Great. Welcome, everybody. Good afternoon. My name is Matt Sykes, a life science tools and diagnostics analyst at Goldman Sachs. I've got the pleasure of hosting the Veracyte management team here with me today, CEO Marc Stapley and CFO Rebecca Chambers. Marc, Rebecca, thank you very much for joining us.
Thank you.
Thank you for having us.
Maybe if you could just kind of help us set the stage first, talk a little bit about sort of the most recent results, some of the trends you're seeing in your business, and what you're kind of expecting for the second half of this year.
Yeah, happy to. Maybe before I start, I can just remind people about our safe harbor statement.
Yes.
which you can find the full text of that on our website at www.veracyte.com. To the extent we make any forward-looking statements, we would expect them to be covered by that statement. Maybe before kind of getting into, you know, the great results that we had in the first quarter and what we expect for the second half, just to remind investors a little bit about, you know, what we do at Veracyte and why we do what we do. Ultimately, our vision is to transform cancer care for patients all over the world. You know, we base that on a belief that exceptional cancer care begins with exceptional diagnostics.
Our role here is to provide physicians with the high-value insights that they need to guide and assure patients at these really critical moments in the race to diagnose and fight cancer and treat cancer. With that in mind, you know, we've been very successful at launching two really important tests, our Afirma test for thyroid cancer and our Decipher test for prostate cancer, and significantly penetrating both of those markets with those tests, with a lot more room to continue to grow. Those are the core tests of our business that fuel our growth and our investments in a really broad and interesting long-term growth portfolio. To your question, Matt, around the performance, I mean, those tests really outperformed in the first quarter.
It was great to see Afirma, which is a dozen or so years in its life cycle, continue to grow at a very significant rate in the quarter, and we're actually able to increase our guidance for the year to high single digits as that test continues to penetrate the, call it more than 50% penetrated market in thyroid cancer testing. Decipher, similarly, we saw fantastic growth from Decipher in the quarter. When you look at the volume year-over-year, it was in the mid-40s % growth, driven very much by the significant body of evidence we have for that test.
You know, as we think about the rest of the year, obviously continuing to see performance, strong performance from our core business portfolio, while continuing to build on the new tests that we're launching and the new markets that we're approaching, both advancing our IVD strategy and advancing our NIGHTINGALE trial for our nasal swab test.
Got it. I think you just addressed it, I just want to kind of go back to the raised guidance, the $5 million at the midpoint. You had mentioned Afirma. Any other puts and takes that we should be aware of that raised guide?
Yeah, the guide was primarily a flow-through of the beat-.
Mm-hmm.
In the first quarter. We did raise our testing guidance.
Mm-hmm.
In addition to our Afirma guidance, to high single digits on the Afirma side and then mid to high teens on the testing side. Those are really the puts and takes. I mean, Afirma and Decipher are the vast majority of our business in terms of revenue contribution at this point in time, you know, when it comes down to what's really gonna drive the guide and the performance, it's those two products.
Got it. Maybe sticking with you, Rebecca, for a minute, just sort of a big picture question, maybe talk a little bit about your path to profitability and any, you know, key drivers to achieve positive cash flow generation. I mean, I think it's a differentiating part of the story in the current environment.
Yeah, I'm happy to, and I 100% agree with you, of course. I do think it's a very differentiated component of the Veracyte story. As many of you know, we did increase our cash guidance as well during the first quarter, such that we said on a year-over-year basis, our ending cash balance would be net neutral, and that was an increase of about $12 million from the prior guide, 'cause we are now fully absorbing the contingent consideration tied to the HalioDx and other prior acquisitions. Super excited about the cash generation story here at Veracyte. What is differentiated and what allows us to do that really is a couple of things.
First, on the gross margin side, you know, our gross margins are in the mid-60s, or the guide for the year is in the mid-60s, and that it is tied to an ASP around $2,600-$2,700, right? We're getting reimbursed for our tests. These are tests that, you know, we have at a minimum for on the Decipher side, just under $200 million covered lives for. I do think, you know, having reimbursement coverage to the extent that we do is differentiated. Additionally, we have specialty oncology channels, and these are highly efficient channels that allow us to continue to grow and penetrate these two tests very nicely in a way that does allow incremental leverage. That, again, is a differentiated asset.
On the R&D side, we're very prudent in our investment approach. We have taken a disciplined portfolio approach, you know, over the course of 2022, did streamline the portfolio really to be tied to those two products primarily. That has allowed us to also, you know, be in this very enviable position from not burning any cash this year. When you boil it down, it's those are the primary drivers that have gotten us to where we are, and obviously, as we continue to move forward, you know, I think from a cash generation standpoint, net neutral is kind of the floor.
You just addressed that a little bit, but just kinda wanna dig a little bit deeper on how you're thinking about balancing continued need for innovation. You've got pipeline products.
Yep.
whether it's nCounter, Percepta, but at the same time maintaining that financial profile that is differentiated.
Mm-hmm.
How do you think about that?
We literally have a scale. We don't put them on the scale, but I mean, you know, in our minds, we do, right? Obviously, we make sure that what we generate is, you know...
being used in a way that can hopefully sustain revenue growth over a long duration, but doesn't take us so far down that we need to, you know, tap the capital markets or really, you know, even burn any cash in any given year. You know, I think it is, overall, it's a portfolio approach, and that portfolio of Envisia, I'm sorry, Afirma and Decipher generates that cash, and that cash then gets funneled into the investment opportunities that will allow us to continue to deliver sustained growth over time. You know, everything has a business case. I mean, it's pretty basic sometimes when you think about it. Everything has an ROI and everything, you know, we make portfolio decisions to fund the highest return products that can help the most patients.
That's a very, you know, conscious philosophy that Rebecca just outlined. I mean, you know, if you think about the things that we're investing in for the long term, the nasal swab and the IVD strategy, those are conscious investments that we're making to provide long-term growth for the company, and we're investing in those at a rapid pace in order to, you know, bring those products to market as soon as we can in the current environment. Then also in addition to that, we're investing in, you know, our discovery engine to continue to fuel the organic growth opportunities for the future as well.
You know, we're able to do those things and make conscious decisions to do those things, and dial that up and down as needed appropriately so. To Rebecca's point, and we're gonna continue to, you know, our view is we need to continue to generate positive cash flow and, you know, at the same time, though, continue to create opportunities for growth in the future.
Got it. Maybe just pivoting to Afirma and Decipher, just given what they represent to growth, could you maybe remind everybody sort of about, you know, sort of the differentiation of those tests relative to the competition? I know there's, you know, Afirma sort of 50% penetrated, and Decipher, yeah, prostate is 25. Just maybe talk about sort of, one, the differentiation, and two, the room to grow.
To be clear, the penetration of those two markets, as you mentioned, is in molecular diagnostics for thyroid and prostate cancer testing, respectively, is 50%, 25% ±, and those are based on end of last year numbers. We believe our tests, Afirma and Decipher, respectively, hold the leading market share in those penetration metrics.
Yep.
I think there's a couple of reasons for that. One reason for both tests really comes to, you know, the performance of the test, as evidenced by the evidence that we've been able to generate, and not just that we've been able to generate, but that others have been able to generate using our test. That's one of the things that I think might not be as well appreciated is, you know, the amount of the R&D that we put into evidence development for those tests is some level, and we fund the studies to result in that, but others do, too. Others do independent studies based on our tests and produce those results. Consequently, both tests perform extremely well in the market. They perform very well as diagnostic tests.
The evidence that exists for them is very extensive. Decipher, a good example, you know, we have over 70 peer-reviewed, published tests and studies, associated with Decipher and over 100 research-based studies that also use Decipher. That level of evidence is what leads to, for example, NCCN Category one guidelines in the case of Decipher. That's the most important thing, is strong performance of the test and that performance to be supported by, you know, really robust evidence, and that's what helps us to maintain and grow market share.
Got it. Just given, just on Decipher, just given, the overall market penetration of 25% for molecular, given there seems to be incrementally more runway, how do you see in terms of, like, the durable growth rate for Decipher prostate moving forward?
I mean, it should be very durable. There aren't that many analogs out there, but when even if you used our own Afirma as an analog, that in 12 years, where the market's over 50% penetrated, I believe there's plenty of room for that to grow. I don't think any of these markets ever get to 100%, but certainly in my mind, 70% wouldn't be an unreasonable and possibly even a conservative estimate of where these markets could end up. That gives you a sense of the room for Afirma. To Decipher, to your question, with that market being 25% penetrated, so many men with prostate cancer are still not getting a molecular diagnostic today, and they should be.
The test is indicated for nearly every indication, with the exception of metastatic, and so that's over 90%. You know, continuing to penetrate that market is our primary focus. We have a great sales team that's highly leveraged, as Rebecca talked about, that's able to do that. The durability of Decipher, in particular, over many years is pretty clear from my standpoint.
Got it. When you look at some of the other tests you have, in terms of getting to where Decipher prostate and Afirma are, what do you see as sort of the pathway for those? I know the market size will differ.
Yeah.
The opportunity set differs. In terms of sort of like how we should be thinking about the rest of the menu and sort of the growth drivers over the next few years, how should we think about that?
I think there are some kinda small and medium-term opportunities there, where we have tests that are single-digit penetrated today or low single-digit penetrated, and that includes, for example, our Prosigna test for breast cancer, which is available as an IVD in the U.S. and outside the U.S. That includes our Envisia test for interstitial lung disease, which is a relatively rare condition, but a very distressing disease, and this test has proven utility there. Even up to, you know, our bladder test, which leverages our urology channel, and we see opportunities to expand our urology TAM by including more tests based on more evidence and, you know, performance for the urology market for bladder. Not as big as prostate as a market, but still meaningful.
You know, those are the medium term, but what's really exciting, I think, is the long-term opportunities that I've mentioned. That includes our Percepta Nasal Swab test for lung cancer, a very simple, non-invasive test for patients who have a lung nodule, who are a former or current smoker, to help classify those patients as low, intermediate, or high risk for lung cancer. You know, our plan is to launch that test in the U.S. and globally as well. That's a really exciting future opportunity. The other one is our IVD strategy, which I think, you know, is somewhat underappreciated.
Because of the great work we do to develop these amazing exceptional tests in the U.S. and create evidence behind those tests, we're able to launch those tests on our IVD platform on the nCounter for diagnostic use, get regulatory approval under IVDR for those tests, and we already submitted Envisia. We'll be submitting Decipher in 2024, and nasal swab in 2025, make those tests available to patients all around the world.
Got it. Maybe just before I start moving on to some of the other areas of the business, can you talk a little bit about sort of the commercial footprint and where you are today? I think you've done a lot of, laid a lot of groundwork to develop a really robust infrastructure from the commercial side. Do you feel like in terms of the presence that you have on the commercial side, you are where you need to be at this point? Obviously, you've got some longer-term pipeline projects that will require some level of commercial spend, but in terms of the existing business you have today, where are you on the commercial footprint, and what level of investment does that still require?
Yeah, you know, I'll talk about the team, and Rebecca, you can talk about the investment if you like. This is one of the really, I think, again, underappreciated, but really, interesting benefits of the specialty oncology business that we're in. We've built these sales teams in endocrinology, and they're not huge, you know, roughly call it 50 or so, plus or minus. Same thing in urology, and a smaller sales team in pulmonology, which I'll come to. These teams are able to address a very significant portion of the market and reach, you know, many, many customers. We haven't had to grow those teams substantially as those products have continued to penetrate the market, because of it's such a specialty, you know, population of customers.
That's a great model. In pulmonology, we have a smaller sales team that is focused today on our Envisia interstitial lung disease product. They're very excited about getting the Nasal Swab to be able to commercialize, and we'll be able to, you know, obviously grow that team as we see that Nasal Swab test, you know, start to penetrate the market sometime in the future. That's really, again, gives us an opportunity to grow that pulmonology sales force as we see penetration of the Nasal Swab test. Outside the U.S., we have a sales team that is more of a country-focused model, and it's more than just, you know, sales.
We have market access, we have medical teams, and we have the commercial team, so that triumvirate works together country by country, where we already have that team in place for the major countries in Europe, for example, UK, France, Germany, Spain, Italy, et cetera, because we're already selling Prosigna in those territories.
Got it. Maybe touching on some of the long-term drivers, you talked a little bit about the Percepta Nasal Swab offering. You talked a little about NIGHTINGALE. Maybe kind of summarize for the audience, sort of what some of the key findings are from that and what we should be looking forward to on that.
A NIGHTINGALE trial is a pivotal clinical study that we're doing to demonstrate the clinical utility for the Nasal Swab test. Important to understand that we've already generated and shared the clinical validity data for that test, that shows that in terms of classifying patients as low, intermediate, or high risk, you know, it works well, and, you know, that's based on going all the way to clinical truth for those patients. That is the basis of the CV study. What that means from a clinical utility standpoint is patients who identified as low risk are able to avoid invasive procedures, such as a bronchoscopy. Patients who are identified as high risk are able to be accelerated to surgical follow-up and treatment. Very important unmet need in lung cancer screening today.
Not enough people are getting screened for lung cancer. There's 15 million people in the US alone who should be screened annually, and roughly 1 million, I'll call it, you know, or even, you know, about 1 million of those patients are getting tested today. There's about 1.6 million lung nodules that are found incidentally in the US. Of course, as I mentioned before, we're gonna launch this test outside the US as well. The market is significant. Our goal is to enroll the final patient for the NIGHTINGALE study by, you know, around the end of this year, and then we'll obviously have to follow up those patients and get to a publication for clinical utility and get that approved and get reimbursement.
Got it. On the biopharma business, which has been a little more volatile, I think there's obviously some well-known, you know, end market health dynamics that are involved in that. Maybe we'll talk about, you know, about that business a little bit, give us an update into what you're seeing now, particularly around that dynamic of spend from the customer base.
Sure, I'd be happy to. As we mentioned on the Q1 call, both the biopharma business as well as the IVD manufacturing and development business, have had a bit of a headwind here, the latter of which, driven primarily by our desire to fund and use those employees to do our own IVD development. Biopharma, you know, back in the fall of last year, we did say we were seeing a slowdown. We play in the earlier stage of the development arena for these customers, and I think that is much more apt to be hit earlier on in these budget macro environments that we currently face as we do today. We've expected this for a little bit.
We had 1 major customer that did take a pause on a very large project, and impact our outlook for 2023. Since then, have also seen a, you know, bit of a more challenging environment, for this portion of our business. I wouldn't say anything has changed dramatically one way or the other. Definitely has not improved. Again, this is only about 6% of our revenue, so in terms of the overall impact from our business, it's not material.
... At the same time, you're continuing to generate the data and build that biorepository, which, you know, I think over time becomes more and more valuable. As spend comes back, you'd expect, you know, Veracyte to participate.
Oh, definitely.
Yeah.
Yeah, I think, you know, we have a host of assets, not just the biorepository with regard to the Afirma Decipher side that you highlighted, but as well as the business that it comes out of, the Marseille, the Halio acquisition from Marseille. I think we have a number of great assets to serve our biopharma customers, a good team to go after it. You know, whether that's six months from now or a couple of years, it's anyone's guess at this point in time.
Got it.
Yeah. I mean, we believe in that biopharma market opportunity. We have some great assets in immuno-oncology. We've had some really interesting projects and good repeat rate. As Rebecca mentioned, we've had some customers of late, either pare back or slow down. Then, you know, bringing on new customers is also seems to be slowing, relative to how long it takes to go from interest to final decision. Interest is there, decision takes a little bit longer at the moment. I'm sure others are seeing that, too. My belief is, and this biopharma business for us could be a significant portion of our revenue in the future.
We're gonna continue to focus on that and invest in that and, hopefully, you know, drive that to where it needs to be once we get through these macroeconomic headwinds.
Got it. Maybe shifting to the IVD strategy in Europe, I think it would help the audience to maybe understand a little bit more about the genesis of that approach. It's obviously a very different market than the US in terms of the decentralization, but maybe talk about why you decided to approach that market that way, you know, and as part of that, the Halio acquisition, and then kind of sort of what your vision is of that business over time.
It goes back to the vision of the company, you know, transforming cancer care for patients all over the world. We've developed these exceptional tests for the U.S. market, and they're penetrating extremely well, but there's clearly demand for these tests outside the U.S. as well, and our primary focus has been Europe. Decipher Prostate is a great example of that. You know, it's pretty clear to us that there is a need for a test like Decipher to be made much more accessible to patients, much closer to the patients in every country that we can access. Knowing that, you know, our strategy was to have a platform that we can develop the tests as a kitted strategy, to distribute those tests.
The alternative of actually creating a CLIA lab in every country is cost prohibitive. You wouldn't do that. You know, that you wouldn't be able to make that, the economics of that necessarily work. The second strategy of having tests shipped to your CLIA lab in the U.S. doesn't work. You have privacy issues, you have samples across borders, you have turnaround time challenges. Making the test available to customers and to labs who are closer to those customers, makes a lot more sense. We're in the process of getting regulatory approval, as I mentioned earlier, for three of our tests. One's already submitted, two to come soon, and that includes Envisia, Decipher, and Nasal Swab. Then at that point, we'll have a very meaningful menu.
We're only at that point, looking at talking about four tests, Prosigna for breast, and then the three I just mentioned. That is significant menu when you think about the number of incidences of breast cancer, lung cancer, prostate cancer outside the US. And that's not even including Envisia, which is a rare condition, as I mentioned earlier. When you think about that is a meaningful menu that should be, in our opinion, is sufficient to get many labs to adopt the instrument, if they haven't already done so, because these instruments already exist in the installed base out there, and the kits.
Now, the idea of the HalioDx acquisition for us was to enable us to manufacture those kits ourselves, control the supply chain, control the economics of that, manufacturing our manufacturing capabilities in Marseille, France, and be able to distribute from there to all of our customers outside the U.S.
The decision to bring that, to sort of vertically integrate that manufacturing, talk to me about sort of the cost benefit trade-off of either, you know, outsourcing that or doing it yourself and vertically integrating that, or even the possibility of doing that? I mean, obviously, it was clearly an economically driven decision, would love to hear kind of the rationale behind that.
I mean, it is. I mean, effectively, we outsource that today.
Mm-hmm.
The idea of bringing that in-house is, you know, controlling that supply chain and also having the economic benefit of, you know, maintaining the margin within Veracyte for that. Of course, outside the US, we're selling to other labs who themselves are running the test, and therefore, they need to cover their costs or make a margin. You're already sharing margin in, outside the US, that you're not doing in the US model today. It's really important for us to control as much as we can, the rest of that cost structure. We believe as we scale and grow, it enables us to take opportunities of that scaling and to leverage those opportunities of scale to manage those procurement, you know, relationships as well.
It's all a volume-based, you know, economic decision, and it's based on the volume growing in each of those countries that we service and having sufficient volume outside the U.S. in order to make those economics work. Again, it's always about menu, volume, and driving enough production for our customers and having the quality and turnaround time that we need.
Talk about sort of the cadence of timing in terms of rolling out this menu expansion. You talked about the different tests.
Yeah.
Just, you know, to really talk about in terms of how we're modeling this and how we're expecting that to start contributing, it would be really helpful to kinda understand how that's gonna be, how that cadence is driven.
The development for those three tests, and again, reminding everybody that the development of the actual assay, and the deep science behind that, including the machine learning that results in the classifiers or the tests that we've come up with, has already been done for the U.S. market. Now the development is bridging that for the European market to the other platform, the Onco platform. You know, developing the evidence that we need for that specific for that market and submitting the dossier for regulatory approval under IVDR. IVDR being the new standard that we're all having to follow. We're all learning, as are the notified bodies as we go through that process.
Our Envisia submission in December last year is progressing very well. Again, we're learning from that, the iterative process back and forth with the notified body in terms of what's required here. The timeline for actually getting a test approved is unknown to us and others at this point. You know, we just don't know how long it's going to take, but we'll learn that as time goes on. As I mentioned, we're developing these three products in parallel, and we'll be submitting Decipher in 2024 and Nasal Swab in 2025. Those are the, you know, we wanna get the Decipher prostate test launched as quickly as possible and then have Nasal Swab follow soon after that.
You know, we are on very compressed timelines here, going from bridging those products, developing those products, creating the evidence and dossier, to submitting and getting it approved as quickly as is possible.
We've heard other companies dealing with the challenges of IVDR registration, and you're obviously dealing with it now. If you could kind of look forward in time and see that taking place, do you think that develops some type of moat for you in terms of actually doing the work and getting there when everyone else is just starting?
I think it does, and it already has, and one of the reasons we acquired the team in Marseille is because they have over 15 years of experience in developing IVD products. Right now, IVDR is new for everybody, but even there, that team has some experience in that, in the early stages as well. Clearly, many years of experience of developing assets and getting them through regulatory approval. Yes, I do think, A, is a moat, and B, it becomes an even stronger one as we get through. You know, a test per year every year is quite an incredible accomplishment and experience.
I'm not as up to speed on the sort of the competitive landscape for these types of tests in Europe. Could maybe talk about as you kind of roll these out, what kind of competitive landscape are you facing for each test, and what are you really going up against?
Again, I think the best way to deal with the competitive landscape. I mean, first and foremost, as I talked about, the challenges to getting a test launched in Europe, the clear model in the U.S. not working, the cost prohibitive outlay that you would have to put in place to build your own lab or do have to put in place. Having our own platform, the access to the nCounter for the clinical markets, is, I think, a key differentiator there. You know, in terms of competition, the most important thing that we will have on top of that is menu.
Mm.
Being able to address many needs of our customers in oncology, in a number of indications, I think is gonna be really important. Being, you know, being able to work with those customers very effectively, the raft of evidence that we have and will have generated... I mean, again, this is the beauty of the flywheel here, that the U.S., the number of tests, if you think about how many tests we've run for Decipher prostate in the U.S., the plus 70 and 100+ studies that I mentioned earlier, the NCCN level one guidelines in the U.S. all add weight. When you think about that's gonna be the same test effectively that we've bridged, that's being used outside the U.S., that is a huge competitive advantage.
You know, our focus on evidence development, the clinical utility study, NIGHTINGALE, for nasal swab, for example, that is what gives us, I think, the competitive edge when it comes to launching these tests outside the U.S. as well.
Got it. Rebecca, just looking at, margins, we talked a little bit about financials before, but just sort of your thoughts, expectations for 2023 and beyond. Last quarter, you mentioned sort of a sequential step down in gross margin. Maybe talk about some of the drivers and opportunities to expand margins, and any color on specific test margin profiles, as you kind of lay that out, would be helpful, if you're willing to talk about that.
Happy to talk about the topic in general, how's that?
Okay, sure.
Um,
I can try.
It's all good. Yes, we did highlight on the last earnings call that we do expect a sequential step down in gross margin. We have seen, as we've highlighted a few times this afternoon, really strong growth in Decipher in particular, and we are getting to the point in the laboratory where we need to add incremental staff, incremental equipment, and incremental space. Over the course of the rest of this year, that will start biasing itself into the financials, and that's one of the large drivers of that guidance. Additionally, we had a $2 million good guy in the quarter that we aren't expecting to repeat, and that obviously flows down, as well as a business mix, contribution in the first quarter.
As you look in Q2 and beyond, you know, we absolutely do feel the need to continue to invest, to catch the lab, the lab operations up, if you will, to the level of volume, that, you know, we are expecting. That's all work that's going on beginning in the second quarter, and that will continue on throughout the rest of the year. As we look forward beyond 2023, we do think there are many opportunities for us to continue to focus on efficiencies in the laboratory. Not really willing to go into what those are today. They're works in progress, if you will, given the advances, you know, across the tools industry, you can imagine that, we have different opportunities at hand. Those.
We expect to balance inflationary pressures, both on the reagent side as well as the labor side, and our goal at a minimum is to be net neutral between those two things. Yes, we're seeing some goodness with regard to, you know, efficiencies on the ability to scale. That being said, we're also seeing some pressures, and our goal is to be net neutral.
Got it.
at a minimum, to be clear.
Got it. Marc, I'm gonna ask the obligatory artificial intelligence, AI, question, which I'm asking everybody, regardless of relevance sometimes. I think with you guys, it is actually highly relevant.
Yes.
Maybe talk a little bit about how you're leveraging AI, what do you think this could mean for the diagnostics industry? I mean, we're dealing with very large, complex data sets, which tends to lend itself to AI. Maybe talk about Veracyte, how you're leveraging it, and what do you think the role of AI will be in your company?
... Yeah, if you think about the development of our tests and our classifiers, there's an incredible amount of data, you know, data involved in analyzing the algorithms and coming up and locking the classifier and determining what is the best algorithm for the test. You can imagine we have incredible machine learning and AI capabilities on that side of our business, as well as, you know, if you think about our immuno-oncology offerings and immunohistochemistry, we have tremendous experience in, you know, using AI on imaging data as well. That already exists in our company as one of the offerings that we have for our biopharma customers. You know, so there's existing capabilities within our business, too.
If you think about the amazing datasets that we have based on the number of patients that we've serviced so far, you put all that together, of course, we're very well-positioned from an AI standpoint as a company, and we think, you know, it's important to continue to opportunistically develop and grow those capabilities over time.
Got it. Just in terms of capital deployment, I mean, you guys were very active a few years ago on M&A. In terms of the balance sheet, it's in, it's in good shape. You're obviously approaching profitability. As you think about sort of capital deployment opportunities, we've talked a lot about sort of the organic investments that you're making. Have you sort of gotten to the point where you might be pivoting back towards, inorganic, or are you still really focused on organic? If there is some in-inorganic, I'd love to kinda get your view on sort of valuations and where you see sort of the landscape.
Yeah, no change in our philosophy here relative to what we've communicated before. It remains the same, and that is, first and foremost, as I mentioned earlier, we are investing in inorganic discovery and research efforts in our company to help identify the products of the future and the technologies of the future that are gonna serve us and our customers well. That's important. We bring fence to the investment in that, and we're continuing to, you know, develop that part of our business. We've made some great acquisitions, and as you can see, Decipher, in particular, is really doing very well because we acquired that business at a really important inflection point. It had a clear path to reimbursement, a great product with significant evidence behind it, and it was ready to really start to inflect.
That's the bar for me for you know, an acquisition like that.
It's a high bar.
It's a very high bar, and there aren't a lot of Decipher out there. You know, we're opportunistic, of course, but, you know, we certainly, you know... Ultimately, we have an incredible portfolio of products that we're developing already in-house. We've got growth drivers, near term, medium term, and long term, that we're excited about. That will help to fuel our business growth. If we can do that, as we've said we can and are, with, you know, clear path to profitability and cash generation, that we're effectively there this year based on the comments we've made with respect to cash, even better.
Got it. Maybe in the minute we have left, what do you think is most misunderstood or underappreciated at Veracyte?
It's a, it's a great question. You know, I think always the question is around the durability. It's the first question you asked of our existing products, and I think we've demonstrated that many, many years, you know, multiple years after a product is launched, that the growth is durable. The second is the IVD strategy. I think, you know, proving that out, we're breaking new ground with that. You know, there's not an analog to look at and say, "Okay, Veracyte's doing what other companies have done here." We're doing it first, and we're doing it really well. You know, I think kinda trying to understand that market relative to the U.S. market is an area where I'm not sure investors have fully appreciated yet.
As we launch a product a year, you know, you'll start to see that penetration curve.
Got it. I think that's a great place to end it. Thank you, Marc. Thank you, Rebecca.
Thank you.
Really appreciate it.