Welcome, day three of the TD Cowen Global Healthcare Conference. Dan Brennan, Follow Tools and Diagnostics, really pleased to be joined here with me on stage. Management team of SOPHiA GENETICS. I've got Dr. Philippe Menu, who's Chief Product Officer and Chief Medical Officer. We also have Kellen Sanger, who's Head of Strategy and Chief of Staff. Gentlemen, welcome, and thank you for being here.
Thank you for having us.
I thought, Philippe, maybe you could start off a little bit with kind of your background on the role in the company, your tenure here, and also if you could introduce from your perspective SOPHiA and the SOPHiA DDM platform and kind of what makes it unique.
Absolutely. Thank you for having us. My name is Philippe Menu. I'm Chief Product Officer and Chief Medical Officer with the company. I've been here five years now. I stay on the medical side instead of the medical function, then took over product management and business development partnerships overall. I'm in charge of more of the strategy offering type of the company. What we are, we are a technology company applied to healthcare. The idea is to democratize data-driven medicine. The way we do that is through a tech platform play. We have a cloud-based and cloud-native platform called SOPHiA DDM that basically does the compute, summarization, and analysis of digital health data modalities.
We started 10 years ago now in the genomic space, and then five years ago we branched out to increase the depth we can see on different patient profiles by adding imaging and clinical data on top of the genomics insight. The model we pioneer is a decentralized one. We basically have landed now about 800 customers across 70 countries that basically adopt whatever technology they want to do the testing. For example, on the genomic side, it can be any combination of wet lab chemistry, sequencers, and we go into the lab, we help them get into routine, and we tailor the analytics to their solution. The power of the platform is with AI at the center from inception. We've been learning now from 2 million profiles that we've computed in the platform.
We do about 1,000 a day across a large gamut of NGS applications, and we've become smarter and smarter as we've seen more diverse profiles from these 70 countries. With that, we basically serve both the clinical and the biopharma market. Again, it's a tech play, so the idea was always to land a global platform, leverage network effects to make the platform more valuable for the clinical users, and then leverage network effects indirectly with biopharma because we have a real-time, real-world view of the testing practices in NGS, for example. We can work with pharma then to clinical trial recruitment, CDX deployment, things like that, both in the U.S. and ex-U.S.
Terrific. I do not know if this question would be more for Kellen or for Philippe, but just a question since SOPHiA just reported yesterday. Just wondering kind of how you guys would characterize the 2025 guidance. You guided for, I think it is about 10%-17% top line growth or healthy growth, still below though kind of your long-term goals, I think, of somewhere closer to 30% plus. The industry, the broader tools industry has been facing a difficult couple of years here. Maybe just speak through the puts and takes around that guidance.
Yeah, sure. 10%-17% revenue growth, the midpoint is more around the 15% there, but I'm happy to just take down the P&L. From a growth perspective, there are really three key things that we're looking for in 2025. First, we signed an incredible number of new customers in 2024, so 92 new core genomics customers on our base of 472 customers today. That's a pretty large step up. I'll remind you that our growth strategy is a land and expand strategy in which we land customers. They implement the solution typically between six to nine months, ramp up revenue usage, and then we expand across those accounts over time as we encourage them to adopt additional applications. Our main focus on that pillar is just getting those accounts into routine faster, having them complete that implementation so that they start generating revenue.
We have had a great ability to expand historically. Our average customer uses 2.6 applications. 30% of our customers use three or more applications. 20% use four or more applications. For us, it is really getting those 92 customers that we signed in 2024 into revenue and then expanding across those. That is the first bucket. The second one on the growth side is the U.S. market. We have done a great job expanding and growing in the US. We were born in Switzerland. We grew up in Europe. We have done a great job penetrating the European market, typically something that is a little bit more difficult. The U.S. still remains largely underpenetrated for us. We are growing at really solid revenue growth rates from the clinical perspective in the U.S.. We announced recently that we signed Mount Sinai in New York, which is a big name.
We've expanded across the Mayo Clinic, and this represents obviously a big opportunity for us from a geographic perspective to continue the growth. It's increasingly becoming one of our largest markets as well, so the basis is growing. The third piece, which I know we'll talk a lot about today, especially with Philippe on stage, is our new liquid biopsy offering, MSK Access. This is a partnership that we started with MSK to decentralize their liquid biopsy solution. Since launch 10 months ago in April, we've already signed 34 healthcare institutions across the globe to that solution, which is a pretty resounding number in terms of adoption. Now it's really getting those customers again into routine usage so that they start generating revenue.
They're not really felt right now in the figures, and then continuing to expand that application both across our existing customers, but then landing new customers. If we look beyond the growth side revenue, we mentioned that we expect to drop 60% of every incremental growth dollar of revenue down to EBITDA. This is something that will at least paint a picture in terms of our loss and how we expect that to perform. A big piece of that is margins continuing to increase. In 2023, we had adjusted gross margins of 72.8%, up 60 basis points from last year. We expect that to continue to grow and then largely holding the line on operating expense.
That's terrific. In terms of the growth outlook for next year, say 15% at the midpoint, maybe just high-level question, what would take you from 15% kind of up towards those long-term targets, 15%, 20%, 25%? Obviously, land and expand. That makes perfect sense. Are there certain pressures on the broader kind of market today with spending that is kind of limiting the amount of spending certain customers are doing?
Yeah, and specifically to our biopharma customers. The current guidance does not contemplate any material growth from the biopharma business, so that can be seen as a pretty material upside in terms of if we are able to bring in new customers or accelerate some of the contracts there. In addition, just the progress from liquid biopsy is exciting, and as we continue to grow new applications at that scenario where that could bring in even more growth. The last is the U.S. market. We're continuing to talk to larger and larger customers, health systems beyond the current customers that we're addressing. There are a lot of exciting things across the growth drivers.
Terrific. Maybe, Philippe, just when we've met with Jurgi and Ross several times, and I think when you look at what SOPHiA does, AI on top of diagnostics and genomics, it's really perfect for this market. Sometimes it's hard for investors still to contextualize what makes you different. Walk through a little bit of, as Kellen just said, it takes time to get these big hospitals or big health systems to sign up. Kind of when you walk into a hospital and you say, "Here's what we do, here's why we're different, here's what you can get from us that you can't get deploying this locally," is it possible to give us some more quantifiable measures about the rate of improvement, what you can see that these customers can't do on their own?
Sure. We have a few unique selling points. The first one is the accuracy, the ability to pick the signal from the noise. This is increasingly critical, especially as you move towards more complex applications and more complex biomarkers. Think about HRD. I think we have a best-in-class application, liquid biopsy with MSK Access. We just launched MRD last year as well. That is really like the bread and butter of what we do, being very highly differentiated in our ability to pick the signal from the noise and confidently call variants, and identify basically causative variants of disease. I think that's number one. Number two, the turnaround time is very important because we're a decentralized player, so we basically push the analytics into the hospital.
Basically, the only thing that stands between you and the results is you actually pushing the button on the sequencer, getting the results. You do not have to send out a sample. The sample does not get lost. It is basically staying in your lab. You generate the data as quickly as you can possibly do it, and then you keep all ownership of your data. The third one I would highlight is the scalability aspect that Kellen alluded to. We do a land and expand strategy. We will land on any application in a given lab, and then basically people use the platform. It is very convenient, it is very fast, and now they will basically go into an expansion, adding new applications on top.
You do the scale-up of the adoption of precision medicine applications very easily in a very cost-effective manner because the alternative as a lab is, well, I can hire a bunch of bio-IT people, which are expensive. I can't really find anywhere in the market because it's very competitive. I have to do cybersecurity. I have to do all of these things, or I can have an internet connection to SOPHiA DDM, and then we take care of all of that for them. Whatever precious resources they have on the bio-IT side, they can use to reallocate more to R&D projects, to do more innovation in-house, and we can take care of all of the operational things that we have industrialized to a very high point now.
I know management has talked about customer deploying TSO 500 locally versus having SOPHiA DDM on top of it and the benefits they'll get. You mentioned your first answer to that question was finding the signal out of the noise and the accuracy. Could you just give some perspective on that level of improvement or just what a customer is that's not deploying SOPHiA that does deploy SOPHiA, kind of the benefits on that accuracy? I'm sure you've written white papers on this, maybe a little more kind of quantitative.
Maybe let's take the MSK example because that's a good example. If you zoom out, MSK has two best-in-class assays. They probably have the best molecular oncology program in the world. MSK Impact, which is tissue CGP assay, MSK Access with their flagship liquid biopsy assay, HRD 46 genes about tumor normal. There's been a lot of demand historically for MSK to increase their volume testing from outside institutions. They would like to benefit from these insights. In the past, they've tried to decentralize MSK Access specifically to central labs in the US, and the concordance was actually really poor. Even in a centralized setting, trying to basically do a tech transplant, if you wanted to, another lab, they ever got to something like 60% roughly concordance with the central test in Manhattan.
We were selected by MSK in early 2023 to do a tech transfer to decentralize now these assays. Look at MSK Access. This is essentially the way to think about this. It's a completely independently developed and validated assay that simply happens to have the same probe footprint. We were basically tasked with having the highest concordance as we can compared to Manhattan. Essentially now what you see is in the real world, we get about 98% concordance, give or take something like this, which means that in practice, you have a super sophisticated assay. It's really like sequence 20,000 exomes. I mean, it's like tumor normal. It's a bit of a Ferrari type of assay. We can deploy it across the world. Thirty-four institutions we announced, I think over 20 countries now.
The point is you can walk into a lab in Brazil, in Paris, or in Australia and get the exact same insight you would get if you were tested in the middle of Manhattan, which I think for me is a pretty mind-blowing idea of us being able, with the decade of experience in the signal detection technologies we have, to deploy that at scale in a year. I mean, pharma has noticed as well. We've been public with AstraZeneca. They've been helping us to deploy the test. There is a huge wave rising where this decentralized aspect of testing is getting a lot of attention.
Maybe you mentioned you're going deeper with Mayo. You signed Mount Sinai. Maybe just as an example, could you discuss whatever you could share on Mayo Clinic? They're obviously a leading institution. How are they using SOPHiA DDM today?
Yeah, at Mayo, we basically have very specific target applications we built with them in a way. That was very much a co-creation, if you want, of the assay. They had very specific, and it goes back to your earlier question, they had very specific assays where there were challenges in detection of the signal. They knew this was a tricky one. We worked very closely with them, with their lab, with their clinicians to make sure that we had a fit-for-purpose application that really met exactly their standards. I think that's a very good halo effect for us. We work with MSK. We work with Mayo. It tells the market the quality is very high.
You mentioned turnaround time as a key driver. I just wonder if you can discuss in terms of what the benefit is that a typical hospital or lab might get. I'm sure it depends on their level of expertise. I'm sure the ones that are more kind of these big academic medical centers or Mayo, they're probably pretty good on their own, but maybe smaller places might not be. What's the level of performance enhancement that you give, and how important is that turnaround time advantage?
Yeah, so this is very material. We increasingly put a premium now on having an end-to-end solution for our customers. I mentioned we're technology agnostic. It expands to sequencer. It expands to liquid handler automation as well. Increasingly, we're trying to come to our customers and say, "Look, let me work with you to have the right automates, the right sequencer, the right deployment on DDM so that this is a completely seamless experience." It varies, but if you have a central lab model, typically you're looking at sending out the sample, you may have a turnaround time that may be anywhere between 10 days to two weeks to three weeks to four weeks, depending on where you are in the world.
I mean, with SOPHiA DDM, again, you just have to load your sequencer, you push a button, and depending on the size of the application, a few hours, the result will come back. You save completely on the logistical time, if you want. Then again, do not forget you have the benefit of keeping all the sample in-house, all the data in-house. Do not just get a PDF report. You get everything. You basically gain time and have more insights.
That turnaround time is obviously critical in some cases to the patient care. If it's a late-stage cancer patient, lung cancer, or something like this, waiting two weeks is sometimes unacceptable, and getting a result or an insight faster is critical to their treatment.
In terms of your competitive positioning with the market, when you're going into some of these hospitals, whether in the U.S. or around the world, and you're trying to convince them about your offering, do you run into any other players because it is somewhat of a unique model?
In short, not really. The typical people that we're competing with are the in-house bioinformatics tools and custom solutions that have been developed. When we're comparing to that, it's often a pretty easy sell. You can compare it to when people were building their own CRM platforms, and then when Salesforce took hold, oftentimes the tech platform offers a large suite of benefits. Fleet touched on a few. It is the ability to deliver accuracy. Of course, we are leveraging, obviously, a collective intelligence of people on a network where algorithms have been exposed to different types of diverse patient populations. If a new sample comes onto the sequencer, we were able to read and harmonize that and then produce an accurate result. It is the ability to retain control of data. It is the usability.
Most of all, maybe, or last of all, it's an ability to expand and scale over time. When you're looking at a custom in-house solution, it's often hard if you want to add an additional application or area. Maybe they've developed a solution around solid tumor testing. If they wanted to add on hereditary cancer or liquid biopsy or HEMONC, that's often difficult. It would require a large amount of resources to build. This is really what SOPHiA DDM specializes in. It's not in the scalability of the compute, but it's also the ability to adopt additional applications without having to add more resources or a large IT infrastructure and maintenance costs and servers and such.
Philippe, you mentioned MRD earlier in the discussion, I do not know that specifically for MSK, but right now the MRD market looks like it is heavily driven by the CLIA labs. I do not know how much it is really locally distributed. Is that something that is currently hospitals are trying to do something locally? Is that something in the future you think there will be a big opportunity since there is such a land grab in that market right now and folks are really excited?
Yeah, so I think MRD recapitulates the story about liquid biopsy and others, which is first, pharma has to establish the clinical validity and clinical utility of doing these things. I think in the hematology space, that's now very well accepted. Now you see the next battleground shifting to solid tumors. What you see is typically a model where first you have a few big central labs that dominate, like a Guardant, for example, with liquid biopsy. We see the same in MRD, which makes sense. You want to decrease the risk. You want a single provider. You build the evidence. Once you have this tipping point where you go towards clinical adoption in routine, which we are seeing now in liquid biopsy, I think MRD in AML we've launched, for example.
This is already ongoing, but solid tumors is still a bit of a way out. There will be a demand for, "Okay, so I need to scale this very quickly." Yes, I have a few central labs in the U.S., but that's still a constrained market. With our presence in these 70 countries and in the U.S., we can be a perfect complement to these early central lab models, and you can decentralize through us to basically get the best of both worlds in one. For us, the analogy I always take is if you are a pharma analyst hat on in a way, we're not first in class. We're best in class, which means we're not investing to develop new markets. We wait for the markets to emerge, have a robust clinical demand, and then we go in with our solution.
When you think about a customer running a 10-gene panel versus running hundreds of genes, running to exomes versus TranSurge from full genome, I assume the richer, the deeper, the test, the more ideally you could be valued by finding the signal from that. It's also probably a better business for you financially. I'm sure there's a higher pay rate for that. Can you just speak to kind of what you've seen, Philippe, in terms of as prices of sequencing will come down, I assume hospitals are looking to deploy kind of larger, more complex tests on their own, and that directly benefits your strategy. Where are we in that evolution? When you look at your portfolio of tests that you guys are applying SOPHiA DDM to, has there been a big shift towards these more complex panels yet? Do you think that's coming?
How would that impact SOPHiA?
Definitely, yes. You start seeing much more complex data being computed, which means both size of the panel but complexity of the biomarkers. If you think on HRD, MRD, I mean, these are very sophisticated detection techniques. I would say this is something we see both in oncology and in rare inherited disorders. In oncology, we see these higher ASP applications for us. Again, HRD, liquid biopsies, MRD that get a premium because they're very sophisticated. You also see that in the rare inherited disorders. I think there's a gradual shift towards whole genome, but I would say that remains still a small minority of institutions. What we now see is more consolidation of targeted specialized panel like hereditary cancer, pharmacogenomics testing, things like that.
We have a new offering that we're very excited about for 2025 called NGS exomes, where you take the backbone of an exome, can be a clinical or whole exome, and then you spike in specific modules that allow you to zoom in and find these what I call gourmet variants, the Alu insertions, your BOLINE inversions. If you're at the exome level, you're basically losing the ability to find them because you simply don't have the coverage. We basically marry our technological bricks to serve customers with a bigger picture with exomes and then having the ability to zoom in very deeply into specific variants of interest. That's a solution that gets a lot of traction, especially in the U.S.. We're working on a few big, large deals on this one and we're very excited about. It's not just oncology.
We also see a very big growth potential on the rare inherited disorder side.
On MSK Impact, I think you said there are 34 entities.
Access, MSK Access, and then seven on MSK Impact.
Kind of where can that go to? And how important is that for SOPHiA? I don't think you break out your revenue contribution from MSK right now, but can you just speak to what you see as the opportunity for that? If we're sitting here two years from now and there's 200 labs that are running one version, either the liquid or the solid tumor or both, how meaningful could that be to SOPHiA?
Yeah, no, I think for us, the MSK deal is a fantastic deal that we've signed. I'll be on the record saying the collaboration with MSK is nothing short of excellent. Really, they've been fantastic partners to us. Just so you understand the trends, MSK Access, we launched in April 2024, which is why you see now 34 customers, a very fast ramp-up of adoption in over 20 countries. MSK Impact, we launched in October, which is why you see a fewer number, like the seven we reported. Also inherently, we know that the CGP market is a more competitive market than the liquid biopsy is. For us, I will focus on the liquid biopsy because I think that's where the big ramp is for us. You have a view of oncology that says liquid biopsy will become the de facto standard at some point in the future.
The issue is today, I have a few central labs, mostly in the U.S., that can run my assays. If I was a pharma tomorrow launching a new asset on a ctDNA endpoint, I will de-risk my regulatory program by going to a central lab in the U.S., and then I fall flat on my face because there is no established testing base of liquid biopsy outside of the U.S. Even within the U.S., you have a lot of underserved populations. The vision we have with MSK is we want to make MSK Access or SOPHiA DDM the de facto standard liquid biopsy testing globally. We are deploying in these 34 sites. We have a pipeline of about, I think, 50 or 60 additional names that we've disclosed. This is kind of a big growth driver.
At the same time, we're actively also exploring regulatory routes to put that under IVD status. We have nothing to share right now, but just to share the vision is to have an IVD platform across the world that can support liquid biopsy testing needs for biopharma and clinical. Again, same concordance with MSK. The quality you would get anywhere in the world would be the same as you would get in Manhattan.
Maybe Kellen, can you speak to, I don't know, I forget if SOPHiA has disclosed this, but back to that question in terms of small panels, bigger panels, and then really big panels. I would assume it's fair to say the larger the panel, the more opportunity is for SOPHiA because the price is probably going to be higher, and you probably collect a price somewhat analogous to the depth and the kind of expense of the panel. Where do you stand today when you look at all the tests that you're running on a sequencing basis? Is there a sense? Could you share with us the relative size of that panel and kind of where that could go over time?
Yeah, sure, absolutely. Two trends that are kind of overarching what's happening with ASBs and also sophistication. First, data is exploding, and in turn, more sophisticated applications are being used. We published some numbers on the amount of data that's coming off of our platform. While analysis volume has maybe grown quite steadily, the data that's coming out of those tests is even more. I think data has grown more than 50% on CAGR over the last five years, which is an incredible amount. This speaks to the sophistication of the tests that are emerging, such as liquid biopsy. Some of the things that we're doing with HRD and solid tumor has been a large kind of data test.
What we're essentially doing is we price, as you mentioned, based on the sophistication of the algorithm that we're running and the complexity of the bioinformatics. If a test ranges between $100 and $500 per run, our business model is pretty simply volume times price. We're seeing a move, hopefully in the long term, to more sophisticated solutions. Philippe has talked a lot about how liquid biopsy is becoming a standard. What you'll see is more ratio of our testing volume move to those sophisticated solutions. Just to note on the liquid biopsy piece, if you look at our 2024 numbers, none of the liquid biopsy or only a very small amount of those 34 customers are generating volumes and producing revenue to date. Fifteen of the 34 have implemented those solutions. They will ramp up over the course of the year.
We want to move the other 34 into routine as well. As you'll see towards the back half of the year, these applications will come online. As we look further out into the future, you should see the more sophisticated tests driving price.
I mean, just one thing to add because we haven't alluded to it, but the business model is a volume-based model. The access to the platform is free, and then you pay basically per use, which basically aligns our incentives with our customers because if the test is not good, they will not use it, will not get paid. The wider point for us is you would do that if you were to bet that precision medicine will explode and you would ride the volume wave, which we very much believe to. If the volumes are going up, the tech complexity are going up as well, then that's the way we're riding.
Can you discuss your pharma business model? You've got a company like Tempus that has a data lake that they basically have, and they apply their own algorithms, and clients can run access to that data lake by years, by therapeutic type or get everything. You've got the other CLIA labs. Mostly, it's like pharma will send them samples, even though they have their own data business, send them samples, they'll run them and send them back, and the assays are oftentimes much deeper and richer. Kind of what's your pharma business model approach today? Is it evolving? Just kind of speak to the pharma opportunity.
Sure. We have kind of two ways to think about pharma. We have one, which is the DX side, so we diagnostics in terms of genomics, and the other one, which is the data/multimodal approach. The DX side is basically the value prop is we have a global testing base. We have real-world, real-life, and real-time visibility on what's going on in the testing base, and we can deploy assay to meet pharma demands. A good example of that is the partnership we've done with AstraZeneca on HRD, where they help us basically sponsor the deployment and the testing of our own solution, which was put under IVD to drive the testing of these patients. This was so successful that we're now doing the same with MSK Access in liquid biopsy, for example.
Here, you can think of the platform as being potentially like a CX platform of the future in a decentralized fashion. That's the vision where we are going to. I alluded with MSK Access, having a standard testing base under regulatory CGP at some point, where you can basically deploy, run your clinical trials. You can run your assays once you're post-marketing from a pharma company. Really plugging that gap between the central labs and the rest of the world that doesn't get access to uniform testing. That's a big part of what we do. The second part is this multimodal approach, where, as I mentioned, five years ago, we started branching out to add to the genomics component, the imaging, the clinical, and the laboratory data using AI in the platform to do next-generation certification of patients. We have a few public examples.
If you want to go to the ESMO Congress with AstraZeneca, we did a reanalysis of their phase three trial in immunotherapy, where we found a population that would have responded much better than the average. The idea here for us, it's more about insight generation with pharma, both on their data and our data, to basically drive then hypothesis generation for clinical trial, go-to-market, and commercialization.
Just on that second point, the multimodal, just remind us on the data that you're running on, the data you're analyzing on behalf of all the clients that are deploying. Do you have access to all of that data in terms of your ability to manipulate that in a de-identified way and analyze parts of it? How are those contracts struck?
Yeah, so we basically have, so it's a project-dependent view. We can have access to pharma data or to real-world data. In the pharma data, the model, for example, could be like the one that is public with AstraZeneca. They send us the clinical trial data. We reanalyze it in SOPHiA DDM, and we basically provide the predictors and the analytics that says, based on this data, we think these patients would actually respond much better to that therapy. That's the trial data. On the real-world data, we have our own observational clinical studies where we collect those data. As part of the MSK partnership, we have access to all of the clinical genomic database from basically the last few years that they have. We have a partnership there. We can interrogate that data as well.
We are now building a network of other institutions like MSK that want to pitch in their data as well to do multicentric research. This is something we're focusing a lot for 2025 and beyond about scaling the assembly of these multimodal data stacks, which when you're a central lab, it's relatively easier because you basically are the recipient of everything, but then you're limited to the test that you run. For us, it's about getting out, harmonizing the data in a decentralized fashion, making these data talk to each other on the platform, harmonizing it, and then providing the analytics tool for people to actually interrogate the data. I think here we're breaking new grounds. I don't think that exists, which means it's not easy either, but we see a very high upside for the future there.
Maybe final question. We're basically out of time, but do you think as you look at where the stock is and you read analyst reports and you meet with investors when you can here, which is terrific, do you think there's anything that the market is not really appreciating for SOPHiA?
Yeah, I think there would be probably many things. I think, first of all, AI has been a big thing, obviously, this year, especially in healthcare. We are a true AI platform. The solutions that Philippe has been talking about, both in genomics and multimodal, are embedded with deep proprietary AI technology. I think there's a story on just re-accelerating growth and reaching a certain amount of growth and then profitability, hopefully in the medium term, will unlock certain things around the story. It is tough because there are not so many companies that look like us, who is a consumption-based SaaS cloud platform that's really a tech provider. It is difficult to compare us to others in the space in terms of what we're doing and some of the innovations we're making.
It's hard to join those parallels, but certainly, we think some things are missing from the story.
Terrific. Thank you both for being here, and thanks to everyone in the audience.
Thank you.
Thanks.