Thank you very much for being here on Thursday at the JPMorgan Healthcare Conference. My name's Raji Gunasekera. I'm an associate on the healthcare team at JPMorgan. I'm pleased to introduce GeneDx, and we have their President and CEO, Katherine Stueland.
Thank you so much, Raji, and thank you to JPMorgan for hosting us. We've got a great crowd here in San Francisco. It's been a really exciting week for all of us at GeneDx. As we've introduced a new company name, we've introduced a new stock ticker, WGS, which is really a nod towards our pioneering work in bringing whole genome sequencing to the market to be able to benefit patients. We also announced that we delivered on 40% revenue growth over the past year and 40% gross margins. We have a clear path to profitability in 2025, thrilled to be able to be here to share with you what our new vision is as we've brought the best of GeneDx and some of WAR together.
First, of course, we will be making forward-looking statements, so we'll refer you to our new IR website on gendx.com for risks and uncertainties. But our mission, as we thought about what the best of GeneDx and some of Sema4 can do together, really is to deliver personalized insights to be able to diagnose disease more effectively and faster, be able to connect patients with treatments, and really accelerate drug discovery, development, and commercialization. As I took a step back to say, "What might you need in order to do that?" I'm really pleased to say we have all of the technology and capabilities that we need in order to deliver on this mission. I think it's important to really get grounded in what is the problem that we're trying to solve.
If it's for an infant in the NICU, if it's for a child with an unexplained symptom, if it's for an adult, a grandfather who might be showing symptoms of Alzheimer's disease, so many patients today, I think all of us can relate to this, are going through a diagnostic odyssey of sorts. You're showing up with symptoms, you're going to the doctor, you're trying to figure out, "Is it a scan that I need? Is it a test? Is it blood work?" Oftentimes this can go on for many months, if not years. What it really drives down is patient care. It denigrates how we're able to get people on the right therapy sooner. It really creates increased costs and burden on the healthcare system, and it's just completely inefficient. It doesn't need to be that way.
Our solution is to bring together genomic data and clinical data to be able to deliver on better health. When I think about what are the three things that we need in order to deliver on this, one, it's one test off of a genome to diagnose disease quickly. Two, it's being able to curate and combine the genomic information with data from an EMR. Three, it's a loyal and growing customer base that can benefit from all of these services, but also can help us drive continued growth in the future of more than 20% with really healthy gross margins. We have all of that today with GeneDx and Sema4. Let's take a look at what we've done in terms of bringing the best of both to the future of GeneDx.
GeneDx, for those of you who don't know, it was spun out of the NIH 20 years ago by scientists who were really pioneering the use of genetic testing for the hardest-to-diagnose patients. What we've built over those 20 years is what we believe is the most comprehensive and definitive genomic interpretation platform. That's critically important in terms of being able to take a genome's worth of information and deliver it reliably with fewer, fewer unknowns. That is what we've been able to build. A hallmark of that really is our exome that we shepherded to the market in 2013, around the time of the Supreme Court decision saying that one could not patent DNA. GeneDx, like many others, was focused on multi-gene panels but very quickly turned towards how do we take the power of the whole genome.
The first step was with our exome. Since 2013, we've been able to drive growth, of 400,000 clinical exomes, a quarter of those over the past year. What that tells us is the market today, 10 years after that historic decision, the market and clinicians are ready today for more information delivered through our exome and genome. What we've also been able to invest in over the past few years is a scalable genomics lab in Gaithersburg, Maryland. We have a genome lab that can run millions of samples per year. We've built out an incredible commercial team, that is growing. We're continuing to add to that commercial team today.
We have also invested in a medical affairs team, critically important in terms of being able to generate additional clinical data and really substantiate our place as the leader in this market, as well as manage care. We will talk a bit about some of the really important changes that have been happening in terms of medical policy moving forward. Now let's turn to Sema4. Sema4 has built Centrellis, which is a health insights engine. What we are able to do is take clinical records from an EMR, curate them, and then be able to combine the insights from those EMR records, combine them with genomic information. That is really what delivers a more precise and personalized health insight, not only for diagnosis but for treatment.
What is gonna be the options in front of you, whether it's a clinical trial or an FDA-approved therapy? Importantly, being able to contextualize. What do other patients like me with the same profile, how have they fared in terms of their prognosis? That is what Centrellis can deliver. I think notably, we're gonna continue to invest in strengthening that asset moving forward. We have reorganized the product and technology team for scale. We did spend quite a bit of time last year discontinuing parts of the business that were just not healthy. We did exit from somatic oncology testing, and we are finishing up in the first quarter our exit from reproductive health testing. Both of those were burning a significant amount of capital. They had materially negative gross margins on the oncology side.
I think as we all know, it can require hundreds of millions, if not billions, of dollars of capital to really create something scalable in the oncology world, to be able to do that well. Given the economic environment that we're in, we wanted to take a look and say, "Where do we really have a competitive advantage?" It is with that genomic interpretation platform and with Centrellis. The best of both of these creates a seamless solution for the diagnostic odyssey that I talked about when I first shared the problem. We intend to sequence once, be able to continuously analyze a genome through our interpretation platform, be able to combine that with clinical data to deliver better health insights, and then generate genomic health insights over time.
Importantly, we're gonna be delivering these insights to biopharma companies as well, and we'll talk about the go-to-market strategy for our partnerships there. We also announced earlier this week that the strategy's working. As we look at our pro forma revenues, excluding the reproductive health revenues from Sema4 from 2022, we exceeded our initial target for GeneDx. We delivered $170 million-$173 million of revenue, which is about a 40% year-over-year growth rate. Healthy revenues, we had our strongest December ever, so we've got incredible momentum going into 2023. We also delivered gross margins of about 40%, and we expect that we're gonna continue to grow that in the future along with other key metrics. As we look at our revenue growth for this year, we expect between $205 million and $220 million. We will continue to expand those gross margins.
We think that in the future, we'll be able to get to gross margins well beyond 50%-60% gross margins as we continue to make improvements in the overall operations, improvements on reimbursement, but also start to shift to more of a data business. We do expect to turn profitable in 2025. We have set the foundations from a financial standpoint to really deliver impressive growth at healthy growth margins and put a stake in the ground on profitability. As we think about growth, it's been a high-growth year for us. I think it's important historically, there wasn't a real true commercial strategy at GeneDx. They had done a phenomenal job of building the technical capabilities but really hadn't put a commercial engine behind that capability to drive growth. It was mainly organic.
As we think about the market, we really think about it in three segments. First, there's the rare disease and pediatrics segment, which we estimate to be about $3 billion conservatively. That's where we are today. I'll talk about the commercial strategy in that space. We expect of that $3 billion that we're gonna be able to get to about 17% of market share by the end of this year. The next area is in the adult diagnostic setting, so being able to diagnose cardiovascular disease as well as neurodegenerative disease as well, such as Alzheimer's disease. Then the final setting is in newborn screening. We'll talk about a landmark collaboration that we have in New York State on that, but that gets us to that future of sequence once analyzed throughout the course of one's life.
We'll focus now on rare disease and pediatrics. I'm pleased that there's been a lot of attention in the rare disease space over the past decade. We've seen it, the benefits of the Orphan Drug Act. We saw the acquisition of Horizon by Amgen, and we're seeing more and more companies investing in drug development. What is implicit in all of this is being able to get a diagnosis. 50% of people with rare diseases are children. One in 10 people have a rare disease, and it is a global problem. We're focused right now in the U.S. in terms of really being able to get our exome first and foremost to diagnose disease. Importantly, as we think about all of the focus in oncology, there are as many compounds in development and under regulatory review in rare disease as there are in oncology.
There's an incredible amount of investment going into that, which means that for these patients, when they get a diagnosis, there's going to be a potential for taking action and getting on a healthier path forward. Our commercial strategy today in pediatrics is in two settings. One is in the inpatient setting. The other is in the outpatient setting. I'll zoom in on the inpatient setting. An infant is in the NICU. We're able to offer a rapid test for that infant, get an answer, move the baby out of the NICU as soon as possible. We're providing rapid results. We're able to connect those patients to, well, the parents of these patients to other parents like them. Ultimately that provides better health outcomes. It also helps drive cost savings.
We estimate in the inpatient setting an average of $30,000 per patient by using exome and moving that patient out. In the outpatient pediatric setting, which might be for autism, it might be for a patient with seizures or with developmental delay, we estimate an average of about $6,800 in terms of cost savings. Where are we driving this growth? It is with a loyal and growing customer base. In the past year, 94% of pediatric specialists ordered an exome from us. We are indeed the one that is leading the way. We'll talk a little bit momentarily about why our exome is the preferred exome by so many doctors. Historically, we really have been calling on the geneticists. Our commercial team is now focused on continuing to work with those geneticists.
The other call points that they're focused on are expanding to the neonatologist, the pediatrician, the pediatric neurologist. All of them rely on the geneticists to say, "Which lab should I call? Should I utilize?" There's a good partnership there. The fact that we've been able to lock in so much loyalty with those geneticists really transfers nicely to be able to add new customers, which means we're able to help more and more patients within each of these children's hospitals and health systems today. Importantly, beyond the work that we're doing, emerging guidelines are supporting the use of exome and genome. ACMG, NSGC all have recently, over the past 12 months-18 months, put out recommendations and guidelines.
Importantly, we're going beyond the genetics societies, and we're getting into the American Epilepsy Society, putting out guidelines saying that exome and genome sequencing are preferred for patients. The reimbursement landscape has shifted to be very favorable for us. 70% of commercial payers do have coverage for exome or genome. In fact, starting March 1st of this year, UnitedHealthcare has announced that they will start covering exome and genome in the outpatient setting. All of these are important elements of what opens up access. I think that it is a testament to the ability to generate data, publish data, bring those data to payers to convince them to put medical policy in place.
It also, I think, is an important nod to the way that we've been thinking about the pricing of these tests to ensure that we can support our gross margin profile, but that it also falls in line with what payers are willing to pay for. In terms of the additional work that we're investing in to transform standard of care, there's Seek First, which is a collaboration that we have with the University of Washington and Illumina that's generating data. We had our first data readout a few months ago in the NICU and in the pediatric outpatient setting. We have The GUARDIAN Study, which is a landmark study in New York State. It's a collaboration with Columbia. It's a collaboration with the New York State Department of Health and with Illumina. Illumina is providing reagents.
We do the sequencing and interpretation, and these are for healthy newborns. We are looking at 250 conditions. What we are learning is how do you deliver that information appropriately to a new parent when there may be a symptom? This is important work from an overall standard of care standpoint in order to see how we might be able to scale that and utilize genetic information more proactively, which really gets us to this entire future of sequence once, analyzed throughout the course of one's lifetime. What you will see on the left of the slide is the sequence once at birth. What we are doing continuously is analyzing that genomic information. Whenever there is an onset of a symptom that may be answered through a genome, what we are able to do is report out and provide an on-demand answer.
If it's a child with a seizure, suspicion of autism, if it's PGx, so matching a patient through PGx with the right medication, or more importantly, making sure they don't get on the wrong medication. If it's eventually getting back to carrier screening, we'd like to get back to informing people on how to have a healthy pregnancy, but running that off of that one test, and then cancer risk and, of course, Alzheimer's disease. This creates a virtuous cycle of being able to provide value throughout the course of one's lifetime and throughout their family. What really sets us apart is our interpretation platform. I mentioned earlier we've run 400,000 exomes, and with every patient that we run through our interpretation platform, it gets smarter and it's delivering fewer variants of unknown significance.
What you see on the left is probably where we started around 2013, where we have a fair number of uncertain variants. What you see on the right is where we stand today. We are able to give a more definitive diagnosis, whether it is benign, whether it is pathogenic. You will see that bottom part there is uncertain, and we have fewer uncertain variants than anyone else. This is a really important element of what sets us apart. Being able to deliver a genome's worth of information with a lot of uncertainty does not do anyone as much good. The preciseness of what we have been able to do is hugely important. This is a really interesting illustration, I think, of the difference between multi-gene panels and exome. On the top, what you see are patients represented from an epilepsy panel that are from multi-gene panels.
What you see on the bottom is represented by our exome. Part of what we have been doing over the past decade or so is testing baby as well as parents. We have trios for 60% of our cases, which means we have richer data, and all of this is enriched for rare disease. When you're thinking about diagnosing rare disease or rare disease drug development, you should be working with us because we've got an incredible database of patients that we might be able to connect you to. That gets into the drug development side of things and our ability to effectively partner with biopharma. In 2020 alone, more than half of novel new drug and biological approvals were orphan drugs for rare diseases. As I mentioned earlier, this is an incredible area of focus and investments.
Our data strategy really leverages Centrellis, as a solutions provider. Centrellis is the combination of genomic and clinical data. On the left, what you see is where we are today, which is we call it the find programs. That is really identifying patients and their clinicians and connecting them with biopharma companies. The second box is understand. That is a combination of the genomics information and the curated clinical data. This is where you're able to see a more complete picture of a patient cohort where we're able to say, "Here were all the lab tests that were done at what point in time with what treatment interventions throughout the course of the way," while also being able to infuse the genomic information.
That sort of picture of that patient cohort is hugely important to biopharma to figure out how to design clinical trials, how to think about exclusion and inclusion criteria to really accelerate drug development. The third box is our future state, which is platform, which is really, it's a therapeutic agnostic platform, but it will enable our biopharma partners to be able to go in and look holistically across all of the clinical data and genomic data. That is a future area of investment for us. We believe that in the find and understand strategy with business pharma, we're gonna be able to drive some meaningful deals over the next several years. Lastly, all of this is supported by just a wonderful team of very committed and passionate leaders across many different disciplines, and a team that I would say is steeped in integrity.
I'm very proud to be able to be standing by their sides as we usher in this new chapter, that really comes down to one test: better health, and there's no one better than GeneDx. With that, I think I will invite some of my colleagues, Kareem Saad, who is our Chief Transformation Officer, and Kevin Feeley, our Chief Financial Officer. Raji, I think we'll turn to Q& A.
Thank you, Katherine. We'll now take questions from the audience. We've got a mic floating around, so if anyone wants to put their hand up, we'll hand you the mic. All right. I'm happy to get this started. We'll give you some soft balls. You mentioned three different markets, right? Rare disease, adult and newborn.
Could you tell us which are you most excited about and where do you see yourself helping patients the most?
You can't make me choose a favorite. You know, I think the future on the newborn side of things is really interesting because I would not have predicted 10 years ago that we'd be in a place where we could actually get a program like that off the ground. The Guardian Study, we have been enrolling at a rapid clip. It has been really good to see the enthusiasm from Columbia, our partners, but also from clinicians who are willing to really dive in and work with us to figure out the best way to do this. I would say that has been an upside surprise from my perspective, having spent the past decade in this industry.
That being said, there is such a dire need for the pediatric rare disease segment. A good portion of my time this week has been spent, yes, with investors, but I've also been spending time with drug developers and patient advocates. These patient advocates, as many of you may know, are parents who are desperate to get a diagnosis for their child. They are actually incredibly motivated. They are out looking for compounds to bring to drug developers to try to convince them to actually put them into development. There is such a near unmet need in the pediatric segment that we can't move fast enough to try to help these parents.
I think that there is both this incredible purpose on the future on newborn screening, but there is such a dire unmet need today that we have the privilege to be able to try to solve for.
Thank you. When do you expect to start driving the adult market?
We're gonna start doing some design work with KOLs and with clinical collaborators in the second part of this year to figure out exactly which conditions we wanna take a look at. I would expect in 2024 and 2025, we'll really start putting, I would say, some more rigor around what those studies need to be. We wanna take a very disciplined approach, which I think is unique to the diagnostic space. I think there are some companies who have done it really, really well.
Genomic Health was one of those companies that would really invest in good, rigorous, clinical trial-like studies. We wanna make sure that we can take a similar thoughtful approach to being able to do this the right way in collaboration with experts. We know that there's a big problem to solve outside of genetics experts. How do you translate the information from a clinical report into something that a specialist who hasn't touched genetics since they were in medical school, how they might be able to understand it? There is a lot of work to do, actually, on the product development side to be able to better activate and support the market where we're not working with geneticists at all and where it's more of a specialist outside of that.
Thank you.
Could you talk about how your commercial strategy has evolved over the past year or so?
Yes. I'm proud to say I led the commercial team at Invitae for many years. Jen Brendel, who leads our commercial team at GeneDx, she was from Pfizer, Bayer, and with me at Invitae, she's built a much better commercial engine. It's one that's really focused on being able to drive revenue as well as new customer acquisition, and really using data to inform our sales team. It is a very disciplined team that we've put together. As I mentioned earlier, the team before I joined GeneDx was really, really focused on technical and clinical excellence, which is what you would want. Not every company has the ability to do that.
If you have to choose to excel out of the gates in technical and clinical excellence or commercial, I would choose technical and excellence every day. The commercial team, I think, is now building off of that strong foundation, but it was underinvested in. We doubled the sales team last year. We're continuing to add some territories just because we've seen such strong rep productivity. It's about $3 million of revenue per rep. We're just getting started in terms of being able to continue to build off of a new team that is doing a heck of a job bringing new customers in the door, but also making sure that customers who have come to rely on us will continue to order from us.
Thank you.
Speaking of acquiring new customers, how do you think about continuing the shift of the physician and the payer perceptions of exome and genome testing?
That's an area that has shifted quicker than I would have expected as well. The United Healthcare bulletin that came out just recently where they're going to be covering exome and genome in the outpatient setting happened faster than we all had expected. I think we are generating important data. We had some data actually at ASHG in October that really showed that many patients are left behind when clinicians are using panels. There are better outcomes when using exome and genome. We take that to the payers to influence them. We've actually seen in state Medicaids some really important leadership in terms of covering exome and genome.
Actually, the state of Michigan had, their Medicaid covers a trio, so, baby and parents for $8,500. We've seen four states quickly follow to be able to put those policies in place. We're actually seeing some really nice movement, and our managed care team is continuing to support those efforts as well.
Nice. Shifting gears a bit, could you talk about how you continue to invest in Centrellis and also what are management's goals for that side of the company?
Centrellis, once again, it's the ability to combine clinical and genomic data. Part of what we wanna do moving forward is invest in data that is tied towards a biopharma strategy. Historically, I think the team had really been focused on amassing as much data as possible without necessarily knowing where it was gonna be going.
What Kareem has done, and I'll let him speak about this momentarily, is really put some rigor behind what patient cohorts were enriched for, what companies are out there that are developing drugs, and making sure that on a go-forward basis, the data that we're curating really ties to being able to go that next step to diagnosis. You want to talk a bit about that?
Yeah, happy to. I don't think this thing is working. Can you guys hear me? Okay, great.
Maybe what I'll just really add, just to underscore Katherine's point, for the foreseeable future, the main investment will go towards integrating all of the historical NLP data curation capabilities that were part of the legacy Sema4 business that came as a result of the massive investments that we made in collaboration with health systems like Mount Sinai, like North Shore, Avera, and others, and bringing those directly into our rare disease capabilities that are now part of our ongoing GeneDx business.
Today, because we're, you know, predominantly pushing our find capability to match patients and providers with biopharma companies that are working on specific programs, the next wave is gonna be to take the data curation capabilities with the appropriate consenting capabilities that we've developed to legacy Sema4 and add that to the rich rare disease database that we've accumulated and continue to grow pretty rapidly through the GeneDx diagnostic testing channel. That's the main thrust of the investment.
Thank you. How do you expect to drive revenue through Centrellis? If you could touch on that a little bit.
Yeah, I think Katherine pointed on this, but let's maybe underscore it a little more. The primary channel for us in the next, call it two to five years, is gonna be through biopharma collaborations.
The first wave of commercialization will be to take data that we have on rare disease patients that we test in our lab and basically match patients with specific genetic variants and some clinical phenotypes with companies that are interested in recruiting these patients for clinical trials or for matching them with drugs that are already commercially approved. It might seem like a fairly simple process in the rare disease world. That's actually quite difficult. Like for patients to be matched with, whether they be clinical indications or experimental indications that are relevant for their odyssey, is actually quite a challenge. Conversely, bringing patients and providers to biopharmaceutical companies that are working on fairly rare and orphan-type diseases and therapeutic indications, that's also a fairly rare, sort of a difficult process. That is going to be the first wave of commercialization.
The second wave is most of these companies come to us after we match them with patients and say, "Listen, we'd love to get as much NGS sequencing data coupled with clinical information on these patient cohorts to do things like natural history studies, like, you know, further target validation, clinical control arms, et cetera." That is going to be the next wave. We think that, between the find and the understand solution, we have ample opportunity for growth in the biopharma sector within the next, call it, three to five years.
Thank you. Going back to the pediatric, or NICU margins, you'd mentioned a year-over-year growth. Is there room for further margin expansion? More importantly, where would that come from?
You want to take that?
Yeah, there is.
There is. And it is multifactorial.
Frankly, if you look at our population, a large proportion of revenue being driven by exome and genome, but overall, it represents the minority of test volume today. As we expect to replace much standard practice of multi-gene panels into use of exome and genome, each proportionate pickup we can find in overall test mix helps drive overall total company expansion of margins. There are attractive margins on our exome and genome product today. We expect pricing to be stable, if not favorable, trending in the coming years, durable, with emerging guidelines and overwhelming clinical support for the use of these tests in more and more settings, which provides ample runway for durable, if not improved, pricing environment, and at the same time, working hard to drive down operational efficiencies with a large portion of cost being in the analysis and interpretation side.
Everything that happens after, the sequencer. And GeneDx has been working for, frankly, over a decade at driving down costs in a meaningful way on that side of the production of these tests. We still have more room to grow in that regard.
That's great. Thank you. Any other questions from the audience?
You spoke a little bit before about Michigan and some of the rates that they have. What are the rates of United, and what do you expect about other commercial payers following suit? They're usually, United's usually first. What do you expect from Aetna, Cigna, some of the rest?
Yeah, so we're GeneDx under contract with every large national payer and have been for well over a decade. Our specific contracted rates are proprietary, but offer the ability to continue to produce at very favorable margins.
The $8,500 that we cited for the Medicaid program in Michigan is an outlier, I'd say, on the high end, but I think we see very favorable pricing that speaks to the overall value that these tests can perform, can provide, not just on a clinical basis, but from a health economic perspective to really drive down overall costs in the system.
I would just add some of the work that we're doing with Seek First and University of Washington is intended to help drive health economics analysis so we can continue to show, it was the numbers that we took a look at of $30,000 on average savings in the NICU, $6,800 in the outpatient setting. We want to continue to get a better understanding of that, particularly as our costs continue to go down on the interpretation side of things.
Thank you.
Any other questions from the audience? I think we're all done. Thank you very much, and thank you to the company.