Global Jefferies Healthcare Conference. My name is Camden Sisler with the Healthcare Investment Banking Team. It's my great pleasure to introduce Rebecca Chambers, Chief Financial Officer of Veracyte.
Thanks, Camden. Thank you to Jefferies for having us. We're happy to be here, and thanks to you all for joining us today. I'm excited to walk you through Veracyte's recent progress, where we're headed next as we continue working to improve cancer care for patients across the world. Before we begin, I'll remind you that we may be making forward-looking statements today, and our safe harbor can be found both in this presentation and on our website at www.veracyte.com. At Veracyte, our vision is to transform cancer care through the power of specialized molecular diagnostics. Patients are our purpose, and our work is grounded in bringing meaningful, actionable insights to clinicians so that patients receive the right treatment at the right time. Importantly, our vision is to serve cancer care patients all over the world, not just here in the United States.
Our fundamental belief is that more data fuels deeper insights, which generates stronger evidence, leading to greater clinical utility and ultimately even more data. This flywheel is the foundation of the Veracyte Diagnostics Platform, a novel approach that we expect will drive continued growth. We are leveraging our platform to serve patients throughout their cancer journey, from early detection to diagnosis, treatment selection, and with our recent addition of MRD, treatment effectiveness and monitoring. I'm proud of our portfolio today, with tests spanning thyroid, prostate, bladder, and breast cancers. Our focus is on serving patients with cancer or patients suspected of having cancer. Looking ahead, we have a rich and exciting portfolio of products in development over the next few years, which will expand our indications as well as our reach across the cancer care continuum with our MRD tests and our Percepta nasal swab test.
I will share more details on our pipeline with you all shortly. Our platform continues to drive meaningful impact with over 600,000 patients served to date and more than 500 publications validating the performance and clinical utility of our tests. Our strong clinical evidence not only drives commercial adoption, but also supports a uniquely differentiated financial profile. In 2024, we delivered 28% testing revenue growth and 20.6% adjusted EBITDA margin, which is an incredible testament to our team's hard work and dedication. This strong performance is driven by the testing revenue of our two core products, Afirma and Decipher. Together, these tests accounted for 95% of total revenue in 2024. This momentum continued in the first quarter, with testing revenue growth of 19% and Q1 representing our 11th consecutive quarter of 20% or more testing volume growth.
We are encouraged by the ongoing durability of our testing business and are confident in delivering on our expectations for this year and beyond. Now let's take a closer look at Decipher. We are incredibly pleased with the growth we have seen for the Decipher prostate test, as we have now tested over 275,000 patients as of the end of the first quarter. This is driven by our strong body of evidence spanning over 90 clinical studies demonstrating clinical validity and utility. This evidence is fueling incredible growth and adoption, enabling Decipher to become the market-leading test for prostate cancer prognosis and prediction. Notably, in the first quarter, we saw both a record number of ordering providers, up over 20% compared to the prior year, and an increase in orders per physician.
The market is large and unfortunately growing, with approximately 314,000 patients diagnosed with prostate cancer annually, including metastatic patients. We estimate the market was 40% penetrated as of the end of 2024, and that Decipher has about 65% of market share. Our long-term goal is to drive at least 80% market penetration in all our indications. Decipher has grown incredibly well over the last few years, as many of you know, with a three-year revenue growth CAGR of over 45% through 2024. 19%-22% growth is implied in our 2025 guidance, and strong double-digit revenue is expected going forward. This is driven by expanding market penetration and favorable market share dynamics. We are proud that Decipher is the only gene expression test with Simon Level 1B evidence in the NCCN guidelines, which is a key differentiator for us.
We continue to see broad-based expansion across all National Comprehensive Cancer Network, or NCCN, risk categories, which is something we're particularly proud of, with similar growth across the low, intermediate, and high-risk categorizations of localized disease. We were pleased to recently announce that Decipher prostate is now available for use in the metastatic population on a limited basis and will be available broadly this month. This launch meaningfully expands the population appropriate for Decipher testing, serving an incremental 30,000 patients diagnosed annually and increasing our TAM by 10%. We will soon be addressing the entire risk spectrum of prostate cancer, further strengthening our confidence in the test's long-term growth trajectory. We've also continued our investment in digital pathology studies to assess the complementary benefits of the technology, as well as to ensure research collaborators have the necessary tools to further our collective understanding of prostate cancer.
In addition to the data presented at the 2025 ASCO GU earlier this year, we have now scanned over 70,000 slides from over 40,000 de-identified patients annotated with outcomes data, solidifying our digital pathology capabilities with advanced AI models that incorporate long-term outcomes and may ultimately complement the prognostic power of our Decipher test. Further, we recently made these capabilities and models available to research collaborators to advance the science in this field of combined AI imaging and molecular analysis. Shifting gears to Afirma, we are the market leader in thyroid diagnostics. We have tested more than 350,000 patients as of the end of the first quarter, and roughly 60% of these have been spared an unnecessary surgery through the utility of our test. We now have over 160 publications to date, and in the first quarter, again drove double-digit volume growth.
While the endocrinology market is more mature than the prostate market, we estimate the market was approximately 65% penetrated as of the end of 2024, with a long runway to get to the 80% penetration I mentioned earlier. Of that 65%, we believe Afirma has approximately 52% market share. We expect Afirma to deliver high single-digit revenue growth this year, driven by gains in incidence, penetration, and share. We saw increased utilization year over year per account, and growth was further driven by the expanded LCD that now includes reimbursement for Medicare for the Bethesda 5 population. Despite Afirma being on the market for 14 years, the volume strength we're seeing, as well as the indication expansion and the product enhancements we've delivered, make us confident in the go-forward durability of the Afirma franchise.
Additionally, as part of our overall COGS reduction roadmap, we have been working to transition Afirma onto the version two of our Veracyte Transcriptome, running on the latest and most cost-effective sequencing technology. We will launch Afirma on the updated assay later this summer. We're very proud of our ability to continue to grow our U.S. CLIA tests, with Decipher and Afirma making up the majority of our revenue today. We have a number of other strategic growth drivers that we're focused on growing beyond Afirma and Decipher, including adding indications in the U.S., serving more of the patient journey through MRD, expanding geographically with our IBD strategy, and solving new cancer challenges with tests like our nasal swab. I'm excited to share the progress on each of these initiatives. Let's start with Prosigna.
On our earnings call last month, we announced our decision to launch Prosigna as an LDT for the U.S. breast cancer market, given the tremendous opportunity we see ahead. There are approximately 300,000 patients diagnosed annually with breast cancer in the United States, and approximately 225,000 of those have early-stage hormone receptor-positive disease and would be eligible for the test. Prosigna is based on the well-known, well-researched, and scientifically respected PAM50 signature and can provide physicians and their patients with additional insight on the biological classification of the cancer and risk of recurrence to help inform treatment decisions. While Prosigna is currently available only as an IBD on the Encounter platform, the Prosigna LDT will be run out of our CLIA lab using our brand new V2 transcriptome.
Commercial availability will begin in mid-2026, and we believe key data readouts, one of which was recently shared at ESMO Breast, will support adoption of Prosigna, augmenting Decipher and Afirma growth in the near to midterm. As always, we are focused on driving evidence for the test through the Veracyte Diagnostics Platform to support continued research for patients navigating the stressful diagnosis and associated treatment paths. Moving to MRD, our approach is different in that it is a whole genome every step of the way, including the initial baseline sequencing, followed by the sequencing of serial testing samples. This approach is backed by our fundamental belief that more data drives more insights, more clinical evidence, more payer coverage, and therefore more durable adoption.
We made good progress in advancing our MRD platform for our first indication, muscle-invasive bladder cancer, which will leverage our strong Decipher brand and channel that serves urologists and radiation oncologists. We remain on track for commercial launch in the first half of next year once we have reimbursement in place. While we are initially focused on MIBC, beginning in 2027, we plan to introduce a new indication annually, serving more patients across more indications. Turning now to our geographic expansion growth driver, where we are committed to launching tests as IBDs to address patient needs outside the United States. There are approximately 270,000 patients diagnosed with HR-positive breast cancer in Europe each year. Today, we have the Prosigna test available for those patients on the Encounter, but to further expand the reach of this test, we are developing Prosigna as an IBD on next-generation sequencing.
Similarly, there are 450,000 patients in Europe each year diagnosed with prostate cancer that do not have access to a test like Decipher, which is why we are developing Decipher as an IBD on the qPCR technology as a distributable test to serve this patient population. We expect Decipher, PCR IBD, and Prosigna NGS IBD product development work to be completed by the end of next year, and we will submit to the regulatory bodies for IBDR certification or approval at that point. Moving on to our last growth driver of solving new cancer challenges with innovative products like our Percepta nasal swab. Lung cancer is the leading cause of death worldwide, and there are 1.6 million incidental lung nodules detected each year and approximately 15 million patients who should be getting screened.
This is a massive market, and we believe effective early-risk classification to indicate whether invasive or surgical management is appropriate and a non-invasive test such as Percepta nasal swab is key to properly treat patients with an identified lung nodule. Our pivotal Nightingale study is expected to be completed in the third quarter, and we are pleased that our analytical validity data was recently published in BMC Cancer in the first quarter, demonstrating the robustness of the test. These are key steps to bring this important test to patients. Now the fun part. Let's look at our financials. Sorry, I think it's just fun for me. We saw very strong growth for both our total revenue and testing revenue in 2024, and continue this momentum into 2025. We delivered 18% total revenue and 19% testing revenue growth in the first quarter.
I couldn't be more proud of this accomplishment or the team that drove it. Moving on to profitability metrics, our financial profile continues to be best in class, driven by our disciplined approach. In 2024, we recorded $24 million of GAAP net income, or 20.6% adjusted EBITDA margin, and we ended the year with just shy of $290 million in cash and short-term investments. Looking ahead to our outlook for the rest of 2025, we guided to 12%-15% testing revenue growth for the full year of 2025 on our Q1 earnings call. When adjusted for a portfolio decision we made around the Invisia test, which was a non-oncology product in our portfolio, our testing revenue is expected to grow 14%-16% year over year.
On our Q1 earnings call, we raised our 2025 adjusted EBITDA guidance to 22.5%, representing a nearly 200 basis point improvement from the 20.6% in 2024. We are focused on balancing our strong growth expectations with financial discipline to reach our longer-term adjusted EBITDA target of 25%. We are incredibly proud of our ability to drive a differentiated profitability profile. With a strong revenue and profitability growth profile as a backdrop, we're on solid footing to deliver upon a rich and exciting pipeline of products in development over the next few years and beyond. To date, 2025 is shaping up to be another great year for Veracyte, and above all, we remain deeply committed to our mission of transforming cancer care and improving patient lives all over the world. Thank you all for your attention this afternoon.
I think we are going to open it up for any questions that the audience may have.
What do you think investors don't understand about the story that isn't, you know, may not be priced into the stock?
Yeah, the question, thank you for the question. The question was, what do investors not understand about the story and isn't priced into the stock? I think that's a great question and something that is obviously very much top of mind for us all at this point in time. You know, I think at this point in time, with Afirma being 14 years into its life cycle, I think it's pretty well understood that, you know, high single-digit growth is actually a home run for a product of that duration in 2025, obviously.
As we look forward, we think that, you know, we can continue to demonstrate very nice growth for Afirma on a go-forward basis. I think folks are very focused on Decipher growth and understand the Decipher story decently well, though react very keenly on, you know, just a couple of hundred tests one way or the other in a quarter and get a little bit overly myopic on that. I do not think most folks have much belief in the growth profile of the pipeline drivers, right? The pipeline is, I do not think, valued in the stock at this point in time. Whether it is MRD or Prosigna, we have two amazing growth drivers that will start really coming to bear in the first half of next year for MRD and middle of next year for Prosigna.
I definitely feel like that is something that, you know, given the competition in the MRD space and given we're a late entrant, is something that I think folks aren't necessarily giving us any credit for. You know, I think that the interesting thing on the MRD front is we came from behind on Decipher, and so we absolutely are used to being in this position. You know, we're patient individuals and we're setting the foundation for, you know, MRD to be a critical part of the story for the next five to ten years. Similarly with Prosigna, we've been working on the trial. We've been supplying Prosigna kits for the trial that is reading out here in the next year or so that will enable us to launch Prosigna as a CLIA-based test in the United States since 2019, right?
We are setting the stage for a foundation for growth across multiple vectors over a multi-year duration. That, in my mind, you know, before we even get to the IBD story or the nasal swab story, are probably the two most tangible items in the forefront. Obviously, the profitability. When it comes down to it, if I look at where we are trading on an adjusted EBITDA basis, it is relatively, you know, value-oriented. Thank you for the question.
Yes. Given your targets for profitability, do you have any capital allocation plans, such as M&A?
Yeah, great question. Not sure if that was picked up by the webcast, so just repeat in case it was not. Given the profitability profile, do we have capital allocation plans, including M&A? We are always assessing the landscape for M&A targets.
Over the course of the four years that we've all been here, we've probably looked at over 100 different targets and executed on C2i in the spring or in the winter of 2024. Our bar is immensely, incredibly high. We are looking for something that we can slot into the profitability profile, a.k.a. not a lot of burn, that is, you know, has a decent path to reimbursement, and the reimbursement journey is known, the timeline is known, and that, you know, potentially we could either augment our portfolio across the care continuum or across indications. The other thing that we're always looking for, which C2i fit perfectly into, was something that is kind of more focused on the additional data that we provide through the whole transcriptome and the whole genome approach for Afirma, Decipher, and MRD, respectively.
Those are kind of the criteria that we're looking at from a business development perspective. There are a ton of wonderful companies out there, but they're going to take four or five years to get to that point. We have an active tracker we're always looking at, but the bar is really high. I don't see anything transformative on the horizon that would require incremental capital raise or anything like that. It's very much smaller companies that are on the cusp of bearing out. All that being said, even with that high bar, the portfolio we have in front of us is amazing. Our biggest challenge is internal resource prioritization because we have so many different opportunities that we have to bear over the next three to five years. That is always taken into consideration as well.
Thank you.
I wanted to follow up on your comment about MRD competition. Just kind of curious, given a lot of other competitors entering the field or have been in the field for a while, sort of how you're planning on competing in terms of, you know, these competitors have more data out there. They have extensive Salesforce relationships. Any insight on how you're planning to compete there would be great.
Yeah, happy to.
Thank you for the question. The question is, how will we compete in MRD with the folks, many companies out there in the space, as well as competitors that are absolutely steps ahead of us? That's totally the case and something that we absolutely recognize. I think the good news is that the MRD market is, as you all sized recently, amazingly large, right?
I think when it comes down to it, you know, obviously we always aim to win, but for it to be a meaningful driver for Veracyte does not require us winning. I think there is a lot of space and a lot of areas for us to be differentiated in our MRD approach. You know, some of those include why we are going with muscle invasive as the first indication. We have an amazing channel. Around 70% of muscle invasive bladder cancer patients are served in the urology channel, which includes radiation oncologists. We already have that channel, and we can slot this into the bag quite nicely when it is available in the first half of next year without having to drive new relationships and incremental sales cost. We have good data in MIBC. We have put the tech assessment in.
On the MIBC front, I think it's a good example of how we're trying to do this with a differentiated approach. By offering the whole genome at every step of the way, the value of the longitudinal data that we will have on things like genetic drift, mutations based on different treatment paradigms is going to be just amazingly valuable over a 10-year timeframe. We're playing this for the long game and really looking forward to working with KOLs and collaborators to demonstrate the value of that longitudinal data in a way that, similar to Decipher, helps us enhance the commercial prospects for the test. While we are behind, I think, you know, given this whole genome approach, we have a toolkit to quickly catch up and hopefully eventually be incredibly successful. We will build a med-onc channel that will start with Prosigna.
Over time, as we launch those indications year in, year out, beginning in 2027, beyond MIBC, we'll have a nice channel that will be ready to scope those in and go forward with each new indication appropriately. We are pretty excited. We haven't talked about what the new indications will be, but you can imagine we have a host of different specialty sales teams as well as knowledge. We will do our best to augment those bags as appropriately as possible. I guess the last thing to do is to cite on that question is we believe we'll be able to do all of this within the profitability envelope.
Despite the higher cost of whole genome sequencing compared to the ddPCR options, I believe that at scale we'll be able to achieve the adjusted EBITDA target of the total company at 25% for the MRD franchise. Any other questions? All right, thank you all again for your attention this afternoon and have a wonderful day.