Q1 2024 Veracyte Inc Earnings Call

Participants

Shayla Gorman; Senior Director, Investor Relations; Veracyte Inc

Marc Stapley; Chief Executive Officer, Director; Veracyte Inc

Rebecca Chambers; Chief Financial Officer; Veracyte Inc

Andrew Brackmann; Analyst; William Blair & Company LLC

Sung Ji Nam; Analyst; Scotiabank GBM

Mason Carrico; Analyst; Stephens Inc.

Tejas Savant; Analyst; Morgan Stanley

Puneet Souda; Analyst; Leerink Partners

Presentation

Operator

Good day, and thank you for standing by, and welcome to the Veracyte First Quarter 2024 financial results conference call. (Operator Instructions)
Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Shayla Gorman, Senior Director, Investor Relations. Please go ahead.

Shayla Gorman

Good afternoon, everyone, and thank you for joining us today. For a discussion of our first quarter 2024 financial results. With me today are Marc Stapley, Veracyte's Chief Executive Officer; and Rebecca Chambers, our Chief Financial Officer, Verisyse issued a press release earlier this afternoon detailing our first quarter 2024 financial results. This release, along with the business and financial presentation, is available in the Investor Relations section of our website at veracyte.com.
Before we begin, I'd like to remind you that various statements that we may make during this call will include forward looking statements as defined under applicable securities laws. Forward-looking statements are subject to risks and uncertainties, and the company can give no assurance they will prove to be correct, and we are not under any obligation to provide further updates on our business trends or our performance during the quarter.
To better understand the risks and uncertainties that could cause actual results to differ. We refer you to the documents that Veracyte files with the Securities and Exchange Commission, including various sites, most recent Forms 10-Q and 10-K. In addition, this call will include certain non-GAAP financial measures. Reconciliation of these measures to the most directly comparable GAAP financial measures are included in today's earnings release, accessible from the IR section of Verisyse website.
I will now turn the call over to Marc Stapley, Veracyte's CEO.

Marc Stapley

Thanks, Shayla, and thanks, everyone, for joining us today. Following a very robust end to 2023. I am excited to share that we have continued our positive momentum with a very strong start to this year. We delivered first quarter revenue of $96.8 million, growing 17% compared to the prior year period this strength was driven by our testing business, which grew 25%, meaningfully exceeding our expectations.
The performance of the Decipher Prostate and Afirma tests again demonstrated the incredible power of the Verisyse diagnostics platform to drive market penetration. This unique approach relies on broad set of genomic and clinical data, deep bioinformatic and AI capabilities and a powerful evidence generation engine, which ultimately drives guidelines.
Guideline inclusion and combined with our proven commercial and managed care excellence is designed to ensure durable adoption and reimbursement for our on-market diagnostics. In the first quarter, we delivered 16,500 Decipher Prostate test hitting a new quarterly volume record with growth coming from both new and existing providers are incredibly productive. Urology sales force continues to drive adoption through awareness of the test utility and associated clinical evidence as well as strong guideline representation.
In February, updated NCCN guidelines were published with Decipher Prostate receiving a level 1b evidence rating the highest rating of all gene expression tests for prostate cancer. Additionally, because of this classification, the Decipher Prostate test is the only gene expression test for which the guidelines include a separate table that summarizes treatment implications for patients based on both the NCCN risk classification and the Decipher score.
These updated guidelines are proving to be a meaningful resource to provide physicians with clear summarized evidence from clinical trials on how Decipher Prostate can inform treatment decisions.
On the reimbursement front, we also made significant progress in the quarter, signing a contract with a major commercial payer to make Decipher Prostate and in network offering bridge close to 30 million members.
We are thrilled to see this payer's patient population obtain more seamless access to the Decipher Prostate test, enabling that treating physicians to more efficiently optimize back care. Generating additional clinical evidence for Decipher remains a priority for us to drive further guideline inclusion for durable reimbursement I mentioned previously and increased awareness in the significantly under-penetrated prostate cancer market.
Last month, a publication in JCO precision oncology showed that among patients undergoing active surveillance for prostate cancer the Decipher test is prognostic for identifying those whose disease is likely to progress pinpointing the optimal candidates for active surveillance, which can help patients delay or avoid interventions such as surgery radiation or hormonal therapy is challenging, given the potential harm of these treatments weighed against the risks of cancer progression and missed opportunities to cure.
These significant findings make the site for the only prostate gene expression test to have treatment outcome data from a prospective multicenter Phase two randomized trial in the active surveillance population, providing a tool like decipher that could help to identify those whose disease is likely to progress to give physicians important insights to help them with this critical decision while also aiding in the further penetration of this portion of the market.
Moving to Afirma, we reported approximately 14,000 test results and 14% revenue growth compared with the prior year. In line with our expectations with Afirma, we continue to illustrate our differentiation resulting in market share gains due to broaden awareness of previously published evidence, demonstrating the quality and performance of our test.
Another point of differentiation has been the launch of Afirma greater RUO tool designed to advance the science around fibroid nodules and cancer. This quarter, we saw a high level of interest in grade with approximately 50% of physicians requesting a report on their test order forms in March.
The addition of the Afirma to promoter Mutation Test enhances the clinical utility of our BioD offering, also reinforcing our competitive position in this quarter following publication of analytical validity data for the test in the Journal of Endocrinology and Metabolism testing received Medicare coverage.
While Turkey represents a small portion of our total Afirma volume limited revenue impact. This is yet another indicator of the strides we are making. It provides the most complete offering possible for physicians and their patients facing a potential thyroid cancer diagnosis.
Looking ahead to our growth drivers over the coming years, we believe that Decipher Prostate and Afirma will continue to grow meaningfully as we drive towards 80% penetration for both prostate and fibroid cancer molecular tests while continuing to gain market share and bolster ASPs for decipher, we believe the updated NCCN guidelines will be a meaningful catalyst to broaden awareness and change physician behavior.
We recently conducted a voice of customer survey on this update, which clearly urologists as well as medical radiation and urologic oncologists across the academic community in large urology group practice or blood processing.
Not surprisingly, 82% of respondents were aware of the updated NCCN guidelines and 75% of respondents utilized the principles of risk stratification section, which details treatment implications based on the NCCN classification and decipher score as a result of ordering trends.
The publication as well as the survey feedback, our confidence in our outlook on Decipher growth over a multiyear period has been further solidified. In addition, we continue to anticipate the draft of Medicare local coverage determination or LCD for patients with metastatic prostate cancer to become final later this year or early next.
We estimate that there are an additional 30,000 patients annually who could benefit from the prognostic and predictive information Decipher delivers to their clinicians, our pivotal moments in their cancer journey. Meanwhile, we unfortunately continue to see growth in the incidence of prostate cancer with the American Cancer Society estimating there will be approximately 300,000 new cases in 2024, up again from 2023, making Deciphera even more important for more patients for Afirma.
In addition to the market dynamics previously highlighted, we are beginning to see standard of care changes of physician adoption in rural areas where we see a long tail of clinicians who are currently utilizing genetic testing for this patient population. Additionally, we are engaging with more OEMs on a draft LCD to cover thyroid nodules, who will testify cytology, expanding access to patients who can also benefit from Afirma.
Now turning to our longer-term growth drivers, we are focused on three vectors global expansion through our robust IVD strategy, solving new cancer challenges through the utilization of our platform. For example, our Percepta Nasal Swab test and with the acquisition of C. two I. genomics serving more of the patient care journey through minimal residual disease or MRD.
And recurrence testing as we often do and as we committed to do following the C. two I. acquisition during the quarter, we continued our portfolio prioritization to rationalize our investments outside of these three key areas as a result, we downsized the commercial support for our ViziLite test. While we will continue to offer this important test to those patients facing interstitial lung disease, we will no longer maintain a separate in ViziLite sales force.
Now shifting to our focus on global expansion. We are on track with the key product and market development activities for our multi-platform IVD approach, developing our Decipher Prostate test on qPCR and our pro segment and nasal swab test on NGS. Recall that once these tests are made available, we will still need to go country by country to drive adoption and reimbursement, utilizing the clinical evidence that we already have and are continuing to generate with our clear base test.
This is yet another example of the leverage we get from the Verifi diagnostics platform. We're a clear strategy built around data insights. Proof and utility will fuel our IVD strategy outside the US on our second growth driver solving new kinds of challenges via Percepta Nasal Swab. We have made good progress with our Nightingale trial and have patients enrolling across our almost 100 sites.
While we remain excited about our progress to date, the current patient enrollment per site is tracking below our updated expectations. We've designed this study with a high degree of scientific and clinical rigor induced by the cancer community, and we believe the slower rate of enrollment is consistent with typical challenges currently faced by large multi-site pulmonology trials and isn't related to physician interest or market potential of the nasal swab test.
While the pace of accrual in April would be indicative of enrollment completion around the end of the year, our internal modeling has wider about and this pace may or may not continue over the coming months. Given that we will update you next when the study is nearing completion, our last long-term growth driver is serving more of the patient journey.
Now that we've integrated the C. two I. genomics team into verify, our excitement for the technology potential has only grown. We kicked off the development of our first MRD test for muscle-invasive bladder cancer in our ClearLab, which we intend to launch in the first half of 2026.
As we mentioned last quarter, C. two novel whole-genome sequencing approach to MRD fits well into the verified diagnostics platform, making it the ideal solution for us to expand our test offering throughout the patient journey as a testament to the strength of this approach.
We are continuing many of the collaborations with academia and industry, the C. two I. initiated and have seen strong interest from potential partners and collaborators as we present the technology and begin to build clinical evidence for the test between the inbound interest we have received since announcing the acquisition and the momentum in our development activities.
We are confident in the strength and extensibility of our new MOMRD. platform and the market potential. We believe this will prove to be a pivotal acquisition for Veracyte across numerous indications over time. With that, I will now turn to Rebecca to review our financial results for the quarter and expectations for 2020 for.

Rebecca Chambers

Thanks, Mark. Q1 was a strong start to the year with $96.8 million in revenue, an increase of 17% over the prior year period. We grew total volume to approximately 33,500 tests, a 16% increase over the same period in 2023.
Testing revenue during the quarter was $90.3 million, an increase of 25% year over year driven by Decipher and Afirma volume, along with ASP. growth driven by payer contracting and prior period collection. Total testing volume was approximately 31,000 tests testing ASP was approximately $2,900 as we resolved and collected approximately $3 million of out-of-period payments.
Adjusting for this impact, testing, ASP would have been approximately $2,800. We began to see some benefit of coverage for the Decipher Prostate from the payer Mark described over the second half of 2023 and a larger benefit with the contract now in place as of the middle of Q1.
Looking ahead to the remainder of 2024 this incremental contract is now forecasted to benefit testing. Pete first quarter product volume was approximately 2,500 tests and product revenue was $3.5 million, down 9% year over year as per segment demand was impacted by supplier issues seen previously biopharmaceutical and other revenue was $3 million, in line with our expectations and down 51% year over year, given overall spending constraints across the industry.
Moving to gross margin and operating expenses I will highlight non-GAAP results, which exclude the amortization of acquired intangible assets, other acquisition-related expenses and restructuring costs, but does include routine stock-based compensation.
Non-GAAP gross margin was 68% down approximately 70 basis points compared to the prior year period. Testing gross margin was 71%, down 160 basis points compared to the prior year period. As we have invested in our footprint and equipment expansion to meet increased Decipher demand.
We expect to leverage these investments as volume continues to grow. Product margin was 25% down versus the prior year period, driven by start-up costs associated with the full-scale precision manufacturing. Biopharmaceutical and other gross margin was 6% down year over year due to lower fixed cost absorption. We have taken steps to address the cost structure of this business that we expect to begin to see play out in the second half of the year.
Non-gaap operating expenses excluding cost of revenue were up 6% year over year at $61.6 million. Research and development expenses increased by $2.5 million to $15.2 million given personnel additions due to the C. two I. acquisition and increased costs related to our Nightingale clinical study. Sales and marketing expenses declined by $1.2 million to $24 million.
G&A expenses were up $2.3 million to 22.4 million, driven by higher personnel costs. We reported a GAAP net loss of $1.9 million which included $8 million of stock-based compensation, $5.6 million of depreciation and amortization and $4.6 million of C. two I. acquisition related expenses.
As expected, we used $9 million of cash from operations and ended the quarter with $209.2 million of cash and cash equivalents, including the benefit of approximately $4 million of acquired correct.
Turning now to our 2024 outlook, we are excited to raise our total revenue guidance to $402 million to $410 million from our prior guidance of $394 million to $402 million. This reflects an improved outlook for our testing business with revenue growth of 15% to 18%, a meaningful increase as compared to the prior guidance of 13% to 15%. We are also raising cash guidance and expect to end 2024 with between 236 million to 240 million in cash, cash equivalents and short-term investments.
Moving to the second quarter, we are forecasting a sequential increase in total revenue given typical seasonality and the impact of reimbursement decisions on Decipher ASP., we expect Q3 to be roughly flat to Q2 with a sequential step-up in revenue in Q4.
I am thrilled with our strong start to the year and our commitment to driving revenue growth with a focus on profitability and continued cash generation will now go into the Q&A portion of the call. Operator, please open the line.

Question and Answer Session

Operator

(Operator Instructions) Andrew Brackmann, William Blair.

Andrew Brackmann

Hi, good afternoon. Thanks for taking the questions. Maybe just first on decipher, obviously continued nice growth there and sort of a lot of tailwinds which you talked about in the in the script. But can you maybe parse out the growth rate there for us a little bit, how should we be sort of thinking about market penetration impacts versus sort of share wins or incidence growth you're moving forward? Thanks.

Marc Stapley

Yes, it's a great question and thanks for that. You should think of it as being all of the above. It's pretty clear that we're both penetrating the market, growing the overall market for molecular diagnostics and gaining are a significant proportion of the share there.
And I'd say taking share in particular, when you look at decipher, I mean, you can do the math on the volume numbers we've given the volumes grew roughly 30% year over year. And then I see gains drove a total growth rate of about 36% in Decipher volume revenue year over year.
So you compare that to how the market is growing, you can you can get to those statements I just made regarding share and I think obviously it's driven by a lot of things. We've talked about the NCCN guidelines that really only come from the extremely high volume of some studies that support decipher.
And then going forward, of course, we talked about on the prepared remarks, the commercial contract, which certainly helps bolster ASP a little bit and then going forward into later this year, early next year, metastatic as well. Adding another 30,000 some potential patient.
So I think that I don't really see anything that affects our ability to continue to be a great trend that we're seeing in both market share and market penetration. And that's why we're confident in saying that we see a multiyear growth opportunity for Deciphera here as we drive this total market to a place where hopefully 80% of patients are getting on treated with a molecular diagnostic. And most likely, given all the trends, the Decipher test it

Rebecca Chambers

Brilliantly nearly only anything to add to that really quickly Andrews, and we'll be updating Pennant our penetration assumptions annually. We did so most recently on the JPMorgan in the Q4 call. And so I think you know those those are that's a triangulation exercise that does take some data that's only released annually and stuff like that and obviously going through other disclosure.
So it's challenging to update that quarterly for those reasons, but I concur with Mark wholeheartedly, we have nothing, but um, we have nothing but whitespace to go after here on the sales team is doing a fabulous job to do so and our confidence has only been furthered over the last quarter to that end of having Decipher continue to grow handily over the next number of years.

Andrew Brackmann

That's great color. Thank you. And then maybe I guess on Nightingale, can you maybe just sort of be a little bit more specific on what might be driving that slowdown in enrollment? And I guess as you sort of think about the scenarios of outcomes here. Can you maybe just sort of talk about your level of investment into that channel ahead of a formal readout whenever that maybe? Thank you.

Marc Stapley

Yes, thanks for the question. Is that you actually that's part of the problem is it's very difficult to be specific because as the proportion of situations that are affecting, I'd say, clinical trials in general, but particularly in pulmonology. I think we all understand how challenging it is to how much of some trial enrollment you don't control, how much is controlled by the site. And what we can control is how quickly we signed the sites up and how many we go after. And I feel really good about the work. We've done there having almost 100 sites actively enrolling, and then it's very much within their own internal process of bringing those patients in.
Now what's really important to us at Veracyte is a robust trial and good science, and that is more important priority than velocity of enrollment. Of course, we want to make sure that the trial is done the right way. And so we have limitations around the customers or the patients actually that are eligible for the trial. Of course, not every patient who's eligible wants to be part of the trial until you have that factor. And then you have resource challenges at individual sites and that can cause trial activity to increase or slow down.
And that makes it very difficult to predict. So trying not to get into, you know, having having now a change that again, trying not to get into the process of trying to predict when that will finish. But I will tell you that based on current rates that we saw in April, not not that April is not an outlier.
And so it's only I'm not suggesting that the April rate is the rate to apply going forward, but that would take us towards the end of the year. But we're doing everything that we can within the bounds of as I said, the good science and a robust trial to make sure that we get the trial completed as soon as we can, and we'll update you when we when we're nearing that point.

Rebecca Chambers

And maybe you just want to talk about and what we said in the prepared remarks regarding our commercial level commercial excitement.

Marc Stapley

Yes. I mean, I think yes, and that's the real question that I think comes from a slowdown in the enrollment is does that affect our view of the commercial interest in the product and also the market and the answer to that is clearly not. We don't see that at all.
There's nothing that gives us any signal other than the at this point, the opposite, which is getting 100 sites signed up with the level of enthusiasm that we saw from those sites. It certainly continues to give us a lot of confidence and excitement about getting test the market and addressing a very significant market. So no, no change in our expectations around the market, the ultimate market for nasal swab.

Andrew Brackmann

Okay. Thank you.

Marc Stapley

Yes, thank you.

Operator

Sung Ji Nam, Scotiabank.

Sung Ji Nam

Cai, I think for taking the questions and congrats on the quarter. Maybe on the on the MRD. for muscle-invasive bladder cancer. I was wondering if you might be able to kind of comment on your development strategy there, given there is some competition out there.
I'm curious if you have a sense of if there how large the trial or if you're running your own internal trial or do you have plans to partner with biopharma companies running clinical trials and things like that. Just kind of curious and if you're looking for partners or kind of pursuing the partnership strategy or if you might be going at it kind of on your own?

Marc Stapley

Joe, it's a great question. Actually, one of the reasons that we are launching folks in bladder in muscle-invasive bladder cancer because we see a clear pathway, getting our test on the market and getting it reimbursed. So we're able to leverage an existing LCD.
We are ingesting the test into our lab. As you can imagine, it's going through the development process. We've already kicked off that program for teams on and they're working very hard on that. And we will do the tax assessment that we need to do in order to get that reimbursement, we will do the automation steps that we need to do within our lab to be able to scale.
And so we see it very much within our control. The work that we have to do for the tech assessment is not a significant number of samples that could demonstrate the necessary concordance. So we need to be able to demonstrate. So that's already in progress.
And so yes, I'm very I'm very confident in our ability to get this test launch ahead of time, as you said, which is the early part of 2026 and get it on the market and reimbursed. It opens up a potential market, an important one of about 18,000 patients. And while muscle-invasive bladder cancer was the indication where we see the earliest path to a product. As you can imagine, this is a platform.
It's not a single test. And so we're excited to think about and determine which indications on which conditions we go after next with our MOD platform.

Rebecca Chambers

And just one thing to add to that, Sung Ji, obviously, on one of the reasons we've highlighted it for really liking the CTI. acquisition was effectively the whole genome sequencing approach that is taken well, maybe slightly more expensive. The amount of clinical data we believe that will give us over time just like in Decipher and now with Afirma.
Great. Also, just like Afirma will allow us to just have a body of evidence that we think will help us gain commercial traction above and beyond just what is in the tech assessment. So I think we have a number of different levers to pull to to compete in this market.
And in obviously, MRD is a really large market. And so we're we're super excited to get our products than tests on the market to go after first muscle-invasive bladder cancer, but then thereafter, other indications to follow and we'll have them as a follow up.

Marc Stapley

When just to add to that, the if you look back at Decipher disciple wasn't the first test on the market and certainly didn't have the greatest traction initially in the way that we've been able to get to the point where we're at now is through that evidence development that, that incremental data we're able to generate what we call the Veracyte diagnostics platform, the pieces all that together. And so I do think while it's a competitive space. There's plenty of opportunity you.

Sung Ji Nam

That's super helpful. And then just on biopharma, obviously, a very small part of your business now. But just kind of curious on given others are starting to see some, you know, some green shoots in that space. And so I was wondering, especially with GRID for pharma and for Decipher kind of gaining a lot of traction and things like that. Do you think there? And just as we as you look ahead to kind of later this year and into next year, there could be some more activity around biopharma related activities.

Marc Stapley

I think you said it well, I mean green shoots for sure you start to see those soon can take a while for those green shoots to really flourish. But Tom and we've got a pipeline. I've said this before. We have a pipeline of new customers with new projects, the time to get those projects from early indication to decision to contract is longer than it used to be.
And so that's part of the challenge is taking time on the I do think you're right to point to the data that we have for grid, particularly on the prostate side. And now with MRD., we're actually really starting to see some, I would say, potentially more than green shoots of interest in our MRD platform. So I'm optimistic that at some point these fees show green shoots should come to fruition. I'm not sure exactly when I'm not willing to train put a timeframe on that. But of course, as you can imagine, scenario, we're watching very closely.
And to your point, the biopharm and other revenues now a small percentage as the rest of the business has grown and that has declined. But but we continue to main our maintain a presence and a team and a capability around that in both the ClearSight supported by the clear side as well as our immunohistochemistry products.

Sung Ji Nam

Great. Thank you for taking the questions.

Operator

Mason Carrico, Stephens.

Mason Carrico

Hey, Mark. Hey, Rebecca. Congrats on a solid start to the year here. Maybe a higher-level question on the prostate cancer market on what types of patients make up the majority of that 35% or so of the penetrated market. And then for the remainder of the market, I realize that metastatic patients make up a portion of it, but what type of patients make up the unpenetrated portion of this testing opportunity? Are there material differences between the two? What's the strategy to continue to grow share and expand the market from here?

Marc Stapley

Yes. I mean, as opportunities to expand and grow in all the indications, as I'm sure that you can imagine by far, I'd say at this point, the penetration is mostly going to be in the intermediate space. We can expand into the high, in particular with MAC as well as you can imagine.
And active surveillance as well is an area of potential growth. So but I'd say no area is particularly an outlier across every part of biopsy as well as our P. And there's opportunities for further expansion in that white space that Rebecca referred to earlier.

Rebecca Chambers

And we just saw that as a really important study published on active surveillance.
Perhaps you want to talk about, Mark?

Marc Stapley

Yes. I mean, I mentioned that a little bit in the prepared remarks that has demonstrated that come that you know, the programs, the capability of deciphering, the active surveillance space and helping to reclassify which patients should be on active surveillance and which not which I think is really important because as I said in the earlier remarks, you don't want to under or over treat those patients, if you can avoid it.
And that does not that there's not a great deal of them molecular information out there. Obviously, when when these tests are being used for two thirds of patients to help as a team was the right approach. And I think with with the evidence that we've now got behind decipher, you're going to start to see more utilization there and especially with the NCCN guidelines.
And particularly that that table as well that talks about how to apply Decipher and how to change treatment based on the Decipher score as well as the risk category you can you can clearly see how we're going to see more penetration across the entire spectrum of patients.
I mean, ultimately making our goal as I've said many times before, I mean, yes, I don't think you ever get to 100% for a whole bunch of inertia reasons. But frankly, most patients with prostate cancer should be having a molecular diagnostic. And of course, we strongly believe that Decipher is the right one.

Mason Carrico

Got it. That's helpful. And then on the Affirm grid offering, where are you seeing the most demand from a clinician standpoint? And has it have you seen any increased traction or higher demand from the academic hospital setting now that you've launched that offering until what we are seeing.

Marc Stapley

Yes, especially I think there's a lot of interest coming from the academic setting around grid. As we've seen on the Decipher side for many years, we're now seeing on the pharma side for research purposes and roughly 50% of some physicians are interested in grid, but also where we're seeing greater penetration, whether driven by grade or not and it's not always possible to correlate all the good things we've done around Afirma to to the outcome.
I think it's actually the collection of all the things we've done including grid and hTERT and the portal and everything else associated with that. But we're also seeing better penetration in the rural communities as well, which is, I think, a positive sign for me because it says that one of the challenges you have with any test like this is getting out that long tail of physicians who haven't adopted either a molecular test or Afirma. And so I think that's a good indication that we're really making good traction there as well.

Mason Carrico

Got it. Thanks, guys.

Marc Stapley

Thanks.

Operator

Tejas Savant, Morgan Stanley.

Tejas Savant

Hey, guys, good evening, Marc or Rebecca, perhaps quick one for you. You're on the pharma side of things so following Medicare reimbursement, over what timeframe do you expect that toward promoter testing to provide an ASP uplift to a forum, especially as reimbursement broadens out there beyond the CMS coverage you now have in place?

Rebecca Chambers

Yes, Tejas, it's a fair question on effectively with new with the test being reimbursed at $185, it's not going to provide a meaningful uplift, especially since you know, only about 50% of patients select to have I'm sorry, clinicians select to have church run and then you have to have a suspicious finding before I turn it is actually ran, and that's another 50% rate.
And so you're talking about small dollar figures on an ASP perspective and not a huge number of patients. And so, you know, I think when we think about it, it's one less barrier to drive penetration more so than an ASP uplift specifically for Afirma. I think more importantly, than hTERT is the vast majority of work that our managed care business has been doing to drive ASP uplifts across both our products.
Obviously, today's news on the Decipher side is huge. And we're very excited and I think the team did a fabulous job negotiating that contract. And on the pharma side, you know, we have we still have some room to go, albeit really do have good coverage and contracting on there as well. So I think with the with the big payer behind us today, there's nice room to grow. But today it's probably a decently sized impact and from there, it will be smaller including term.

Marc Stapley

I just want to point out one agreements, for instance, I totally agree ID to meet third is dry, helping drive Afirma because we have a more complete offering. It's important to have it for physicians. So it's driving a firmer. It's not necessarily driving revenue for revenue's sake.

Tejas Savant

Got it. That's fair. And then one on just the data monetization strategy, Mark, on a go-forward basis, including that CTIC. two I. data, which I'm sure you've not had a chance to get better acquainted with. And my question is less so about the reimbursement angle, which you already alluded to earlier, but more so from other ways to monetize it perhaps on the biopharma side.

Marc Stapley

And that would I think we talked about that before. There is some there's always a challenge with monetizing data for data's sake. I think what the way we think about it is that data really supports the flywheel that we talk about that drives the testing. It drives further research drives further evidence and then continues to drive more testing. Now to the extent that from a biopharma perspective of interest in that data, we of course capitalize on that.
And those are great projects because typically what you find is the biopharma customer reaches out to you because of the tremendous success that you have and the amount of data you have versus having to go and build a team to go and try and drive that funnel. And so you can imagine on the prostate side, we get interest.
And as I said earlier, what's really exciting is on the MRD side, particularly driven by the fact that this whole genome we get and the performance of the test, we're getting interest there as well. So we'll continue to fill those inbounds and see what opportunities come out of that. But it's not at the point where it's a, you know, put a line on the spreadsheet for monetization of data at this point is fueling the rest of our business.

Tejas Savant

Fair enough. And one final one for me and just M&A strategy. The balance sheet is in good shape. You took up the year end cash guide a little bit over here and, you know, just following C. two I. The asset is clearly a strategically important technology. You talked about MIBC. and broadening out to other indications over time, but the revenue contributions will take a little bit of time.
Right. And then you've got the Percepta Nasal Swab, which are the Nightingale delays that you enrollment delays that you cited. So as you consider the landscape, your and your balance sheet, but just remind us again, sort of what are the priorities for tuck-ins and how much of, I guess the revenue bridge plays into it in the sense that a focus on near-term revenue generation, is that fair to assume as a priority for other tuck-ins, you may do here in the next year or so?

Marc Stapley

Yes, thanks for the question. And I appreciate you picking up on the strength of our balance sheet, which is obviously only getting stronger as we increased the guide around cash here, we've been pretty clear about what we're focused on, and I'll reiterate those points again today.
There's no question we want to continue to drive the penetration of Decipher into a market when we last did the math was 35% penetrated into Afirma in a market that I will after the math was just over 60% penetrated. We see tremendous opportunities that, as I said today, I see those products helping to fuel the growth of our business for multiple years ahead. And certainly, we are bridging us to to our long-term growth drivers, which are the next three things that we're very focused on.
Percepta Nasal Swab, as I talked about, our diabetes strategy outside the US and now MRD. So if you think about those five things, Afirma Decipher nasal swab, IVD. and MRD., we had a lot on our plates were very very busy. We got a lot of projects going on on those three long-term growth driver projects are absorbing more than the majority of our R&D spend, as you would expect them to since the strategic and important to us.
And then, of course, growing a firm and decipher and us sustaining our business and working on Discovery is driving most of the rest of the R&D spend. So we're very, very focused. We've got very clear priorities. We've got the we feel like we've got the near term to midterm to long-term growth and spectrum is covered with everything that we're doing.
And so I would say that, yes, M&A is the priority for us right now. And of course, we're always opportunistic and things come knocking on our door that look interesting to us than than we would certainly take a look, but that is not something where we're focused on because as I said, we've got a lot of opportunity ahead of us and what we're already doing can ask.

Tejas Savant

Thanks for the time, guys.

Marc Stapley

Thanks.

Operator

Mike Matson, Needham & Co.

Hey, guys, this is Joseph on for Mike. Maybe just wanted to get an update on how you guys were kind of thinking about the the FDA final rule on LDTs, um, I guess I imagine they kind of went to your expectations. I guess it wasn't really worry for you too much at all and are you kind of thinking a little bit more positively on any more spend needed for that or yes, I guess any update on that would be good.

Marc Stapley

Yes. Thanks, Joseph. Appreciate. I mean, just thinking about it at the highest level, a company that has been on the market with clear tests for a number of years. And with the evidence that we got behind those tests as well as having the IVD test already on the market and IVD. capabilities and developing three IVD tests as we speak. We've always is always felt very ready for whatever this new regulation might throw at us.
So we're clear we've got New York State and all those things now, obviously, the more regulation add burden to any business, of course. And so we are we actually think we're very well regulated already. We don't necessarily anymore, but to the extent there is more and then we're ready for it if it adds cost burden in some areas, again.
We've got the quality systems in place, but there might be some things that we have to invest in in order to support any new requirements that come our way we'd be ready to do that able to do that. And I'd say that's already included in our projections because we also have opportunities to optimize and reduce cost as we scale to. So I'd say that that would offset any increased regulation or regulatory burden that might show up in the P&L.
I would say just maybe specifically on what did come out. Of course, it was great to see that existing tests get some some special treatment as they should, obviously because they serve. So many patients today?

Yes. Okay. Great. Absolutely. And then maybe just a question on the AUA conference. I mean, you guys had a bunch of posters. They probably took up a lot of space was just kind of wondering what was attendance like there. Appreciate, you know, the initial color and everything.
But I was also wondering if you know if there's any discussion at these conferences around Decipher Prostate and how some of the, I guess, American physicians feel about the test potentially move into PCR? I guess it correct me if I'm wrong, but I guess that's more internationally and then clear model here. But just wondering if there's any discussion around that as that's changed, maybe your viewpoints on Tesla data.

Marc Stapley

I don't have yes, I mean, let me clarify that in the first instance that the Decipher is run as a clear base test for the U.S. today, and that's not going to change going forward. And of course, here that also we run a whole transcript and that also helps fuel grid. Where we are moving to PCR for Decipher is our IBD product that will be launched outside the US.
Okay. So we are hearing a lot of interest for that outside the US. We do think there's a pent-up demand. I don't know to what extent that that showed up as closely. I'm sure it came up probably mostly the month. That conferences mostly focused, I would say on U.S. from what I hear. It went really well, it was a great conference.
We of course, had a very good showing there will be abstracts that we had it presented and presentations. I understand our booth was very well attended and our team, congratulations to our Decipher team, commercial and marketing team who did an outstanding job supporting the conference. So so far, everything I've heard, so is extremely positive.
And I'm sure there was a buzz around the new guidelines to the points we made in the presentation. We did our own survey and we heard them a very significant majority of physicians over 80% are aware of the guideline and 75% of them are actually using them the way that I intended.

Okay, great. Thanks. Thanks very much, Marc, for taking the questions.

Marc Stapley

Yes, thank you.

Operator

(Operator Instructions)
Matt Sykes, Goldman Sachs.

(inaudible - microphone inaccessible) Yes, yes, Paul, so you have Bye. Well, yes, yes, I would say I think they really come together.

Marc Stapley

You don't necessarily need to bifurcate them as we talk about the opportunity for growth. I mean, by far, the majority of growth and the majority of volume is going to come from the biopsy side rather than the RP. side, but there's opportunity for them for them, both mostly, as I say, mostly on the biopsy side, where you have by far the largest volume in terms of reimbursement, the real opportunity there is commercial contracts like the one that we announced today.
We've made great progress and great traction in getting both coverage and contracts in place. There's still opportunities. I think we feel really good about where we are so far. There's smaller payers to go after now and we never really stop.
We are still and finding out payers for Afirma, 13 years after the product was launched. So you just keep blocking and tackling your way through that. So that's where the I'd say, the reimbursement opportunity comes from. I've talked at length about where the volume growth is going to come from and what's going to drive it. And again, it's the NCCN payer contracts metastatic and just fantastic execution by ourselves team, quite frankly, started.

(inaudible - microphone inaccessible) And then moving to. Yes, sorry.

Marc Stapley

Yes. How high I think it would be very difficult for new entrants to enter this stage with the level of share and penetration and performance of the tests that we have. And most importantly, the level of evidence behind them, including the recent meta analysis that we had that really showed the performance of a farmer in a real-world setting even outperformed our own clinical validation.
We actually just got word that was one of the most cited articles last year in the publication. So I think that in and of itself, we've always maintained this aside, she is at the heart of the various diagnostic platform. We talk about the just generating the evidence which comes from the data and then having having more data generate more evidence is really a significant barrier to entry that shouldn't be underestimated. And this is how a firm has not only maintained, but it's also growing its share and how Decipher has become number one test with with the high level of guidelines that it has.

(inaudible - microphone inaccessible)

Marc Stapley

Thank you.

Operator

Puneet Souda, Leerink Partners.

Marc Stapley

If we can hear you, you might be on mute.

Puneet Souda

I apologize. That's my boss. Mark, can you hear me now?

Marc Stapley

Yes, he finds.

Puneet Souda

Yes. All right. Great. Thank you.
Thanks for taking my question. So and I apologize if this was covered already, but just could you talk about the pharma and decipher growth rates that we ought to be thinking within the context of the guide?
And I have a quick follow-up after that.

Marc Stapley

Yes. So without getting into projecting either one of them, let's just I don't know if you caught it. But just to recap on our testing in the first quarter grew 25%. I mentioned that beginning of the call that Decipher grew 36% in revenue. We guided testing to 15% to 18%, which is an increase.
And of course, you can imagine Decipher is the larger driver of that growth on a farmer's is obviously smaller, but still growing very, very nicely. And I think it's fair to say that the testing overall is exceeding our expectations and hence, we raise the guide for the Company. We still have headwinds on the product and biopharm and other line at the moment. But testing is firing on all seven.

Puneet Souda

Got it. And then if I could ask about the AUM, you had a number of presentations there, obviously important conference for you. Anything you would note that, you know, is important driver for maybe 2025. And maybe if you can take a few minutes and talk about sort of the how should we think about the next set of data sets that could be released either in second half of '24 or in '25 on some other assays that you have or even Decipher? Thank you.

Marc Stapley

Yes. So thanks for mentioning that in AUA, and we talked a little bit about that earlier. We did have a very strong showing with a large number of abstracts and presentations in the past, there would have been around a couple of things, but the NCCN guidelines for sure and metastatic, I think people are excited to have metastatic covered and it should be.
And so I think that's one of the areas that you should think about the hope and hopefully by the end of this year, early into next year, we get an answer. And so maybe that that can become a driver for 2025. As I said, I do think Dr. Decipher in and of itself across all indications that we cover and all markets is a potential growth driver for multiple years to come. And outside of that, of course, the data related to bladder, muscle-invasive bladder cancer and our MRD test and of course, completion of Nightingale and further support for that as well.
And then let's just say our IBD strategy I had mentioned before, but we have three products that we're working on right now, two of which are completing 25 and one and 26. And so I think of those as being certainly not necessary revenue drivers for the timeframe you asked about, but early indications of us continuing to execute and knock down some of the milestones that we set.

Puneet Souda

Got it.
Okay. Thank you.

Marc Stapley

Thank you.

Operator

Thank you. And I'm showing no further questions at this time. I would like to now turn it back to Mark for closing remarks.

Marc Stapley

Thank you, Lauren. Appreciate it. So in closing, as you can tell, I'm excited about our strong start to 2024 and the positive signals we're seeing in our core testing business, which bolster our confidence in the growth trajectory of Verisyse both this year and going forward.
We're making progress towards our goal of 80% penetration in the critical markets that Decipher and Afirma serve and expect to drive significant revenue from these tests over the next few years, bridging us nicely to our numerous and exciting long-term growth drivers.
I want to thank the entire Veracyte team for the work they do every day for the patients we serve all over the world for their tireless efforts have enabled us to grow and scale our company to accommodate the significant growth that we are experiencing in our business. So thank you.

Operator

Gentlemen, that concludes our call today, and thank you for joining us. You may now disconnect.