Veracyte, Inc. (VCYT) Q3 2016 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen. And welcome to Veracyte’s Third Quarter 2016 Financial Results Conference Call. After the speakers’ remarks, there will be a question-and-answer session. [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 2016 financial results conference call. With me today are Bonnie Anderson, President and Chief Executive Officer; Chris Hall, Chief Operating Officer; and Dr. Neil Barth, Chief Medical 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, our competitive position in the market, future growth, cash flow and profitability, predictability of payments from insurers, future revenues and expenditures, reimbursement coverage and rates for thyroid and pulmonology tests, product launches and adoption, clinical utility of products, healthcare cost savings 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 this call are valid as of November 03, 2016, and Veracyte assumes no obligation to publicly update these forward-looking statements. Our financial results press release for the third quarter ended September 30, 2016 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. Since our second quarter call, we have achieved several major successes across the business, and I look forward to updating you on all of those this afternoon. We delivered tremendous revenue growth in our Afirma business, where we are transforming the diagnosis of thyroid cancer. We achieved a major Medicare milestone for Percepta in lung cancer screening and diagnosis, and we launched our third commercial product, the Envisia Genomic Classifier to improve the diagnosis of idiopathic pulmonary fibrosis. We demonstrated a narrowing and discipline in cash burn for the quarter, and we will raise more than $32 million in an equity financing once closed. We are well positioned with the capital we made to achieve profitable revenue growth, as we pursue a combined market opportunity of over $2 billion across our current products. With that, I would turn to the third quarter results, focusing on the three areas we have used in 2016 to measure our success. First, Afirma growth and reimbursement expansion. We delivered robust revenue growth this quarter for Afirma, our flagship franchise, where our strategy and executions in achieving more predictable reimbursement and in-network contracts is paying off. Our revenue for the third quarter was $18.6 million, an increase of 51% compared to $12.3 million for the same period last year. We reported 5,740 Afirma Gene Expression Classifier or GEC results in the quarter, which was a 14% increase compared to the third quarter of last year. Our revenue included $3.5 million that previously would not have been recognized until the cash were received. The increase in accruals is important for several reasons. First, it underscores the growing predictability and history of Afirma GEC payments from insurers. It also reflects our success in converting payer medical coverage policies into contracts, particularly with the Blues plan. In fact, we now have contracts in place with health plans, representing nearly 155 million Americans, including over 25 million members of the Blues plans. And perhaps most importantly, our strong reimbursement foundation drives our business and speaks to the overall soundness of our business strategy because payers are willing to pay for tests that deliver meaningful value to patient care. Our third quarter Afirma GEC volume is in line with our expectations. Historically the third quarter has been flat to slightly down from second quarter due to physicians taking vacations. Last year was an exception to this pattern because we were in an aggressive growth mode in institutional sector, which camouflaged this typical seasonal cadence. We are now well positioned to drive strong Afirma GEC volume growth following our transition in September from the Genzyme relationship. Our reps are trained and energized to power the business forward. We also now have more clarity on Medicare pricing for the Afirma GEC going forward. As you will likely recall, in the end of September, CMS released its final 2017 gapfill Medicare reimbursement rate of $2,864 for the Afirma GEC. This is about a 10% reduction from our current rate of $3,200. While we were pleased that this amount is higher than the preliminary rate announced by CMS in June, we have filed a reconsideration request with CMS because we believe the data we provided supports a continued rate of $3,200. We are engaged in direct conversations with CMS, but it is difficult to predict when the outcome will be known. In the meantime, we look forward to implementation of the Protecting Access to Medicare Act, or PAMA, beginning January 1, 2018, which will bring market-based rates to Medicaid pricing for advanced genomic tests, including the Afirma GEC. By our calculations, the Afirma GEC Medicare rate should be above the current $3,200 rate. Medicare represents approximately 20% of Afirma GEC volumes. Finally, we continue to be excited about the market-leading position we've established in endocrinology where we are building substantial evidence that our genomic test is helping to keep patients out of the operating room just to get a diagnosis. At the American Thyroid Association’s annual meeting in September, six external authors presented powerful data reinforcing the value and clinical utility of the Afirma GEC. But the most exciting case of evidence at ATA came from our own scientist who showcased the feasibility of an enhanced version of the Afirma GEC, which gives us even greater confidence in the future sustained growth of our Afirma franchise. Our Chief Scientific Officer, Dr. Giulia Kennedy, presented new data suggesting that the Afirma GEC specificity could be increased significantly to potentially classified 70 to 80% of the patients with an indeterminate cytopathology as benign, rather than the current 50%. This would increase by half again the number of patients for whom the Afirma GEC could help avoid unnecessary surgery. Our prototype classifier, enhance classifier combines genomic information from our proven RNA expression-based technology with gene variant and fusion data all on a single RNA sequencing platform. This advanced platform enables us to derive very rich genomic information, which we then combine with our machine learning expertise to answer very specific clinical questions, in this case, which patients have benign nodules. Importantly, as the evidence builds telling that molecular test that detects the presence of just DNA mutations provide limited clinical utility, we believe that our RNA sequencing-based approach can unlock the true power of this genomic information and help save even more patients from unnecessary surgery. When we entered the year, our second measurement of success was coverage for Percepta. We are making tremendous progress in lung cancer, our second clinical indication, which we believe can significantly improve patient care, while addressing a market opportunity between $425 million and $525 million. Further we believe this market opportunity will grow significantly, given that 8 million patients are now eligible for annual screening through their insurance providers. We were delighted to announce a draft Medicare coverage policy for the Percepta Bronchial Genomic Classifier through the Palmetto GBA MolDx program in September. This draft Medicare policy was awarded following substantial published evidence, demonstrating the clinical and an analytical validity, as well as the clinical utility of our test as part of lung cancer screening and diagnosis. We believe this evidence puts us in a phenomenal position to secure coverage and contract with Medicare contractors outside of the MolDx program, as well as with private insurers. Given the strong reimbursement foundation and network of contracts that we've laid with Afirma, we expect that process for Percepta will be streamlined. At the CHEST Annual Meeting last month, new interim data from our prospective multi-center clinical utility trial were presented, which showed that use of Percepta classifier dramatically reduced unnecessary surgeries in lung cancer screening and diagnosis, while also reaffirming the huge opportunity we have to improve care in this clinical area. We have enrolled over 400 patients in our Percepta registry and found a couple of interesting data points. First, 69% of patients undergoing bronchoscopy with intermediate or low risk for potential lung cancer had an inconclusive result, despite the use of advanced navigational techniques in the majority of cases. This confirms our 65% to 70% estimate. Secondly, among the 176 patients who met the inclusion criteria of a minimum of three months of follow-up, the Percepta test reclassified 44% to low or very low risk of cancer, which in turn prompted a 33% reduction in recommendations for subsequent invasive procedures. As we enter 2017, we are well prepared to ramp our commercial efforts for Percepta. To that end, we've been evolving and expanding our sales structure throughout 2016 in order to drive efficient and profitable growth across our product portfolios. Here is some additional granularity on what this will look like. We are establishing a team of Veracyte product specialists to carry their responsibility for advancing Afirma and Percepta, and in the near future, Envisia growth. These sales executives will be supported with three types of team members. Number one, clinical specialists and medical science liaisons, who bring deep knowledge in each medical discipline. Number two, account managers, who maintain our key accounts who are all focused on Afirma today with more frequent contact. And number three, institutional channel managers to facilitate stakeholder alignment in complex institutional sales where sample handling, shipping, ordering and billing need to all be operationalized. We expect to exit the year with approximately 50 sales professionals across these areas and expect to add 15 to 20 more during 2017, as we ramp commercialization. We are confident that the commercial model, we are building, will enable us to achieve our goals of profitable revenue growth. Our final measure of success is the launch of the Envisia Genomic Classifier. We were thrilled to announce the commercial launch of our Envisia Genomic Classifier at the CHEST Annual Meeting last week where we have the unveiled compelling clinical validation data from an independent patient cohort. This first of its kind genomic classifier is designed to enable more timely and accurate diagnosis of idiopathic pulmonary fibrosis, or IPF, without the need for risky, invasive and costly surgery. Each year, an estimated 200,000 patients in the U.S. and Europe present with a potential interstitial lung disease, or ILD, including IPF, building what we believe is a $500 million market opportunity. As a first-mover in this space, we believe we are well positioned to address the significant market and are already engaging with leaders in the field. This includes the Pulmonary Fibrosis Foundation and several of their Center of Excellence institutions across the country which are on the forefront of slapping standards of care for patients with IPF and other ILD. Of note, Dr. Greg Cosgrove, the PFF Chief Medical Officer presented compelling data meeting at the CHEST meeting from a patient survey supported by Veracyte, which reinforced the magnitude and impact on patients of the IPF diagnostic challenge. To provide more background on how Envisia fits into the clinical pathway of care and to review the science and clinical evidence behind the test, I'm going to turn the call over to Dr. Neil Barth, our Chief Medical Officer. Neil?

Thanks Bonnie. Good afternoon, everyone. It's a pleasure to be here to highlight the scientific advances behind the Envisia Classifier and to describe how patients, physicians and healthcare system will benefit. Let's start with some foundational information. IPF is the most common and most deadly form of fibrotic interstitial lung disease, or ILD, a group of disorders that are characterized by chronic progressive fibrosis and scarring of the lungs. As Bonnie indicated, IPF is difficult to distinguish from other ILDs but its treatment in prognosis can vary greatly. Currently many symptomatic patients who present with suspected IPF may endure months to years of incorrect or delayed diagnosis, often while undergoing invasive risky and expensive surgical lung biopsies or receiving suboptimal and potentially harmful treatment. A diagnosis of IPF is typically made when a multidisciplinary team comprised of a pulmonologist, radiologist and pathologist, collaboratively evaluate information gathered during a thorough clinical work-up including whether a specific pattern called usual interstitial pneumonia, or UIP, is present. Presence of this UIP pattern is essential to the diagnosis of IPF and is identified through either a high resolution CT scan or from a surgical biopsy of the lung. A confident determination of UIP however can be difficult for even experienced radiologist and pathologist and substantial disagreement often exists between physicians evaluating the same case. When a UIP pattern is uncertain by high resolution CT scan or HRCT, which we believe is the case in about 80% to 85% of patients being evaluated for fibrotic interstitial lung disease, diagnostic lung surgery is often considered as the next step. However this surgery is invasive, risky and expensive with cost of over $40,000 per surgery and reported mortality rates ranging from 1.5% to 16%. Further many patients who are already compromised by their disease are not able to withstand the surgery and never get with confirmed diagnosis. It is precisely at this critical point in the diagnostic pathway where the Envisia Genomic Classifier provides a solution. The test is designed to replace the need for diagnostic surgery by genomically identifying the presence or absence of the pathology-defined UIP pattern, but by using patient samples obtained through a less invasive and much less risky bronchoscopy. Our research suggests that use of the Envisia Genomic Classifier could reduce the rate of surgical biopsy recommendations by more than half in patients whose diagnosis are ambiguous. The Envisia classifier was developed using Veracyte’s rigorous, evidence-based approach, combined with the enormous power of deep RNA sequencing. We married two rich databases, clinical and genomics, with our expertise and machine learning to create a classifier that determines the presence or absence of the hallmark UIP pattern in patient samples without the need for surgery. We are pleased to have recently shared the successful clinical validation results for the Envisia classifier in an independent test cohort from our multi-centered prospective blinded clinical trial known as the BRAVE trial. The BRAVE study has enrolled over 300 patients from 30 domestic and international sites, with more than 1,200 bronchoscopy obtained lung samples from patients undergoing evaluations for ILD. We rigorously trained the classifier using more than 350 samples from 90 patients. Once the classifier was locked, we evaluated it with an independent test set of more than 200 samples from 49 patients. The Envisia classifier achieved a pre-specified performance threshold with the mean area under the curve, or AUC, of 0.85 and remarkably high specificity of 88%. At this specificity level, when the classifier indicates that UIP present, a physician can have high confidence that the UIP pattern is in fact present in that patient, while minimizing false positive results. High specificity is important to help reduce the need for more invasive and dangerous diagnostic procedures and also avoid over-diagnosis of IPF and the potential for mistreatment. The Envisia classifier also demonstrated a sensitivity of 67%, meaning it would be expected to identify more than two-thirds of pathology confirmed UIP cases. These results are highly concordant with the ability of an expert panel of pathologists to diagnose UIP or non-UIP using surgical histopathology review. These study findings were presented in a private event at the CHEST Annual Meeting last week by our Chief Scientific Officer, Dr. Giulia Kennedy. With that, I will turn the call back to Bonnie.

Thanks, Neil. We plan to initially make Envisia available to a limited number of institutions around the country, as we build the clinical utility and other evidence that support coverage and reimbursement. We will use the same strategy that we have successfully used with Afirma and Percepta. Above all, we are motivated by the opportunity to make a significant difference in the diagnosis and course of treatment for patients with this challenging disease. Now I'd like to turn the call over to Shelly to review our financial results for the third quarter.

Thanks Bonnie. We saw substantial improvements in operating performance in the third quarter. Our GEC reimbursement per test increased. Our gross margins improved. And we made progress in controlling our operating expenses. The focus on more efficient growth with an eye on profitability is paying off. As Bonnie indicated, we experienced 51% revenue growth during the third quarter. Our revenue for the quarter was $18.6 million, up from $12.3 million for the same period of 2015. The $3.5 million pickup from new accruals in this quarter compared to approximately $130,000 in the same period of 2015. Our accrual criteria, is that when we can reasonably estimate future payments from test conducted, we should recognize and accrue that revenue in that period. For the GEC as well as our other Afirma tests, we now have sufficient history and experience with payers to estimate such amounts. In this quarter, 75% of revenue was accrued, compared to 57% in the same period of 2015, with the remaining revenue from cash collection for tests conducted in prior quarters. Our revenue from cash payers was $4.7 million and there were no large one-time increases in cash collections from payers, either in this quarter or the prior year quarter. We anticipate that these increases will be smaller in the future for Afirma, as 99% of our test volume is now accrued. Of course when we begin to accrue for Percepta, we will again experience such pickup. The other important factor in revenue is our average reimbursement rate. We noted that the ASP would increase as more payers come under coverage in contract. This quarter the rate was $2,200, up from $2,100 last quarter. Recall that this is a lagging indicator looking back one year. Our more recent experience is improved rate as we see the benefit of higher overall reimbursement amounts and quicker collections, primarily from the Blues and other non-contracted payers. The number of total FNA samples received in the quarter increased by 8% over the prior year to 21,747. We reported 5,740 Afirma GEC test results during the quarter, a year-over-year increase of 14%. 15% of total FNAs received in the quarter were for GEC-only testing, surpassing the prior year’s 12%. Afirma GEC-only samples received increased 30% year-over-year and now represents 53% of our GEC reported number. Our “gross margin” for the third quarter was 66%, which is significantly up from levels in prior quarters due to the pickup in the accrued revenue. Absent this pickup, the gross margin would have been 59%, a nice step-up over our most recent quarters. This improvement is largely due to the increase in reimbursement levels, which have led to consistently solid and improving GEC margins. We have previously indicated that gross margin would be flat in 2016 over 2015 at about 57%. We now anticipate a couple of points of gross margin improvement. Operating expense for the quarter was $23.5 million compared to $21.2 million for the comparable period in 2015. We made good progress in several respects in controlling our spend and the growth in spend. Let's break this down by line item. Cost of revenue for the quarter was $6.4 million compared to $5.6 million for the comparable quarter of 2015, an increase of 13%. The increase was due primarily to an increase in samples tested, especially the higher volume growth in the higher cost Afirma’s GEC tests, relative to the lower volume growth in the lower cost cytopathology. Due to the increase in accrued revenue, there was an increase in certain vendor payments that are tied to revenue. And finally, we also had increased facility costs from more expensive and larger lab phase in our new facility compared to a year ago. Research and development expense for the quarter was $4 million compared to $3.6 million for the comparable quarter of 2015, an increase of 12%. The increase was due primarily to increases in personnel-related expenses. We also incurred significant expenditures for materials purchased for research and development experiment, although at lower levels than earlier in the year, and we expect these spends to continue to moderate. Selling and marketing expense for the quarter was $7.1 million compared to $6.1 million for the comparable quarter 2015, an increase of 17%. This increase was partly due to an increase in Genzyme co-promotion expense. We only incurred Genzyme fees on test reported through September 9 when our U.S. co-promotions agreement terminated. The quarter also had increases in personnel-related expenses due to higher headcount of our sales team, up 28% over last year, and the associated increases in commission. We are on track to have a sales force totaling 50 by year-end. General and administrative expense for the quarter was $5.8 million compared to $5.7 million for the comparable period of 2015, an increase of 1%. The increase was primarily due to personnel-related expense, including increased headcount, accrued bonuses and stock-based compensation expenses. There were also reductions in spend. This quarter we did not have any excess rent payments hitting G&A which we incurred in the year ago period. And finally, we continued to control G&A expense growth by dramatically decreasing consulting expenses as compared to last year, a trend which we expect will be sustained through the remainder of the year. Operating loss for the quarter was $4.9 million compared to $8.9 million for the same period in 2015. The large reduction is not only due to the increase in accrued revenue but also to our controlling expense. Interest expense for $800,000 this quarter relates to interest on the $25 million term loan taken down at the end of March. We elected to pay 9% interest in cash. The remaining 3% interest was paid in kind and this $193,000 was added to the term loan outstanding principal balance, as we did last quarter. Net loss for the quarter was $5.6 million, or $0.20 per common share, compared to a net loss of $8.9 million, or $0.32 per common share, for the same period in 2015. Cash and cash equivalents as of September 30 totaled $31.7 million. This week we announced pricing of an equity offering, which is scheduled to close on November 7, subject to other customary closing conditions. The underwriters have advised us that they had exercised the over-allotment option, so the deal should net us approximately $32 million when closed. Our cash burn for the quarter was $7.3 million, much lower than the $8.5 million burn in the second quarter and the $10.9 million excluding loan financing costs in the first quarter. Of this amount, $4 million was paid to Genzyme, which represents both amounts due in the third and the fourth quarters. This completes all payments due to Genzyme under our U.S. co-promotion agreement. As noted previously, we expected the burn to be lower in the third quarter and we anticipate a continued decline for the remainder of the year, now that we've exited Genzyme and are beginning to experience more efficiencies in the business. In our fourth quarter 2015 call, we noted that we expected our burn to be about the same for 2016 as in 2015. We now expect it to be somewhat lower, given the progress we have made in bringing the burns down this quarter. I will now turn the call back over to Bonnie to provide closing remarks.

Thanks Shelly. Based on our stronger-than-anticipated revenue growth to-date and visibility into the fourth quarter, we are increasing our 2016 annual revenue guidance to $62 million to $65 million. We expect Afirma GEC volume to come in at the lower end of the guided range of 24,000 to 25,500. As we approach the year’s end, we’d like to provide you with some directional thinking for the upcoming year. For Afirma, we will continue to focus on driving continued GEC volume growth, expanded reimbursements and revenue growth. For Percepta, we plan to expand patient access by increasing the number of accounts offering the product, while we secure additional coverage and contracts beyond the Medicare MolDx program. For Envisia, we will focus on developing strong published evidence that will position us for Medicare coverage. And lastly, we expect to continue our financial discipline, building on the progress we have made and would expect our cash burn per quarter to be in the $6 million range with some quarterly fluctuations. I'll now ask the operator to open up the call for questions.

[Operator Instructions]. Your first question comes from the line of Bill Quirk of Piper Jaffray. Your line is open.

Great. Thanks. [Technical Difficulty]. First question, your DSOs spiked up almost 50% in the quarter. Can you talk about this metric in light of how you’re moving to higher accrual revenue?

I don't know how you're calculating the DSO since we don't really provide that. So our collections are getting actually a lot more rapid in - now that we have a number of contracts and also as we have sort of longer term relationships with some of the other payers and under coverage decisions and such. So I would say that the time to collect is actually coming in appreciably. But we don't have a formal DSO number that we issue, so I don't know how it's being calculated.

Okay. And then on 2016 guidance, can you give us more color on the fourth quarter guidance in light of the third quarter GEC [ph]?

Yes, I think what we said is that we are increasing revenue guidance to $63 million to $65 million of revenue - $62 million to $65 million of revenue. And we would expect the GEC volume range to be directed towards the lower end of the guided range, 24,000 to 25,500. And that would be full-year number, so you can do the math on the year-to-date.

Okay. Thank you.

Thank you.

Your next question comes from the line of Amanda Murphy from William Blair. Your line is open.

Hi, this is Aurko in for Amanda. Congrats on a good quarter. I had a couple of questions. One related to the previous question, is that, guidance even if at the lower range would imply a pretty strong sequential pickup in volume, and tied to that, you had said that you now expect to exit the year with 50 sales reps. I was wondering if you could add some color on to the six sales reps that you were planning to add in the second half of the year and how many of those have come to fruition? And then the second part being is that kind of a linked initiative.

Yes. So yes, we've made a lot of progress, and you're right, it's been a terrific year and what a great quarter it was. We've made a lot of progress on the expansion of our sales team. I think we said earlier, our plan was to add 10 in the first half of the year, which we achieved, and we are well through the hiring of the additional six. So we are teed up. The reps are trained. They are energized. And I think that, on top of the fact that Q4 is always a really strong growth for quarter for us, we are very confident that we can deliver on those results.

Got it. And then you had previously said that you are planning to add fewer than 15 to 20 more per quarter. You had said, three to five sales reps per quarter over 2017, and now it looks the number is more like four to five. And is that three to four - four to five, could you give me some color on that, as to what caused the change there?

Yes, I think it's just three to five per quarter is really in line with what we would expect. I think we just rounded the number off to somewhere between 15 and 20. It could be 12 to 20, but it's just sort of a rounding error. The point being that we have now about 50 exiting this year. We have structured them in a manner that is going to allow us to get great leverage and build on the strength of the brand presence for Afirma in all of these institutional accounts where we’ve made terrific progress. I mean, as Shelly said, even with the soft quarter that we've spoken about in the past with doctor vacations in the physician office market, our GEC-only business remained very strong at 30% growth over prior year. So our presence in institutions and large integrated networks is very strong, and there is no reason why we can't gain a lot of leverage for that as we build the structure and bring Percepta into the market, targeting exactly those same institutional accounts followed by either preparation and leverage with Envisia when we begin to expand that on the back of Medicare coverage. So we've made phenomenal progress at setting ourselves out both with numbers of reps, but more importantly, with a structure in the sales organization that allows us to continue to grow Afirma, bring two new products through this channel to drive growth there, but do it without building single verticals that are much less efficient and do not provide you the leverage. So we think we’re positioned with a great team, good clinical, medical support of that team, junior set of account managers that can maintain our high-volume accounts those will remain mostly Afirma for the foreseeable future. And then the institutional channel managers that really are the driver of multi-stakeholder alignment around pathology, radiology, now bringing in that pulmonology stakeholder, that has been so effective in driving our institutional business. So I think we are very pleased with the progress that has been made there and will continue to be made and we're very excited about finishing a strong 2016 and entering ‘17 on the back of a phenomenal amount of momentum.

Great. Thanks. And last question for me. How are conversations with Anthem going on? Pardon me, if you’ve already discussed that.

Thank you for bringing that up. Okay. It was one item not in our script. We remain very bullish that we will, based on the data that’s been published, new data that was just presented at ATA by a lot of external investigators, I would say that combined with movement with thought leaders to stop the over-treatment and taking patients to surgery that don't need it, we really believe we are going to get Anthem there. And as we said when they made the update to their policy mid-year, which was sort of on their cycle and not including all of this new data, since then we've made a lot of progress in having them review this additional utility data, long-term outcome data, and we are still pretty confident we can get that done by year-end. There is no guarantee. It could flip into the beginning of next year. But keeping in mind that that metric, although it's remained a really important milestone catalyst for us and we continue to be bullish. Having that accomplished really was not an impetus to any of our revenue predictions or volume predictions per se. So we still hope to get it done in ‘16.

Great. Thanks. I'll hop back in queue.

[Operator Instructions]. Your next question comes from the line of Amanda Murphy William Blair. Your line is open.

Okay. I guess it’s me again. I guess my follow-up question is related to Anthem as well, as your reimbursement conversations are going on. Has the decision by Medicare to price lower prior to test had a 10% decline to your previously reimbursed rate. Has that influenced at all the kind of pricing that you're able to negotiate, and if - has it influenced the pricing to be able to negotiate with other private payers?

We have had no request for any opening of any negotiations around price with any of the payers. Keep in mind, the CareSource agreement as an example that we signed earlier this year is a five-year agreement and we continue to make a lot of progress per se. This is the result of our increased revenue and accruals, etcetera, on the back of that contract allowing us to bring more and more Blues plans under network. So we really believe that pending the success of our reconsideration, which we believe, we have a strong basis for and are hopeful that CMS will see it that way. Beyond that, we are sort of moving forward and looking forward to PAMA and getting this all set out. But no, we have not been under any real request or certainly not any pressure to make any changes to our private payer rate. Keep in mind that we really believe - and we've never really tied our contracted rates to Medicare per se, because what we negotiate on is the value of our test in saving $20,000 plus surgeries. And being able to replace a surgery for every two tests we perform with Afirma, we are giving the payers a big percent of the value. So I think that - where they are going to put pressure is not in areas where they are already gaining a significant financial benefit, but focus on other areas of their business, and that gives us the confidence that we’re going to be able to maintain our pricing. It's all based around the value we deliver.

Got it. And then final question from me before I actually stop. The last one is on the data shown by your CSO about the specificity increase that could potentially classified 70% to 80% of patients who they determined as benign, what are the kind of the milestones and steps of getting that on the market, and also covered? And what’s the timeline you foresee for that, if you were to pursue it?

Well, the actual launch of the product based on that validations data have happened. We will begin to build our sites for the registry study, which will continue - I’m sorry, I thought your question was about Envisia. My apologies. So we obviously have kind of held our card [ph] tight on that product for obvious competitive reasons, and we would not likely be throwing that card out there and sharing those great exciting data if we did not have something well on its way. I would expect it as we enter ‘17 and provide more specific guidance that we will be giving a little more direction on that as we go forward, but it's a very exciting development to maintain our sustained growth with Afirma.

Great. Thank you.

Thank you.

There are no further questions at this time. I'll now turn the call back to Bonnie Anderson, President and Chief Executive Officer for closing remarks.

Thank you. We are extremely pleased with the value, our pioneer approach is now delivering across the spectrum of disease areas. By asking the right clinical questions and using cutting-edge science, including machine learning and RNA sequencing, to provide actionable answers, we are fundamentally changing patient care. As we approach the end of the year, we are at a truly exciting point in our business. We now have three commercialized products that are targeting large untapped market, where we can make a significant positive difference in the life of patients, while reducing healthcare costs significantly. We are firing on all cylinders and now have the capital we need to achieve profitable growth. This is just a beginning. So thank you all for joining us to day. We appreciate your shared interest and support of our mission and look forward to keeping you updated on our progress.

This concludes today's conference call. Thank you for your participation. You may now disconnect.