Good day, ladies and gentlemen, and welcome to the Personalis Third Quarter 2022 Earnings Conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this call may be recorded. I would now like to hand the conference over to your first speaker today, that is Caroline Corner, Investor Relations. Please go ahead. Thank you, operator. Welcome to Personalis' Third Quarter 2022 Earnings call. Joining me on today's call are John West, President and Chief Executive Officer, and Aaron Tachibana, Chief Financial Officer. 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. For example, any statements regarding trends and expectations for our financial performance this year and longer-term cash runway, revenue expectations and timing, new orders, products, services, technology, the timing of data publication, clinical and regulatory milestones, the outcome and timing of reimbursement decisions, future collaboration activities, cost expectations, and our market opportunity business outlook. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our current expectations. We encourage you to review our most recent filings with the SEC, including the special note regarding forward-looking statements and risk factors described in our 10-Q for the third quarter of 2022 filed today. Personalis undertakes no obligation to update these statements except as required by applicable law. Our press release with our third quarter 2022 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 P.M. Pacific Time today. Now, I'd like to turn the call over to John for his comments on third quarter business highlights. Thank you, Caroline. In Q3, all of our revenue came from our oncology business, which was up 73% over the same period from the prior year. Going forward, we expect the centerpiece of our oncology business to be our MRD test, NeXT Personal. Given its importance for our future and the progress we've made since Q2, I will focus today on this revolutionary new platform. I believe that NeXT Personal is the most sensitive and most richly informative cancer MRD test in the world. Although we see a lot of potential for this platform in advanced pharmaceutical clinical trials, and that adoption has already begun, this platform is ultimately intended to provide key information for oncologists to use in making decisions for the treatment of individual cancer patients. When we began the development of NeXT Personal, we completely rethought what was needed. While other MRD platforms detect cancer recurrence earlier than radiology, we believe that it was one year or more, only to have the cancer eventually rise again above the limit of detection. During that initial year, the patient actually has cancer, but the test is not sensitive enough to detect it. We asked ourselves, what sensitivity would it take? Using published data from earlier technologies, we extrapolated back to the point just after surgical resection and calculated what level the tumor signal in the blood plasma might have been. In one case after another, we found that sensitivity at a part per million should be able to make the detection. Detecting tumor DNA in blood plasma at a part per million is a daunting challenge, requiring a sensitivity improvement of as much as 100-fold. Sequencing the blood plasma more deeply will not help because there are only a few thousand copies of the genome in a typical plasma sample. To detect a cancer signature at a few parts per million requires at least a few million molecules, each spanning a known tumor mutational signature. We realized that we would need to combine the signal from over 1,000 different positions in the genome and sequence a few thousand unique molecules at each of those to amass the data required from a few million total molecules. It is not easy to find thousands of mutations in a single tumor sample. From our experience sequencing tens of thousands of cancer exomes, we knew that would not be enough. According to the American Cancer Society, by far the largest number of cancer survivors, people at risk of cancer recurrence, are those who have had breast or prostate cancer. Those two cancer types, in particular, have low rates of tumor mutation. We realized that the only way to consistently identify the thousands of mutations we needed from these cancers was to use whole genome sequencing of the tumors. Personalis first worked on this problem and filed our foundational patents about a decade ago. At that time, deep whole genome sequencing was very expensive, but we believed the cost would come down. Over the years, we also drove down our own costs of whole genome sequencing by the automation and optimization that we implemented, sequencing whole human genomes for the VA Million Veteran Program. Personalis has now sequenced over 150,000 whole human genomes, a number that we believe is more than any other for-profit U.S. company. We have leveraged this experience to pioneer whole genome tumor-informed MRD testing and achieve our goal of part per million sensitivity. When we planned our MRD test, sensitivity was not the only dimension we reimagined. While sensitivity is essential for the initial detection of cancer recurrence, and an MRD test can be used to monitor the growth of the recurrent cancer, just monitoring on its own is not good enough. Physicians will need information about a recurrent cancer to decide how to fight it. For example, what would be the best first-line therapy? Is the patient responding to the first-line therapy? Is the tumor developing resistance to the therapy, and if so, what options are there for second-line treatment? Is the cancer detected even a recurrence at all, or could it be a new cancer with different characteristics from the original? To help physicians fight recurrent cancer, and frankly, to deserve ongoing test reimbursement after a recurrence has been detected, we realized that integrating tumor characterization capabilities into our test could make an MRD result much more actionable. To address the questions just mentioned in a sensitive MRD assay, we pioneered a method to combine tumor-agnostic content, which is the same for every patient, with tumor-informed content, which is different for every patient, in a single assay. Our software combines these two data types, and we synthesize all of this content together in a custom assay designed for each patient. Presentations about MRD often focus on detection of recurrence after surgical resection, and that is a huge need. Metastatic patients can also benefit from a sensitive MRD assay. This may seem counterintuitive, since metastatic cancers can be much larger than early-stage cancers and shed much more DNA into the blood plasma. What we and others have found, though, is that the amount of tumor DNA in a patient's blood plasma can drop dramatically in an initial response to therapy. It can fall by more than a factor of 100 in just a few weeks. In one published study using an earlier technology, patients responding to immunotherapy fell below the limit of MRD detection and stayed there, sometimes almost 2 years, before regrowth of the cancer finally brought the MRD signal back above the limit of detection. Just as in the case with surgical resection, the patients had cancer the whole time, but the MRD assay was not sensitive enough to detect it. In the advanced diagnostics field, talented leaders often are drawn to what they perceive to be the next big opportunity. Excuse me. In planning for our diagnostic business, Personalis has recruited new leadership in medical affairs, clinical development, reimbursement, diagnostic sales, marketing, lab operations, and general management. As we have recruited, our advanced MRD platform, NeXT Personal, has been an amazing magnet, drawing some of the best talent from leading companies across our industry. While it is a broad group, I would like to highlight in particular our recent addition of Chris Hall as Senior Vice President of our diagnostic business. From 2010 through 2019, Chris progressed from Chief Commercial Officer to COO and ultimately President at Veracyte. For almost a decade before that, he held leadership roles at Berkeley HeartLab, which was acquired by Celera Diagnostics. This is a great addition to our senior management team. Welcome, Chris. Like top management, key opinion leaders in our field are also attracted to transformational new technologies. Over the last year, we have found KOLs to be increasingly drawn to our NeXT Personal MRD platform. We have signed and are executing on a growing set of collaborations and expect to be testing thousands of plasma time points across many different cancer types and stages. We expect to announce more of these collaborations in the coming months. Quite a few of these collaborations involve sets of longitudinal patient samples which have been collected over many years. We anticipate that data from these collaborations will lead to important publications and conference presentations in 2023. We expect these publications to lay an important foundation for our future reimbursement applications. Initial data from our collaborations is beginning to be generated, and the results show exactly what we anticipated. We see patients whose entire MRD trajectories are below the limits of detection of earlier technologies, but which we can detect with our per million sensitivity. In some cases, tumors appear to be beginning the process of escape from immunotherapy, but at a level that would not normally be detected yet. We also see mutations which indicate that if immunotherapy does fail, targeted therapy could be a second-line possibility. In addition to academic and nonprofit KOLs, we should have seen early pilots in pharma now lead to larger scale adoption. Two pharma have placed orders over $1 million each. We've seen that interest in our platform is growing at pharma in the United States, Europe, and China. Notably, we see a growing interest in use of NeXT Personal in clinical trials of personal cancer vaccines and other personalized neoantigen-targeted therapies. Personalis has worked with the majority of companies in that field since 2016, and although early clinical results were challenging, more recent results seem to be rekindling interest and investment. Long term, we expect the largest market for our MRD test to be in clinical diagnostics, and plan to launch it as a lab developed test, or LDT, in 2023. We have been building a commercial team to support that, and now have regional sales leadership all across the United States. We launched the latest LDT version of our NeXT Dx test in late September, and have an initial flow of orders and are beginning to invoice payers. We anticipate a MolDx submission in early Q1, and are optimistic that we will receive initial approval in Q2. Looking to the future, we predict diagnostics as our largest opportunity and our MRD platform, NeXT Personal, as the centerpiece. In it, we are pioneering personalized diagnostics designed and synthesized individually for each patient at a level we've never seen before attempted. Each test targets over 4,000 genetic loci, and over 2,000 of those are personalized to the patient being tested. The mutations which cause cancer are personal, and the fight against the cancer is also a deeply personal one. Appropriate to our company name, Personalis, we are now creating cancer diagnostic tests which are highly personal as well. Given the importance of this strategy to our future, we have initiated an evolution of our company brand as we enter into the clinical market. Please join us at the SITC conference in Boston next week for our first preview. Given its strategic importance, I have focused so far today on our MRD assay, NeXT Personal, and the launch of our diagnostic business to support it. Before I hand this over to Aaron for our financial results, I would like to mention three other areas of progress. First, in Q1, we recognized approximately $1.5 million of revenue from an exome scale liquid biopsy project for a leading global pharmaceutical company. Interestingly, as we work with KOLs on our MRD test, NeXT Personal, we find they often ask to combine its deep sensitivity with the breadth of our liquid biopsy exome test at select time points, and our tissue-based ImmunoID NeXT platform as a starting point. Second, in September, we were awarded an exclusive 5-year contract and an initial $10 million order from the VA Million Veteran Program. Personalis has been the sole provider of whole genome sequencing to the VA MVP for 10 years. The VA MVP has also begun to enroll veterans into the program once again after a break during the pandemic, and they are now up to approximately 900,000 enrollees with a stated goal of enrolling the 1 millionth veteran in 2023. After the contract was awarded, we were notified that the contract is under protest by a competitive bidder. Assuming a favorable outcome, we expect to begin receiving samples within a few months, and we expect to recognize revenue from the most recent order in the first half of 2023. Third, I want to briefly comment on the exciting wave of breakthroughs in DNA sequencing technology that have been announced this year, and how that can help Personalis drive costs lower in the future as we run very large assays. We have mentioned being an early access customer of Ultima Genomics, which is at the forefront of realizing the $100 genome. In addition, Illumina recently announced their NovaSeq X Plus sequencer that will have twice the throughput of the current NovaSeq platform at an approximately 60% lower cost per base. We placed one of the first orders for a system so that we can test and evaluate it once it becomes available. This matters because most Personalis products are large scale, using either deep exome or whole genome sequencing. We built our platform expecting that the throughput and cost of sequencing will decrease over time. As that happens, and because of the size of our platform, we think we can benefit more than other companies who have products that use much less sequencing than ours. New sequencing platforms focused on high throughput at lower cost potentially give us opportunities to reduce the cost of our large assays, and they are an important part of our plan to improve our gross margins. In summary, we see our MRD test, NeXT Personal, which takes the personalization of cancer diagnostics to a much more advanced level, as patients and oncologists will want to see the best test to actively manage their cancer. We believe that we have the best MRD test for the clinical market, and that is why we believe we will win in the marketplace. It will build on the base we have built with our pharma and other customers, and is beginning to take off with customers, new company leaders, and KOLs. We have a strong balance sheet to support this, and look forward to telling you more in the quarters to come. With that, I will now hand it over to Aaron for our financial results. Thank you, John, and good afternoon, everyone. During my prepared remarks, I will provide detail about our financial results for the third quarter of 2022 and guidance for the full year. Total company revenue for the third quarter of 2022 was $14.9 million. Decreased 33% compared with the same period of the prior year, which was expected due to the $13.7 million decline of VA MVP revenue. The entire $14.9 million was from our oncology business, which continued to perform well, with revenue increasing by 73% over the same period of the prior year. The year-over-year increase in oncology revenue was driven mostly by the volume increase from Natera, which accounted for half of our oncology revenue in the quarter. Gross margin was 16.7% for the third quarter compared with 36.2% for the same period of the prior year. The year-over-year decrease of 19.5% was primarily due to the expected under-absorbed overhead costs from the decrease in revenue volume from the VA MVP and also an increase in expenses to support our growing oncology revenue volume. Within our production laboratory, we use more direct materials and sequencing equipment capacity for the VA MVP whole genome samples, while our oncology business requires a higher proportion of labor and overhead expenses, such as direct and indirect labor, lab supplies, facility footprint and other related costs compared with the VA MVP. Over the next couple of years, we expect some gross margin variability due to the fluctuating VA MVP volume, investments in new capabilities such as dedicated production lines for liquid biopsy offerings, providing diagnostic tests while we work to increasingly secure reimbursement, expanding in China, adding our new facility and others. However, we expect our gross margins to increase longer term as we achieve scale by growing our oncology revenue. Operating expenses were $29.7 million in the third quarter compared with $25.8 million for the same period of the prior year. R&D expense was $14.9 million in the third quarter compared with $13.6 million for the same period last year, and SG&A expense was $14.8 million for the third quarter compared with $12.2 million for the same period last year. The increase in R&D expense was for product development, building our clinical and medical infrastructure and sample test expenses for clinical validation work. The increase in SG&A was due to commercial expansion and continuing to enhance our infrastructure. Net loss for the third quarter was $26.5 million compared with the net loss of $17.7 million for the same period of the prior year. The net loss per share for the third quarter was $0.58 and the weighted average basic and diluted share count was 45.9 million compared with the net loss per share of $0.40 and a weighted average basic and diluted share count of 44.5 million for the same period of the prior year. We finished the third quarter with a strong balance sheet with cash and short-term investments of $192.8 million. In the third quarter, we used $40.7 million of cash due to the net loss, working capital needs, construction of our new headquarters facility and capital equipment purchases. We continue to work on extending our cash runway as far out in time as possible, and as of the end of the third quarter, we have more than 2 years of cash on the balance sheet. Our 2022 full year cash usage estimate is approximately $120 million, which we have reduced from $140 million at the beginning of this year. This amount includes a one-time investment of approximately $38 million for the construction and fit-up of our new facility, and this amount is net of $13 million for tenant improvements from the landlord. We expect approximately $4 million of building costs to be paid in early 2023, and we expect $2 million of that amount to be reimbursed by the landlord. Although our liquidity is very good, we continue to manage and invest our cash prudently. Now, I'd like to turn to guidance. In the first half of this year, our revenue was impacted by slower and reduced patient enrollment for clinical trials due to COVID. Despite these headwinds, we remain on track to achieve oncology revenue results that are within our original guidance range. For the full year of 2022, we expect total company revenue to be in the range of $63 million-$64 million, and we expect oncology revenue from biopharma and other customers to be in the range of $55.5 million-$56.5 million. No additional VA MVP revenue beyond the $7.5 million recognized in the first half of 2022. Net loss is expected to be in the range of $111 million-$114 million. We are planning to provide our 2023 guidance on our fourth quarter and full year 2022 conference call. At that time, we should have more clarity about the VA MVP, and importantly, we expect to have a better sense of recovery trends for biopharma customer clinical trial enrollment and the ensuing sample shipments. We look forward to providing more information at that time. Now I will turn the call back over to the operator to begin the Q&A session. Operator? Thank you. Ladies and gentlemen, if you have a question at this time, please press the star then one on your touch-tone telephone. We ask that you please limit yourself to one question and one follow-up. One moment for our questions. Our first question comes from Tejas Savant with Morgan Stanley. Please go ahead. Hi, this is Neil on for Tejas. You know, recently you cautioned of tightening budgets among large pharma customers. Would you characterize this as a broad-based dynamic you're seeing among these customers? Are you seeing any more pronounced issues among smaller or mid-sized biotechs? Amid, you know, the evolving macro backdrop, any high-level color you can share with us on how you're thinking about this trend having a potential impact on growth or sample shipments in 2023? Hi, Neil. Thanks for the question. Yeah, so in terms of what's been happening recently, you know, with the recessionary concerns and the overall macro backdrop, we have seen, you know, a slowdown with biopharma demand, primarily because of their budget concerns and them watching their spend. In addition, it's definitely been a little bit tougher for the smaller biotechs who maybe have cash constraints or have to go raise additional money to be able to move forward with trials and projects. So we have seen that, you know, over the last several months here. In terms of, you know, when it'll start to improve, right now, based upon what we do see, it is continuing today. You know, it's our anticipation this could go on into early 2023, but hopefully, you know, things start to turn around. You know, cancer is, you know, something that is a global problem. It needs to be solved, and drug discovery is an important aspect of what pharmaceutical companies work on, and we believe we have a great tool and platform to help them with it. You know, hopefully this is, you know, a short-term dynamic that we're dealing with. Understood. On a related note, you know, some of your peers have, you know, noted customer slowdowns at clinical trial sites as it relates to staffing shortages. Are you seeing any sort of similar dynamic impacting some of these sample shipment delays or any of your own hiring efforts? Yeah. The sample shipments coming back in from trials, it's definitely slower as well, primarily because when you look at our backlog today, two-thirds of our backlog is for prospective clinical trials, meaning, you know, patient enrollment and sample collection have to occur before we can do work on these projects. With some of the things that have gone on with staffing shortages, you know, starting from the pandemic, it's been going on now for several months, that's another reason for some of the constriction or the tightening in terms of you know, sample flow to us. I would say that, you know, this is probably. I agree with everything that Aaron has said here. I think that pharma has multiple different needs, and one of the areas we're seeing a lot of interest in now is pharma focus on clinical trials that affect drugs being used in earlier stage cancers, for example, in on an adjuvant basis after surgical resection. I think as people are beginning to understand the capability of our NeXT Personal platform, even if next year is a more difficult overall budget environment, I think the strength of our new product will help us there in pharma. We're beginning to see pharma go through pilot studies with NeXT Personal, and as we mentioned, we're beginning to see some larger scale take-up in that. I think as more pharma get through that pilot stage, I think that can lead to growth next year, even if the overall market area is a bit constricted because of recessionary issues. Got it. One last from me. You know, one of the other new entrants in the MRD space recently saw some pushback with the FDA requesting for additional clinical data in order to secure coverage. Do you foresee this response having any implications on your efforts as you pursue the MRD opportunity? Yeah, this is John. I think that the performance of our test and the richness of its information are quite different from some of the other platforms, so we'll obviously be careful about that, and it's part of the reason that we've set up such extensive collaborations so that we will have really thorough data. I mean, we're looking at thousands and thousands of samples that are going to be processed. To some extent, the scale of laboratory that we built when we were working with the VA MVP puts us in great shape to be able to handle such large sample volumes. I think, you know, the FDA and also the insurance companies will be looking for extensive published peer-reviewed data. I think with the collaborations that we have set up, I think we're gonna have some fantastic data and some amazing publications. I think we may be in a different position from some of the other companies in this space. Great. Appreciate the time. Thank you. One moment for our next question. Our next question comes from Max Masucci from Cowen. Please go ahead. Hey. Good afternoon. Thanks for taking the questions. John, one for you to start. Just curious how you're thinking about the ideal, you know, timing or strategy around refreshing or updating your sequencing infrastructure. Just understanding that it takes time to, you know, to complete the, you know, the infrastructure upgrade. Just curious if we look, say, a few years down the road, is there any way that we could sort of ballpark, you know, where the per sample gross margin, you know, ceiling could improve to? Just generally how it compares to what you're seeing today. Yeah, that's a great question. I'd say the timing, as you know, we're working with the Ultima platform, and that's still not been commercially released. Our understanding is that may be released on a full-blown basis in the middle of next year. That may help us quite a bit. Just to put it in context, our current sequencing costs on the high-end NovaSeq platforms that we already have would be the equivalent of about a $500 genome. Going from a $500 genome down to a $100 genome would be an 80% reduction in our sequencing cost. For many of our products, sequencing is the largest single element of cost of goods sold. An 80% reduction in a prime cost like that could be very substantial. We did order one of the first of the new Illumina NovaSeq X Plus systems. Back when the original NovaSeq came out, we ordered 10. In this case, we've just ordered one to sort of see how it goes and compare it with the Ultima system. We've been hearing that that may be delivered in February. I think our expectation is these new platforms usually take a little while to have you know the issues get shaken out of them, and frankly, to compare the two platforms. Let's say by this time next year, you know, I would expect Illumina will actually be delivering on the large flow cell that they expect for the X Plus system, and that's what really will bring the cost down. Somewhere at that point that we'll probably have early access to something like that. I'm guessing that by the time, you know, that the cost really comes down on those Illumina systems, to the extent that we take our products to that platform, you could be seeing improvements in gross margin that might begin in early 2024. You know, similar kind of thing if we ended up bringing some of the products onto the Ultima platform. It could be quite a substantial reduction in cost of goods sold, given how much sequencing we put in. That's intentional, that we've designed our products to be the cancer diagnostic tests of the future, not to be, you know, designed around the HiSeq or something from the past, which many of the competing products are. I think as those new sequencing platforms come out and we can really get them into production, I think they'll help us substantially from a gross margin standpoint. Great. That's fantastic. You know, I know it's only been about a month since you announced the partnership with Olink, but you know, it would be great to hear, you know, where you see the proteomics technology like, you know, the PEA technology sort of addressing, you know, any key limitations of the core MRD platform. If you just take a look at some of the differentiating factors of NeXT Personal compared to some of the other MRD platforms that are out there, you know, whether you see differences in the value of the synergies that, you know, that can be had as we start to sort of, you know, work proteomics into the equation in a more meaningful way for MRD. That's fine. Yeah. I would say, you know, proteomics would be something that would be pretty exploratory for us. I can't say we have anything to say publicly about that. It's an area we're interested in, and we'll certainly work with that, but it's not the centerpiece of what we're doing. You know, I think on the MRD side, two key differences are dramatically higher sensitivity, which means cancer recurrence may be detected, you know, like a year earlier than with some other platforms, so really substantial difference for patients. In addition, the fact that our MRD assay isn't just an MRD assay. It's not just measuring whether the cancer has recurred or not, it's not just quantifying it, but it's providing deep characterization of the tumor. We know that many tumors have a lot of dynamics to them, that there may be certain sub clones that are changing relative to others, and that may substantially affect the success of treatment. You may see resistance to the therapy that the patient is put on, but opportunities to use a different therapy. That richness of data to guide the actual decisions of the oncologist, not just detecting or not detecting, is really pretty transformationally different. I think we're pretty much the only tumor-informed test that has that kind of capability, and the tumor-agnostic tests just aren't really sensitive enough. I think we have the best of both worlds in that regard. I think it's an important difference, and we've put a lot into that. About half of the content of NeXT Personal is not aimed at MRD, it's aimed at characterizing the tumor and seeing how the tumor is changing dynamically. I think that'll turn out to be a really winning strategy for us. Great. I'll sneak one final one in here, and I will acknowledge that I'm probably front-running this question by at least a year, but it'd be great to hear your opinion. I mean, we're starting to see the next phase of, you know, development and optimization of MRD monitoring platforms. You know, I guess one obvious anecdote would be rising interest and acceptance, you know, that we've seen, you know, for MRD approaches that employ upfront whole genome versus whole exome sequencing. You know, there's rumblings of potential integrations of long-read technologies and whatnot. If you look at your IP portfolio, you know, it would just be great to hear, you know, which aspects of the platform you feel are best protected, you know, most defensible, things of that sort. Sure. I think that, you know, the two key areas that we've focused on from an IP standpoint have been the use of our whole genome sequencing upfront to identify the largest number of variants. We've talked a bunch about that. Then also IP around the combination of what we would call fixed and variable content. The fixed content being the tumor-agnostic content and the variable being the personalized content to do with that individual. Those are two real centerpieces. We have IP that covers a variety of other things, but I think if you focus on those two pieces, those would be the most helpful. I'd say in terms of long-read sequencing, probably not so useful in the MRD space because, again, MRD is mostly being measured from cell-free DNA, and most of the cell-free DNA molecules average about 165 bases long. Even though it would be, you know, the long read technologies are admirable, the molecules just aren't long enough to require it. I think, you know, it's part of the reason that we've focused on some of the very high throughput shorter read platforms like Ultima Genomics, because I think liquid biopsy is an enormously important tool going forward, and it's pretty much all short molecules. I think that's more important for us, at least in oncology, than the long-read platforms are. Great. Well, thank you as always, for the great color. Appreciate it. Good. Thanks. Thanks, Max. Thank you. One moment for our next question. Our next question comes from Patrick Donnelly with Citi. Please go ahead. Hi, this is Lizzie on for Patrick. Thanks for taking my question. I was just wondering, I think last quarter you mentioned that you're opening a new Shanghai facility the beginning of next quarter, and you expect to see revenues kind of accelerate through 2023. Is that kind of the same timeline we should think about just given the recent lockdowns again? Thank you. Yeah. We don't anticipate any revenue here in 2022. We believe it's gonna accelerate into 2023. In terms of the expectations, we haven't given formal guidance or an estimate just yet, but, you know, revenues are gonna be moderate in 2023 and then ramp from there. I'd say that one of the things that's important to understand about our initiative in China has been that it was really all driven by pharmaceutical companies saying that they really needed to have a capability to run international clinical trials where they're recruiting patients all over the world. From anywhere in the world other than China, they can just ship the samples to us and that works fine. They're not allowed to ship samples out of China, so they asked us to open a facility in China where we could handle the samples just directly in China and return the data to them in China. What that's enabled, though, is for large international trials where, you know, it may be that only 5% of the patients are actually being enrolled in China, the other 95% are outside of China. Because we can do that 5% in China, we get the entire deal. We've seen revenue. We haven't recognized revenue actually processed in China yet, but we've had $ millions worth of orders from pharmaceutical companies where we won it, in part because we could handle that small percentage that's in China. The larger part of our revenue that will be, in a sense, caused by us having or the benefit of us having a China operation will actually be recognized here in California. Oh, great. Thank you. That's interesting. Then on supply chain, I think last quarter, you said that this quarter, there'd be some alleviation. Is that sort of the same way to think about, you know, as we head into Q4 and into 2023 as well? I'm just going off of the labor question earlier. Thank you. That's it for me. I'm sorry, can you clarify the question again? We didn't quite understand. Yeah, just anything on what you're seeing on supply chain. I think you may have touched a little bit on this when you spoke about labor as well. I was just wondering if you could, you know, elaborate on that. Were you able to hear me? Yes, now we've got it. Thank you very much. Okay. Yeah. Actually. Thank you. Yeah. I think we had supply chain issues substantially a couple of years ago when COVID first started. But I would say, you know, it's probably pretty much back to normal at this point. I don't see that being a restriction for us. Many of the issues that we had in the past because of reagents that were used for RNA because the primary vaccines were made from RNA, a lot of those reagents suddenly had shortages and some of the lab plastic ware and so forth. But that's kind of a thing of the past at this point. We're generally able to get what we need and I don't see supply chain as being a limiting factor for us. Great. Thank you. Thanks. Thank you. One moment for our next question. Our next question comes from Mark Massaro from BTIG. Please go ahead. Hey, guys. This is Vivian on for Mark. Thanks for taking the question. Could you give us a sense for what factors drove the gross margin during the quarter, how we should think about modeling for 2023, and any potential lift, maybe contemplating some VA revenue coming back on? Thanks. Sure. In terms of the gross margins, Vivian, in terms of the Q3 dynamics compared to a year or so ago, you know, the 20-point decline or 19.5-point decline was predominantly from volume. Although we had a little bit of expenses going up because of the biopharma business and supporting that, you know, which is more labor intensive, for the most part, it's been the drop off in the VA MVP volume that caused most of the reduction in margin points. In terms of the VA MVP, as John had mentioned in the prepared remarks, one of the competitive bidders did file a protest. Until we hear back from the VA in terms of the outcome, it's hard for us to know exactly, you know, what the sample flow is gonna look like. You know, from our estimation at this point in time, the $10 million order we did receive, it's our expectation that we would fulfill that in the first half of 2023. We're very pleased about the contract award, primarily because it is a five-year exclusive contract. We've been the sole provider with the VA MVP for the last close to 10 years now. You know, it's exciting that they're collecting samples again, they're enrolling new veterans. In terms of the number of samples that they have in their freezer in Boston, it's still a significant number. It's probably more than 700,000 samples. We believe that the program has many, many years to run. Yeah, this is John. I would just comment that protests like this are not that unusual. We had one of these with the VA contract that we received back in 2013. You know, we of course respect that the VA will go through, I think, a thorough process on this. What happened with us, at least back in 2013, was after a period of reanalysis of things, we ended up being still awarded the contract. We hope to hear about this in the next month or two here. You know, obviously, we'll communicate what happens. If things go well, we certainly look forward to continuing what's been over a 10-year track record with the VA. Got it. Thanks so much for that. You also mentioned initiating outreach with oncologists for NeXT Dx. Can you just refresh us on the timing for the MolDx submission? Could you also give us a sense for the pipeline and demand that's been building there? Thanks. The timing we expect the MolDx submission to be in the first quarter of next year, and hope to have an approval in the second quarter. That's the timing. I think, basically the timing. We have been going out. We've launched our sales force. We've brought out the newest version of our NeXT Dx test at the end of September. We've been beginning to receive orders for the test, and we've been beginning to invoice them to payers. I think it'll be, you know, pretty small revenue until we get the, you know, reimbursement decisions online. We are actually processing tests and invoicing them today. Got it. That's it for me. Thanks for taking the question. Yeah. Thanks, Vivian. Thank you. One moment for our next caller. Our next question comes from Derik De Bruin from Bank of America. Please go ahead. Hi, good afternoon. This is John on for Derik. With the cash use being down this year, in terms of your thoughts on operations cash burn for 2023, are you still looking in the range of $80 million-$85 million or has there been any update there? Hi, John, this is Aaron. In terms of the cash on balance sheet, we do have more than two years of cash on balance sheet at the end of Q3. In terms of looking forward, the operating cash burn, we're expecting that to be below $85 million. This year, 2022, is a little bit unusual because we are setting up our new headquarters facility, and it's gonna cost us roughly $38 million or so of net cash this year. Going forward, the operating burn is gonna definitely be below $85 million. Right. Thanks for that. Yeah, taking out that any cash use for the new building, what sort of CapEx demand are you looking at? Are you expecting any additional orders of new instruments? Yeah. In terms of new capacity, CapEx, as we look forward here, you know, most of the spend right now that we see is for the new facility. In terms of a refresh on sequencing equipment, I think John, you know, answered that a little bit ago. There's a lot of potentially exciting new technologies in the marketplace. None of them are really production ready just yet, and so we don't see ourselves adding any sequencing capacity with older technology. You know, we're gonna get through the next several quarters here with what we have, and then we'll have to take a look at, you know, where some of these suppliers are at, like Illumina and Ultima and others. Yeah. I would just comment. I think in terms of the new facility, part of the expenditure that we've had this year already for the new facility actually has been new equipment, not in sequencers, but in terms of a lot of the robotics. We use a lot of high-end laboratory robots. They can be $500,000-$700,000 a piece, and there's quite a few of them. You know, we need to get the new lab up and running while the old lab is still running. We've actually added a fair amount in terms of laboratory robotic equipment this year that's brand new for the new facility, and that's been part of the cash burn in building out the new facilities. I think, you know, by the time we're fully in there for next year, I think we'll be in great shape in terms of, you know, the robotics, which can be a substantial expenditure. I think, you know, the question may be on the sequencer side, but at this point, you know, we have to see how well the new instruments work when Illumina's come out with a new instrument, but they've said they won't have the high throughput flow cell for it, which is probably the biggest driver for that platform. That's projected by Illumina to be in the second half of next year. We don't know when in the second half. I think if it turns out that that's you know early in the second half and it works well out of the box, then you know we could be looking at things in the third or fourth quarter. If it turns out that the new flow cell isn't really you know ready until near the end of next year, then it could be 2024 before that would drive some uptake on the platform. Gotcha. Appreciate it. If I could squeeze in just one more. Your Natera contributions has been pretty steady the last couple quarters between $7 million-$8 million. Any potential changes there? If you could speak to that'd be great. Yeah. We haven't given any formal guidance or estimates around the Natera volume. The Natera volume, you know, has continued to tick up or increase over the last several quarters here. We believe we have a pretty good partnership with Natera. In terms of where this volume goes longer term, we believe that the tumor-informed MRD products are the way to go. Natera's done a good job in the marketplace on the commercial front, getting reimbursement. You know, it's our expectation that our business with Natera, you know, could continue to grow as we go into the future. I think people have asked us about, I mean, we have an MRD product, and obviously, we're helping Natera with their MRD product, and they've asked about whether that's an issue at all. The products are so different that they really address different parts of the market. We actually see them as it's a way of happy to work with Natera and, you know, help on the front end of what they're doing in their segment of the market. We have our own product coming, but it's gonna be addressing different parts of the market. I think they're both. There's plenty of room for both products, and I look forward to a lot of growth in the MRD segment. Thank you. Thank you, John. One moment for our next question. Our next question is from Mike Matson with Needham. Please go ahead. Hi, guys. This is Joseph on for Mike. Maybe a question around Natera first. I saw a press release today that they announced an agreement with a VA MVP for basically a Signatera processing for the Veterans Affairs. Can you maybe speak to your involvement, essential involvement in that? I guess maybe more importantly, is there potential for a similar contract or maybe competitive bidding with the, you know, VA MVP for using NeXT Personal in these efforts? Kind of what does Personalis really have to do in the coming months or year to really be an option for the VA in MRD testing? Thanks. Great question. Let's see. Just to clarify a couple of things, the contract that Natera won from the VA was not from the MVP, it was from the clinical side of the VA. The Million Veteran Program is a research project that's funded entirely out of the research side of the VA. The MRD testing that Natera won was through the clinical side, so they're really different segments. Personalis was not in a position to compete for any of that, the MRD part, at this point because we don't have the diagnostic version of our MRD product out yet. We expect that in 2023. At that point, we would have things. Again, we would be at, you know, pursuing probably different parts of that market from what Natera is doing. Once we have the diagnostic version of NeXT Personal, then that would be something we'd be happy to work with the VA or other major hospital systems to implement. Okay. Yeah. Thank you for the clarification. I guess we haven't gotten too much commentary on any future population sequencing contracts. Obviously, we saw the announcement with the new task order for the VA MVP, which is encouraging. Just given that we're kind of seeing reduced pharma spend going into this recessionary environment, are you seeing any increased or decreased interest from governmental bodies to take on some types of efforts like these, whether in the United States or internationally? Thank you. Sure. Happy to answer that. Yeah, we actually spent some time looking at Pop-Seq opportunities outside the United States a couple of years ago, and we found two things. One was that many of those countries want that work to actually be done in their own country. It's an issue of employment and building up local sequencing capabilities in addition to generating the data. So rather than us setting up subsidiaries in all those countries to do those things, we've often found those efforts have gone often to academic labs inside of those countries. I'd say also a lot of population sequencing efforts really slowed down during the pandemic when it was difficult to recruit patients and hospitals were chock-full of those patients. That's probably beginning to speed up more, but we've just put all of our effort into the oncology side of the business. We see such an opportunity there, particularly with being able to so sensitively detect cancer when it's either after surgical resection or when the patient has responded to an immunotherapy, where today there's really almost no solution to that problem that can really see what's going on. That's what we put our energies into. At this point, we will happily continue to work with VA MVP, and if there were opportunities, opportunistically we would look at population sequencing, but it's no longer an area that we're really actively pursuing from a commercial standpoint. I think the way that we'll be augmenting our pharma business is a, with expanding our pharma business into many more time points because of the MRD product, but then also supplementing it with diagnostic revenue, both from our NeXT Dx test as it gets reimbursement and with our NeXT Personal test. Okay. Thank you very much for taking our questions. Good. Thank you. Thank you. Again, if you have a question, please press star then one on your touchtone telephone. Please stand by for the next question. Our next question comes from Arthur He with H.C. Wainwright. Please go ahead. Hey, good afternoon, John and Aaron. This is Arthur He for RK. I just had a quick one on the VA program. Assuming the favorable outcome for the initial contract, when could we hear the decision from VA for the following four-year option? What's the main factor to drive their decision, in your opinion? Thank you. Yes. This is John. Assuming that this goes forward, we would be working off of the task order that was already issued back at the end of September. It's possible there could be additional task orders during this year. We don't know whether that will happen or not. In our prior experience, where we had multi-year contracts, generally the amount of money that would be applied each year towards the contract would be decided in September of that year, often near the end of September, because it's the end of the government fiscal year. It wasn't unusual for it to be the last few weeks of September. But at this point, You know, with this contract decision and assuming that there's no issue with the protest, the VA is now free to go ahead and continue to issue task orders to us over the next five-year period of time, without having to do any competitive rebid or anything like that. I think we don't know what the size of that will be. Obviously, the VA has the option to start something completely new if they wanted to. The most straightforward thing is, since we've been doing sequencing for them for over a decade, and they've just given us this contract that's so easily extensible that way, historically, what's happened is they've just extended it every year, decided the amount of money that they could afford to spend on it, and that's been the next year's task order. It usually happens in September. Okay, thanks. Thanks for taking my question. Thank you. Thank you. I'm not showing any further questions. Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Have a great day.