Earnings Call: Q4 2023

Feb 28, 2024

Summary

FY 2023 revenue grew 13% to $73.5M, while annual expenses fell $35M and cash runway extended through Q1 2026. FY 2024 revenue guidance is $73M-$75M, with MRD and biopharma growth expected to offset lower Natera revenue.

Greetings, and welcome to the Personalis Fourth Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should you require operator assistance during the conference, please press star 0 on your telephone keypad. A reminder, the conference is being recorded. It is now my pleasure to introduce your host, Caroline Corner, Investor Relations. Thank you. You may begin. Thank you, operator. Welcome to Personalis' Fourth Quarter and Full Year 2023 Earnings Call. Joining today's call are Chris Hall, Chief Executive Officer and President, Aaron Tachibana, Chief Financial and Chief Operating Officer, and Rich Chen, Chief Medical Officer and EVP R&D. All statements made on this call that do not relate to matters of historical fact should be considered forward-looking statements within the meaning of U.S. securities laws. For example, any statements regarding trends and expectations for our financial performance this year and longer term, cash runway, revenue expectations and timing, reimbursement goals, size and booking of orders, product services, technology, clinical milestones, the outcome and timing of reimbursement decisions, expectations for our existing and future collaboration activities, cost expectations, our market opportunity, and business outlook. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. We encourage you to review our most recent filings with the SEC, including the risk factors described in our most recent filings. Personalis undertakes no obligation to update these statements, except as required by applicable law. Our press release with the full year and fourth quarter 2023 results is available on our website, www.personalis.com, under the Investor section, and includes additional details about our financial results. Our website also has our latest SEC filings, which we encourage you to review. A recording of today's call will be available on our website by 5:00 P.M. Pacific Time today. Now, I would like to turn the call over to Chris for his comments on full year and fourth quarter business highlights. Thank you, Caroline. Good afternoon, everyone, and thank you for joining us. 2023 was a year of strong performance for Personalis as we build a culture of execution and winning. We focused on the MRD market, reduced our annual expenses by $35 million, and extended our cash runway to two years, delivered on all of our commitments to investors, and positioned our company for a pivotal 2024. We ended the year with $73.5 million in revenue, a 13% year-over-year growth. Our culture of execution yielded many important wins. We received Medicare coverage for NeXT Dx, which is our high-performance comprehensive genomic profiling, or CGP test. We launched an early access program for our ultra-sensitive MRD test, NeXT Personal. We presented compelling early-stage lung cancer MRD data with our partners at TRACERx. We entered collaborations with multiple leading cancer centers to develop robust clinical evidence. We entered partnerships with companies, including Myriad, Tempus, and Moderna, and we extended our agreement with Natera. With momentum across our business, we are excited for what lies ahead. Taking a step back, we are focused on achieving scale and our $100 million in 2025 plan, where we intend to cross $100 million in annual revenue in 2025, and that we have put in place a growth strategy with three engines to propel us there. First, and most importantly, we are executing on our win in MRD strategy. The MRD market, using liquid biopsy to find evidence of molecular residual disease or cancer recurrence, is estimated to mature into a $20 billion opportunity, and we are establishing Personalis as a leading company in the space. The clinical evidence is coming together to demonstrate that an ultra-sensitive test provides tremendous value to patients, doctors, and partners, and that puts Personalis in a position to grow rapidly. Second, we are leveraging our core ImmunoID NeXT platform to support biopharma customers in their drug discovery efforts and personalized cancer vaccine companies in their efforts to establish a new generation of therapies. Our proprietary solutions create a unique molecular fingerprint of a patient's cancer, allowing for new insights and pushing the entire field forward. Third, we are deepening and expanding our relationships with our enterprise customers, such as Natera and the VA MVP, with our Personalis Inside approach that allows customers to leverage our technology and ability to produce cost-effective assays. I will now walk you through a more tactical view of our 2024 strategy as we push into delivering on our $100 million in 2025 plan before I will turn it over to Aaron, who will detail our 2023 financial highlights and our guidance for this year, 2024. Starting with NeXT Personal, our first growth engine, I will quickly remind you that our win in MRD strategy has four pillars. First, focus and launch our test in cancer types where an ultra-sensitive liquid biopsy test can unlock significant value for patients, payers, and partners. Second, to drive reimbursement by developing robust clinical evidence and partnering with the top global collaborators. Third, to leverage our deep pharma relationships to accelerate adoption and power our revenue growth by using NeXT Personal in clinical trials. Fourth, to commercialize NeXT Personal with a partner-centric model. Now, delving into the first pillar, we have previously explained how we are developing evidence to support NeXT Personal's clinical usage in early-stage lung cancer, breast cancer, and IO therapy monitoring. Our focus on these cancers is intentional, as we believe we can win with our ultra-sensitive approach. In each indication, we believe that detecting a recurrence as early as possible can dramatically impact a patient's health. A highly sensitive test can be used to de-escalate patients from ineffective therapies, potentially saving payers money and sparing patients therapies and procedures they may not need. You might recall that we launched our NeXT Personal Dx LDT for MRD in October 2023, and we are currently selectively launching that under an early access program, or EAP. We are the first ultra-sensitive test to market, and the adoption of our test has been rapid, and indeed, it is exceeding our initial targets. We now have characterized and are monitoring more than 250 patients referred to us by only 10 doctors enrolled in the program. We've capped the number of MDs in our early access program, and we have a wait list of more than 150 doctors that have indicated they want to be included. Moving to our second pillar, I believe many of you saw the compelling early-stage lung cancer clinical MRD data presented by Professor Charles Swanton and Dr. James Black with TRACERx in October. The TRACERx study is greatly advancing the understanding of lung cancer and cancer biology, and NeXT Personal is enabling an ultra-sensitive, specific detection of ctDNA before and after surgery, through treatment, and during surveillance for recurrent cancer, which we believe will ultimately allow clinicians to make more informed decisions about patient care. To put it in the simplest terms, the data show that our ultra-sensitive approach can detect cancer up to 11 months before imaging. We are completing the testing of the full cohort for the TRACERx study and expect our collaborators to submit in 2024 for publication. We expect that work, once published, to form the foundation of a Medicare submission for lung cancer. In breast cancer, we completed processing samples from our collaboration with the Royal Marsden, one of the leading global institutions in breast cancer. Our work here is focusing on patients with early-stage disease for several subtypes, including ER-positive, HER2-positive, triple-negative breast cancer. The Royal Marsden collaboration provides access to a well-annotated set of samples with known clinical outcomes. We plan to use our work here to provide a clinical data set to support Medicare coverage in breast cancer. This data set is expected to be showcased in mid-2024. We are also working with the Dana-Farber Cancer Institute in breast cancer, which provides us with a robust set of HER2-positive prospectively gathered samples, and with the Institut Curie, which provides access to a study in triple-negative breast cancer. These collaborations are extremely important because we have multiple cohorts that we can leverage to drive commercial success and underpin our reimbursement submission. Additionally, for breast cancer, our own prospective clinical trial called B-STRONGER is underway. We've made progress establishing committed sites, and we've begun enrolling patients. Breast cancer is an important priority for us, and we continue to deepen our collaborations and expand our clinical evidence. Turning to IO therapy monitoring, our key study is a pan-cancer data set with the Vall d'Hebron Institute of Oncology, or VHIO, designed to demonstrate and leverage the efficacy of NeXT Personal. VHIO gives us access to a large, well-annotated bank of prospectively gathered samples that are the cornerstone of our efforts to achieve reimbursement coverage for pan-cancer IO therapy monitoring. We've begun testing VHIO patient samples and expect clinical data to be presented in the middle of 2024. This exciting collaboration joins existing work we've announced on melanoma and IO therapy with the University Medical Center Hamburg-Eppendorf, also known as UKE, and our Duke and UC San Diego relationships. These data sets will form the core of our Medicare submission for coverage for IO therapy monitor. Reimbursement coverage is accomplished with great products that demonstrate clinical utility and a relentless focus on execution to build and publish the data. Our team at Personalis is focused on delivering data to collaborators that spotlight the compelling performance of our approach and then submitting for reimbursement coverage for all three cancer types this year. The third pillar of our NeXT Personal strategy is to leverage our biopharma relationships to drive the use of NeXT Personal in clinical trials. We are engaged with most of the world's top biopharma customers and have received positive feedback on our platform. Customers want an ultra-sensitive approach to ensure that only the most appropriate patients enter into a clinical trial. The promise of an ultra-sensitive assay is that we believe patients testing negative are much less likely to recur. This would mean for our biopharma customers that these patients are less likely to benefit from a therapeutic intervention. The data that the TRACERx team analyzed on lung cancer indicated that patients testing ctDNA negative on our assay largely didn't recur and were still alive five years later. This holds out the promise that NeXT Personal could be an excellent approach to optimize biopharma trials. Indeed, here in the first quarter, we've already booked record new orders for NeXT Personal, and we believe it will be a driver of revenue moving forward and an important way for us to deepen the clinical utility of NeXT Personal. Now I'll move on to the fourth and final pillar, commercializing NeXT Personal using a partner-centric model. On our last call, we mentioned that we are seeking partnerships that help us amplify our message to the marketplace, allowing us to market and sell our test in a capital-efficient manner. In December, we announced our key partnership with Tempus to commercialize NeXT Personal Dx in clinics with oncologists. We are thrilled that Tempus selected us as their MRD tumor-informed choice to offer to their customers. Under the agreement, we will leverage Tempus' sales channel, which consists of more than 200 sales professionals calling on oncologists, to co-commercialize NeXT Personal Dx and accelerate growth. Personalis will process samples in our lab. We will obtain reimbursement and invoice health insurance payers and patients under the arrangement while paying Tempus fair market value for the commercial services they provide to us. Overall, the deal is worth approximately $30 million for Personalis should all the milestone payments be triggered and if Tempus fully exercises their warrants. Most importantly though, it allows us to ramp up our commercial efforts quickly with minimal cash investments. We will work through 2024 to expand our early access program to include Tempus, and we'll learn how to work together as partners, integrating our business systems and refining our message to oncologists. This is an exciting relationship that paves the way to achieving commercial traction in a capital-efficient manner. While we've made strides with our first growth engine, our win in MRD strategy to establish NeXT Personal as a leading MRD test, we've also made progress with our second growth engine, leveraging our ImmunoID NeXT platform to deepen relationships with biopharma customers who use the offering to pioneer new therapies and enterprise customers as they develop or ramp up volume for tissue-informed products. We previously told you about our partnership with Moderna and Personalized Cancer Therapies, where Moderna is utilizing our platform in their mRNA cancer program. We have several other partners that work in this space as well. Moderna and its partner, Merck, are enrolling patients in clinical trials, and we expect our collaboration with Moderna to be a driver of revenue for us in 2024 and 2025. In November, we disclosed that Myriad is expanding its pharma service offerings by introducing our ImmunoID NeXT platform to its pharmaceutical partners who use Myriad's cancer tests. This is another exciting opportunity to continue to grow our biopharma customer base. Myriad is a pioneer in the industry, and we're excited to be collaborating with them. Last month, we disclosed that we also partnered with ClearNote Health. ClearNote has an epigenomic platform that we believe is gaining traction with biopharma customers by allowing those partners to detect cancer earlier, monitor disease progression, and understand mechanisms of resistance with the aim of identifying promising drug targets and biomarkers. In this relationship, Personalis' biopharma sales team will bring ClearNote's products to our customers, which provide another growth vehicle. Relationships like the Myriad and ClearNote deals are examples of how we expect our partner-centric approach to drive our revenue going forward. We are laser-focused on adding value to biopharma customers with a comprehensive suite of products and services and accelerating our growth rate. You will know when Aaron walks through guidance for the year ahead that we expect our biopharma segment to grow in 2024 by more than 20%. This is a reflection of the progress we are making serving this segment. The third engine of our growth strategy is growing our Personalis Inside approach as we service enterprise customers. In these relationships, partners adopt our platforms and technologies to power their solutions and provide new insights to their customers. We have two large relationships where this is the case. First with Natera. We've partnered with Natera for a few years, and they've leveraged our sequencing platform to analyze the exome as a part of their Signatera product. At the end of the year, we extended our agreement with Natera through the end of 2024. We worked this year with Natera to evolve our platform so we can reduce our price to them while growing our margins. To those ends, we expect our revenue to decline this year from Natera, but expect our margins to improve, and are optimistic we put in place the foundation to continue the relationship over time. Our second key enterprise relationship is with the VA. The VA utilizes our whole genome sequencing capabilities to power the Million Veteran Program, a national research program looking at how genes, lifestyle, military experience, and exposure affects health and wellness in veterans. We have helped power this program with the VA for years, and we're excited to continue the work in 2024. Both of these relationships are examples of how our platforms drive value for partners. We're focused on expanding our efforts with additional partners this year. We've made significant progress across multiple fronts, and we appreciate our collaborators, partners, and investors being part of the journey to establish an ultrasensitive test at the forefront of the MRD market. I want to especially thank my colleagues and our team at Personalis for their extraordinary efforts in 2023 to navigate through a challenging climate as we reduced headcount, grew our revenue, launched new products, achieved coverage, and showcased truly transformative clinical data. 2024 is an exciting year, and we look forward to updating you on our progress towards our $100 million in 2025 initiative and our win in MRD strategy. With that, I will now turn it over to Aaron to review our financial results. Thank you, Chris. Our fourth quarter and full year 2023 financial results and milestone achievements demonstrate our ability to execute crisply. Importantly, we continue to meet our financial commitments. I will be providing details about the fourth quarter and full year 2023 financial results and guidance for the first quarter and full year of 2024. Total company revenue for the fourth quarter of 2023 was $19.7 million, an increase 18% compared with $16.7 million for the same period of the prior year. The increase in revenue was due to higher volume from biopharma customers and the VA MVP. For the full year of 2023, total company revenue was $73.5 million, an increase 13% compared with $65 million for the full year of 2022. The full year revenue increase was due to higher volume for biopharma customers, Natera, and the VA MVP. Gross margin was 26.5% for the fourth quarter compared with 13.8% for the same period of the prior year. The year-over-year increase of 12.7 percentage points was primarily due to operating leverage from the 18% higher revenue volume. Also, an increase in work performed for product development and clinical evidence generation that is classified as R&D expense. For the full year of 2023, gross margin was 24.8% compared with 20.5% for the full year of 2022. The 4.3 percentage points of margin expansion was primarily due to favorable operating leverage from the 13% increase in revenue volume. Operating expenses were $29.2 million in the fourth quarter and included a one-time expense of $4 million for employee severance costs from the reduction in workforce, compared with $34.4 million for the same period of the prior year. Excluding the employee severance costs, operating expenses were $25.1 million and decreased $9.3 million from the same period last year. R&D expense was $13.6 million in the fourth quarter compared with $16.6 million for the same period last year, and SG&A expense was $11.5 million compared with $17.8 million for the same period last year. For the full year of 2023, operating expenses were $128.1 million and included severance and lease impairment costs of $13.6 million compared with $128.9 million for the full year of 2022. In 2023, we made significant progress in reducing our expense base by approximately $35 million annually. Net loss for the fourth quarter was $26.6 million compared with $31.1 million for the same period of the prior year. The fourth quarter net loss included $4 million from employee severance costs and also an additional $4 million of non-cash expense related to the fair value accounting of the outstanding warrants issued to Tempus. This non-standard expense was a result of the increase in fair value of the warrants at December 31, 2023, compared with the fair market value when the warrants were issued. The net loss per share for the fourth quarter was $0.54, and the weighted average basic and diluted share count was 49.6 million compared with $0.67 and a weighted average basic and diluted share count of 46.3 million for the same period of the prior year. For the full year of 2023, net loss was $108.3 million compared with $113.3 million for the full year of 2022. The full year net loss included $8.1 million of employee severance costs, $5.6 million of a lease impairment write-down for the Menlo Park facility previously vacated, and a $4 million expense related to the fair value accounting of the outstanding warrants issued to Tempus. The net loss per share for the full year of 2023 was $2.25, and the weighted average basic and diluted share count was 48.2 million compared with $2.48 and a weighted average basic and diluted share count of 45.7 million for the full year of 2022. Now onto the balance sheet. We finished the fourth quarter with a strong balance sheet with cash and short-term investments of $114.2 million. During the quarter, we used $6.5 million, and for the full year of 2023, we used $53.5 million of cash, primarily to fund operations. In the fourth quarter, we received $6 million from Tempus related to the first two milestone payments. We estimate the remaining $6 million of payments to be received equally in 2024 and 2025. We have approximately two years of cash on the balance sheet, which is expected to last through the first quarter of 2026. Now I'd like to turn to guidance. For the first quarter of 2024, we expect total company revenue in the range of $18 million-$19 million, revenue from pharma tests, enterprise sales, and other customers in the range of $16 million-$17 million, and revenue from population sequencing of approximately $2 million. For the full year of 2024, we expect total company revenue in the range of $73 million-$75 million, with oncology revenue from pharma tests, enterprise sales, and other customers in the range of $65 million-$67 million, and population sequencing revenue to be approximately $8 million. Our full year revenue guidance of $73 million-$75 million includes an estimated revenue decline of approximately 25% from Natera, which reduces our total revenue by 10%-12%. In late 2023, we amended our volume supply agreement with them. This amendment extends the minimum quarterly volumes out through the end of 2024, compared with Q1 in the prior agreement. In addition, we have modified selling prices to Natera in this amendment, along with the ability to convert to a cost-optimized product so that the amended terms are beneficial for both companies. We expect revenue growth from biopharma customers to offset the decline from Natera. In addition, we expect net loss of approximately $80 million, which is $28 million lower than the loss of $108 million in 2023. This estimate does not include any income or expense related to the outstanding warrants issued to Tempus. Cash usage is expected to be approximately $62 million and includes employee severance payments of approximately $3 million from the Q4 2023 reduction in headcount. We look forward to updating you on our progress during the next conference call in a few months. With that, I will turn the call back over to the operator to begin the Q&A session. Operator? Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. Star two if you would like to remove your question from the queue. Participants using speaker equipment, it will be necessary to pick up your handset before pressing the star keys. Once again, that is star one at this time. A moment while we pull up our first question. Our first question from Tejas Savant. Your line is open. Hi, this is Madison Pasterchick coming on for Tejas. Thanks for taking the question. I just had two for you. One, starting out, within biopharma, I was just wondering, could you comment on, like some other peers are seeing, if you are seeing any headwinds from the tightening of customers' budgeting, or if you are seeing just stabilization on that front? As we look out to 2024, do you have any headwinds baked into the guide, or do you expect to see just a recovery in the biopharma spend? Yeah. Hi, Madison. This is Aaron. Thank you for the question. In terms of the biopharma landscape, over the past couple of years, there had been some slowdowns in trials and things of that nature. We are not seeing a lot of that sitting in front of us today. Our funnel is building, and as Chris went through the prepared remarks, we talked about our win in MRD strategy. So we are seeing a lot of good take-up for our NeXT Personal product in biopharma. In addition, as part of the biopharma revenue, we also have our PCV business with Moderna ramping up their phase III clinical trial. They have been going through enrollment, and we are starting to see those patient samples start to come in to us now. Okay, got it. That is good to hear. Then maybe just one more. I know you have talked about Moderna being an important contributor to your top line in 2024 and 2025. I was wondering if you could comment on how much is embedded into the 2024 guide and how you see that ramping throughout the year and into 2025? Sorry, 2025 guide. Yeah. We haven't said publicly what those specific numbers are from Moderna, so we probably should stay away from that. But what we can say, and what we have said in the past, is that our biopharma in total, biopharma plus PCV, will more than offset any of the decline we're going to see from the Natera business in 2024. So the guide we have for our total oncology business in 2024 is $65 million-$67 million, which is up a tiny bit from 2023. Got it. Thanks so much. Thank you. Next question comes from Mark Massaro with BTIG. Please proceed. Hey, guys. This is Vivian on for Mark. Thanks for taking the questions. I apologize, I might have missed some parts jumping around on calls here. Could you just walk me through how we should be thinking about the NeXT Personal launch with Tempus? I guess, what steps do you need to take before the launch? How the test will be marketed? Then I just kind of wanted to circle back to if we should still be expecting the NeXT TRACERx readout maybe in the middle of this year. Thanks. Yeah, awesome. Thanks. We'll start with Tempus. With Tempus, we launched the test as an early access program, so it's commercially available. I talked on the call that we're now, we've baselined and created the unique molecular fingerprint for more than 250 patients and are now monitoring those patients with our liquid biopsy approach. That's super exciting. The uptake has been phenomenal. I've worked on many launches of products. I think this is one of the ones that I've been really taken aback by the strong demand that there is for an ultrasensitive approach. So we're super excited. With Tempus, we'll be working with them through the entire year, starting with a few reps and then just growing as the year goes on. Our goal this year, because we're not getting reimbursed for the test this year, so we'll be running in a relatively low volume situation, and we've been pretty clear about that until we get reimbursement. So the goal as we go through the year is to, first of all, learn how to work together. Secondly, integrate systems and make sure that we can take samples from them appropriately, get them back, results delivered to their customers, et cetera. Thirdly, to make sure we get messaging right, et cetera, about how we talk about the test to the community and hit the right points. We've started that journey, and we're working together, and we feel like it's the time that we've worked with them has only underlined that we feel like it's a great partnership, and it's built for the long term. We're super excited about where we are, and we're off to a great start. You'll see that that gave us confidence in talking about our $100 million in 2025 plan, which we're excited about. On the TRACERx data, I've got Rich in the room with me, and he can sort of walk you through kind of how to think about that this year as the dataset gets enlarged and we work to make it public. Yeah, the TRACERx expansion is on track. We are actively working on it, and we expect that data should find its way to publication sometime this year. Okay, perfect. Thanks, guys. Awesome. Go ahead, Vivian. How should we think about reimbursement for NeXT Dx, and just how you are thinking about the impact of the test in 2024? Yeah, so we achieved reimbursement. If you remember, like, what we've talked about, I mean, is that if we use the reimbursement process for the test to establish relationships with payers, that was really our goal with moving forward with the test and bringing it to market. So we were excited that we started the dialogue with Palmetto and MolDX, and they now know who we are and we managed through the first test. I think that helps de-risk NeXT Personal for investors. As we go through the year, we'll keep working on enlarging the number of payers that reimburse the test, so we'll be engaging with some of the big payers to try to enlarge the number of payers. Again, it's a way for them to see the quality of product that we have with NeXT Dx, the quality organization, and our systems and our processes, so that when we come to next with them with NeXT Personal, we're a known entity. Medicare reimbursement was in the $3,200 range, and Aaron, how much did we disclose guidance? Yeah, so our guidance for the oncology revenue is $65 million-$67 million. So inside of that number, Vivian, is a couple million dollars for NeXT Dx. Yep. Okay, understood. Thanks for taking the question. Thank you. Awesome, thanks. The next question comes from Daniel Sammarco with TD Cowen. Please proceed. Hey, Chris and Aaron. I am on tonight for Dan Brennan. Thanks for taking the questions. The first one, in the reduction in force press release, you noted that you plan to develop clinical evidence across 10 different clinical studies. Could you just go into a little bit about how much R&D dollars you expect to invest in order to publish evidence in MRD? Yeah. I mean, it's one of the reasons why we spend a lot of money on R&D, is that we have invested heavily in this test. We think it's a significant opportunity. Of the 10 studies that you mentioned, there's the TRACERx collaboration on running those samples and getting that submitted. We're well on track, and most of that work has already been done, is in the rear-view mirror in the P&L. In the breast cancer, we're working with Royal Marsden, we're working with Dana-Farber, we're working with the Institut Curie. A chunk of those samples have already been run, and you'll start to see that data come out in mid-2024. We have a prospective clinical trial with the B-STRONGER collaboration, and we've got our first sites, we're enrolling our first set of patients, but we're probably still early days there in terms of the spending. We think it's really important to have a prospective clinical trial there to establish the evidence and the clinical utility of the product in triple-negative breast cancer. We're really excited about that indication because the opportunity to de-escalate patients is really exciting with an ultrasensitive approach. In IO therapy, we have run most of the samples for VHIO, and you should start to see that data in mid-2024. We've run many of the samples with our Duke and UKE collaborations, and the University of San Diego collaboration continues onward. I don't know that we have a fixed percentage, but we've spent a good chunk of the dollars that we need on those 10 studies. I think, as you know, in this space, we're not done with just the 10. We think the 10 give us the good cornerstone to drive the right kinds of submissions that will get us Medicare coverage, because we think these datasets are strong and robust and comprehensive. We'll be deepening the work in these three indications as we go forward, and it's a journey to build the evidence and show the clinical utility that's ultimately going to make a product like this standard of care. Great. Thanks, Chris. Just digging a little bit deeper into gross margins for the guide. Apologies if you mentioned it earlier, but would you mind going through a little bit of your assumptions for 2024 and possibly how they develop into 2025? Sure. So in terms of gross margin, that's embedded in our guide. So we're assuming somewhere around 25%, plus or minus a point here or there for the full year. In terms of 2025, the gross margins will increase, it will accrete. We haven't guided for 2025 yet, so I'd be hesitant to give you a specific number, but we should be in the low 30s in 2025, especially if we can get to this $100 million number that we're targeting, right? We're not going to be adding a lot of fixed costs. Most of the footprint for the lab operation has been invested in. We will need to add variable costs as volume grows, but for the most part, we're going to leverage the fixed cost footprint. Awesome. Thank you. Have a good night, guys. Thank you. Thanks. Once again, to ask a question, that's star one at this time. Our next question comes from Mike Matson with Needham. Please proceed. Hey, guys. This is Joseph on for Mike. Maybe just touching on that 2025 revenue number. I guess maybe what are the main assumptions in getting to that number? I guess more broadly, do you need VA MVP revenue to remain stable, increase? Do you expect a lot of this to be driven by biopharma mainly, and is VA MVP upside just given the uncertainty around future task orders? Yeah. No, I mean, I think we walked through those three drivers. But right in the heart of that is our win in MRD strategy. We're sitting here in 2024. We're well along the way in evidence development across key indications. We intend to submit for Medicare reimbursement across these three large indications this year, and we're on pace to do that. We expect that to yield efforts and significant revenue, because we're also growing the commercial traction with our partner, Tempus. As that starts to come together, we expect the revenue for NeXT Personal in the clinical market to really start to grow and get traction, and that's a big driver. Secondarily, we're seeing a lot of interest and excitement among the biopharma customers with NeXT Personal, and that's starting to move the needle in terms of our growth rate. You see that embedded in the guide with the traction in 2024 and the growth rate starting to pick up. That's just going to We expect that to pick up steam as we come through the year and come into 2025. That'll be a big year. We do have a five-year sort of renewable set of agreements with the VA for the Million Veteran Program, but we don't expect that. That would be nice if that grew, and there's certainly the possibility because there's a lot of untapped opportunity there that they have not sequenced yet. So it's possible that that would pick up steam. We have not assumed in any way that that's going to be a driver of us getting there. We've assumed that that'll be pretty stable, to be honest. Okay. Yeah, thank you very much. That's super clear. I guess just to understand the Tempus relationship a little bit more clearly. In terms of samples, cancer type samples, are you guys going at this as kind of agnostic to cancer type, or is this a little bit more targeted towards the submissions you expect to do in 2024? I know you guys said you're kind of just like feeling it out and learning how to work together, integrate systems. No, but we're To be clear, we're focused on our own commercial energy and traction, and then with them, we're focused on breast cancer, we're focused on immunotherapy monitoring, and we're focused on lung cancer. As part of the agreement, they have exclusivity on those three areas, and that's what we're focused on. That's the messaging, that's the type of doctor that we call on, and that's what we're focusing on. We're seeing a good chunk of our samples there. I'd be kidding if I said that everything was in those three indications because we get other stuff coming through the system, and we got to manage through that the best we can. But we're staying laser-focused on these indications and will as we go through the next several months and few years. Remember that the strategy here was to focus on the indications where we thought we could gain significant traction with an ultrasensitive approach and add really tremendous value by finding cancer earlier, allowing us to escalate patients to therapy quicker that actually could yield big results. Secondarily, because if you're flying blind, you do therapies and you do invasive procedures that a patient may not get benefit from, but because you don't know who does and doesn't, then you do it. We have the opportunity to de-escalate patients, and that's especially true in breast cancer. So that's where we're focused and building that. We think that from an investor standpoint, that covers a good chunk of the market, to be quite frank. I mean, it's not like these are esoteric parts of the MRD market. This is where a good chunk of the patients are. There's several hundred thousand patients a year that are on immunotherapy and that are being monitored, and then breast cancer is one of the biggest cancers, and lung cancer is one of the biggest cancers. Those three together, those three indications together, we think cover a good significant portion of the $20 billion expected market, and we feel like we're positioned to hit it well with this approach and in a cost-effective manner, rather than building evidence across every single clinical indication simultaneously. Got you. Makes sense. Thanks for taking our questions. Much appreciated. Thanks, Joe. Thank you, ladies and gentlemen. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day. Awesome. Thanks. Goodbye.