I would now like to hand the conference over to your speaker today, Gabby Capell with Investor Relations.
Good afternoon, everyone. Thank you for participating in today's conference call. Joining me on the call from BillionToOne, we have Ozan Atay, Co-Founder and Chief Executive Officer, and Ross Taylor, Chief Financial Officer. Earlier today, BillionToOne released financial results for the third quarter ended September 30th 2026. A copy of the press release is available on the company's website. Before we begin, I want to remind you that during this call, we may make forward-looking statements within the meaning of federal securities laws. Such statements about future events may include statements about our financial outlook and performance, market size, our products and services, reimbursement coverage, future clinical performance, and other similar statements. We caution you that such statements reflect our current best judgment, and actual results may differ materially from those expressed or implied in any forward-looking statements.
Risk factors that may cause our results to differ are discussed in our filings with the SEC, including our previously filed annual report on Form 10-K, our quarterly report on Form 10-Q to be filed following this call, and the current report on Form 8-K filed today. Any forward-looking statement made during this call is made as of today, November 4th, 2026. If this call is replayed or reviewed after today, the information made during this call may not contain current or accurate information. BillionToOne disclaims any obligation to publicly update any forward-looking statements, whether because of new information, future events, or otherwise, except as required by law. With that, I will turn the call over to Ozan.
Good afternoon, everyone, and welcome to our third quarter 2026 earnings call. Before I begin, I want to recognize the people who make our work possible. To the patients and providers who rely on us during the most important moments of their care, thank you for your confidence in us. To our employees, your commitment is what allows us to deliver superior tests that lead to better care and remove the fear of the unknown for our patients. Before turning to our quarterly results, I would like to remind you of our four pillars that guide our strategy and set BillionToOne apart from other molecular diagnostics companies. The foundation is our first pillar. Our patented QCT, or Quantitative Counting Template technology, has allowed us to create category-defining products in prenatal and in oncology. Those products drive our second pillar, scalable rapid growth.
We have grown rapidly to $492 million annualized revenue run rate in just six years. We also believe we have only scratched the surface, with a $100 billion of annual cell-free DNA testing opportunity in prenatal and oncology in the U.S. alone. Our third pillar is a superior gross margin profile, which together with relentless discipline on both ASPs and COGS, keeps our gross margin above 70% today, and we believe with more room left to expand in the long term. Our fourth pillar is GAAP profitability. The margin profile, paired with our fiscally disciplined culture and AI-enabled operations, has made us GAAP profitable and cash flow positive, with roughly one-tenth of the accumulated deficit of our public peers. Our long-term goal has not changed. We are building a generational company that transforms the standard of care in molecular diagnostics for millions of patients.
In the third quarter, we executed on every one of our four pillars. It was another strong quarter. We delivered record revenue and a combination of rapid growth and GAAP profitability that remains exceptionally rare in molecular diagnostics, as well as the type of product and clinical study developments that can position us for exceptional growth and performance in the years to come. Briefly, pillar by pillar. In our first pillar, we published two important studies. First, in the leading journal for OB-GYNs, the Green Journal, we published the first and only peer-reviewed prospective study in single-gene NIPT. In oncology, in The Journal of Liquid Biopsy, we published what we believe is the first head-to-head study of a tissue-free test, Northstar Response, against a tumor-informed assay for response monitoring with on-par to superior results.
We are launching Northstar Clear, our tissue-free MRD test, on December 15th, which I will come back to shortly. On rapid growth, prenatal revenue was up 42%, and oncology revenue was up 96%, resulting in total Q3 revenue growth of 47% year-over-year. Our gross margins remained very consistent in the quarter at 71%, even with COGS per test rising 10% to $169 due to faster oncology growth. Lastly, we generated GAAP operating income of $11 million, a 9% GAAP operating margin, and a remarkable 18% adjusted EBITDA margin. It was our fifth consecutive quarter of positive GAAP operating income. We were also cash flow positive and finished the quarter with $562 million in cash. Now, let me walk through each pillar in more detail. Beginning with our first pillar, our SMNGS platform and products.
Clinical evidence is what turns a powerful platform into a standard of care, and this quarter, we meaningfully expanded that evidence across prenatal and oncology while preparing our next major product launch. Starting with prenatal. On August 18th, we published the first and largest prospective study of a single gene non-invasive prenatal test in its intended use population, validating it as a first-line screen. The study appeared in the leading journal for OB-GYNs, the Green Journal, and was conducted in collaboration with nine U.S. institutions. This is exactly the kind of high-quality evidence that changes clinical practice. We obtained outcomes for more than 98% of the 2,212 pregnancies studied. Unity Fetal Risk Screen demonstrated 94.4% sensitivity and 99.5% specificity, with consistent performance across a racially and ethnically diverse U.S. population. To put this in perspective, with traditional screening, the highest fetal risk a family can receive is one in four.
Unity provides a personalized fetal risk as high as nine in 10 and as low as one in 10,000. Unlike others' studies where most affected fetuses come from previously identified high-risk couples, this prospective multi-site study was conducted in the intended use general population with near-complete outcome collection. Therefore, it constitutes the highest form of evidence in showing that the assay works in identifying affected fetuses with high sensitivity and specificity. We believe this publication reinforces Unity as the leading cell-free DNA screen for recessive single gene conditions. In oncology, on October 7th, in The Journal of Liquid Biopsy, we published what we believe is the first head-to-head comparison with the most widely used tumor-informed assay in patients on active treatment for advanced cancer. This was a pan-cancer real-world comparison, with the data coming from providers who use both assays in their clinical practice.
The results show that Northstar Response delivers on par to superior results versus the tumor-informed assay, which, to our knowledge, makes this the first time a tissue-free test has ever demonstrated superior head-to-head performance against a tumor-informed assay. The two tests agreed on the direction of ctDNA change in 94% of sequential pairs. However, in all divergent cases, the patient's clinical records supported Northstar Response's findings, whereas the tumor-informed assay's results were either false positives or false negatives relative to the patient's clinical response or progression. Tumors evolve over time, and this study shows that relying on a test that depended on years-old tissue can sometimes lead to inaccurate results. This study also shows that physicians do not need to trade away performance to receive the turnaround time and other logistical benefits of a tissue-free test.
The study is a powerful demonstration of the precision that our QCT technology delivers, and it further strengthens the evidence base for Northstar Response. We expect this data to accelerate adoption of Response and further ensure that the Medicare coverage for Response is a matter of when rather than if. We are excited to announce that Northstar Clear, our tissue-free MRD test, will be commercially launching on December 15th. Clear is a pan-cancer test and only requires a blood draw, so it is available for all solid tumors from day one, with no need to wait for a tissue sample or build a patient-specific assay. What we set out to deliver with Clear is tissue-free MRD with tumor-informed performance. MRD represents an estimated $30 billion annual market, and we believe we have developed the most sensitive tissue-free MRD test. We will launch with head-to-head data against the tumor-informed comparator.
While this head-to-head data will initially be in colorectal cancer, the assay will be available for all solid tumors. We will continue further evidence generation across all solid tumors through 2027 and beyond. Clear is also an important step in expanding our platform. Together with Select and Response, Clear means the Northstar portfolio will now span early and late-stage care, all built on the same QCT technology. The work behind Clear also lays the groundwork for our longer-term opportunity in early detection. Fundamentally, a tissue-free MRD and early detection are very similar technical problems, with both requiring the detection of very low levels of tumor DNA without the benefit of tissue access. As such, our MRD launch significantly de-risks our long-term plans for a highly sensitive early detection test. Next, our second pillar, scalable rapid growth.
In the third quarter, total test volume grew 25% year-over-year to approximately 206,000 tests, up more than 10,000 tests sequentially, and with sequential growth in both prenatal and oncology. There were three overall drivers to strong test volume: strong execution by our teams, a larger field sales force, and continued positive reception of the product enhancements we have introduced across both prenatal and oncology. In prenatal specifically, we are continuing our focus on pushing into larger health systems, which remains a large opportunity. This is supported by our newly launched 130-gene Fetal Risk Screen, category-defining Unity Confirm test, and Epic Aura integration. In oncology, volume growth was exceptional again, driven by our expanding sales team and continued adoption of our PGx, CH, and tissue of origin enhancements. Both prenatal and oncology were significant drivers of growth in the third quarter.
Prenatal revenue was $106 million, up 42% year-over-year, representing an annualized run rate of $424 million. Oncology revenue nearly doubled, growing 96% year-over-year to $17 million, representing an annualized run rate of approximately $68 million. Our total revenue performance in the third quarter reflects our ability to execute remarkable growth over the past six years. We have built a $492 million of annualized revenue run rate business from essentially zero in approximately six years. Together, prenatal and oncology drove a record total revenue of $123 million in the third quarter, up 47% year-over-year and 12% quarter-over-quarter. This growth was driven by 25% growth in test volume and 18% growth in ASP. Now to the third pillar, our superior gross margin profile. Turning to our ASPs in the quarter, overall ASP increased 7% sequentially and 18% year-over-year to $589 per test.
Both prenatal and oncology ASPs increased quarter-over-quarter. Excluding true-up revenue, overall ASP was $552, up 3% sequentially and 15% year-over-year. This increase was driven by more payer contracts, higher reimbursement for RhD NIPT through its PLA code, and a growing proportion of oncology, which has a higher overall ASP than prenatal. Growing ASP is only half of the equation, with continuous improvement on COGS per test remaining core to how we operate. Overall COGS per test was $169 in the third quarter, compared to $161 last quarter, reflecting the continued mix shift toward oncology, along with some transient costs from recent product launches. In oncology, COGS per test continues to improve, and importantly, Northstar Response is already at approximately gross margin breakeven. Because oncology is growing faster than prenatal, we continue to anticipate a gradual increase on overall COGS per test over time.
Gross margin, in turn, was 71% in the third quarter, up approximately one percentage point from a year ago due to higher ASPs. Prenatal gross margin was 75%, and oncology gross margin increased to 45%, and that is even before any Medicare coverage for Northstar Response. We have maintained a superior gross margin profile even as oncology continues to keep growing much faster than prenatal. With ASPs continuing to rise in both prenatal and oncology, and with ongoing cost reductions in oncology, we believe we can sustain this profile as oncology grows into a far larger share of our business. With that, I will turn the call over to Ross to review our financial results and guidance before I conclude.
Thank you, Ozan. As Ozan mentioned, in Q3 of 2026, we had a strong performance that combined 47% year-over-year revenue growth with a 9% GAAP operating profit margin and an 18% adjusted EBITDA margin. Total revenue in the third quarter of 2026 was $123.0 million, compared to $83.5 million in the third quarter of 2025. Both our prenatal and oncology product lines demonstrated strong growth in the quarter. Prenatal revenues, consisting of clinical testing revenues and revenues from clinical trial support and other services, increased 42% to $105.9 million in Q3. Oncology revenues increased 96% to $17.1 million in Q3 of 2026 versus Q3 of last year. Our total revenue growth was driven primarily by test volume across both prenatal and oncology, as well as continued expansion of our prenatal ASP year-over-year.
True-up revenue was $7.6 million in the third quarter of 2026, compared to $2.8 million in the second quarter of 2026 and $3.7 million in the third quarter last year. Excluding true-up revenue, total revenue grew 8% sequentially versus the second quarter of 2026. True-up revenue rose sequentially, driven primarily by progress in resolving the held claims issue with one payer that we discussed in our second quarter call. Gross profit in the third quarter of 2026 was $87.1 million, compared to $58.4 million in the third quarter of 2025, resulting in a gross margin of 70.9% in the third quarter of 2026 versus 69.9% in the third quarter of 2025. The increase in gross margin was primarily attributable to continued increases in our overall ASP.
Total operating expenses were $76.1 million in the third quarter of 2026, compared to $48.8 million in the comparable prior year quarter, representing an increase of 56%. Within total operating expenses, R&D expense was $20.2 million in the third quarter of 2026, compared to $13.0 million in the comparable prior year quarter. SG&A expense was $55.9 million in the third quarter of 2026, compared to $35.8 million in the comparable prior year quarter. Operating income was $11.0 million in the third quarter of 2026, compared to operating income of $9.6 million in the third quarter of 2025. Our operating profit margin was 9%, compared to the 5% operating margin we delivered in the second quarter of 2026.
Net income available to common shareholders was $17.4 million, or $0.32 per diluted share, in the third quarter of 2026, compared to net income of $1.5 million, or $0.10 per diluted share, for the same period in 2025. Looking at the cash flow statement for the third quarter, the cash flow from operations in Q3 was $12.5 million, while capital expenditures were $3.9 million. This resulted in free cash flow of $8.6 million in the third quarter of 2026. We are well capitalized with a very healthy balance sheet. We ended the third quarter with $562 million in cash and equivalents. We believe our balance sheet positions us for strong growth moving forward. Finally, I will provide an update on our full-year guidance for 2026.
We are raising our 2026 total revenue outlook to a range of $460 million-$470 million, from $450 million- $465 million previously, representing an increase of $7.5 million at the midpoint and growth of approximately 51%-54% compared to full year 2025. We also expect to operate the business such that it will continue to generate profitability similar to current levels, even with significant continued investments. I will now turn the call back to Ozan to conclude.
Thank you, Ross. To close, our mission is unchanged. We are transforming healthcare one molecule at a time, one patient at a time. What gives me confidence is not any single result, but the way each part of our business builds on the others. Every piece of evidence we publish strengthens the case for our platform. This quarter, a prospective study validated Unity Fetal Risk Screen as a first-line test, and our head-to-head data showed Northstar Response delivering on par to superior performance versus a tumor-informed assay. Each launch broadens the reach of our platform, and Northstar Clear will extend it into early-stage cancers with MRD next month. Our financial profile continues to set us apart. We grew revenue 47% year-over-year, maintained gross margins at 71%, delivered a 9% GAAP operating margin and an 18% adjusted EBITDA margin, and raised our outlook for the year.
We believe we are truly differentiated in molecular diagnostics, with our unique and proprietary technology positioning us for sustainable growth and long-term profitability. Our long-term goal remains the same: to transform molecular diagnostics, build a category-defining company, and earn our place in the S&P 500. We are proud of what we have accomplished through the first three quarters of 2026, and we look forward to sharing our annual results with you on our next call. Thank you. Over to the operator.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment for questions. Our first question comes from Subbu Nambi with Guggenheim. You may proceed.
Hi, this is Ricki on for Subbu. Thanks for taking our question. Maybe first, there were some changes recently in the competitive landscape in prenatal. Does Labcorp owning FirstGene, which does have fetal recessive testing components, change anything about either your competitive positioning or how you are approaching the market in terms of competition?
Thank you, Ricki, for the question. In the past, as you know, previous acquisitions and consolidations have created disruption for customers and have become growth opportunities. We believe that this can be another good opportunity for us for further organic growth. We believe that our Unity Fetal Risk Screen is so differentiated with so much clinical data backing that, other tests that are coming to market will not have a significant impact in our competitive positioning.
That makes sense. Just a follow-up then on, I guess, both prenatal and oncology. Have you seen any uplift from EMR ordering showing up in volumes yet? If not, when could we start to see that?
We are starting to see some of the earlier integrations showing impact even in accounts that have been using us. As you know, with EMR, it is sometimes easier to integrate the accounts that might already be using our tests in some other form. In those accounts, what we see is that we get a higher number of tests, even if they were fully converted in previously. We also are working on new health system adoptions with a number of health systems. We have seen in the past with Q2 and Q3 last year, each health system can be a significant additional test volume growth, and that is why we are investing so much in the health system side of things with Epic Aura and the Unity Fetal Risk Screen expanding to 130 genes.
Thank you.
Thank you. Our next question comes from Mark Massaro with BTIG. You may proceed.
Hey, guys. Thank you for taking the questions, and congrats on a strong beat-and-raise quarter. I wanted to start on, pardon me. I wanted to start on Northstar Clear. Other companies in the space, when they launch an MRD test that is not reimbursed, we have seen others sort of manage the volume growth in order to limit some of the drag in the bottom line. I wanted to just ask, maybe can you walk us through your plan? I know it is launching on December 15, but to what extent do you put this test in the hands of all of your reps? How hard do you push it? Can you maybe give us a path to your reimbursement timelines and any particular indications you want to call out?
Thank you, Mark, for the question and for the kind words. This is actually where we are truly differentiated. Because of the way that we design assays and because of how QCTs amplify the signal so much more compared to other methodologies, we have designed our MRD tests to have much, much lower cost profile compared to some of the other MRD tests in the market. In fact, we believe that as the test volume increases, it is going to get to the same place as responses today. It will be gross margin positive without even having Medicare coverage. That means that we do not have to throttle the test volume the way that other companies have to because of the impact on the bottom line, because we actually do not expect to see an impact on the bottom line even as MRD scales.
That is why we are not going to limit the indication, and that can result in, I think, faster test volume growth compared to a more limited launch that other companies might be forced to do.
That's fantastic. Then I know this is a pan-cancer test. Others have typically started with colorectal, moving to some of the larger indications like breast or lung. Can you just give us a sense for your reimbursement trajectory? I don't know if you can comment on any indications where you plan to submit data. I recognize we're months away from that, but how should we think about the cancer types that you might be targeting initially?
We are actually doing studies across all three largest cancer types, as you mentioned, colorectal, lung, breast, as well as their subtypes. Of course, MRD studies take a longer time as well. What we are going to launch with is the head-to-head data around CRC and some clinical data around CRC, but we have been collecting samples for doing clinical studies across multiple cancer types. We might start with initial submissions in CRC as well, but we believe that a tissue-free test has significant advantages outside of CRC, especially because in other cancer types, tissue availability is much lower and the QC fail rates are much higher with tumor-informed tests.
Excellent. Maybe one last quick one. I know that at the time of your IPO, you talked about how you welcomed head-to-head competitions, so it's nice to see the Northstar Response data against another tumor-informed assay. I'm wondering, Ozan, if you're planning other head-to-head type studies, whether it's with Northstar Select, whether it's with Northstar Clear. I'm just sort of curious about, these studies take time, so I'm just wondering if we can expect any perhaps in 2027, or is that more of a later timeline?
Yeah. As you know, we have already published a peer-reviewed study against all existing competitors at the time for Northstar Select, where we showed 51+% more actionable therapies. In clinics, we actually continue to do those head-to-heads to show for their own patients, for a practice, that we can detect significantly more options for patients. This is one of the big drivers of our growth. We are winning these head-to-heads literally every day in the clinics, in the field for Northstar Select. Northstar Clear, at the time of launch, as I mentioned, we are actually going to do a head-to-head as well against tumor-informed comparator. This is going to be in CRC initially. In the future, I think we can certainly look into more head-to-heads for MRD as well. This is one of the areas that I think we are really differentiated from other molecular diagnostics companies.
We truly welcome these head-to-heads to be able to show that our tests are superior.
That's great. Thanks so much for the time.
Thank you. Our next question comes from Dan Arias with Stifel. You may proceed.
Hi, guys. Thanks for the questions. Ozan, on prenatal volumes, by my math, the volume number was in the neighborhood of about 190,000 or so. Is that ballpark correct? I think the way that seasonality tends to trend for you guys has 4Q often similar to 3Q. So that would kind of put the prenatal volume gross number in the mid-20s for the year. If I think about next year, and I know that we'll get the details next quarter on next year, but you have rep productivity, you have Unity Confirm, you have EMR integration progress, and then you have this new 130-gene panel. Again, I know we'll get the guide at the beginning of 2027, but as a starting point, do you think that volume growth accelerates next year for prenatal?
I think it is a matter of timing with respect to all these health system initiatives that we are doing. Dan, we previously talked a little bit about this, but just as a reminder, prenatal is not a monolithic market, right? There is the independent clinics, which is about 40% of the market, and then there are health systems, which is about 60% of the market. Historically, our products, our positioning, our continued quarter-over-quarter growth really focus on these single specialty clinics. Of course, it is much easier to grow from within that 40% from 5%- 0%, and then 10% to 20%. As we get to being the largest market share in independent clinics, it is not surprising that the growth in independent clinics would slow down.
If you look at the health systems, though, that remains a really big untapped opportunity of 60% of the overall market. That is what we had seen in Q2, Q3 last year, when we had close to almost 20,000 sequential growth in Q3 last year, which was, I think, the strongest test volume quarter growth that we have potentially ever had. So really, that is when we realized that we need to invest in the health system growth, and that is why we did the Epic Aura integration. We expanded to 130 gene. All of these things were required to be able to continue to win health systems. But health systems are long sale cycles. These are 12, 18, 24-month discussions.
With some of them, we are, I think, getting closer to the finish line, and we can certainly see upside to test volumes for prenatal as they happen. But we also, I think, are going to see oncology contributing a bigger and bigger component of growth next year as well, coming probably closer to, in terms of sequential test volume growth, similar to prenatal levels.
Okay. Okay, and then just as a follow-up, Ross, the new revenue number range for the year, does that assume some amount for true-ups in 4Q?
No, sorry, Dan. We exclude any true-up revenue from our forward-looking guidance. It includes the historical true-up, but we do not include anything for Q4.
Just making sure. Thanks.
Thank you. Our next question comes from Tycho Peterson with Jefferies. You may proceed.
Hey, team. This is Noah on for Tycho. Thanks for taking our questions. Just wanted to start by asking about the new CLFS proposal. Looks like your carrier screening rate will be going up by 112%. Also seeing an increase on Northstar Response, but I think some of the aneuploidy codes are going down next year. How are you thinking about the moving pieces there? Any impact to ASPs, and how does that flow through to other payers like Medicaid and commercial plans?
Thank you for the question, Noah. Of course, it is still not certain if the PAMA changes will be in effect. I think we are in a very fortunate position that we are looking at an overall increase, rather than decrease. The only code that we use that is common with other laboratories, in general, for a major test is the aneuploidy code, and as you said, that will be decreased. Our increase on the single gene NIPT, I think, will make up for it. In the long term, it actually puts the potential for single gene NIPT to be a huge ASV driver, to be really high, especially if the clinical practice changes and single gene NIPT continues to get reimbursed more and more.
In terms of the oncology, of course, that would be a really net positive for us if our response is increased almost 30% from a CLFS perspective. Again, it is difficult to comment on the full impact of how that is going to change our response ASVs before it gets implemented. It certainly would, if it were to get implemented, I think it would make our response gross margins particularly positive, even without Medicare coverage.
Got it. Thanks, that's helpful. Just one more on the oncology side. With the MRD launch upcoming, how are you thinking about your needs for hiring new sales reps? Will the existing sales force today also sell the MRD test? Maybe I just missed it earlier, but is there an updated expectation around MolDX timing for Northstar Response?
For the first question, with respect to different sales force, no, we are going to use the same sales force. In particular, we believe that the providers who are already using our Northstar Select and Northstar Response tests, they have already switched from other competitors to us. They believe in the technology. They believe in what we can do. They have seen head-to-head results. So those are going to be, I think, the first customers that we can go to to be able to switch them. We also believe that MRD is going to open up doors to us in places that access might have been difficult in the past.
With respect to the Northstar Response, the Medicare coverage, we believe that, and you might have seen this, I think, in other timelines with respect to tissue-free tests versus tumor-informed tests, that MolDX seems to have a much, much higher bar for tissue-free tests. That is why we have done the head-to-head study to show that we are on par to superior to the tumor-informed tests. We believe that that piece of evidence really de-risks the Medicare coverage for Northstar Response. So that is why we believe that it is a matter of really when rather than if. While we still believe that it can happen by the year end, the timing is uncertain.
Got it. Thank you.
Thank you. Our next question comes from Kyle Mikson with Canaccord Genuity. You may proceed.
Yeah.
Kyle?
Hey, I have another question. Yeah. Hey. Thanks for the question. Congrats on the quarter. I was just hoping you could talk a little bit more about the health system penetration and the rollout there in 2027. I know we don't want to really talk too much about the kind of guidance and outlook there, but just like qualitatively, you have a pipeline of systems, how long could that take, and what could that really mean in terms of additional tests to come online? Thanks.
Without getting into specific numbers, we have more than 20 health systems that are in various parts of the pipeline, and each health system can be anywhere between 2,000 tests to 5,000 tests per quarter. Of course, not all of these health systems will happen over the course of next 12 months, but we are very encouraged by the progress that we are seeing in many of them. A lot of the times, this is not even about the clinical sales. In many of these healthcare systems, the clinical decision team might have already even made the decision that they want to switch to Unity, but just the EMR integration, the legal, the phlebotomy, the logistics can take anywhere between six to even more than 12 months.
When we are really thinking about to guidance, which we are not providing for 2027 yet, we typically don't incorporate any of these health systems into our guidance. But I think more and more, we are going to see an increase in contribution from these health systems in 2027 and 2028.
All right. Thanks, Ozan. Then on the prenatal menu, just kind of like the wars that go on between the competition, I don't think there's an answer yet in the marketplace for the larger gene, the 130-gene panel. I mean, I guess like how far of an advantage does these sorts of innovation in terms of the menu and the tests kind of provide? Is that kind of the core here, or do you think there's like a commercial edge that you're sort of gaining or growing into, I guess, as you sort of mature the company?
Certainly. I mean, what we have realized is that to be able to win in these health systems, unique products that are attractive to every single stakeholder. I think historically, our products with smaller panels have served the needs of OB-GYNs, and with our fetal antigen test, MFMs. But because we didn't have even just standalone carrier panels that were larger panels, let alone single gene NIPT, I don't think we were serving the full needs of every single stakeholder, for instance, including genetic counselors. What we realized that every stakeholder is important in a health system, and you need everyone to be enthusiastic for them to go through the trouble of changing. That is why I think 130-gene is such an important addition.
It might not be the test that becomes the majority of the test volume, but it becomes a test that unlocks these discussions in health systems.
Thank you. Our next question comes from Casey Woodring with JP Morgan. You may proceed.
Good afternoon. This is Paul on for Casey. Thanks for taking our questions. Would love to hear more about what kind of data we could expect to see by year-end for Northstar Clear. Can you share anything about any studies in the pipeline as you look to demonstrate the high sensitivity of the assay? Assuming there will be some pan-cancer studies, but would you also look at running single indication studies, maybe in indications that are really key, like breast cancer, where there's some more specific subtypes that you'd want to have more granularity, for example, or just any color on kind of a data generation pipeline?
Yeah. At launch, the clinical data is going to focus on CRC because I think that is where we can show true apples-to-apples comparisons to other tumor-informed assays. I think in 2027, we are going to certainly have other cancer types and other data readouts that we have already started clinical studies for them.
Appreciate that. Just as a follow-up, your MRD assay has been really well telegraphed since last year. I'm just wondering to what extent could there be some pent-up demand from existing oncology accounts who've been waiting for your launch? Do you have accounts who are just sort of waiting for December 15 to adopt Northstar Clear, or is perhaps the investor community maybe more familiar with the fact that this test is coming than the oncologists?
There's certainly some pent-up demand. We haven't been kind of pre-selling and talking about our MRD as much with the customers, but we actually already see, in some cases, physicians using our response test even outside of the late-stage indication that it is designed for. So, that really tells me that there is unmet need in our physicians, and they are already sometimes using our response test for MRD. So, that, I think, is a really strong indication that we are going to have adoption in our existing physicians for our MRD test.
That's helpful. Thank you.
Thank you. Our next question comes from David Westenberg with Piper Sandler. You may proceed.
Hi, guys. Thanks for taking the question. I am going to first maybe ask about consolidation and acquisitions in the prenatal space. Does this change how you might think about market shifts opportunities? One thing about genetic tests that tend to be like a decade old is that you sometimes have a lack of discipline in contracting from some of the players. Do you think that maybe you could see, with a more concentrated environment, more discipline in contracting and maybe some better ASPs in the future, or maybe, say, less negative pressure on ASPs in the future?
With respect to ASPs, I think we have been so disciplined, Dave, that we have only contracted when the contracts would be additive to us. We do not see a significant change that this would bring to the market. In terms of the test volume shifts, as I mentioned this a little bit previously, as you know, these acquisitions do not really tie customers to the acquiring party in any way. Previous acquisitions and consolidations have created a lot of disruption for the customers that might be used to one way of dealing with their customer service, their lab operations, their results, their billing policies. As those things result in disruptions, they become really important growth opportunities for us and for any other parties that might be in a position to use this. We believe that this is another good opportunity for organic growth.
Got it. Perfect. Ozan, I know you have been very disciplined around margins and profitability, et cetera, and it comes out in the P&L, et cetera. On a go-forward basis, you do have this Clear product, you have more oncology products coming through. How do you think about investing versus that 70% gross margin versus that EBITDA positivity that you had? If you did decide to spend a little bit more, would that be sales or maybe CapEx, or do you think maybe even a whole continuum of new products, for instance, in say, MCED or something else that would be on the bigger side?
I think in both short term and long term, we want to maintain our GAAP profitability. Because of the way that we designed the assays to be cost-efficient, I don't think even as we scale our oncology products, we are going to see an impact on our GAAP profitability. That can certainly be an impact on the overall gross margins as oncology becomes a bigger part of the business, but we believe that we can have both rapid growth and continue to invest in both the growth of the sales force, which drives the test volume growth, as well as the clinical studies. Clinical studies in the long term drive such higher ASPs through coverage that it is an area where I think it makes sense to continue to invest and invest more in 2027.
Thank you.
Thank you. Our next question comes from Matt Larew with William Blair. You may proceed.
Hey, good afternoon, Ozan. A lot of territory covered here, but wanted to follow up on the head-to-head that you talked about that you published back in October. It's been about a month since that time. Obviously, it sounds compelling. I'm curious, for folks who haven't adopted Northstar Response, was this head-to-head, has it been compelling enough to have some new providers give you a shot? Or if not, are there other things that people are looking for in terms of the broader product offering, workflow, turnaround time, et cetera, that you might need to add to the table?
I think this has been already an impactful clinical study for us to show, in addition to our previous head-to-head with Select, that our platform is strong and superior. It is, I think, going to continue to drive our Response test volume growth. We have seen a very strong Response volume in Q3, and we believe that that is going to continue in Q4 and in 2027.
Okay, great to hear. I guess just to put a fine point on the positive Clear commentary throughout the call. It sounds like Clear has the potential to be a meaningful revenue contributor in 2027 and not just be year about having incineration and building the funnel. Is that right?
I mean, ASPs are, of course, not going to be thousands of dollars for a test that doesn't have Medicare coverage yet. We are going to be scaling it. I think the better way to think about this is that we now are launching a tissue-free test that can be truly category-defining. No tissue-free test has historically shown on par performance to tumor-informed tests. This is the first time that the physicians don't have to choose between convenience versus the sensitivity. Given that in some cancer types, failure rates can be so substantial, I think having an ultra-sensitive tissue-free test is going to be a really big part of our long-term growth. I think for 2027, revenue contribution is going to be modest, but I think in the long term, this can be the biggest revenue contributor among all of our product lines.
Okay, very good. Thanks for all the updates.
Thank you. I would now like to turn the call back over to Ozan Atay for any closing remarks.
Thank you. I would like to thank everyone for joining. As I mentioned previously, our goal is to build a category-defining company, and this quarter was another great quarter in our 20-mile march towards that. We look forward to sharing our Q4 and our annual results with you on our next call. Thank you.
Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.