Personalis Inc Stock

Greetings, and welcome to the Personalis First Quarter 2026 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded.

It is now my pleasure to introduce Caroline Corner of Investor Relations. Thank you, and you may proceed, Caroline.

Thank you, operator. Welcome to Personalis' First Quarter 2026 Earnings Call. Joining today's call are Chris Hall, Chief Executive Officer; Aaron Tachibana, Chief Financial and Chief Operating Officer; and Rich Chen, President and Chief Medical Officer.

All statements made on this call that do not relate to matters of historical facts should be considered forward-looking statements within the meaning of the U.S. securities laws, including any statements regarding trends and expectations for our financial performance this year and longer term, cash runway and liquidity position, revenue expectations and timing, size and booking of orders, products, services, technology, expansion of clinical volume, reimbursement goals, the outcome and timing of reimbursement decisions, expectations for our existing and future collaboration activities, cost expectations, market size and our market opportunity and 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 recent filings, including the risk factors described in our most recent filings. Personalis undertakes no obligation to update these statements, except as required by applicable law. Our press release with our first quarter 2026 results is available on our website, www.personalis.com, under the Investors section and 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 5:00 p.m. Pacific Time today.

With that, I would like to turn the call over to Chris.

Good afternoon, everyone. Thank you for joining us. I'm incredibly proud of what our team has accomplished in this first quarter. More importantly, I'm energized by where we're going. Since we launched NeXT Personal, we haven't just validated our win in MRD strategy, we have disrupted the market.

Last year, in 2025, we established the power of our platform. This year, in 2026, we are scaling it. We're squarely focused on driving volume in this large and rapidly expanding market. Physicians trust NeXT Personal, our clinical test volumes are accelerating and the broader medical community is validating our road map.

Now for those of you new to our story, Personalis is changing how cancer recurrence is detected and monitored. We operate at the absolute leading edge of sensitivity for tracking cancer in the blood. Our test requires just a simple blood draw to detect a single fragment of tumor DNA in a background of 1 million.

Now let me be clear, this level of ultrasensitivity is no longer just a technical leap forward. It's a clinical necessity. This precision allows oncologists to detect recurrence months and years ahead of standard imaging. It also provides unprecedented confidence when delivering a negative result. The clinical market for tracking cancer in the blood or MRD is advancing towards a $20-plus billion opportunity, and Personalis is armed with the right technology to win.

Now beyond the clinic, we are the engine powering the next generation of precision oncology. Biopharma companies rely on our platforms to analyze tumors, identify novel biomarkers and derisk their clinical trials.

Now turning to our Q1 results. We are executing aggressively. In the first quarter, we delivered more than 7,800 clinical tests. This represents a 26% sequential growth over the fourth quarter and a 258% year-over-year increase. We're thrilled with this momentum, especially considering that the first quarter is typically the industry's most challenging due to standard seasonality.

First quarter revenue of $15.5 million reflects our planned transition towards high-value, high-margin testing. In this quarter, total strategic revenue, which is revenue derived from the clinical testing and biopharma MRD adoption reached $4.5 million. We remain on track to achieve our full-year guidance of $78 million to $80 million, with strategic revenue expected to more than double year-over-year to a range of $30 million to $32 million.

Now let's dig deeper into the 3 pillars of our win in MRD strategy that are fueling this growth. Our first pillar of our strategy is clinical adoption. Our commercial engine reached a new high watermark this quarter. We've now surpassed 1,000 ordering physicians in the quarter, and we are seeing incredible retention of over 98% over the past several quarters among oncologists who integrate NeXT Personal into their routine testing workflows.

We're continuing to scale our commercial footprint with our partner, Tempus and are extremely confident in our 2026 annual volume estimate of 43,000 to 45,000 tests. We continue to innovate as we launched the pilot for our real-time variant tracker module. This new approach pushes MRD testing beyond ctDNA detection to track how the biology of the tumor is changing in response to therapy.

This feature allows physicians to not just monitor the presence of cancer, but to track how the biology of a tumor is changing in response to therapy. gaining insights into the changes of emerging or resistance variants can enable doctors to proactively optimize the patient's therapy. The early feedback has been positive.

The second pillar of our strategy is building clinical evidence to secure and expand reimbursement, and we've come out of the gates fast in 2026. We submitted neoadjuvant breast cancer this quarter and both that and our pan-cancer submission to monitor immunotherapy are being reviewed for coverage. While exact timing is subject to MolDX reviews, we are confident in our data and submission.

If you want to understand why we're so confident in our data, look no further than the AACR Conference in San Diego last month. The data showed off the power of our ultrasensitive approach and 3 points stand out.

First, the NEOPRISM-CRC data. Our collaborators use NeXT Personal and demonstrated 100% negative predictive value for disease relapse following surgery in a group of colorectal cancer patients. They also used our test to identify super molecular responders who achieved a complete response after just the first cycle of neoadjuvant therapy. This opens the door in the future for potential non-operative management for some patients that could potentially save patients from unnecessary surgery and saving the healthcare system significant cost.

The second point is our real-world evidence. Data from NeXT Personal testing of 10,000 patients revealed that 40% of all positive detections occur in the ultrasensitive range below 100 parts per million across 14 different cancer types and stages. These are crucial early signals that conventional tests simply miss.

Third is the DARWIN II study. Our collaborators show that NeXT Personal is a strong predictor of a long-term immunotherapy success in lung cancer patients. Patients who cleared DNA early during treatment were 5x more likely to remain progression-free at the 3-year mark.

The third pillar of our strategy is leadership in the biopharma sector. Our biopharma MRD pipeline is growing robustly. We're on track to achieve $20 million to $21 million in biopharma MRD revenue this quarter. While Q1 MRD revenue was $3.1 million, we expect this to scale significantly in the second half of the year as we commence the work for several large trials that are now committed.

Biopharma companies recognize that to prove the efficacy of next-gen therapies, they need the highest resolution tools available. This realization is driving the adoption of NeXT Personal.

The first quarter has provided us with a powerful launch pad for the rest of 2026. We aren't just talking about the potential of NeXT Personal anymore. We're actively seeing it translate into clinical volume, biopharma adoption and a robust data set. The momentum we built in these first few months gives us immense confidence in our full-year trajectory. I want to thank the Personalis team for hitting the ground running this year as well as the clinicians and patients who are moving the needle of cancer care with us.

With that, I'll hand it over to Aaron to walk through the financials.

Thank you, Chris. I will discuss our first quarter 2026 results and then cover the outlook for the full-year. Before diving into the detail, I wanted to mention that our focus, priorities and objectives remain intact.

First, is to gain market share and scale our clinical test volume.

Second, to invest in the best possible studies in order to support and secure Medicare reimbursement.

Third, to continue to innovate and extend our technology lead within the MRD market. As I discuss our Q1 results, please keep these priorities and objectives in mind.

Let's start with the top line. Total company revenue was $15.5 million for the first quarter of 2026. On the surface, this amount is 25% lower than a year ago, but underneath, there's an important shift taking place. We are intentionally migrating from lower-margin legacy enterprise revenue over to higher growth and strategic clinical and biopharma MRD revenue that Chris mentioned earlier.

Additionally, as we previously forecasted, this quarter reflects the planned decrease in revenue from Moderna due to the conclusion of the large Phase III trial enrollment that ended last year. We currently expect a baseline of $2 million to $3 million per quarter from Moderna the rest of this year. Our full-year revenue guidance of $78 million to $80 million reflects a healthy growth rate of 26% at the midpoint when comparing with the 2025 full-year revenue of $69.6 million and excluding $6.9 million for the non-strategic enterprise amounts and the onetime license fee.

Breaking down our core revenue, biopharma testing services was $11.2 million in the first quarter compared with $13.6 million for the same period of the prior year. The first quarter decline was entirely due to the expected decrease in revenue from Moderna previously mentioned.

Looking ahead, our biopharma MRD engine is poised to accelerate. We realized $3.1 million of biopharma MRD revenue in the first quarter, and we remain confident in our revenue goal of $20 million to $21 million of biopharma MRD revenue for the full-year. We expect the majority of this revenue to be realized in the second half of the year as larger projects ramp up.

We are winning many new pharma MRD projects because of our ultrasensitivity and ability to detect cancer recurrence much earlier than other technologies. Our backlog of contracted business is growing as well as our funnel of future opportunities. This gives us confidence about our biopharma growth potential for this year and beyond.

For clinical revenue, the story is about exponential 2026 growth and expanding our ASPs as we achieve reimbursement milestones. We recognized $1.4 million of revenue in the first quarter compared with $0.3 million for the same period of 2025. Although the absolute number is small, this is important now that we are driving revenue from the Medicare reimbursement coverages of breast and lung cancer surveillance received to-date. As a reminder, breast cancer was covered in November 2025 and lung cancer in February of this year.

Next, I will address gross margin as it's an important component of our investment strategy to win in MRD. Gross margin was 1.8% in the first quarter compared with 35% for the same period of the prior year. It's vital to understand that this margin compression is both intentional and temporary. We foresee this margin dilution to continue throughout 2026 with the lowest point expected to be in the first 2 quarters of the year, but begins to improve when we receive reimbursement coverage for IO.

The margin dynamic is driven by the strong growth in NeXT Personal test volume ahead of reimbursed revenue and our goal of gaining market share now. In the first quarter, unreimbursed test costs diluted margins by more than 2,000 basis points. We are securing physicians and volume now. When coverage decisions like the recent wins in breast and lung cancer come online, that volume run rate converts to higher margin revenue. We expect to realize the benefits from investments to gain market share over the next 2 to 3 years as our clinical revenue gets to scale.

Operating expenses were $32.4 million in the first quarter compared to $24.9 million for the same period of the prior year. Our expense base is increasing as we are forging ahead with key investments in order to win market share. We are investing in commercial resources to drive volume, investing in new and existing studies to support reimbursement, and we are investing in our technology like our variant tracker feature in order to maintain and increase our ultrasensitive leadership position.

The first quarter R&D expense was $14.5 million compared with $12.6 million for the same period of the prior year. SG&A expense was $17.9 million compared with $12.3 million for the same period of the prior year. Net loss for the first quarter was $30 million compared with $15.8 million for the same period of the prior year. The increase in net loss stemmed from all of the investments previously discussed.

Now let's review the balance sheet and our strong cash position. We finished the first quarter with cash and short-term investments of $233.2 million and no debt other than some small equipment loan. We used approximately $28 million of cash in the first quarter, which included approximately $5 million of incentive compensation that do not repeat throughout the rest of the year.

Now let's review our 2026 outlook. Our full-year 2026 guidance is unchanged. As a reminder, our guidance only assumes paid tests from reimbursement coverage decisions received to-date. Upsides may be realized from faster coverage expansion, accelerated payer adoption, additional volume growth for clinical tests and increased strength in biopharma MRD demand.

We expect total company revenue to be in the range of $78 million to $80 million, and this assumes clinical revenue of $10 million to $11 million, specifically from breast and lung cancer surveillance tests recently covered by Medicare. Revenue from pharma test and services and all other customers to be in the range of $55 million to $56 million. MRD revenue from these customers is expected to grow rapidly and be in the range of $20 million to $21 million, population sequencing plus enterprise customers of approximately $13 million.

Gross margin is expected to be in the range of 15% to 20% with the first 2 quarters being the lowest points of the year. Net loss of approximately $105 million, and we expect our cash usage to be approximately $100 million as we continue to invest in our win in MRD strategy in order to gain market share, fund pivotal clinical studies to support Medicare reimbursement and help change medical guidelines in our favor. With $233 million of cash on our balance sheet, we have the ability to invest this year and drive scale.

We are leading the ultrasensitive MRD market with our technology and the proof point is our ramping clinical test volume. The market is expanding rapidly and is expected to grow to $20 billion or more, and we are positioned to win. We look forward to updating you on our progress during the next conference call in a few months.

With that, I will turn the call back over to the operator to begin the Q&A session. Operator?

[Operator Instructions]. The first question comes from Subu Nambi from Guggenheim.

You ungated volumes mainly for share gains and to push growth. What did you see in 1Q from like a competitive win perspective to reinforce that strategy is working?

In terms of the volume, Subu, we achieved 26% growth quarter-over-quarter, 7,800 tests. In terms of the first and third quarters are typically lighter quarters because of seasonality, in terms of competitive dynamics, we're seeing that we're doing really, really well in the marketplace. We're winning with our ultrasensitive capability, and we couldn't be happier with where we're at today.

Yes. I would just note, Subu, we set the overall annual target of 43,000 to 45,000 clinical tests with this idea that we'd be pursuing disciplined land grab with our partner, Tempus. We really feel like nailed it this quarter in terms of tracking and trending exactly where we need to be. We really have been focusing on depth inside of existing clients. We crossed 1,000 physicians ordering this quarter. That was tremendous progress.

At the same point in time, that we focused on depth and we talked about really significant retention within the accounts that have adopted NeXT Personal and they stay with us because they see the clinical utility of what we're providing.

Then any color on how to model 2Q? Should we expect a similar volume step-up? When you are onboarding new physicians, can you talk a bit about the ARCOP volume growth? How long does it take for a new doc to ramp on ordering to steady state? Today, is there a mature ordering number you're seeing from any of the early adopters?

Yes. I mean I think we see physicians in general, jumping in, in many different ways. There's obviously physicians that we are selling to that are jumping in and using MRD testing for the first time. There are people that have experience with MRD testing and they want to experience the ultrasensitivity that we provide. Then there are people that have some experience that don't often use it. We see those people starting to work with the technology. I've always felt like the way to make this standard of care is to really sell into that group and really push usage significantly deeper on the back of an ultrasensitive approach because you can have more confidence in the negative which is what we've been focused on.

Some physicians jump in and have a lot of experience and order a lot out of the gate, others try a few and see what happens, etc. I think there's always a desire to test us operationally to see whether we hit the lead time goals that we commit to, which we've been largely able to do across the board now month after month. We feel like that we survive those tests pretty quickly.

In general, and we've got physicians who continue to order more every quarter. I think that's pretty common as new technologies are adopting and people feel confidence with it, they tend to pick up the pace. In general, in all these accounts across anybody using MRD, there's significant opportunity to go deeper. I mean I don't think in very many accounts, probably any of us that are working in the space probably can say that 100% of the patients that are eligible are getting access to the test. There's always ways to go deeper the patients and continue to build the business in the market.

The next question comes from Mark Massaro from BTIG.

I know some of us have been hopping various calls, so pardon me if any of these have been asked before. I wanted to get a sense for how strong the lung versus breast volumes are in the quarter? Can you also just speak to IO monitoring as well? Any color on those indications would be helpful.

Yes. Mark, this is Aaron. In terms of the breast volume, so it's in the ballpark of what we've been expecting and seeing. It's roughly 20% give or take a point or 2 there either way. Lung is between 15% and 20%. It's closer to 15% in terms of what we saw in Q1. In terms of the trends that we've been seeing and the expectations, the volumes by cancer type have been in the ranges we've been expecting.

In terms of IO coverage -- the IO coverage, I'll let Rich and Chris maybe take that.

Well, there's 2 questions, which is the samples we're getting there, no change there, which is in a similar percentage. The actual coverage journey, we feel confident that we're making progress there. We only submitted in August. This process is always variable. We feel like the data looks really good in that indication, and we feel like all of our interactions have been positive, and we're optimistic that we will be covered for IO with the strength of the evidence that we have.

I was wondering if you could speak to -- I know that the abstracts are embargoed, but speak to the importance of ASCO coming up here. Should we expect any releases of data? Would be helpful if you could discuss any areas of focus.

Yes. It's always tricky because of embargoes and things like that. Rich will take this, Mark.

Mark, it's Rich. Yes. We have an exciting ASCO coming up. I think one of the things that you can look for is more colorectal data, which has been a focus of ours as sort of the next step in terms of coverage and also evidence generation. We're excited about that data, and it will build on the data that you saw last year that the initial data that was presented last year around this time.

Then there's also an expansion of additional cancer types. As you can imagine, we're not sitting still. We did a lot with breast and lung and focus there for a few years, but now we're starting to expand into other cancer types. I think you can look to see that we'll have additional data there.

That's coming off a really great AACR, where we showed 15,000 real-world patients and a consistent limited detection across those patients, almost 40% of the results, the ultrasensitive zone, some really great data on colorectal neoadjuvant usage and the power of an ultrasensitive approach there.

Then we debut data for our new product extension, real-time barrier tracker. We've got a lot of -- we also at AACR had a lot of, I think, really impactful data that's moving the needle in the field of physicians.

Then my last question, your large commercial partner recently disclosed that your tumor-informed test is well over 90% of their MRD volumes. It speaks to the value of your test, but it's interesting because Guardant just disclosed that Reveal is a very rapidly growing product as well on the tumor-naive side. I want to get a sense for how long do you think your tumor-informed test will sort of be that lead pole position horse in the Tempus portfolio versus their tumor-naive somehow becoming more balanced as they think about promoting MRD?

Yes. I mean, we've always felt -- I mean, you certainly can ask them their perspective on this. We've always felt like sensitivity was what was key in these indications and MRD testing. That's always been our guiding principle. That's what's fueled the innovation of the ultrasensitive approach that we've had on all of our R&D efforts. Our hypothesis and our belief has been that the tumor-informed approach is what will carry the day in terms of sensitivity, and that's what most physicians demand. We think the market will continue to be very much focused on the power of a tumor-informed approach.

The next question comes from Thomas Flaten from Lake Street Capital Markets.

Aaron, just a quick question on gross margin. You mentioned the second quarter was also going to be a bit of a low point. Does that mean another 2% gross margin quarter or something significantly better than that? Then following on from that, I guess, question 2 is, as you look to maximize the reimbursed indications, are you disproportionately incentivizing the sales team to push for those indications that are reimbursed today and maybe additional indications as we roll through the year to help boost those margins? Or how are you thinking about that?

Yes. Thanks for the questions, Thomas. In terms of the full-year guide for gross margins, we said 15% to 20%, right? Obviously, the back half of the year will have higher margins as our biopharma MRD revenue and clinical revenue actually increases in terms of the first quarter, so we were just shy of 2%. In Q2, we see that maybe ticking up a little bit. The first half of the year is definitely going to be the lowest point for the full-year comparatively.

In terms of 2026, the margins of 15% to 20%, our expectations are that this is going to be a low point for the company as well. As we get through the end of '26, head into '27 and beyond, we see that reimbursement is going to continue to catch up. We've got a lot of things in the hopper. We're doing really, really well in terms of collecting on claims. The ASPs are expected to increase as well. That's going to help with not only the top line growing, margin expansion and also we'll start to subside or reduce the cash usage as we go forward, okay? That was the first part of the question.

The second is, are we disincentivizing or metering in any way some of the non-paid tests. It's hard to do that, Thomas, when we're selling to community oncologists, they have patients with all different cancer types, and we don't want to discourage any physician from bringing in this cancer type versus that. We want all comers because at some point in time, we know that we have to go get reimbursement for other cancer types. We have a lot of progress that's being made at this point in time. It's not showing up just yet, but it's to come, right?

I hope that answers your questions about incoming volume and what we're doing with the commercial field and how physicians are treated as well. We want to make sure that patients are treated really, really well.

[Operator Instructions]. The next question comes from Mike Matson from Needham & Co.

This is Joseph on for Mike. One question around the ordering physicians, the 1,000 physicians. Just want to confirm, is that in the quarter or more like to-date? Then just wondering if you could maybe segment those 1,000 physicians, if you have any color on what percentage of those are reordering after having using a competitor or maybe reordering or maybe new to MRD? Maybe just that second part, new to MRD, depending on how big that bucket is, what is that really telling you about how fast this market is growing?

Yes. Whenever I talk in the script about the number of physicians that are ordering, we mean in the quarter, we don't mean cumulative that have ever ordered from us. In this quarter, there were more than 1,000 physicians that ordered from us. I think that's a more meaningful way to talk about it than mentioning some physician who may have ordered something several months ago, it's kind of an irrelevant sort of thing. That's how we think about it and talk about it internally.

Most of the physicians are physicians who have some experience ordering MRD, quite frankly. I mean, I think that's the simplest way to commercialize these tests are physicians who have some experience, but we wanted to make sure that we didn't limit to that because that's almost half of the physicians probably don't have a lot of experience ordering it. We hit those physicians, but a good chunk of our physicians, the vast majority have had some experience at some point using MRD testing.

They're probably using us in some cases, exclusively or using other providers all collectively in their offices. I mean people think physicians often use different approaches simultaneously within their office. I don't think that's uncommon. I think we're seeing the market just continue to grow.

There's a lot of energy and excitement around using these blood tests as a way to better monitor cancer progression, both to see whether the therapy is working in immunotherapy or whether to see whether the cancers come back. I think the power of this ultrasensitive approach is that you are able to give a lot more confidence to a patient that they're truly cancer-free. At the end of the day, that's what a lot of patients are looking for. We're hoping to deliver on that. I think that's helping to grow the market and you're seeing that in the numbers.

Then just on the backlog, you guys mentioned of contracted pharma business. I'm just wondering if there's any way whether it's quantifying it or maybe just comparing it to this quarter or a year ago, how much has that grown? How long of a stretch of visibility does that backlog give you? Just, I guess, your average trial or your average project with a pharma partner. Congrats on the strong test volume in the quarter.

No, I appreciate it. Thanks. Yes, I mean we -- I don't know if I can compare everything year-over-year, but what we really are focused on was this year and what are the clinical trials that we see both kicking off and starting and trials that we plan on characterizing for biopharma companies, both in MRD and for the tumor profiling product. When we kicked off guidance, we kicked off the year, we had a good sense of that as the year has gone on. That's only got firmer and those are committed in most cases, contracted now. We feel like it's like we're in a good position at this point to deliver on it.

From the very beginning, and we talked about this at the beginning of the year, we saw that the second half of the year would be a bigger part of our revenue number in biopharma than the front half of the year. That was never hopes and dreams, but we did need to make sure that it was that it was better solidified and circled as we've gone through the year. Typically, and that's what's happened this quarter.

Typically, what happens in this business is that most of the business that you end up doing for the year, you have pretty good visibility to by the middle to the end of the second quarter in general. We feel like at this point of the year, we have good visibility and have affirmed where we are guidance-wise and being able to hit that $20 million to $22 million in MRD and then the overall biopharma revenue.

Maybe just to piggyback off of what Chris just said. In terms of the biopharma MRD backlog, it has continued to grow. The funnel of opportunities as well is continuing to grow. It's really, really robust. We're happy about it. I think the customers are seeing the value of the ultrasensitive test that we provide and can clearly see that we can detect recurrence before other technologies, which is important.

In terms of the backlog, so we have a mixture of different types of projects in the backlog. We have retrospective projects as well as prospective. Some of the prospective projects will go out past 12 months, right? It's great to have some of that because it gives you clarity beyond just 12 months, but in terms of what we rely on financially as we look at the backlog inside 12 months because that's what's going to potentially convert to revenue. We need to get samples in, right? Even if the backlog is growing, we still need to get samples in so we can run them and record revenue.

The next question comes from Dan Brennan from TD Cowen.

Maybe just zooming out for a minute at a high level. I know there was a question asked on ASCO already. When you zoom out and you think of the ultrasensitive approach versus maybe first-generation approach, is there anything at ASCO to speak to that? Or just anything you can say from a high level about the interest in the market, kind of where it resides today and how do you think what the message will be coming up at ASCO?

Yes. Rich is going to take this one, Dan.

Dan, yes. No, thanks for your question. I think what's great is if you go to these conferences, it really has changed over the last few years and the increasing recognition that the ultrasensitivity is critical for patients. I think it's really something that that is seen as not just a nice to have but a must have at this point for patients. It's on the back heels of a lot of the data that's come.

Before this, I think what you'll see at ASCO is that continued message, and it's really -- the data speaks for itself. I think, for example, in colorectal cancer, last year, preliminary data, we showed that made a big difference for the patients in terms of sensitivity, recognizing the cancer recurrence risk very, very early for the patients. You'll see some of those things being reinforced with the data that is being presented at ASCO this year. That's true in colorectal cancer, but it's also going to be seen in some of the other cancers that we present data for.

Then in terms of the updated guidance, I mean, I joined a little late, but just on the molecular volumes, was there any change in your thought there? I mean first quarter was a little better than expected. Just wondering how we think about the sequential path as we go through the year there.

We just reaffirmed guidance, Dan. We haven't changed anything at this point, right?

We had a super strong Q1, but we continue to -- I think we have an aggressive plan to go from 16,000 samples last year, 43,000 to 45,000 this year, but doing that in a really disciplined way and being thoughtful about how much money we're spending and gaining that by the number of resources that we apply. That's both our partner, Tempus and both the number of sales reps that we put in the field, and we feel like we're on plan to do that we're managing in a really responsible way, but yet a way that seizes the opportunity and pushes us closer towards realizing the goals of our winning MRD strategy.

Is there a typical -- I know in the past, you've given some color around typical MolDX turns and how many times back and forth it requires. The submission is, I'm sure, consistent, but between neoadjuvant breast and IO, like given when you submitted those, is there a framework by which that it would be logical to think we could get an answer?

No. I mean it's always a 60-day turnaround time from the time that you respond to those questions. I mean that's pretty typical. I think the back and forth here, I think it's variable always. I think they do a great job. We really respect and buy the work that they do. We feel like it's -- we're sitting well relative to how those processes typically go.

We did think it would take a while to get through the breast cancer process just because it was the first time we went through it and they had to both assess the test, understand it, etc., but it always takes some time to work through it. I think it's going to be variable based on the indication, based on the evidence, etc., so we expect that at this point. I think most all the companies would tell you the same thing.

The next question comes from Bill Bonello from Craig-Hallum.

I think you said to Mark, that about 35% of your testing is in covered or in reimbursed indications. I know you're not specifically targeting or incenting people to focus on reimbursement versus non-reimbursed indications. Just as you think about the opportunity, you look forward over the end of the year, how do you think about that shaking out? I mean will you be satisfied if we're at sort of a similar mix of indications by the end of the year? Is there any strategy to try and maybe grow the reimbursed indications a little more aggressively than the other indications?

Yes. No, I think there is, Bill. I mean I think always trying to push more aggressively into physicians who treat breast cancer or treat lung cancer is what we're trying to do strategically. I think what Aaron had referred to is when you walk into an account and the doctor is an oncologist who sees patients across the board, we don't tell them to send us breast cancer patients and send everything else to a competitor. That's just not been typically our talk track. We've been there to serve and work with them. I think in doing so, there'll be evidence, and that's been the strategy to-date.

I think the goal as we go through the year will be continue to grow the sequential growth, continue to push into the leading positions in some of these areas. At the same point in time, continue to drive the reimbursement. The reimbursement is picking up steam as we go across an ever broadening set of indications spots within these cancer types.

Then just -- it looks like -- and we may have this wrong, but Tempus gave some numbers on their call. If we just sort of do the math on that, it looks like maybe the number of tests that weren't -- that were sold by you, I guess, or not by Tempest maybe actually went down sequentially. Can you just talk a little bit about what you're doing? I mean I thought that maybe you were also building up your internal sales force a bit and just how you're thinking about that right now?

Yes, we are. We are building side-by-side with them and both to continue to build capability, etc., but we don't compete with them in the field, though. We work synergistically. Tempest has a pretty deep and comprehensive infrastructure to serve customers. Sometimes, quite frankly, it's probably better for customers to work through them or we'll sell something and Tempus is there. Tempest also has to offer a comprehensive product snapshot. We've not -- we don't want to be competing in the field. If it's easier or better or more conducive to the way the business is built for it to flow through Tempest, then that's ultimately the way it will go.

I would look at the total number, not so much how much is coming from each one of the companies because that's not how we're driving it in the field.

Yes, in terms of the total volume, Bill, so total volume grew by 26% quarter-to-quarter. Tempus was a little over 80% of the volume. The volume from the internal commercial team did not really decrease. It was flattish. Again, Q1 is typically seasonally a little slower than Q2 or Q4. I wouldn't read anything really into that. Then some of our internal team is helping some of the Tempus reps as well from a marketing.

We work together. What we've learned in having done these relationships over my career is that you just don't want reps fighting in the field over this stuff. One of the main -- we partnered with Tempus for so many reasons, but one of the couple of the key reasons were the deep EMR linkages, infrastructure and build-out with the nuts and bolts of the business that we just quite simply haven't had with portals, etc.

Then the second is the ability to offer a comprehensive one-stop shop, and that's worked really well for us with them.

There are no further questions, and this does conclude the question-and-answer session as well as today's teleconference. Ladies and gentlemen, thank you very much for joining us, and you may now disconnect your lines.

Greetings, and welcome to the Personalis Fourth Quarter 2025 Earnings Conference.

[Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Caroline Corner. Thank you. You may begin.

Thank you, operator. Welcome to Personalis' Fourth Quarter 2025 Earnings Call. Joining today's call are Chris Hall, Chief Executive Officer and President; Aaron Tachibana, Chief Financial and Chief Operating Officer; and Rich Chen, Chief Medical Officer and EVP, R&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 U.S. securities laws, including any statements regarding trends and expectations for our financial performance this year and longer term, cash runway and liquidity position, revenue expectations and timing, size and booking of orders, products, services, technology, expansions of Clinical volume, reimbursement goals, the outcome and timing of reimbursement decisions, expectations for our existing and future collaboration activities, cost expectations, market size and our market opportunity and 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 recent filings, including the risk factors described in our most recent filings. Personalis undertakes no obligation to update these statements, except as required by applicable law.

Our press release with our fourth quarter and full year 2025 results is available on our website, www.personalis.com, under the Investors section and 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 5:00 p.m. Pacific Time today.

With that, I would like to turn the call over to Chris.

Good afternoon, everyone. Thank you for joining us to discuss our fourth quarter and full year 2025 results.

As we stand here at the beginning of 2026, I'm incredibly proud of the progress our team made over the past year and the momentum that we have today. 2025 was the year we validated our winning MRD strategy. 2026 is the year we expect to scale.

Physicians increasingly trust our NeXT Personal test. Our Clinical volumes are building, and our strategic road map is being validated by the medical community. For those listening in for the first time, Personalis is a leader in MRD testing services, and we're helping patients, partners and doctors see more in cancer samples. We operate at the leading edge of MRD sensitivity.

Our ultrasensitive NeXT Personal test is capable of detecting approximately single fragment of tumor DNA at 1 million. This is not merely a technical improvement. It's a Clinical necessity.

This level of sensitivity allows physicians to detect cancer recurrence months ahead of standard imaging and provides them with far greater confidence in a negative result. The Clinical market for these types of tests known as Minimal Residual Disease or MRD test is growing rapidly and is expected to mature into a $20-plus billion opportunity, and Personalis is exceptionally well positioned to command a significant share of that opportunity.

Beyond Clinical testing, we remain a leader in supporting biopharma companies through Clinical trials and drug development. Our platforms are used by our partner companies to analyze tumors and identify new biomarkers serving as the foundation for the next generation of personalized therapies. We are the engine that supports researchers as they explore new treatments and allow physicians to personalize treatment for every cancer patient.

Now turning to our results. The headline of our performance is our explosive Clinical growth and our achievement of 2 Medicare coverage decisions. In the fourth quarter, we delivered 6,183 Clinical tests, this represents a 41% sequential growth over the third quarter of 2025 and a 329% increase year-over-year. Now to put that in context, in Q4 of 2024, we delivered just 1,441 tests. Our performance this quarter reflects the strong uptake of NeXT Personal in the marketplace. For the full year of 2025, we delivered more than 16,000 Clinical tests, growing 394% over 2024. We achieved $17.3 million of revenue in the fourth quarter, in line with our preliminary announcement last month.

Our full year revenue of $69.6 million reflects a transitional period for our top line. As we previously discussed, we've shifted our commercial focus from lower-value project work to higher-value MRD partnerships, which meant that we experienced a nearly $20 million year-over-year decline in revenue from Natera while we set the stage for growth with our MRD engine.

The uneven biopharma spending environment we discussed last year has persisted, creating variability in the timing of large project-based translational research. However, it is critical to note that the underlying demand for our strategic MRD offering remains exceptionally strong. We grew our MRD biopharma revenue by nearly 240% over 2024. We believe we are the partner of choice for biopharma companies who need to see what others cannot. And we expect penetration of our MRD testing into biopharma companies to be a growth driver for years to come.

NeXT Personal has the potential to help these partners fail in early Clinical trials sooner, succeed in these trials quicker and enroll the right patients into their studies. Now innovation is the heartbeat of Personalis. Just as we've led the way in pioneering ultrasensitive MRD detection down to 1 part per million, we recently announced the next evolution of our NeXT Personal MRD test, our real-time variant tracker report. Cancer changes over time, and it can change in reaction to treatment. The real-time variant tracker allows for the detection of mutations targetable with therapy and the identification of resistance mutations during MRD surveillance with NeXT Personal.

As an example, in metastatic HR-positive breast cancer patients, the ESR1 gene can acquire mutations over time that cause resistance to the hormone therapy patients may be receiving. Knowing when these mutations can happen allows physicians to adjust therapy proactively. The addition of this opt-in report is intended to give clinicians a dynamic window into how a patient's cancer is evolving in real time.

We announced the early access program for this module for Clinical and academic leaders in January of this year. The feedback from early discussions with doctors has been positive, and we believe this provides a powerful new tool for physicians as they seek the best possible outcome for their patients. This new addition to NeXT Personal underlines our continued innovation in MRD and most importantly, our commitment to innovate for patients.

Looking ahead to 2026, we expect total revenue to be in the range of $78 million to $80 million. However, to understand the velocity of the business, you must look at our strategic growth engines, that is, our Clinical revenue and our biopharma MRD revenue.

We expect our strategic revenue to grow from approximately $14 million in 2025 to a range of $30 million to $32 million in 2026, which would be roughly 121% growth driven by the expectation that Clinical volumes will quadruple. I will now dig deeper into the 3 pillars of our Win-in-MRD strategy that are driving us forward.

The first pillar is Clinical adoptions. Now the numbers speak for themselves. Last quarter, we had more than 900 oncologists ordering our test, and we're seeing strong retention among those who adopt NeXT Personal. We're scaling our commercial footprint to onboard more oncologists and drive testing volumes. We now have more than 10 dedicated reps in the field working in close coordination with our partner, Tempus.

In 2025, we expanded our relationship with Tempus to include colorectal cancer, and our commercial efforts are fully aligned to champion the market shift towards ultrasensitive MRD testing. We're setting our initial 2026 annual volume guidance at 43,000 to 45,000 tests, which would be about 170% growth year-over-year. This underscores the tremendous momentum we are seeing and our confidence in our commercial team and our physician partners.

Our second pillar is building Clinical evidence and the data we need to support continued positive reimbursement decisions. We made massive strides here in 2025. We submitted 3 dossiers for coverage to Medicare, backed by industry-leading Clinical data.

In the fourth quarter, we successfully achieved Medicare coverage for breast cancer with favorable pricing. And just a few weeks ago, we received Medicare coverage for lung cancer. These coverage decisions validate the value of our technology and changing patient lives, and I'm proud of our team for these accomplishments.

Both reimbursement frameworks are for ongoing cancer surveillance for patients, so our test can be used at multiple time points along the patient's cancer journey and across many years. We currently have an additional dossier under review with MolDX for the use of NeXT Personal to monitor immunotherapy in metastatic cancer patients. Though exact timing remains subject to MolDX review, we remain confident in our data.

Our drive towards coverage has been powered by data and the strong performance of our NeXT Personal test. These last several months, we continue to build upon our foundation to transform Personalis from a high-growth testing company into a high-margin reimbursed Clinical powerhouse.

The landmark studies with TRACERx, Royal Marsden and VHIO published in cells, Annals of Oncology and Clinical Cancer Research, respectively, are the anchors of our evidence base. The TRACERx lung cancer study is one of the largest, longest and most rigorous lung cancer MRD studies to date with over 400 patients.

In this study, NeXT Personal showed exceptional sensitivity and specificity throughout the patient journey from diagnosis to surveillance even in lung adenocarcinoma, the most common yet difficult to detect subtype. Our Royal Marsden breast cancer study also showed exceptional sensitivity and specificity across HR-positive, HER2-positive and triple-negative breast cancers with 15-month plus medium lead time ahead of imaging.

The VHIO study across 24 cancer types showed that advanced cancer patients receiving immunotherapy who achieved durable molecular clearance had 100% overall survival. The Pan-Cancer UCSD I-PREDICT study was just published in npj Precision Oncology, and it showed that NeXT Personal identified molecular progression and medium of 161 days over 5 months before imaging in late-stage cancer patients receiving immunotherapy.

Yale University is leading the case study to demonstrate the utility of NeXT Personal in breast cancer. Furthermore, our prospective B-STRONGER-1 trial in triple-negative breast cancer is well underway, having now enrolled more than 200 patients.

Overall, we're now involved in 35-plus additional studies that are powering the next generation of evidence, and that number just continues to grow. In 2026, we're focused on neoadjuvant breast cancer and colorectal cancer and submitting for coverage there. As a reminder, we've presented data earlier from PREDICT and SCANDARE.

Those studies showed the power of NeXT Personal in neoadjuvant breast cancer and the British Columbia Cancer study showed the power of the technology in colorectal cancer.

The third pillar is leading in the biopharma sector. MRD or NeXT Personal biopharma revenue grew nearly 240% this past year.

Biopharma companies are realizing that to prove the efficacy of their next-generation therapies, they need the most sensitive detection tools available, and this has led to our success in driving their adoption of NeXT Personal. We made tremendous strides this last year with biopharma companies in terms of their adoption of NeXT Personal.

As a part of that progress, our business has been evolving towards more prospective work where revenue from a project is spread out over several years compared with retrospective analysis where an entire study is analyzed in one batch.

In 2026, we expect our biopharma revenue to be in the range of $20 million to $21 million. This growth in our core MRD offering is expected to propel our entire biopharma segment, providing a stable and high-value revenue stream that complements our Clinical expansion.

In closing, Personalis is a different company than it was just a year ago. We've proven that we can build world-class Clinical evidence and win Medicare coverage, and we've proven that our technology is the gold standard for sensitivity. We're starting 2026 with the winds at our backs and the confidence that we are winning in MRD. Changing the way medicine is practiced is never easy, but progress like we've seen over the past year shows our efforts have been worthwhile.

I want to thank our employees and collaborators for a great year and thank our biopharma partners, physician champions and their patients for trusting us to provide results that truly matter.

Thank you. And I'll now turn it over to Aaron to dig deeper into our financial results.

Thank you, Chris. I will be discussing our fourth quarter and full year 2025 results and then cover guidance for 2026.

Total company revenue was $17.3 million for the fourth quarter of 2025. While this is a modest 3% increase year-over-year compared with $16.8 million for the same period last year, the headline number masks a positive rotation in the quality of our revenue. We are successfully replacing low-margin and sporadic legacy revenue with high velocity Clinical volume.

And for the full year 2025, total company revenue was $69.6 million. As Chris mentioned, we navigated a planned $19.5 million decline in revenue from Natera during the year and also the conclusion of the Moderna melanoma trial enrollment, which was a $10 million decline from 2024.

Despite these headwinds of nearly $29 million, we delivered 239% growth in biopharma MRD revenue over the prior year. We are no longer dependent on a single legacy contract. We are building a diversified and sustainable high-growth engine, which is centered around our Win-in-MRD strategy.

Moving to our core revenue. Biopharma was $10.9 million in the fourth quarter compared with $12.2 million for the same period of the prior year. And for the full year 2025, biopharma revenue was $49 million compared with $51 million for 2024. Both the fourth quarter and the full year declines were due to the expected decrease in the Moderna volume mentioned earlier.

For Clinical revenue, we recognized $0.9 million in the fourth quarter and $2 million for the full year of 2025 compared with $0.2 million for the fourth quarter and $0.8 million for the full year 2024. The fourth quarter 2025 includes initial breast cancer surveillance revenue, which was covered by Medicare in the fourth quarter.

Now I want to address gross margin directly as it's a critical indicator of our MRD investment strategy. Gross margin was 11% in the fourth quarter and 22.7% for the full year. It's vital to understand that this margin compression is intentional, but temporary.

We foresee margin dilution to continue into 2026 with the lowest point expected to be in the first quarter of the year until the time when our third reimbursement coverage, which is expected to be IO, begins to convert to revenue. The margin dynamic is driven by the strong growth in volume of NeXT Personal tests ahead of reimbursement revenue.

In the fourth quarter alone, unreimbursed costs diluted margins by approximately 1,900 basis points.

We are securing the oncologists and the volume now. So, when coverage decisions like the recent wins in breast and lung cancer come online, that volume run rate begins to convert to higher-margin revenue. We expect to realize benefits from investments to gain market share over the next 2 to 3 years as our Clinical revenue gets to scale.

Operating expenses were $27.2 million in the fourth quarter compared with $22.7 million for the same period of the prior year. And for the full year 2025, operating expenses were $103.8 million compared with $95.1 million for the full year 2024. Our Clinical business is thriving, and we are investing for future growth.

Most of the year-over-year increase was related to commercial expenses for ramping up test volume and also R&D investments for Clinical evidence to support reimbursement initiatives and technology development. The fourth quarter R&D expense was $13.1 million compared with $11.5 million for the same period of the prior year, and SG&A expense was $14.1 million compared with $11.2 million for the same period of the prior year.

Net loss for the fourth quarter was $23.8 million compared with $16.4 million for the same period of the prior year. And for the full year 2025, net loss was $81.3 million, which was the same as 2024.

Now let's review the balance sheet. We finished the fourth quarter with a strong balance sheet with cash and short-term investments of $240 million and no debt other than some small equipment loans. For the full year of 2025, we used approximately $74 million, just below our $75 million guidance. We operated with discipline throughout the year and even as revenue fluctuated, we managed more than $12 million in downward spending adjustments to protect our cash runway.

Now looking into 2026, we entered the year with a focus on scaling volume. Our guidance reflects reimbursement coverage decisions received to date. Any upside may be realized from faster coverage expansion, payer adoption, faster volume growth for Clinical tests and continued strength in biopharma MRD demand.

Additionally, we are guiding annually this year and not providing detailed quarterly ranges due to the variability and seasonality that may occur throughout the year. Our 2026 guidance is as follows: total company revenue in the range of $78 million to $80 million, and this assumes Clinical revenue of $10 million to $11 million, specifically from breast and lung cancer surveillance tests recently covered by Medicare.

Revenue from pharma test and services and all other customers in the range of $55 million to $56 million. MRD revenue from these customers is expected to grow rapidly and to be in the range of $20 million to $21 million; population sequencing plus enterprise customers of approximately $13 million.

Gross margin is expected to be in the range of 15% to 20% with the first quarter potentially being the lowest point of the year. Net loss of approximately $105 million. And we expect our cash usage to be approximately $100 million as we continue to invest in our Win-in-MRD strategy. This estimate reflects our decision to accelerate volume and gain market share.

With $240 million of cash on hand, we expect to have the capital to execute our plans. Additionally, our success is opening up additional Clinical studies that may be able to influence guidelines. And therefore, we are stepping up investments in this area, too.

What you are hearing from both Chris and I is unwavering confidence in our ability to execute our Win-in-MRD strategy and plans. We have proven that our ultrasensitive technology can help change patient care. The market is expanding fast towards the $20-plus billion estimates. We have growing test volume, and we are turning on the reimbursement engine to drive revenue growth this year and beyond. 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&A session. Operator?

[Operator Instructions] The first question we have is from Subhalaxmi Nambi of Guggenheim.

Moving in a short period of time from no reimbursement to now 2 indications, potentially more here early in 2026, how does that affect the focus of reps internally, externally with Tempus for Clinical and also your eye for still building the pharma business longer term?

Yes. Thanks, Subbu. Appreciate the question. I think there's a couple of ways to think about it. I mean what we're starting to do is increasingly ungate the business increasingly to pick up steam. We had the number this year, guided the $43 million to $45 million that we think represents a good mix between investing aggressively, but at the same time, making sure that we manage the cash in a prudent way.

And as we go through the year, we continue to make more progress potentially with reimbursement, either getting more decisions, we've got IO in front of us or find ways to collect more, et cetera, we could continue to invest more in the area as we go, and we'll play it as we go. But right now, this is the way that we see it. And we're continuing to push hard on biopharma companies.

I mean those relationships and those are growth, that's a big growth driver. And we've spent a significant amount of time over the last 2 to 3 years establishing ourselves and growing that business. I think we're having a lot of success there.

Thank you for that Chris. How has reimbursement changed receptivity from clinicians compared to other competitors in the field? Have you seen an acceleration in ordering since the reimbursement announcement?

Yes. I mean I think overall, what you have, getting reimbursement gives you gives you legitimacy in the conversations. I think being able to say that you pass through the process and the rigors of Medicare is gives you legitimacy when you're having discussions with physicians and certainly key opinion leaders.

I think there's a wide recognition among people who are in the know that MolDX does a particularly phenomenal job reviewing the evidence and looking at it deeply. And so yes, I think it does help to reinforce the power of what you're doing when you've got Medicare coverage and does put wins to your back field.

The next question we have is from Mark Massaro of BTIG.

This is Vidyun on for Mark. I just wanted to ask one on the biopharma outlook. So, are you seeing pushouts or cancellations of contracts there? And then just at a higher level, you're investing into NeXT Personal MRD and focusing more on the Clinical side of your portfolio. So just how material do you think MRD side of biopharma is versus other areas that you've done historically like PCV is longer term?

Yes. Thanks. I mean I think we're seeing the sector stabilize right now. We haven't seen any pushouts or any big jolts to the business. I mean, last year was certainly more challenging. We're not seeing biopharma companies come rushing back in a major way for translational purposes. And we reflected, I think what we see right now is what we've reflected in the guide. I think things are stable right now in that sector overall is what we're seeing. I think we are making progress in MRD, and we feel like we've been accelerating our progress there. I mean, those customers are some of the most discriminating buyers. They often do head-to-head trials with the data.

And so, when you win there, and you see the revenue growth that we're showing in that sector, which I think was nearly 240% year-over-year, and that came off a particularly strong year the year prior, and we see it continuing to grow this year. That reflects the decision of large companies that really do detailed analysis to choose personnel.

So, we feel like we're well-positioned there. But we're investing heavily overall to win the space, both biopharma and also Clinical. We've always thought that those 2 work synergistically and that the evidence that we built in biopharma helps drive the Clinical business, and that's been one of the key vectors. As you know, with our relationship with Moderna, we've been focused on supporting them through the journey of their INT program, and that's been a potential driver of our revenue over the out years.

And then NeXT Personal, can you share any details on the mix of volumes you expect to run in '26? In your reimbursed indications versus your not reimbursed indications? I think the volume in, yes, go ahead.

Yes, go ahead and finish the question, if you want.

Sure. I was just going to say, I think the volume in rev guide implies that a good chunk of the volumes you're running today are not lung and breast. So I just want to understand what indications you're seeing there.

Sure. Aaron will take this one.

Yes. So if you just look at the volume at the top level, so, for the 43,000 to 45,000 tests, roughly 20% or so is coming from breast, 15% to 20% is coming from lung. IO is somewhere between 20% and 25%, CRC is around 20% and all other is the remaining 20% or so. And it's true. There's a fair amount that we're running for zeros, right? We're not getting paid for only getting covered for breast and lung at this point in time. So it's less than half of the test, right?

And Medicare is roughly half of the volume, and the fee-for-service is half of that half. And so again, we are running a lot of tests with zeros. But when you're dealing with physicians, you have to accept samples of all different cancer types. And that's what we're doing. We're doing really, really well. And we're finding that our ultrasensitive test is really sticky with physicians. Now, as we want to go forward here to drive more growth, we're going to be adding more physicians, right?

We're adding more commercial heft on the Tempus side and internally. We're going to add another 10 or so reps. We ended the year with 10 reps. We're going to double it at this point in time. That's our current plan, and we could invest even further depending on how things go here in the first couple of quarters, right? So things are going really, really well.

The guide didn't assume IO yet, but that's clearly out there, and we've got a significant amount of revenue. We expanded the relationship this past year with Tempus to include CRC, and we've gotten a tremendous uptick and energy around that for doctors. The data that we had at AACR last year showed that if you apply an ultrasensitive approach on the testing paradigm, you can get a dramatic leap in performance at Landmark.

And that really raised a lot of eyebrows, and a significant number of physicians have been starting to adopt in the CRC. So we have been investing because that's been a historically strong space, and we've looked at it that, we're making investments in growing that market and our presence in the CRC market, and we've had a lot of progress.

And so when Aaron talks about 20% of the samples coming from that group of physicians, or that 20% of our samples coming from CRC, that's been a really nice growth engine. And I think over the arc of time, progress we're making there is really going to pay off.

The next question we have is from Thomas Flaten of Lake Street.

Aaron, just a follow-up on your last prepared comment about having the cash to execute your plan. Should I read that as having cash to break even? Or should I not read that far into it?

Yes. So we haven't said anything about cash to breakeven or cash profitability or anything like that. So that's probably reading a little bit more into it. What we meant by that statement, Thomas, is that we had $240 million of cash at the end of the year. We're going to use approximately $100 million in 2026. So you can see just by the simple math, it's 2.5 years or so of cash on the balance sheet, which means we have plenty of capital here for the next couple of years to go and drive to go get market share. And that's the focus right now, really investing for market share.

Got it. Got it. And then just a question on the real-time variant tracker. I think, Chris, in your prepared comments, you mentioned that there was an opt-in test. So are people ordering it? I mean, of the physicians you went out to with the early access program, are they ordering it? Do they literally have to click a box? Or just mechanically, how does that work? And how do you drive the stickiness on that?

Yes. I mean, Rich is with me and can add any color to it. But it's an opt-in module. It's not something that just everybody gets by default.

Yes. And we're getting geared up for the early access program as we speak. But we expect that physicians will opt in, and a lot of them will, and there's been a lot of excitement about it.

Yes. One of the feedback is not just being able to quantify the tumor in the blood, but being able to track how the tumor is changing is really one of the key unmet needs in cancer. And so starting to superimpose this longitudinally really is, I think, exciting, and I think is the next big innovation in MRD and quite frankly, sort of underlines our ability to lead the space in innovating. I mean, having started with the ultrasensitive push that we've been pioneering and now starting to add this, I think, is a great positioning for where we are and the impact that we're making for patients.

Got it. And just one quick last one. Of the Clinical volume you're expecting this year, you mentioned that you had 900 oncologists ordering last year. Do you have a sense of how many docs are going to be responsible for that 43,000 to 45,000? Just again, big ranges are fine. I'm just curious about depth versus breadth.

Yes. I mean, this year, we'll keep focusing on driving deeper within existing accounts. The 900 doctors ordering from us will continue to grow, and we'll continue to go broader, but we're focusing always on going deeper as is our partner, Tempus. Because I think people start to use the technology. They see the power of it, and our experience has been that the customers who have been with us longer tend to be the customers who order the most. And so we're focused on continuing to tell the story, underlying the value and driving deeper within existing relationships.

The next question we have is from Kallum Titchmarsh of Morgan Stanley.

This is Jason on for Kallum. So maybe just a question on 2026 guidance. How should we think about the Q-over-Q Clinical volume growth? You delivered 6,200 Clinical tests in the fourth quarter. Is that a good jumping off point for you guys, from what you guys could grow 24%, 25% Q-over-Q to get to the midpoint of your volume guide?

Yes. So we haven't given quarterly guidance. But if you take the 6183 exiting 2025 in the fourth quarter and just maybe linearize it, that probably gets you close. There would be a little bit of seasonality, right? The second and the fourth quarters are going to be the strongest, where the first and the third will have a little bit of seasonality.

Yes. I mean Q1 is always and Q3 are always the slower growth quarters in this kind of an environment versus Q2 and Q4 because of the combination of vacations, holidays and then Q1 weather, and we've always seen that. But right now, we're still learning exactly how the seasonality works. But we saw that in our numbers last year. And I think that's, I've spent years in this business, that's pretty calm.

That was helpful. And then maybe just as a follow-up, for a question on the competitive landscape. There's a lot of new entrants in the MRD space, and there's been some consolidation in the space as well with one of the large MRD players recently making a large acquisition of another large MRD player in December and potentially integrating their IP to enhance the sensitivity of their assay. So could you just share your thoughts on the current competitive landscape and why you think you can gain share against arguably larger players with deeper pockets?

Yes. I mean I think we've proven this over the last couple of years that we can execute. We've been focused on pioneering the story. I think a lot of people are trying to either get to or debut ultrasensitive products. Our intention is to stay ahead and continue to push forward. We're aligned with one of the biggest partners in the space, Tempus, which is providing the commercial infrastructure, which gives us the ability to move quickly and make progress, and we've gotten traction now with, we talked about in the script, 30-plus ongoing studies, and that continues to grow. And so we're investing heavily in R&D and driving forward.

And so I think if you look at where we've been, where we are, we've emerged as one of the large players in the space. I think we've stitched together is only 3 companies with more than 2 coverages now in MRD, and we're there. And I think just in terms of test volume, we've emerged as a major player, and we've got momentum, and we're still the leaders in data and in terms of where it is. And so we feel like we're positioned well, and we're continuing to make the investments necessary to keep that position in the industry.

The next question we have is from Bill Bonello of Craig-Hallum.

So the volume expectations, obviously looked great, well above, I think, what people have been expecting. The Tempus comments last night were incredibly bullish. I think what might surprise people is sort of where you're ending up on the Clinical revenue, the gross margin and the cash flow guide. And you kind of talked about your philosophy, but maybe you can just give a little bit more color on what's prompting that.

I mean, historically, your approach had kind of, as you said, been to sort of be a bit gated with the sales. I think there were some restrictions to Tempus in terms of kind of what you were encouraging them to do. You knew all along you'd be getting reimbursement. What, is it response you're getting from the field? Or what is it that's made you decide to sort of put on the gas at this point of time and maybe move away a little bit from that capital-light strategy you've talked about in the past?

Bill, this is Aaron. Thanks for the question. And so exiting 2024, getting into 2025, we did meter things a little bit primarily because we had not received any coverage at all just at that point in time. And our balance sheet did not have $240 million back then either, right? And so those 2 items there have changed over the past few months. Having coverage now for breast cancer and lung cancer and having a healthy price that we're really, really pleased with that's going to give us the right unit economics and help us get our gross margins into the low 60s and show us a path to eventually 70%.

But again, at full reimbursement gives us now the confidence that we should step on the gas and go fast because this market is going to turn into $20-plus, $30-plus billion over time. And so, there's only a few players in the market today. There are only 2 real tumor-informed players that have a really robust test. We are the leader in the ultrasensitive marketplace. And so, it behooves us to go fast right now while the window is open and there's very little competition in the ultrasensitive space.

So, we see it as an opportunity to go get market share over the next year or 2. And in doing so, we would have to sacrifice a little bit on cash burn as well as on gross margin, primarily because until we get a few more coverages, right, it's going to be dilutive to our gross margins. Does that make sense?

Yes. No, it does. And I get the capital and the reimbursement. I was just curious if you were seeing things in the market that we're saying, hey, we should really step up as well too. But it sounds like

Bill, I mean we see strong demand. And I mean, I think you're hearing that from people talking about it. And we're here to meet the demands of the physicians, and we're still managing this carefully. I mean the step-up from 74 to 100 is not like a crazy drive forward. We're also investing heavily in R&D, both in the studies, the evidence development, pushing forward in multiple different ways to accelerate coverage. And then, and the guide at the current level doesn't have any more progress in coverage and reimbursement, and we feel like there's a lot of upside there, and that will continue to be helpful as we go forward.

So we feel like this is the right spot. The guide, I think, hit a good cadence of investment versus weighed up against expansion. And I think the investments that we do make now will pay dividends in the future, and we could probably ungate and go ever faster, but that would spend even more money. And so I think this is, I think we've, we feel like we've hit the right balance here.

Sure. Just a couple of follow-ups then. To the extent that you're allowed to talk about this, have you sort of given Tempus also the green light, maybe not to go full throttle, but do they have a little more freedom in what they can do with sales as well?

Well, we're focused on going deeper within accounts, and we're focused on, we've added some more reps ourselves. And I feel like we're in a good position, and we work really well right now, and we're driving forward with the idea that we're building demand for this ultrasensitive approach and making progress.

Okay. That was a good nonanswer. The last thing is just cash burn for the year. I think you, just in your comment, there was no cash flow statement. But I think in your comment, you just said it was about $70 million for this year. Is that right?

Yes. So we used about $74 million, and that was in our prepared remarks, Bill, and we expect in 2026.

$74 million to $100 million.

The next question we have is from Mike Matson of Needham & Co.

This is Joseph on for Mike. Just a couple here. In your prepared remarks, you called out, I guess, a heightened focus on CRC and neoadjuvant breast moving forward. Just wondering, should we expect maybe a submission at least for reimbursement in 2026 for those 2? And I have a couple more after that.

Yes. No, absolutely. We're not, I mean we're not sort of laying out exact timelines because everything is dependent upon when we can get publications, both submitted with investigators and then accepted because we can't submit until those things happen.

But yes, we're driving hard in order to be able to submit for coverage for both of those. But there's a lot of variability as to when and how that might happen. So that's not in the guide, if you will. But I mean, we're not, we're moving fast because we see a big demand for use of the technology for those indications for patients.

Okay. And I guess just building on that, in terms of, I guess, evidence generation, your guys' strategy around evidence generation for additional cancer indications. I'm just wondering, is there any difference now in strategy compared to breast and lung in terms of, is the focus or at least part of the focus looking at trying to get into these very large, almost landmark studies.

Is, now that you have reimbursement in two indications, do you think smaller studies can pass the bar for Medicare? You called out 35 clinical trials. So, is the idea here now quantity of trials rather than number of patients in the trial? I'm just trying to get some broad color on that.

Rich will provide his thoughts on this one.

Yes. Thanks for your question. Yes. So, we've done think of the strategy of working with the top KOL in the world and establishing some baseline evidence for these indications as we expand out our reimbursement coverage. So, we're going to continue to do that. It's really paid off for us.

And so, we debuted very, very strong data in neoadjuvant breast at conferences last year and then also colorectal cancer as well with top KOL. And we think that helps us in the Medicare coverage process. So, we'll continue to do that not only for those indications, but for others.

In addition to that, we are also, we've had a lot of inbound interest from KOL wanting to expand into Clinical utility studies using our assay to make decisions for patients and then show that it actually makes a difference in outcomes. And this is really important for long term, not just for the field, but also getting into guidelines and things like that. So, you'll begin to see more of that as well.

Okay. Great. Yes, that's helpful. Maybe just one last one. To get to that high gross margin target you guys have laid out, obviously, reimbursed test volume is the biggest factor there. But I'm just wondering in terms of other things like lab optimization, automation, what have you, I'm just wondering, have those steps all been completed? Are there more planned? What inning would you say you guys are in, in terms of really getting ready to ramp up reimbursed Clinical volume?

Good question. So, we haven't said specifically what percent of completion are we on all of our operational aspects or projects. We continue to automate the workflow, which means as we add capacity and all the capacity for this year isn't all in place at one point in time, right, because you have to buy equipment, hire people, and that's going to weigh even further on margins if you get too far ahead of your skis.

And so, we take it one step at a time. But having said that, we are continuing to automate, streamline the workflows, strip out costs from labor or overhead wherever we possibly can, right, as we go forward to be efficient. And over the last couple of years, as we launched the product, we've done a good job with getting ready. And so, we believe we're in a good position sitting here today.

In terms of getting to the upper end of the range on margins, right, some of that is dependent upon what happens with biopharma as well because biopharma is a fee-for-service, they pay for every test. In terms of some of the commentary Chris made earlier, we have not baked in IO into our guide, right? And so that's not contemplated. Depending upon what happens with reimbursement coverage for other cancer types, that could help us as well in terms of moving towards the upper end or beyond. Reimbursement wins so far.

[Operator Instructions] The next question we have is from Tom Stevens of TD Cowen.

Just a quick one on adjuvant reimbursement. So, have you outlined any expectations over the next couple of years in breast and lung on the potential for adjuvant reimbursement? And kind of what's the pushback from MolDX there? Any color would be helpful.

And then kind of secondarily, on the neoadjuvant opportunity, I mean, could you lay out broad strokes where pharma is applying them in trials today, neoadjuvant feels like an easier use case and maybe some initial market sizing on the neoadjuvant opportunity, if you could also spare that.

Yes. Richard is going to grab this one, Tom.

Yes. Thanks for the question. Yes. So, adjuvant breast and lung, rest assured, that is something that we are also focused on, and we'll be pursuing that just like the other indications that we've been successful with. So, we know that's important. With regards to neoadjuvant breast cancer in, or neoadjuvant use of the assay in biopharma, yes, I mean, there's a lot of interest there.

I mean, as you know, the oncology pipeline for drugs, there's an intense interest in bringing the drugs that are being used in the adjuvant setting and bringing them earlier for patients. So, then the neoadjuvant setting is one that's really important. And they want to know if these drugs are working. And so, a highly sensitive assay like ours can be really, really helpful for that. We actually, and that, if you look at the data that we presented last year in neoadjuvant breast cancer, it just shows the power of an ultrasensitive approach.

That was in triple-negative breast cancer and HER2-positive. And the current state-of-the-art biomarker that's used is something called pCR. And so, in those studies, we showed that our assay performed very well compared to pCR and in some cases, better. And so, you can imagine, since that data has come out, there's been a lot of interest in using an assay like ours to get an early read on their neoadjuvant studies and whether they're being successful or not.

Great. And then just any initial view on the sizing of the kind of Clinical market there and kind of what the potential for that could be long, long term?

Yes. So, I think we, there's definitely, we haven't estimated that. What I'd say is if you look at the patient journey for MRD, it does start with neoadjuvant, but it's a relatively small fraction of that entire patient journey. surveillance over time, over many years. There's going to be a lot of testing done there, both for breast cancer and early-stage lung cancer. That's why we started there, and we achieved coverage there. And now we're kind of working our way backwards into these other indications.

Ladies and gentlemen, that concludes the question-and-answer session. And with that, this concludes today's teleconference. Thank you for joining us. You may now disconnect your lines. Goodbye.

Good afternoon, and welcome to the Personalis Third Quarter 2025 Earnings Conference. [Operator Instructions] Please note that this event is being recorded.

I will now hand you over to Caroline Corner of Investor Relations. Please go ahead.

Thank you, operator. Welcome to Personalis' Third Quarter 2025 Earnings Call. Joining today's call are: Chris Hall, Chief Executive Officer and President; Aaron Tachibana, Chief Financial and Chief Operating Officer; and Rich Chen, Chief Medical Officer and EVP, R&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. securities laws. For example, any statements regarding trends and expectations for our financial performance this year and longer term, cash runway and liquidity position, revenue expectations and timing, size and booking of orders, products, services, technology, expansion of clinical volume, reimbursement goals, the outcome and timing of reimbursement decisions, expectations for our existing and future collaboration activities, cost expectations, market size and our market opportunity and 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 recent filings, including the risk factors described in our most recent filings. Personalis undertakes no obligation to update these statements, except as required by applicable law.

Our press release with our third quarter 2025 results is available on our website, www.personalis.com, under the Investors section and includes additional details about our financial results. Our website also has the latest SEC filings, which we encourage you to review. A recording of today's call will be available on our website by 5:00 p.m. Pacific Time today.

With that, I would like to turn the call over to Chris.

Thank you, Caroline. Good afternoon, everyone, and thank you for joining us. Q3 was another step forward in our Win-in-MRD strategy. We delivered 4,388 clinical tests, a 26% sequential and 364% year-over-year growth and now have 700-plus physicians ordering NeXT Personal. We also submitted lung cancer for coverage, and we now have 3 dossiers under review by MolDX as we continue to target 2 coverage decisions in 2025.

Our clinical evidence from recent Phase III programs and the CATE trial launch shows how ultrasensitivity can detect progression several months before imaging and provide greater confidence in a negative result. While biopharma project timing continues to have variability, the underlying MRD demand is strong, clinical adoption is compounding and our cash position gives us the flexibility to execute.

For those listening in for the first time, Personalis is a leading company helping partners, patients and doctors see more in cancer samples. Our ultrasensitive NeXT Personal test is capable of detecting approximately one single fragment of tumor DNA in a million. This is not merely an improvement. It is a clinical necessity that allows us to detect recurrence months ahead of standard imaging and provides more confidence in a negative result.

The market is growing rapidly for these types of tests and is expected to mature into a $20-plus billion opportunity for which we are exceptionally well positioned to command a strong share. We're also a leader supporting biopharma companies with our discriminating platform, and that is used to analyze cancer tumors and identify new biomarkers. Our platforms are used to build personalized therapies and allow physicians to personalize treatment for cancer patients.

Now turning to our Q3 results. We delivered $14.5 million in revenue in the quarter, which was above the high end of our estimate. Our progress this quarter is best highlighted by our clinical volume. We reported 4,388 tests this past quarter, representing a 26% growth over the previous quarter. To put that in context, it's worth pausing to note we did just 945 tests in the third quarter of last year, and our performance this quarter reflects a 364% year-over-year growth. And cumulative to date, we have delivered more than 13,000 tests to help patients.

We're providing an updated range for full year revenue in the $68 million to $73 million range. The uneven biopharma spending environment we discussed last quarter has persisted, creating continued variability in the timing of large project-based work. While the underlying demand for our strategic MRD offerings remain exceptionally strong, this quarter, the biopharma volatility is compounded by logistical delays we believe are unique to this quarter and are impacting the timing of samples for several large projects. This increases the variability of our Q4 biopharma revenue.

As a result, we are prudently adjusting our full year guidance to reflect these updated project time lines. This adjustment does not reflect a change in underlying demand for our technology and offerings, but rather the lumpy and unpredictable nature of our legacy translational research business. And while we manage the variability with discipline, our strategic focus remains squarely on the key drivers of long-term value, clinical adoption and reimbursement. On that front, we continue to execute strongly.

We advanced our goals this quarter by submitting an additional indication for coverage lung cancer, meaning we now have 3 dossiers under review with MolDX. We remain confident in our data and continue to target coverage for 2 indications by the end of the year, though exact timing is dependent on MolDX review. Our progress this quarter is a direct result of the execution of the key pillars of our Win-in-MRD strategy.

Now let's walk through the updates. The first pillar is accelerating clinical adoption. The oncology community is voting with their orders. We continue to see impressive sequential growth in clinical test volumes. We now have over 700 physicians ordering NeXT Personal, and this growing base of physicians understands that when it comes to residual disease, ultrasensitivity matters.

Our retention is high and the growth we are seeing is a direct result of NeXT Personal providing greater confidence in a negative result and the ability to detect recurrence earlier than any alternative. The clinical volume growth is the single most important leading indicator of our future high-margin revenue ramp as reimbursement comes online. This momentum is being driven by our partnership with Tempus, which continues to exceed our expectations. The collaboration has been so effective that we've already achieved the primary volume target we set for the entire year.

When we set our targets at the beginning of the year, our goal was to grow 30% to 40% each quarter, ending the year with around 4,800 quarterly tests. We've effectively reached that milestone a quarter early and having achieved our goal ahead of schedule, our focus for the rest of the year now shifts to responsibly scaling our operational and commercial foundation. Additionally, we are strategically expanding our in-house sales force to complement the Tempus team to ensure we are fully prepared to capitalize on the inflection point of Medicare coverage.

The second pillar is driving reimbursement and adoption through clinical evidence. We are proud of the latest NeXT Personal data from AstraZeneca's Phase III studies.

First, in neoadjuvant lung cancer, data from the NeoADAURA Phase III trial was presented at the World Conference on Lung Cancer that demonstrated the superiority of NeXT Personal in the neoadjuvant setting. NeXT Personal showed significantly higher baseline sensitivity for ctDNA detection compared to a leading gene mutation-based test, offering physicians a more accurate assessment of disease burden and the ability to monitor treatment response. The data also showed that our test was prognostic for outcomes across treatment arms.

Second, in the adjuvant EGFR-mutated lung cancer, further data from the Phase III LAURA trial was presented at ESMO, which showcased the utility of NeXT Personal for treatment monitoring. Our assay demonstrated a median lead time of 5 months in detecting MRD progression ahead of imaging and standard expert review.

Lead time is a difference maker for patients, underscoring the value of an ultrasensitive approach for earlier intervention. These studies demonstrate how our biopharma partners are utilizing ultrasensitive MRD testing with NeXT Personal to better understanding response to therapy in their Phase III studies.

In addition to these results, we are excited to announce the launch of the CATE clinical trial with the Yale Cancer Center and the Translational Breast Cancer Research Consortium. This prospective multicenter trial is a step towards establishing clinical utility for ctDNA-guided treatment in high-risk HR-positive HER2-negative breast cancer. This study is designed to generate evidence that will help integrate NeXT Personal into the standard of care, empowering oncologists to move from surveillance to preemptive treatment based on our ultrasensitive detection.

The third pillar is leading with biopharma partners. Our technology offers our partners a powerful way to improve their clinical trials. The use of our NeXT Personal technology allows them to derisk their pipelines, reach critical go/no-go decisions sooner and enroll the right patients for their studies. We believe this leads to improved financial performance for our customers, cementing the value of our ultrasensitive approach.

As a result, the underlying demand for NeXT Personal clinical trials has never been higher. We capitalized on this demand by signing 2 major prospective clinical trials this quarter. As mentioned before, our MRD biopharma revenue is set to grow approximately 300% year-over-year.

As we wind up the year, Personalis is executing with precision on a winning strategy. Just 2 years ago, we launched NeXT Personal and started our journey to redefine the MRD market with an ultrasensitive approach. We made tremendous progress in this time, having built a network of over 700 physicians and numerous collaborators and biopharma partners adopting NeXT Personal. I want to thank our shareholders, partners and employees for their dedication and commitment to the mission as we redefine the standard of care for cancer patients.

With that, I will turn it over to Aaron to review our financial results.

Thank you, Chris. I will discuss our third quarter 2025 results and then cover guidance. Total company revenue for the third quarter was $14.5 million, representing a 44% decrease compared with $25.7 million for the same period of the prior year. The decrease in revenue was driven by the expected decline of $4.6 million from Natera as we wind down this business, a $4.2 million decline from the VA MVP due to fulfilling most of the task order received in 2024 within the first 2 quarters of this year and a $2.5 million decline from biopharma customers.

Biopharma revenue was $13.2 million in the quarter, representing a 16% decrease compared with $15.7 million for the same period of the prior year. This decline was primarily due to the prior year, including a significant amount of revenue from Moderna's Phase III melanoma trial that concluded enrollment late last year. The third quarter of 2025 year-over-year revenue decline from Moderna was $6.1 million and was partially offset by the increase in NeXT Personal MRD revenue from several biopharma customers and accounted for more than 1/3 of the total biopharma revenue in the quarter.

We are pleased with the adoption of NeXT Personal that is taking place, and it highlights the solid execution of our Win-in-MRD strategy. For clinical revenue, we recognized $0.4 million of revenue from our NeXT Dx and NeXT Personal molecular tests compared with $0.3 million for the same period of the prior year.

Gross margin was 13.2% in the third quarter compared with 34% for the same period of the prior year. The year-over-year decrease of 20.8% was expected and primarily due to the 44% lower revenue volume which reduced the amount of fixed cost absorption and also an increase in clinical test costs in advance of reimbursement. The third quarter impact from our investments in unreimbursed clinical test costs was approximately 18% and excluding those expenses, gross margin would have been approximately 31%.

We are being prudent by balancing test volume and margin dilution. And looking a bit further out in time, we expect the investments in test volume to put us in position to achieve a higher level of revenue once reimbursement is obtained. Longer term, we expect total company margins to expand beyond 50% once we have obtained reimbursement coverage for more than a few indications, and we also achieved greater revenue scale.

Operating expenses were $25.2 million in the third quarter compared with $23.1 million for the same period of the prior year. Most of the year-over-year increase was attributed to selling expenses related to our clinical test volume growth. The third quarter R&D expense was $12.2 million compared with $11.7 million for the same period of the prior year, and SG&A expense was $13 million compared with $11.4 million for the same period of the prior year.

Net loss for the third quarter was $21.7 million compared with $39.1 million for the same period of the prior year. The prior year's net loss included a $26 million noncash expense related to the warrants issued to Tempus that were exercised in the third quarter of last year.

Now on to the balance sheet. We finished the third quarter with a strong balance sheet with cash and short-term investments of $150.5 million and no debt other than some small equipment loans. The cash usage from operations and capital equipment additions for the third quarter was $23.4 million. We expect to use approximately $75 million for the full year of 2025 and end the year with more than $130 million of cash on our balance sheet.

The cash usage estimate has remained the same throughout the year, while our revenue estimate at the midpoint has declined by approximately 17% from the original range. This is a critical proof point of our financial and operational discipline. It demonstrates that as market conditions have shifted, we have proactively managed over $14 million in spending to fully offset the revenue variance, ensuring we continue to fund our most important strategic investments while holding our bottom line cash commitments to our investors.

Now I'd like to turn to guidance. For the full year of 2025, we revised our guidance and now expect total company revenue in the range of $68 million to $73 million as we reduced the range from the prior guidance of $70 million to $80 million. Revenue from pharma tests and services and all other customers in the range of $50 million to $54 million, for which the range was reduced from the prior guidance of $52 million to $58 million.

Population sequencing plus enterprise customers in the range of $16.5 million to $17 million, an increase from the prior guidance of $15 million to $16 million. Revenue from clinical tests reimbursed in the range of $1.5 million to $2 million, which is reduced from the prior guidance of $3 million to $6 million, reflecting that the company has not yet received reimbursement approvals underpinning the previously higher estimate range.

Gross margin in the range of 22% to 24%, no change from the prior guidance and reflects investments in clinical test volume in advance of reimbursement. Net loss of approximately $85 million, no change from the prior guidance and cash usage of approximately $75 million with no change from the prior guidance. 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&A session. Operator?

[Operator Instructions] Our first question is from Thomas Flaten with Lake Street.

Chris, you mentioned in the last quarter call, there were a couple of very large customers kind of on the cusp of coming online with you. Could you give us an update on those?

Yes, they both come online. One of them was a big driver of our Q3 numbers. I don't know if you noted that almost 1/3 of our revenue now came from MRD this last quarter. That was directly driven by one of those customers. And the other one had some revenue in this quarter and then it will bleed into Q4. So those are still on track, and we are still growing MRD revenue 3x this year and the demand for our MRD technology has been super high, and it's been a really, really good quarter.

One of the things we also noted, and we can't announce the names of them yet, but we've signed 2 large prospective clinical trials that will start to kick in and be serviced over the next 2 to 3 years with biopharma customers. So we've continued this year to make really, really promising progress with biopharma customers in terms of MRD adoption.

That's great. And Chris, in your prepared comments today, you said something about a logistical delay specific to this sector. Could you clarify what you meant by that?

Yes. So we've had some samples run into problems at customs. I mean one of the challenges with the business as it's constructed now, is that it's almost all revenue from biopharma customers, and those are based on large cohorts and so -- and larger million dollar-plus studies. So 1 or 2 things, having some hiccups or some challenges along the way and cause us some -- a lot of variability.

And we've had some challenges getting samples across the border. We don't know whether that is due to the government shutdown, honestly, Thomas, or whether that's something else. We know there's been some other challenges with getting things over. We've had one sample cohort be turned around, and we're going to try to get it back in. And so we thought it was really prudent to just make the range wider on the bottom end in case those samples don't end up making it in here in time to run them in Q4 in that case, those slip into Q1. And that's what accounts for the challenge.

And we said it was unique to this quarter. We always have some challenges getting samples, but we haven't run into problems before at customs like this. And so that's -- we think that's probably related to what's happening with the shutdown, where there's probably a bit less staffing and some paperwork isn't done proper, it may get turned back. And so we're still working on it, we're still optimistic, everything will flow in here, but we just want to be prudent and create a wider range.

Our next question is from Mark Massaro with BTIG.

Yes, great to see the progress. I just wanted to start, and I apologize if this is nitpicky. The NeXT Personal growth was just a hair shy of your previously communicated 30% to 40% a quarter growth coming in at plus 26%. I'm just curious if that is largely due to you metering or tempering demand ahead of reimbursement? Or did you see anything in the field that might have surprised you? Obviously, this is a competitive space. So I was just curious or if there are some other timing elements. Any clarity there would be helpful.

No, I appreciate it. Thanks for flagging it, Mark. We -- when we said 30% to 40% at the beginning of the year, the goal was to end the year in that 4,800 test mark, and we're largely there. So I wouldn't say we metered per se, but we definitely were very careful and are being very careful to manage the investment here. I mean we're investing a lot of money ahead of reimbursement and building demand, building usage, building KOLs. So kind of rolled into where we wanted to be. And so yes, we were thoughtful this quarter.

I think Tempus has said something similar ahead of reimbursement being careful, and we also did that and did that in conjunction with them. Third quarter is always a tougher quarter, Mark, in terms of volume being flat. Q2 and Q4 are always the big quarters in the clinical business. And so we didn't really roll into it. So that's sort of the seasonality that we typically see, but we didn't respond by throwing more resources at it.

I will say that we will continue to be thoughtful about managing it in the context of the demand, but that's -- so we felt like it was -- we're in a really good spot. We'll be where we wanted to be in the [ end of the ] year.

Okay. And I think you lowered the guidance on the clinical revenue contribution here in Q4. And I just want to ask what gives you confidence that -- maybe if you could characterize your conversations with MolDX just a little bit at a high level. Is this still an active review? Because I think you talked about still expecting 2 by year-end.

It is. It is. I mean we still have -- we have 3 in now. We've had productive conversations with MolDX. Those are always a combination of some voice, but also there's a back-and-forth process with written questions. And we are -- we find that to be -- we're in a very encouraging spot. But we have -- and we are expecting -- we have all 3 moving along, and they're all moving along really well. And so we continue to feel like we're on track, Mark, to get 2 of those done this year.

And there can always be some variability because the -- we don't control MolDX final clock. And one of the things that I think we all admire about what they do and the work they do is the seriousness for which they do it and really understanding all the details of the clinical studies. And so there could be more questions that cause more back and forth. But we think where we are right now and based on where we are, we think we're in a really good spot. That's why we still feel like we're on track to get 2 done.

I would note that when we threw this out there a couple of years ago, it was a really ambitious target. And as we've come down into the spot, we've made tremendous progress, and we really derisked it. It was a really big deal this quarter to have a lung paper basically accepted. Now to have all 3 accepted and through the peer review process and be able to have the dossiers and be able to be in that journey is exactly where we want it to be. So we feel like we're in a good spot and those conversations have been positive and productive, and we're optimistic about where we are.

Great. And if I could ask one last one. Maybe as it relates to MRD biopharma would love -- appreciate some of the metrics you provided. Obviously, there's a lot of demand. Admittedly, it's off of a low base. But can you just talk about what feedback you're hearing from biopharma with respect to going down to 1 part per million and how you think that's resonating on some of these lower shedding cancers? And just give us a sense for how you're thinking about 2026 and 2027, if you can.

Yes. No, thanks for asking. It's I mean -- and I think it's more than just the lower shedding cancers, honestly, Mark. What we hear from biopharma companies is there's really 3 things they want, but there's a focus on 2.

First of all, they want to fail faster on earlier-stage trials. And the key to that is being able to see quickly whether or not there is a signal because of the drug. And getting down and being able to see something to 1 part per million, the 40% of our positive results are inside that range. So they can just see it faster, fail faster and pull out of an early-stage trial. That's key right now for them and where they can use it.

Later-stage projects getting to success faster means we can get the patients -- get the drugs in the hands of patients quicker. And again, when you can see the recurrence months ahead of imaging or any other approach, that's really powerful in order to get to the answer quicker and be able to yield more revenue on it.

The last clinical use, quite frankly, is being able to enroll the right patients in the clinical trial where they use an MRD assay to be able to decide whether to put a patient in a treatment arm or not a treatment arm. And you really want to have confidence that when you call a patient negative, they're likely negative because that is enriching for success, and you really want to get that metric well. And there's been some challenges in the past around doing that really well for them. And so we get really positive feedback with that.

So those are the things, 1, 2, 3. I will say they are the most discriminating buyers -- they put us through all kinds of checklist every time we do something. We run a lot of pilots, a lot of bake-offs that we wouldn't be having the kind of success we were having if we weren't performing and if we weren't building a global presence to be able to service these companies' needs. And so if you back up, it was just 2 years ago, we launched this test, the ability to go from that to starting to run large prospective clinical trials with some big biopharma companies is a big leap forward. And I think this is going to pay dividends in '26 and '27 and beyond.

It's a really nice way to get paid for all the tests. It really helps us build the clinical evidence. And you saw the data. We talked about the data at ESMO this year at World Lung with AstraZeneca, where they talked about the use of ultrasensitive testing inside 2 clinical trials. And that really helps underline and cement the approach that we're pioneering. And so it's -- we feel like it will be a continued clinical evidence pipeline and revenue growth over the next couple of years.

Our next question comes from Dan Brennan with TD Cowen.

Sorry, I joined a second -- a few minutes late. So is the government shutdown having any impact on MolDX? Like are they short staffed? Is that a factor? I don't know if you mentioned that.

We haven't seen it yet, honestly. We've been able to have the back and forth, and we don't see anything. I think all of us, just honestly, I've -- I'm always surprised a little nooks and crannies of things that pop up with this government shutdown. So you never know what the future holds. But right now, we haven't seen it. They seem to be working well.

And remember, it's a private company that's been given the contract to both pay claims in the territory they have, but also make decisions about molecular genetic testing, these types of tests that many of the MACs in the country that -- many but not all defer to. So because it's a private company with a contract, we're not surprised that we don't see any impact from it.

Got it. No, thanks Chris. And then can you just remind us -- I know, we met with another company that also has some filings with MolDX and they were referring to like standard cycle. So there's a cadence to how many turns this could occur. I mean, can you just remind us, I know when we had you in New York not long ago, just in terms of I think you filed breast in April. Is there a certain normal cadence that occurs? Like are you in the midst of a second turn or third turn or fourth turn? Just kind of walk us through like what the normal sequence of back and forth is, if there's like a routine to that and kind of where you guys sit?

Yes. Rich is going to jump in.

Dan, thanks for the question. Yes, there is. And the back and forth that goes on with MolDX. Usually it kind of goes in 2-month cycles. And so -- and that usually results in a set of questions and response. It's usually a great dialogue, good questions. And so we're kind of going down that journey, both on the breast cancer side, but now also on IO and so lung cancer.

Got it. And sorry, Rich, [ that ] I missed it, like is there typically like you start it and then it goes 2 months and then either it gets approved or they go back and then it goes another 2 months? Is there like a certain finite end in each cycle or it can kind of persist that would give us a sense of where you guys actually sit?

Yes. No, I mean, you typically -- you do the -- you send the submission in Dan and then there's a 60 days they have to get you the answer back. You may turn -- those are phrased as questions back to you typically about the data, about the test, about the assay, about its use, about your intent to use, et cetera. You're answering those questions. You can take as long as you want to answer those questions. You can do it overnight or you can do it in a month. And then when you submit those, the clock starts again for 60 days.

Got it. Right so.

And there could be more questions. There could be new -- yes, there could be new questions that they could come up with as they continue to pour into the data and find new questions or there could be questions upon the questions, right? And I think about -- it's very much like a process where you go through to get a permit in a city in a planning department where there's questions on what you've done, and there can be questions to your response, et cetera. And that back and forth is usually gated by time periods of how long they have to respond to you.

So yes, so we started it earlier in the year in mid -- breast. We thought that one would take a little longer, so we're rely optimistic to get that going because that's really their first way to engage with the test and the AV data, analytic validity data, which is sort of key to underpinning it all. And then we've got the IO going and then we've got the lung cancer ones going.

And so we expect -- we've had back and forth on all those, and we expect to get an answer back on all 3 of them by the end of the year. I mean the process will go as it goes, but we feel optimistic that we're on track to get a couple of them done this year.

Got it. And then -- sorry, one more. And in terms of your confidence, this year, obviously, it was based upon, I guess, historical precedent. I mean, I guess, you've got a handful of companies that have gotten approvals. Was there like an expectation it would be 2 cycles or [ 3 ] cycles or the 60 days? Or did you guys just kind of looked at the predicates and said, if we count forward, I'm just wondering since it's November 4, and it's always hard to predict like timing of the government, right? Or even if MolDX is a private entity, it's always hard to predict the timing.

Yes. There's variability. I mean remember, we put this go out 1.5 years ago, and we've come a long way to derisk it. And as we've continued to stick with it. It's also based on the strength of the evidence. This is really, really good data. The TRACERx data is probably one of the largest, most comprehensive data sets in MRD, certainly in lung cancer. The data is just phenomenal. The IO study is 200-plus patients, 18 different types of cancer, a really nice signal there. and the breast cancer data has been really great also.

And so we did it based on the strength of the evidence, what we would expect in the others. But just to back up, like the goal of whether it leads a little bit into next year happens this year, like none of this is make or break for the trajectory of where we are or what we're trying to do. And we feel like we've made tremendous progress over the last 3 to 4 months on this and derisking it, and we feel really optimistic sitting here in November.

Got it. And maybe a final one. Like assuming when you guys do get approval, I know you've been asked this a lot, but now as you get closer to that and you've had more time and more experience in the field with clinical customers and some pharma customers. How would you think about like that year 1 or year 2 ramp now? Like what would you point us to, to look at? It would be just to give us a sense, I mean, obviously, you have Tempus, which is a huge commercial engine.

But just any updates on how we might think about breast, for instance, since that ideally could be the first one since that's when you file the first, like how that might launch, how you might try to kind of help investors think about that piece of that launch?

Yes. I mean we think that we're early stages here, and we think it will be a really, really great year on the backside of reimbursement. And we haven't guided here and provided numbers. But you're right, we'll turn Tempus fully loose, and we'll continue to augment their approach with some sales reps to really sort of augment and really cover the market in nuanced ways to help accelerate what they're doing. And we really learned how to do that over the last few months. And so it will continue to take hold.

But what's happening at a high level in this market, and you can see this in -- and all the energy and excitement is that the data is really starting to come together in so many different ways that MRD testing provides incremental value. And to patients, to doctor -- to patients, doctors, clinicians, the data is looking great across multiple vendors or multiple people that are providing things. And I think the market's acceleration starting to pick up.

I think you all are -- different analysts have said that we're probably 5% penetrated somewhere around that. So you can imagine if we double, triple the market and we can get a toehold on that. I think it's a -- I think we're in a -- we'll be in a really good position.

Our next question comes from Subbu Nambi with Guggenheim.

This is Thomas on for Subbu. Maybe a follow-up on the question earlier about the 2 large pharma customers and then just relating that to pipeline. I think those were around $5 million each. Is that roughly the size you'd expect per customer going forward? Or in the future, do you expect that account size to increase alongside your scaling of the business? Any color on the pipeline would be helpful.

I think -- yes, I think the -- I mean, I think as you penetrate these accounts, there is more than $5 million of potential inside of these large customers. So we expect that number to grow. Capturing in a large biopharma with multiple oncology trials prospectively being able to capture 100% of that share in a world where they're really using MRD, I think will be worth more than that. So I think we're early stages in penetrating that.

But that's a journey in and of itself, too, right? You just don't go there overnight. We're making progress with it.

Okay. Great. And then maybe just a follow-up on -- within pharma, a newer account versus those more mature accounts, what's the difference in kind of order growth rate you're seeing? Are you still seeing acceleration among those mature accounts? And then maybe what's the typical run rate for some of those mature accounts?

Biopharma -- in biopharma?

Yes, biopharma MRD.

Yes. We -- I mean, it's -- there is -- most of our energy is focused on the top biopharma companies where they're spending large amounts of money on clinical trials. So you can imagine that set of customers, and that's where we're focused. And so it's a penetration drill because we're in most of those places right now. Some of the smaller biopharma, biotech companies are opportunities, but we're really probably focused on going deeper and winning more of the business inside these customers.

And partly, I think ultrasensitivity opens up more opportunities for them to be able to do more with MRD technology. And so I think we're also expanding probably the market by a result of what we're doing as we pioneer this approach.

We're really optimistic about where biopharma is going to go as well. Over the last 2 quarters, the pipeline and funnel for MRD has grown rapidly. In addition, the orders that have come in for MRD projects have continued to grow. The challenges we've seen near term have been on the translational research side. And as Chris mentioned in the prepared remarks, we have been seeing some delays on the sample receipt side, right, which has been a headwind to the biopharma revenue. But overall, we're optimistic about where this is going.

Yes. I mean I will note that we had 2 large customers, Natera and Moderna that had declines this year. We expected, obviously, both of those -- Moderna because they -- it ended their -- it ended enrolling their Phase III melanoma trial, which really drove our numbers last year. And then Natera, we were winding that down this year. And so when you subtract -- you just look at the loss of that business and then where we'll end up this year, we're still going to grow this 40% this year. I mean it's still really nice growth.

And the business is shifting, and the mix is shifting, and that opens up a set of challenges. But there's a -- that's really, really healthy growth, and that's been driven off the back of the progress that we're having with MRD. I would just note one thing for folks listening. So we really -- when we hunker down in this new world, we were really focused on managing the cash burn and making sure we were really prudent. And so our cash usage guidance has not changed this year.

We've really focused on making sure we were really smart with our spending and what we're investing this year in the midst of what's been a challenging year because of some of the biopharma slowdown and managing through it. So we have been really focused on the financial discipline here of hitting the cash burn number and being really prudent with investors -- with investors' money.

Our next question is from Mike Matson with Needham & Company.

So just with regard to Natera, so there was a big decline this quarter. I think it was expected. But is there any revenue expected from them in the fourth quarter? Or is it -- are they completely out of your numbers beyond this quarter? And then I assume it's not -- you're not expecting it in next year either.

No, it's very, very small in the fourth quarter. It's pretty small in the second quarter. We really started to bleed down in Q1, Q2 with the idea that Q2 would be sunsetting and at the end of Q2. And then we've just been doing cleanup or helping on some studies that we have been helping them with, because they probably want the same technology, right, or platform or whatever. So it's been -- but it's been very, very, very small. So it's bleeding down.

And you see that in the numbers where almost all of our revenue this quarter was biopharma revenue, right? And so -- and which -- and we made -- and most of that revenue is just the diversity of clients. And so actually, when you really look at the numbers, I mean, we've come a long way of building a diverse set of biopharma customers and really what's now mostly a pharmaceutical-based revenue base.

And of course, that will start to change as we get Medicare reimbursement and we start to layer in the clinical and it starts to grow rapidly alongside that. But we've really transitioned the revenue profile really, I think, overall, really positive way for the company, and you're seeing that right now in those numbers. So Natera is pretty much out of it.

Okay. Got it. And then just TRACERRx (sic) [ TRACERx ] trial, any expectation on when that will be published? And then where do things stand on colorectal with getting a dossier put together for that in terms of the data, trials, et cetera, you would need there?

Sure. Rich is going to jump in, Mike.

Yes. So the TRACERx study should be published in the next quarter sometime. So that's going to be great to have that come out, a really strong study, over 400 patients, non-small cell lung cancer. So it really will be a great summary of how strong the performance with NeXT Personal is in non-small cell lung cancer.

And in CRC, we're just starting the journey there. It will be one of our things that we'll work on this next year. But the investigator still has to decide that, that particular study is time to wind that down and submit that data for publication, and we're not there yet. So -- and when that happens, then that will be submitted. And obviously, we can't submit for coverage until it's accepted. And so we're still on that -- we're still early in the journey on CRC.

[Operator Instructions] Our next question is from John Wilkin with Craig-Hallum.

So I wanted to just press a little bit more on the molecular volume growth in the quarter. I know you guys had -- you guided earlier in the year to expecting 30% to 40% sequential growth, and you kind of talked through some of the reasons that came in short of that.

But I mean, just given the stock reaction, I think there might be some concerns out there that with a couple of other players launching MRD tests in the market, there could be other factors driving that kind of below that target range and given you had also given that before you had reimbursement. So maybe you could just drill down a little bit more on that and talk through anything that was impacting the volume growth?

On the clinical side, no. I mean, we're -- I think we've said and Tempus has said that we want to be really smart with where we are and we have not -- we've certainly not seen any slowdown. The retention has been high, and we've continued to add some new clients, but not at a torrid rate as we've pulled back a bit, but the retention has been super high. And I think nearly 30% quarter-over-quarter growth in what's traditionally a pretty flat quarter is actually really, really strong quarter. The numbers are starting to get bigger, quite frankly, too.

Yes. So we were thoughtful. So with revenue only $14.5 million in Q3, John, we did pump the brakes a little bit on volume, primarily because we have to balance margin dilution and cash usage as well. And then the other point that Chris mentioned earlier was in the third quarter, typically, you do have some seasonality, right?

And the goals that we set out over a year ago were 30% to 40% quarter-over-quarter growth. And like Chris had said previously, we've already achieved the level that we had targeted [ albeit ] at the end of the year, a quarter early. And so we didn't see a need to go overboard and push forward more volume in the third quarter and then drive margins even lower, right? So you have to kind of appreciate what we were trying to do in terms of balancing cash burn and margin dilution as well.

Yes.

That makes sense. Appreciate the clarification. And then wondering if you could talk through just anything you've been hearing from the field through your conversations with Tempus and what their -- what sort of feedback their sales team is getting. I know they haven't been talking too much about MRD yet, just in advance of reimbursement, but any early feedback you are getting and talk about any like ordering patterns with the 700 ordering physicians you're at now?

Yes. I mean I think one of the learnings is, we were -- collectively, we were really the first set of companies to really pioneer this notion of the one-stop shop along with the ultrasensitive and combining that together and stitch it together. And I think that's been a really compelling value proposition. I think physicians want to get all this together in their case, by the hereditary test, certainly the CGP and the MRD. And we've gotten really positive feedback about the approach that they've taken. And we've -- the customers when they start ordering have largely stayed with us.

It's great to have a test where 40% of the positive results are unique and differentiated. And that allows us to underline the value that we're delivering every day with these doctors. So the feedback has been super positive, and we've been able to keep the growth going, and we really focused this last a couple of quarters, we said, really learning the logistics of the business and how to win more business within accounts. Because ultimately, it's going to be depth of penetration that's going to make a difference within accounts.

Our next question is from Arthur He with H.C. Wainwright.

This is Arthur on for RK. So just a quick follow-up regarding the clinical test growth. Could you just give us some more color on the -- how these growth will be driven by? It's more from the increase in the physician numbers or new physician numbers or it's more from the test number per physician getting increased to push the test number?

Yes. I mean we -- a little bit of both, but I mean, we've been really focusing on not so much trying to grow top line, but getting more out of the accounts. So because I think we've learned how to sell physicians, and that's one way to "manage the investment" that we're spending, is not focused on driving deeper and faster and quicker growth within the -- within the physician community, but rather really focusing in on going deeper. And so that's been the crux of a lot of the growth that's getting more from these accounts.

Ladies and gentlemen, with no further questions in the question queue, it brings us to the end of this event. Thank you for attending, and you may now disconnect your lines.