Good afternoon, ladies and gentlemen, and welcome to Veracyte's fourth quarter and full year 2018 financial results conference call. At this time, all participants are in listen only mode. Later, we will conduct a question- and- answer session, and instructions will follow at that time. If anyone should require operator assistance, please press the star and the zero key on your touch-tone telephone. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to Angie McCabe, Veracyte's Vice President, Investor Relations and Corporate Communications. You may begin.
Thank you, Catherine. Good afternoon, everyone, thanks for joining us today for a discussion of our fourth quarter and full year 2018 financial results. With me today are Bonnie Anderson, Veracyte's Chairman and Chief Executive Officer, Keith Kennedy, our Chief Financial Officer, and Chris Hall, our President and Chief Operating Officer. 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 include those regarding our future plans, prospects and strategy, financial goals and guidance, product attributes and pipeline, drivers of growth, expectations regarding reimbursement, other statements that are not historical fact.
Management's assumptions, expectations, and opinions reflected in these forward-looking statements are subject to risks and uncertainties that may cause actual results and/or performance to differ materially from any future results, performance, or achievements discussed in or implied by such forward-looking statements. The company can give no assurance they will prove to be correct and will not provide any further guidance or updates on our performance during the quarter unless we do so in a public forum. Please refer to the company's February 25, 2019 press release and the risk factors included in the company's filings with the SEC for discussion of important factors that may cause actual events or results to differ materially from those contained in our forward-looking statements. Additionally, non-GAAP financial measures will be discussed during this call.
Please refer to the appendix section in our earnings release for a reconciliation of these measures to their most directly comparable GAAP financial measure. Prior to this call, we announced our fourth quarter and full year 2018 results, which are available on our website at veracyte.com under Press Releases in the Investor Relations section. We also published a financial presentation, which Keith will reference during his remarks. The presentation is also available on our website under Events and Presentations in the Investor Relations section of our website. With that, I will now turn the call over to Bonnie Anderson, Veracyte's CEO.
Thank you, Angie, and thank you everyone for joining us today as we discuss our 2018 fourth quarter and full year results and provide you with our outlook for 2019. I am very pleased to report on an excellent 2018, which was a transformative year for Veracyte and one that we believe positions us for continued growth in 2019 and beyond. This afternoon, we report a full year 2018 revenue of $92 million, representing a 28% increase over 2017, and genomic test volume of nearly 32,000, an increase of 22% over the prior year. Cash burn for the full year 2018 was $15.4 million, an improvement of 39% over 2017. Our fourth quarter 2018 results were particularly strong, reflecting robust momentum as we closed out the year.
Our revenue was $25.8 million, an increase of 31% over the fourth quarter of 2017. Cash burn was $1.7 million, an improvement of 73% over the prior year's fourth quarter. With a strong position as we enter this year, we are guiding to full year 2019 revenue in the range of $113 million-$117 million. This represents 25% growth at the midpoint compared with last year, driven by the growth of our three commercial-stage revenue-generating products, as well as our biopharmaceutical collaborations. As Keith will speak to in more detail in his remarks, we are guiding to full year 2019 net cash used in operating activities of $4 million-$6 million, which includes $5 million of cash that we received from Johnson & Johnson in January of 2019. At the midpoint of the range, this represents a 63% improvement over last year.
This afternoon, I'll highlight our accomplishments in 2018. Keith will review our financial results and add some additional color on our guidance for 2019. I will share our thoughts on strategic growth drivers of the business and close by laying out the key milestones and catalysts that we expect to achieve this year. Let's start with a review of 2018. We entered the year with five key metrics by which we would measure our performance. I will highlight our achievements for each of them. The first was commercial growth. Our results demonstrate that our multi-product sales strategy is working. We experienced a more than 30% sequential growth from third quarter to the fourth quarter of 2018 in the number of multi-product accounts.
About 30% of our Percepta accounts are also using Afirma, and more than 80% of our Envisia accounts are using either Afirma or Percepta. We are pleased with the leverage we are getting and the cross-brand equity we are building with this sales approach. In our flagship Afirma business, we transitioned all of our customers to the Afirma Genomic Sequencing Classifier, or GSC. The GSC runs on our RNA whole-transcriptome sequencing platform and enables us to help even more patients avoid unnecessary surgery as part of thyroid cancer diagnosis. We also introduced the Afirma Xpression Atlas, which enables us to inform on hundreds of gene alterations to help guide physician treatment decisions, including choices for targeted therapies. We believe our comprehensive Afirma solution extends our leadership in the thyroid cancer diagnostic market.
In lung cancer diagnosis, we reported nearly 1,550 tests for the Percepta classifier in 2018, the test's first full year of broad commercialization. Of note, this exceeded the 1,500 reported Afirma Gene Expression Classifier test in 2011, which was its first full year of commercialization. Importantly, Percepta genomic volume accelerated 74% sequentially from the third to the fourth quarter of 2018, and by the end of the year, over 300 physicians at more than 200 institutions had ordered the test. We are also driving strong brand awareness for Percepta among physicians, setting ourselves up well for continued growth in 2019. Notably, our internal research conducted last year showed that 33% of pulmonologists surveyed could name Percepta unprompted when asked about genomic testing in lung cancer diagnosis. This is an impressive rate at this early stage.
Turning to the Envisia Genomic Classifier, we laid a strong foundation for commercialization upon which to build once we receive final Medicare coverage. We launched an early access program last May to address demand from physicians wanting the test for their patients. As of today, 30 sites are participating in the program, including leading centers such as Cleveland Clinic, Tulane University School of Medicine, and the University of California, Los Angeles, and Emory, among others. Next was reimbursement expansion. We are very pleased with the progress we made in 2018. Early last year, we entered into a contract with Anthem and are now an in-network service lab for most major health plans, an accomplishment that we believe only a small number of genomic labs ever achieve.
In addition to helping to drive further Afirma adoption and reimbursement, we believe this accomplishment will facilitate coverage and reimbursement of our Percepta and Envisia classifiers. Additionally, in August, we received draft Medicare coverage for the Envisia classifier through the MolDx program. We continue to expect a final positive coverage decision in early 2019. This milestone would make the Envisia classifier the first test for improved diagnosis of idiopathic pulmonary fibrosis, or IPF, to be commercially available and covered by Medicare and would also make Veracyte one of the very few companies to achieve Medicare coverage for three genomic tests. I will now turn to our third measure of success, which was scientific innovation. During 2018, we transitioned most of our business to our RNA whole-transcriptome sequencing platform, which we believe will drive our ability to innovate and deliver value into the future.
The platform enables us to maximize the amount of genomic content that we extract from each nonsurgical patient sample. We deploy our whole machine learning expertise to develop classifiers that answer specific clinical questions. Additionally, using this rich genomic content, we can expand further along the care continuum, providing information to help guide surgery strategy and therapy selection, all at the same time of diagnosis. Our scientific platform is also attractive to biopharmaceutical companies seeking to advance precision medicine. In April, we announced an agreement with Loxo Oncology through which we are providing them with information on thyroid cancers with TRK fusions and RET alterations for their use in developing targeted cancer therapies. Additionally, in January of 2019, we were thrilled to announce our collaboration with Johnson & Johnson Innovation, which we expect will contribute an estimated $50 million of monetary and non-monetary value.
We have teamed up with J&J to advance the development of innovative diagnostic tests using our novel field of injury science to detect lung cancer early when more lives can be saved. Most exciting is the acceleration of our first nasal swab test for early lung cancer detection, a market opportunity we estimate at more than $30 billion globally. Through the partnership, we believe we will also accelerate the transition of our Percepta test to its whole transcriptome sequencing platform. This opens up opportunities to inform other clinical questions along the clinical care continuum and provides a basis for efficiency and continuity in our laboratory operations. We also delivered strong results with evidence development, our fourth measure of success in 2018.
In May, clinical validation data for the Afirma GSC were published in JAMA Surgery, demonstrating the next generation test's ability to help keep approximately 70% of patients with indeterminate thyroid nodules out of the surgery suite. A subsequent publication in Endocrine Practice reinforced the Afirma GSC's performance and clinical utility. We also presented 12 Afirma studies at three key endocrinology conferences throughout the year. These presentations included real-world results showing that the Afirma GSC is performing consistently with the clinical validation study findings. For Percepta, we presented early clinical utility results from our ongoing registry at the CHEST meeting in October. Our findings show that the test changed clinical decision-making and reduced invasive procedures at every evaluation time point up to 12 months post-testing.
Also at CHEST, we presented clinical validation data for the Envisia classifier, demonstrating its ability to help distinguish IPF from other interstitial lung diseases without the need for surgery. We look forward to publication of these data in the near future. Our final measure of success was financial discipline. We demonstrated excellent operational efficiency in 2018, reducing our cash burn to $15.4 million, a 39% improvement over 2017. We will continue to focus on disciplined financial management so that we can achieve sustainably profitable growth over the long term. I will now turn the call over to Keith for a more detailed review of the financials and our 2019 guidance.
Thank you, Bonnie. As Angie mentioned earlier, our fourth quarter and full year 2018 financial presentation is available under Events and Presentations in the Investor Relations section of our website. This afternoon, I will review our fourth quarter and full year 2018 results and conclude with remarks regarding our 2019 guidance. Turning to page three of our financial presentation, our performance against six financial key performance indicators, or KPIs, for the fourth quarter of 2018 as compared with the prior year's quarter, including select highlights for each metric at the bottom of the page, are as follows. Revenue of $25.8 million, increased 31%. Genomic volume of 9,154 reported tests, increased 28%. Gross margin of 66%, increased 600 basis points. Operating expenses, excluding cost of revenue, increased 12%. Net loss of $3.1 million, improved 63%, and cash burn of $1.7 million, improved 73%.
Turning to page four of the presentation, our performance for the full year 2018 against these same KPIs as compared with the prior year are as follows. Revenue of $92 million, increased 28%. Genomic volume of 31,710 reported tests, increased 22%. Gross margin of 64%, increased 300 basis points. Operating expenses, excluding cost of revenue, increased 15%. Net loss of $23 million, improved 26%, and cash burn of $15.4 million, improved 39%. The next page five, shows our performance against these same six KPIs on a quarterly and annual basis for 2018. We saw revenue and genomic volume acceleration across our products and gross margin improvement, as well as continued discipline in how we use shareholder money to fund our operations, which resulted in significant improvement to cash burn. The next six pages outline the sequential and year-over-year results underlying each of the six financial KPIs. A few observations.
First, turning to page six, revenue growth rates relative to the prior year accelerated from 22% in the first quarter to 31% in the fourth quarter, increasing 28% on an annual basis compared to the prior year. Page seven highlights the ramping of genomic volume in 2018, a pivotal year for the company, one in which we accelerated adoption of our three products. As Bonnie mentioned, we expect to carry this momentum into 2019. As we look further ahead, we believe we can continue to scale our business and seize opportunities for additional biopharmaceutical collaborations. Turning to page eight, we expanded our gross margins on a sequential and annual basis. We achieved this principally by selling higher-margin products and services, moving our test to a unified assay through which multiple tests can be performed on the same sample, and maintaining financial discipline.
Turning to page nine, in 2018, we focused our spend on revenue-generating activities, primarily our investment in sales and marketing. Our operating expenses are shown as a percentage of revenue on the right side of this page. In 2018, our quarterly average of combined R&D and G&A spend was just under $10 million. From 2017 to 2018, our combined spend improved from 51% to 42% of revenue. Turning to page 10. Compared with the prior year period, our net loss for the fourth quarter and full year 2018 improved 63% and 26%, respectively. Our basic and diluted net loss per common share as compared to the prior year improved 67% and 32%, respectively. On page 11, as we've already discussed, our cash burn improved sequentially and on an annual basis. Turning to page 12, cash at December 31st, 2018, was approximately $78 million, unchanged from September 30th, 2018.
In January 2019, we received $5 million in upfront payments from Johnson & Johnson. In January, we also elected to prepay $12.5 million of our principal debt balance, or 50% of our total interest-bearing debt, without triggering any prepayment fees under our loan agreement. Turning to page 13 and our 2019 guidance, as Bonnie stated earlier in her remarks, we are guiding to revenue of $113 million-$117 million. At the midpoint of the range, this represents a 25% increase over last year. We are also guiding to net cash used in operating activities of $4 million-$6 million. At the midpoint of the range, this represents a 63% improvement over last year. Since our business is not capital intensive, we believe using net cash used in operating activities, a GAAP measure, instead of cash burn, a non-GAAP measure, is the more appropriate metric to use.
Generating positive operating cash flow remains a key goal for us, we expect to achieve cash flow breakeven before the end of this year. Some additional color on 2019. We expect the following. Our revenue and cash flow guidance includes $5 million in anticipated revenue from our collaboration with Johnson & Johnson. We expect the positive revenue and genomic volume trends from the layering in of multiple products in 2018 to continue to positively impact seasonal trends in 2019. We expect margins to be stable within the 64%-66% range, excluding the impact of biopharmaceutical revenue that we may recognize. We expect to increase our investment in sales and marketing, spending approximately $12 million-$13 million per quarter to support our growth efforts. Our combined G&A and R&D spend is expected to stay within a million-dollar band around the average quarterly spend of approximately $10 million.
With our strong financial position and continued focus on operational execution and financial discipline, we believe we are well-positioned to achieve long-term profitable growth. I will now turn the call back over to Bonnie to discuss our strategy and milestones for 2019.
Thanks, Keith. I will close today's call by speaking to the three transformative levers of value creation in our business. First is our strategic investment to advance three clinically impactful products to revenue-generating stages in large markets. Our Afirma, Percepta, and Envisia classifiers address a more than $2 billion market opportunity and are positioned as first to market and market-leading products. They will all be covered by Medicare, pending a final positive coverage decision for Envisia expected in the near term. Importantly, over the next five years, we anticipate significant revenue growth and operating leverage from the layering effects of these products, all positioned early in the clinical continuum of care, relative to other downstream tests that focus on patients who have already been diagnosed with disease.
Strategically, this gives us the opportunity to answer more clinical questions at the same time as diagnosis and on the same non-surgical sample, driving value and improved efficiency for patient care decisions. Second is our innovative scientific platform utilizing RNA whole-transcriptome sequencing and machine learning, which we believe is a competitive differentiator. This platform serves as a basis for effective and efficient discovery, development, and commercialization of our tests, as well as for biopharmaceutical partnerships to advance clinical development programs in the same indications. Our decision to move our products to this platform positions Veracyte with a very differentiated strategy for expansion along the clinical care continuum, which we believe will deliver incredible value in our clinical indications over the long term.
Finally, the third level of value creation is our compelling pipeline, led by our development of the first nasal swab test for early lung cancer detection, which we believe expands our addressable pulmonology market to over $30 billion globally. Against this strategic backdrop, we will focus our four metrics success in 2019 on these. First, revenue growth, as indicated by our full year 2019 revenue guidance of $113 million - $117 million, driven by total genomic volume growth of 20%-25% for the year. Second is evidence development, as we expect additional publications of clinical validation and utility data for our tests, which is extremely important to drive early stages of commercial growth and reimbursement expansion. Third, pipeline advancement, with an eye toward data this year on our first nasal swab test for early lung cancer detection and a mid-year launch of our next-generation Percepta classifier. Finally, financial discipline.
We will continue on our pathway to profitability through the efficient use of resources, including our multi-product sales strategy to drive revenue growth. I would now like to take a moment to make an important announcement. After nine incredible years of helping to build Veracyte into the company we are today, Chris Hall, our President and COO, will be retiring on July 1st of this year to spend more time with his family. Chris, I want to thank you for nine amazing years, and I want to acknowledge to everyone listening today, your valuable contributions in successfully building our key functional areas, including sales and marketing, managed care, laboratory operations, client services, and billing operations, which are all now being led by very strong and very capable executives, a true sign of a great leader. Join me in a round of applause for Chris.
We plan on transitioning Chris's responsibilities as we near his date of retirement. While we are very sad to see him leave, on behalf of everyone at Veracyte, we wish him well on his new adventures. In summary, we are thrilled with the results we produced in 2018 and are really excited about 2019 and beyond. We are expanding our capabilities to advance the early detection of disease to save lives, further improve diagnostic accuracy, and inform treatment decisions. We believe that through this approach, as well as continued operational execution and financial discipline, we will continue to drive even more value for patients, physicians, the healthcare system, and our shareholders. I'd like to thank all of our Veracyte employees for their ongoing dedication. Without their focus, creativity, and hard work, we would not be in this exciting position that we are in today.
I will now ask the operator to open up the call for questions.
Thank you. Ladies and gentlemen, if you have a question at this time, please press the star then the one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, press the pound key. Again, to ask a question, press the star then the one key on your touch-tone telephone. Our first question comes from Sung Ji Nam with BTIG. Your line is open.
Hi. Thanks for taking the questions. Chris, congratulations, and thank you for your contributions.
Thanks.
Maybe for starting off, your Percepta customers, I know this might be early, but are you seeing an increase in bronchoscopy procedures, even if anecdotally among the customers who are using Percepta or among those who have been using it for a while?
Chris, why don't you take that?
Well, I think that the overall position of the product is to do less invasive procedures because we resolve a good chunk of the bronchoscopies that are non-malignant. That's been the core value proposition. We've been really excited that's been embraced. I think one of the challenges with lung cancer diagnosis has always been that patients sometimes go straight to a TTNA or go straight to a surgical lung biopsy rather than a bronchoscopy. We've always believed that the product successfully used might make bronchoscopy be more successful, which would mean more invasive procedures to start. It's too early to say that's happening. I think that at this stage, we're just really excited that the core value proposition of the product is being embraced.
Great. That's helpful. Then on Envisia, if I'm remembering this correctly, I feel like this is a product where you have engaged KOLs not only from the U.S. but also from Europe from the very beginning.
Absolutely.
Was wondering if there might be efforts underway from a commercial standpoint. Could also be early here, but was curious as to if there are any kind of commercial strategies that you guys are putting together.
Yeah, I think 2018 was interesting because of all of our products, this is the first product that we've ramped an early access program for, mostly because of physician demand. We did hold a scientific advisory board meeting about a month ago, and we had participation from physicians in Europe, where there is a lot of, it's a small community of experts that drive excellence in care in trying to get these ILD patients diagnosed. We did have three to four of our clinical trial sites in Europe. While we've always been hesitant to not get too far out in front of spending to open up new markets outside the U.S., it's certainly something that we're looking at. We have no immediate plans to go after that.
I think right now we're focused on the near-term goals of getting the Medicare decision finalized and getting our price established there. Then we have increased the early access sites by a few, so we're now up to 30. Then we'll focus on the methodical expansion of that through 2019. I think do some groundwork to see whether or not offering this test more broadly would make sense perhaps in 2020.
Great. Thank you. Then lastly from me, just a housekeeping question for Keith. Sorry if I missed it, but is there incremental contribution from Loxo Oncology this year for pharma services?
We are expecting another $1 million or $250,000 per quarter.
Okay, great. Thank you so much.
That's $1 million, we've said $5 million from J&J, $6 million in biopharmaceutical revenue over what we had last year.
Fantastic. Thank you.
Thank you.
Thank you. Our next question comes from Puneet Souda with SVB Leerink. Your line is open.
Hi, Bonnie. Congrats on the quarter, Chris, thanks for all the great work. We'll definitely miss you. First one, if I could ask on J&J, just wanted to clarify the $15 million that you have potentially longer term. I just want to clarify, 2019, you're baking in only $5 million of that, or is there any additional contribution that you're expecting in the latter part of the year?
That's right. We'll update you throughout the year.
Okay, got it. Nasal swab, could you elaborate, Bonnie, just in terms of the data, when should we expect the data? You gave sort of some timeline around data, just wanted to understand what sort of venue would this data be in, and how should we be benchmarking this data? Should this be comparative to Percepta here? I just have a quick follow-up on Percepta as well.
Yeah, I think as our programs always unfold, usually the first data that gets unveiled either at a meeting or sometimes we hold a special meeting to unveil data to key opinion leaders, those involved in the clinical trials with us, I'm sure that will involve J&J this year, is usually looking at what early classifier development looks like and whether or not the performance goals that we set for our product, which will be a little bit different for this product than it is for Percepta. Percepta is positioned to really improve, with very high sensitivity, the ability to detect low-risk patients so they can be halted from further invasive procedures and be followed by follow-up CT, because we know those patients have nodules. There are a couple different places in the clinical pathway of care that we envision developing nasal swab tests.
This first test, we will reveal more about that positioning as time goes on. I would say, in the last half of the year, we will be in a good position to see some of the early discovery data unveiled. If we get more clarity on what and when, I'm sure we'll share that with folks.
Okay, great. Just on Percepta, I know you started out the year with the thoughts that you will exit 500-1,000 on Percepta and you're exiting at 650. Just wanted to get a sense of, in 2019, how you're looking at Percepta overall and the contribution here. One of the reasons I ask is, there's a new entrant to the market from a liquid biopsy, I think, in this position through a different pathway. You're more closer to the pulmonologist in this. Maybe just educate us how you're thinking about positioning of Percepta in the market with some new entrants as they try to enter from a liquid biopsy end. Thank you.
Yeah. I think that we always talk a lot about one of the things that we believe we do really well as a company is not just the development of the test, but figuring out how to integrate the test into today's standard of care so that it is positioned at a point where it really adds a lot of value to what the doctor is doing today and doesn't require the doctor to believe in the test to not do what they might do today as a standard care procedure to get a diagnosis. I think that is even more important in an aggressive cancer like lung cancer, than it was with our Afirma program. I think with some of the data that we shared in our prepared remarks of the number of doctors, 300 now across 200 institutions ordering the product.
We just came off of a meeting, actually, just in the last few days, a lung cancer meeting, where the team was quite excited with the reaction from the doctors. In one form, we were asking physicians what they wanted for the future, they told us they thought the current product was totally on point, just help them get it used more and more. These things are always anecdotal, pretty exciting news to hear. I think that our focus on having Percepta positioned to complement bronchoscopy and yield a 97% sensitivity, when you think about that, when you combine our test with its companion procedure, we are only missing a small number of cancers in order to improve the overall care and reduce invasive procedures. That's the kind of stuff we look for.
If we were to come in advance of a procedure, you certainly have to be as good, if not better than that, in terms of missing cancers and especially when it's lung cancer. That sets a very high bar, we believe, for performance on any new test that might come along. I also think that people have to realize the length of time it takes to deliver the results from these studies that we talk about having data on today. This is a three, four-year, five-year journey to get these studies in place, IRB and patient consent, so that we can follow the patients, collect all this data, and then we're already a year plus on the backside of a Medicare coverage decision. We feel really, really good that we are getting significant uptick.
Our customers are really happy with the product, and we are positioned to expand that in 2019, gain more reimbursement coverage from commercial payers. In terms of some color around what that could look like, we'd expect Percepta volume and revenue will probably roughly double in 2019 over 2018. If you just look at what it takes to continue to derive traction as we would exit the year, we were pleased that we ended 2018 right where we thought we would be. Envisia, of course, will be a little bit behind that there. I think we would expect that if 500 - 1,000 tests in 2019, and of course, that assumes that we would get a final Medicare coverage early this year in the next couple of months. That's sort of how we look at it.
We have a lot of experience now in how these products ramp and what it takes to get not just volume, but sticky volume that allows us to become part of the operation within the institutions that's doing the workup, and that's key to success.
Thanks. That's very, very helpful. Thanks for the details.
Okay. Thanks for joining us.
Thank you. Again, if you would like to ask a question, press the star, then the one key on your touch tone telephone. Our next question comes from Paul Knight with Janney Montgomery. Your line is open.
Hi, guys. Congratulations on the quarter and congratulations on the retirement.
Thank you.
Paul, thanks for joining us today.
Yeah. How much service are you expecting in the year 2019?
Biopharma service revenue?
Yeah.
Okay. We would estimate that now at about a total of $6 million in revenue. That includes the estimate of $5 million from J&J that we spoke about on the back of that announcement and then about $1 million in addition to that. We think the majority of that, given the structure of the J&J deal, will be recognized in the first half of 2019. It could be higher depending on the timing of some of the milestones achieved and the financial treatment of some of those milestones, that is our best directional guidance at this point.
Bonnie, J&J has made a large investment of over $3 billion for Auris to do, I guess, next generation biopsy technology in the market. How do you feel that new generations of biopsy technology fit in with your lung tests, I should say? How does it fit in with the continuum of the swab test someday and also Percepta?
I think it will end up being quite a compelling investment and a compelling offering across the lung cancer area. We're quite excited to be a party to it. I think as you think about where we are today, what will happen out of all of these initiatives is the effort to get earlier and earlier at diagnosing and treating early cancers. Through J&J's efforts at looking at ways they can do surgical procedures, et cetera, less and less invasively, but we'll also be moving to earlier and earlier size nodules. Many of those nodules, depending on the site, couldn't be reached by any bronchoscopy device. I think the market is going to be really transformed for lung cancer.
The size and stage of cancers that are going to be detected three, four years from now are not going to be the same as they were five years ago when many of these clinical trials were done. I think being teamed up with a consumer-oriented company with their eye on early detection like J&J and our nasal program is going to position us very modernly with the testing of cohorts that represent what this new stage of patients is going to look like in lung cancer and unfold our programs for discovery and validation in that space where we will likely be in a leading position as that market changes over time. We're pretty excited about it.
Lastly, Bonnie, what is the sensitivity of traditional biopsy? If I can do a biopsy, could I not also use Percepta in conjunction if I can do a better biopsy?
Well, biopsies by nature, depending on the institution, of course, and the quality of the care center, sensitivity can be anywhere from 40%-60%. That's exactly the rationale behind us positioning Percepta as a complement to the bronchoscopy biopsy, because we give the physician a reason to do the procedure, and as one of our KOLs describes it, we save every biopsy by providing an answer. We're not having doctors stop doing what they do today that they're comfortable and confident in, and having to develop confidence in a new test that replaces that. We're just increasing overall confidence in what they are doing today because our test is making it better.
We think that is a smart way to introduce tests into new markets, in new indications, and build the scientific credibility with these thought leaders and users of our tests, so that down the road, we might be able to evolve to bring tests that are positioned differently. That's exactly what we're doing across our lung cancer portfolio.
Thank you.
Thanks for joining us.
Thank you. Our next question comes from Brian Weinstein with William Blair. Your line is open.
Hey, guys. Thanks for taking the question. Chris, congratulations to you on the retirement. I know Corey Minter and his bum that you beat him to retirement, as he's already texted me. Congrats. I think a lot of stuff's been asked, but just a couple quick ones here. First, Keith, can you elaborate a little bit on the need for the specific investments that you guys are planning on for 2019 that will allow you to grow at that 25%? Can you just be a little bit more specific on what you're doing there?
We're investing again another year of putting our money into sales and marketing. As I covered in the prepared remarks, we're spending around $10, ten and a half million dollars on a quarterly basis last year, and we're going to $12 million - $13 million this year. We found that provides a very nice return, investing in the sales force and touching physicians and ordering physicians. That's where we're continuing to push on that lever.
Got it. On Xpression Atlas, can you give us any idea about kind of contribution that that is seeing at this point and feedback you're getting, and how do you move that beyond, I think you'd said, 30% of Afirma GSC orders are coming with Atlas. How do you tactically kind of move that higher? Do you have any thoughts about where that should be next year or even longer term?
Well, the way to think about it in terms of the percentages is that when we do a genomic sequencing classifier test in thyroid today, roughly 70% of those patients are going to be benign. Having 30% of the suspicious patients, the other 30% of the suspicious patients be the ones that will benefit most from the Xpression Atlas, because that's where you will guide extent of surgery and whether or not targeted therapies could be a consideration. We would never expect to get the number of orders coming in with Xpression Atlas super high. What we want to do is make sure that it gets ordered on those that end up not being benign and driving those patients to a better quality of care.
I think it's early. I think we do have evidence that the new brand material that was rolled out beginning actually the end of January, February. We always have a very massive national sales meeting at that time of the year. A lot of this new material and new data is just still coming out on Xpression Atlas. I think it could edge up to perhaps maybe peak 50%, 60% of orders over time, that the key will be getting those orders, so that the patients that can benefit most will benefit.
Got it.
In terms of the revenue piece, we don't track this product as a separate product. You just end up getting into the weeds on all these things. We do bill, we do get incremental revenue from the product, but we sort of track it as an overall number with our GSC and Afirma genomic testing. That way, it just kind of keeps it simple and not too many assumptions going in that can be wrong and sort of magnify each other.
Great.
Does that make sense?
Yep, makes total sense. Thanks for the detail on that, and congratulations on a really good, strong, solid 2018.
Thank you. Thanks for joining us.
Thank you. I'm showing no further questions. We would like to thank everyone for participating in today's conference. This does conclude today's program. You may all disconnect.