GeneDx (WGS) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics - Q1 2023 revenue was $40.7 million, up from$ 38 million in Q1 2022, driven by a 22% growth in whole exome sequencing revenue [30] - Total test volumes increased by 8% sequentially and 29% year-over-year [30] - Adjusted gross margin for whole exome sequencing was approximately 60%, contributing to 17% of total volume in Q1 2023 [32] - Cash burn improved by 31% year-over-year to approximately $59 million in Q1 2023, with expectations of further reductions in subsequent quarters [35] - Total company adjusted net loss in Q1 2023 was$ 48.8 million, a 34% improvement compared to Q4 2022 [63] Business Line Data and Key Metrics - Whole exome and genome testing delivered $22.4 million in revenue, representing a 22% increase year-over-year in Q1 2023 [51] - Orders among neurologists and pediatric specialists were significantly higher compared to the previous year [24] - The company expanded sales territories from 58 to 66 across the United States and added cross-functional support teams to drive growth [24] - Non-exome tests, which serve as stepping stones to exome sequencing, saw increased volumes but carry lower average reimbursement rates and gross margins [60] Market Data and Key Metrics - The company expects to see margin expansion throughout 2023, with gross margins reaching the mid-40s by year-end [42] - Whole exome and genome testing is expected to become increasingly standard of care, particularly for cardiovascular and neurodegenerative diseases, allowing expansion into the adult population [50] - North Carolina Medicaid added coverage for exome sequencing, becoming the 28th state to do so, reflecting favorable payer trends [56] Company Strategy and Industry Competition - The company is focused on converting physicians to exome testing, leveraging non-exome tests as stepping stones [52] - Marketing efforts include conferences, publications, and brand awareness campaigns to educate clinicians and drive adoption [53] - Automation and AI are being implemented to improve turnaround times, reduce COGS, and expand gross margins [55] - Partnerships with biopharma companies are being pursued to leverage clinical and genomic data assets for drug discovery and development [28] Management Commentary on Operating Environment and Future Outlook - Management expects sequential improvements in cash burn, with Q4 2023 burn projected to be around$ 20 million [4] - The company reaffirmed its 2023 revenue guidance of $205 million to$ 220 million and expects to reach profitability by 2025 [37] - Management highlighted the growing market for genetic testing, with increased adoption by patients and physicians [14] - The company is optimistic about the favorable clinical and health-economic benefits of exome and genome sequencing, supported by medical societies and payers [27] Other Important Information - The company completed a reverse stock split at a 1 to 33 ratio, with all share-related figures retroactively adjusted [66] - In April 2023, the company issued an additional 1,378,328 shares as milestone payments related to the GeneDx acquisition [38] - The company signed data agreements with five companies focused on rare diseases or neurological disorders, leveraging its Centrella platform [57] Q&A Session Summary Question: Reconciliation of volume growth with revenue decline in single and multi-gene tests - The decline in revenue despite volume growth is attributed to lower realized ASPs, which are expected to improve as the year progresses [1][41] - Non-exome tests are seen as stepping stones to exome testing, with the sales team incentivized to drive this conversion [1][73] Question: Gross margin drivers and expectations for 2023 - Gross margins are expected to improve sequentially, driven by mix shift towards higher-margin tests, better reimbursement, and lab efficiencies [70][75] - The company aims to achieve mid-40s gross margins by year-end, up from 41% in Q4 2022 [42] Question: Cash burn and restructuring costs - A substantial portion of Q1 2023 cash burn was tied to restructuring, with remaining payments expected to wind down by Q2 2024 [4][76] - The company is focused on reducing G&A expenses and improving operational efficiency to further lower cash burn [4][76]