service. They pay for every test. In terms of, you know, some of the commentary Chris made earlier, we have not baked in IO into our guide, right? That's not contemplated.

Depending upon what happens with reimbursement coverage for other cancer types, you know, that could help us as well in terms of, you know, moving towards the upper end or beyond.

Speaker 11

Okay, great. Yeah, that's all from us, and congrats on the reimbursement wins so far.

Rich Chen (Chief Medical Officer and EVP of R&D)

Thank you.

Chris Hall (CEO and President)

Thank you.

Operator (participant)

Ladies and gentlemen, just a final reminder, if you would like to ask a question, you may press star and then one. The next question we have is from Tom Stevens of TD Cowen. Please go ahead.

Rich Chen (Chief Medical Officer and EVP of R&D)

Tom.

Tom Stevens (VP)

Hi, all. Thanks. I've set my question here. Just a quick one on adjuvant reimbursement. Have you outlined any expectations over the next couple of years in breast and lung on the potential for adjuvant reimbursement and kind of what's the pushback from MolDx there? Any color would be helpful. Kind of secondarily on the neoadjuvant opportunity, I mean, could you lay out broad strokes, you know, where pharma is applying them in trials today? Neoadjuvant feels like an easier use case and maybe some initial market sizing on the neoadjuvant opportunity, if you could also spare that. Thank you.

Chris Hall (CEO and President)

Yeah. Rich is gonna grab this one, Tom. Thanks.

Rich Chen (Chief Medical Officer and EVP of R&D)

Thanks for the question. So Adjuvant breast and lung, rest be assured, you know, that is something that we are also focused on, and we'll be pursuing that just like the other indications that we've been successful with. We know that's important. With regards to neoadjuvant breast cancer in or neoadjuvant use of the assay in biopharma. I mean, there's a lot of interest there. I mean, you know, as you know, the oncology pipelines for drugs, there's intense interest in bringing the drugs that are being used in an adjuvant setting and bringing them earlier for patients. The neoadjuvant setting is one that's really important. They want to know if these drugs are working.

A highly sensitive assay like ours can be really, really helpful for that. We actually, you know, and you know that, you know, if you look at the data that we presented last year in neoadjuvant breast cancer, it just shows the power of an ultrasensitive approach that was in triple-negative breast cancer and HER2-positive. The current state-of-the-art biomarker that's used is something called pCR. In those studies, we showed that our assay performed very well compared to pCR and in some cases better. You can imagine since that data has come out, there's been a lot of interest in using an assay like ours to get an early read on their neoadjuvant studies and whether they're being successful or not.

Tom Stevens (VP)

Great. Just any initial view on the sizing of the kind of clinical market there and kind of what the potential for that could be long term?

Rich Chen (Chief Medical Officer and EVP of R&D)

Yeah. You know, I think There's definitely we haven't estimated that. What I'd say is, you know, if you look at the patient journey, for MRD, you know, it does start with neoadjuvant, you know, it's a relatively small fraction of that entire patient journey. Surveillance, you know, over time, over many years, you know, there's gonna be a lot of testing done there, both for breast cancer and early-stage lung cancer. That's why we started there, we achieved coverage there, now we're kind of working our way backwards into these other indications.

Tom Stevens (VP)

Got it. Thanks so much, guys.

Rich Chen (Chief Medical Officer and EVP of R&D)

Thanks, Tom.

Operator (participant)

Ladies and gentlemen, that concludes the question and answer session. With that, this concludes today's teleconference. Thank you for joining us. You may now disconnect.