GeneDx - Earnings Call - Q3 2025

Executive Summary

• GeneDx delivered another strong quarter: revenue rose to $116.7M (+52% y/y), adjusted gross margin expanded to 74%, and adjusted net income reached $14.7M; GAAP net loss was $7.6M as non‑GAAP add‑backs (D&A, SBC, fair‑value changes, legal reserves) drove the swing to adjusted profitability.
• Management raised FY25 guidance: revenue to $425–$428M (from $400–$415M), exome/genome revenue growth to 53%–55% (from 48%–52%), and adjusted gross margin to 70%–71% (from 68%–71%); volume growth ≥30% and quarterly profitability reiterated.
• Execution drivers: exome/genome momentum (volumes +33% y/y to 25,702; mix up to 43%), improving reimbursement (avg collection >$3,800/test in Q3), and cost discipline, partially offset by a planned OpEx ramp to build general pediatrics and international go‑to‑market.
• Strategic catalysts: FDA Breakthrough Device Designation for ExomeDx/GenomeDx, expanding Medicaid coverage (36 states covering exome/genome outpatient with Medi‑Cal), NICU channel acceleration (Epic Aura integrations), and leadership in genomic newborn screening (NIH BEACONS, Florida Sunshine Genetics Network).
• Estimate context: S&P Global consensus for Q3/Q4 2025 EPS/revenue was not available at query time; thus, no beat/miss vs. Street can be cited for this quarter.*

What Went Well and What Went Wrong

What Went Well

• Volume and mix: Exome/genome test volumes grew 33% y/y to 25,702 with mix at 43% (up from 33% y/y), underpinning revenue growth and gross margin expansion.
• Margin and unit economics: Adjusted gross margin expanded to 74% (GAAP 72%); CFO cited average reimbursement “over $3,800” per test in Q3 (vs. ~$3,700 in Q2 and ~$3,100 a year ago), supported by coverage expansion and reduced denials.
• Strategic milestones: FDA Breakthrough Device Designation for ExomeDx/GenomeDx; leadership in gNBS via NIH BEACONS and Florida Sunshine Genetics Network; management emphasized a “new era of proactive, personalized care”.
  • CEO: “Based on our momentum exiting this quarter, we're raising our 2025 revenue guidance to $425 to $428 million.”

What Went Wrong

• GAAP profitability: Despite adjusted profitability, the company posted a GAAP net loss of $7.6M as non‑cash and non‑recurring items continued to weigh on reported earnings.
• OpEx ramp: Adjusted total OpEx rose to $71M (61% of revenue) as GeneDx invests ahead of expected volume inflection in general pediatrics and international, implying potential near‑term pressure on EBITDA/operating margins.
• Hereditary cancer wind‑down: The hereditary cancer line is being discontinued and expected to be near zero in Q4, removing ~$1–3M of quarterly revenue from the mix as focus shifts to exome/genome.

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the GeneDx third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star one-one on your telephone. You will then hear an automated message advising your hand is raised. To start a question, please press star one-one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Sabrina Dunbar. Best relations, please go ahead.

Sabrina Dunbar (Head of Investor Relations)

Thank you, operator, and thank you to everyone for joining us today. On the call, we have Katherine Stueland, President and Chief Executive Officer, Bryan Dechairo, Chief Operating Officer, and Kevin Feeley, Chief Financial Officer. Earlier today, GeneDx released financial results for the third quarter ended September 30, 2025. Before we begin, please take note of our cautionary statements. We may make forward-looking statements on today's call, including about our business plans, updated 2025 guidance, and outlook. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, October 28, and we are under no obligation to update. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results.

Please refer to our third quarter 2025 earnings release and slides available at ir.genedx.com for definitions and reconciliations of non-GAAP measures and additional information regarding our results, including a discussion of factors that could cause actual results to materially differ from forward-looking statements. With that, I'll turn the call over to Katherine.

Katherine Stueland (CEO and President)

Thank you, Sabrina, and good morning, everyone. The third quarter was another exceptional quarter for GeneDx. We continue to drive record growth while maintaining our commitment to profitability. For us, better patient care and profitability go hand in hand because our ambition is truly transformative to fundamentally alter how precision healthcare is delivered, making it more accessible, effective, and patient-centric. We envision a world where any genetic disorder is diagnosed quickly to prevent disease progression and ensure everyone has a chance to live a long and healthy life. Achieving that vision requires a fast-growing, disciplined, profitable business that delivers both life-changing answers for patients and long-term value for shareholders. Based on our momentum exiting this quarter, we're raising our 2025 revenue guidance to $425 to $428 million.

Our North Star, the goal that drives each and every one of us at GeneDx, is to diagnose disease earlier for as many families as possible. Our strategy to do so is to, one, drive high profitable growth, two, offer the best-in-class diagnostics products and experience for clinicians and patients globally, and three, build the network effects required to usher in the next era of precision medicine. Across all three focus areas, we are leveraging the power of GeneDx Infinity, the largest rare disease data set, to generate deep genomic insights that enable fast and reliable diagnoses and fuel the precision medicine revolution. Just last week, the FDA granted breakthrough device designation to our ExomeDx and GenomeDx tests, offering powerful validation that our industry-leading technology is the gold standard in transforming lives and shaping the future of health.

There are over 10,000 rare diseases impacting one in 10 Americans, most of them children, and it still takes an average of five years to reach an accurate diagnosis. Receiving an accurate genetic diagnosis is a pivotal milestone in a patient's journey that is often not planned. Today, 95% of rare diseases have no approved treatment. That is the largest provider of rare disease diagnoses in the world. GeneDx will be central in changing that. As we look toward the future, GeneDx isn't just a starting point for rare disease. We're the nexus connecting patients, biopharma health systems, payers, policymakers, and advocacy to unlock the full potential of genomic medicine. We recently announced two key executive hires: Lisa Gurry as Chief Business Officer and Dr. Mimi Lee as Chief Precision Medicine Officer, to unite our data diagnostics and partnerships so that clinical adoption, equitable access, and therapeutic advancements reinforce one another, creating a network effect. We are uniquely positioned to move our system from sick care to healthcare. Strengthened by the network effects, we will deliver on the promise of precision medicine for all. What fuels our business is growth and diagnostic testing at scale, and our strategy is twofold. We're deepening our penetration while widening the market, enabling us to serve more patients today while opening access for patients tomorrow. Our existing markets of geneticists and pediatric neurologists continue to deliver impressive growth, and we have ample room to run. With updated guidance from the American Academy of Pediatrics now in place, we can now shorten that multi-year diagnostic odyssey by meeting parents where they go first, their pediatrician.

Our commercial buildout is underway, and we expect to nearly double our sales force over the coming quarters with a dedicated GenPeak team. We're also leading medical education on updated guidance, expanding GeneDx's authority as the leader in genomics to this new cohort of clinicians, many of whom are learning about these changes for the first time from us. We're also investing in customer experience to drive utilization. The opportunity is significant, and we expect it will take 18 to 24 months from the June update before we see real adoption. Turning to the inpatient setting, the NICU remains underpenetrated and continues to be a focus, with less than 5% of NICU patients receiving any genetic testing today. We have eight Epic Aura integrations live and are on track to deliver at least 12 by the end of the year.

Our ultra-rapid genome continues to prove its value for critically ill infants, and as protocols evolve and whole system engagement increases, we're well-positioned to significantly scale testing in level three and level four NICUs over time. Our work to date has shown the value of testing symptomatic patients, but we know the next step forward is to enable proactive personalized care, beginning at the earliest moment possible. Our leadership in genomic newborn screening, from supporting pioneering research to enabling clinical adoption in Florida, reflects our mission to drive true longevity and highlights our unique ability to expand access to this technology at scale. Our work on the Guardian study generated foundational clinical data to support adoption, demonstrating an over 3% true positive rate for actionable conditions at birth. This quarter, we announced our role in two new pivotal initiatives: the NIH's Beacon Program and the Sunshine Genetics Network.

These programs are relying on GeneDx as a trusted advisor in newborn screening because we have the unique talent and experience to design programs that are clinically impactful, equitable, and scalable. Broad adoption of newborn screening will flip the system from reactive to proactive, advancing our mission and accelerating impact at population scale. At the same time, exome and genome testing can have significant utility later in life. Adult conditions represent another large untapped market where GeneDx is uniquely positioned to offer diagnoses for cardiovascular conditions, neurodegenerative diseases, and many others. As we grow our footprint domestically, we're also poised to address growing opportunities internationally. The Fabric Genomics platform offers us flexibility to serve global markets at scale, and we're excited to have boots on the ground in key ex-US regions to develop these markets.

We're proud to have built a business that delivers both purpose and profit to fuel reinvestment, and the strength of our model today is laying the foundation for an exciting future. With that, I'll pass it over to Kevin to share more about our results.

Kevin Feeley (CFO)

Good morning, everyone, and thanks for joining us today. We reported third quarter 2025 revenues of $116.7 million, a 52% increase year over year. That total includes $98.9 million in revenue from exome and genome, up 66% from the same quarter last year. In the third quarter, we reported 25,702 exome and genome tests. Growth there has accelerated from 24% year over year in the first quarter to 29% in the second quarter to now 33% in the third quarter. We expect volume growth on these tests to continue to accelerate in Q4 and offer high growth for the foreseeable future. For those new to our story, the business began by serving expert clinical geneticists 25 years ago, and now eight out of ten in the U.S. order their testing from GeneDx.

I mention that because it's been just over two years since we began calling on pediatric neurologists, and already a third of those physicians order from us. Over the next few years, we expect to pull volume from many more call points, the largest of which is the general pediatrician. Near-term growth should continue to be fueled by increased ordering patterns from existing accounts as they continue to convert from panels and activating more untapped pediatric neurologists. We'll also open up and penetrate additional pediatric and adult specialty call points and begin international market development. The NICU remains a compelling market for us, expected to ramp over the next several quarters and years.

Of course, all of that is supplemented by the long-term potential to establish a commercial newborn screening market and by our ability to put GeneDx's immediate work for biopharma and other healthcare partners in a way that contributes meaningfully to our revenue base. The average reimbursement rate for exome and genome was over $3,500 a test in the third quarter. That's up from approximately $3,700 last quarter and $3,100 a year ago. With a talented team in place, our cross-functional revenue cycle efforts are positively influencing Medicaid coverage expansion and fighting for fair adjudication. There's one big recent development to share in that regard. On November 1, the largest state Medicaid program, Medi-Cal, will begin covering whole genome testing for their members in California. We applaud their decision to become what is now the 36th state to cover exome and genome outpatient.

As I mentioned on our last call, when we begin to sell into new call points and for new indications, we inherently expect lower initial payment rates compared to our established channels like pNeuro and Geneticists. With this strategy to expand into new markets, some new volume may start out at lower collection rates, which in turn may have a modest impact on our average reimbursement rate in the coming quarters. That said, any impact should be transitory. To be clear, unit economics matter to us. Lessons from this industry's past are always top of mind when contemplating pricing and go-to-market strategies. Our view that rates will be durable and enable both high growth and attractive gross margins well into the future remains intact. Turning to gross margin, we expanded Total Company adjusted gross margin to 74%, driven by favorable mix shift, improved reimbursement, and lower COGS.

Bryan's team continues to innovate, and they have an impressive roadmap to further reduce COGS by leveraging automation and AI to optimize production. GeneDx has achieved an important economy of scale advantage, and we expect to hold on to that advantage well into the future. Adjusted total operating expenses were $71 million. That is up sequentially in terms of aggregate dollars, representing some variable costs growing with the revenue base, but primarily early investments we expect will drive volume growth mid-2026 and beyond. Total OpEx was 61% of revenue this quarter, and that's a number I'm quite comfortable with at this point. I want to underscore the spend here is deliberate, representing strategic investments into accelerating our long-term growth vectors. Specifically, we've begun to build the first phase of a dedicated GenPeak sales team. We've added the first two sales heads in new specialty markets and key international markets.

We're executing against our first-ever brand campaign. We ramp product and technology talent to design and build our next-gen customer experience for non-experts. R&D includes innovation to our genomics program and support for clinical and health economic research, as just some examples. The expense ramp reflects continued confidence in the ROI. They're all designed to drive volume in the future. That growth, in turn, accelerates a flywheel effect whereby our Infinity database expands, our competitive moat strengthens, we attract new customers, and economies of scale continue to improve. While these investments impact near-term operating margin, every dollar is meant to build high-quality, durable future revenues. Expect sequential growth in our operating expense for the next several quarters, all within a framework designed to achieve industry-leading growth rates while maintaining attractive gross margins. We have demonstrated the ability to drive operating leverage and EPS accretion.

With strong demand and an ever-expanding serviceable market, we'll be reinvesting back into the business to capture an exponentially larger future and build long-term value creation. The team here has the experience to understand our responsibility to be good stewards of investor capital. On the bottom line, we generated $14.7 million in adjusted net income and $0.51 of adjusted basic EPS in the third quarter of 2025. We're well capitalized with cash, cash equivalents, marketable securities, and restricted cash totaling $156 million as of September 30, 2025. Cash flow for the third quarter included $9 million in free cash flow generated and $12 million in ATM proceeds, net of fees from the issuance of 101,367 shares of common stock. Now an update on guidance before turning you over to Bryan. We're raising top-line total revenue guidance to between $425 million and $428 million for full year 2025.

Just as a reminder, in the third quarter, we discontinued our hereditary cancer offerings. That business generated $1.2 million in this third quarter of 2025 and $3.3 million in the same quarter last year. It will be near zero in the fourth quarter of this year. We're raising exome and genome revenue guidance to deliver between 53% and 55% growth for full year 2025, which is exome and genome revenues of $358 million to $361 million. As a reminder, when looking at the prior year comp, the fourth quarter of 2024 included a discrete benefit of $6.8 million we called out on our fourth quarter 2024 call. $5.8 million of that benefit was exome and genome. Excluding that, the full year growth rate is 57% to 60%. We again reaffirm our expectation to deliver at least 30% exome and genome volume growth for full year 2025.

As had always been expected, volume growth has accelerated throughout the year, and the guide implies a fourth quarter exit of at least 34%. We're raising expectation for full year 2025 adjusted gross margin to between 70% and 71%. We once again reaffirm our expectation to remain profitable. I'll now hand it over to Bryan, our Chief Operating Officer.

Bryan Dechairo (COO)

Thanks, Kevin. Good morning, everyone. When children need medical care, parents like myself want an accurate diagnosis as soon as possible. That's what we do every single day at GeneDx. We do it better than any other lab in the world because of GeneDx Infinity, the leading rare disease data set. Made up of more than 2.5 million rare genetic tests, including nearly 1 million exomes and genomes and over 7 million phenotypic data points, Infinity contains an unparalleled vast and structured reservoir of potential gene variants that cause rare conditions. We reported over 25,000 cases this quarter, and nearly 2/3 of those were parent-child trios capturing mom and dad as comparator samples. That means this quarter alone, we actually sequenced more than 55,000 individuals. The scale of the data is fundamental. It takes at least two children with the same gene variation to validate a diagnosis for both kids.

The greatest chance of finding another child with your child's variant is within GeneDx Infinity. Every patient enriches Infinity's data density, creating the flywheel effect and rapidly making it more difficult for competitors to catch up to our quality, speed, and accuracy across diverse populations. As we're accelerating, this year alone, we are projected to add 30% more rare disease exomes and genomes into Infinity than in the previous 24 years combined. Tapping into Infinity is our brilliant team of more than 100 MDs and PhDs and 150 genetic counselors who transform Infinity into clear, trusted answers that clinicians can act on with confidence. We are also applying AI-powered tools like our Multiscore gene ranker on top of GeneDx Infinity to harness the power of our data, scale our platform, and increase speed and turnaround time.

We already deliver answers in as soon as 48 hours in critical care settings like the NICU. By expanding AI across our systems, there's potential to turn our ultra-rapid turnaround time into standard of care in every setting. Infinity, our team, and our technology have helped us build a best-in-class genome, and we continue to raise the bar. We are constantly enriching our products with new genomic technologies, including medium and long-reach sequencing and adding multimodal analysis beyond DNA. Partners come to GeneDx looking to validate emerging technologies and pioneer modalities that will forever change how we diagnose disease. That's creating a virtuous cycle of innovation that not only future-proofs our product leadership but enhances our ability to serve more patients with speed, accuracy, and scale over time.

As showcased in the science we delivered at the ASHD conference, these programs generate data that compounds upon our massive library of more than 1,000 peer-reviewed publications, further exemplifying GeneDx's position at the forefront of genomic innovation. In parallel, we are radically simplifying genomics to enable broad adoption in everyday medicine. GeneDx is the number one genetic testing brand amongst pediatric providers, and we are evolving our customer experience to extend that lead. On average, general pediatricians have only 10 minutes with the patient, so we need to meet them where they are with one-minute ordering and best-in-class customer experience. Catalyzed by the American Academy of Pediatrics' clinical report in June, we are simplifying ordering and result interpretation for clinicians while enriching the patient and family experience. We are already field testing many of these customer experience innovations and are positioned for broader rollout in 2026 and beyond.

With that, I'll hand it back to Katherine.

Katherine Stueland (CEO and President)

Thank you so much, Bryan. We talk about being a fast-growth business in volumes because each one of those samples represents a family that is desperate for an accurate diagnosis. We act with urgency and purpose because those patients and families are counting on us. There are incredible opportunities ahead as we continue the broader paradigm shift already underway across healthcare, supported by GeneDx Infinity and strengthened by our network of partners. GeneDx is leading the shift to proactive personalized care that begins at birth, unlocking earlier diagnoses, faster breakthroughs, and healthier lives for all, and we're very proud of the work we do each and every day. Thank you. With that, I'd love to open up the line for your questions.

Operator (participant)

Thank you. As a reminder, if you would like to ask a question, please press star one-one on your telephone. You will then hear the automated message that says your hand is raised. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. Our first question for today will come from the line of Subhu Nambi of Guggenheim. Your line is open.

Subbu Nambi (Director of Equity Research Department)

Hey, guys. Thank you for taking my questions. With the emphasis at the AAP for clinicians to take a stepwise approach to ordering, beginning with chromosomal microarray, have you seen an uptick in volume there? If so, how does that change your strategy, if at all, to sunset some of these legacy products?

Katherine Stueland (CEO and President)

Absolutely. Thanks, Subhu. As I mentioned in the script, most pediatricians are hearing about the guidelines update for the first time from us. Whether it is at AAP or as we're starting to engage with pediatricians on education, they're hearing about it from us. I think that underscores the massive need for education and why it reaffirms our view that it'll take 18 to 24 months. Beyond education, it's also going to require workflow. I would say what we saw in the quarter was the vast majority of growth coming from our core, which is great, and no meaningful uptake in terms of orders from pediatricians, from CMA, and no notable changes on CMA or orders from general peds, but really good engagement. I would say that the research that we've done with pediatricians is affirming how important that opportunity is.

It's not if they're going to order an exome or a genome, it's how they're going to order it. Is it going to be through an improved ordering process that we're building that Bryan talked about? We think the one-minute ordering is an awesome improvement for us as we think about 2026. Doctors are consumers too, and they're used to fast, efficient ordering. Epic Aura integration is also going to be a great way. I would say that the feedback that we're getting from the engagement that we're having with pediatricians is really positive about the fact that they are going to order testing and want to order it from us. I think that FDA breakthrough device designation only further reinforces why they should order from us. Infinity database is another reason why they're going to order from us in terms of accuracy.

It's not if they're going to order, it's how, and we feel really confident it will be from GeneDx.

Subbu Nambi (Director of Equity Research Department)

Thank you for that, Katherine. Kevin, this one is for you. The guide implies ASPs to go down sequentially. Is that just conservatism, or are there any seasonal dynamics to call out? Even the margin guide implies COGS to increase sequentially. Any color you could provide? And then just to clean up, the true EPS for 3Q24, in this print, it says $2.2 million, but in the queue, it had said $6.3 million, if I remember it right. Just help us out here, please.

Kevin Feeley (CFO)

Yeah. By the way, in case I misspoke in my prepared remarks, the third quarter average reimbursement rate was over $3,800, representative of a lot of strength in the third quarter and continually reducing denials. Really pleased with that third quarter result over $3,800. The guide would imply that potentially the rate could bounce around some in the magnitude of about $100 down in the fourth quarter. That is really just part of that inherent expectation as we continue to open up new call points, target indication expansion. There may be some experience on the outset where rates are artificially lower to start, and we have to build up some experience and show that demand to payers. The guide builds in some conservatism in that regard, just to level set.

In terms of true EPS throughout the year, the third quarter, nothing to call out, very minimal impact in terms of out-of-period adjustments in the third quarter. That rate of over $3,800 is representative of what we think the third quarter activity will produce. Historically, we've averaged a couple million dollars of those true EPS each quarter, but nothing that I would call out as extraordinary or one-time.

Subbu Nambi (Director of Equity Research Department)

Kevin, it was a pretty good margin as well this quarter. Is there any reason for us to believe that it should not be sustainable?

Kevin Feeley (CFO)

Look, we raised the guide, again, in terms of gross margin. I just wanted to leave some room there should we see some of those reimbursement rates bounce around in the fourth quarter. It is a little bit of a function of raising the guide, but keeping a bit of a conservative stance.

Subbu Nambi (Director of Equity Research Department)

Perfect. Thank you so much, guys.

Operator (participant)

Thank you. One moment for the next question. Our next question will be coming from the line of Dan Brennan of TD Cowen. Your line is open.

Dan Brennan (Sellside Senior Equity Research Analyst)

Great. Thank you. Thanks for the questions. Maybe the first one, Kevin and Katherine, could you just speak to the NICU? I know you discussed, Katherine, in your prepared remarks, you guys are on track for the number of NICUs that are being enabled with EMR. Just kind of what did you see in Q3? How do we think about implicit in the volume guide for Q4, what the NICU contribution is, and any color on just kind of what some of the early action and kind of feedback has been?

Katherine Stueland (CEO and President)

Yeah. I'll start, and then we'll pass it over to Kevin. The NICU, as I said, remains a really important opportunity. It is shocking to people when you say fewer than 5% of babies in the NICU get a genetic test. We have the clinical data. We've got the health economic data. We have the calculator that can convince the CFO that this is going to be good for their business. Hospitals are running businesses as well. We have Epic Aura. We're continuing to see growth in that sector. In fact, it's a fast-growing part of our business. We're seeing meaningful growth in terms of same-store sales on the NICU side of things. We definitely see it as an important contributor to our overall goal of getting an earlier possible diagnosis.

What we're also learning is that some clinicians like our portal, and we're on track to continue to drive Epic Aura. We'll have at least 12 systems activated by the end of this year. We're seeing the full test menu being ordered, which is fantastic. We think Epic Aura continues to be a meaningful unlock for new clinicians who are working with us, and we're going to continue to drive utilization of Epic Aura at the health system level in order to impact both outpatient and inpatient.

Kevin Feeley (CFO)

Yeah. Through the third quarter and to date, volumes from the NICU are growing nicely. It's one of our fastest-growing channels, albeit from a much smaller pace, but percentage-wise, it's growing nicely. Throughout the year, we've been tracking, looking to bring in an incremental 2,000 units or so in the second half of the year, with most of those coming in the fourth quarter. We're going to run through the tape as much as we can through the fourth quarter. Whether or not we hit that number exact or not, more than confident that outpatient volumes will supplement and more than make up for that. I think most importantly, we're seeing growth. We're engaging with health system administrators, and our thesis that the NICU market is very compelling and part of our growth story in the years to come remains very much intact.

Dan Brennan (Sellside Senior Equity Research Analyst)

Maybe just on the quarter itself. The quarter came in better than expected. I know in past quarters, you've given some color about same-store sales growth, maybe some new indications. I know you discussed in the prepared remarks also, new doctors. Is there any way to frame kind of what's happening with their volumes and how that might inform the implied guide for the fourth quarter with those building blocks?

Kevin Feeley (CFO)

Yeah. The strength really driven by those core outpatient markets, continued nice step up from even that innermost core of expert geneticists. We are seeing strong signals of the continued evolution of those docs putting down single-gene tests and multi-gene panels in place of exome and genome. We'd expect that to continue for several more quarters or years to come. In terms of same-store sales rates at expert geneticists, continued to see nice uptake there. In pNeuros, good account activation. We're now at a point where just over a third of all pNeuros are ordering their exome and genome from us. Not all of those are mature yet in their ramp cycle, so good growth to come from docs we've already activated. What is more exciting to us in the coming quarters is just the green space to activate more docs there.

The messaging we have for how we can serve that cohort in particular is really resonating. The next couple of quarters, we'll continue to see growth rates pretty similar to what we just produced from pNeuro and geneticists. Of course, what we remain most excited about is activating even more call points in the coming quarters.

Dan Brennan (Sellside Senior Equity Research Analyst)

I heard you mention on the cost side, I'd love to get a little more color on kind of OpEx. I think you said the third quarter OpEx numbers are a good number. Maybe you can just elaborate a little bit on the OpEx spending from here. I think you said it's going to open up growth by mid-2026. Is that when we're expecting to see a bit of a, like some pediatrician volume show up? Maybe just clarify the OpEx outlook and kind of the pediatrician call point and the impact there. Thank you.

Kevin Feeley (CFO)

Yeah. We've begun to build out the commercial team that, of course, includes building a dedicated general pediatrician sales team. I think we remain anchored on that initial expectation we set of about 18 to 24 months from the time those AAP guidelines drop in June to when we would see sort of escape velocity on incoming volume. That said, we're engaging with the pediatrician community as we speak. We attended their conference in September, and all of that has validated our thesis that the market will be real and that there will be demand out there. We've got to build some of the tools in medical education. We'll, of course, be carrying some incremental commercial costs as we go through that education period. That's part of the step up there.

If we look at overall R&D spend, we continue to rev our genomic assays and technology to keep the best-in-class product in the field and build out that customer experience for non-experts, because we continue to see strong ROI opportunities and pulling through volume from even more position types out there. The level of step up from Q2 to Q3, you might expect something similar into the fourth quarter from Q3 to Q4, but fall within an eye towards keeping the business profitable. We've sort of maintained our commitment to keep the business in the black there so that we can continue to reinvest back into achieving industry-leading growth rates.

Dan Brennan (Sellside Senior Equity Research Analyst)

Great. Thank you.

Operator (participant)

Thank you. One moment for the next question. Our next question will be coming from the line of Mark Massaro of BTIG. Your line is open.

Mark Massaro (Managing Director and Life Science and Diagnostic Tools Analyst)

Hey, guys. Congrats on the strong quarter, and thanks for taking the questions. I wanted to start, you know, you guys indicated, if I heard correctly, that you plan to double the size of your sales force over the coming quarters. Just looking at your website, it looks like there's over 80 job openings and over 35 to 40 in general pediatrics. Can you just give us a sense for how quickly you plan to onboard these folks? I think you indicated that you've added the first few reps, but can you just give us a sense of how large of a team this might look like, say, maybe two years from now?

Katherine Stueland (CEO and President)

Sure. We have started hiring our Regional Sales Directors, the leaders who are coming in and who are starting to form their teams. Frankly, there's just really good talent available to us on the market right now, and we wanted to make sure that we're hiring the best of the best. I'm thrilled to see the talent that's coming in at that RSD level. We expect that as the Regional Sales Directors get assembled, we want to make sure that they are discerning and recruiting the best. I expect over the next several quarters, we'll get them up to, you know, in their seats and activated. Of course, it requires training and ensuring that they have their marching orders in the field. We've said about double the size of the sales force today, and we'll be opportunistic and continue to hire over the next several quarters.

Our goal is to accelerate that adoption framework. We said 18 to 24 months. We still think that that's accurate, but we're going to push to see if we can pull that in as much as we can. It all centers around that North Star of earliest possible diagnosis for as many families as possible. We're hiring. I think looking at two years from now, could we grow beyond that? Possibly, but we first need to see. I'd like to get this team assembled. I'd like to have them activated. We want to get the features up and running in terms of the workflow. We know it's going to require more education, more medical affairs education. We have a lot of work to do.

I wouldn't want to commit to building the team beyond what we've built or beyond what we're hiring for today because I think that's a really healthy investment in forward-leaning growth. Hopefully, that gives you a sense of how we're thinking about it.

Mark Massaro (Managing Director and Life Science and Diagnostic Tools Analyst)

Yep. That's great. I wanted to ask, congrats on all the progress on the newborn side, with the Florida Sunshine Genetics Network, the Beacon Program, NIH award, and the ongoing Guardian study. Recognizing this is, you know, a ways away in terms of, recognizing, I would say, perhaps clinical revenue. Can you give us a sense for whether or not you think that this could be, you know, more of a near-term driver as it relates to driving clinical adoption? I guess what I'm asking is, in 2026, like, first half of 2026, would you expect to drive any clinical testing in genetic newborn screening, or would this all be basically, you know, precursor work to create the evidence for this in the out years?

Katherine Stueland (CEO and President)

Yeah. Thank you for recognizing that we have been central to all of these studies. These have all been competitive processes, and we have put our best foot forward with each of them. I think the reason why we continue to be selected is because we've done more of this than anyone in the United States. Now with Fabric, it certainly extends our opportunity to be able to do it in a standardized way, regardless of if a baby is born in Los Angeles or London. Every child deserves results that are coming from the same dataset, which is Infinity. We think that we've got a massive opportunity to be able to really lead this new era of genomic medicine. Just to give you a little bit of color on each of these programs.

Obviously, with Guardian, it established, I think, a responsible, ethical foundation for why you can do newborn screening in a way that is going to be something that parents have demand for. 70% of parents enroll, and to be able to deliver clinically actionable information. More than 3% of babies had a clinically actionable finding. With Beacons, which is an NIH grant, that is looking at a federal approach to how do we operationalize it, we're going to be gaining more and more information on how to do this in a more standardized way across multiple states. There is inherent goodness, I think, in that. Of course, Sunshine really takes it out of a research setting and into the clinic.

Each one of those is playing an important role in how we get to a place where we can drive clinical samples and start getting paid for them, which is ultimately what we want to accelerate. I would say the one piece that we have yet to deliver on, but that we are working on with the various groups that are overseeing the steering committees of these programs, is the health economics. We think that's going to be a critically important part of how we can actually start getting paid for it. As we talk to state Medicaid, we're talking about outpatient health economics, we're talking about inpatient health economics, and we're talking about newborn screening and why they need to start paying attention to it.

I think Florida gives us the first opportunity to say that there is a state that has a progressive approach to genomics and child health. We want to continue to drive kind of the competition across these other states in order to start getting paid for it. We don't anticipate that that's going to be a '26 driver in terms of revenue, but we'd like to see how we can continue to accelerate some of these policies to get paid as soon as possible.

Kevin Feeley (CFO)

I think that's the base plan mark, not counting on anything material in 2026, and we'll have further updates throughout 2026 on what that means to 2027 and beyond. Certainly, the momentum would say that, beginning in 2027 and beyond, we may start to see some nice contribution there.

Mark Massaro (Managing Director and Life Science and Diagnostic Tools Analyst)

Okay. Fantastic. If I can ask one more, I am curious about the FDA path. Nice to see breakthrough device designation come in from the agency. Can you give us a sense for timing here? Are you expecting to have to run any more clinical trial work or samples to prove the evidence to obtain the approval? I recognize that some clinicians sort of like the stamp of approval from the agency, but there could potentially be pricing or ADLT implications here. Can you just maybe walk us through the rationale to pursue FDA approval?

Katherine Stueland (CEO and President)

Sure. I'll kick it off, and then I'll hand over to Bryan, who's been leading the charge here. Part of the rationale is as we think about the future market, I think a couple of things. One, your point about, yes, clinicians do respond to FDA, and FDA-approved, FDA-authorized, and see it as a sign of validation. Pediatricians who are really busy looking at everything under the sun, we know that they also respond to FDA-approved, FDA-authorized. We think that there's a really important message to be delivered to accelerate that market. I think part of what's interesting, and this is different than in the oncology space, as we think about the importance of FDA, in rare diseases, we're trying to open up access and open up more diagnoses, not limit them. We don't see a real restriction coming through this designation.

I'll let Bryan comment some more on what the next steps are and how the path will look moving forward.

Bryan Dechairo (COO)

Thanks, Katherine. Hey, Mark. The breakthrough designation is really important because what it actually shows and signals is that our test is unique. The power of our Infinity database is also unique, and it shows that what we're doing today is actually helping critical patients make decisions that there's nothing else out there to help them with today. That's what breakthrough designation says from the FDA's recognition. It also is letting us know that FDA is working side by side with us in an accelerated regulatory framework to get this critical technology through the agency and to as many people around the U.S. and globally because FDA is also recognized by many markets around the U.S. as we expand ex-U.S. as well. The nice thing I would also say is not only expedited regulatory review, we are also working by the fact that we've been around for 25 years.

Our process, our test is not changing, and what we're doing is we're working with FDA to understand our legacy data and all the power of our database and how it informs the accuracy that we've already been bringing to patients. It's not a new test. It's a test that we've done for many years that we lead in that place. I wouldn't look at this at all as limiting access or limiting reimbursement or limiting the actual diseases that we're answering today. It will just be a partnership to accelerate the regulatory review and give that stamp of FDA approval that pediatricians look for in their medications. They look for that in their diagnostic tests as well.

Mark Massaro (Managing Director and Life Science and Diagnostic Tools Analyst)

That sounds great. Thanks so much, guys.

Operator (participant)

Thank you. One moment for the next question. Our next question is coming from the line of Tycho Peterson of Jefferies. Your line is open.

Tycho Peterson (Managing Director and Research Analyst)

Hey, thanks. I want to go back to the OpEx questions. I know you've had a few already. Appreciate the color on the sales hires. I guess, Kevin, maybe help us think about the ROI on some of the buckets that you flagged. I'd love to hear a little bit more color beyond the sales hires. You talked about the first brand campaign, international product and technology investments. Maybe could you bucket those for us, how meaningful they are?

Kevin Feeley (CFO)

Yeah, in many ways, it's like choosing between your children. They're all really important to create a bit of the virtuous cycle to make us more attractive and more sticky with more and more physician types out there. The commercial expansion should be viewed as our competence in the long-term market, well beyond the existing physician types that we have today. We have about three call points today, or at least primarily, pneumono-geneticists and then the NICU. You can see that expanding well beyond a dozen towards 20 over time as you slice different physician types. The largest is the general pediatrician. There's 60,000 pediatricians in the U.S. There's about 25,000 of those who are ordering diagnostic tests for developmental intellectual delay, which is covered by the umbrella of those AAP guidelines.

That's a lot of doors to knock on, and we intend to do so, bringing the best available experience to those non-experts. As Bryan talked about, those are really busy physicians without a lot of face time. It's important that we build the experience both on the front end to honor their time, but also on the back end to make them feel comfort in providing what oftentimes is a devastating diagnosis to families. GeneDx is one of the largest employers of geneticists and genetic counselors in the country, if not the world. Part of the long-term roadmap is to force-multiply those resources with technology so that non-experts are comfortable in providing care to patients on the back end of a diagnostic result. All of those, we think, are important to capture a leading market share.

Today, we hold about an 80% market share of all clinical exome and genome run in the United States. Whether we hold 80% or give up a few hundred basis points here or there over the next decade, we'll see. We intend to hold a majority market share in much larger markets to come. We think now is the time to make some of those investments.

Katherine Stueland (CEO and President)

The only thing I would add, Tycho, two things. One, whenever we're putting a sales rep out there, we first are following the patients, and we're also following reimbursement. We're not going to put a rep in a territory, whether it's in the U.S. or in a region outside the U.S., unless there's ample patients for us to help and a healthy path to reimbursement. Those have been our core principles that, I think, are unique to GeneDx's business model that we're committed to. Second, on the brand campaign, we are continuing to drive awareness of GeneDx because part of the problem is geneticists have known GeneDx. 8 out of 10 geneticists know us.

We need to continue to raise awareness amongst general clinicians as well as parents, so parents know to ask for the testing, that the technology exists today, it's paid for today by insurance companies, and that we can get them an answer in a short period of time. We've got a strong effort there that is only being amplified by the addition of Lisa Gerrey, who was at Microsoft running marketing across different business units, amongst other roles for about 25 years, and she was at Truvada as well. She's going to help us also really amplify how we communicate the message, both to clinicians and to patients as well.

Tycho Peterson (Managing Director and Research Analyst)

Okay. Maybe a follow-up along those lines. I guess CapEx is also up 3X over the last year, I guess. Kevin, anything to flag there? Is that the core Maryland facility? Is it Fabric Genomics? How should we think about CapEx here?

Kevin Feeley (CFO)

It's primarily all pulling forward some additional sequencers, as we scale. Obviously, the business, we think, has achieved great economies of scale such that we're able to exponentially grow volumes without matching, adding resources one for one. As we grow, we're going to have to add more to the sequencer line. What you see in the third quarter, by and large, is really just some sequencer technology to keep pace with the volume. The facility itself has plenty of room in it, and yes, we're still operating the one core laboratory down in Gaithersburg, Maryland. Very little from the Fabric side.

Tycho Peterson (Managing Director and Research Analyst)

Okay. Maybe just shifting to denial rates, can you give us a sense of where you ended the quarter? I understand your ASP commentary for the fourth quarter, but how are you thinking about denial rates and how much leverage you will have, maybe first half of 2026?

Kevin Feeley (CFO)

It's mid to high 50% collection rates. Picked up a nice basis point or two on that, with the rates in the $3,800s. Really pleased with the progress of the team. I think what's most exciting is if you look at that Medicaid population in the 36 or 35 states up until next week, the 35 states with coverage outpatient. We're seeing a really high payment rate of about 80% fairly consistently. Pretty clear rules to follow, and not some of the non-medical denials that we see over at the commercial insurers. The aggregate rate has picked up some towards the high 50s in terms of collection rate.

Tycho Peterson (Managing Director and Research Analyst)

Okay. Last point, Katherine, can we get an update on how some of the earlier launches this year have tracked, cerebral palsy, IEI, etc.?

Katherine Stueland (CEO and President)

Yeah. I think as we have continued to roll out additional new indications, and again, there's 10,000 more diseases, we're just going to be routinely cranking out new indications over time. I think that's part of the reason why we're seeing the strong growth. It's contributing. A lot of the symptoms are overlapping. You might have a rep who's talking about symptoms associated with epilepsy, and it turns out it's cerebral palsy. You might have a rep going in talking about cerebral palsy, and it turns out that it's epilepsy. Some of these, there are dual diagnoses. The new indications are certainly contributing to our growth. I think it just speaks to the vast underutilization of testing for so many of these kids. We'll continue to have kind of rolling indications launched. This is a core part of the way that we operate the business.

Tycho Peterson (Managing Director and Research Analyst)

Okay. Thanks.

Katherine Stueland (CEO and President)

Thank you.

Operator (participant)

Thank you. One moment for the next question. Our next question will be coming from the line of David Westenberg of Piper Sandler. Your line is open.

David Westenberg (Senior Research Analyst and Managing Director)

Hi. Thanks for taking the question and apologize if I asked something. I've been jumping between calls. Can you give us a sense for the incremental revenue opportunity with the expansion of Medi-Cal and what the strategy is for securing the remaining 14 states? How should we think about timing there? I'll just have one more. Thank you.

Kevin Feeley (CFO)

Yeah. Look, with California being the most densely populated state, certainly a nice win. The probably next largest to come would be Massachusetts. Really exciting to see California come online next week in a couple of days. Today, a couple of thousand tests that would have run through as zeros that now we might expect to get paid for. Obviously, we have to build up some history and experience to see that. Of course, with coverage now, a more focused effort to calibrate and pull more volumes through the state. Excited about a larger opportunity ahead beyond the existing volume that we have. Then the second part of your question, Dave.

Katherine Stueland (CEO and President)

Strategy is for other states to come online for Medi-Cal. We've got a fantastic market access team that we only continue to bolster. We now have an East and West Government Affairs leader, and they're continuing to put good data, great guidelines, health economics data in front of these state-by-state Medicaid officers. We work with local clinicians and local parent advocates. I would say it's a well-oiled machine, but it's within their control, not ours. We're just going to play the playbook. We know they respond well, particularly to the health economic data. The reality is we are paying for these children, and the absence of accurate diagnosis, one way or another, using our testing upfront, is an opportunity to get to the right diagnosis sooner and save all of these payers sooner. That message is resonating.

We'll continue to drive that until we have every single state with inpatient and outpatient. As I said earlier, then we move on to newborn screening. We've got our work cut out for us, but a very optimistic path ahead.

David Westenberg (Senior Research Analyst and Managing Director)

Sounds great. I just have to ask one longer-term question, and that is about pricing in the longer term. Now, a lot of times you're billing for codes of exome and genome. Not all exomes and genomes are the same, and there's a constant need to integrate things like methylation, long reads, it's skillful informatics. Do you think that payers understand that constant innovation is necessary to enhance diagnostic yields and you're able to retain pricing over the long term? Consequently to that, when you're thinking about new competitors coming in, do you feel like the constant need for improving the test does maintain pricing long term because you will be constantly needing to enhance the assays? Thank you.

Katherine Stueland (CEO and President)

Thank you, Dave. I asked Bryan and Kevin to tag team this because I think it speaks to, one, what we're doing today beyond short read, but also why Infinity and that dataset set us apart from others. Yeah.

Bryan Dechairo (COO)

Thanks, Katherine. On the technology front, it's really our job to continue to innovate and fund that innovation to bring the best answers to patients every day. We already have seen that with the indication expansions as we move more and more people off of panels and into genome and exome, which is what's driving the growth that we've been seeing and will continue to drive a lot of that growth. That takes new technologies, technologies around medium and long reach sequencing, multimodal technologies that we discussed. What's great is at the scale of our operations that we continue to scale, we are actually able to be driving down costs of goods as we bring in more and more innovations. You're not seeing an increase in COGS as the innovations roll out into production. You're actually seeing COGS continue to come down, with those innovations with higher diagnostic yield.

Really, only GeneDx with our scale can deliver that quality.

David Westenberg (Senior Research Analyst and Managing Director)

Kevin, I can't hear anything.

Bryan Dechairo (COO)

Sorry, can you hear anything? I'll hand it over to Kevin to talk about some of the reimbursement.

Kevin Feeley (CFO)

Yeah. Let's assume that's an issue with Dave's technology. To follow up with Bryan's comments, look, it's upon us to prove the value proposition of all of our services to payers. We're hard at work doing so. We've always viewed the long-term durability of our rates at that average reimbursement or cash collection rate. Potentially, over time, you might see the billable rate come down. We're still facing a dynamic today where we just produced $3,800 in tests despite having a denial rate in the mid-40%. We absolutely think that we can improve upon that in a meaningful way. We continue to believe that the average collection rate will be at or higher than today's levels for the foreseeable future.

David Westenberg (Senior Research Analyst and Managing Director)

John, are you there?

Kevin Feeley (CFO)

Over time.

David Westenberg (Senior Research Analyst and Managing Director)

You took up the WGS call.

Kevin Feeley (CFO)

Yeah.

Katherine Stueland (CEO and President)

I think we can move on to the next one.

Kevin Feeley (CFO)

Yeah, maybe we'll move on to the next one, operator.

Operator (participant)

Thank you. The next question will be coming from the line of Bill Bonello of Craig Kellogg. Your line is open.

Bill Bonello (Senior Research Analyst)

I was kind of interested in hearing where David was going to go with that conversation.

Katherine Stueland (CEO and President)

Bill, you hit the riff on that.

Bill Bonello (Senior Research Analyst)

Virtually everything interesting and not interesting has already been asked. I just want to clarify one thing on the margin front. With the incremental investments that you obviously need to make to drive growth and drive these new opportunities, is the thinking right now that you would at least try and sort of maintain the level of EBITDA margin where you are at, or should we think about this more as, in the interim, we may see EBITDA margin drop down a little bit as you set up for a future where it could be significantly better?

Kevin Feeley (CFO)

Certainly, all within the framework and design of a future where it's significantly better. We're entering an investment cycle here. Not every quarter will be different, and we'll have more to say about 2026 at our Q4 call. Look, may see that EBITDA margin come down some in some of these quarters as we ramp up investments, and then wait to see those investments mature in terms of top-line contribution. Read through the commitment as keeping it in the black and positive, but not necessarily at these levels. Certainly, we think the business model has proven the ability to accrete EPS upwards, and there'll be a time and place when we focus back on doing that. For now, there's such a large opportunity ahead. We think it's important we make some of these investments to take advantage of that.

Bill Bonello (Senior Research Analyst)

Okay. That's helpful. The second thing, as I talk to people, there always seems to be some skepticism about the 18 to 24 months, and to avoid the possibility that people get sort of overly exuberant here, can you maybe just talk through in a little bit more detail some of the steps that need to be completed before you can really see a meaningful ramp in the general pediatrician market? You talked about the sales force obviously has to be recruited and trained, but you also mentioned some things that you want to do with the ordering platform and the results delivery platform. Maybe you can tell us a little bit more about that and just some of the other basic nuts and bolts kind of work that is required to expand into a totally new segment of the market.

Katherine Stueland (CEO and President)

Thank you for that, Bill. Education is key. As I said, most of these pediatricians are learning about the guidelines update from us. We need to make it relevant for them. They're seeing a whole host of symptoms and issues coming into their clinic, and we have to do a lot to dispel some of the myths related to genomics. They think that it's going to take a long time, it's going to be confusing to understand, it's going to be hard to order, that a geneticist should be the one ordering it. When we come in and we explain to them that it is covered by insurance, we can turn around their sample within a few weeks, and we're going to provide a simplified report, it changes the way that they're thinking about things.

I would say education is key to kind of setting the record straight about what we can and cannot do. Also, educating them, there's still a, you know, there can be 12 to 24 months to get in to see a geneticist. They may say that they would like to send a patient to a geneticist, but if you say, "Well, if that delays a diagnosis by 12 to 24 months," then they don't want to see that happen. They want to activate in that moment. We're getting a lot of good market research feedback that affirms the need to continue to educate. Education is one. Coming out of that too, yes, we talked about workflow. Their time is precious, and how do we take our ordering platform today and bring it to what Bryan said was a one-minute ordering approach?

We're building that capability as well as other ways to ensure that we can unburden the pediatrician from some of the administrative work that they may have to do. Workflow is another key investment. Market access and ensuring that our market access team is delivering exactly with these updated guidelines is going to be critically important. They've started doing that. That's the third piece. Then, fourth is the sales rep, and the sales rep going in and doing a lot of the kind of hand-in-hand combat in terms of education. That's part of the reason why we're investing now. We would love to see an acceleration of that 18 to 24 months, but we know that there's a lot of work that we have to deliver on to educate and to smooth things out and make it easier for these clinicians to order.

Kevin Feeley (CFO)

Yeah. Look, if the skepticism is that we'll beat the timeframe we set. I guess I could characterize that as a high-quality problem. Will it be more than zero in 2026? It'll be more than zero in 2026 for general pediatricians, but we want to make sure we're approaching the market in a responsible way that really sets the stage for the company's growth over the next half a decade to decade. You only get one good first impression, and we intend to make that.

Bill Bonello (Senior Research Analyst)

Yep, that makes a ton of sense. One last question just along that line, and you just may not care to answer this at this point, but in some of the areas where we've been seeing companies reach out to primary care physician markets, which obviously are a lot larger, but not a ton different conceptually than reaching out to the pediatric market, we've seen companies with specialized tests partner with some of the larger lab companies with broad menus to make ordering of testing a little bit easier, even results delivery a little bit easier. Is that something you would consider?

Katherine Stueland (CEO and President)

You know, I. Look, we're always thinking about new channels and ways to help more patients. I wouldn't say no, we would not consider that if there's an opportunity for us to drive our business forward, help more families. Certainly, in our experience, we haven't seen that work because it tends to not be the highest priority on the part of the partner, but certainly, we would be open to it. For now, our plan is to make sure that we can drive as much of the business forward as we can in service of more patients. We're placing a bet on what we know works, which is our team.

Bryan Dechairo (COO)

Yeah, perfect. We've been around for 25 years, and pediatricians have seen their patients who they stay with for 18 years. These kids come back to them with our reports. When we did market research to look at what was the brand that they thought of when it came to genetics, GeneDx was the number one brand over all other testing companies, even the ones that they use every day for other tests. I think with that recognition and with the understanding that our test is number one in this space, it makes sense for us to continue with the models that we're exploring.

Bill Bonello (Senior Research Analyst)

Yep, makes a ton of sense. All right, thank you very much.

Katherine Stueland (CEO and President)

Thanks, Bill.

Operator (participant)

Thank you. One moment for the next question. The next question will be coming from the line of Kyle Mikeson of Canaccord. Your line is open.

Kyle Mikson (Managing Director and Senior Equity Research Analyst)

Hey, guys. Thanks for the questions. Congrats on the quarter. Kevin, on the Medi-Cal impact, California is obviously large, it's densely populated, as you said. How significant of an ASP and a gross margin headwind is that going to be, and how long will that dynamic take to stabilize and then approach the higher kind of core ASP and gross margin?

Kevin Feeley (CFO)

Yeah, look, we're excited. The Medi-Cal news, of course, will further bolster the reimbursement environment here. It's certainly a positive, so consider it a tailwind. Those are tests, at least the existing volume or tests that we're running and taking zeros on today. Starting next week, we'd expect to get paid for that volume. The couple thousand tests, I think, would understate the long-term opportunity with now Medicaid coverage in hand. It's certainly a nice talking point for our commercial team to get out there, spread that word, and begin to pull in even more volumes. You know we're serving all 50 states, but at various levels. In those states where there's good reimbursement coverage, that's where we tend to amplify sales resources to pull in more volume, and we certainly plan on doing so moving forward.

Kyle Mikson (Managing Director and Senior Equity Research Analyst)

Just to clarify, so payment collection rate would go from 0 to like 80% overnight, you're kind of saying, in that state?

Kevin Feeley (CFO)

Still waiting on the ultimate price from the Medicaid administrator, but we expect it to be in line with other states that have gone live with coverage.

Kyle Mikson (Managing Director and Senior Equity Research Analyst)

Okay, sounds good. Katherine, on the longer terms, kind of the data business, Infinity database, AI and Multiscore gene ranker, you know you're kind of emphasizing that recently. Could you just contextualize the competitive moat that provides and what the future kind of holds there? I think follow up to Dave's question, how critical is the longer range sequencing data going to be to advance that asset, specifically the medium range kind of sequencing from Roche or longer read with PacBio, etc.? Thanks.

Bryan Dechairo (COO)

Let me take that in two parts. First is the Infinity database that you were just mentioning. As I mentioned in my earlier comment, the power of that database is the fact that it's a massive reservoir of variants that we have seen in patients that have yet to be validated by a second patient. Every day, with the volume that we're having, we're validating more and more and growing that database over time. The AI tools that we put on top are machine learning, Multiscore. It really just improves the accuracy, the speed, and the efficiency that our clinical experts can go through and find those diagnoses. It gives us the highest accuracy in that space.

As you're also mentioning, those same AI tools become value add to our partners like pharma, employers, and others as they go out and look at the Infinity database, look at the data that it sees, and really start to actually open up the ability to have more and more drug targets, more therapies, and bring more solutions to these children with these devastating diagnoses over time. We really see that this AI approach is expanding into our pharma and our other partnerships around the globe. As far as our technology, you know the genome needs has some gaps in it. There are some difficult-to-sequence regions that we know about, which is why there are still some panels that people will order.

Every time that we bring in a medium read or a long read or other type of technologies, it really starts to improve the diagnostic yield for some of these other conditions, which again converts more and more folks off of panels and into the excellent genome as the best answer for all patients. We are continuing to add more and more of these technologies for the right patients with the right phenotype.

Kyle Mikson (Managing Director and Senior Equity Research Analyst)

All right. Thanks, Bryan. Thanks, guys.

Operator (participant)

Thank you. One moment for the next question. The next question is coming from the line of Keith Hilton of Freedom Capital Markets. Your line is open.

Keith Hinton (Director and Equity Research Analyst)

Great. Thanks so much for taking the question. Just two quick ones. First one on the XGen volumes. Just based on the volume split for the second half of 2025 that you talked about on the second quarter call, it seems like volume in the quarter slightly exceeded your internal expectations. Can you talk a little bit about where you outperformed versus your internal expectations and maybe why you decided to leave the full-year guide unchanged despite the beat?

Kevin Feeley (CFO)

Yeah, we saw good momentum through the third quarter with accelerating volumes each month of the quarter, and wrapped up September sort of as expected with the high points of the quarter. Momentum has continued nicely. The outperformance mostly coming in, or primarily coming in, the outpatient side of the business, really farming that P neuro call point. Most of the outperformance there coming from that physician type. We continue to see a lot of space to go activate more P neuros and bring in more volume. Overall, really pleased with the third quarter performance.

Keith Hinton (Director and Equity Research Analyst)

Okay, great. Just one more question about the launch in general pediatricians, less so about the sales force and more talking about any kind of build-up you need to do on the back end in terms of adding additional billing and revenue cycle folks to make sure the ASP doesn't drop too much, DTC spend aimed at parents, anything like that. Can you talk through how we should be thinking about the magnitude there? Also, is there any concern that there could be a bottleneck around genetic counseling for those patients that do have variants that come back that they need to better understand?

Kevin Feeley (CFO)

Yeah, part of those investments, as you rightly pointed out, are to ensure that there is no bottleneck in terms of genetic counseling resources or other support for non-experts both at the front end or back end of the process in translating those results to patients. Those are core to the experience design changes that we'll be investing in. If you look at the expense ramp from Q2 to Q3, as I called out, from Q3 to Q4, expect something in the same order of magnitude. We'll have more to say as we frame out 2026. Again, would expect that there's ample gross margin to cover those reinvestments back in the business such that we'll keep the business profitable on an adjusted basis.

Keith Hinton (Director and Equity Research Analyst)

Okay, great. Thanks so much.

Operator (participant)

Thank you. This does conclude today's Q&A session. I would now like to turn the call back over to Katherine Stueland for closing remarks. Please go ahead.

Katherine Stueland (CEO and President)

On behalf of all the families who we serve, our customers, and all of the employees at GeneDx, I just want to say thank you to our shareholders for continuing to support our long-term growth and changing healthcare for the better. Thank you all, and we look forward to seeing you soon over the coming days and weeks. Take care.

Operator (participant)

Thank you. This does conclude today's program. Thank you all for joining. You may now disconnect.