Focus on Diagnostics here at Raymond James. Happy to be joined by the Veracyte team this morning. We have Marc Stapley and Rebecca Chambers here with us. I'm going to give it to Marc for a little bit of a presentation, and then we'll stop and do some Q&A, a little fireside chat as well, and then head down to Amarante One for the breakout. So with that, Marc?
Thank you very much, Andrew, and good morning to everybody. Yeah, so as Andrew said, I'm just going to do a few presentation slides, update everybody on the company, the quarter, the year, and the plans going forward. And then we'll go into some Q&A. Obviously, I want to remind everybody about our forward-looking statements that we might be making today and our safe harbor that can be found both in this presentation and on our website at www.veracyte.com. Now, into the slides. And I think, you know, most people are familiar with Veracyte's vision, and there's some very important words that we always include on this slide. We do feel that we are transforming cancer care with very complex molecular diagnostics, and the patient is front and center. Patients are our purpose. They're front and center of everything we do.
Importantly, our vision is to serve patients dealing with cancer all over the world, not just here in the U.S. Clearly, we've made tremendous progress so far with that, over 500,000 patients served. What's really behind, and I'll explain this more in a minute, Veracyte's success is the evidence and the publications behind the strong reference of strong evidence behind our tests. Fantastic revenue performance. Testing revenue grew 28% last year, which I think is an incredible testament to our team's hard work. Importantly, and I think very differentiating in this respect is the profitability that we've been able to accomplish through a lot of activities that we've focused on, 20.6% adjusted EBITDA margin last year as well, combined with that revenue growth. So how are we achieving that kind of performance?
The testing revenue is driven by our two core products, which are our Afirma test for thyroid cancer, our Decipher test for prostate cancer, and those tests together now account for 95% of our total revenue, or did so in 2024. Q4 saw the 10th consecutive quarter of testing revenue growth in excess of 20%, which is a metric, you know, we couldn't be more proud of, so it's consistent and it's durable, and how is it so durable? Let me kind of just give you a little bit about what differentiates Veracyte. We have what we believe is a really important platform for growth, which is the Veracyte Diagnostics platform, and it's hinged on this fundamental belief that more data drives more insights.
More insights drive more evidence, and more evidence drives more utility, which in and of itself drives even more data and more insights and so on and so forth, and the flywheel keeps turning. What I'm also really proud of is how we address so many parts of the care continuum. We're very focused on patients with cancer or patients suspected of having cancer. And so we focus on the early detection all the way through to, with our recent addition of MRD, treatment effectiveness and monitoring. Afirma and Decipher sit nice and squarely in the diagnostic prognosis section and moving into prediction for treatment selection. We also have tests for bladder and for breast cancer as well. We're soon to be launching our muscle-invasive bladder cancer test in MRD and longer-term our Percepta Nasal Swab test for lung cancer. And I'll talk more about those shortly.
So starting with Decipher, you can see the extent of the penetration that we've made with Decipher. It's driven again by evidence, approximately 85 clinical studies demonstrating validity and utility. And that's what's helped to drive the incredible growth in the adoption and Decipher becoming the market-leading test. The growth is driven across all NCCN risk categories, which is something, you know, we're particularly proud of. As we mentioned on the last earnings call, each of the low, intermediate, and high-risk categories grew 40%-55%. And low risk now represents an impressive 20% of our volume. And again, you know, those clinical studies are behind this with more than a dozen focused on active surveillance or decisions involving active surveillance. From a market standpoint, the market is large and unfortunately growing over, you know, approximately 314,000 patients diagnosed with prostate cancer annually.
We now, you know, as an industry, we've penetrated about 40% of that market, and Decipher has about 65% share based on our calculations. We believe that both Decipher and Afirma and our tests in general should be able to achieve 80% penetration, so that's kind of our longer-term goal here. Decipher has grown very well in the last few years, and we expect that to continue going forward, driven by more market penetration, strong market share dynamics that I just talked about, NCCN guideline inclusion. Decipher has level one evidence, Simon Level 1 evidence, which has resulted in it being called out as the only test in the NCCN Guidelines table, and we're very proud of that as well, and then metastatic launch this year, which is something we're excited about. The metastatic population is about 30,000 of those patients, 10%.
And I'm excited to have Decipher be able to be used across the entire care continuum and risk spectrum, including metastatic. On the thyroid side, we're market leader. Again, a vast number of patients tested to date, the majority of them 60% or more spared an unnecessary surgery through the utility of our test. And again, driven by evidence, and that's helped drive strong double-digit growth. Afirma grew 14% last year from a revenue perspective. And now we believe has 52% market share in a market that is more mature than prostate, but still only 65% penetrated. So plenty of opportunity to continue to grow. We've guided to high single-digit growth next year, and we'll achieve that through, again, deeper penetration into existing accounts, favorable market share dynamics, and slight tailwind with the expanded LCD that now includes reimbursement for Medicare for Bethesda V.
You can see here how Afirma has consistently grown across multiple years, and it's been on the market for 13 years, as you can see. It continues to grow very nicely. Last year was a great year for Afirma. We're expecting to see continued growth. Beyond those two core products driving 95% of our revenue, I'm excited about having, you know, five core strategic growth drivers. Continuing to grow Decipher and Afirma the way that I just described is kind of priority number one and two. Serving more of the patient journey through MRD, expanding geographically with our IVD strategy, and then solving new cancer challenges with tests like nasal swab. We have a very differentiated approach starting with MRD, a whole genome approach every step of the way. Not just that initial sequence, but the subsequent sequences are all whole genome.
Again, going back to that platform and more data drives more insights. Having that whole genome data, we think, would be incredibly valuable. And that's why we're focused on that. We're going to launch first in muscle-invasive bladder cancer. We have that channel already with the urologist because of our prostate test. And there's a clear path to reimbursement. In fact, I'm pleased to announce that just yesterday we submitted our tech assessment to MolDX for MRD muscle-invasive bladder cancer. And so one of the first important milestones has now been accomplished, and we're looking forward to launching that test in the first half of next year.
IVD, as I think most of you who are watching closely are aware, we communicated an important consideration to our France entity very, very recently that we are considering no longer funding that entity, which has kicked off a consultation and a divestiture process, but we do remain committed to our IVD strategy, and I think that's a very important distinction. This could potentially delay some of our timelines. We've talked about that, but we're okay with that. It's the right balance as that entity has been loss-making for a number of years, and so we need to really think about where our investments are going and what opportunities that creates for investment in further growth strategies, so IVD will continue, and we're looking forward to launching Decipher on PCR and Prosigna on NGS and ultimately nasal swab on NGS as well. Talking of nasal swab, really important.
You know, I've communicated very recently that we're up to 85% enrollment in a pivotal NIGHTINGALE Study that will demonstrate clinical utility and give us the clear path to reimbursement that we need before we launch a test like this into a massive market where 1.6 million incidental lung nodules are detected every year and 15 million people should be getting screened. Clearly, I think we all appreciate very few of those are actually getting screened, and obviously, you know, the more we can help that with a non-invasive test, the better, so coming back to the financials, obviously last year was a very strong year for total revenue and testing revenue. I already alluded to the 28% growth, and we ended the year very, very strongly and couldn't be more proud of our team and our accomplishments.
As I've mentioned a few times, the profitability was very strong last year, and we ended with $289 million in cash and short-term investments. And as we think about our outlook for 2025, we've guided to 12%-15% testing revenue growth. But when you adjust for a portfolio decision we made around the product Envisia, which is a non-oncology product in our portfolio, on an apples-to-apples basis, that's a 14%-16% testing revenue growth. And we also guided to improving EBITDA margin by 100 basis points during the year from 20.6%. So obviously looking forward to a really exciting 2025 and what we can accomplish across both growing our core business and those three long-term strategic growth drivers that I've talked about.
And so as you can see here, we've got quite a few catalysts in our business, both very near-term and over the next three years or so. Excited to pushing each of these forward and working with the rest of my Veracyte colleagues to make that a reality. So with that, I will stop. Thank you. Great. Well, thank you so much. That was super helpful. I'm going to start with maybe kind of the noisier part of 4Q just to sort of get it out of the way. When we think about France, you know, you're pretty clear they're committed to the IVD strategy. How does that process change and what does it look like if you don't continue with the French operations? Yeah, that's a great question. Thank you, Andrew.
Yeah, so obviously a very important communication and a process that we're following to go through here, which at the end doesn't change the what about our IVD strategy. It just changes the how and the when to some extent. You know, as I think most of you know, a lot of what our Marseille team is working on, particularly our biopharma business, it's an immunohistochemistry business and other parts of third-party service provider, is important but not part of our core business. And then what they're working on that is related to our core business is our IVD development and our manufacturing of Prosigna. And clearly we're going to have to go through that process and then, you know, try and drive and ensure we have continuity of supply for Prosigna, which is important, albeit it's a relatively small revenue line.
There are patients involved here and we want to make sure we always do the best for our patients, and then also transition our IVD development programs if ultimately we make the decision to no longer fund our France operation, you know, more to come in the future as we work through this process, which is very rigid and structured, but again, I want to just make it really clear, no change to our strategy to make our tests available to patients outside the U.S. These markets are significant. Prostate's a great example, 500,000 patients with prostate cancer in Europe alone, you know, don't have access to a market-leading test like Decipher like we do in the U.S. today. I think a lot of reasons to hope that it does get there.
So shifting gears to more of the base business today, you know, you called out Decipher, the only sort of called out by name, has the table in the NCCN guideline, and that's a new change for this year to be the only one there. How do we think about what that change means relative to the first time that table went in, relative to other guideline changes we've seen in the past in terms of the magnitude of what it could mean? Yeah, I do think that's a pertinent question. If you go back to actually before, you know, guidelines were differentiated. In fact, every gene expression test was at a level playing field in the guidelines a few years ago.
You know, Decipher through its massive evidence, you heard me reference the 85 studies, was taking share and growing fast and, you know, had become, we believe, the market-leading test. Guidelines certainly have helped expand and accelerate that since then. But I'd say what was really important was the guidelines in April 2024 when, for the first time ever, the guidelines included a table that showed which level of evidence had been achieved by each of the tests. And Decipher was the only test with Simon Level 1, other tests having Simon Level 3C. And by the way, I commend the NCCN on the hard work that they do to really examine all this evidence and interpret it and make sure, you know, that they think through the patient impact and then articulate that in their guidelines.
They actually went so far as to put a treatment table in for the first time in April 2024 that showed, based on the Decipher score and the NCCN risk category, how the physician should respond. And I thought that was an incredibly helpful point as well. In the latest set of guidelines, as you quite rightly pointed out, it feels like NCCN has raised the threshold of inclusion to be tests that have Simon Level 1 evidence and therefore, you know, Decipher remains there, which is great. And so I think that's helpful. But to me, you know, April 2024 was when that first, you know, kind of step function improvement in differentiating Decipher happened and has just continued to grow as we continue to generate evidence. And just two things to add there perhaps.
I think, you know, what we've implied in the guide is effectively that the slope of the curve, which is incredibly steep already, it doesn't inflect again as a result of this. And then the second thing is, you know, there has been some debate around these guidelines and we just, I think, feel like the bar we need to hold ourselves to is making sure NCCN is approving every statement that we make externally, which, you know, I'm pleased to say they have, so. Perfect. That's helpful. And then thinking about the metastatic kind of process from here, what needs to happen to get that on-market reimbursed and kind of fully adopted relative to where we are today, where you've, I think, checked a lot of the boxes to get there? So just help us think through kind of that process and the timeline.
Yeah, so just to catch everybody up on what's been done, obviously the LCD has come out that now will cover metastatic, which is the fantastic catalyst that kicks all of this off, and we've submitted and had approval for our tech assessment and our New York State approval, so now what's left is really in our own internal control. It's the lab automation and the software development and the sales training and so on and so forth, and we said we're going to launch the test in the first half of this year, and then for you to start to see it ramp in the second half of next year. It's the same urology channel, and so, you know, anytime we launch a new product into our channel, we're both excited about it and thoughtful about it. We don't want to disrupt what's working incredibly well.
At the same time, we want to make this available to our physicians as soon as we can. Shifting gears a little bit to Afirma, one thing that kind of jumped out to me just looking at the slide you had of kind of the volume progression, the biggest unit step-ups we've seen have been kind of the last two years. So help us think about, is it adding TERT? Is it, you know, what lets that be the case when it's a product that was launched, you know, north of a decade ago? Yeah, I think it's really a couple of things. First and foremost, we have an incredible sales team and they're doing an amazing job. And, you know, we're excited for what they've been able to accomplish.
We've given our sales teams great new enhancements to our products and our processes to go out and talk to customers about, and I think that's been really helpful. You cited one. We added TERT promoter gene, which, you know, at some point may end up in guidelines and clearly we're ready if it does. We've enhanced the ordering portal and the test report, and then recently we launched GRID, our research-use-only, you know, platform that is based on the fact that we run a whole transcriptome for every patient, and so that's, again, given our sales rep something to go and talk to our customers about, and so, you know, I think that's helping them have regular routine conversations and really demonstrate the benefits of Afirma and why they should use it. Maybe a hard question to answer, but I'm going to try anyways.
So, I mean, that makes me think it's more that we have new things than necessarily exactly what that new thing might be. Is that fair? I know you've got Bethesda V. It's, again, you kind of have steadily rolled out these new things to talk about. Yes and no. I mean, every new component that has a good reason for a sales. By the way, even an example of this is when we, a couple of years ago, we had some supply challenges and of course we sent our sales team out to talk to our customers about that. And I think that just drove more and more engagement. So anytime it's blocking and tackling from a commercial perspective, anytime you give your sales reps a good reason to go out and engage with their customers, I think is a very positive thing.
But I think, you know, what you're announcing and what you're including really does matter too. You know, it's got to have utility. It's got to be very useful. It's got to be something that the customer wants. And so voice of customer is important. We do these things based on largely what our customers are telling us they're looking for. And so when we deliver on that and execute on that, you know, obviously it's a very positive conversation. And to that end, later this fall, you know, we will have a next generation GRID report out for Afirma with additional signatures. And so I agree with Marc. I think the what is as important.
And I think, you know, continuing to work with the KOL community on products like GRID and signatures involved in GRID is so critical to driving that portion of the penetration curve, if you will, or the market share curve. So I think, you know, we do our best to try and continue to advance the science in parallel with doing the right thing, you know, for all stakeholders, patients, shareholders, et cetera, employees. And is that drumbeat of kind of steady incremental additions or new insights, et cetera, the biggest thing to get you from 65 to 80? I think it's a big part of it. And then just continued blocking and tackling execution. You know, there's a long tail of physicians that need to start using molecular diagnostics and we would like that to be Afirma. Maybe jumping to the pipeline a little bit.
You know, I'm glad to hear the MolDX submission for muscle-invasive bladder for MRD. I guess how do we think about kind of next milestones and what that launch trajectory looks like? Obviously, you need to hear back from them. It's not just make the submission and you're done. But, you know, how are you thinking about building into that launch next year? Yeah, so first I'd just like to say, I mean, within just over a year after acquiring C2i, to actually be in a position to submit our tech assessment, I think is an incredible milestone and a huge congratulations to our cross-functional team, you know, both the teams that we acquired that are working hard in Israel and our team in the U.S. for achieving that important milestone. So it's great to see, yes, we do have to get feedback.
That'll be the next milestone when, you know, our tech assessment hopefully gets approved, we get a pricing decision there and then we're ready to launch. And again, that's very similar to metastatic. The software work, the LIMS work, the lab automation work, and the sales team training work needs to get done. And remember, the sales team is the sales team that's selling prostate and will be selling metastatic. We'll now be adding muscle-invasive bladder cancer MRD to their portfolio. And maybe just to touch on that pricing piece, you know, a bit of a unique approach with the whole genome on kind of every run, like you mentioned. How do we think about ADLT potential and kind of what pricing could be knowing that hopefully the, you know, the industry is going to think about what having whole genome means in each draw as well. Yeah, absolutely.
Happy to take that one. And I think, you know, over a multi-year period, we do believe that whole genome will be the right way to go for not only the insights it provides to the MRD status, but also just for the insights it provides to the biology of disease. Similar comment to what I had on GRID. With regard to pricing, I think that, you know, our understanding of the path forward is effectively the equitable pricing model, which takes into account your cost. And obviously this will be a conversation that we have with MolDX, but effectively our hope is that we get priced at a reasonable place, recognizing that the COGS of whole genome sequencing will be, you know, worthwhile for those incremental insights offered.
All that being said, you know, I think where we're really focused on is not necessarily what the ASP is, which obviously is a critical component to the equation, but also, you know, ensuring we're optimizing the data structure in a way that drives clinical utility evidence and sales force efficiency such that we can have a, you know, a very strong adjusted EBITDA margin on this business at scale. That's really what we're focused on here, more so than, you know, ASP of X and COGS of Y, right? It's really the whole equation across the P&L. And remember, MRD is a platform for us. Muscle-invasive bladder cancer is our first test and we're going to expand beyond that. And obviously, you know, this paves the way for decisions made here, paved the way for that in the future. So we're excited about that. Absolutely.
And maybe just to touch on something you mentioned as well, you know, that whole genome approach gives you the potential just like whole transcriptome does elsewhere in the portfolio to potentially have more insights. Can you give us hints as to kind of what you're thinking about from that perspective or how we should think about what that looks like?
Yeah, that's an interesting question. I think the answer is we don't even know. You know, we just know that more data drives more insights. And I'll give you a perfect example on Decipher, right? We could have been running a 22-gene whole, you know, assay all these years. We've been running a whole transcriptome. COGS is obviously different when you do that. And it's really paid off.
I do believe that's driven a lot of the research, independent research that Veracyte really doesn't have anything much to do with that has driven this incremental utility and ultimately guidelines for Decipher. And so we would expect to see the same thing happen, both research that we drive, research that we support, and then research that others do around whole genome and MRD. Having those, you know, longitudinal data points where you have a whole genome, I think it's hard to put a quantitative value on that and predict where that might be used, but it's clear to us that it will be. Maybe you wanted to also mention tumor-naive. Yeah, and I do think it, you know, potentially with that data, as you think about, you know, today we're going to be using tissue-informed tests because why wouldn't you?
The tissue's available and we believe it helps improve performance, but at some point when you don't have enough tissue or don't have access to tissue, tumor-naive could be an important paradigm, and obviously having all that data will be helpful as we transition or launch tumor-naive as well as a future potential way to go.
Perfect, and just looking at time, I'm going to shift over to the financials a little bit. I'm genuinely thinking, at least across my coverage and I think beyond, the execution on that transition from loss-making to kind of profitable entity, I don't think there's a better kind of story to point to, so, you know, congrats on that, I guess.
But thinking about the 21.6% that you guided to for EBITDA margins this year and you've kind of talked about a 25% plus target longer term, can you help us think about the timeline for that longer term and how you balance getting there sooner versus some of these investments like, hey, we're running whole genome, hey, we have a lot more than just muscle-invasive bladder we want to get to and so on?
Yeah, I'm happy to take that one. I think really what we try to do is balance, right? I mean, effectively, you know, we recognize that growing and investing for long-term revenue growth is absolutely paramount, but can we do that in an efficient manner that allows us to also drop a decent amount to the bottom line? And I think we've proven that we can, right?
I would say our prioritization process has an incredibly stringent bar. Everything's backed by a rigorous analysis. And when it comes down to it, you know, we have to make some really hard trade-off decisions. There's a lot more that we want to do than we can do. But, you know, the goal is to make sure we are balancing that investment, that focus, that execution such that we can eventually deliver that 25%. Specifically to 2025, last year we had around $11 million of prior period collections that flowed down at 100, I'm sorry, at 100%, right? So that's around a 250 basis points headwind to operating margin. When you think about the 100 basis points of expansion in light of that, you know, you're really talking more like 350 of expansion.
And so I think when it comes down to it, last year we delivered 700 or so basis points of expansion. This year we're going to deliver about half. As we look forward, those increments are still going to be positive, but not necessarily linearly or in a step function matter. We're absolutely focused on making sure we're getting that balance right, not under-investing, but also delivering enhanced profitability, best-in-class profitability day in, day out. Perfect. And I'm sorry, one last quick thing. We think about that on an annual basis and not quarterly. As we're in Q1, I feel like I always have to say that because the Q1 numbers are always lower and the back half will be higher.
Yeah, seasonality to the spend. I totally talked about it on our next call. I don't want to get too deep into it right now. Fair enough.
I think one of the ramifications of kind of that journey you've been on there is you're going to get a lot more capital allocation questions than you did five years ago, which is a good thing, I think. But maybe just to ask that question, you've got C2i in the fold, you've got Percepta nasal swab that you're working on. You know, how do you think about where that capital needs to go? Is there kind of external things that are particularly interesting and where might those be and kind of what are your thresholds when you look at them?
Yeah, and as Rebecca said, there's internal things, there's organic. We're working on discovery activities in the company to help drive long-term growth drivers of the future.
You know, there's the top three strategic growth drivers and ones that we're working on that we don't even talk about yet because we're not ready to. You can hear if you'd like. Not yet. We did the tech assessment. We did the MRD tech assessment, you're right. Fair enough. You know, and then of course there's always external things. You know, the benefit of being in our position is we hear a lot. You know, a lot of folks come to us, share what they have. The bar is high. Decipher was a great acquisition. We got Decipher right around the time that reimbursement was inflecting. And you saw from the graph how well that's done since then. And yes, if there were other, if there was other menu in our oncology space that felt like that, then that would be of interest. There's not a lot, unfortunately.
What we're not interested in doing is taking on something that needs three to five years of investment to prove clinical utility and maybe get reimbursement, right? We're not in that space right now. We're very proud of the portfolio management that we've done that's got us to where we are. And how do you think about, you know, the willingness to go beyond urology, to go beyond the Afirma channel? You've been in lung, you've stepped back from some of those products. You have Percepta nasal swab kind of on the come in lung again. You know, is the threshold higher to go into kind of a new specialty area? And how do we think about that in the context of C2i as well?
Yeah, not really. I mean, we're very open to it. You know, it obviously has to make sense from an ROI perspective.
Obviously when we launch nasal swab, we'll do that in pulmonology again. And, you know, we'll do that at the right time. And if we have to go into the MedOnc channel, we'll do it with menu. MRD, certainly, you know, as we start to see that platform grow and expand, creates that opportunity for us to do that. And we're very thoughtful about that. We like to see the more certainty around the revenue opportunity before we make the expense decision. Perfect. And we're just about at the end of time. I get half a question out, so we will call it there and head down to Amarante One for the breakout.
Thank you so much.