Good morning, everyone. Welcome to the JP Morgan Healthcare Conference. Last day today, we have a lot of presentations still to go, so I hope you've had some coffee and ready to go. I'm Josh Bowers from the London Healthcare team, and it's my pleasure this morning to welcome Jurgi and Ross from SOPHiA GENETICS. As with all the other presentations, about 20 minutes, and then we'll open it up to Q&A. With that, hand it over to Jurgi.
Thank you, Josh. It's a pleasure to be here today to present at the JP Morgan Conference, 2024. Before I start with our story, I'm Jurgi Camblong. I'm the CEO and one of the co-founders of SOPHiA GENETICS, and today I'm going to speak to you about the story of SOPHiA GENETICS, our strong execution in 2023, and our plans to further execute in 2024. Before I start, as it is traditional, I need to give you a moment to quickly read our cautionary notices. When we started our journey back in 2011, the three co-founders of SOPHiA GENETICS, we had a clear idea on where precision medicine would go and how there would be one day a world of data-driven medicine.
Our strong belief that was with new data types that would be produced to better understand disorders, there would be an opportunity for a tech player to basically bridge a gap between science and technology, and while sitting in the cloud, break information silos across institutions that would produce data of patients, as well as break information silos across data modalities, so that the bigger the network, the more data computed, the more collective intelligence would be created, and hence, on the base of the patients today, be in a position to better inform decisions for patients tomorrow. While this was a bold statement when we started 2011 with no technology, I think our credentials have demonstrated that this world exists today and probably will become a new norm in the future.
Before I go in details within SOPHiA GENETICS, I would like to take a moment to highlight you some of the innovations that we believe have been paving that potential world of data-driven medicine along the last 20 years. Back 2003, long time ago, we, I think, were all excited about the first human genome sequence, and this sounds very, very long time ago, but was a very important event because thanks to the ability of understanding how the genomics functions, we have been able, since then, through a lot of discoveries and science effort, to understand the key drivers of important disorders, such as cancer.
From 2003 to 2011, it took actually eight years to move from the first human genome to have an industry player, Illumina in that case, distribute sequencers, MiSeq, into the hospitals to enable hospitals to sequence patient data locally close to the patients and take informed and good decisions. 2012 to 2014 were years where some reference labs developed very sophisticated solutions, and by doing so, demonstrated the value of profiling the tumor of patients, so that either from the tissue or from the blood, one could understand what was driving cancer, better diagnose patients, have a better idea of prognostic, and have better information to be able to take clinical and medical decisions.
I think there is no question that today, CGP testing and liquid biopsy testing have demonstrated clinical utility, and beyond that, we've seen other actors that went beyond genomic data by computing and combining in-reference lab phenotypic data together with genomic data to be able to even better understand what is driving cancer. 2018 was a year where Illumina launched their first CGP in the market, TSO 500, so basically six years after Foundation Medicine had done that in a central lab. We believe that this was very important movement because as it was for the MiSeq launch into the hospital, it demonstrated that eventually, one day, every hospital around the world, every reference lab, will be able to produce genomic information and do precision medicine at home.
We believe that today, we are already in an era of data, where platforms will become more and more important, and while by breaking information silos as we do, we will be able to deliver better and better insights to clinicians to take smart decisions, as well as leverage on the data that are being gathered to inform the biopharma industry on how to develop more targeted drugs. While this is, I think, something that is very important for humanity, and in particular, important to give equity of care to patients around the world, doing testing as close as possible to where they live, it's actually a good business as well.
Today, we estimate that our total addressable market is a $40 billion TAM, $25 billion in the clinical market and $15 billion in the biopharma market, and that this total addressable TAM can be addressed with the capabilities we built since 2011, as we have been developing our cloud-based consumption analytics platform, SOPHiA DDM. Since 2011, we've invested $400 million in the development of SOPHiA DDM, the workflows, the algorithms, the security requirements to really be able to scale that. And today, I'm really proud to tell you that these efforts have enabled us to build unique factory capabilities that are powering up our algorithms and bioinformatics, these are radiomics factories and multimodal factories.
And as you will see later in my presentation, as we have been computing data, we have been able to have a very sophisticated data sets of clinical genomics patient profiles in our data warehouse, which today gives us a competitive advantage. As thanks to this data diversity, we can continuously improve our algorithms, and as we deploy them in the clinical market, better help the clinicians, as well as the pharma industry. Recently, with our customers, we made a-
NPS?
Yeah, well, we asked our customers what they thought about SOPHiA GENETICS. We made a survey, and we end up demonstrating that, you know, the NPS was really state-of-the-art. So our customers are in love with SOPHiA DDM. 75, it's really strong, not only for any company, but in particular for a tech company. And we believe that this NPS reflects the capabilities of our platform in being able to accurately compute data while data are being produced by different workflows, reflects the universality of our platform that enables hospitals to properly compute and produce data without making big CapEx investments. We believe that this represents as well our performance when it comes to security and privacy of the data, scalability and interoperability.
In that regard, I think it's very important to acknowledge that in the world of today, it's very important to be able to have bi-directional communications between systems so that the patients get the best information out of it. We're very proud to have highlighted some of those, including what we did with the Institut Gustave Roussy this year. We ended up 2023 strong. I can't disclose any forward-looking revenue for Q4, neither full year, but I can give you some data when it comes to the number of analyses, which is a proxy of our performance, as well as the number of customers we've landed during the year. We ended this year with 315,000 patient profiles computed within SOPHiA DDM.
We added 87 core genomics customers to our platform in a full year, and ended the year with over 750+ institutions using SOPHiA DDM. Not only we ended up the year strong, but actually we ended Q4 very strong. Out of the 87 customers that we added, 35 were signed in Q4 and are going to start producing by H2 of next year, so you should expect volumes to continue to growth on the base of the signatures. And we ended up, this quarter, while I'm not going to yet give specific numbers, with over 80,000 patient profiles that were computed in the platform.
So to be able to achieve that, one of the recipes that SOPHiA GENETICS has deployed and applied along the years has been to be very close to customers, and this has not enabled us only to develop a very accurate platform, a universal platform, but as well, to have in our platform a set of applications, today, over 300 applications, that enable us to support biopharma, academic hospitals, as well as reference labs in rare inherited disorders and oncology for multiple applications all along the patient journey and for any type of organ, and in particular, any type of cancer type.
We've never highlighted what has been our performance in terms of compute of the data for specific type of applications, and today we decided that we will give you a sense on what type of data, in terms of disease applications, are being computed over time within our platform. So we ended up 2023 with a strong growth, double-digit growth for all the disease areas where we've been involved. The volume of data compute in rare inherited disorders grew 19%. The volume in hereditary cancer grew 25%. The volume of patient computed for hem-onc grew 26%. The volume of patients computed for solid tumors grew 32%.
And while for us, it's liquid biopsy is pretty new, we're really happy to see a strong growth in 2023 on liquid biopsy with a year-on-year growth of volume of 362%. So given our platform is consumption-based, the analysis you see here are a good proxy of our revenue. And so in Q3 2023, we announced that we had had strong growth, so we had a 40% growth year-on-year on a reported basis, and 37% growth of revenue year-on-year on a constant currency ex-COVID basis.
We believe that this is the type of growth that SOPHiA is going to be able to sustain in the future as more disease applications require, for example, DNA sequencing and multimodal capabilities become more and more important to take medical decisions or inform decisions in deciding how to develop drugs. While the performance for 2023 was strong, we're very excited about 2024, and today we decided we will highlight three key drivers. The first one is solid tumors. We see that over time, solid tumors will require more and more complex signatures to be identified, like HRD, and we believe that a platform like SOPHiA will become even more important, thanks to our AI capabilities. We see a strong growth opportunity for 2024 with a liquid biopsy.
And last but not least, we have right now significant momentum in the U.S. with recent wins, and we believe that this is something that will be a catalyst for 2024 and beyond. So going to specific applications, I would like to explain you how now quickly we can develop and deploy applications in the market. Recently, we published in Cell Reports Medicine, our GIInger deep learning algorithm, which has been the algorithm that enabled us to strongly growth on HRD testing over the last year. It took us about a year to develop this algorithm that we deploy in our platform in February 2022, and in 2023, we've seen this algorithm used by over 47 customers, and we grew the volume of HRD testing by 180%.
This is a trend that we expect might continue in 2024 for different reasons. First, biopharma is really requiring decentralized testing, in particular for complex signatures such as HRD. Two, we start to see positive traction of SOPHiA DDM for HRD testing into new geographies. End of last year, we had announced that Institut Gustave Roussy in Paris, which is one of the top five cancer centers around the world, had adopted SOPHiA DDM for HRD testing. Early this year, we are being announcing actually today that Royal Marsden, part of the NHS hubs, has as well deployed SOPHiA DDM in-house for HRD testing. And beyond, I would say, marquee names that are basically validating the quality of our technology, we do see for 2024 growth opportunities, given that our algorithm is technology agnostic.
As platforms like MGI, Element, and others will be deployed, we believe that we will see more usage of our platform for HRD detection. So stay tuned for 2024 when it comes to HRD growth. And beyond 2024, we believe that this growth will be sustained as HRD score may be applied to other cancer types beyond ovarian cancer. To finish on HRD, I would like to highlight that for us, this was the first time we were working with a pharma company to deploy our capabilities into the clinical market. We did that very well and very quickly with AstraZeneca. And as I turn now to another application, which is liquid biopsy, I want to highlight that we're going to apply the same recipe.
So, back in October 2022, Memorial Sloan Kettering had given us exclusive rights to one of their technology called MSK-ACCESS, that they wanted to decentralize beyond the Memorial Sloan Kettering lab. We've been industrializing that solution as we did for HRD, and we gave already some color of the performance of this technology a few months ago. This effort led to a three-party agreement between Memorial Sloan Kettering, SOPHiA GENETICS, and AstraZeneca to push liquid biopsy testing, powered by SOPHiA, with MSK-ACCESS across many continents, and so we are very excited about this potential for 2024. End of 2023, we had announced that in the U.S., BioReference Labs was the first adopter of MSK-ACCESS, powered by SOPHiA.
Today, we're announcing that another very important lab, Dasa, which is actually the third largest lab in the world, largest in Latin America, is as well adopting, SOPHiA DDM powered, excuse me, MSK-ACCESS, powered by SOPHiA DDM for liquid biopsy applications. Turning to our third driver, U.S., we ended up the year adding BioReference Labs. I want to remind you that we have very strong marquee names that are customers of SOPHiA DDM in the U.S. Most of them being academic centers, comprehensive cancer centers, university hospitals, but some of them now being as well reference labs. And this morning, we are announcing that Tennessee Oncology, one of the largest cancer care networks in the U.S., is adopting as well SOPHiA DDM for multiple applications, including MSK-ACCESS for liquid biopsy testing.
So while the deployment of new applications in the market and the deployment of SOPHiA DDM into new market is important, in the end, this enable us to animate our flywheel effect. The more usage of the platform in the clinical market as we deploy new capabilities, new applications in new regions, the more data, the more data, the more we can as well help either researchers or the biopharma on discovery and development activities. And we believe that this flywheel effect will accelerate in the next years.
As an example, I would like to highlight as well the fact that, the biopharma, as, right now, realize that this flywheel effect can benefit them, as it was in the case of, Boundless Bio, with whom we've started on the development phase, for their clinical trials, to target specific patients that have a signature called extrachromosomal DNA. But with the understanding that if together we would validate the signature for their indications, they could then, use our platform to deploy the testing in 750 hospitals as a turnkey in the deployment phase.
This era, I think, is just the beginning, but we believe is going to accelerate in the next years because sequencers are more powerful, because new data modalities become relevant in the clinical decision, because computing cost as well is decreasing. I would like for the first time to give you a sense as well on how ourselves we think about data at SOPHiA GENETICS, and how the data amount we've been computing over years have evolved. From 2021 to 2023, as we have been expanding the network of our customers and computing more patient profiles, actually, the data volume has grown 51% on a compounding annual basis....
30% of this growth in terms of terabytes comes from more patient cases, and 70% comes from more complexity into the data, which means more genes, more depth, more data modalities. This is, for us, extremely encouraging because it's demonstrating that the platform will be leading this industry and that this platform will need to be powered with very sophisticated algorithms as signatures become more and more complex. So turning to multimodality, last year, we had announced that Memorial Sloan Kettering had adopted SOPHiA DDM as a partner to deploy their 80,000 clinical genomics database, which is a unique data set that MSK has been able to develop over years with comprehensive genomic profiles, liquid biopsy, digital pathology, radiomics features, and clinical data. And this week, we announced that another partner just joined this effort.
This is Exactis, so it's a foundation that is representing 18 hospitals within Canada. And, through Exactis and MSK, now we're going to accelerate this data movement and hope to see other foundations, other hospitals, other networks join our multimodal platform to eventually share data with each other. So while this is, I would say, the future, and clearly it's, still a bold mission, I want to highlight that we're not alone in our journey, and that we have multiple partners so that we can execute, the adoption and the deployment in our platform, both in the clinical and in the biopharma market. Today, I've been talking about our strong, performance in, 2023 when it comes to the top line, with 40% year-on-year growth on Q3 2023.
I've been talking about our strategy for 2024, but I would like to finish saying that we are committed to sustainably grow at SOPHiA GENETICS and that we are on a path to profitability. It is now five quarters out of the last seven continued quarters that we have been improving our operating margin. We've been able to grow 40% year-on-year, Q3-on-Q3, while decreasing cash burn by 42% and end up Q3 2023 with very strong adjusted gross margins of 73%. Right now, our cash position is $132.8 million, and today we're very confident to announce that our path to profitability will be reached in over the next two plus years.
With that, I would like to thank you, and I would like to as well tell you that we count on you as investors, as partners in our journey to democratize data-driven medicine. Ross and I are now ready for your questions.
Maybe I'll kick it off. Jurgi, if you could give us a little bit more color on, you know, your multimodal, multimodal approach and how that differentiates you with, with other approaches.
So we started building our multimodal capabilities about three years ago, and we did that around one specific cancer type, which is lung cancer, stage four non-small cell lung cancer, stage four. And this enabled us really to build our multimodal capabilities. And so to give you some numbers, in two years' time, we've been able to deploy this platform for lung cancer in 30 centers around the world, including Mayo Clinic, follow 2,000 patients, and demonstrate that by doing so, not only we're trusted by the hospitals for computing data beyond genomic data, but as well that there was a value on it, right? A value to cohort patients and a value eventually to be able to define a prognostic score, in that case, to guess how a patient might respond to immunotherapy.
So this is something that I think is pretty unique and has been able to be achieved so quickly in two years' time, thanks to the $400 million investments we made in our platform, to build up our factories, and that has been as well one of the important elements to trigger the interest of Memorial Sloan Kettering, as well as Exactis, on putting their multimodal data as well into our platform. And to end last year, we've been public as well of a partnership with a biopharma company, so AstraZeneca, where our factories are being used as well to compute the data of AstraZeneca in the context of a specific clinical trial.
So I would say that these different steps have been very important to demonstrate the value, the trust of our platform for both the clinical market and the biopharma market. And I would say, as the therapeutic areas become more and more nuanced, I do believe that these type of capabilities will become more and more important.
Great. Thanks. And then I saw that your current cash balance, $132 million. Where does that get us, and how far along your path to profitability does that reach?
I will start by reiterating that so we're committed to profitability, that we have enough cash to reach profitability, and that our plan is to be profitable in two plus years. But I don't know if, Ross, you want to give some more color?
Sure. So obviously, you know, we've been trying to balance what we would consider the path of sustainable growth. Inherently, you know, if you look at our long-term growth guidance, 30%-35%, we've been tracking, at least in the third quarter, above that range. But certainly for the year, as we pointed to, we continue to feel comfortable with our performance. But I would say, in a challenging backdrop, we were not only able to deliver those strong revenue results, but we've shown very significant gross margin expansion, which again, I would say, gives us really nice ability to then lever that to the operating line and ultimately cross over to profitability. And so what we wanted to get across today was certainly, you know, to Jurgi's point, we have sufficient capital.
We intend to cross over to profitability in two plus years and have a nice, comfortable cash buffer as we do so. And so we've been running the business to be able to sustain that growth momentum that is also underpinned by very strong industry dynamics, but do so in a disciplined way, where we can be sustainable, self-sustaining, and profitable. And so I think, again, this is an incredibly important period for us, from an execution perspective. We did end the year strong. And so as we look to 2024, obviously we'll update folks when we guide, typically with our fourth quarter results.
But in the end, we wanted to give some color around that path and that crossover, because I think particularly in the current environment as an executive, it's very important to be cognizant, not just of your market potential and objectives, but also doing so within your capital means, which is what we've done.
Great, thanks. That's clear. In terms of liquid biopsy, it's exciting. We're hearing a lot of chatter about it. What are you seeing from your customers, and can you give us a bit more color on what you see the future of that is?
Yeah, I would say the clinical utility of liquid biopsy now is being demonstrated, right? But it took quite some time. And the utility today, it's for a specific type of cancers, so lung cancer, prostate cancer. But we believe that this will go beyond diseases and applications, and that liquid biopsy will not only be used to diagnose patients for those type of cancers when a biopsy is not feasible, but beyond that as well, to monitor longitudinally patients as they are being treated, right? And I would say, in October 2023, at ESMO, it was very clear that there is a strong trend towards the adoption of liquid biopsy by many hospitals around the world. And the big expectation from the pharma, that decentralized liquid biopsy testing is happening for multiple reasons.
One, for finding patients that may be eligible to drugs. Two, for being able to identify patients that can be recruited into clinical trials. And three, for discovering perspectives. So we are very, very enthusiastic about that trend. We don't think we'll be the last one. Today we didn't cover MRD, but we believe that MRD, at some point as well, will follow the same trend. So we try to explain that this comes in waves of innovations. We saw decentralization of hereditary cancer testing or solid tumor testing.
Now we are in the phase of liquid biopsy testing, and in the future, when we come to a specifically genomic testing, there will be other type of tests that will demonstrate clinical utility, and again, will be deployed in a decentralized way, and will require a platform like SOPHiA DDM to compute this data.
Yeah, I would just add commercially, you know, liquid biopsy will launch, you know, in a full routine basis for us in the first part of 2024. And so the fact that we already have great brand customer names signed up and we have a very strong pipeline is a testament to, one, the quality of the product. Obviously, everyone knows the MSK brand name. Other than the, you know, market-leading product, Guardant 360, I think this is probably the most recognized application in market. And so there's a lot of excitement, not just here in the U.S. where we've had, you know, some really nice wins, but on a global basis. So if you start thinking about, again, pharma's interest in therapy selection, the, I would say, advantages in some instances, right, of a liquid versus solid application.
You know, we're quite confident that this will become, for us, one of the more important growth drivers over the next certainly 24 months. And you'll see more from us over the course of this year. And so, the product's off to a fantastic start, and we're very excited about updating you on its progress over the course of this year and into next.
Great, thanks. And you mentioned the U.S. and, you know, of your success over here and with your partnerships with large pharma. Where are you in terms of penetration here in the U.S., just kind of with the DDM platform? And how fast do you think that can grow?
Well, it should be our biggest market, right, in the clinical, clinical business. Just taking a step back, we started commercializing our platform back 2015 in Europe, and we didn't move away from Europe before 2019. But since then, we've seen a lot of traction, and one of the testimonial of this traction is the marquee names that are using SOPHiA DDM today. Definitively a market where we can do better, a market where I think right now there is a lot of sensitivity as well on return on investment and efficiently producing and computing data, even for players who are producing data at scale. So I refer to specific type of reference labs.
And where the fact that we ourselves are being among the only one industrializing a platform like SOPHiA DDM are uniquely positioned now to support them. Not only to enable them to launch new applications, not only to enable them to manage their existing business, but to do so while decreasing a lot their cost. And in that sense, the recent pressure that the market put on the OpEx has been a pretty positive for us because it's opening up new sales opportunities into these type of customers.
... Yeah, just to give you a bit more color, so I think for us, for this year, the U.S. was probably the one piece of the business that most outperformed our expectation internally. So we're quite happy with the progress we're making here and with the names that we've shared with you. I think there's been, you know, some debate, including from our IPO, sort of how decentralized and, you know, in the U.S., centralized play together. I guess our view continues to be we can help all laboratories, big and small, and you've seen us announce some very significant wins here in some fairly large, centralized entities.
You know, there's more we haven't discussed, but I would say in total, our ability to power up many different institutions here and abroad of varying size and scale, this is becoming more obvious. And to Jurgi's point, in an environment like today, where, for many labs, you know, there is a push to profitability as well, and there's scrutiny on gross margins, this is some place where we can be helpful, and really enable the power of our platform to aid in that journey, on top of also bringing obviously best-in-class capabilities analytically.
Great, thanks. I'll open up to the floor.
Hey, good morning. I was just wondering if you could elaborate on how the adoption of MSK-ACCESS at some of your early customers is going, and then what type of opportunities you see for cross-selling into kind of the more core legacy SOPHiA testing portfolio?
Yeah, thank you for the question. So, in September last year, we had an event at the Nasdaq, where we had as well invited multiple pharma partners, including AstraZeneca, including Janssen, and we released some preliminary data that demonstrates that despite MSK-ACCESS is being produced in a decentralized setup with a different workflow than the one at MSK lab, the data are very, very sensitive and that the concordance between this data computed by SOPHiA and the data produced within MSK is extremely, extremely close and of high quality. Since then, we've been announcing the partnership with AstraZeneca plus MSK that will now enable us to deploy quickly MSK-ACCESS within SOPHiA DDM into the five continents.
In terms of early adoption, we mentioned BioReference Labs, we mentioned Dasa, but our pipeline is growing very, very quickly.
Yeah, I would say what's really great about an application like MSK-ACCESS, and this is true as well for us in HRD and CGP, these are great door openers for us in terms of new logos. And so in terms of some of the larger institutions I alluded to, this is a really good conversation starter and one that's driven, I would say, some of our new logo momentum, and obviously, it takes some time for the new logos to turn into revenue. But that sets us up nicely over the next 12-24 months. I would say on the expand side, in terms of new applications, we had a very strong year. But honestly, I do think we can do better even on that end. You know, our net dollar retention has been strong all year.
It's certainly top of class for software businesses. But I would say, you know, as someone who, you know, scrutinizes the numbers all the time, you always want more, and I do think with the menu that we now have of applications, you know, our average customer still is only using, you know, one to two, right? So of the 10+. And so on that end, there's still a ton of ability for us to upsell and drive that. So if you think about what Jurgi talked about, so we've got the new logos coming on, industry-based, you know, volumes are great because the price of sequencing is dropping. Data's exploding, so you've got more, you know, data per test that's going up. And so all of those vectors and the extra menu are all contributing to our solid revenue growth.
If you think about what that means with some of the announcements even Illumina had this week, right, around the XLEAP and other pieces, this is, you know, portending quite well for us as we think about both the land and the expand part of the revenue equation.
So with that, another question? Yeah. We still have four minutes.
Can you talk more about the MSK product itself? Are you selling branded kits, and what other services might customers need to be successful besides the kit and the interpretation software?
They need a sequencer, and they need people who are capable of doing pathology reports, and trained people in the lab to be able to do the library prep, right? That's it. Actually, this highlights pretty much the complexity for any lab that today would work with us. The complexity is not anymore in the data computing. It's very much into properly preparing the samples and being able to sign the clinical reports.
And so we also have a program called MaxCare, and this is, I would say, is a pretty big differentiator for, for us relative to most. We will come in and hold the hand of the institution from the time they buy the sequencer to when they put the application into routine. And despite all of the advancements that's happened in NGS over the last, you know, decade plus, these are still quite complex solutions, right? Having a team that's now seen over 750 labs be set up to produce data, I would say we're quite good, maybe the best in the world, in understanding how a lab should be producing information, right, in precision medicine.
We typically partner with the lab, and obviously, it's a service relative to their ability to, you know, get that application to what we would consider routine. So there's quite a lot of focus 'cause it's the one part we don't necessarily control, right, in this. We have very visible revenues. We have very visible kind of customer momentum, but, you know, that switch over into routine of when they're going to be running. I mean, there's many pieces, and even from a regulatory standpoint, they need to do to get there. But for us, we want to make sure that they've got the support, and particularly with something more complex like liquid biopsy, you know, we, we are there the, the full way as we implement.
So I think that's a real nice differentiator for us, and something we typically hear back from customers, as you saw that NPS score, that, you know, many of the other, if you're a, you know, reagent or a instrument provider, they sort of drop off the box, or they ship the kits, and then, you know, it's up to you to go get everything working. And for us, we really are a partner to our customers, which is why I think you see that NPS score at such a top-tier level.
Thank you very much. Follow us. We will have our earnings, I think first or second week of,
First week of March.
... of March, where we're going to disclose our 2023 full year financials. Thank you. Thank you.