Veracyte, Inc. (VCYT) Q3 2015 Earnings Report, Transcript and Summary

Good day, good afternoon, ladies and gentlemen, and welcome to Veracyte’s Third Quarter 2015 Financial Results 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. [Operator Instructions] As a reminder, today’s conference call is being recorded. I’d now like to turn the conference over to your host, Ms. Shelly Guyer, Chief Financial Officer. Please go ahead.

Good afternoon, everyone, and thanks for joining us today for our third quarter 2015 financial results conference call. Joining me today are Bonnie Anderson, President and Chief Executive Officer; and Chris Hall, Chief Operating Officer. During the course of this call, we may make forward-looking statements that are not purely historical regarding Veracyte’s or its management’s intention, beliefs, expectations and strategies for the future, including those relating to scale and sustainability, future growth, future revenues, reimbursement coverage for thyroid and pulmonology test, strategic investments, product expansion and launches, geographic expansion and market growth. Because such statements deal with future events, they are subject to various risks and uncertainties and actual results may differ materially from the company’s current expectations described in this call. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found in Veracyte’s annual report on Form 10-K, quarterly reports on Form 10-Q and other filings with the U.S. Securities and Exchange Commission in addition to today’s press release. The forward-looking statements in the call are valid as of November 5, 2015 and Veracyte assumes no obligation to publicly update these forward-looking statements. Our financial results press release for the third quarter of 2015 crossed the wire a short while ago and is available on the Investor Relations page of our website at veracyte.com. I will now turn the call over to Bonnie.

Thank you, Shelly. Good afternoon, everyone, and thanks for joining us today. We delivered solid growth in the third quarter and achieved key milestones that firmly established our Afirma Gene Expression Classifier as new standard of care in thyroid cancer diagnosis. The Afirma GEC is now included in all of the recently updated major thyroid guidelines and is covered for nearly 155 million Americans through policies deeming it medically necessary. We continue to amass extensive clinical data in all of our programs with more than a dozen studies published or presented at major medical meetings during the third quarter. This included four long term clinical utility studies for the Afirma GEC. We believe the breadth and depth of our clinical program truly sets us apart. And in an era when precision medicine is generating great excitement for its potential benefits for patients in the healthcare system, yet scrutiny over whether it can deliver real world results Afirma is delivering. To-date, we performed more than 45,000 Afirma GEC test, saving an estimated half of those patients from an unnecessary thyroid surgery and removing millions of dollars from the healthcare system. We are also very pleased with the progress in pulmonology where a feedback from pulmonologist regarding our Percepta Bronchial Genomic Classifier and the value it delivers in lung cancer diagnosis has been overwhelmingly positive. We now have nearly doubled our user base in the last quarter to over two dozen thought-leading institutions offering Percepta to their patients as we develop the clinical evidence needed to secure reimbursement for the test. Turning to our third quarter results, I will focus the three areas that define our success in 2015. They are the growth of Afirma, coverage and reimbursement progress and the advancement of our pulmonology pipeline. First the growth of Afirma, or revenue for the third quarter was $12.3 million compared to $9.8 million in the third quarter of 2014, an increase of 25%. We performed 5,034 Afirma GEC tests in the quarter, a 46% increase compared to the same quarter of 2014 demonstrating continued strong demand and adoption for the test. Our growth is coming from both our Afirma solution, which comprises cytopathology, an indeterminate samples reflex to the GEC and from our Afirma-enabled model which is for the GEC testing only. This dual model approach ensures that our sales team is best able to meet our diverse customers’ needs and is clearly working. During the third quarter of 2015, the number of samples received for GEC only testing increased by 97% compared to the same period in 2014. And total Fine Needle Aspiration or FNA samples received was 20,191 for the quarter, with GEC-only samples comprising 12% of that total, up from just 7% in the third quarter of 2014. We believe we are poised for continued strong growth aided in part by new guidelines from the American Thyroid Association. The new guidelines for the management of patients with thyroid nodules, includes recommendation that the Afirma GEC may be used in lieu of diagnostic surgery to rule out cancer in patients with indeterminate thyroid nodules. The Afirma GEC is the only molecular test with a high enough sensitivity and negative predictive value demonstrated in prospective multi-center blinded studies to be recommended as an option for such use. We’re especially pleased that the ATA guidelines reference and highlight the rigorous clinical data supporting the Afirma GEC. We further showcase our scientific rigor last month at the combined meeting of the International Thyroid Congress and annual meeting of the American Thyroid Association, where among the studies we presented were powerful data that advance the science around the world of gene alteration [ph] in thyroid cancer diagnosis. As background gene variance and fusions are becoming more and more common in the literature. And physicians are increasingly trying to understand how to best use them in clinical practice, in line with our focus on providing clinical useful genomic tests we’re exploring potential opportunities to combine gene alteration data with our Afirma GEC to extract additional powerful information that may further enhance physician decision making in thyroid cancer diagnosis. We believe our deep RNA sequencing technology will provide a strong platform for our business because it looks at biological activity associated with these gene alteration, which may be more indicative of disease processes compared to other DNA based approaches. We look forward to keeping you appraised of our progress. Our second key area for growth is coverage and reimbursement progress. Blue Cross Blue Shield of Massachusetts issued a positive coverage policy for the Afirma GEC effective October 1, deeming it a medically necessary test for its members. Prior to that in August we entered into a contract with Blue Cross Blue Shield of Louisiana. We are pleased with our progress across the Blues network where we now have 10 plans comprising more than 20 million lives under coverage and three plans under contract. This brings us to nearly 125 million total lives under contract for the Afirma GEC. We significantly advance the long-term clinical utility data for the Afirma GEC during the third quarter. This included two studies published in peer-reviewed journals which demonstrated the durability of a benign GEC result. One of those, an independent study lead by Brigham and Women’s Hospital researchers, found that Afirma GEC benign nodules behaved similarly clinically to cytopathology benign nodules over a meeting of 13 months of follow-up, a timeframe recommended in the guidelines. This is further proof that the test is able to impact patient care as we intended from the very beginning. Additionally, several Afirma GEC clinical utility studies were presented at the combined ITC-ATA meeting last month. One study involving 16 community-based practices showed a significant reduction in surgeries for Afirma GEC benign patients compared to historical rates for patients with indeterminate cytopathology over a 36 months of follow-up, the longest follow-up period to-date. And importantly, researchers from HealthCore, an Anthem subsidiary, examined data from the HealthCore integrated research base, which comprises national claims data from Blue Cross Blue Shield insured patients. They found that on average follow-up period of 20 months, patients with benign Afirma GEC results were no more likely to undergo thyroid surgery than a controlled group of patients with benign cytopathology. These studies provide powerful real world data, which we believe will influence further Blues and other coverage decisions. We look forward to their publication in peer-reviewed publications in the coming months. The last topic, I’d like to talk about related to reimbursement is the Centers for Medicare & Medicaid or CMS. And first let me start with some background through the Protecting Access to Medicare Act or PAMA, which is scheduled to go into effect in January 2017, CMS plans to adopt market based pricing for Precision Medicine Test, likely Afirma GEC and Percepta, the agency released its proposed will for the Afirma reimbursement on September 25, while details still need to be evaluated. We fully support to PAMA, because we believe it will bring greater transparency and predictability as well as a value orientation to Medicare reimbursement. Through PAMA, diagnostic test makers will provide CMS, with commercial payments rates on allowed claims for their test starting in 2016. To facilitate this, we sought and received earlier this year, a CPT code that is specific to the Afirma GEC. Since PAMA will not going to affect into January 17, however, CMS needed to price to new codes like ours for 2016. Historically, CMS confused a gap fill method for advanced diagnostics, like Afirma, which are categorized as multi assays with algorithmic analysis, also refer to a small test. That is what we another stakeholders that indicative for and what the agencies expert advisory panel, actually recommended in August. However, the agency’s preliminary rate use a crosswalk approach, in which it price the Afirma GEC by comparing it to a single-gene test, for completely different indication. We along with our industry partners in correlation for 21st century medicine have been working vigorously since then to CMS to change its proposed approach and used gapfill pricing for the tests including the Afirma GEC. This is included meeting with CMS administrators, lawmakers, white house officials, industry groups and other supporters to advance our position. Importantly, in October 19, public meeting, where I presented the CMS’s advisory panel on clinical laboratory diagnostic test voted unanimously for gapfill pricing for the GEC. While, CMS, will make a final decision by December 1, we are encouraged by the expert advisory panel’s vote at our that are hopeful that the agency were use gapfill pricing. We believe this would result in 2016 reimbursement rate of $3,200, which is what CMS currently paid for each Afirma GEC. Wrapping up our Afirma discussion, the results of the quarter confirm that we remain on track to achieve performance goals we establish for 2015. We reiterate our guidance to achieve annual Afirma GEC volume in the range of 19,000 to 21,000 and annual revenue of $48 million $53 million. We expect to continue our momentum through the end of 2015, achieving our goals by securing additional positive medical coverage policies was of course a focus on the Blues plan, becoming an in-network provider for health plans that have already covered the Afirma GEC, and continuing to drive adoption of Afirma across all customers segment, particularly leveraging our Afirma enabled model. I’ll now turn the call over to Shelly, to review our financial results for the third quarter, before returning to discuss the advancement of our pulmonology program.

Thanks Bonnie. As Bonnie indicated, we had a great quarter marked by significant growth in the number of Afirma GEC test performance. Our revenue for the third quarter of 2015 was $12.3 million, up from $9.8 million in the same period in 2014, an increase of 25%. Revenue for the nine months ended September 30, 2015 was $35.5 million compared to $26 million for the same period in 2014, an increase of 36%. Note that we accrue revenue of $7 million or 57% of total revenue in the third quarter of 2015. This is up slightly from our accrual percentage in the previous quarter and it’s more than double our accrual rate of 25% in the third quarter of 2014. Our accrued revenue included one-time pickup from no accrual payers of approximately $130,000. This was much lower than the one-time pickup from the past two quarters. In the second quarter of 2015, we had pickup of $240,000, and the first quarter it was $325,000. Our revenue from cash payers was $5.4 million. And notably, there was no large one-time increases in cash collection from these payers by comparison last year’s third quarter had a pickup of approximately $500,000, with one payers settling all them out due in one large payment. Variability in payment timing from cash based payers as well as from the process of moving payers from cash to accrual creates some lumpiness in our revenue. With some quarters benefitting more than others from one-time pickup, this quarter we had a very little benefit from such increases. We’ve reported 5,034 from a GEC test during the third quarter of 2015. A year-over-year increase of 46%, and this was up 6% over the second quarter. Historically, the third quarter is flat to slightly up from the second quarter in terms of volume of test samples received, so this was nice uptick. As Bonnie mentioned 12% of the total FNAs received in the third quarter were for GEC only testing, driven by our Afirma enabled model. This far surpasses the 7% rate from the same quarter last year. Our gross margin, quote unquote, for the third quarter of 2015 was 54%, this is down slightly from the previous few quarters largely because we had a very little pickup from one-time accrual pull-forwards or large cash payments as I would just discussed. We have in the past noted that our gross margin percentage can change due to the lumpiness of payments and that we expect the gross margin to fluctuate quarterly, because our gross margin improvement is largely driven by reimbursement gains, we’ve previously guided not to expect our gross margin to increase substantially in 2015 compared to 2014. And year-to-date we are gross margin, quote unquote, 57% compared to 55% in the similar period of 2014. Again the gross margin will remain fairly static until we secure coverage or contracts that yield increased payments from major Blues plans. Also keep in mind, that cytopathology reimbursement rates are declining, which we put pressure on the margins. Operating expense for the third quarter 2015 was $21.2 million, compared to $17.6 million for the comparable period in 2014. Let met break this down a little bit further. Cost of revenue for the quarter ended September 30, 2015 was $5.6 million compared to $4.2 million for the same period in 2014. The increase was due primarily to a higher number of samples processed especially the heavier mix of GEC samples, which have a higher costs of run, both in terms of reagents and chip costs, but also in direct labor costs. Research and development expense for the quarter ended September 30, 2015 was $3.6 million compared to $2.2 million for the same quarter in 2014. The increase was due primarily to increases in personnel costs, including bonus accruals and stock-based compensation and to higher costs of experiment as well as expenses associated with ongoing Thyroid study and the Percepta clinical utility study. Selling and marketing expense for the third quarter of 2015 was $6 million compared to $5.5 million in the third quarter of 2014. This modest increase was due to an increase in headcount of our sales force, including commissions and related stock-based compensation expense as well as increases in consulting and marketing expenses, offset by a decrease in the Genzyme co-promotion fees. General administrative expense for the quarter ended September 30, 2015 was $5.7 million, which is largely unchanged compared to the same period in 2014. We had increased personnel related expenses due to an increase in headcount, the accrued bonuses in stock-based compensation expense this quarter as well as increases in professional fees, including higher accounting, audit, legal and consulting and other corporate expenses. Finally, included in G&A this quarter, the expense for the rent for our new facility, prior to beginning to utilize a space this rent expense is being charged to G&A at approximately $500,000 per quarter, a non-cash item. Thus, a year-over-year spend for the remainder of the year in the first quarter of 2016 will increase. When comparing to the quarter ended September 30, 2014. Recall, that we’ve recorded $1.2 million of bonus and severance costs and approximately $500,000 of legal accounting valuation services associated with the Allegro acquisition. Intangible asset amortization expense is again a new line item, as of the second quarter of 2015, when we launched Percepta in April. We reclassify the indefinite-lived intangible asset for IPR&D to a finite-lived intangible asset with the cost of $16 million and will amortize it over 15 years, the estimated useful life of the asset using the straight-line method. The expense in the quarter was $270,000 which will be the amount in subsequent quarters, this is a non cash item. Net loss for the third quarter of 2015 was $8.9 million or $0.32 per common share compared to a net loss of $7.9 million or $0.37 per common share for the same period in 2014. Cash and cash equivalents as of September 30, 2015 totaled $46.1 million compared to $51 million at the close of the second quarter. Our total cash balance in the third quarter was $4.9 million. Note that our cash position was better than accepted due to catch-up amounts and payers we contracted with late in 2014 who resolve their payment processing issues recently and thus paid our claims. We also had a few large payments related to the build out of our new facility in our quarterly payment to Genzyme which were not paid in the third quarter but will be paid in the fourth quarter. Thus, we would expect the fourth quarter burn will be higher than the range of $78 million per quarter which we have provided. And our average quarterly burn will continue to vary quarter-by-quarter depending on the timing of build out and with expenses. In closing, we did see our average reimbursement for the GEC rise to approximately $2300 up from $2100 a year ago. We call that this number is a lagging indicator which can only be accessed after several quarters of payments having then received. So, we are looking back the payments and tests that we are conducted by a year prior. This number will continue to fluctuate as new contracted rates are set and will likely only move significantly when we sign a large blues contract. With that, I will now turn the call back over to Bonnie to address our progress in pulmonology our second clinical area.

Thanks Shelly. I’ll now move to our third key area success of the advancement of our pulmonology program. We’ve made tremendous progress with the commercialization of our Percepta Bronchial Genomic Classifier which is designed to help produce ambiguity in the invasive costly and risky procedures that often result in lung cancer diagnosis. The early feedback from ordering physicians has been quite positive. This includes emails from pulmonologist telling us about their cases and expressing great enthusiasm and relief in the test ability to help them make more informed decisions without surgery when their patient’s lung nodules are inconclusive based on bronchoscopy as you know we are focused on signing up a limited number of our leader sites as we assemble the clinical evidence needed to approach medicare for reimbursement. Today, 25 customers across the country have ordered the Percepta just in more than half of these have already ordered the test on multiple patients. More than a dozen additional sites are in the process of coming on board and are formally on track to secure the more than 50 active sites we are initially targeting. We reiterate that we believe we are well positioned to gain medicare coverage in 2016, but we not expect to see meaningful revenue from Percepta until 2017. We have already begun developing the clinical evidence to support the adoption and reimbursement or Percepta following publication in July of our strong clinical validation data the AEGIS trials in the New England Journal of Medicine more AEGIS related data were presented at the world conference on lung cancer in September. And at the CHEST 2015 meeting just last week. The latter included a clinical utility study in which leading researchers evaluated data from the AEGIS trials and concluded that the use of Percepta would have reduced unnecessary invasive procedures by 41% among patients with lung nodules that were inconclusive based on bronchoscopy. This study has been submitted for publication in a peer-reviewed journal which will be an important step in our march towards reimbursement. We are also building momentum for the plan 2016 launch of our second test in pulmonology to improve the diagnosis of Interstitial Lung Diseases including idiopathic pulmonary fibrosis or IPS. 35 are now enrolling patients in our brave studies in which we are collecting multiple microbiological samples and phenotypic data which will allow us to complete the development in subsequent validation of the test. We are especially delighted to partner with the pulmonary fibrosis foundation that trusted resource for the pulmonary fibrosis community on a survey to advance the understanding of the patient’s diagnostic experiences with ILD. Finding from the intensity survey which quantify a staggering rate of diagnostic delays misdiagnosis and often invasive procedures will be presented by PFF next week at the PFF summit 2015 in Washington DC. We believe these in depth findings will help us define among pulmonologist and payers the value that our task will deliver once it is available commercially. Additional abstracts will be presented as well at the PFF summit quantifying the need for improved tools and IPF diagnosis and also detailing our development of our molecular classifier to improve the differential diagnosis of IPF using patient samples obtained through bronchoscopy. As we build out our clinical programs to support our existing and pipeline products we’re delighted that Dr. Neil Barth joined our executive team in August as chief medical officer. Neil’s deep experience providing the end directing patient care for healthcare provider organizations and diagnostic companies will be key as we continue our strong momentum with genomic test in help produce a necessary invasive procedures and of these diagnosis and lower healthcare cost. Finally, as we move towards the end of 2015, I thought it would be helpful to preview some of the directional trend we’re anticipating going into 2016. We expect the strong trajectory of GEC Test Volume growth to continue at a rate of 25% to 30% year-over-year. Our Afirma GC reimbursement rates are expected to remain relatively constant with a small incremental lift through the year. When we secure additional significant loose coverage decisions and contracts there will be an upside. We are hopeful that CMS more evasive cost decision and preliminary 2016 rates of the GEC and we will address any impacts their decision may have when it is released. Also note, that we expect continued pricing pressure on our cytopathology test this is consistent with commodity pricing trends. We anticipate a medicare coverage decision for Percepta and the launch of our IPF test to be two key milestones in 2016. Neither contributing meaningfully to revenue however for the year. Early next year we’ll provide in more detail guidance of the year as well as the key milestones and catalyst to keep an eye on. We continue to have tremendous confidence in building this business and our ability to maintain sustainable impressive growth. Thank you for your intention today. I would now like to ask the operator to open the call up for questions.

Thank you. [Operator Instructions] our first question comes from the line of Bill Quirk with Piper Jaffray, your line is open. Please go ahead.

Great, thanks and good afternoon everyone. I am going to apologize at times background noise and you’re doing the costly input. I guess, first question is on PAMA, we certainly understand your arguments regarding just thinking on the PAMA levels going up, certainly understand the argument regarding the gap-fill versus crosswalk. And I guess we’re just going to have to - probably we can - again in [indiscernible] get that. If you could take a step forward and think about PAMA and data collection in such, will you likely be submitting your claims data due to the amount and if so can you help us think a little bit of I guess the stroke of what you’re turning in the network reimbursement out of network reimbursement obviously in some cases you guys are collecting much stock to payers. Just help us think a little bit about kind of how that client work here or what’s we’re going to install in 2015?

Okay. Well, there is still a little bit of ambiguity in terms of how all of this will exactly play out. So, we kind of do our best. So, with the reason of course that we got our specific code for the GBC, so that we would be prepared just summit the data that would set it up to be reimbursed in 2017 based on those commercial rates. It’s our understanding that the data that will be used to base those new comer reimbursement rates by medicare will include the liable rates on claims that are paid by commercial payers. It’s our understanding therefore that any claim that is rejected which as you know drag zone on average reimbursement rate that we talk a lot about and we continuously give you an update on those zero allowed claims would be removed from the calculation. We have also said in prior calls that we have worked very hard not to enter a contract with a payers that would have a potential impact on the allowed rate knowing that these gamma rules and this new process is coming about, but having said all of that I think the exact direction and exactly how it will work out for 2017 would depend a little bit on those final decision made by medicare and whether because of gap filled route for our 2016 payments. And so, we would just have to play that out, but once we get that decision we will be able to add a lot more clarity on the exact stuffs and directions that we see for both 2016 and 2017.

Okay, got it. Thank you very much.

Something I would add though just quick is that is that the whole PAMA legislation itself is going through a common period and will ultimately catches the pricing, but the actual payment track information is going through its own set of comments and then ultimately a final rule will be published in which time this all become much clear the mechanics of how to work as to report, what has to be reported.

Okay thanks, I appreciate it. One follow-up and that is Bonnie based on your comments it is safe to assume that any good contract you are entering are going to essentially be close to half of the above where medicare pricing that’s kind of a lead through that you’re trying to imply.

Yes. I mean, it would not have been in our best interest over the course of last 18 months as we moved a lot of these contracts to closure to have answered any contract that would have put an obvious pressure on the medicare price. We’ve been advocating for and actively involved in the PAMA legislation for some time. So, we always expected that would at some point to commercial rates. So, we’ve been very careful to use that negotiating to our advantage.

Perfect. Thanks so much.

Okay. Thank you Bill.

Thank you. And our next question comes from the line of Amanda Murphy with William Blair, your line is open. Please go ahead.

Hi, it’s Orco [ph] calling in for Amanda. How are you?

Fine. Let’s take the question.

I had a quick question about completion and have you seen any impacts on the composition of this or in additionally is there broader takeout message from CMS that you might have glean from you entrench with absolutely.

I’m not sure I understood the second part of the question.

So, the first was competition and then the second part of the questions you can repeat it was little broken up.

Yes. Where there any broader take off messages from CMS, they’re looking to maybe perhaps reduce the cost and expenses in testing or was it a take home from that and your interactions with it lately.

I will take that one first and then hand it over to Chris to speak to the competition. We don’t believe, we actually believe in an era of precision medicine becoming one of the top initiatives at the highest places in the government that this was more of a process issue as opposed to any intent to drive down molecular diagnostic pricing. I think, everyone agrees that superstition medicine to be successful diagnostics are at the heart of it and I would say that all of our interactions with the CMS administrators and White House staff that we’ve met with would all reiterate that. So, no we do not believe that this is in any way intended to specifically target those industry. And we’re hopeful that it will get resolved in at the end of the day PAMA coming into place will actually be the path going forward that will allow the molecular diagnostics to have a value in market driven pricing.

On competition, I think everybody following the market knows that there have been multiple competitive entrance into the market and I think from our standpoint there is a lot of positives to that, the single biggest thing we compete against every day are physicians taking these patients to surgery. And you saw that in an ace abstract or not an ace abstract that was presented at the ITC meeting in Orlando, but it look to practice patterns with United States and across the globe and find a large percentage of patients still going on and getting surgery even though a growing number have some form of molecular testing done. We see it all of our market research and we see it in all of your market research that this is the single biggest thing we compete with. However, having people in the marketplace talking about this problem does two things. First of all, it helps us grow market right, because there is more validation that this is an approach that ought to be considered in both surgery. And secondly the data that any of these other potential competitors have is just very shallow data and that’s probably a function of just the fact that they’re brand new. So, it gives us always the opportunity to shine a spot line on what we believe is the strength of a pharma which is a deep library of published data which gets deeper and deeper as the months and the years go by and a broad based insurance coverage. And so, we’re always able to contrast that against any of these other competitors which just haven’t had the time in the marketplace develop any of that. And I think if you get into some of the data and you reprove it you will still see that even as these test have been proposed, you’re still missing way too many cancers to be a role out test at the same level of quality of the pharma. So, overall we continue to think it is a good thing to have more noise in the marketplace.

Great. That’s very helpful. And I just had a couple of follow-up questions that are trajectory related. The first one is I’m not going to miss this first do you know when your price to private rates is that 2017 or is that not yet clear?

This is not yet clear. We just kind of answered that. We have to let PAMA play out the commentary isn’t over yet, the final rolling isn’t out and then depending on the decision that they make for the pricing methodology for us for next year that could implement as well and we would just keep everyone informed as we long along the way.

Thank you. That’s very helpful.

Great. Thanks for joining us.

Thank you. And our next question comes from the line of Doug Schenkel with Cowen and Company, your line is open. Please go ahead.

Hey, thank you for taking the questions and we do appreciate you sharing some initial thoughts on 2016. I believe you indicated that you expect easy growth to approximately 25% to 30% this would seem to represent a little bit of moderation in growth relative to the 30% to 45% rate we see in the last few quarters. Can you provide any additional color on why the growth rate would moderate given the most recent sales force was completed only within the last few quarters and the market still seems to be in a pretty early stage of penetration. Thank you.

Yes. First of all I think if you look at the overall numbers the same we’re still thinking the growth is roughly the same as its standing year-over-year and the sales force expansion that we went through started at the end of last year and sort of get done last year and so we’re really at a year of sales folks out there now. And so, I still think it’s what we’re seeing for this next year is actually quite aggressive and strong growth as we push forward into this direct channel where we’ve been selling the GEC enabled model and receiving samples directly from hospitals, directly from IDMs, directly from radiologist the sales cycle and that is always longer the community base endocrinologist. And so we still see as whenever your number gets bigger your growth rate will go down and that’s where we are right now.

Yes. We think it still represents a very solid number of GEC test that will have to maintain and go into deeper for the year.

Okay, thank you.

Thank you. And our next question comes from the line of Karen Koski with BTIG , your line is open. Please go ahead.

Great, thank you. Can you guys hear me okay?

We can. Thanks for joining us Karen.

Excellent. Here, you certainly had a good deal of what I would call very strong longer term data published and presented as of date. I don’t want to call these scenarios will improve, but other payers that were waiting for this waiting data that you think you can now go back to near-term or do you still think that there are payers out there that need more data to kind of get over the hump.

Yes, I mean, it’s the need for more data, you’re almost right, but if you read the policies that have been issued from the Blue Cross plans they’ve called on wanting longer-term follow-up data. And it in the policies that’s what they’ve asked for inside those policies over the last few years. And so this data coming together, both can only come together after the test has been used long enough. And so we think that this is actually exactly the type of data that they need in order to move Afirma to being medically necessary for their members. So it actually aims squarely at the concern. And I would say, you know, we’re excited about the abstract that was presented from the HealthCore subsidiary of Anthem, where I think it’s the only study that’s ever been done to our knowledge. We’ve looked at - somebody’s looked at actual molecular diagnostic claims, and compared and looked at the clinical utility, not theoretically or not with what doctor said they did, but with what actually happened by how much money was spent. And they saw a dramatic change in the care curve. So we think that type of data is exactly what’s needed by these larger Blue Cross plans to move the needle.

Great. And I guess, as a follow-up, and congrats on the Blue Cross Blue Shield positions in the quarter. In the case of Massachusetts I know it’s a positive coverage and not yet a contract. But, has the preliminary clinical laboratory fee schedule, the terminations impacted your discussion with payers at all? I mean, do they look at that Medicare rate, things that they can get under contracts, it’s the lower rate or are they more focused on your true cost effectiveness data?

I mean, they certainly do look at the Medicare rate. I don’t that - I’d be honest, I don’t think they really - I mean, I don’t think they know the ins and outs of all that’s occurring right now relative to it all. But we always in our discussions with them keep the dialogue, point it on the benefit and that were saving them and their members. And then the test is cost-effective and at the prices that we’re asking them to compensate us for it. And we try to keep the dialogue focused on that. But the Medicare - I mean, I don’t - they’re not packed into all the minutia of the policy stuff with these smart codes in these contracting organizations who know all of the ins and outs of all the CMS proposals.

Okay. And then, just a final question and again it was nice to see the GEC volumes pick up nice sequentially, where 3Q usually little bit lighter. And back to competition, are you even in fact seeing kind of competitive reps in the field or does it still feel pretty greenfield at this point?

It still feels pretty greenfield at this point. As Chris pointed out earlier, our biggest competition continues to be battling the standard of care today, which is to take a lot of these people to surgery. And it’s a long road. The data and evidence that we’ve amassed, having all of these long-term utility studies come out, because of the length of time now that the test has been used on patients. We have a significant first mover advantage at maintaining that leadership and none of these tests meet the performance criteria to be a rule-out test. And at the end of the day that’s what’s going to drive healthcare cost down.

Our focus as a thyroid focused sales team is unique among these three companies. We’ve been competing with both Rosetta and Interpace have a suite of diagnostic products that they’re piecing together to be able to offer a comprehensive solution into different customer bases and an CBL pathology offers a comprehensive suite of pathology services. So it’s a very-focused thyroid company calling into this call-point. It’s a unique proposition as compared to having products that are into - that are part of an overall puzzle that you’re offering in a lab or a pathologist if that makes sense. It’s a slightly different approach from a sales and marketing standpoint. At least that…

Yes, no, that’s very helpful. Great color. Great. Well, that’s all I had. Thanks so much.

Thank you.

Thank you. And our next question comes from the line of Paul Knight with Janney Montgomery. Your line is open. Please go ahead.

Hi, Bonnie.

Hi, Paul.

Can you talk - how are you? I’m at my desk. I’m not on a mobile phone, so I’m unclear I hope.

Yes, yes, very clear.

Good. On the covered live, you’re now 155 million. What’s the optimal number before it is incremental news to investors?

Yes. What will really move the needle and push us towards the 200 million mark will be the wealth - are Anthem and HCSC. So those are the two Blues plans that we have been focused on getting this long-term clinical utility data out and published, and happy to see some of the independent studies that are coming out. And we really believe that these will be the final piece of evidence that’s been requested. And we’re going to push hard to try to get a Blues coverage decision as soon as we can.

And then, I know last year the institutional demand was that they want GEC volumes only, I know you’ve addressed that issue. Is it kind of where you wanted to be with the billing process on the institutional side?

Yes, we’re very pleased. We actually managed most of the billing for all of these because these types of samples tend to be collected in an outpatient setting. And as you can see from what we pointed to is 97% growth of GEC only samples year-over-year, and this is in the quarter, that last year where we began to actually see the uptick GEC only sample. So you may have predicted that growth to drop off a little bit from the prior couple of quarters this year. And it’s still very strong. So we’ve got a good opportunity to continue to drive their - not just with endocrinologist where we amassed a great position, but radiology physicians as well, which we have to serve in this institutional environment. So we think we’re positioned very well to continue that.

Thank you.

Thank you.

Thank you. [Operator Instructions] And I’m showing no further questions at this time. And I would like to turn the call back over to Ms. Bonnie Anderson for any closing remarks.

Thank you, Operator. It has been two years since our IPO. Since that time, we’ve grown from a trailing 12-month revenue of $17 million to nearly tripling our revenues. We’ve moved from being a single product company with $800 million addressable market to one that is poised to launch its third product within a year targeting a combined addressable market of $2 billion. We’ve amassed an extensive library of clinical evidence supporting our products, including both the Afirma GEC and Percepta flagship clinical validation study published in the New England Journal of Medicine. Our Afirma GEC is included in all of the recently updated relevant medical guidelines. And we now have 150 million lives under coverage and nearly 125 million getting access to the Afirma GEC through in-network service contracts. Most important of all, we estimate we saved more than 20,000 patients from necessary surgery and have taken millions of dollars out of the healthcare system. In a nutshell, our molecular cytology approach is working, and our momentum is strong. I’d like to thank you for joining us today. We appreciate your ongoing support and look forward to updating you afore our progress in the future. Thank you.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone, have a great day.