Personalis(US:PSNL)2022-11-03 02:49Financial Data and Key Metrics Changes - Total company revenue for Q3 2022 was $14.9 million, a decrease of 33% compared to the same period last year, primarily due to a $13.7 million decline in VA MVP revenue [29] - Oncology business revenue increased by 73% year-over-year, driven mainly by volume increases from Natera, which accounted for half of the oncology revenue in the quarter [29] - Gross margin was 16.7% for Q3 2022, down from 36.2% in the same period last year, primarily due to under absorbed overhead costs from decreased VA MVP revenue and increased expenses to support growing oncology revenue [30] - Net loss for Q3 was $26.5 million, compared to a net loss of $17.7 million for the same period last year, with a net loss per share of $0.58 [33] Business Line Data and Key Metrics Changes - All revenue in Q3 2022 came from the oncology business, which saw a significant increase in revenue [29] - The company recognized approximately $1.5 million from an exome-scale liquid biopsy project for a leading global pharmaceutical company [23] Market Data and Key Metrics Changes - The company has seen growing interest in its NeXT Personal platform from pharmaceutical companies in the U.S., Europe, and China, with two pharma placing orders over $1 million each [19] - The Veterans Administration Million Veterans Program (VA MVP) has begun to enroll veterans again, with a goal of reaching 1 million enrollees in 2023 [24] Company Strategy and Development Direction - The centerpiece of the company's oncology business is the NeXT Personal MRD test, which aims to provide highly sensitive and informative cancer monitoring [6] - The company plans to launch its MRD test as a lab-developed test (LDT) in 2023 and has been building a commercial team to support this initiative [20] - The company is focused on personalized diagnostics, integrating tumor characterization capabilities into its MRD test to provide actionable insights for oncologists [12] Management's Comments on Operating Environment and Future Outlook - Management noted a slowdown in biopharma demand due to budget concerns and macroeconomic conditions, particularly affecting smaller biotechs [40] - The company anticipates that the current challenging environment may continue into early 2023, but remains optimistic about the long-term need for cancer solutions [40] - Management expects gross margins to improve in the long term as oncology revenue scales up [31] Other Important Information - The company has a strong balance sheet with cash and short-term investments of $192.8 million, providing more than two years of cash runway [34] - The company has initiated a brand evolution to align with its strategy of creating highly personalized cancer diagnostic tests [22] Q&A Session Summary Question: Concerns about tightening budgets among large pharma customers - Management acknowledged a slowdown in biopharma demand due to budget concerns, particularly affecting smaller biotechs, and anticipates this trend may continue into early 2023 [40] Question: Impact of staffing shortages on sample shipments - Management confirmed that sample shipments are slower due to staffing shortages affecting patient enrollments and sample collections [44] Question: Implications of FDA requests for additional clinical data on MRD efforts - Management believes their test's performance and data from extensive collaborations will position them favorably compared to competitors facing similar FDA scrutiny [46] Question: Timing and strategy for refreshing sequencing infrastructure - Management indicated that new sequencing technologies could significantly reduce costs, with expectations for improvements in gross margins beginning in early 2024 [50] Question: Revenue expectations from the new Shanghai facility - Management does not anticipate revenue from the Shanghai facility in 2022, with expectations for moderate revenue in 2023 [59] Question: Factors driving gross margin changes - Management attributed the decline in gross margin primarily to decreased VA MVP volume, with expectations for recovery as the program resumes [68] Question: Cash burn expectations for 2023 - Management expects operating cash burn to be below $85 million in 2023, with significant expenditures related to the new facility accounted for in 2022 [78]