Good morning, everybody. Welcome to our discussion with Veracyte. I'm Doug Schenkel. I lead Wolf Research's Life Science and Diagnostic Tools team. It's my pleasure to welcome the company's CEO, Marc Stapley, and Chief Financial Officer, Rebecca Chambers. Thanks for making the trip out. Thanks for having us, Doug. It's a pleasure to be here. I think looking around the room, I think everybody here knows the Veracyte story well. That being said, it's possible there's some newbies either here or on the webcast. For those of you who don't know, Veracyte is a leading genomic diagnostic company that sells tests to help clinicians diagnose and guide treatment decisions in cancer, initially with a focus on thyroid and prostate, but broadening from there. This enables more precise patient care. This has been one of the best management improvement stories over the last several years, and the company continues to grow at a really robust rate while expanding margins. One of our favorite companies in our coverage universe. That's not just because I like you guys. In terms of the agenda for today, I thought we would start by spending a few minutes kind of just state of the company. I think embedded in that, teasing out a little bit of your philosophy on kind of balancing growth in a responsible way. Then I want to go to product specifics. We'll spend a few minutes both on Decipher and then Afirma. Then I want to get to the pipeline. That's a lot to cover in half an hour. Why don't we get into it? Revenues on track to more than, I think, over four years revenues will, you're basically on a pace to basically double revenues in a fairly short period of time. You've meaningfully expanded EBITDA margins and actually increased guidance over several periods over the last few quarters. You're now pacing towards, I think it's over 25% EBITDA margin this year. Do I have that right as the coffee's kicking in? Is it fair as we just kind of think about where you are now and where you were a few years ago? Are you tracking ahead of plan? If so, how much of that has been market versus internal efforts? Excellent question. Actually, before I answer, maybe I should just do a quick reminder of our Safe Harbor statement for everybody to the extent we're making forward-looking statements. You can find our full statement on our website, www.veracyte.com. Thanks, Doug. Appreciate the setup there for the question. Yeah, the company has done an incredible job. A large team of Veracyte employees driving the core business forward, creating an interesting pipeline, managing the business responsibly. Philosophically, Rebecca and I both came into this, and our leadership team is totally aligned with this philosophy, as of course is our board of, you've got to balance growth with kind of a responsible approach to portfolio management. That's pretty much the best way to look at it. In doing that, we focused on projects that we think provide a decent near-term return, medium-term, long-term, such that when you layer those all together on top of the core product portfolio of Afirma and Decipher, you can drive sustainable double-digit growth going forward for the company into the future. That is just based on the pipeline that we talk about. We obviously have a lot of things also going on in the company as well. Very, very strong performance to date. As you mentioned, revenue has grown substantially driven by Decipher and Afirma. The pipeline has grown, and then the profitability, I think, is a really exciting story. To answer your question directly, yes, we are ahead of plan. We are ahead of where we anticipate ourselves to be both in terms of Decipher growth, which has been over 25% for 14 quarters in terms of volume. Vastly outsizing the deal model. A good point, yeah. Of course, Afirma growth, which has been year-over-year growth for 13 consecutive quarters, which I think when we came in and investors felt this way too, the general consensus was it's starting to plateau, which it clearly hasn't. The beauty is both of these have, and I know we're going to get into this, but incredible opportunity for growth from here because in terms of our penetration of the total addressable market, it's still relatively early innings. Yeah, and we will unpack this in a little more detail, but the way I kind of dumb it down for myself right now is Afirma, which, I mean, amazingly, I had to double-check this. It's down to about a third of sales at this point, which I think just speaks to how well Decipher has done. It does seem like Afirma, even as penetrated, that over the next few years should be able to continue growing at least in the mid-single digits. Then on the Decipher side, we got that growing another 20% plus, at least in 2026. It does seem like there's still a lot of room to grow. Basic math, if it were only those two things, you can grow double digits for a little while. Yeah, I mean, we haven't given any long-term or even at this point, 2026 guidance, but certainly we've made the statement that we feel that we can comfortably with those two products alone grow into the double digits here. When you layer on the portfolio as well, some of which kicks in as early as next year with Prosigna and MRD, albeit early stages for both of those next year. Those aren't even included in that statement. We feel very good about where we are. Yeah, totally agreed. One other thing to note is we won't be guiding with those in either for next year. Next year in mind, yeah, the new products. That would be awkward if we weren't guiding with Afirma and Decipher, but now the new products. Also, I think when it comes down to it, what we're really focusing on next year is getting reimbursement, getting the launches done on time, and we'll get into the pipeline, but kind of metering out the adoption to ensure a good customer experience. Building off of what you talked about in terms of the philosophy, responsible growth, you're enthused about these products, but we'll come back to the new products. Putting those to the side for a second, philosophically, is it important or strategically, is it important for the company to diversify? It is, although let's just take a kind of step back and look at the industry. There's quite a lot of companies that have been very successful even with single products. Of course, Veracyte was a single product company not that long ago, in fact, up to the point that we came on board and right before that, the company had acquired Decipher. I think it is important for the reason I said earlier to have these layers of S curves that lie on top of each other. Even without those new products, though, Decipher and Afirma would be sustainable growth for the company for the foreseeable future. Here we are with this great opportunity with a profitable cash-generating business to invest in new pipeline, to be part of this MRD story, which we think is very important to launch Prosigna as a test to tackle the international markets and to have innovative new products like Nasal Swab. We're in a position where we're able to do that thanks to the benefit of those two tests that are very well established. So yeah. Is there any risk associated with, I mean, you have two great franchises right now. The products we're going to talk about that are in the pipeline are really exciting. How do you manage the risk of going broader? Yeah, that's a really interesting question. I think that might be one of the kind of misnomers out there. You don't have to, when you launch a new product in this space, you don't have to invest your entire profitability in order to do so. I think the launch of new products and the maintenance of a reasonable operating margin target like we've put out there are not mutually exclusive. You can do that together. We think about growing these new businesses responsibly, adding sales teams at a meaningful but relatively manageable clip initially, and then seeing how the opportunity is starting to grow. You start to think about adding more sales teams after that, coming up with new indications, supporting new clinical studies. One of the other things is what drives and fuels this business is evidence. Our model in terms of how we generate and enable the generation of new evidence, which will apply to future products, enables us to do that without us having to necessarily invest the R&D in that as well. You get some fuel from outside of the company's P&L as well. Let's pivot to Decipher specifically now. Just to frame this, as we talked about before, it's about tracking to about 60% of sales this year, on track to grow well over 20% revenue-wise. For those of you who don't know the product, it's a genomic classifier used on prostate cancer tissue to predict a patient's risk of metastases and help urologists, oncologists tailor how aggressive treatment should be. Did I do okay there? You did. You did brilliant. You delivered another quarter of over 25% volume growth in the third quarter, recognizing again you have not guided 2026, but I did provide a framework, which you did not yell at me about. What gives you the confidence that Decipher can keep growing at rates close to current levels? I am thinking about things like mix, market penetration, share gains. How should we think about this? You should think about it initially all of the above. If you think about the tailwinds that we've got in Decipher, you've got a couple. One, the market is still significantly underpenetrated for molecular diagnostics in general. Coming into this year, the market was, we represented about 25% of the overall addressable market. When you look at our opportunity, both in terms of market penetration and market share gains, that is all there for the potential taking for Decipher as a test. As I said earlier, and this is really the second tailwind, evidence drives adoption. It drives reimbursement. It drives guideline inclusion. Decipher has over 200 publications and is the only test with NCCN level 1 guidelines behind it. We're continuing to drive more evidence. There's a lot in play, and you hear us talk about that every quarter. In addition, we've added the metastatic indication this year, so another 30,000 patients. There's an opportunity to go after some of the prevalent population in biochemical recurrence driven by evidence. You've got incidence growth of single digits there as well, unfortunately, driving more men to need to be tested with our test. Any other. High risk. We're starting to see high risk has always been one of the least penetrated markets. With the evidence that's been coming out, particularly in metastatic and with very high-risk patients, we're starting to see that really demonstrate some growth. It was actually one of our highest growing indications last quarter. I think high risk is another tailwind. You're absolutely right. In terms of studies, STAMPEDE, BALANCE, are these the key studies we should be looking at in terms of the influence they could have on accelerating adoption? Those are many more. I mean, they're both very different. STAMPEDE obviously addresses the metastatic population. It's a kind of a predictive outcome, which is Decipher is helping to determine which patients are going to benefit from chemotherapy and which aren't. BALANCE is around new signatures like PAM50 and how that can be used. There are numerous other studies that are in play coming out. By the way, sometimes studies come out and we don't even know about them, which is the beauty of this model driven by this data, the approach that we have. From a commercial standpoint, I mean, this is the indications, I guess if that's the right way of framing it as we think about high risk, if we think about metastatic, it's still the same doctors, but I guess this is a long-winded way of saying, do you need to invest more in commercial or can you leverage the infrastructure you have to basically get after all of these Decipher opportunities? Yeah. I mean, that is, I think, has been a key and excellent question that we've answered over the last few years by demonstrating the leverage there. We're still seeing record numbers in terms of new physician growth and growth per physician. While those are continuing to increase with the sales team we've got, which is roughly over 50 sales reps, we don't see the need to continue to expand that. We have optimized our territory allocation and it's working. There's an optimal equation to this. You don't want to actually go too far too soon or you disrupt territories. We're very happy. We don't actually think that that is one of the factors. Certainly when you think about revenue growth and sales and marketing growth, there's leverage there in the future. Absolutely. It would not be a discussion in 2025 about Decipher unless we talked about digital pathology. I think there has been, how do I frame this? Coming into the year, I think a lot of folks in the investment community viewed some of the new digital pathology products as a potential threat to Decipher. That certainly has not shown up in the financials thus far. I would say there have been a number of positive developments recently, including prostate cancer guidelines coming out of NCCN that indicate digital pathology tools should not be used on a standalone basis. Where do you think the debate sits today and how are you thinking about the role of digital pathology? I think where it is is where we felt like it should have been from the beginning and there's been a lot of noise around this. Decipher is now clearly the gold standard driven by the over 100, 200 publications I mentioned earlier and the guidelines. Physicians, when they get a discordant result between Decipher and another test, whether it be digital pathology or something else, they lean on Decipher as giving them the treatment path and the other test might lose credibility in that situation. I don't think that's good for the industry. I think there is an opportunity for digital pathology here, but it has to follow, in our opinion, and a lot of KOLs feel this way too, has to follow the same path we took with Decipher, which is generate the evidence and then let the evidence speak for itself. Do not confuse the physician and give him clear if this, then that outcomes based on strong level 1 evidence. That is what we are going to continue to do so. We are supporting digital pathology research by scanning every slide that comes in, over 100,000 scanned already. That is now part of our standard workflow. We are doing research. Others are doing research on the data. It is available as a research-use product in GRID. All sorts of, I think, good things are going to happen with this in the future. It will be alongside Decipher as a standard of care. The timing of which is going to be highly dependent on the science, to Marc's point, right? I think the molecular features, signatures that we talked about on the last earnings call are a good example of how we're going to do digital pathology as well, right? The clinical evidence got strong enough to justify moving it on to the proper report. We are in the process of doing that. You'll have a molecular features report in addition to your Decipher report because the science is now robust. If and when digital pathology gets to that same point, we'll follow the same path. That is the whole strategy between moving from an RUO report to the clinical report is, let's let the science advance. You do not want to put the patients at risk. This is a research-use product. All in good time, we'll have it on to the main report. We are not the governor on that, if you will. I would think of anybody, and this isn't to take away from some of the other innovators in digital pathology, but given everything you just described, you guys are pretty uniquely positioned to develop a top-notch digital pathology product when the time's right. Is that fair? We have obviously the tissue samples. We have the scanned images. Now we have a whole transcript and we have outcomes for many of those patients. We are very well positioned to provide the research community with the data that would support a digital pathology offering in the future. We can all speculate what that might be. I think, as Rebecca said, let the science drive it as we did with Decipher. That formula has worked really well, as you can see. Okay, let's pivot to Afirma for a few minutes. We've talked about this already in terms of the growth profile and the percentage of sales. For those who don't know it, it's a genomic test used on thyroid nodule biopsy samples with indeterminate cytology to help determine whether surgery can be safely avoided by identifying nodules that are likely benign. In the third quarter, volumes actually grew, I think it was low teens, while revenue growth was tempered by prior period collections from last year. The ASP trends depressed the revenue a little bit relative to volume, but that was pretty good volume. Now, a couple of times, I think it's been, we've talked about this being a more mature franchise. I've talked about this as probably normalizing around mid-single digit growth. Again, the volumes are still there. There is an opportunity to, there's levers like class five, class six usage, GRID, just taking share. Another long-winded way of saying, are we being too conservative in thinking about this as a mid-single digit grower? Yeah, I don't know whether you're being too conservative or not. We haven't given longer-term guidance around Afirma. If you think back, as I said earlier, 13 quarters of year-over-year growth for Afirma, which I think surprised us all. If you think about coming into 2025, we had about a third of the market, addressable market. Whether in this case it is more of a share gain than a market penetration story, but it's both. We have a tremendous opportunity to continue to gain share there. With the evidence and the tailwinds you mentioned around expanding into indications, we added TERT a couple of years ago. We launched GRID. We're driving more research. It's really great to see so many publications coming out now that start to use GRID. We feel pretty bullish about the ongoing growth of this product. It's nowhere near its maturity level yet. I wouldn't say Afirma is a mature product. Yes, it's been on the market for 13 years. With the kind of growth that we've seen, there's plenty of opportunity already to go in the future. Yeah, I think probably using a somewhat dated market model, we have pretty high market penetration. When you think about all the extensions you've done, how penetrated do you think you are right now? As I said, I mean, I'm not adjusting for this year, but coming into the market, we were about 25% of the time, 33% of the time, third of the time in Afirma. I'd say the, and we have about 52% market share coming into this year. Obviously, that's probably grown a little bit. It's hard to get the numbers, so it's hard to be precise. If you think about it that way, there's a significant part of the market both to go after in terms of penetration, but in particular, share gains, which we've been on that, clearly that drive of gaining share. There's nothing that I can see that would prevent that, cause that to slow down or prevent that from happening in the future. We've got all the tailwinds, and I don't see too many headwinds in that respect. What's the right way to think about the transition of Afirma samples to the V2 transcriptome in terms of whether it's product positioning or more below the line dynamics? Yeah, I think it's actually both. On the product positioning side, one of the headwinds that Afirma has historically faced is that we don't offer slide scraping. And what that impacts is your no-result rate. When it comes down to it, the new transcriptome has, at least as of the end of the third quarter, looking like it potentially has a lower no-result rate. I think from a market positioning standpoint, that's really good news for physicians. If that holds through the rest of this year, we'll roll that out from a commercial messaging standpoint in the first quarter of next. Below the line, absolutely. I mean, we haven't quantified it because we're working actively to reinvest in all the growth drivers. In 2026, you're going to see a higher testing gross margin definitively by definition. I would say the third thing that you didn't mention, but I think is impactful, is effectively we are standardizing the laboratory over, call it a five- to ten-year period on two assays, whole transcriptome and a whole genome, right? Effectively launching new products like Prosigna becomes incrementally easier each and every time because the workflow isn't changing. It's just the bioinformatics and software. From a kind of continuous improvement and leverage standpoint vis-à-vis different products being able to be put in the lab, I think it's going to be shown to be very, very impactful over that five-year timeframe. Excellent. All right, let's talk about the pipeline. I want to spend some time on MRD, Prosigna, and then Nasal Swab. True MRD, your plan is to launch the test in muscle-invasive bladder cancer first half of next year, correct? Okay. Can you just talk through how you're differentiating here? You have the commercial infrastructure, but it's not just that. I mean, I think more importantly, you're talking about the power of using whole genome sequencing at every time point. Maybe you could just talk a little bit about how you're differentiating here. Yeah, that is the differentiator. MRD is a platform for us, right? The first test, which we should really think of as the first proof of concept here, is muscle-invasive bladder cancer, where you're absolutely right. We do have the channel already, at least 70%-80% of that channel that we can go after in urology. Really, it's a platform, and we're going to launch it in other indications as well. The differentiation is going to matter in every indication. That is a whole genome approach every step of the way. Many sequence a whole genome upfront in terms of getting after the tissue component of this and also, in some cases, the blood. Our approach is to do a whole genome on all of the surveillance samples thereafter. This fits very well in with Veracyte's philosophy around more data drives more insights, drives more evidence and adoption. We think that longitudinal whole data, you really do not want that pencil, do you? We think that. That's something else. There you go. That longitudinal whole genome data every step of the way is going to be incredibly valuable from a research perspective. It is going to drive that flywheel effect of others doing research on the data. It is really going to help to differentiate. There are other kind of more technical differentiations of doing a whole genome in terms of performance, amount of blood that you need, turnaround time, and so on. All those are great, but it is that data component that I think really matters. You've talked about adding roughly one new MRD indication per year after Bladder. I think it, tell me if I'm wrong, it probably makes sense to focus, if the science is there, of course, on cancers that you can leverage your existing infrastructure first. Is that right? That would be a logical approach. Obviously, we're going to be building some of that infrastructure for other tests like Prosigna, for example. We will have some infrastructure as well that we can leverage there. There are quite a few variables in terms of the order we go in. There is cohort availability, the test performance and evidence that is coming out on those tests, and then the channel. I would not say it was just one thing we would consider. It would be the collection of those factors that would help us determine which is the right order. We are not sharing the order because we are still figuring out some of those variables. Some will flip and change over time. Two, I'm not sure it actually makes sense to give that precise order and be held to that because if we make changes, it'll be for a very good reason. It just gets into another conversation around why did that change. There'll be negatives created around that, which when they don't need to be. We'll just be on our way just as we do, executing, launching MRD tests into the marketplace at the right time and with the right evidence behind them. I oftentimes get questions about how does Veracyte or, frankly, any company come in and compete with Natera, given how great a job they've done in really developing this market in so many ways. I mean, you obviously feel really excited about your scientific differentiation in the areas you're going after, but not to take anything away from what you're doing. As somebody who likes to play in Microsoft Excel a lot, is there an argument that if you can generate $20 million, $30 million, $40 million in incremental revenue with a new product in year one or year two, again, my number's not yours, that does make a difference to the company from a growth standpoint. I mean, is part of this just developing good products, not that that's easy, and having the infrastructure to generate incremental revenue? First and foremost, the part of this that matters is the care continuum. We're offering patients very early in their awful cancer journey a prognostic test, a diagnostic test, a predictive test to help figure out their treatment. Veracyte needs to be able to offer tests post-treatment. We looked at MRD as something we needed to have in our portfolio because it completes that care continuum part. It is very important. I actually think it will be an advantage to have a diagnostic, be the diagnostic partner who's able to go all the way through to helping those patients and those physicians post-treatment. That is first and foremost a strategic focus. Having a platform that gains some market share, and you don't need to put a very high market percentage in there to make our acquisition and our business case work very favorably. I think from a financial standpoint, that's important. I don't take anything away from what Natera has done. They've created the early part of a market, still the early part. I mean, it's not significantly well penetrated yet, but they're doing an amazing job of creating that market. There are very rarely single players in these markets. It's a very crowded space. I think what's going to matter in terms of other players having any meaningful penetration is differentiation. We've talked about our differentiation. We think that's going to matter. We think it's going to fuel growth. I don't think about it as what's the number in the spreadsheet in year one and year two. Yeah, that's me. You do. I think about it as the long term and the multiple indications and the size of this market and how meaningful it could be for Veracyte. That is after I think about what the patient impact is. I started with that. Maybe, Rebecca a question. What's a low regret Prosigna launch look like? Yeah, actually, I think a low regret Prosigna launch really looks like really strong optimal data, right? I think it comes first with the data. We will know that at ASCO next year. Hopefully, that'll be a very positive readout. Shortly thereafter, in the middle of next year, we'll launch. In year one, getting a tech assessment reimbursed, the data looking good, and effectively the launch going off on time are the three data points I care most about. This isn't costing us a ton of money, right? I mean, this is another test going into our lab. We're going to start with fewer than 10 sales reps. We're going to go after the KOLs. I think for me, it's less about volume, and it's much more about do we have the KOL engagement? Are we working on the signatures to put onto an RUO type report? Are those KOLs bought in? Those are the data points that we'll be looking to more so than volume. Part of the reason why we're not guiding is because with the new products is I don't think if we put too much focus on volume in the first year, we're going to miss the long-term opportunity. I think really, if we break even year one, great. That's not my expectation by any stretch of the imagination. I think a no regrets launch is just getting those three factors really off the ground and running in a good way. Marc, OPTIMA p relim and other studies suggest Prosigna may be better at stratifying risk in certain HR- positive and HER2 negative populations. What do you need to see from OPTIMA-Main and maybe other data sets to support NCCN breast cancer guideline inclusion with level 1 evidence and maybe ultimately be in a position to take some real share from the incumbent? Yeah, I mean, we're excited about OPTIMA-Main. Bear in mind, of course, that data hasn't been published. The preliminary data was very encouraging. Main is a prospective study with a lot of patients. We're excited to see what that shows us. If that shows a favorable outcome using Prosigna for those patients, I think that will really give us a boost in terms of evidence. It will demonstrate that Prosigna has incredibly strong utility and we'll be off and running with our test. That's why we're launching it when we're launching it to coincide with that. Frankly, I think had we not done that, the reasonable question from investors would be, you've got this great asset. You've got these great results. Why aren't you commercializing this? Obviously, we are. That came from within the company. As Rebecca said, we do not need to gain a ton of share. I think in the worst cases, this is a test that has utility and is utilized in a meaningful percentage of patients. The best case is, as we have demonstrated with Decipher, strong evidence drives to market leading share. The answer is somewhere between those two bookends in the future, we believe. We will be ready to launch. We do believe that the.