All right, great. Thank you, everyone, for attending this morning. It's my pleasure to welcome Katherine Stueland, CEO of GeneDx, as well as Kevin Feeley, CFO of GeneDx. We have around a half an hour or 35 minutes this morning. I'll go through some questions, and then we'll open it up for broader Q&A towards the end of that. Katherine, Kevin, pleasure to have you here.
Thanks so much for having me.
Great. Maybe just to start off, whenever I speak with generalists or even with health care and life science investors, GeneDx is always a company that stands out as one of the few non-oncology diagnostics testing names that has really achieved strong growth, starting to have meaningful scale, a premium valuation. Maybe for investors that aren't as familiar with rare disease testing, what do you think is really the most important thing to understand about rare disease, relative to what investors in the space might be much more familiar with in oncology and the diagnostic paradigm there?
A few comments on the oncology space. The entire industry changed in 2013 when the Supreme Court determined that you couldn't patent DNA. I think part of what is so encouraging and inspiring about what has happened in cancer diagnostics since then is we're testing more people. There's earlier diagnosis of cancer, and therefore people are living longer lives. My mom is 89 years old, and she is the beneficiary of early diagnosis, as well as cancer immunotherapy, and is healthy and cancer-free today. When you think about the other side of the coin, which is the rare disease side, that has largely been a neglected space, save for the investments that GeneDx really started making 25 years ago in diagnosing the hardest to diagnose patients.
The company was actually started at the National Institutes of Health, and it was started by two geneticists who would get the hardest cases sent into them, and they spun the company out in order to really start scaling the capability that they had. Back in 2013, the company started investing ahead of the market in whole exome and whole genome sequencing. What that really has done is put us in a position of, one, market leadership. 8 out of 10 genetic experts rely on GeneDx in order to diagnose children with rare diseases. We've been able to amass an incredible amount of data that really puts us in the leadership position that we've earned. 80% of the market today is dominated by GeneDx. What we see ahead is a really important opportunity to continue to open up access.
The goal really is to diagnose anyone with any genetic disease as early as possible in order to achieve what has been achieved on the oncology side of things, which is earlier diagnosis leads to more options for people with rare diseases, and really ensures that everyone has the greatest chance of being able to live longer and healthier lives. I should note, rare diseases, I think it's a bit of a misnomer. 1 out of 10 Americans has rare disease, and half of them are children. They're actually quite common, in aggregate. We're talking about epilepsy. We're talking about autism, developmental delay, as well as a whole host of other conditions. There's about 7,000, and a growing number of conditions as we start to really make more gene-disease correlations. We're at the earliest stages of being able to have an impact on these kids' lives.
It still takes on average five years for a child with rare disease to get an accurate diagnosis. We really are focused on the utilization of our testing as early as possible in order to affect change.
Thank you. Maybe just a follow-on to that. You mentioned that there's a constellation of rare diseases. How should investors think about how GeneDx is positioned and where you've had the most success to date?
As I mentioned, there's about 7,000 rare diseases today, and we've really been focused on the clinician segment of geneticists. If you think about it through the lens of a family's journey, there's a child with a rare disease or with a symptom, I should say. They're going into the general pediatrician's office. That pediatrician is referring out to another specialist. Historically, they would refer out to a geneticist. There's very few geneticists in the world, so there's about a 12 to 18-month wait list even to get in to see one of those geneticists. Our entire strategy is to get this testing utilized much earlier. About two years ago, we really focused the entire team on utilizing exome sequencing and utilizing whole genome sequencing, specifically in epilepsy and autism and in developmental delay. Where we've been really focused on expanding are additional conditions and additional symptoms.
We launched into additional indications like cerebral palsy earlier this year. We've been focused on the NICU. Fewer than 5% of babies in the NICU get a genetic test, and so there's really this wide open canvas where we're getting started with epilepsy, autism, and related conditions, but we have the ability to have an impact on a much broader group of patients as well.
Right. Coverage and reimbursement are always front and center for investors in this space. How should investors think about where you all sit today from a coverage and reimbursement paradigm? How has that evolved, and how do you see that continuing to evolve going forward here?
Yeah. Look, I think first and foremost, investors should know how seriously we take driving improvements to get paid fairly for our services. We think we offer a fairly unique value proposition with respect to the clinical and health economic benefit for our testing, and we continue to see guidelines and payer policies shift in favor of covering whole exome and whole genome for more and more patients. If you look at the Medicaid population in particular, about a third of all children in the United States at some point before becoming adults run through Medicaid, and therefore, a fairly important cohort of payers for us. There have been radical improvements in the coverage landscape for exome and genome. Go back 10 years, there were zero state Medicaid programs covering these tests.
We're now up to 35 states that cover exome or genome outpatients and 17 that supply supplemental dollars for inpatient coverage of a rapid genome. We've been seeing a steady pickup of more and more states. Our average reimbursement collection rate has been improving as those states roll on for coverage, and we'd expect ultimately to fill up the rest of the map. Thirty-five states, moving from zero in just a short period of time, is very helpful to our overall growth profile. Certainly, we don't expect to stop there. We'd expect a continued evolution of more states picking up coverage. The largest population centers still without coverage, or only with really narrow coverage for these tests, probably cite California and Massachusetts, still on the come. There is a lot of room for continued improvement and expansion in that overall collection rate on the Medicaid side of things.
At the same time, great steady progress at reducing denials and opening up medical policy for more and more patients on the commercial side of things in the United States. We're now at a point where we've gotten our payment rate above 50%. We're not satisfied there. We continue to add to the team, both in terms of talent as well as technology, to continually ensure that every test we're submitting to insurers is following their unique requirements, and therefore, we're avoiding unnecessary denials. We've been able to do that fairly successfully over the last couple of years, and we will continue to invest in having the best team in the industry to do that.
What do you think have been the most significant challenges you've faced to date from a reimbursement perspective? Can you give us a sense of how you've approached those?
Yeah. I think in general, there's just a maturity of the product. While GeneDx has been steeped in being experts in exome and genome for well over a decade, these technologies are still fairly emerging and new to payers. If you look at what is causing the vast majority of denials for us, it's very little dispute around medical necessity, but more so adhering to a web of procedural or administrative requirements, which are different payer by payer. You put that in contrast to well-established mature products in the oncology space. Things like gene testing for BRCA1 and 2, those tests have been out for a long time. They're well understood by payers, and therefore, you've got a paradigm where medical necessity criteria and administrative criteria is the same across almost every payer. That's very different if you look at whole genome, where you see bespoke requirements for each payer.
Over time, we'd expect the understanding and acumen of payers to improve and mature, get to a more normalized reimbursement environment. It's, of course, incumbent on GeneDx as the leader in the space to continually bring not just the clinical evidence, but the health economic benefits to payers so that they understand that these tests are not just best for patients and physicians, but also best for the health care system at large and controlling their own cost for their own members. We've been able to create that information and bring it to payers, and we'll continue to do so.
Right. Maybe for this next one, it's more of a two-part question. I'm wondering if you can spend a little bit of time just talking about what is it that makes GeneDx's platform and the approach that you're all taking so differentiated? Obviously, today you've accumulated an incredible data asset. What do you see as being the growth opportunities or potential commercial opportunities, partnering opportunities for that going forward?
A couple of things. I think one, competition is not new to us. There have been, for many, many years now, dozens of exomes and genomes on the market through really good labs that are out there. Part of the reason that we continue to have 80% market share and that we continue to be the leader in the space is because of our data asset. That's one reason. The data asset is now comprised of more than 850,000 exomes and genomes, all enriched for rare disease. I should say, while we talk about exomes and genomes, we've run well over 3 million patients with rare diseases. That data asset actually goes far beyond the exome and genome richness that we have. The genotypic side of the data asset that we have, enriched for rare disease, 60% of the time, we're running mom and dad.
We have healthy comparator samples that are embedded in that as well. Ahead of the time that Medicaid's first starting to really focus on exome and genome, we were running patient populations that were dependent on Medicaid. What that means, and this is very unique to the space, is that we have a patient database on the genotypic side of the house that is highly correlated with the U.S. population by way of diversity. The genotypic data is incredibly rich. It's also met with more than 7 million phenotypic data points. Think about all the clinic notes, data from EMR records, information on symptoms, on medical history, on family history that comes in. It's that totality of data that we have that's informing every diagnosis, every patient that we're running.
Our expert group of geneticists in-house are able to utilize that data to more rapidly upgrade or downgrade a variant of unknown significance, which then creates this virtuous cycle of product improvement and product development within GeneDx. That data asset is part of the reason why we are the most accurate platform that is out there. When we think about the competitive advantage, what are health systems and payers looking at when contemplating which lab to partner with? Accuracy matters, as well as turnaround times and cost. We win all the time when it comes down to how quickly we're able to turn around answers. Interestingly, looking back at BRCA1 and BRCA2, back in 2013, those cost about $3,500 for each of those genes. We were able to run a genome or an exome for the same cost. We're also able to turn around an exome within three weeks.
Our rapid genome, we can turn around within 48 hours. We've invested in the scale in order to ensure that turnaround times and costs are never a barrier, either for the clinician or for the clinician when trying to figure out exactly which lab to choose. When we think about our leadership position, those are really the reasons that we have continued to lead. We think that that's going to be incredibly important as we think about the general pediatrician opportunity. This summer, we had, I would say, a game-changing moment for pediatric medicine. The American Academy of Pediatrics put out new guidelines that said that the pediatrician should be utilizing an exome or a genome for any child where they suspect that there may be developmental delay or intellectual delay.
The market leadership that we've enjoyed with the expert geneticists, we believe, is really going to translate into why a pediatrician is going to work with GeneDx versus any competition that's out there. They care about what the most discerning genetic experts are thinking about when using an exome or a genome. That market leadership, we believe, is going to really nicely translate. We have market research showing we're the number one brand when it comes to diagnosing children with rare diseases. As we think about future growth opportunities, that general pediatrician opportunity, while it's going to take some time to really take off, it's going to require education. It's going to require customer experience, product improvements, and ensuring that payers are also going to pay for it. We think that that's one of the most important opportunities for us to have an impact on child health.
That gets us in there with the first line of defense for any family who has a child who is sick. We're really excited about being able to drive that entire shift in standard of care at the pediatric medicine level.
Would you say that that is the most important growth priority for you? How should investors think about, across the constellation of different areas where you could drive growth, whether it be indication expansion or expanding to different parts of the patient population within an indication? How should investors think about where you're most focused or the prioritization of where you are in driving growth over the next, call it, three to five years?
We're focused, in 2025, on continuing to grow from what we call the core. Think about that continuum of referrals. We've been deeply embedded in the genetic space, but we've been driving utilization to that next referral call point, which are pediatric neurologists and other specialists like pediatric immunologists. All of the growth that we've seen over the past several years, and as we think about 2025, that's really where we're seeing really good uptake, both on bringing new clinicians to GeneDx as well as driving greater utilization with existing clinicians. They're finding more and more patients in their clinics who are benefiting from testing. As we think about the near term, our team is continuing to really focus on that core group of customers that has been serving us really well and, importantly, serving more and more families well.
As we think about the longer-term opportunity, I mentioned 18 to 24 months in terms of really being able to see the general pediatrician. We have a separate commercial team that's starting to really begin the process of education with general pediatricians, and we view that as more of a medium-term opportunity that we're starting now. As soon as those guidelines were published in June of this year, we obviously took notice. Investors took notice that as we're starting to really do outreach to pediatricians, we are the ones who are informing them of this. If you think about the universe of issues and medical topics that they're confronted with on a day-to-day basis, this is one piece of it, and we need to make it a priority. That's our job.
I think part of what gives us confidence that we'll be able to do that is we've made it a priority in the pediatric neurology space. Pediatric neurologists weren't ordering genetic testing before, say, 2017, 2018, when there were more and more gene therapies that were being developed by biopharma companies. As we think about the growth, there is our outpatient continuing to drive utilization among specialists. There's our NICU where fewer than 5% of babies in the NICU are getting a genetic test. We want to drive utilization there. There is this universe of general pediatricians where we're starting education, we're starting product development, we're starting conversations with market access, but then there's also some amazing opportunities in terms of newborn screening. We've done the largest newborn screening study to date. We're starting to be the first state.
Florida is the first state to have legislation supporting newborn screening, and of course, in our mission of wanting to diagnose any genetic disease as early as possible, there's also a future for us to be able to do that with adults as well.
For newborn screening, how do you see that, you know, playing out or evolving both in the near term and I guess over the longer term? Like, and I guess what would be your kind of ideal state of that market?
Some of the work that we've done is in collaboration with Dr. Wendy Chung, previously at Columbia, now at Boston Children's. This study, which is called the Guardian Study, was done here in New York State. We have now sequenced more than 17,000 healthy newborns. Part of what has made this study, I think, so foundational to the future of being able to do this at scale is what Dr. Chung put together is a really ethical and responsible approach to delivering information to what we expected were healthy newborns. Put another way, we're only delivering clinically actionable information to these parents and to the clinician. We're not delivering risk-related information that the child in the future may have a higher risk of prostate cancer or breast cancer. We're delivering information that in that moment is clinically actionable. We started with 200 conditions.
We expanded the roster to more than 450 conditions in year two. What we were able to find was a positive diagnosis in 3.2% of these babies where there was an intervention of, say, putting a child on a ketogenic diet, adding zinc as a supplement, directing them to a clinical trial or to an FDA-approved therapy, a surgical intervention—so something clinically actionable at that point in time. Interestingly, we went back to say what was the average age of diagnosis in our 25-year history at GeneDx for the diseases that we're now diagnosing at birth, sometimes ahead of symptoms manifesting, and it was 7 to 11 years, which means that we can now eradicate 7 to 11 years of unnecessary disease progression and unnecessary cost. We have this really ethical and responsible foundation from which we can now start to deploy it.
I think part of what activated the state of Florida was seeing that this is something that they could put into practice today. They liked the nature of the protocol and how it was designed. What, of course, always needs to be solved for is who's going to pay for it. The state of Florida has gotten funding for this. It's been budgeted. As we think about deploying this either at the federal level or at the state-to-state level, that's always going to be a consideration. We have yet to deliver the health economics data that further substantiates it. I think empirically, we view this as it's going to be a no-brainer in terms of health economics when you think about 7 to 11 years of disease progression. That's something that is in our future in order to really turn this into a reality for more and more patients.
I think the other piece of it is, we made an acquisition of a company called Fabric Genomics. Fabric gives us the ability to deploy our data and our interpretation platform regardless of where sequencing is done. In another way, if there's a baby born at a hospital in Tampa or a baby born at a hospital in San Francisco, we'll be able to have standardized results regardless of where that baby is born. I think that's also an enabler for the market.
Got it. Are there other similar opportunities that you see to deploy capital in ways similar to Fabric, or how are you thinking about that element of the business?
Yeah. I mean, we entered 2025 with two main areas of investment focus in order to accelerate, and those remain true today. One would be how do we continually move the needle on improving the overall customer experience for ease of ordering and for understanding of results. In particular, as we think about a paradigm of moving to a really busy cohort of physicians and general pediatricians, it's going to be important that we demystify the use of genomics and we make it really easy for that busy practitioner. Whether it's building, buying, or licensing, improving the customer experience with a more guided ordering, intuitive order experience, and then making sure that we support families and physicians on the end with care plans and steps and education on what to do next will be a continued area of investment.
We think that helps us not just be more attractive to new customers, but sticky with existing customers. That will remain an area where we'll want to deploy capital, whether that comes in the form of building it or buying capabilities. We'll leave that to our product and development team. I think they built the right skill set in order to analyze opportunities to ensure that we're driving forward strategic priorities with the right level of near-term ROI on those investments, whether they build the functionality or buy it. The other is continually taking advantage of our scale advantage to lower turnaround times and costs. The more we can automate, in particular, on what I'll call the dry side of the laboratory after the sequence, those steps today remain fairly manual.
As we move towards a paradigm of serving millions of patients a year at GeneDx and not hundreds of thousands, it's going to be more and more important that we take the embedded knowledge of our internal resources and force multiply them with the use of algorithms, AI, and technology. That will remain a strategic area where we'll continue to allocate capital. Again, whether that means we acquire, buy, or license is to be determined. I'd call those out as the two areas that we identified to start the year and wanting to invest, and those likely will remain for the near term as the two top priorities for the use of capital.
That's great. Maybe one more question for me, and then I'll open it up to the audience here. What do you think is the most underappreciated element of GeneDx in the business that you all have grown to date?
I think probably the competitive advantage that is driven by the data asset and the scale, how hard it is to actually diagnose these children, how powerful that data set really is, and also the fact that we have been running really fast to continue to expand that data set. Four years ago, the data set was about 270,000 exomes and genomes. As I said, we're now at 850,000. The data moat is something that is difficult to recreate. I think it's underappreciated by anyone other than a geneticist, and the growing number of clinicians who are starting to rely on us. I think that's probably one of the most misunderstood and underappreciated parts of GeneDx. I think the other piece, we're in a position where we have a technology today that can benefit so many families so much earlier.
The education both of parents who today are out there on Google, they're on Gemini, they're on ChatGPT, they're some of the most motivated patient advocates for their own child to try to get an answer. Our ability to ensure that they know that this technology exists today, that their clinician can order it, the fact that it's paid for, I think some of the key topics that Kevin touched on in terms of scale, turnaround time, and cost. The fact that we've been able to make this as within reach, both in terms of speed and in terms of patient access as multi-gene panels have been historically. All of that education is something that we just started to embark on pretty recently.
As we think about our future, we're excited to continue to lead that education, and we're excited to be the ones who are leading the market and ensuring that all of these families have the benefit of an earlier diagnosis. There is no reason that any child should have to go through a five-year diagnostic odyssey where they are just getting sicker and sicker, when we can provide this information within weeks, if not 48 hours. Our mission every single day is time to diagnosis. That's one of the most important metrics for us. As we think about our P&L, we've driven a culture that is about faster diagnosis for more patients. That is represented in our P&L. The fact that we're a profitable company today ensures that we can make the right investment bets for the future to open up more access. We're really proud of what we've built.
Yep. We realize we're just beginning in so many ways.
Great. Thank you. Glad to open it up for any questions from the audience.