Good afternoon, ladies and gentlemen, and welcome to Veracyte's fourth quarter and full year 2021 financial results conference call. As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to Tracy Morris, Veracyte's Vice President of Corporate Communications and Investor Relations. You may begin.
Thank you, Lee. Good afternoon, everyone, and thanks for joining us today for a discussion of our fourth quarter and full year 2021 financial results. With me today are Marc Stapley, Veracyte's Chief Executive Officer, Rebecca Chambers, our Chief Financial Officer, and Dr. Tina Nova, President of our U.S. CLIA business. Veracyte issued a press release earlier this afternoon detailing our fourth quarter and full year 2021 financial results. This news release, along with the business and financial presentation, is available in the investor relations section of our website at veracyte.com. Before we begin, I'd like to remind you that various statements that we may make during this call will include forward-looking statements as defined under applicable securities laws. Forward-looking statements are subject to risks and uncertainties, and the company can give no assurance that they will prove to be correct.
Further, we are not under any obligation to provide further updates on our business trends or our performance during the quarter. To better understand the risks and uncertainties that could cause actual results to differ, we refer you to the documents that Veracyte filed with the Securities and Exchange Commission, including Veracyte's most recent Forms 10-Q and 10-K. I will now turn the call over to Marc Stapley, Veracyte's CEO.
Thank you, Tracy, and thanks everyone for joining us today. I am very pleased to share an update on our strong Q4 and 2021 results. We delivered fourth quarter revenue of $67.3 million, an increase of 95% over prior year, despite headwinds from the sudden and rapid onset of the COVID-19 Omicron variant. We closed out the year with revenue of $219.5 million, an increase of 87% over the prior year. Importantly, behind these numbers are thousands of individuals who benefited from Veracyte's tests and are at the heart of our vision to improve outcomes for patients all over the world at every step of their journey. This vision inspires us to come to work every day, helping patients to avoid unnecessary and often risky procedures and interventions, while also reducing their time to appropriate treatment.
As many of us know from personal experience, any patient going through a diagnosis of cancer or facing the potential prospect of such a diagnosis already faces unimaginable anxiety. Few things motivate our team more than being able to quickly help that patient and their family achieve an accurate diagnosis, prognosis, or treatment decision. I am incredibly proud of the entire Veracyte team for helping make this vision a reality. Through their efforts, we delivered strong results in 2021, while also integrating two acquisitions, Decipher and HalioDx, and advancing a number of important product development projects. With our augmented leadership team and recent key promotions, our business is now aligned to set us up for long-term success. To start, I would like to remind everyone of the strategy of our newly combined organization.
We believe we are uniquely positioned, given our broad menu of advanced novel diagnostic tests, to serve patients in the U.S. through our CLIA labs and patients in the rest of the world through our IVD products on our nCounter platform. Further, we believe that our cycle of innovation, commercialization, and data creation produces a flywheel effect that will propel our long-term growth, enabling us to deliver on the promise of becoming a leading global diagnostics company. We start by identifying the unmet clinical needs that could be addressed by Veracyte to help physicians make better informed decisions for their patients. From here, we deploy our world-class global scientific team, led by Dr. Giulia Kennedy, our Global Chief Scientific and Chief Medical Officer, to develop robust clinical assays.
With a technology-agnostic mindset and advanced capabilities in whole transcriptome genomics, immuno-oncology, and machine learning, we have tremendous flexibility to employ the best approach to answer challenging clinical questions. It is this approach that led, for example, to the development of our Percepta nasal swab, a unique non-invasive test intended for the many patients who undergo evaluation for a potentially cancerous lung nodule. In parallel, our business teams assess the market size, reimbursement dynamics, and competitive landscape before developing and launching our tests in the US market through our CLIA labs. Dr. Tina Nova, a renowned diagnostics industry leader, drives this process as president of our CLIA US business. Together with our scientific, clinical and medical team, we build a library of clinical evidence to help us gain reimbursement, KOL support, and ultimately guideline inclusion.
This enables our experienced sales team to work with their physician customers to secure broad adoption for our tests. Our Decipher Prostate test is a wonderful example of how well this works as we continue to build the library of clinical evidence that is driving the market share gains that we are seeing. Outside the United States, we develop tests to be run locally, closer to the patient, on our nCounter diagnostic instrument, leveraging the clinical expertise that we've generated to drive adoption market by market. Stéphane Debono , who has deep experience developing, manufacturing, commercializing such products, leads our IVD business and our EMEA region.
Our IVD development team in France, collaborating with our San Francisco and San Diego scientists, is working hard to bring the next wave of products to the nCounter, building menu that will enable our experienced commercial team in EMEA to drive market access and reimbursement and to secure our test inclusion in clinical guidelines and to educate stakeholders on the clinical value of our products. A good example of our IVD market potential comes from Prosigna, our breast cancer assay, test, which is growing nicely outside the U.S. with coverage decisions now in a number of countries. Finally, we partner with biopharmaceutical companies to provide valuable whole transcriptome and immuno-oncology data, utilizing our unique biorepositories of over 350,000 patient samples. We believe these data assets, combined with our ability to reach patients globally, will be of great value to biopharma companies' precision medicine programs.
Corinne Danan, a co-founder of HalioDx, leads our global biopharma business unit. Our work with J&J, AstraZeneca, and Kite, a Gilead company, are great examples of our biopharma collaborations. Turning now to our product portfolio, our first and most mature test, as you know, is Afirma for patients who are facing the uncertainty of a thyroid cancer diagnosis, and treatment. We gained Medicare coverage for this test in 2012, and to date, Afirma has provided key clinical information for over 225,000 patients, and we estimate has helped eliminate over 130,000 unnecessary surgeries. Last year, the outreach performed by our endocrinology sales and marketing team resulted in approximately 6,500 ordering physicians, the most we have ever served.
Given the penetration of the market, we are focused on gaining traction with the long tail of endocrinologists who are not currently utilizing our test. On the product development side, while Afirma is mature in the life cycle, we have some exciting projects underway which we believe will drive further adoption and enhance the physician experience. Our pulmonology tests continue to be impacted by COVID in the fourth quarter. These tests are largely performed in hospital settings, which have more restricted access for patients and our reps. A lack of access for our sales team has been the theme of our lung portfolio since the beginning of the pandemic. In Q4 and January, this continued as we struggled with the surge of the Omicron variant. We have seen an improvement in February, though we believe that procedures and access still trailed 2019 levels.
As we look towards the next few years, we do expect to see further adoption of our lung portfolio, which we believe will be advanced by additional data publication and our tests inclusion in clinical guidelines. Additionally, work on the Percepta Genomic Atlas has progressed. We are finalizing our launch strategy and will provide an update in the coming months. Our urology portfolio continued to perform well in the fourth quarter as we reached record levels of tests ordered and reported. Contributing to our test momentum is the expanded recommendation in the 2022 NCCN Clinical Practice Guidelines for Oncology, which now recommend treatment decisions based specifically on the patient's Decipher Prostate Score. Decipher is currently a covered benefit for over 150 million people in the U.S.
Our urology products are in the early stages of penetration, and as a result, we believe will be a driver of our near and long-term growth through a steady cadence of new clinical utility data and reimbursement contracts. We are particularly excited about study findings that were presented to the ASCO GU meeting earlier this month. This data from a phase III trial showed that the Decipher Prostate test is a prognostic biomarker that helps physicians personalize treatment for men with intermediate risk prostate cancer. We also recently commercially launched the Decipher Bladder test, which helps to determine which patients with muscle-invasive bladder cancer will benefit from chemotherapy prior to cystectomy. We believe our test is the first molecular test of its kind and will require comprehensive physician education to drive commercial adoption over the course of the coming years.
While one of our key focuses in 2022 is executing upon our near-term revenue growth opportunities, primarily in Afirma and Decipher, we are also building the foundation for long-term growth. There are three key projects in which we are investing to that end: our Percepta nasal swab test, our IVD menu development, and the nCounter kit manufacturing transfer. Beginning with our Percepta nasal swab, we believe this test is going to be a game changer in lung cancer early detection. It provides physicians with key information to determine the appropriate next steps for patients with lung nodules that have been found through standard of care CT screening or incidentally.
Today, we believe that there are approximately 1 million patients annually in the U.S. with detected lung nodules for whom our nasal swab test could help determine whether they are at low risk for cancer, and so can avoid unnecessary workup, or at high risk and should be accelerated to more aggressive diagnosis and potential treatment. Our novel Percepta nasal swab has been validated with findings from our multi-center clinical validation study presented last year at ASCO and with expanded data presented at the CHEST meeting in October. We believe the nasal swab's ability to augment the current screening paradigm of highly sensitive but not very specific low-cost CT imaging will go a long way toward improving lung cancer screening.
Today, among the estimated 15 million people in the U.S. who are at high risk of lung cancer, and thus eligible for annual CT screening, only about one in 15 are actually getting screened. Knowing that there is a non-invasive test that can give physicians and their patients greater confidence in the classification of lung nodules should help funnel more patients into screening, saving many more lives through earlier detection of lung cancer when it could be more effectively treated. We expect our clinical validation study to be published this year. Looking forward, we have already started testing patients with Percepta nasal swab and returning results as part of our clinical utility efforts. We believe this growing body of evidence will enable KOL support, reimbursement, and guideline inclusion for the test. We anticipate that Medicare reimbursement will likely take up to two years.
As we consider future opportunities in lung cancer, beyond the nasal swab, we continue to advance the NOBLE trial, which we initiated in late 2020 with the Lung Cancer Initiative at J&J. This multi-center prospective trial is expected to enroll over 9,000 individuals with lung nodules detected incidentally or through screening and will include patients who are benign at initial diagnosis but subsequently develop lung cancer. Through NOBLE, we aim to further enhance the early detection of lung cancer, reducing many more deaths. Moving to our second major investment this year, driving menu for the nCounter platform. The development work is progressing very well, and we expect to launch Envisia for interstitial lung disease next year, followed by Decipher Prostate and then Percepta nasal swab.
Our goal is to launch a test annually over the course of 2023 - 2025, thereby driving demand for and use of the nCounter instrument. I'm extremely encouraged by the collaboration across our global teams in three sites to advance these programs and to accelerate time to market. Our IVD commercial team that is already successfully driving Prosigna sales growth throughout Europe and beyond is poised to develop the international markets for these additional tests. Finally, with respect to our third major investment, we are on track to transition the manufacturing of our IVD kits, beginning with Prosigna, to our facilities in Marseille, which will give us end-to-end control over our IVD testing business. By the end of this year, we expect to be handling inventory management and global customer fulfillment, and by the end of next year, we expect to be fully manufacturing the kits in Marseille.
In closing, 2021 was a monumental year for Veracyte, and the outlook for 2022 is encouraging. I've now been here nine months and couldn't be more inspired by the impact we're having on patients' lives, where we're headed as a company, and the world-class group of employees that is going to get us there. With that, I will turn the call over to Rebecca to review our financial results for the quarter and expectations for 2022.
Thanks, Mark. As Mark mentioned, we are pleased with our fourth quarter performance despite headwinds from COVID-19. Our total revenue for the quarter was $67.3 million, an increase of 95% over the prior year, including $6.8 million of revenue from HalioDx. We grew our volume to 22,300 tests reported during the quarter, a 70% increase over the same period in 2020. Testing revenue equaled $53.4 million with an ASP of approximately $2,625 per test, down slightly sequentially, primarily due to billed tests and commercial payer mix. Over 12,000 Afirma, Envisia, and Percepta GSC tests were reported in the quarter, and Decipher contributed approximately 7,700 tests.
Product revenue was $2.8 million, reflecting 2% growth year-over-year, with Prosigna volume of approximately 2,000 tests, down slightly sequentially, given COVID-related challenges. Biopharmaceutical and other revenue equaled $11.2 million, benefiting from a full quarter of HalioDx and a $4 million milestone payment tied to the availability of the Percepta nasal swab in our CLIA lab. Excluding the impact of intangible asset amortization, gross margin was 66%, an increase of 200 basis points sequentially. Testing gross margin was 69%, slightly higher sequentially, and product gross margin was 43%, lower sequentially, driven by start-up costs for the manufacturing transfer of our IVD kits. Biopharmaceutical and other gross margin was 56%, higher sequentially, primarily due to the nasal swab milestone payment.
Operating expenses excluding cost of revenue increased $1.4 million sequentially to $56.8 million. R&D expenses grew $2.2 million - $10.3 million, driven primarily by the full quarter impact of the HalioDx R&D organization. Sales and marketing expenses grew $500,000 to approximately $22.2 million, driven in part by continued investment in the urology commercial team and the full quarter impact of the HalioDx organization. G&A expenses were $18.8 million, down $1.9 million, primarily due to acquisition-related costs recognized in the third quarter. Total operating expenses included $6.5 million of stock-based compensation. We recorded a net loss of $10.5 million.
Net cash provided by operating activities was $8.4 million, and we ended the quarter with $173.2 million of cash and cash equivalents. Turning now to our 2022 guidance. We project total revenue of $260 million-$275 million, or 18%-25% growth compared to 2021. The low end of this range takes into account some uncertainty around the trajectory of the COVID-19 pandemic. Additionally, our guidance reflects strong year-over-year growth in the urology business and Afirma growth that is reflective of its penetration. For the pulmonology portfolio, the impact of the Omicron variant in Q1 and the lingering effects of a prolonged period without access to providers is expected to mute growth in 2022.
Biopharma revenue is expected to grow, driven by the full year impact of HalioDx, partially offset by the nasal swab milestone in the prior year. For the first quarter, we expect a sequential decline in revenue, given the milestone payment, typical seasonality, and the impact of the Omicron variant. We expect gross margin, excluding the impact of intangible amortization, to be in the low- to mid-60s% for 2022, approximately flat to the fourth quarter when adjusting for the impact of the nasal swab milestone payment. We are fortunate to have a strong business and portfolio of products with levers to achieve profitability in any given year. With that said, we are focused on investing to ensure the continued growth of our business, and therefore, we expect cash flow from operations to result in a slight use of cash.
Notwithstanding potential M&A, we are confident in our position and believe we have the foundation necessary to take the business to profitability with cash on hand. In closing, we are excited about the catalysts we will deliver in 2022 and beyond, and are focused on continued execution to deliver strong financial results. I will now turn the call back to Tracy.
Thanks, Rebecca. We'll now go into the Q&A section of the call, and Tina Nova, President of our CLIA US business, will join us. Operator, please open the lines.
Thank you. At this time, if you would like to ask a question, please press star one on your telephone keypad. Again, to ask a question, simply press star one on your telephone keypad. Your first question comes from the line of Brian Weinstein from William Blair. Your line is now open.
Hey, guys. How are you doing? Thanks for taking the question.
Hey, Brian.
Hey. I guess we'll just start with Decipher. You know, I know you just gave a little bit on the guidance there, but anything else that you can provide in terms of the growth expectations there? I'm also curious about, you know, some of the drivers there. You've been talking a lot about the sales force expansion and sales force effectiveness that's gone on there. What I'd like to try and get a little better understanding of is, you know, the growth profile broken down a little bit between kind of sales force investment versus kind of going deeper in the accounts. Can you give us any idea about how, you know, truly effective these sales force members are being versus kind of just adding brute force there?
Yeah. Maybe I'll start and then turn over to Tina to add more color here. If you think about the levers that we have for growth in Decipher, you know, just reiterating some of the things you mentioned, but adding one is, you know, firstly, coverage decisions, right? There's 150 million covered lives, so there's more room to go there, and that is driven by the vast array of publications and getting included in guidelines. Tina can talk to some of that stuff. Another is, you know, the blocking and tackling of working with physicians to sell, and that's adding, you know, sales force, which we're doing. And then, you know, obviously over time, there's also broader indications, which kind of goes a little bit hand in hand with coverage.
you know, we're already covering something like over 90% of the prostate cancer patients potentially, but and that's been through a process of adding indication after indication, and then there's a little bit more to go there. Tina, do you wanna add anything to that?
Sure. Hi, Brian. It's Tina. I think that there's still only about 20% of the market is penetrated, at this time, and we believe that we have a majority of the share. I really think that number one, we have a fabulous sales team who does a great job of getting in there and selling. Since we don't have to go to hospitals and we can go directly to urologists that are out in the community for the most part, we've been able to access our customer even through COVID. That's given us a great advantage. The other thing is, I think a lot of our growth is really driven by the number of clinical studies that we have done and are in the process of continuing to work on, which is quite a few.
The data that keeps coming out of those, the presentations that are done by KOLs at very important meetings, and the fact that we just recently had another addition expanding the recommendation in NCCN guidelines to use Decipher, I think all of that has really put us in a great position on top of the increase in the sales reps. I still feel very good about the growth and prospects for Decipher.
Brian, to address your question on how much is implied in guidance with regard to growth, we're not going to be going into, you know, quantifying each of the puts and takes. I will share that Decipher is the largest contributor to the growth implied in guidance.
Okay. Thank you for that. On the IVD menu that you guys are developing in the pace of one test per year, and you mentioned Envisia, I think in 2023, Decipher Prostate 2024, and Percepta nasal swab in 2025. Why is that the right cadence? Can you just kinda talk about what it takes to kind of get those products ready for nCounter? You know, could you potentially do something faster than that one per year cadence? What would that take?
Yeah. It's a great question. You can imagine we spend an inordinate amount of time across our team since we acquired HalioDx in August, asking that question. Consequently, the timeline has come down very, very significantly as a result of that. Bear in mind, these are not serial, right? They're happening in parallel, and some of the tests are more advanced than others. Envisia, for example, we already did, you know, the code set generation and then the validation of the code set conformance with, you know, our existing tests. That same process has to be gone through for any other tests that we're gonna bring up on the platform.
Once you do that, you've obviously got to go through, as I said, the design of the assay itself to be able to do that. Then don't forget the IVDR part of it, the regulatory part of it as well, which also takes time, and some of that's within our control and some of it's outside of our control. We squeezed this timeline as much as is, I think, humanly possible to squeeze the timeline, with some incredibly experienced people across all of our Marseille, San Diego and San Francisco teams. We've had the best scientists on this, and we've gone as far as we can in terms of squeezing it.
The goal is to come out with very, you know, strong tests, well-validated, good data supporting them, work the reimbursement and market access, you know, challenges in parallel for these other OUS markets, which we're already doing for Prosigna, of course. Then, you know, really drive that cadence of one test per year and potentially go beyond that. That's the focus, Brian. I think that is absolutely. If you think about IVD development under an IVDR framework, and if you talk to other companies who are doing this, that is a very accelerated timeframe.
Great. Thank you for the color on that. Thanks, guys.
Okay.
Thank you. Your next question comes from the line of Tejas Savant from Morgan Stanley. Your line is now open.
Hi, this is Yuko on the call for Tejas. Thank you for taking our questions. You mentioned in the opening comments about Omicron impact in this quarter and some encouraging trends as you head into February. Could you elaborate on what you saw during the quarter, particularly on Afirma volumes? You know, when does your guide start to bake in that return to normalcy?
Yeah. Well, I mean, I'll start, and then Rebecca, jump in here. You know, Omicron came upon us all rapidly and surprisingly, and I think, you know, it started to drop off at a similar gradient in some ways. You know, we dealt with it a lot during the back end of the fourth quarter and the early part of this quarter. I think, you know, the effect on our businesses is consistent with the way we've always talked about it. In the script, I talked about pulmonology being most and of course Decipher least. I don't know, Rebecca, if you wanna add anything.
Yeah, no. I would echo Mark and effectively say that on the Afirma volumes, you know, I think in general across the broader portfolio, as Mark cited, January was light, and we did see a bit of a return to, you know, the new norm, if you will in February. What our guide contemplates is that at the low end, that we will have, you know, some meaningful business impact from COVID over the course of 2022. We aren't necessarily expecting that per se, but we did feel it prudent to try and bracket that for the broader community if that was to occur. Obviously, if we had meaningful shutdowns, that wouldn't necessarily be impacted in the low end.
If we had, you know, kind of a Q3, Q4 type impact, that would be. If you look to the mid to high end, what you can effectively take in there is that the February trends that we have seen continue. I think that would be a fair expectation. That is, you know, we haven't necessarily said the world is going to be perfect at the high end and really challenging at the low end and, you know, February's in the middle. That's not the case here. I would take the low end as a challenging environment and then, you know, mid to high being more in the lines of what we've seen of late.
Maybe I'll just add two quick things, one on Afirma. You know, I think as we've said before, Afirma hits us in those hotspot areas, and there is access, you know, physician sales rep access and patient access issues in those hotspot areas. You know, generally across the board, the procedures are less impacted as a result of that than they are, for example, in lung. In terms of a new normal, I don't know when we'll be in a new normal as far as the pandemic's concerned. You know, there'll be these variant spikes like there were with Omicron, and let's hope we don't see another one of those in the future. We've talked before about second and third order effects.
For example, the effect the pandemic is now having on staffing within our customers is pretty clear, and I think, you know, none of us knows when those are gonna abate. You know, that's one of the cautions I would always have is, you know, there are these other effects that so far we've been able to manage through, but, you know, they could impact our business. I think to Rebecca's point, that's really contemplated, you know, those negative effects are contemplated in the low end to some degree.
Great. That was super helpful. Just a quick model question. Could you help us think about quarterly cadence of OpEx through the year?
Yeah. Why don't we handle that on the post call?
Okay. Thank you.
Thank you. Your next question comes from the line of Matt Sykes from Goldman Sachs. Your line is now open.
Hey, everybody. Thanks for taking my questions. Appreciate it. Hey, Marc, high-level question for you, kind of capital allocation, but also kind of present state of the business as you've kind of been in the seat for a little while now. Just given the number of acquisitions you made last year and some of the sales force you acquired but also invested in, how are you thinking about from a capital allocation standpoint? My assumption would be a lot of it would shift kind of internal versus sort of external, organic versus inorganic.
Just would love to get kind of the state of the way you see the sales force, any pockets of opportunity that you see that you might want to bring in, and just how you see the year playing out in terms of how you're gonna allocate capital.
Well, I think of it in terms of really two phases. One is, you know, our catalyst for the coming year, so the things we've talked about, like driving Decipher growth through adding sales team to that. Some of the projects that we're doing around, you know, Afirma as well to continue to enhance that product. You know, continuing to support and fund studies that help drive our pulmonology portfolio in addition to the other assets in our portfolio. Remember, we're in eight of the ten top cancers now, so we're really taking a portfolio approach to our investments. The second. Oh, by the way, I probably should add one, which is building the infrastructure. We're a much different company than we were before we acquired Decipher and HalioDx.
We're a company of 750 or more employees now with complexities that we didn't have before and locations in multiple countries. You know, for that reason, we need to invest in the infrastructure as well to support the scaling and being ready for when these other major products, which I'm gonna talk about in a moment, hit. That's an investment over the next couple of years. Then that second phase was the longer term investment. The three that I talked about, investing in the nasal swab, investing in the nCounter portfolio, and then bringing our manufacturing to Marseille.
Just one thing to add, we don't have at this point in time any M&A activities to cite. Obviously, with the asset dislocations that you have seen of late, there are opportunities out there. But, you know, we have a great portfolio that we will invest in, as Mark said, and, you know, we will be available for any M&A conversations that we feel prudent but aren't necessarily gonna be out there proactively.
Yeah. Never say never, but, you know, we got a lot to do right now with handling it well.
Got it. Thank you for that, helpful color. Maybe, I know it's a smaller portion of your business, but when you look at the biopharma revenue, I know you've included HalioDx in there, and there was a milestone payment in Q4. If I were to kinda look at the underlying trends, in your ability to leverage that biorepository, that 350,000 patient samples, how do you feel in terms of your progress? You mentioned a couple partners that you've got, but just would love to hear, you know, what you think that business could be, understanding you're not gonna guide on a segment basis, but just would love to hear the momentum in that biopharma-specific business and perhaps some of the leverage you can apply to that large biorepository you have.
Yeah, I think over time, I've always said the biopharma business could be a significant growth driver for us. I mean, that data, you know, asset set that we have, we're already able to leverage a large part of that in these deals that we're doing, but there's clearly opportunity to do more. We only put this global BU together in August, and Corinne is very focused on driving that business across, you know, all of Veracyte globally and leveraging all of the assets that we have got.
You know, whether it's in translational research and kinda looking at the drug effects on the tumor microenvironment, which is one of the things that we got from the HalioDx business, whether it be kinda clinical development and clinical trial selection and optimization, looking at biomarker work, the kind of things that we've done with Kite, for example. Commercial and market access, companion diagnostics, I think is an opportunity across all of our businesses, all three that we put together. There's ways, multiple different ways that we could leverage our skills and capabilities in addition to the data set.
Corinne's very focused on, you know, kind of building the data asset, the atlas that we need to really help to give biopharma what they're looking for to help grow that business. I think we'll probably talk about this a little bit more in the future, because I do see it, as I mentioned, a good growth driver for us, but very happy with the progress so far in putting the businesses together.
Great. Thank you very much.
Thank you. Your next question comes from the line of Sungji Nam from BTIG. Your line is now open.
Hi. Thanks for taking my questions. Marc and Rebecca, could you talk about any early feedback you're getting on the nasal swab as you're delivering some of these tests to the early access sites?
Yeah. It's early days at this stage, but we, you know, we have obviously initiated sites and returned results to patients. I'd say the first thing is we're getting a lot of interest in becoming one of the sites here. It's not gonna be available to everybody. Sites have to qualify for that and be the right kind of site. The interest level is high, and then the desire to get through the necessary stages of contracting and initiation and training are very much there. We've been seeing a lot of response. So far the feedback we're getting from those that have used it is very good. I think that's helping to really drive momentum and, you know, we'll continue to build those sites up.
We're looking at, you know, up to 50 sites. We can go further if we want to. We can do less if we need to. We're trying to get to a certain number of patients here and we're making good progress on that.
Great. For the IVD strategy, you know, as you talk about launching a product a year, you know, after obviously Envisia and Decipher, et cetera, I think in the past you guys had some products under development with partners or partners developing products for use on nCounter, and I was wondering if they're still, you know, part of the strategy and if that one per year launch includes potential tests from partners as well?
I'm actually glad you asked that because that's a good clarification. That one per year over that 23-25 timeframe does not include those. We're talking specifically about our own tests there. Those, you're absolutely right. Those other tests, you know, there've been a couple in development there and we haven't talked about the timeframes. That's really up to them to talk about those timeframes, not us. We're continuing to work and support them and, you know, looking forward to adding more of those. That is certainly part of the business model that we're very interested in.
Gotcha. Lastly from me, maybe one for Rebecca. Thank you so much for the growth margin guidance for this year. As we think about next year, as you guys transition the manufacturing, the nCounter manufacturing, to France and launch some of the new IVD products, how should we think about growth margin, even if you can comment on it kind of directionally, in being impacted with those activities?
Yeah. It's a great question, Sungji. Thank you for it. But I'm gonna broaden it a little bit and cover both testing and product growth margin if that suits you. On the testing side, we do think as we bring the three companies together, that there are efficiencies that we can gain through the CLIA lab operations in particular. And while we're not necessarily ready to quantify those today, you know, I think in the future years we'll be happy to chat about that. It is something that the team's focused on and we're working through. On the product side, I see the benefit to gross margin really coming in that first full year when we have both the logistics as well as the manufacturing.
Think about that as less of a 2023 impact and more of a 2024 impact. As we have volume absorption over the course of 2024, 2025, 2026, you'll see even more of a benefit for it. Again, not willing to quantify it today, but that will definitely drive some significant efficiencies through that line.
Maybe one point on the CLIA lab operations and the efficiencies. To be real clear, I mean, that's efficiency as we scale versus synergy of putting the businesses together.
Agreed.
Yeah.
Great. Super helpful. Thank you so much.
Thank you.
Thank you. Your next question comes from the line of Puneet Souda from SVB Leerink. Your line is now open.
Yeah. Hi, Marc, Rebecca, thanks for taking the questions. The first one is really, and I don't know if this was covered already, but in terms of the organic, you know, guide that you have for the full year, can you just remind us how much of that is, you know, sort of, organic versus the new additions, including HalioDx and others that you're baking in for the full year guide?
Yeah, Puneet, we haven't separated the pieces beyond the commentary in the script at this point in time. I think you can back into it based on the commentary on Afirma and lung as well as Decipher and Halio. Obviously, we have a full year benefit of that. I will say their business tends to be back-end weighted, so I wouldn't necessarily just run rate that when doing your calculations.
Yeah. I think just one, Puneet, one thing for us and how we look at the business going forward, obviously, you know, the capital deployment for those acquisitions was a key part of our strategy in putting the pieces together. Yeah, I totally understand why you're asking the question, but we really think of that as that's now part of our organic business. Our resource allocation decisions have been made for 2022 and beyond across the entire portfolio at this point. It's become inextricably blended, if you like. That's probably how we're gonna talk about it going forward.
Okay, got it. In terms of, you know, I believe at one point, and I don't know if this was, you covered it already, but in terms of J&J, there was an expectation for a payment in biopharma in the fourth quarter. Can you just remind me if that came through this year?
Yes, Puneet. It did come through in the fourth quarter of this year. It was $4 million in the biopharma line.
Okay. The last one for me. In terms of, you know, commercial sales force, can you just maybe remind us, you know, further investments and expectations to increase the sales force and sort of what are you expecting in terms of overall expansion, or do you have enough adequate sales force coverage on all the products now?
Maybe break that into two parts. As you know, we reorganized in January to really focus our commercial efforts on our U.S. CLIA business and then our IVD business because they're very different businesses with very different commercial needs. I'll ask Tina to talk to, you know, her thoughts around, you know, scaling and growing the commercial activities for the CLIA business, and then I'll talk about the IVD.
I actually think that we're in a really good position starting off the year with our sales reps in all of our indications. What I truly believe in is finding the best people, not just a lot of people, and making sure that they have the depth and the knowledge to go in and really, you know, sell. I think that's really the key to success. We're at 39 with Decipher and I think that team is really well-versed in urology, and they get to go in and actually speak to the doctors because they don't go to hospitals. They go to where the urologists are. We haven't been as affected by COVID as, you know, some of the other divisions, like the pulmonology division, where you can't get into hospitals.
It's a little unfair to compare them because, you know, some of them were more affected by that than others. I feel really good with where we are with our teams right now, and I don't think that we need to make huge additions to any of the teams, at this point as far as the rest of the year goes.
Thanks, Tina. I couldn't agree more. Outside the U.S., you know, obviously, you've got to go country by country, and right now our focus is very much on where the Prosigna opportunities are, and our team has been very successful in driving those. That starts with building, you know, the structure of a country manager and then the reimbursement and market access capabilities. You know, that's all now part of Stéphane's organization and still being driven by Morton across all of EMEA. You know, as we launch new menu, then of course, you know, we're gonna make sure we're prepared for where the opportunities are, kind of meet the customers where the needs are.
As we come out with Envisia and Decipher, and you know, by the way, there's a lot of pent-up demand for Decipher. We'll make sure that we're appropriately staffed in each of the countries to be able to launch those products as quickly as the excitement level grows.
Got it. Okay. Hopeful, guys. I'll back into the queue. Thanks.
Thanks.
Thank you. Your next question comes from the line of Mike Matson from Needham & Company. Your line is now open.
Yeah, thanks. So I wanted to ask about the nasal swab test. I think, Marc, you said something along the lines of that it might actually drive more screening, which I thought was interesting because, you know, I kinda thought, well, more screening will lead to more nasal swab, you know, opportunity. But maybe you could just talk about that and is there some way you can kind of, you know, market the product with that, you know, to your customers on that basis?
Yeah, it's a great question. Thanks for picking up on that. I think, you know, let's break it down. Today, under the USPSTF guidelines, there are 50 million people who are high risk for lung cancer. Smokers, former smokers, current smokers, et cetera, who should be getting screened on an annual basis. We currently believe one in 15, so call it 1 million people, are currently getting the screening that they should be. I think there's a lot of reasons why it's not being driven. You know, access to screening, people's reticence, whatever. When you do get screened and a lung nodule is found, so many of those nodules are actually benign, and so you go through this whole journey of, you know, could it be lung cancer.
In the majority of cases, of course, it turns out that it isn't. Low-dose CT for screening is very sensitive, but not very specific. It's also very low cost. It's accessible in that regard to a large degree. You know, having a test like nasal swab, which is clearly, I mean, world-first of its kind, very non-invasive. I mean, we've all gotten used to having, you know, a swab stuck up our noses over the last few years, and it's truly non-invasive.
Having a test like that that can actually help kinda figure out if a nasal swab or the lung nodule in a patient is at low risk for cancer and, you know, can avoid unnecessary procedures or is at high risk and should get accelerated diagnosis or treatment, that ability to do that without having to do a bronchoscopy necessarily in and of itself might encourage more screening. Just one of those effects that, you know, in my opinion, I think could happen and would potentially position the nasal swab in the future to help achieve that. Anytime that in and of itself would result, as you quite rightly say, in more lung nodules being found.
Every time a lung nodule is found, we believe, you know, if it's, you know, imaging alone can't assess it, which in many cases it can't, we believe a nasal swab should be used.
Okay. Got it. Thanks. And then just on the other, you know, pulmonary tests, lung cancer tests, you know, I hear the comments on the, you know, lack of access to the physicians or clinicians, but you know, I've heard other companies talking about, you know, things like virtual training or, you know, maybe capturing them at medical conferences or things like that. I mean, are there places? Are there ways to, you know, get in front of these physicians and educate them about the tests, you know, outside of the kind of hospital setting? And are you pursuing any of those?
Hi, Mike. It's Tina. I mean, absolutely. We do that ourselves. The COVID has put us all in a different training realm than we used to be in.
Sure.
We actually do a lot of virtual. I mean, recently there was a very large pulmonology meeting. I think it was an audience that would fit about 500 people, and there were about five in the audience, but there were thousands of people that had called in for the meeting. We're still seeing that, and virtual plays a very big role in training and a big role in dispersion of data and what people are seeing. There's also a lot of communities online where docs, you know, talk together, where just pulmonologists talk or just endos talk together and communicate that way. You're absolutely right. It plays a very important role today.
That can do a great job of, you know, continuing that cadence of awareness and education, but what it won't do is replace the bronchoscopies that aren't getting done and the procedures that aren't getting done. That'll continue to be a challenge as long as we're, you know, in either the situation of a variant shutting down locations or staffing shortages resulting in these procedures not being able to get done.
Okay. Got it. Thank you.
Thank you. Your next question comes from the line of Mason Carrico from Stephens Inc Your line is now open.
Hey, guys. Thanks for taking the questions. Just one or two quick ones from me. Appreciate the detail on the rollout of the additional nCounter tests. I think you may have previously mentioned this, but could you provide any color on how many nCounter platforms are currently installed in Europe? And are there any specific geographies that you guys plan on targeting initially?
Well, yeah, again, we're very much focused right now on the Prosigna that's on the market. Of course, as we've said before, we need menu in order to drive more installations and placements. So these additional tests will help drive more of the same. You know, it's important that the sites, the labs that are purchasing the nCounter are able to utilize those for multiple different tests and amortize that cost across. I don't know if we've talked publicly about the number of sites. We can always follow that up. A number of installed base, we can follow that up. Clearly over the next couple of years, we're getting ready to launch first Envisia and then Decipher Prostate and then nasal swab.
The impending launch will enable us to place more instruments as well.
Got it. That's it for me. Thanks again.
Thank you.
Thank you. Your next question comes from the line of Thomas Flaten from Lake Street Capital. Your line is now open.
Hi, guys. This is Travis filling in for Thomas. Congrats on the quarter. You know, you said that you are covering, you know, eight out of the 10 top cancer indications. Should it be our expectation that you'll try to get the other two, or are you good with the eight?
No, not necessarily. I mean, I wouldn't, again, never say never, and we might go beyond the top 10. But the eight is a very significant part of, you know, from a patient standpoint, the main causes of mortality in the U.S. We're very focused on those. Not only, I mean, we actually have, within our portfolio, we have a portfolio approach. I mean, if you think about it, you know, we have a lung portfolio of multiple tests. We have a urology portfolio of multiple tests. You know, we'll continue to broaden within those indications and continue to make those tests accessible to more patients with more, you know, different types of disease within the indication, and, you know, continue to broaden geographically and across the care continuum.
You'll see us continue this portfolio approach. Again, we never say never. I mean, we'll continue to add indications. That's one of the things as we grow our business we look to do. Right now, we're very much focused on executing on the opportunities that are ahead of us with what we've got, which is very substantial, thanks to all the great strategic work that's been put in place over the last six years to build that.
Very helpful. My final question is, can you just tell us on any, like, publications that are coming out or any kind of presentations that you guys are getting ready for?
I mean, there's a lot. I think just kinda keep an eye on those big markets that those indications that we're in, but there's a lot coming up.
We've got ASCO meetings, we have ESMO meetings, we have CHEST meetings, we have lung meetings. That's the problem with having all eight cancers. There's a meeting every time you turn around. Yes, of course, we plan to have publications continue to roll out. That should never stop. Results from clinical trials, and we will participate in meetings. It's very important.
Thanks, Travis.
All right. Very good. Thank you for answering my question.
Thank you. Your last question comes from the line of Andrew Cooper from Raymond James. Your line is now open.
Hi, everybody. Thanks for the question. A lot's been covered, so maybe just to drill in a little bit more on a prior question in terms of the nasal swab, you know, and low-dose CT compliance. When you think about the potential of driving that higher, it seems like it might be a nice place to partner with some other players and maybe go through some different channels, you know, a little bit further removed from sort of your core. How do you think about whether there's a partnership opportunity that can kinda be that rising tide for low-dose CT and the nasal swab, or kinda what's the openness to working with other players out in the field?
Yeah. I mean, when you're developing a new market, you're always looking at different ways to you know address that market, and I think partnerships are one. I mean, actually way more. There are people outside of us, a lot of them who are trying to drive more screening. It's better for the nation. It's better for all the patients who are being missed, who aren't getting diagnosed early with lung cancer. We're just you know part of that, but there's a lot of other people who are focused on that as well. That may present opportunities in the future and something that we might consider.
We have an organization, a business development, corporate development organization that spends their time literally looking at that kind of stuff, as you can imagine, not to mention the focus from the business units.
Okay, great. Like I said, a lot's been covered, so I'll stop there. Appreciate the time.
There are no further questions at this time. I'll now like to hand the call back over to Marc Stapley to make any closing remarks.
Great. Thank you, Leah. Appreciate it. Before closing, I'd like to reiterate how pleased we are with our Q4 and full year 2021 results. In 2022, we expect Afirma and Decipher to be the primary drivers of our business with new clinical data continuing to drive reimbursement and guideline inclusion across our broad suite of products, resulting in greater adoption. We're also investing this year in our key long-term growth drivers, which again are our Percepta nasal swab, expanding our IVD test menu, and transferring manufacturing of our IVD kits to Marseille. I truly believe we have the strategy and people we need to advance our ambitious plans to become a global diagnostics leader. I also know that we cannot underestimate the power of culture in driving our success.
To that end, one of my top priorities for 2022 is to ensure that we have a strong culture that draws from the best of our legacy organizations and enables us to move forward as one Veracyte to achieve our ambitious goals. I look forward to updating you on our progress in our Q1 earnings call. Thank you.
Ladies and gentlemen, this concludes our call today. Thank you for joining us. You may now disconnect.