Good day and welcome to the Myriad Genetics Fourth Quarter 2023 Financial Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder this call is being recorded. I would now like to turn the call over to Matt Scalo. You may begin.

All right. Thanks Michelle and good afternoon and welcome to the Myriad Genetics fourth quarter and full year 2023 earnings call. During the call, we will review the financial results we released today and afterwards, we will host a question-and-answer session. Our quarterly earnings release was issued this afternoon on Form 8-K and can be found on our website at investor.myriad.com. I'm Matt Scalo Senior Vice President of Investor Relations and on the call today are Paul Diaz, our President and Chief Executive Officer; Scott Leffler, our Chief Financial Officer; Sam Raha, our Chief Operating Officer; and Mark Verratti, our Chief Commercial Officer. This call can be heard live via webcast at investor.myriad.com and a recording will be archived in the Investors section of our website along with this slide presentation. Please note that some of the information presented today contains projections or other forward-looking statements regarding future events or the future financial performance of the company. These statements are based on management's current expectations and the actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time-to-time with the Securities and Exchange Commission, specifically the company's annual report on Form 10-K, its quarterly reports on Form 10-Q, and its current reports on Form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections or forward-looking statements. I'll now turn the call over to Paul.

Thanks Matt. Good afternoon everyone and thank you for joining us. On today's call, we will discuss the highlights from our fourth quarter and year end performance and provide an update on the progress we continue to make accelerating profitable revenue growth. I want start by thanking the team here at Myriad Genetics for their efforts this year. Despite the challenges we faced in 2023, our team's commitment to delivering on our mission was evident as we serve more patients and added more customers than ever before. Next slide please. Our overarching goals are to continue to develop best-in-class molecular diagnostic tests to better detect disease, support treatment decisions, and improve clinical outcomes. Second, to improve the clinical utility and ease of use for our patients and provider partners and make our genetic test more accessible and affordable by leveraging technology and scale in our lab and commercial operations. On Slide 5, you'll see that we are not alone in our endeavor to become part of a more patient-centric and integrated health care system as our industry partners help us create better products and data solutions that allow us to address friction points and expand adoption and access for our genetic tests. Over the next few years we expect to build on these technology and health care system partnerships to drive continued innovation and growth. Turning now to the quarter and full year results released today on the next slide. We are pleased that we continue to deliver on our commitment to shareholders to achieve double-digit profitable growth as total revenue increased more than 11% in 2023 compared to last year. And we achieved positive adjusted EPS as well as positive adjusted operating cash flow in the fourth quarter. With this strong performance and market share gains in mind, we…

Thanks, Paul. I'll start on slide 12. We remain focused on women's health, oncology and pharmacogenomics. On the call, I will share a snapshot of our 2023 performance by business unit, as well as an update on our commercial transformation and product development efforts. On slide 13, we saw a strong double-digit growth across all of our core products in 2023. As a commercial leader of Myriad, I want to sincerely thank our commercial teams for their part in delivering this level of company growth and success. In the slides to come, I will share how we will plan to continue this momentum in 2024. Now on Slide 14, I want to provide an update on the commercial transformation that has driven our success in 2023. By creating enterprise-wide efficiencies across the company, we have optimized our enterprise and business unit capabilities using data and insights to deliver consistent performance. We've also enhanced our customer targeting, digital marketing, and overall operating model to drive commercial leverage in 2024 and beyond. Next slide. Continued commercial execution led to record-breaking volume growth for our pharmacogenomics business in 2023, as we added approximately 16,000 new providers ordering GeneSight for the first time over the course of the year. In the fourth quarter, GeneSight volumes grew 21% year-over-year, while revenues grew 11% over the same period. We continue to build on GeneSight's strong foundation of clinical data, including a collaboration with Optum to create a multi-phase study design better to understand GeneSight's ability to improve clinical outcomes and reduce overall healthcare costs. We look forward to the updates on the Optum study sometime in the second half of this year. The momentum that our women's health team carried through 2023 is demonstrated by their strong results. In the fourth quarter, women's health grew hereditary…

Thank you, Mark. I'm excited to be here today for my first earnings call since joining Myriad in December. I believe this company's mission to advance health and well-being for all, and I'm energized with the significant opportunity we have to shape the molecular diagnostics market and positively impact patient lives. Moving to Slide 21. Let me start with our enterprise-level strategic measures tied to driving near and long-term profitable growth. We actively measure and track key performance indicators for five important categories: people, quality, growth, productivity and finance doing so on a quarterly and annual basis. Our analytical capabilities are improving as we continue to mature into a high-performing business. We are increasing our focus on customer-centric initiatives and expanding how we track productivity gains in our commercial, lab operations and technology functions. Turning now to the next slide. Let me touch on select operational highlights from 2023. We are proud to have a high level of organizational engagement across the company. We have been designated a great place to work, with 86% of our team indicating their strong endorsement of Myriad. We also significantly improved our employee turnover in 2023 at a just 9%. Healthcare providers are among our most important constituents and their satisfaction led to a Net Promoter Score of 70 for 2023 a figure that has improved over the past few years as a testament to the focus on ongoing investments we have made in the patient and provider experience. We continue to see rapid test turnaround times in our labs while reducing operating costs and actively identifying opportunities to improve and differentiate ourselves. Notably with credit to Mark and his team, we increased sales productivity by 12% in 2023 compared to last year and saw an increase of $45 million of revenue in excess…

Thanks Sam. I'm also excited to be here for my first earnings call with Myriad Genetics. Like Sam, I was attracted to Myriad because of the company's mission to advance health and well-being for all and for the opportunity to leverage my own experiences with both payers and lab services to drive profitable and sustainable growth. We'll begin on slide 27 with a review of key volume growth drivers. In 2023, we delivered double-digit volume growth year-over-year across hereditary cancer, prenatal and pharmacogenomics. This performance speaks to several factors such as an improving customer experience that Sam talked about and the strong execution from our commercial team that Mark discussed. This most recent quarter marked Myriad's sixth consecutive quarter of positive volume growth year-over-year in hereditary cancer testing and we continue to grow at the high end of our market growth estimates. On slide 28 I want to highlight our financial performance by quarter throughout 2023. As Paul mentioned, full year 2023 financial results hit the high end of our financial guidance and we achieved our goal to generate profitability on an adjusted basis in the fourth quarter. We delivered revenue growth in all three of our business units compared to 2022 and remain disciplined in our cost management, which contributed to our adjusted EPS of positive $0.04 and adjusted operating cash flow of positive $14 million in the quarter. While revenue progression during the year typically follows a seasonal pattern, we benefited from a concentration of biopharma revenue in Q1 of 2023. That being the case we expect only mid to high single-digit percentage growth for revenue in Q1 of this year compared to last year. We then expect year-over-year growth rates to increase in subsequent quarters. Also as a reminder, adjusted operating expenses tend to be seasonally higher…

Thanks Scott and welcome. We continue to build on the pillars of long-term growth and profitability that has delivered our strong results this year. Our clinically differentiated products supported by technology, deliver value in real-world clinical settings and enable early detection and better treatment decisions for providers and their patients. Our modernized lab and commercial engine are examples of where investments in automation, and, advanced technology are yielding improved workflows faster turnaround times and reduce operating costs. Looking forward, we will deploy our strong balance sheet in a disciplined manner in ways to support the enterprise in our shared mission, and vision to make genetic testing and precision medicine more accessible. With that, I will turn it over for Q&A

All right. Thanks Paul. And as a reminder, during today's call we use certain non-GAAP financial measures. A reconciliation of the GAAP to non-GAAP financial results and a reconciliation of GAAP to non-GAAP financial guidance can be found in our earnings release and under the Investor Relations section of our website. Now we're ready to begin the Q&A session, to ensure broad participation, we're asking participants to please ask only one question and one follow-up. Michelle, we are now ready for the Q&A portion of the call.

[Operator Instructions] Our first question comes from Doug Schenkel with Wolfe Research. Your line is open.

Hi, this is – this is actually Collin Babington [ph] in for Doug Schenkel. I've got a question about MRD. Could you give any updates on the timing of new data releases and the path forward for reimbursement?

Yes. We're really proud of the progress that we're making in the study. We mentioned the study this morning in the press release. We have the study with Memorial Sloan Kettering as well and MD Anderson advancing pretty quickly, not really ready to call out sort of the expected readout of those studies but from all indications they're progressing well. And all the analytical validation and our labs are also progressing really well to the specs and the – that we expect. In terms of reimbursement to some extent we're going to take advantage of the progress that others have made here and be a fast follower. We're building those use cases and working on the clinical utility studies, which I think are going to be really important to reimbursement. And so there are a number of different efforts in that regard that we'll be talking about. So we're expecting a commercial launch in following the research studies that we'll do later this year with pharma going into 2025 as well. But we'll have more to update on MRD including our freedom to operate and the IP in the months to come.

Great. Thank you. Just one quick follow-up there. Are there any concerns given the patent landscape in MRD?

We are quite confident in our freedom to operate. And as we spoken to before. We've built these technologies on existing platforms and systems and processes that have been in existence and are patent protected for a way back. So we're very confident when we come to market we're going to have a highly accurate and sensitive MRD assay and that we'll be able to participate in what is a large market and a great opportunity for patients most of all.

Thank you.

Thank you.

Thank you. Our next question comes from Rachel Vatnsdal with JPMorgan. Your line is open.

Hi. This is Casey on for Rachel. Thanks for taking our questions. So I wanted to start on prenatal. Curious how sustainable the strength is that you guys have been seeing another strong quarter in 4Q with 17% volume growth outside of SneakPeek. What does that runway look like in terms of share gains in 2024? And how much upside would the carrier screening guideline updates potentially later this year provide?

Yes. Our women's health team and Mark can dive into this some more. We're really pleased about the progress that we're making both in terms of wallet share and new customers. Obviously, there's been a lot of dislocation in the women's health space and we are certainly seeing our fair share of new customers and market share gains. So we do expect those gains to continue. And as you noted, we see significant upside both in terms of volume and ASP as guidelines come out for expanded carrier screening and that will also be supportive of our FirstGene launch hopefully later this year as well. Mark would you add?

No. I think Paul said it best. I don't think when we think about the momentum coming out of 2023. We really don't see any headwinds in 2024. I think we've stated before it actually is an underpenetrated market, awareness in many cases still seems to be low. And so, especially when you think about the unaffected on the Hereditary Cancer side that is in the OB/GYN channel. And so we expect this continued momentum going into 2024 both in driving depth as well as earning back from new customers due to the dislocation.

Thank you. Our next question comes from Andrew Cooper with Raymond James. Your line is open.

Hi everybody. Thanks for the question. Maybe first I appreciate the comment on pricing being at the low-end or a little bit better for 2024. I was hoping you could maybe just break that down a little bit more in terms of is it largely Hereditary where you continue to see the headwinds and GeneSight gets a lot more stable after a bit more challenged of 2023? Just kind of how do, we think across the segments about what pricing maybe looks like as part of that build for 2024.

Yeah. Andrew, I mean, again despite those headwinds we had a really good year. And again hats off to Mark and the commercial teams and our folks in lab operations that kept up with the volumes. So the volume more than made up for a tough year on ASP. And we made up the cash collection piece in the back half of the year. I would say that obviously the low-hanging fruit is with FirstGene. I mean with GeneSight we see a lot of opportunity for improvement and coverage there. Its market-by-market, blues plans-by-blues plans, but the biomarker laws have given us, another ability, in 14 states now to look to expand coverage. But the transition issues we have with the payers, we don't see any of that dislocation going into 2024. So really across the product portfolio, probably less than Prolaris, we saw a really strong ASP year in Prolaris, but both for Hereditary Cancer, Prenatal and especially for GeneSight, we see ASP opportunities here in 2024 and 2025.

Okay. Helpful. And then, maybe just I did notice I forget if it was in the slide deck or the press release the word relaunch next to Precise Tumor. Just maybe a little bit of color on kind of some of the moving parts there? And then, how do you think about the opportunity and how it changes when you do have that broader set of Tumor and Liquid and MRD and kind of the rest of the portfolio together being ideally more than the sum of the parts. So I just would love sort of your latest thinking on how much of a step-up can that broader portfolio really mean as opposed to some individual pieces that are there today?

Yeah. Thanks. I think it's an excellent question. This is Mark. Historically Myriad has always been known for having the gold standard when it comes to the Germline Test. And I think more and more especially as you think of Health Systems, where you think of larger accounts. They are really looking for a single provider, because it makes their workflows easier. And ultimately they want as many answers or all the answers that they can, at the same time when they're making treatment decisions for their patients. So bringing Precise Tumor, bringing Precise Liquid and eventually MRD, that's going to round out the Myriad portfolio, combined with what we're doing on the Operational side that Sam will talk to in terms of that ease of use is really first in mind for all of the health care systems that we talk to. Sam, do you want to add to that?

Yeah. Thank you, Mark. Building on one of the slides that I covered, right, we know very definitively one of the major drivers for our customers, the providers of health care systems, building on what Mark said, is really the comprehensive nature of our offerings. And this allows us to really participate all the way from hereditary cancer unaffected all the way through therapy selection and down the line with Precise MRD, which we've touched on really to monitoring and MRD. So we think that we also have a really differentiation in the sense that, listen, liquid biopsy is very important. We're all talking about it in the industry now. But at Myriad, we've been doing this for almost three decades, right? Because our myRisk tests are foundational assay has been -- has started from liquid, and that also gives us that capability, the infrastructure all the way through collection through how we process samples to do it at scale with excellence, which I think will be part of the differentiation that we're going to have across the portfolio.

And lastly, Andrew, I would just say we're having a meeting with health systems now that wouldn't talk to us six months ago. And so we really see an emerging health system strategy. That's a world that I come from, as you know. And so we've built up a whole infrastructure and team to really across our portfolio from oncology to prenatal to pharmacogenomics. And Intermountain LifePoint specialty providers like Simon Med are just the first of what we think will be a much bigger opportunity for us. And also in academic medical centers that, quite frankly, we've been shut out for many years. because some of our own self-inflicted wounds. Those doors are opening up, and we're having some really great conversations in a lot of systems across the country.

Great. Appreciate it. Look forward to more next week. Thanks, guys.

Thank you. Our next question comes from Matt Sykes with Goldman Sachs. Your line is open.

Hey, guys. Congrats on the quarter. This is Prashant Kota for Matt. Could you provide some color on OpEx cadence throughout the year?

Sorry, that was OpEx. What?

Cadence progression?

So you're asking about 2024 or 2023.

2024.

Yeah, we made some reference in the prepared comments about the fact that seasonally Q1 does typically have an elevated level of CapEx and certainly elevated relative to Q4 2023 on a sequential basis. And then you could see it follow normal seasonal patterns from there as well throughout the year. But beyond that, we're not going to provide a specific quarterly guidance.

Yeah. I think the only thing I would add is that, I think you've seen the team just do a really great job in the lab on COGS as well as managing OpEx. You really saw us bring that down actually over the course of the year, even as we address wage rate issues and other things, and we're committed to continuing to do that for our teammates to keep people competitive. So we've just continued to build more discipline on the OpEx even as we're investing more in R&D. So as we find productivity gains, we're investing more in Dale shop in clinical studies and other things to advance the portfolio. So it's -- it will continue to be a focus of ours, but a real disciplined approach, as Sam talked about.

Got it. And then can you just provide some color on revenue contribution, cost implications in 2024 from the acquisition of Intermountain for both 1Q 2024 and for the year?

I'm sorry, you're going to have to speak up because we really can't hear you.

Sorry about that. Can you hear me now?

A little better. Go ahead.

So can you provide color on revenue contribution and cost implications in 2024 from the acquisition of Intermountain for both 1Q 2024 and for 2024 full year?

Let me see if I give you that specific number. I think it's modest. So, we will certainly have transition costs and integration costs that we've built into the guidance. And as Scott pointed out, we'll probably have a heavier hit for OpEx in Q1 because of all the new business that we're onboarding. So we'll probably spend an extra $2 million on EMR integrations for new customers and try to keep large market [Technical Difficulty] So, hopefully that's helpful. But we're -- we've got high returns on investment for the OpEx that we're investing, whether it's to bring on new customers or integrate Intermountain Precision Genomics.

Thank you.

Sure.

Thank you. Our next question comes from Jack Meehan with Nephron Research. Your line is open.

Thank you. Good afternoon. I wanted to ask about hereditary cancer testing. So, historically the fourth quarter is a pretty seasonally strong volume quarter. Not sure if this is right, but I'm calculating a sequential decline in the fourth quarter this year though. Can you just talk about the sequential trends you're seeing in the hereditary cancer testing?

That's incorrect Jack. And seasonally, the hereditary cancer is pretty strong in Q4 and it was off a pretty big base from the prior year in 2023 and you saw really strong growth in women's health as well. So depending on work in process and lots of different factors but let me just underscore very clearly that we are very excited about both the organic growth of myRisk hereditary cancer test is a highly differentiated product, ASP opportunities there. That was a bigger challenge in 2023 quite frankly was not volume with ASP and having addressed those issues with a couple of our payers as we work through some of the coding issues. And we see accelerated market share gains. So, when I joined the company, everybody thought hereditary cancer just like GeneSight should be put out to pasture. I think we've proven that now to be an incorrect set of assumptions here.

Okay. So I mean, just looking at your women's health volume in the fourth quarter in the deck it was $191,000. Last quarter it was $190,000. But I assume prenatal…

Why don't we take your numbers off-line Jack and maybe some more strategic issues for the company? If we have -- you have questions about specific volume numbers or your model, I'm sure the team can handle that after the call.

Sure. Yes. I just wanted to address the financial questions here on your fourth quarter earnings call. Maybe one guidance question for you? Can you talk about what gives you the confidence in 50 to 150 basis points of gross margin expansion in 2024? Just considering, they've been on the downslope since 2013. So what's going to move this back to expansion?

I don't think that's correct. We've maintained there's quarterly volatility in gross margins depending on product mix and we always see that in but we have maintained within our guidance range of 68% to 70% gross margins for the last two and a half years. So, -- again I'm not sure what numbers you're looking at Jack but they're not the same numbers that we're reporting. Again we're happy to go through those offline with you.

Thank you. Our next question comes from David Westenberg with Piper Sandler. Your line is open.

Hi, thank you for taking questions. I have two questions. I'll just ask some both upfront here. Can you quantify or maybe just discuss if you can some of the potential exits in BRCA in women's health and actually in non-invasive prenatal testing. If you contemplated a big competitor exiting in your guidance or if that is upside to your guidance? And then secondly when should we anticipate or do you think you anticipate expanded carrier screening in ACOG? And then can you tell about how much -- if that's contemplated in guidance and how fast you can really get coverage for expanded carrier screening? Thank you. I know that's long with them both at the same time.

Those are really very thoughtful questions. So, as we mentioned before, we do see a lot of disruption in the marketplace. It is not something that we are celebrating that some of our peers are struggling -- and I think we all want to make sure that patients have access to both our hereditary cancer and prenatal testing. And I think everybody is working hard to make sure that that happens. And there have been several companies unfortunately that have struggled over the last year and more sort of under the radar smaller companies as I said, this is still a pretty fractured market. We certainly expect to continue to see share gains. We don't have an overly aggressive sense of market share gains in our guidance. We've sort of tried to keep that pretty centered. It does present more opportunity for us, but let's -- we do not want to get ahead of ourselves here. And we're certainly not the only ones that are going to try to be there for patients and do that. With respect to ACOG, I think we've all been waiting for ACOG guideline expansion. We think it might happen this spring. As we've talked about on prior calls it will take 12 to 18 months before the payers get on board. So, none of that is really contemplated in terms of volume or ASP lift in 2024. We certainly believe it could be a great tailwind Foresight Universal Plus as well as for FirstGene in 2025. But both of those are not factored into our guidance.

Thank you very much.

Thank you.

Thank you. Our next question comes from Mason Carrico with Stephens. Your line is open.

Hey guys. Congrats on the quarter and the year. First, could you talk about the opportunity to begin capturing some incremental hereditary cancer volumes this year given the disruptions with the key competitor. I think at least in the near-term, they'll continue to operate. So, I guess the question is what do you think has to play out? Or what do you think the catalyst will be for clinicians to begin shifting volumes away from them? Is it turnaround times get impacted? Or how are you thinking about that?

Well, look, I think over the last year, we've been talking about increased wallet share gains. In part as I mentioned earlier we had lost fellowship with genetic counselors and others. And so we've continued to see wallet share gains and more recently an acceleration in new customers Mason. So we certainly believe that those trends will accelerate in 2024 even as we're signing some of these customers it will take a quarter or so to onboard them. And even a couple of quarters to transition to the EMRs that they're hopefully we can transition to. Those will not happen overnight. But we do see both prenatal and hereditary cancer volume opportunities because of the dislocation in the marketplace among a number of different providers and one obviously big one that again we are yes it's not it's this assets.

Got it. And then maybe a follow-up here. I know it was still relatively recent, but just given what you're seeing from hereditary cancer and the opportunity there has it changed your view at all around the mid single-digit growth in hereditary implied in your 2026 target?

We are pretty excited about our core MyRisk with risk core product. It's clinically differentiated. We see guidelines expansions for the use cases for hereditary cancer. So we do see probably upside in the size of the market and we certainly see upside in terms of our ability to win market share gains. And as Sam and Mark both talked about that precise oncology solutions for affected patients including MyChoice HRD and on the unaffected side where it's only 15% penetrated and you've seen again 17% growth in women's health this quarter I think 20% last quarter. So again quarter-to-quarter I'll just remind everybody the volumes can be choppy. But we have a high degree of confidence in our 2024 annual guidance that we've given you this afternoon.

Understood. Thanks, guys.

Thank you.

Thank you. Our next question comes from Kyle Boucher with TD Cowen. Your line is open.

Hey, good afternoon. This is Kyle on for Dan. I want to start -- maybe if you could just walk us -- so a little bit more detail on the announcement you made this morning at the National Cancer Center Hospital East in Japan. I guess what are the key milestones we should be looking for as this sort of progresses?

Yes. It's like 2000 patients across a broad array of indications the industry leader right now did a lot of their seminal work with this institution. So we're quite proud that they've chosen our highly accurate MRD assay to follow. But it's really too early to talk about readouts but they are incredibly efficient organization and we've had great success in Japan and with MyChoice and other products. So we're quite excited about the study. And the fact that it does cover a broad array of cancers really will help us advance our MRD strategy again to be among the leaders in MRD. It will also help I think as we work with Optum Genomics and others on clinical utility. I'm as enthusiastic about MRD as anyone, but it is early days here for adoption and use in clinic. A lot of the docs that we talk to at San Antonio Breast and other places. We're really excited about this but not quite know what to do with it. And I think that's on us to figure that out. And the payers are certainly looking for us to figure out how and when to pay for MRD and how often, et cetera.

Got it. Got it. Thank you. So moving back to the disruption in the hereditary cancer testing market, I guess conceptually, how should we think about maybe ASPs on hereditary cancer going forward? If share gains come from, I think a bit of this market is maybe in a lower-priced space? How should we think about that?

Well, we're not taking on lower price profit losing business that has not been the strategy here, which is why we kind of stand alone as the only profitable company in our space with the gross margins that we have, again, right around 69%, 70% depending on the quarter. And as I stated earlier, we do see improvements in ASP. We had some disruptions for hereditary cancer ASP this year because of some payer issues. So we're not going to be taking on business to go downstream in terms of pricing, which is why we don't buy customer lists and pursue the opportunity that way. So people are moving to our products on our contracts. And as you know we signed a four-year contract with United, we've got a lot more visibility on ASP than we've had in a long time despite some of the things that we went through in 2023, because of the things we went through 2023. So again we're very excited about the opportunities for hereditary cancer and that's a sustainable growth part of the business.

Got it. Thank you.

Thank you. Our next question comes from Brandon Kramer with Guggenheim Securities. Your line is open.

Hi, guys. Can you hear me okay?

Yeah.

Awesome. Thank you. This is Brandon on for Subbu and Andy. I just had a quick follow-up on the unaffected market. That 15% market share, do you have any levers that you're looking to push over the next one to two years that could help you grow that penetration?

Yeah. No the market is only 15% penetrated. That's what I meant. That's not ourbut that's what I'm saying there's a lot of white space there. But Mark why don't you take this.

Yeah. I think some of the levers and we've talked about them I think during our Investor Day and previous, I think one of the challenges with the unaffected market is really the customer journey that patient is on. And quite honestly the awareness level, I think we've quoted before. And if you look at the market there's over 13 million women who are seeing OBGYNs who are getting mammograms, but are not aware that they qualify for a hereditary test cancer, because they're just not being asked the questions around their family risk and so on And so I think the challenge that a lot of health care systems have is how at time of intake when they're collecting all the information how do they accurately in a very swift digital way that it has a great ease of use and a great customer experience ask those questions raise those flags so that those patients actually know that they do qualify. So we have stood up a digital solution that we're excited to share with different health systems. We're in conversations with many health systems now, which I think is probably one of the biggest levers, which is how do we increase awareness level, how do we incorporate it into the current customer journey where patients are visiting imaging centers and they're getting mammograms. So a lot -- you'll hear more from us on that as the year progresses.

Great. Thanks. And then just one quick follow-up on the margin outlook. You said that the first quarter expect a bit of a step down then a ramp up in the second half. Is there anything strategically, you would point out in the second half like cost of goods sold per test or lab automation that you want us to focus on moving into the second half to help that margin boost.

I mean, we're in the middle of our lab moves. So the fact that we are maintaining the volume and gross margins that we have while we're flying the airplane and changing the engines on the airplane in the air, are a big testament to our team and that we continue to get through FDA approvals and CLIA certification. There's a lot of moving parts here that Sam and the team are working through. So, I think as we go into 2025, as we finish these moves into the new facilities, as we continue to automate and our Archer [ph] system. And essentially, we've moved the robots or built robots and move them from South San Francisco, into campus West. For those of you that toured a few weeks ago got to see that. So, as we're standing that up and as we continue to move to new sequencing technology like XPlus, we see a lot of opportunity with that to improve margins over the next couple of years. But believe me, Sam has a supply chain $200 million target that he is responsible for going after. So, we do see near-term opportunities in supply chain that he and the team are going after today even while the automation and the new lab of the future stuff takes more time.

Great. Thanks again.

Sure. Thank you.

Thank you. Our next question comes from Puneet Souda with SVB Securities Your line is open -- I'm sorry with Leerink Partners. Q – Puneet Souda: Paul – Thanks for taking the question. First, one just a clarification. Was there a contribution from the biomarker bills in the quarter? And wondering just sort of what line items actually had helped in the -- I mean in the segments and the assays.

We saw a little bit of lift in a couple of states for GeneSight, but it's early days. Remember many of these same biomarker laws are just going into effect in January. A bunch don't go into effect until July. And believe me, it's -- the payers are like, what biomarker law. And then you have to go to the general office in the state to weigh into the GC of the payers. And then the payers say, "Well, we don't think it's covered". So, -- but the fact that we have for Oncology and for GeneSight in 11 of the 15 states and they're big states Texas, New York and others in California just passed, the ability to put more pressure on the state Blues plans to cover, our genomic products. It's an indication of a broader opportunity for adoption. Again, it's early days for genomic testing. This industry we're still toddlers here, as compared to the rest of the health care system. And so I just think it creates a lot of opportunity to increase awareness, penetration and that's the time that should lift all the boats in our sector quite frankly. Q – Puneet Souda: Got it. And maybe, if I could ask about MRD. Could you just elaborate a bit on the indication path forward? I mean there's obviously a leader in the space that has started out with CRC than breast the IO monitoring other indications and the more indications are coming on board. So just wondering, sort of what's your strategy? Is there an indication that you're pursuing that's potentially maybe not mined just yet obviously very nascent to market still. Thank you.

Yes. No, I -- look, our hats off to them. They've done a great job and they've paved away. So we were appreciative of the work they've done. We have a deeper test. We think that that's going to matter, particularly when you're talking about withholding treatment for patients. And so -- but I think there's room for more than one, two, three, four, five in a market as big as this opportunity could be. I think you'll see us stay pretty disciplined to the cancers that as Mark described within precise oncology solutions that we're known for breast, ovarian, endometrial, prostate and -- but the studies are will enable us to look at the more complicated tumors and the ability to think about the different indications that we can express. And we're doing the same thing with our expansion of MyChoice HRD. Remember that's ovarian only and we're looking to expand that to breast and prostate as well. So, yes, we're really excited about MRD for us as a company. I'm not sure if anybody is giving us credit for it on some of the parts basis or anything else. But we're quite excited to be a fast follower and we think we'll have a highly sensitive test with a building body of clinical evidence between Memorial Sloan Kettering, MD Anderson in the study we announced this morning.

Got it. Okay. Thank you.

Thank you. Our next question comes from Derik De Bruin with Bank of America. Your line is open.

Hey good afternoon. This is John Kim on for Derek. A quick one. how are there -- if there are how much opportunities are there left from improving authorizations or cash collections or working on RCM or reducing no pays? And looking at that medium-term plan, do you have the MRD launching this year in the second half. What sort of contribution can we expect? Thank you.

Yes. So MRD for our pharma partners, great news they pay. And so we'll be doing MRD, running MRD assay for our partner, farm partners in the back half of this year, as that's our expectation with hopefully a commercial launch with reimbursement in '25 sometime. That's the goal. Again plenty of runway I think for MRD as we as we just described. Look the broader rev cycle prior of ASP issue is hundreds of millions of dollars. We are not getting paid 46% of the time for our test. So we are very focused across the portfolio, whether it's in GeneSight, where we have the biggest opportunity but even in some of our more mature products like myRisk our hereditary cancer test. So, across our products and it's one of the things that we're excited to Scott can join the team given his experiences. We do think there's a lot of upside over the next few years in engaging with Washington and policymakers about prior auth. And now there was an OIG report that talked about the Medicare Advantage plan not only for my [indiscernible] diagnostic providers and for others putting up undue barriers. But it's kind of trench warfare with the payers, it's payer-by-payer, state-by-state continuing to build clinical evidence and working through all the genetics. But our investments in EMR, which allow us to pull the prior off out of the record to pull the clinical necessity documentation out of the record. All of that enables us to do a better job and be a better partner for the payers. So – it is something that we're very focused on and we think provides a lot of opportunity for the company over the next few years.

Appreciate it. And talking about investments, you're checking the guide in terms of the cash flow and you're reducing the CapEx this year as you said you would. But any – are there any other organic.

It's not everything we said we would by the way just for the record.

Any assets that you see would complement the existing portfolio? Anything that you're eyeing in the say like the MRD landscape. I know you have – you're launching with the pharma partners in 3Q and going for that commercial launch next year. But yes, just wanted to ask come back.

Yes. We faced that question when I first came to the company and we were told we needed to spend $500 million in MRD and our team has built an MRD assay all in probably for $75 million by the time we launch commercially, so our return on invested capital for an assay that we know we can stand up in our labs that we know we can get through FDA approval. We think that was the right decision for shareholders. There's a lot of great science out there and we're going to keep our eyes open but be really judicious on their balance sheet and do tuck-ins like Intermountain that we did were something that we know we can put into the sales channel, it's additive, but we'd always rather build than buy quite frankly because we – the probability of success is much higher there. But there's going to be a lot of assets coming to market and we'll be – and we are looking at some really interesting things right now. What we're not going to do is take on somebody else as big burn rate what we're not going to do is take on people's commercial issues and coding and those kind of things. So we're going to be pretty careful about M&A.

Thank you. Appreciate that.

Our last question comes from Brandon Collier with Jefferies. Your line is open.

Hi, guys. This is Kayla on for Brandon. Thanks for taking the question. I'll start off with just some of the modern lab investments you guys are making, I know you talked about maybe around $12 million a year of savings starting in 2025. Is there any chance that we'll see that start to come in a little bit in '24? Or is that still more of a '25 and beyond event?

I mean, it's all in the mix, right? I mean, so we have product mix changes that affect gross margins the team has dropped our cost per test like 8% last year. I mean so there's a lot of moving parts in there. But yes, I think every day, Shim and the team are working to stand up our new lab, get through CLIA certification, get through analytical validation. And there's a lot of process improvement the team is looking at across each of our products as we move them into the new labs. So we actually see more opportunity than that 12 that we had originally identified, it's just going to take time to get there. So you can assume what we have in the guide, though, that we've assumed that people are going to continue to work hard to get some of those savings as quickly as possible. Sam, I don't know if you'd add anything.

Paul, I think that's comprehensive.

Awesome. Thanks. And then just quickly on precise liquid. Before the launch in 3Q, can you have through any steps you're taking on the commercial side ahead of that/

Yeah. I don't know if there's anything unique about launching precise liquid, right? And we I think the good news is we are currently in almost all of the oncology offices today that are currently using tumor, both on the solid as well on the liquid side. I think something that we spoke to on this call is consistently when we talk to our customers, both large and small, to look for clinical utility, which Myriad has proven to do time and time again. But they do look for a comprehensive panel. And so now we have comprehensive offerings, both on germline as well as solid tumor as well as liquid. I think that puts us in a very unique position with customers where before Myriad wasn't even considered. And then the other two points is obviously ease of use, which I think we've talked a lot about and then the third piece is affordability. And so we've always met the customers in many of those, but in the one area where Myriad did not have, we didn't have a comprehensive offering. And now we will. So we'll make sure to share some of those details. But I think Myriad has got a success of launching products into the market. And I think the benefit is we're already with most of those customers today.

Great. Thanks.

Great, well, thank you very much, Matt.

Yeah. Thank you very much. This concludes our earnings call. A replay will be available via webcast on our website for one week. Thanks again for joining us, and have a good afternoon.

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