Personalis, Inc. Price & Performance (PSNL)

We encourage you to review our most recent filings with the SEC including the risk factors described in our most recent filings. FirstNL's undertakes no obligation to update these statements except as required by applicable law. Our press release with our fourth quarter and full year 2024 results is available on our website www.personnel.com under the Investors section and includes additional details about our financial results. Our website also has the latest SEC filings, which we encourage you to review. A recording of today's call will be available on our website by five p. M. Pacific Time today. Now I'd like to turn the call over to Chris for his comments on fourth quarter business highlights. Thank you, Caroline.

Good afternoon, everyone.

And thank you for joining us for our fourth quarter and full year 2024 call.

For those of you joining for the first time, Welcome.

Personalis is a leader in the fast growing MRD testing market. MRD stands for minimal residual disease and involves using blood which is commonly called a liquid biopsy instead of imaging or invasive biopsy to monitor therapy effectiveness.

And to detect cancer recurrence.

The MRD market is expected to mature into a $20,000,000,000 market and with our ultra sensitive MRD test next Personalis. We believe Personalis is positioned for success. Our technology is able to spot cancer, there's only one fragment of tumor DNA circulating and a million DNA fragments in blood. Our tumor profiling platforms and tests are cutting edge. We're able to see more with high sensitivity and as a consequence, our platforms and tests are used by many of the world's top bio companies to improve clinical trial results personalized treatment empower a new generation of therapies. Before we dive into our 2024 accomplishments, I want to share another case from this last quarter that highlights the power of our ultra sensitive test next Personalis to change care. During the last call, I discussed how a physician using Personalis was able to spot a recurrence of breast cancer access to therapy ahead of imaging. This quarter, one of our cases involved a woman in her 70s with Stage three lung cancer that was being treated with chemotherapy plus immunotherapy The doctor did a series of three next personal tests over several months that showed the level of circulating tumor DNA was increasing with each test suggesting the treatment regimen wasn't working.

Notably, all the results were in the ultra sensitive range, As a reminder, the ultra sensitive range covers measurements of circulating tumor DNA below 100 parts per million that our next personal test excels in quantifying and that could be missed with less sensitive test. Based on these results, the doctor switched the patient to a dual immunotherapy regimen with subsequent next personal test indicating an improved response. We hear many anecdotes like this and they demonstrate how our platforms are impacting clinical care and frankly stories like this motivate us every day at Personalis Personalis. 2024 was a significant year for the company We laid out a multiyear strategy to grow our business, with a focus on our win in MRD strategy and we made big strides. Our full year revenue of $84,600,000 grew 15% over 2023 driven by 60% year over year which more than offset the expected decline from our enterprise customer. The growth from biopharma was fueled by an acceleration of clinical trial patient samples from Moderna's Phase three melanoma trial during the first three quarters of twenty twenty four. For those new to Personalis, we provide Moderna with our tumor profiling capabilities to help enable them to create personalized neoantigen therapies for patients.

Neoantigens are present only in cancer cells and are platform is used to identify them so that individualized therapies can be created. At the end of twenty twenty four, we agreed to a long term extension of our agreement with Moderna to be their partner for ongoing clinical trials through to commercialization. We expect this relationship to be a key driver of revenue growth for us in the next decade. For our clinical business, 2024 was a pivotal year as we ramped our commercial efforts to pioneer the ultra sensitive MRD testing market.

We drove a solid increase in test volumes as we continue to generate compelling clinical evidence that highlighted the power of Next Personalis to detect cancer recurrence earlier than standard of care imaging and instill more confidence in negative ctDNA results. Our collaborators demonstrated alpha lung and io therapy monitoring using Personalis submitted manuscripts detailing these findings to medical journals which we expect to see published in coming quarters. Once published, these studies are expected to support our submissions for Medicare reimbursement. On the IP front, we successfully settled our litigation with Foresight in a way underscored the value of our MRD intellectual property. We also cross licensed our MRD patents with MeriGenetics, for tumor informed MRD approaches to ensure clear freedom to operate We believe this patient centric approach is best for us as a business, but importantly, best for doctors, patients and payers. Lastly, in 2024, we raised a significant amount of capital. In total, we raised approximately $115,000,000 net of expenses by closing two strategic investments in using our ATM. The first strategic investment with Tempest expanded and accelerated our clinical distribution partnership and the second investment was by Merck. Merck has been a long time collaborator and we're thrilled to deepen our relationship with them.

We ended 2024 with 180 and we have a strong liquidity position to continue ramping up our clinical volume ahead of reimbursement coverage. We believe 2025 will be another pivotal year for Personalis, as we drive our win in MRD strategy and ramp up our testing volumes touching more and more patient lives. We're confident that this is working and ushering in a new way of managing cancer patients. Enabling physicians to intervene sooner when a patient recurs and to have more confidence in a negative MRD result. There are three key areas we'll be tracking as we move through the year. These are the core elements of executing on the next chapter of our Win in MRD strategy. First is clinical usage. We've gained significant traction in the clinical marketplace as we delivered one thousand fourteen forty one molecular tests in the fourth quarter an increase of fifty two percent compared with nine forty five tests in the third quarter. The core of our strategy is a partner centric approach and we're working with Tempest leveraging their approximately 200 person sales force to bring our approach to oncologists. In 2024, the personnelis and Personalis commercial teams learned how to work together to relay the value of Nexpersonal to doctors and the growth we're seeing today is indicative of the strength of the relationship.

Physician feedback has been positive retention is high. We believe our growth is a testament to the power of our ultra sensitive approach the compelling data we've been generating. Since launching our test commercially in the fourth quarter of twenty twenty three, we've grown test volume by at least 40% sequentially each quarter and our goal is to continue to increase test volume by 30% to 40% each quarter until we achieve reimbursement. We've been adding billing and customer care staff and focusing our internal teams on reducing turnaround time and scaling our lab to meet increasing demand. Additionally, we have built out our sales team to complement Tempest's effort and are ready to hire additional commercial team members to accelerate sample growth on the back side of reimbursement. Second, is deepening the clinical evidence and achieving reimbursement. We are on track to get same best reimbursement for at least two indications in 2025. As we've previously discussed, we focused our evidence generation on three indications breast cancer, lung cancer and IO therapy monitoring. We previously summarized the findings from investigation investigators at Royal Marston for breast cancer BHIO for therapy monitoring, and TRACER X for lung cancer and those three studies and their results powered three We're pleased to report that our collaborators have now submitted manuscripts for all three of those patients to peer reviewed journals.

Additionally, the breast cancer paper was recently accepted and we have now submitted for Medicare coverage in breast cancer ahead of our internal expectation. Publication is pending and we won't say more about it until it is in the press, but work excited with this progress towards Medicare reimbursement. When the VHIO and TRACER X papers are accepted for publication, we plan to submit for Medicare reimbursement for immunotherapy monitoring earlier stage lung cancer, respectively. In summary, we are tracking to achieve reimbursement at at least two of the indications this year and I look forward to updating you as this continues to unfold. Our clinical study pipeline continues to deepen with now over 20 studies in progress [indiscernible] We're working with Vanderbilt, John Hopkins and other institutions on the PREDICT study. And approximately one hundred and eighty patients study at early stage triple negative breast cancer and HER2 positive breast cancer, and have an ongoing prospective study called B STRONGER-one and triple negative breast cancer that has now enrolled more than eighty patients. We have an ongoing study with Dana Farber on HER2 positive patients. And the Institute Curie on an approximately one hundred patient early stage triple negative breast cancer study.

We're also working with MD Anderson on an additional breast cancer study. In IO therapy monitoring, we're working with VALDEHEBRON or VHIO UKE in two different melanoma studies Duke in a study of gastric cancer patients and UCSD on a pan cancer IO IO study across eight different [indiscernible] In early stage lung cancer, we're continuing to work with TRACER X team and we're pushing forward on another study As the year progresses, collaborators will be presenting results of many of these studies at conferences. We expect this data to continue to highlight the importance of an ultra sensitive ctDNA detection and breast lung and io therapy monitoring as well as other cancer types. All of this is pointing towards a better way for managing cancer patients with an ultra sensitive [indiscernible] We of course, the Personalis are not done. And we expect to announce additional studies through the year. Deepening the clinical evidence is important to gain clinical traction and payer acceptance. The third area we will be tracking for investors is progress with our biopharma customers. Most of our biopharma revenue comes from our leading immuno ID. Next platform, which is an advanced tumor profiling platform used to support translational The Immuno ID.

Next platform remains a platform of choice for biopharma companies developing immunotherapies.

But we see other opportunities to serve biopharma customers. To those ends, our tumor profiling product set will continue to broaden with new versions developed to capture additional business from biopharma companies that have grown to trust Personalis as a partner This approach will expand the spectrum of biopharma use cases that our platforms can reach. And of course, Biopharma customers want and need an ultra sensitive approach to more effectively select patients for clinical trials and to more accurately monitor trial results. And we believe Next Personalis elegantly meets the market need. The ultra sensitive approach may allow customers to get an answer regarding success, or failure of clinical trials more quickly and more accurately we believe this can make for increased efficiency and can translate to significant revenue for our biopharma customers by getting answers sooner. We've done multiple pilots and technology assessments in 2024 and the value we create for biopharma customers is increasingly appreciated. We grew the revenue from our MRD testing from biopharma companies more than 50% in 2024 and expect continued growth in 2025.

The strategy of driving our ultra sensitive test [indiscernible] to win more business should drive our growth in 2025 and I look forward to reporting on our progress in We're running fast towards multiple milestones in 2025. I believe it will be a significant year for most importantly, our Goodstart growth drivers and redefine the way cancer is managed with ultra sensitive MRD approach. I want to take a minute to address our 2025 full year guidance. We have two core areas of focus in 2025. First, we are driving volume growth in front of NEX Personalis reimbursement. And we are confident that we can continue to grow in test volumes at 30 to 40% each quarter.

Second, we're driving towards reimbursement this year and on plan to achieve reimbursement at least two indications by the end of the year. We're guiding revenue to be in the range of $80,000,000 to $90,000,000 Aaron will further discuss the details in a minute. But I wanted to provide some high level context That is. We're modeling a run rate that is comparable to full year 2024 despite the loss of the lion's share of Latera's business.

When you take into account an expected decline of about $20,000,000 from the Terrace business, our expected growth rate in full year 2025 is around 31% at the midpoint of our guided range. We expect 2025 will be another transformative year for Personalis and we appreciate all the investors that came into the story this last year. And are now part of our journey to pioneer ultra sensitive MRD testing We have created a unique company that is poised to be a key part of the fight against cancer. And of course, that only happens because of the dedication and passion of our employees who work so hard to help us achieve our mission With that, I will now turn it over to Aaron to review our financial results. Thank you, Chris.

I will discuss our fourth quarter and full year 2024 results, and then cover our guidance for 2025.

Total revenue for the fourth quarter of twenty twenty four was $16.8 representing a 15% decrease compared with $19,700,000 for the same period of the prior year. The decrease in revenue was expected and driven by lower volume from Natera who has continued to reduce test volume as they transition to their own house lab and also lower volume from the VA MVP as 2024 task order was mostly fulfilled in the third quarter.

These reductions were partially offset by a 6% increase in biopharma revenue compared with the same period of the prior year. In addition, we recognized $200,000 of clinical revenue from our NextDx tumor profiling test.

Gross margin was 27.1% in the fourth quarter compared with 26.5% for the same period of the prior year. The year over year increase of 60 basis points was primarily due to favorable customer mix from the increase in biopharma volume, In the fourth quarter, we saw an impact of approximately eight percentage points to our gross margin due to unreimbursed test [indiscernible] Excluding those costs, gross margin would have been approximately 35%.

Operating expenses were $22,700,000 in the fourth quarter compared with $29,200,000 for the same period of the prior year. Most of the year over year decrease was attributed to actions taken to reduce headcount in 2023. The fourth quarter R and D expense was 11,500,000.0 compared with $13,600,000 for the same period of the prior year, and SG and A expense was $11,200,000 compared with 11 point $500,000 for the same period of the prior year. [indiscernible] the fourth quarter of twenty twenty three, we classified $4,000,000 of employee severance costs as restructuring within the income statement and it's included within the 29,200,000.0 previously mentioned. Net loss for the fourth quarter was 16,400,000.0 compared with $26,600,000 for the same period of the prior year. Next, I will provide results for the full year of 2024. Total company revenue for the full year 2024 was $84,600,000 dollars representing a 15% increase compared with seventy three point five million twenty twenty three. The increase was driven by growth from biopharma, which was fueled by Moderna's Phase three clinical trial which had robust patient enrollment through the first three quarters of the year. And more than offset the decline in revenue from Natera and the BA MVP.

Gross margin was 31.7% for the full year of 2024 compared to 24.8% for 2023. The year over year increase of 6.9 percentage points was primarily due to favorable customer mix from the increase in biopharma volume as well as cost reduction. In the full year of 2024, unreimbursed test costs impacted gross margins by approximately four percentage points Excluding those costs, gross margin would have been approximately 36%.

Operating expenses were $95,100,000 dollars for the full year of 2024 compared to $128,100,000 for the full year of 2023.

Most of the year over year decrease was attributed to actions taken to reduce headcount in 2023 and also a one time facility lease impairment expense of $5,600,000 in 2023. R and D expense was $48,900,000 in 2024 compared to $64,800,000 in 2023. SG and A expense was $46,200,000 in 2024 compared with $49,700,000 for 2023. And a bit of clarification for 2023.

There is $8,100,000 in employee severance cost for headcount reductions shown in the restructuring line of the income statement and it's included within the total operating expense amount 128,100,000.0 previously mentioned Net loss for the full year of 2024 was $81,300,000 compared with a net loss We reduced our net loss year over year by increasing gross profit and reducing product costs and operating expenses. Now under the balance sheet. We finished the fourth quarter with a strong balance sheet with cash and short term investments of $185,000,000 During the quarter, Merck made a strategic investment of $50,000,000 into Personalis by purchasing common stock at a price of $3.56 per share which was the closing price of our common stock on December 18, 2024, This investment underscores the strength of our partnership with both Merck and Moderna. Throughout 2024, we operated cost effectively and reduced our cash usage down to $46,800,000 for the full year which was approximately $20,000,000 lower than 2023. Now I'd like to turn to guidance. For the first quarter, twenty twenty five, we expect total company revenue in the range of $17,000,000 to $18,000,000 Revenue from pharma tests and services and all other customers in the range of $10,000,000 to $11,000,000 And revenue from population sequencing plus enterprise customers of approximately $7,000,000 And for the full year, we expect total company revenue in the range of $80,000,000 to $90,000,000 This range is a bit wider due to the variability of reimbursement timing and prices.

Revenue from pharma tests and services and all of their customers in the range of $62,000,000 to $64,000,000 Population sequencing plus enterprise customers in the range of $15,000,000 to 16,000,000 Clinical revenue in the range of $3 to $10,000,000 gross margin in the range of 21% to 23% which is lower than the 32% for 2024 due to the impact of investing in clinical test volume, ahead of reimbursement. Net loss of approximately $85,000,000 which includes approximately $20,000,000 of un reimbursed test costs and cash usage in the range of $75,000,000 to $80,000,000 with the majority of the increase in cash usage compared with 2024, we're investing in clinical test volume, clinical studies and commercial capabilities ramping up our clinical volume before and after reimbursement. We look forward to updating you on our progress during the next conference call a few months. And with that, I will turn the call back over to the operator begin the Q and A session. Operator, Thank you. Ladies and gentlemen, we will now begin the question and answer session. The first question comes from the line of Thomas Flatten from Lake Street. Please go ahead. Hey, good afternoon guys. Thanks for taking the question.

Congrats on the quarter. Hey, Aaron, just sticking with guidance for a second, you have grouped together enterprise [indiscernible] That they're continuing the Terra revenues or is there a different enterprise customer in there?

So Thomas, basically what we've done is we've guided both together So there would be right? The VA contract is $7,500,000 So you can assume $7,500,000 to $8,000,000 for the VA balance would be for enterprise customers.

Great. And then maybe for Chris, I know you've mentioned how many you've done, but we haven't heard, at least I don't recall hearing the number of customers you've had And then if you're willing to share that, and then any thoughts on reorder rate for those physicians that have been using the test so far? [indiscernible] Yes. We're closing in on about 300 doctors last quarter. Using the test now, so that continues to grow really nicely.

You see that in the volume that's coming from both our organic group, which is only just a small group of about four ish people and then Tempest, which is which has got a couple of hundred people out.

Carrying the message to doctors. So closing on 300 the retention has been super high. We talked about last quarter, we talked about how it was in the high 90s reorder rate. We're not going to disclose that quarter over quarter and so many moving parts about what doctors do and how they practice. But we feel like that we feel the retention has been high and we feel like the value is just being [indiscernible] About forty percent of our results, our positive results are in the ultra sensitive range As physicians start to to see the power of that, we they're sold and there's so many success stories that we run into around finding cancer Sooner and being able to intervene and being able to see things therapeutic response and get the patient on the right on the right therapy and these things are underscoring the value and helping this Super helpful. Thanks for taking the questions.

Thank you. The next question comes from the line of Yoko Oko from Morgan Stanley.

Please go ahead. Hi. This is Madison on for Hugo. Thanks for Congrats on the quarter. Just wondering if we could start, I realize you gave color on first quarter, but wondering how we should be thinking about the phasing of the top line as we look out to the rest of 2025?

So basically in terms of the revenue guide, dollars 85,000,000 at the midpoint And the way we look at it, Madison, is it's probably half [indiscernible] half of the revenue in the second half. And in terms of the mixture there, so biopharma, is going to be probably 40% first half, 60% second half. But the enterprise In addition, clinical sales, the guide there is $3,000,000 to $10,000,000 Most of that is going to be in the second half, right? Primarily because it's pending reimbursement.

Got it. Okay. That's very helpful. And then on gross margins, I know last quarter, I think you noted a potential headwind of about 15% to 18 percentage points from un reimbursed tests. Is that still how you're thinking about it? And then just given the uncertain of the specific timing of reimbursement, how should we be thinking about the GM cadence over the year?

Yes. So that's the primary reason why we did provide a gross margin guide. Our gross margin guide for for the full year of '25 is 21% to 23% In 2024, we achieved 32% If we didn't have the unreimbursed test costs, in 2024, we probably would have been around 36% And going into 2025 is as we assume, don't unreimbursed test costs. Between 40% and the low 40s, right? So there would be approximately 17% to 18% of headwinds due to the un reimbursed test costs.

Okay. Thank you.

Thank you. The next question comes from the line of Soham Pukula Ramakanth from H. C. Wainwright. Please go ahead. Thank you. Thanks Chris and Aaron. So when you talked about the three areas, that you would be monitoring, for growth in 2025 and beyond. Regarding when you're talking about the clinical usage, you said not only utilizing the TEMPUS commercial team, but also you will be building a commercial team Is this how much of of an impact is it going to be on SG and A in 2025 or is this going to be pending reimbursement and all that? So most of that will actually be in late 'twenty five, early 'twenty six. How should we think about that, please?

Yes. I mean, we've always said we'll have a small team. I mean, we're mostly planning on depending on TEP But we'll always have a small team for for some of the relationships and also to work with the Tempest team in the field and be able to fill in some gaps and and work and you learn a lot from doing that.

Expect that team to be small. We've always said it will be [indiscernible] small investment in the next year or two and we nothing about today's call suggests that that's That's not the case. And we'll continue to just grow it as we go through the year by one season, two seasons.

And a little bit more aggressive as we have line on sight exactly on reimbursement. But you always want to get in front of because it takes some time to find the right people and get them into place and get them trained.

But it won't be meaningful financially.

Okay.

Okay.

And then talking about the reimbursement, it's great that you already have one submission done for breast cancer. In terms of How what to expect on that in the sense in general, how long does it take for some of these submissions to to come to a decision point? And in terms of the next next one, I thought you said lung cancer. If that is true, Is there any way we can gauge the timing on it? Or is this just TBD?

Yes.

I think it's I mean, so we have never said that the next one would be lung cancer, Iotherapy we have gotten to this point as all three of the key publications have been submitted in the lung cancer and the IO have been submitted.

The journey of going through those that process with journals is variable, RK. And if the lung cancer one gets gets accepted before the IO one, we'll submit with for lung cancer. And if the IO one gets sooner than we'll submit for IO sooner.

Our intention to be clear, while we're saying we expect to get two of three over the finish line, We're shooting for all three. Our goal is to have all three accepted and all three submitted and move the ball forward on all three. And that's what our internal goal is and that's what we're shooting for. I mean, I think there's realistically something always tends to happen.

The time on the the time from submission onwards, I think we think about it as six months plus or minus. In general. I think sometimes it goes as long as nine. It could go as fast as three. But that's sort of where it is. But I expect the back half of the year is when we'll start being able to make announcements on that.

But we were super excited to be able to move the ball forward and be able to get to the point where could submit and the submission looks great and we're really confident that we're on the right track here. [indiscernible] Thanks for taking my questions. Thank you.

Thanks.

Thank you.

The next question comes from the line of Dan Brennan from TD Hi.

This is William Ruby on for Dan.

Just one question for you. With the CAST cash usage of $75,000,000 to $80,000,000 are you anticipating you'll potentially look to the capital markets this year?

So we have plenty of capital in terms of what we've got on the balance sheet. What we've been saying William, is that we have cash to give us the cash flow breakeven. In terms of going back to the markets to raise capital, we'll have to look at how things come together in the rest of the year.

And if there's an area where maybe we need to further invest in, call it, evidence or other areas of our business and we'll look at different opportunities. But sitting here today, there's no specific need to come back Thank you. Sure.

Thank you. Ladies and gentlemen, as there are no further questions, this concludes the question and answer session. The conference Personalis has now concluded. Thank you for your participation and you may now disconnect your lines.