Okay, welcome back to the 2025 Stifel Healthcare Conferences. We are back on the Life Sciences and Diagnostics track. I'm Dan Arias. I'm the Life Sciences and Diagnostics Analyst. We're happy to have GeneDx Kevin Feeley with us. We have CEO Katherine Stueland, CFO Kevin Feeley. Guys, thanks very much for spending some time with us here. Yeah, my pleasure. I think we've just been starting these sessions with a high-level sort of comment on the company, the background. It's been obviously an exciting journey for you guys over the last 12-plus months. Maybe Katherine, just start with giving us a brief introduction to the company, touching on the business, and then what you see GeneDx Kevin Feeley ultimately trying to be over the next couple of years for those, for your customers.
Fantastic. Thank you so much for having us. GeneDx Kevin Feeley has been around for 25 years. The company was born actually at the NIH, and the real mission is to diagnose any genetic disease as early as possible. In fact, that's our North Star for the company, is accelerating the time to diagnosis for more and more families. The reason why that's so important is it still takes five years on average for a child with a rare disease to get an accurate diagnosis. We can do that today within 48 hours. We can actually run a rapid whole genome, interpret it, and be able to provide an accurate diagnosis to a family. Our real mission is to eradicate that five-year diagnostic odyssey that is totally unnecessary, and it's also very expensive for the healthcare system.
Utilizing our testing upfront actually is delivering better clinical outcomes for patients. The earlier you diagnose, the more options you have for these patients, whether it's a clinical trial, an FDA-approved therapy, or a different type of medical intervention. It's also better for the healthcare system. Using this testing upfront actually saves the healthcare system valuable dollars. The absence of using this testing is contributing to a trillion-dollar economic burden to the U.S. healthcare system when it comes to rare diseases. We're in a unique spot of being able to really provide better clinical care and better health outcomes. Where we want to go in the future is being able to really drive a world where we're not waiting for children or even adults to not only get sick, but get sicker over many years.
We want to be able to get to a place where we can diagnose these conditions as early as possible, even get to a place where we're running newborn screening. We're now involved in three newborn screening programs that are going live in the United States. We are ushering in an entirely new era where we can start utilizing this testing before symptoms are really fully manifesting. I like to think what we do better than anyone is be able to take a genome's worth of information and put it to work for more and more patients. A part of that vision does include building a network of biopharma companies, of parent advocacy groups, really to ensure that we're not only providing a diagnosis, but we're giving them a clear path to being able to live a healthier and longer life.
Yeah. And to that point, I mean, the company is one of the first to offer exomes and genomes to your customers, to the patients. What is the competitive advantage that that bestows on you, and then how durable do you think that actually is?
What sets GeneDx, Kevin Feeley, apart, there is a number of things, but I think one of the most unappreciated parts of our story is Infinity, which is our data asset. The moat that we have been able to establish through the data that we have generated and that we continue to generate makes it harder for anyone to catch up to us. Let me go a bit deeper in terms of what that means. When we think about Infinity, there are really two sides of our data house. On one side of the house, you have genotypic data. Infinity is comprised of more than 2.5 million rare disease patients who have been tested at GeneDx, Kevin Feeley, over the years. About a million by the end of this year are exomes and genomes. The other side of the house is the phenotypic data.
When we think about the genotypic data, all of the data that we have amassed includes patients who have some sort of rare disease. 60% of the time we're running mom and dad as well. We started investing ahead of state Medicaids, which means that we have a diverse patient population. If you think about being able to biosequence or plugging it in and running a million or two million exomes or genomes to be able to actually find patients who have a rare disease and be able to then reflex and test their parents in addition to that, do it across a diverse patient population, it's extraordinarily difficult to recreate that. Possible, yes, but it's going to take a lot of time, think a decade, and it's going to take a massive investment.
On the phenotypic side of our data house, we have more than 7.2 million phenotypic data points. What I mean by that, any clinic notes that we're gathering when a clinician is sending in an order. What symptoms are being reported by the parent who's coming in, what family history is there, what medical history for the child, they're sending in a lot of really important clinical context. It is those two data sets that ensure that we're providing a more accurate diagnosis. We've just seen more of these cases than anyone in the world. Our expert geneticist, as they're looking at a new case coming in the door, if there's a variant of unknown significance, they're able to more rapidly upgrade or downgrade a variant of unknown significance, which then pays it forward to the next patient.
It is this constant cycle of product development where our interpretation platform based on Infinity is getting smarter and paying it forward to the next patient. Infinity is the core of what we've invested in in terms of the knowledge base that makes it just a better test on the market and a more accurate test. We've also invested quite a bit over the past several years in how do we scale so we can provide faster results, we can do it more cost-effectively. We also know that we are chosen eight out of ten times by very discerning geneticists, and we're the number one brand when it comes to genetic testing by pediatric experts. The combination of Infinity, of our scale, and of our reputation and the trust that clinicians have in us together really puts us in the market-leading position and will continue to be in that position as we expand to more clinicians.
Yeah. You mentioned VUSs, which in the medical genetics world is sort of a practical limitation in a lot of cases. Do you find that clinicians will run into that issue far more frequently than they will for yours? Are you able to sort of win business on that angle? I mean, you mentioned it as such, but I'd love to just sort of get an extra thought there.
Yeah. Our ability to deliver fewer VUSs certainly is one of the selling points when we're talking to clinicians. Our ability over time to reanalyze and be able to provide updated answers to patients if we've upgraded or downgraded a VUS is an important selling point for us as well. That's part of the reason why we've built the reputation, and it's part of the reason why so many rely on us and will continue to rely on us as we expand into general pediatrics and beyond.
Yeah. And what gives that ability, that Infinity database, if you look at the span of the close to one million exome and genome, two-thirds of the cases since inception, we've captured asymptomatic mom and dad as comparator samples and have accumulated all of the phenotypic and genomic records for those comparator samples, therefore allowing GeneDx, Kevin Feeley, to have more de novo gene variant findings than would be publicly available, all captured and fueling that data set to provide our ability to limit the VUS rate across the diagnostic reports that we provide.
Yeah. Okay. Okay. So you've got this great platform. It has some performance advantages. What about the market? What portion of the market do you think is accessible to you? What portion do you think you've penetrated? And how does that expand from here? You kind of teased it with the adult population, but I'd love to just hear your thought on where you are versus where you're going, if you can sort of slice that pie up in any certain way.
Absolutely. First, I think what we're learning is rare diseases aren't that rare. One out of ten of us has a rare disease, and half are children. We're focused in the pediatric market today in part because the reimbursement coverage is well established there. We're tackling that problem in the outpatient setting as well as in the NICU setting. I mentioned we're pioneering newborn screening as well. When we think about the outpatient setting, I would think of three different clinician segments. You have your genetics experts who have known us for a long time. They generally love GeneDx. Eight out of 10 of them prefer GeneDx. We are well penetrated amongst those genetics experts. They're a hugely important influencer for us as we think about more clinician types.
There is a limited number of them, and it takes anywhere from 12 to 24 months in most parts of the country to see a geneticist. It is that wait time. It is that clogging of the system that contributes to that five-year diagnostic odyssey. In order for us to get to the point where we can diagnose these kids earlier, we have to really intervene and drive utilization earlier in that parent journey. When you think about a parent who has a child who is sick, the first place that they are going, of course, is the general pediatrician. The guidelines that were updated this summer in June open up that market for us. We have not been focused in general pediatricians at all. I would say that is wide open space for us when we think about future growth.
Today, a general pediatrician will refer a parent out to a specialist. Think about a pediatric neurologist, behavioral specialist, developmental specialist, pediatric immunologist, a whole host of additional specialists that will take the patient from there. Sometimes they're referring back into the geneticist, then they hear that there's a long wait time, and that's part of the reason why we've been able to drive adoption in that specialist sector. If you look at pediatric neurologists, which is where so much of our growth has come from as we've expanded, we're about a third of the way in terms of the number of clinicians who are ordering testing from us. We still have a healthy pipeline of clinicians that our team has the opportunity to continue to reach out to and drive utilization. There are 10,000 rare diseases. Several years ago, we thought there were 7,000.
Because we're upgrading and downgrading those buses, we're making new gene disease discoveries almost on a weekly basis now. Rare diseases are now up from 7,000 to 10,000. What that means is we've got about 10,000 different indications that we can continue to drive. As we think about our ability to bring on new customers in that specialty setting and drive more utilization in each of those customers' clinics, there are many, many different indications that we're able to talk to them about and drive utilization of. What we're seeing is really healthy same clinician utilization. We're seeing deeper penetration in those clinics.
Our sales team, as we think about 2026, is going to continue to focus in that setting as we ramp up a general pediatrician sales team to start what we think is going to be an 18-24 month horizon to really see massive adoption in that GenPEDS setting.
Okay. I imagine the conversation is different from specialist to generalist. How do the generalists deal with exome and genome information, which can be overwhelming for a lot of folks? Love to just hear how that differs. Kevin, I guess to the point that's made here on commercial expansion, what does that mean for growth in the commercial team over the next year and a half? I mean, it sounds like it's a journey that you'll take, but I'm curious whether it's a sort of a build it and they will come type philosophy or you'll meter the way that you grow the sales force depending on how the market evolves.
I'll start. In terms of what does it take to win over the general pediatrician, first, we have to tell them that this is something that they can do. Oftentimes as we're reaching out to a general pediatrician, they haven't heard about these guidelines yet. Again, I zoom out. We think about genetics all day, every day, but for a pediatrician, they're seeing a child coming in with any host of symptoms. They're just tackling so many different issues on behalf of these families. We have to make it relevant. We have begun a massive educational effort. We were at the American Academy of Pediatrics conference in September. We'll do medical education. Peer-to-peer engagement is hugely important. The medical education effort has begun by GeneDx Kevin Feeley. That's the first effort that's underway.
Second, we know we need to make it easier for them to order it and then understand what it is that we're delivering. The answer is not we should teach them everything there is to know about genetics. These folks are super busy. Of the 10-12 minutes that they have per family, we can't be eating up most of that time having them input all of the information, and we've got to make it as simple as possible. We've shared we're designing a one-minute ordering approach specifically for the non-expert, whether it's a general pediatrician or a cardiologist in the future who's seeing an adult patient. We need to unburden the clinician from having any sort of laborious workflow. That work is underway.
The third part is ensuring that both payers are aware of these and ensuring that we've got our sales team out there doing what they do best, which is education, demystifying it, talking about that one-minute ordering, and really starting to get them comfortable with an exome or a genome.
The essence of one-minute ordering is you get in there and in 60 seconds you've kind of explained it and gotten them to the point where they should feel comfortable ordering.
That's exactly right. Yeah. There's a customer experience part of it where when we're helping them actually tap into order, we want that ordering experience just to be a minute.
Yeah. Yeah. In terms of the build-out, we're not Iowa. The approach of if you build it, they will come, I would change to say we'll build and then we'll assess and remeasure and then we'll continue to build from there in an iterative fashion. We will be expanding meaningfully the size of the sales team. We've got close to 100 client-facing individuals today. You can envision over the next 12 months something like doubling that, but in a phased controlled fashion. We debate the difference between being aggressive to seize the market opportunity ahead with also being financially disciplined, and we think we can do both. We need to do both. This team's built the skill to do that.
If you look at the existing outpatient call points today, about 2,000 geneticists in the U.S., close to 2,000 pediatric neurologists, by comparison to 60,000 general pediatricians in the U.S. There are 25,000 of them who we can see through the data are seeing patients with suspected global intellectual developmental delay, the subject of the guidelines that AAP put out in June. You are looking just in that one call point in general pediatricians, 10 times the existing doors that we have to knock on. That will require an investment to seize a commensurate size of the opportunity.
I think what we want to do is engage with that community, take back the learnings, and continually refine what is it going to take in terms of the customer experience build, but also the commercial might in order to own and continue to own a dominant share of the market. The idea would be that the existing sales force today stays mostly focused on the specialized population, and then your incremental hires from here will be almost entirely devoted to this generalist population.
That's exactly right.
Okay. Okay. You mentioned guidelines for those where testing is taking place pretty regularly. The AAP updated their guidelines. Exomes and genomes are now seen as a first-line test in those with intellectual disabilities. I think you've talked about the impact that you think it will have on your business. It does seem like a conservative timeline when you think about when it is that that could be impactful for you. I'd love to hear just your take on why that might be the case or why I'm thinking about it incorrectly if it is conservative, if it's not conservative.
I hope that we can accelerate it, but based on at least our collective experience with guidelines, that's a pretty fair timeline that we've seen in the market before. I remember several years ago, one of the medical associations updated guidelines to say every woman with breast cancer should get hereditary cancer testing. It was on CNN. I was convinced that overnight every woman with breast cancer would start to get hereditary cancer testing. It took 18-24 months. It took doctors going to several medical conferences. It took a massive educational effort. It took sales reps in the office. It took simplifying the experience. We are working from our lived experience with guidelines, and we are doing our best to do more faster as well. We think that it really is a fair timeline.
When we were at the AAP conference, as I said earlier, we were the main driver of conversation on this topic. We have to make it relevant, but we're going to do everything we can to accelerate that. What continues to be unacceptable is any child going beyond a few months of unexplained symptoms when it's genetic. We can rule in or rule out whether or not there is a serious genetic condition. Our exome is two to three weeks. Our genome in the NICU setting, 48 hours. There's no reason that any family should go on this multi, not just month, but a multi-year diagnostic odyssey. We're driven with a huge sense of purpose that we should be able to arm every pediatrician to do this. We also know the absolute best advocates out there are parents. A motivated parent can do a lot.
We see motivated parents actually, once their child is diagnosed, find an investigational compound to bring, and they get them licensed by pharmaceutical companies. Do not stand in the way of a parent who is trying to help their child. We think that that is such a special part of the world that we're in. Not only do we have clinicians who we know want to do right by these kids, but you have parents who are also going to drive some of the behaviors as well.
Yeah, absolutely. That makes perfect sense. Have you talked about the mix between exome, genome? And if you haven't and you don't want to, could you at least talk about how you think things shift over time, presumably from exome to genome? Is that a realistic expectation in the next couple of years, if not in the shorter term?
We believe that the future is all genome. Today, most of our testing is exome. In the outpatient setting in particular, exome is our predominant product that's being utilized. There are certain states like Texas that leapfrogged exome, and they have Medicaid coverage just for genome. We are starting to see, we talk about Texas and Florida, are actually very progressive when it comes to genomics. The future is genome from our perspective, but today, most volume is exome. In the NICU, that's where most genomes are run. We believe that over the next several years, we'll continue to see an increase in utilization of genome.
Kevin, is there or Katherine, for that matter, is there a rep incentivization when it comes to those two?
They are incentivized to bring in exome or genome. Both tests are great for our business, and both tests, particularly compared to multi-gene panels, are great for patients and physicians. Today, from a rep incentive perspective, agnostic on whether we bring in an exome or genome, more importantly, we lock in the doctor to the platform, and we get them accustomed to leaving ineffective panels behind.
Okay. We run into Dr. Steven Kingsmore quite often when we troll around in our next-gen sequencing circles. He's no stranger to the conference circuit and just generally showing up in cool places. You have a finding from him that says that 5% of babies in the NICU actually get a genome test. Why do you think that that number is so low? Could you see that inflecting somewhat quickly as momentum starts to get more into gear?
We love Dr. Kingsmore. He is one of the most, I would say, prolific and important advocates for changing behavior in these NICUs. Yes, fewer than 5% of babies get a genetic test in the NICU, yet GeneDx has established through our Seek First collaboration with Seattle Children's that 60% of babies in a level three or level four NICU would benefit from a genomic test. We have the data that shows better clinical outcomes. We have data that shows, and I think this is conservative, $40,000 of savings per patient in that NICU setting. We have generated our own proprietary data that convinces a CFO that they can still continue to run a good business by discharging babies from the NICU sooner. It increases throughput in the NICU, and it requires conversations with several different stakeholders in that NICU setting. GeneDx, Dr.
Kingsmore, and Rady together, I think it's a really important example of where competition is a good thing. We need more voices out there driving changes in clinician behavior, establishing data. We're going to continue to drive utilization in that NICU setting. We've seen this year that when we bring clinicians on board using testing, they're reordering testing. They like what we're selling. They like the service that we're providing. As we look to 2026, we're going to continue to bring on and change that from fewer than 5% of babies. We ultimately want to see everyone get to what Seattle Children's has done. Dr. Mike Baumschad, who is the principal investigator of Seek First, he is also a really important advocate. He wants to see other NICUs across the country do what they've been able to do.
Yeah, that was going to be my question. Are you seeing that other institutions are trying to become sort of centers of excellence the way that Rady, Seattle Children's, Mercy is or are? Is that a movement amongst the clinical community? Or do you think that the way that it is today is kind of sufficient for the time being, given that you do have commercial excellence and then a couple of these other labs that are sort of carrying the torch?
It's not sufficient the way that it's working today. The lack of testing in the NICU setting is contributing to the outpatient five-year diagnostic odyssey. These kids not getting an accurate diagnosis in that NICU are being discharged and are finding their way symptomatic into the offices of pediatricians. The system is not working today. Ultimately, we need to get to where we're screening every baby at birth. The Guardian study has really established, I think, an important ethical and responsible framework for newborn screening. While we're driving utilization in the NICU, we're also establishing a new pathway using whole genome sequencing to diagnose babies before they're getting too sick.
The Guardian study had an interim readout a couple of quarters ago, if I remember correctly. Did that influence behavior or at least conversations at all amongst those that are at a company or just when you look at what the clinical population is up to or the way that they might be feeling?
Yeah, I joined the company four and a half years ago, and one of the first decisions we were able to make was supporting the Guardian study. The readout, it was published in JAMA, I think it was two years ago now. It has really sparked not only a lot of interest, but action. We were speaking with a state representative in Florida about the importance of outpatient testing, inpatient testing, clinical outcomes, the fact that it's a better way to run a healthcare business, and also talked about the Guardian study. Unfortunately, this policymaker had lost his son to a rare disease at age four. He heard about the Guardian study. He put pen to paper almost immediately and was able, that was last year in August, he was able to get legislation passed.
I think it was in June of this year through the House, through the Senate in Florida. Governor DeSantis has funded it. It's the Sunshine Genetics Act. That sort of state activation, I think, is extraordinarily powerful in terms of what one study—it's the largest newborn screening study that was done here in New York State—what the benefits of that can do in terms of influencing whether it's a policymaker, a clinician, or a parent getting them to activate.
Okay, winding down here, Kevin, two for you just as we finish. What percentage of tests are being reimbursed at this point? And to circle back to the commercial expansion effort that's very obviously going to be underway next year, how does that influence profitability and just the way that you're thinking about EBITDA trajectory from here?
Yeah, I mean, over the past two-plus years, radical improvements in improving the collection rates. Driving to now, if you look at the overall performance across all exome and genome, getting paid about 55% of the time. We've been able to systematically improve that in two ways, continually reducing unnecessary denials at commercial payers. As importantly, roughly 40% of our volume is Medicaid, given the pediatric cohort target of ours today. We've seen great progress quarter over quarter with more states picking up and expanding coverage for exome and genome. Now, 36 states, and the 36th was a real big one. Just this last week, the state of California implementing whole genome coverage for Medi-Cal. That comes online as we speak. We'd still like to see all 50 states. I started with GeneDx nine years ago, and it was zero.
Depending on how you view time horizons, that's a fairly quick ramp from zero to 36, and we'd expect that to continue. That's had an overall effect on creating upwards average reimbursement rate. Effectively, we've been targeting and bringing in that volume since inception with a commitment to the Medicaid population and now seeing that elevate up the collection rate. $3,800 in the third quarter is what we posted at that average rate. As we enter into new call points, you might expect a bit of a higher denial rate from new physician types, new indications as claim experience is built up at commercial payers. There tends to be an inclination to deny things that are relatively new. We can demonstrate that there will be strong persistent demand from physicians.
I think we're as well equipped now as ever to make sure that payers are seeing that value proposition and the ultimate demand, which we see as insatiable at this point. We'll continue to work hard to get medical policy expanded to ensure we're getting paid fairly for the services we perform.
Yep. Insatiable is a good word to describe demand if you're a CFO. Okay, the flashing red light is telling me that we are out of time. So I'm just going to say thanks to both of you. I appreciate you participating and talk to you soon.
Thank you so much.