Personalis Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2023

There are 10 speakers on the call.

Operator

Good afternoon, and welcome to the Personalis Third Quarter 2023 Earnings Conference Call. All participants will be in a listen only mode. After today's prepared remarks, there will be an opportunity to ask questions. Please also note that this event is being recorded today. I would now like to turn the conference over to Carolyn Corner, Investor Relations.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Welcome to Personalis' 3rd Quarter 2023 Earnings Call. Joining today's call are Chris Hall, Chief Executive Officer And President and Aaron Tachibana, Chief Financial and Chief Operating Officer and Rich Chen, Chief Medical Officer and EVP R and D. All statements made on this call that do not relate to matters of historical fact should be considered forward looking statements within the meaning of the U. S.

Speaker 1

Securities laws. For example, any statements regarding trends and expectations for our Financial performance this year and longer term, cash runway, revenue expectations and timing, reimbursement goals, size and booking of orders, products, services, Technology, clinical milestones, the outcome and timing of reimbursement decisions, expectations for our existing and future collaboration activities, Cost expectations, the outcome of legal proceedings to enforce patents, the validity or enforceability of our patents and our market opportunity business outlook. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. We encourage you to review our most recent filings with the SEC, including the risk factors described in our most recent quarterly report on Form 10 Q. Personalis undertakes no obligation to update these statements except as required by applicable law.

Speaker 1

Our press release for the Q3 of 2023 results is available on our website, www.personalis.com, Under the Investors section, it includes additional details about our financial results. Our website also has our latest SEC filings, which we encourage you to review. A recording of today's call will be available on our website by 5 P. M. Pacific Time today.

Speaker 1

Now, I would like to turn the call over to Chris for his comments and Q3 business highlights.

Speaker 2

Thank you, Caroline. Good afternoon, everyone, and thank you for joining us. We're thrilled with the progress we made since we updated you in August. We exceeded our revenue goals for the Q3 and increased our full year guidance. We presented compelling data on next personal with the team at TracerX.

Speaker 2

We launched the next personal clinical test. We deepened our collaborators in breast cancer and we strengthened our management team. I'm very proud of the team and Personalis for delivering on the commitments we've made to investors and our continued focus to execute Our win in MRD strategy and establish DEXT Personal as the centerpiece of a better management paradigm for cancer patients. Let's start with our commercial traction. As mentioned in our press release, we reported $18,200,000 in quarterly revenue Powered by nice growth in each of our business lines, biopharma, enterprise sales including Natera and population sequencing for the VA MVP.

Speaker 2

That performance represents 23% year over year growth. I'd like to point out that we've managed this growth Despite an environment where biopharma companies have been cutting their spending on clinical trials and related services and the actions we took Earlier this year to streamline and remove non profitable business. Given our commercial traction, we're raising our guidance to $73,000,000 to 74,000,000 Now while our revenue goal in Q3 exceeded our goals and allowed us to increase guidance, we're most excited about the progress we're making And executing our win in MRD strategy. MRD testing using liquid biopsy tests to find residual or recurrent Cancer and to monitor treatment effectiveness is expected to grow into a $20,000,000,000 plus market. As a reminder, our winning MDD strategy has 4 pillars.

Speaker 2

1st, focus and launch our test in cancer types We're an ultra sensitive liquid biopsy test can unlock significant value for patients, payers and partners. 2nd, To drive reimbursement by developing robust clinical evidence and partnering with the top global collaborators. 3rd, To commercialize Next Personal with a partner centric model and 4th, to leverage our deep biopharma relationships To power the development of clinical evidence by the use of next personal and clinical trials. I'll next review each of these strategies and the progress we've made this quarter. First, starting with indications for ultra sensitive tests.

Speaker 2

We've chosen to focus on early stage lung cancer, breast cancer and immunotherapy monitoring because the high sensitivity Jeff is uniquely suited to detect recurrence very early and to guide treatment decisions and to deescalate low risk patients off of therapy. Let me elaborate about high sensitivity and why that matters for our key indications as it's at the heart of our strategy. We detect cancer at levels down to 1 part per million. What this means is that next personal may find residual or recurrent disease When there is only as few as one circulating cancer DNA fragment among a 1,000,000,000 normal DNA fragments in the blood, allowing our test and platform to detect cancer earlier than competitive technology. And it can do this not just for some patients, but consistently for Most patients across many different cancer types and stages.

Speaker 2

We believe next personal can provide confidence that one, When we detect cancer, we see it earlier, when patient management can be modified to result in more favorable outcomes and 2, When we don't see cancer, the patient will likely remain disease free and may not need additional therapy. In early lung cancer and some types of breast cancer, Our approach is particularly well suited to escalate and deescalate therapy. Detecting the cancer recurrence early may be the key to getting a patient The therapy they need to save their lives and next personal sensitivity may be key to identifying patients with low risk So they can potentially avoid additional treatments. We've kicked off our commercial journey by launching our next personal Test for early access clients. We've confirmed this quarter that NeX Personal can detect cancer as low as 1 part per 1000000.

Speaker 2

We've completed the analytical studies and documentation needed to launch the test. The launch has been met with robust early demand with several doctors sending a sample. We continue to deepen the clinical evidence of our test with early adopters and expect to ramp up rapidly post Medicare coverage. As a reminder, we're managing towards obtaining Medicare coverage in late 2024. The second part of our Win an MRD strategy is Clinical evidence with top institutions and thought leaders around the world to demonstrate the clinical validity and utility of our test.

Speaker 2

In early stage lung cancer, we're working with the TRASER X consortium led by lung cancer expert Doctor. Charles Swan and teams at Cancer Research UK, The Francis Crick Institute and University College London. Previously, this group conducted research on prior generations of MRD Assays and identified significant opportunities for detection improvement and is now using next personal to determine the clinical value of an ultra sensitive assay for early stage lung The TRACERx team presented compelling clinical evidence at ESMO a couple of weeks ago highlighting the power of the next personal assay. There were 3 key findings. First, we are seeing higher sensitivity up to 4 times higher than other liquid biopsy tests analyzed by TracerX.

Speaker 2

2nd, we found lung cancer 6 to 11 months ahead of standard imaging and significantly ahead of other tests. And third, we have the ability to determine low and high recurrence risk, which could lead to improved therapy decisions. We expect the complete cohort results from the TRACERx study to be published in mid-twenty 24. In breast cancer, We're actively processing samples from our Royal Marston collaboration. Royal Marston is one of the leading global institutions in breast cancer and our work It's focusing on patients with early stage disease for several subtypes including ER positive, HER2 positive and triple negative breast cancer.

Speaker 2

The Royal Marston collaboration provides us access to a well annotated set of samples with no clinical outcomes. We plan to use our work here to provide a clinical data set to support our medical coverage in breast cancer. The data set is expected to be showcased in mid-twenty 4. Excitingly, we recently added 2 new collaborators in breast cancer to augment our path for Medicare coverage. First, we're now working with Dana Farber in breast cancer, which provides us a robust set of HER2 respectively gathered samples And also the Institute Puree, which gives us access to a study that was prospectively gathered triple negative breast cancer patients.

Speaker 2

These are extremely important because we now have multiple prospective cohorts that we can leverage to drive both commercial success and underpinned our reimbursement submission. Additionally, for breast cancer, we have our own prospective clinical trial called Be Stronger and it has begun. We made progress establishing committed sites and are targeting to begin enrolling patients late this year. For I O therapy monitoring, we have multiple collaborations underway. Our key study is a pan cancer dataset with Valdo Heberron Institute of Oncology, VHIO, designed to demonstrate and leverage the efficacy of next personal for I O therapy monitoring.

Speaker 2

VHIO gives us access to a large well annotated bank of prospectively gathered samples that are the cornerstone of our efforts to achieve reimbursement coverage For pan cancer I O therapy monitoring, we have begun testing VHIO patient samples and we expect to present clinical data next year. This is an exciting collaboration and it joins existing work we've announced on melanoma and I O therapy with the University Medical Center Hamburg Ependorf, also known as UKE and also our Duke relationship. We're driving hard to process all the samples across these many collaborations And we're targeting to achieve coverage for at least one of them in 2024. The third part of our strategy is a unique partner centric path commercialization. We're seeking partnerships that help us amplify our message to the marketplace, helping us market and sell our test in a capital efficient manner.

Speaker 2

We continue to work on that core part of our strategy and we believe it provides significant opportunities to accelerate commercial traction while minimizing investment. The 4th and final part of our strategy is to leverage our biopharma relationships and establish infrastructure to submit Next Personal as the assay of choice to determine clinical trial enrollment, monitor therapy effectiveness and develop new insights into treatment pathways. This quarter, we continue to deepen our business with pharma clients and in particular, driving NEXT Personal forward in several discussions. Growing these relationships is important to us. And in September, we announced that Ms.

Speaker 2

Deepshika Bhandari joined Personalis as SVP, Regulatory Quality and Clinical Compliance. Most recently, she was VP of Regulatory Affairs at Grail and has also held leadership roles at Roche Diagnostics. She and her team are charting a path forward to establish our NeXpersonal assay as the clinical trial enrollment assay of choice for our pharma partners. NextPerson was the key driver of revenue growth moving forward. And over the last quarter, we've demonstrated strong performance for the test One of the best data sets available globally, we've deepened the list of our blue chip collaborators and we launched our product.

Speaker 2

Our progress and executing on our women MRD strategy has been impressive. We've also made progress in other parts

Speaker 3

of the business. As we

Speaker 2

mentioned before, our platform is powering personalized cancer therapies. As announced earlier this year, we are a key partner for Moderna's Trial work as they pursue regulatory approval of their personalized therapies. We are partnered with Materna across their clinical studies and as Merck and Materna disclose, We've begun enrolling patients in their Phase 3 clinical trial for melanoma. We expect this partnership to be a significant driver of revenue for us in 2024 2025. With thousands of new cancer patients each year in the U.

Speaker 2

S. Alone, our aspirations are for personalisis technology to power the development of next generation vaccines and therapies as we are doing with our Moderna partnership. Lastly, turning to our population sequencing business. We recently received a new task order from the U. S.

Speaker 2

Department of Veteran Affairs 1,000,000 Veterans Program known as the VA MVP in the amount of $7,500,000 This relationship stretches back several years and we are proud to continue supporting the VA MVP and their initiatives. It's an exciting time at Personalis with much progress across multiple fronts. We appreciate our collaborators, partners and investors being part of our journey

Speaker 3

Thank you, Chris. We executed very well in the 3rd quarter and continue to meet our financial commitments. I will be providing detail about our Q3 financial results and guidance for the Q4 and full year. Total company revenue for the Q3 of 2023 was $18,200,000 and increased 23% compared with the same period of the prior year, primarily due to higher volume from biopharma customers, enterprise, which includes Natera And population sequencing volume from the VA MVP. Gross margin was 19.1% for the 3rd quarter 28.7% for the prior quarter and 16.7% for the same period of the prior year.

Speaker 3

The sequential decline of 9.6% was primarily due to the impact of lower selling prices to Natera as a result of their volume based pricing structure and to a lesser extent Higher allocated facility costs to the operations lab now that all production testing has been moved from Menlo Park over to the new Fremont facility. The year over year increase of 2.4% was primarily due to operating leverage from higher revenue volume. Operating expenses were $34,300,000 in the 3rd quarter and included a one time non cash impairment charge of $5,600,000 For a write down of the remaining lease asset for the Menlo Park facility that we recently vacated compared with $29,700,000 for the same period of the prior year. Excluding the one time charge, operating expenses were $28,700,000 and decreased $1,000,000 from the same period last year. We continue making progress to reduce our expense base by limiting investments to high priority initiatives such as deepening clinical evidence to pursue reimbursement, transitioning to lower cost sequencing platforms and others.

Speaker 3

R and D expense was $16,700,000 in the 3rd quarter compared with $15,000,000 for the same period last year and SG and A expense was $12,000,000 compared with $14,800,000 for the same period last year. Net loss for the 3rd quarter was Excluding the non cash impairment charge mentioned earlier, the net loss would have been 23,500,000 The net loss per share for the Q3 was $0.60 and the weighted average basic and diluted share count was 48,700,000 Compared to the net loss per share of $0.58 and a weighted average basic and diluted share count of 45,900,000 for the same period of the prior year. Now onto the balance sheet. We finished the 3rd quarter with a strong balance sheet with cash and short term investments of 120 $700,000 During the quarter, we used $16,500,000 of cash primarily to fund operations. We expect our cash balance to last approximately 2 years.

Speaker 3

Now, I'd like to turn to guidance. For the Q4 of 2023, we expect total company revenue between $19,000,000 to $20,000,000 Revenue from pharma test, enterprise sales and other customers between $18,500,000 to $19,500,000 and revenue from population sequencing Of approximately $500,000 And for the full year of 2023, we have increased our revenue guidance Due to the strong demand for both pharma and enterprise sales, we now expect total company revenue between $73,000,000 to $74,000,000 With oncology revenue from pharma, enterprise sales and other customers between $64,000,000 to $65,000,000 and population sequencing revenue to be approximately 9,000,000 In addition, we expect net loss of approximately $103,000,000

Speaker 2

which is

Speaker 3

$10,000,000 lower than the loss of $113,000,000 in 2022 and the net loss of $103,000,000 Includes the one time charge of $5,600,000 for the Menlo Park facility. Cash usage Is expected to be below $70,000,000 and represents a reduction of approximately $50,000,000 from 2022. We look forward to updating you on our progress during the next conference call in a few months. And with that, I will turn the call back over to the operator to begin the Q and A session. Operator?

Operator

We will now begin the question and answer At this time, we will pause momentarily to assemble our roster. And our first question will come from Patrick Donnelly with Citi. Please go ahead.

Speaker 4

Hey, guys. Thanks for taking the questions. Maybe one just on the MRD side, you talked about the pharma opportunity there. Can you just about what the funnel looks like at the moment in terms of those opportunities. Just trying to think about how to size that revenue opportunity, Yes, the activity you're seeing and expectations going forward here?

Speaker 2

Yes. So we as you know, we've worked with I think The last over time, I think we've worked with 16 of the top 20 biopharma companies with our Immuno ID platform. And that platform powers a lot of the translational kind of work that they do. So we've built relationships into many of those companies. We have been engaged in discussions.

Speaker 2

We originally launched it as an RUO product and we've been Building the revenue base in X Personal over the last year, we announced the we announced a relationship with AstraZeneca Where they begun using the assay and some of their efforts and we've been and since as the data has come out with TRACERx, Continue to get significant interest. We've been in benchmarking pilot studies with several biopharma companies. We expect the revenue on the biopharma side for NEX Personal to be one of the nice revenue growth in 2024 As we move through the year. Those trials can be larger and can be significant. So we're excited about the journey there.

Speaker 4

Okay. That's helpful. And then you mentioned the reimbursement side going for kind of coverage in 24. Can you just talk about, I guess, the pathway there? What hurdles you have to clear?

Speaker 4

Your reimbursement timing is Always tricky. So, I guess, when are you thinking that could come during the year? And again, what are the key catalyst milestones we should be keeping an eye out for as you progress towards that?

Speaker 2

Yes. No, absolutely.

Speaker 3

So, I

Speaker 2

mean, we it is one of the things that is always tricky to try to predict timing because there's a lot of it beyond our control. But what is in our control is getting the samples with collaborators and we've picked some of the top collaborators. I think there's 7 or 8 studies now we're working with Across our core indications, and the key thing there is to have analytic fluidity studies that show that The assay is robust across multiple different conditions and gets the performance numbers that we did. We've completed all that with the launch of the product. We'll be Submitting that data for publication and that will be one of the data sets, the publication there that will underpin reimbursement Success and progress.

Speaker 2

The others will be clinical evidence in each one of these indications. And so the core thing to watch for Over 2024 is the publication of the clinical evidence, because that publication of the clinical evidence that The test is valid in lung cancer breast cancer I O therapy and that there's clinical utility there, I. E. We can accelerate We can accelerate a doctor and a patient knowing when cancer is present. Getting that published will be important to get through the coverage hurdle With Medicare.

Speaker 2

So we plan on having all that accomplished across these indications and be able to submit for coverage in 2024. And our goal is to have one of those done, Patrick, by the end of 2024, because I think we've always had some roadblocks along the way, depending on the So we're shooting to be able to submit for all three and we're targeting to get one over the finish line by the end of the year.

Speaker 4

Great. I appreciate it guys.

Speaker 2

Absolutely. And for us the quarter has been really one of sort of checking off more and more boxes of lowering the Is it lowering the risk for investors? The risk of getting the test live, we've checked that off. The risk of some early clinical evidence, we checked that off this Quarter with some great evidence and next is the next big one is reimbursement and we keep stitching together the data to be able Check that off. So that's where we are.

Speaker 2

Thanks for the question.

Operator

And our next question will come from Tejas Sivant with Morgan Stanley, please go ahead.

Speaker 5

Hi, this is Jason in for Tejas. Congratulations on the quarter guys. My question is, the VA MVP extended your contract for next year for $7,500,000 This is down from $10,000,000 the previous year. Do you think was a driver behind this lower rate and how should we think about this number going forward?

Speaker 3

Hi, Jason, this is Aaron. In terms of the VA contract, They don't say specifically the rationale for dollar amounts here or there, but it's our belief that was what they had in line from a budgetary standpoint. It was down a little bit. In terms of the way we look at that $7,500,000 it's good business. We've been doing business with the VA for several years now, Back to 2012, our focus is really on the oncology business.

Speaker 3

And so Everything we do inside of our company is focused on driving the clinical evidence, the commercial engine, Getting towards reimbursement, driving MRD with pharma, working with PCB manufacturers to be able to go and exploit that technology. So in terms of long answer here, but the focus is really on the oncology revenue. So the VA has been nice business for us in the past, but looking forward, The oncology business is really more important for us.

Speaker 5

Got it. Thank you. That was helpful. And if I may ask a follow-up, you ended the quarter with $121,000,000 in cash. So you previously guided at this providing you about 2 years of cash runway.

Speaker 5

So it's another 3 months to pass us. How do you think about cash management and financing opportunities over the next year?

Speaker 3

Yes. Earlier this year, we took some actions to extend our cash runway, reduced expenses. We continue to Reduce expenses every quarter, we're looking at discretionary spend and we're looking at what we absolutely Critically need to go and invest in, right, that's along the path to go get clinical evidence done or reimbursement. Other types of things where we can defer or eliminate spend, we've been doing so. And over the last few quarters, we've been continuously saying we have 2 years of cash runway and that's because we're Successful in pushing things out and deferring in different places, right?

Speaker 3

And so in terms of where we're at today, we believe we have a strong balance sheet To weather the storm, the capital markets aren't very good. As Chris mentioned, we have several milestones in front of us here in 2024, Meaning get more clinical evidence out, being able to submit for reimbursement. And our targets are to be able to get reimbursed for at least one cancer Type in 2024, so we believe we have enough capital to get us to reimbursement and be able to start to go up the ramp And then start to show some revenue for NEX Personal in the clinic.

Speaker 5

Thank you. That was helpful.

Speaker 3

Thanks, Jason.

Operator

And our next question will come from Dan Brennan with TD Cowen. Please go ahead.

Speaker 6

Great. Thanks for the questions, guys. Maybe just on the commercial partner, can you just kind of remind us on The type of partner you're looking for, kind of how advanced those discussions and when something like this might come about?

Speaker 2

Yes, I mean, Thanks, Dan. We've always said that like since in the last that finding a commercial partner Was key to ultimately helping us bring this to market. I've always believed that you're better off partnering these types of things that go a lot in this particular climate and in particular it's better to do that. We think that the type of partner that works well There's a partner that doesn't have an MRD solution, but yet calls on and talks to oncologists, so that they have those And they have those relationships and they can integrate this in. And ideally that partner would be able to integrate it Due to their call cycle and their talk track and their discussions that helps to distinguish them of having a cutting edge Product that they're bringing that adds luster to their brand.

Speaker 2

And so we've been engaging in those discussions, Continue to engage in discussions. Don't have anything to report at this point, but it's been key part of our strategy because quite frankly, If we can find a partner that gets that helps us commercialize through the journey, then that reduces dramatically the amount Capital that we need to build a sales and marketing engine. And I've done this in many several companies now built these out. I know how to do that, but it costs capital. So being able to leverage somebody to do it through the journey is part of our strategy.

Speaker 2

We have been able to execute on that yet. But I think having the product live and having some great clinical data is we're sitting where we are right now. We feel like we're well situated to continue moving

Speaker 6

And would that be something more likely after Medicare coverage gets in place, you have more power or just kind of any sense on timing of a commercial partnership?

Speaker 2

When we identify the right partner and get an agreement put together is when we would announce something. I think Sooner is always better than later in these things, honestly. The reason is because this current period that we're in, we call it early access program. So we're currently We have a set of early adopters that and we have demand and we're sort of working through. This is the time that you work through the systems, you work through your Call points, your talk tracks, you work through your marketing material, you build more clinical evidence, you start to develop advocates.

Speaker 2

And so and then when we get Medicare coverage, we expect The all systems go pushing the gas down on the pushing the gas down and really trying to build revenue as quickly as we can on the back of that. And so ideally having a commercial partner before

Speaker 3

we do that, so we

Speaker 2

learn how to work together would be what we're shooting for.

Speaker 3

Yes. So we did announce that we've launched the product. We have an early access program, so we are engaged with oncologists. We have Real tests coming into our operation now. And in terms of the sales team, we have a small sales team today, but We will continue to add to that and build that until at the right time until we have a partner, right?

Speaker 3

And so we're planning for success. And like Chris mentioned, A partner is going to help us be capital efficient. We won't have to go and hire a really large sales force and spend a lot of money on that, Assuming we can find a partner sooner rather than later, but we're going to continue down the path to build the commercial team until we do have something done.

Speaker 6

And maybe just one follow-up, just on filing the 3 assays next year, could you just give us a sense of like by the time you file, What kind of dialogue will you have had with Medicare ahead of it just to ensure like you've got the right data package in place? And I guess it's fair to think either colorectal or breast will be the opportunity just given the size of the market or that will be one of those 2 will be the area where you probably feel you have the most opportunity. Just maybe any color on Two questions.

Speaker 3

Yes. I think well, I think it's a

Speaker 2

good it's an interesting yes. So the answer is yes, we will engage. We've already had Already have had dialogues with Palmetto. We'll continue to have dialogues with them as we go forward. I think So the three indications are lung, breast and IO.

Speaker 2

They're in different spots. So lung Is one where we have a shot to be really like the kind of the early the first coverage really in that indication. I think fair to say an early stage lung. And we think the data is really compelling and really great there. In I O therapy, it was one of the first indications after CRC See, they got coverage.

Speaker 2

And so there's a really nice benchmark set of data out there that we feel like we'll have as robust Or more complete or larger data set can exceed that in size. And so we feel like I owe or we'll position. In the breast cancer, we're just stitching together a wealth of studies As we really push down on that, that's one where there's coverage now by another player. And so you get some sense by what other players have done, What you need to do and so we have a good sense of that. But long as probably more open and the other ones are more clear about what we But we feel like we'll be in a good position across the 3.

Speaker 6

Great. Thank you.

Operator

And our next question will come from Mark Massaro with BTIG. Please go ahead.

Speaker 7

Hey, guys. Thank you for taking the questions. So my first one, it's great to see the initial TRACERx study data readout. Just for housekeeping, is it right that we should see, that next group of patients Data readout around mid-twenty 24, that's the first part of my question.

Speaker 8

Yes. Hi, this is Rich. I think that's Reasonable. That's a reasonable target for us. Things can intervene to kind of make it come in or come out a little bit in terms Timing, but that's probably a reasonable assumption.

Speaker 7

Okay, great. And then, Rich, this one might be for you. I think One of the interesting things about TRACE Rx is that I think it started in non small cell lung cancer and I know that's a big focus. But I believe other cancer states like melanoma, prostate and renal cancer are being investigated. Is that the case still?

Speaker 7

And Are you guys having some conversations with Charlie's group about potentially expanding beyond lung cancer into other cancer types?

Speaker 2

Yes, we

Speaker 8

haven't publicly talked about expanding beyond lung cancer because lung cancer is our major Focus. But you can imagine there are discussions about different avenues, it's not just cancer types, but expanding our relationship with TracerX.

Speaker 7

Okay. I also wanted to ask about NextDx, which I didn't hear any comments on, how are the reimbursement discussions going there? And then Any update in terms of adoption and demand for the test?

Speaker 2

Yes. I mean, it's Yes. So we continue the dialogue on NextDx and reimbursement. We are still aspirational to get coverage End of the year, still possible. And we're managing towards that.

Speaker 2

We have a small handful of reps in the field and they do talk about it and they work on it and we are seeing samples Coming in, we are seeing we've always believed that it works hand in glove with IO monitoring for Personal and our early experience so far is that that's true. So that they the products often may be ordered together. When a patient is diagnosed in their later stage and they go on IO therapy, they're a candidate for that, the doctor will want to both create a baseline for Next personal, while at the same time doing the therapy selection. And so we're seeing in our early Access sites that that's the case. And so we're optimistic that the products will Work together in the marketplace from a messaging standpoint.

Speaker 2

So rather than send the CGB test to vendor A and then send the next personal to us, Would be better to be able to just send it both to us and have a one stop shop. And so we're seeing evidence that that will happen. So the 2 products, the growth will actually happen synergistically.

Speaker 7

Okay, great. Last question for me is on the Moderna partnership. I believe Moderna's Phase 3 melanoma Clinical trial is expected to start in the second half of the year. Do you have any update on that? And how should we think about Moderna and some of that broad interest on personalized cancer vaccines into the model in 2024?

Speaker 3

Hey, Mark. This is Aaron. So yes, so Moderna did start enrolling patients in the Phase 3 trial In the second half, like was planned, things did get pushed to the right a little bit. And so the enrollment has been slower than what we originally thought. So although we're recognizing some revenue here in the Q4, it's smaller than what we originally thought.

Speaker 3

So it's our expectation now At this point in time that the ramp should start here into 2024 and then into 2025, Right. So the next 2 years could be quite lucrative for personnel in terms of revenue ramp from The Phase 3 work with Moderna.

Speaker 7

Okay. That's it for me. Thank you.

Speaker 3

Thanks, Mark.

Operator

Our next question here will come from Shwyankakula Ramakanth with H. C. Wainwright. Please go ahead.

Speaker 3

Thank you. Thanks for taking my questions. I just want to understand a little bit more about what you're doing in terms of partnerships For our commercialization, so you said that's one of your pillars for growth. Can you expand on that?

Speaker 2

Yes, sure. So I think we think that so we offer and we have a test We believe is the most sensitive MRD test. We think that product is unique and differentiated. And my own experience in commercializing these products with partners Is that when you have a set of relationships with oncologists or other physicians as a sales group, Having a new cutting edge product that you can bring in and walk in and talk to It's actually something that distinguishes you and makes you more valuable and that's good. And so we're seeking partnerships It can help to augment the partners' set of products to help them grow and build their talk tracks inside customers and deepen their relationships and broaden their offering.

Speaker 2

At the same point in time for us, while we know how to do this and we know how to build Products, it's expensive to do it by ourselves and we'll never in a relationship where we turn it over to somebody else, Being able to commercialize side by side would allow us to move a lot faster with a lot less investment and a lot less fundraising needed. So one of the things we've been very focused on is how do we become ever more efficient, ever more focused on the mission at hand here, Which is to capture a decent part of this $20,000,000,000 market. And part of that is having a partner to allow us to move faster. That will either mean that we'll have less investment capital needed to be able to dramatically scale the company's revenue or it will free up more capital and invest right back into the clinical study evidence development. Neither one of those Study evidence development.

Speaker 2

Neither one of those two scenarios is good for shareholders. So that's what we're focused on.

Speaker 3

Okay. Thank you. Thanks for taking my question. Sure.

Operator

And our next question will come from Mike Knutsen with Needham. Please go ahead.

Speaker 9

Hi, guys. This is Joseph on for Mike. Hopefully, this wasn't addressed already, but I'm looking through a transcript right now. I'm not Seeing it. So, I was just wondering if maybe you could talk about your expectations for cash burn as we start to move into what was being done in 2023.

Speaker 9

I don't know if you guys still have much more wood to chop there, but as you're nearing some of these commercial milestones, We expect that to change pretty materially.

Speaker 3

Hi, Jason. This is Aaron. So in terms of The cash burn, cash runway question that you asked. So we ended the quarter into Q3 with close to $121,000,000 of cash And we said as basically 2 years of runway. In 2023, our cash usage is going to be below $70,000,000 So looking into 2024, our expectation at this point in time and our estimates are for cash usage to be less In 2023 next year, okay?

Speaker 3

And so as we go forward and that's going to There's going to be a multitude of different things that contribute to reducing the cash usage. A, some revenue growth. The gross margin expansion, we have a lot of initiatives to improve gross margin. In addition, Controlling our OpEx, similar to what we've done this year. We reduced OpEx, some $10,000,000 excluding the impairment charge that you just saw.

Speaker 3

And we're going to continue to be prudent as we go into 2024.

Speaker 9

Okay. Yes, perfect. Thank you very much. That's the only question from us. Appreciate it, you guys.

Speaker 2

Thank you, Jason.

Operator

And this concludes our question and answer session and also concludes today's call. Thank you for attending today's presentation. You may now disconnect your line.

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Earnings Conference Call
Personalis Q3 2023
00:00 / 00:00